As the defendant has not adduced evidence which it accepted would establish reasonable grounds for the Peppers representation, it follows that that representation is deemed to be misleading, and the plaintiffs have established in respect of the Peppers representation, but only in respect of the Peppers representation, that Twin Creeks engaged in misleading and deceptive conduct in contravention of Trade Practices Act s 52."
The complaints on the cross-appeal and their disposal
25The issue of the financial capacity to construct two 20 apartment unit blocks, the so-called hotel, was never articulated by any pleading as an issue for trial. It formed no part of the allegations and particulars in the statement of claim. It formed no part of the particulars of the defence. No expert evidence was led by the Awads about it. Rather, the burden of the evidence of Mr Foley-Jennings as to value and damage was as to the involvement of Peppers in the project. The evidence in the case was directed to the significance of Peppers' involvement, rather than to the construction of the hotel. Thus, Mr Awad gave the following rolled up evidence on reliance at paragraph 43 of his affidavit:
"[43]Subsequently I decided to make an offer for the Land. I did so in the belief that there would no more than 177 lots, each no smaller than one acre in size, that our investment would be secure and on the basis of the matters which I have been led to believe set out at paragraphs 25 and 28 above. Had I been told that there was a possibility that Twin Creeks would be subdivided with more than 177 lots, or had I been told that some lots may be less than one acre in size or that Peppers may not construct a resort I would not have made an offer for the Land, let alone purchased the Land."
26Peppers was never to construct the resort. The resort was constructed, though without the so-called hotel. Peppers had a connection with the resort. It maintained that connection, managing the restaurant and bars for six months. It has transferred that management to an entity, otherwise apparently reputable, called Troon. Ultimately in argument, Dr Birch accepted that the following was the relevance of the building of the hotel and the connection with Peppers:
"That without reasonable grounds to believe that the hotel could be built by whoever was going to build it there were no reasonable grounds to believe that Peppers, who would otherwise need to manage what was on the premises, would stay and manage what was on the premises without the accommodation".
27Particular (d) to paragraph 6 of the statement of claim complains that there has not been a "resort" constructed and that the defendant does not intend to construct a resort to be managed by Peppers or otherwise. That way of putting the matter elides the hotel with a resort. Accepting that, the focus of complaint at the hearing was upon the Peppers connection.
28The evidence of Mr Wiesener was more than bare assertion as described by the primary judge. First, it was given by a director of the company since 1999 who had been involved in real estate development for 20 years. He said the following about his experience in paragraph 6 of his affidavit:
"I have been involved in the real estate development business for at least about 20 years. During that period I have been the principal of various companies whose primary business is to manage the investment in and development and sale of land and/or buildings. The nature of the projects I have undertaken include development and sale of Torrens title and strata title real estate, either as part of an estate type development or otherwise, including the development and sale of land in larger community titled estates. Those developments include (in approximately chronological order): ..."
He then set out 22 past developments ranging in size by value from $1m to $70m. All were in New South Wales. He also identified four projects upon which he was working, one of which was valued at $500m. Whilst the affidavit did not deal with any particular financial expertise of Mr Wiesener, the nature of land development and 20 years of experience in land development are such as necessarily to involve financial considerations and experience.
29The development was a substantial one. It contained an 18 hole golf course designed by a well-known golfer. No direct evidence was led as to the financial structure underpinning the building of the so-called hotel or of the project as a whole. Mr Wiesener, however, when taxed in cross-examination about the finances of the project, with particular reference to the absence of the 80 villas, gave the evidence recited by the primary judge at [42]-[45] of his reasons (see [21] above). He also gave this evidence:
(a)T135 lines 1-7, Black 135
"Q.And just so we are clear, Mr Wiesener, what I put to you a moment ago was this: that ever since the August refusal by the Department the development, as you saw it, had a serious financial problem in that it didn't have sufficient density with 177 residential lots alone. Do you agree?
A.No, I don't. There was no issue in August 2004 whether this was approved or not from a financial perspective, none at all."
(b)T137 line 50 - T138 line 6, Black 137-138
"Q.In any event, in answer to a question I asked you about 2 or 3 minutes ago, as I understood it, what you tried to convey to the court was that the concern you were referring to in that paragraph related to the viability of things such as bar and restaurant facilities, not the commercial viability of the development overall?
A.It had nothing to do with the - the development was going fabulously well at that point in time."
30These are all statements of opinion by someone with personal knowledge of the development as to its commercial viability. He was not cross-examined on them by reference to contemporaneous records. He was accepted as a witness of truth. He plainly had deep experience in land development and its commercial undertaking.
31There was evidence that the resort facilities other than the hotel were finished and operated to a high standard: see Blue Vol 1, p 56 in the report of Mr Foley-Jennings. That matter assists in an inference that at a time when the development was underway there was a sound financial basis for it: North East Equity Pty Ltd v Proud Nominees Pty Ltd [2012] FCAFC 1; 285 ALR 217 at 228-229.
32Mr Wiesener said (at T145 S-T) that the viability of the project was never in question up to the time an injection of equity was made by AMP. He also said that the project finance was provided by Macquarie Bank which had provided finance freely (T146 I).
33He said that sales did not begin to drop off until 2006 (T138 X-Y). He said, in effect, that even so the project was viable; the equity injection being required in 2007 by borrowing covenants based on loan to value ratios (T142 E-J and 145). It was not until 2009 (after the global financial crisis in 2008) that the financial viability of the project depended on the development of the villa land (T145 K-V).
34This evidence from a witness who was accepted by the primary judge must be assessed by reference to s 51A and its requirements, as well as by reference to how the trial proceeded. Section 51A does not cast the legal or persuasive onus on the representor. Rather, evidence "to the contrary" of there being a lack of reasonable grounds is required. As I said in McGrath v Australian Naturalcare Products Pty Ltd [2008] FCAFC 2; 165 FCR 230 at 283 [191], what must be adduced is evidence that tends to establish, or that admits of the inference that there were, reasonable grounds for making the representation. See also North East Equity at 223-224 [28]. How one assesses the evidence of the witness under cross-examination is affected by how the case was run.
35As I have noted, the financial capacity of TCP to construct the whole development, including the so-called hotel, was never identified as an issue. As a matter of logic what the primary judge said at [41] can be accepted. If one says that one is going to build something, one will need to fund it. Whether or not there is a real issue as to the availability of funding, however, depends on how issues fall out in the litigation.
36Here, the ability to fund one part of a large development was not, before the trial, identified by either party as relevant for examination. That said, the breadth of the operation of s 51A must be accepted and the responsibility it places on defendants to identify the basis of representations recognised. If representations about future matters are to be made, the statute requires there to be reasonable grounds for their making. The broader and more expansive the representation, the wider the responsibility for proof.
37Litigation, however, is not a game. It is to be conducted, if possible, with efficiency and precision. The plaintiffs identified what they saw as likely subjects for a lack of reasonable belief. The defendant, which had developed and built this large development proposal, did not direct evidence to the funding arrangements in place as at 2004. Its particulars (late given) accorded with its evidence, which was not directed to this question of funding capacity. Whether it should have need not be explored. It did not, but nor did the Awads. The topic was raised in cross-examination. One could readily infer from Mr Wiesener's evidence that there were valuations and finance in place as at 2004 for the construction of the whole development that did not depend upon the cash flow from the sale of the 80 villas. Thus there was evidence from which one could infer that there were reasonable grounds to represent that the developers would build the one part of the whole development that was in question.
38In these circumstances, there was evidence to the contrary for the purposes of s 51A(2), and the plaintiffs therefore bore the onus of proving a lack of reasonable grounds for this representation. They led no evidence to contradict the general evidence of Mr Wiesener and what could be inferred from it. If the issue had been thought appropriate for, or worthy of, agitation and resolution, it could have been properly isolated in due time. In those circumstances the answers in cross-examination may have carried different, perhaps less, significance. It was not, however, put to Mr Wiesener that TCP did not have financial arrangements in place to build the so-called hotel. There was, as I have said, a general attack on the viability of the project without the 80 villas. Mr Wiesener rejected that proposition and his evidence was accepted by the primary judge. He had the knowledge and experience to give that evidence. It did not lie in the realm of bare assertion. It was evidence from which inferences could properly be drawn.
39In my view, the cross-appeal against the Peppers representation should be allowed.
Other Issues
40That conclusion makes it unnecessary to resolve the other legal and factual issues in the appeal. The question of the availability of rescission was dealt with by the primary judge at [51]-[57] of his reasons. I will not set these out. He accepted that the place of Peppers was a significant selling point, there to influence buyers. He was satisfied that the Awads relied on the Peppers representations as one of a number of matters which contributed to their decision to purchase the property, at the price they did. His Honour examined the evidence of Mr Awad, in particular paragraph 43 of his affidavit set out at [25] above.
41His Honour said at [57] of his reasons:
"[57]Evidence of this type, on the other hand, is in my view inherently unreliable. It is well known, for example, in medical negligence cases, that a plaintiff patient's views or evidence as to what he or she would have done, had he or she been warned of a minor risk of the operation, may be given with all due honesty after the event, but is very much coloured by what has happened in the meantime. Conscious as I am of the risks of rejecting unchallenged evidence, it seems to me that when it comes to reliance in the context of a Trade Practices claim of this type, a court is much better assisted by examining objectively the indicia as to what a party would or would not have done, rather than relying on the party's subjective assertion. I do not doubt that Mr Awad's affidavit contains what he now believes would have been the position. But, looked at objectively, considering his reasons for visiting Twin Creeks in the first place, and examining his description of what it was he was looking for, a neighbouring resort hotel simply does not feature in the picture, and I am unpersuaded that, but for the Peppers representation, he would not have purchased the land."
42His Honour then at [58] dealt with relief:
"[58]That conclusion is very important when it comes to relief. As I have said, the plaintiffs seek an order under Trade Practices Act, s 87, avoiding the contract. Alternatively, they seek damages under s 82. It would not be appropriate to avoid the contract if the impact of the representation would not have been that the purchase was not undertaken, but only that any purchase would have proceeded at a lower price. In my view, this is a case in which it cannot be concluded that the purchase would not have proceeded, but I can conclude that the Peppers factor added something to the price at which the Awads were prepared to purchase."
43I have some difficulty with this approach. Relief under the TPA, s 87, should be viewed not by reference to general law analogues but by reference to the rule of responsibility in the statute that is directed against misleading and deceptive conduct: Marks v GIO Australia Holdings Ltd [1998] HCA 69; 196 CLR 494 at 503-504, 510 and 528-529; Henville v Walker [2001] HCA 52; 206 CLR 459; Murphy v Overton Investments Pty Ltd [2004] HCA 3; 216 CLR 388 at 407; and see generally Bullabidgee Pty Ltd v McCleary [2011] NSWCA 259 at [64]-[72] and Akron Securities Ltd v Iliffe (1997) 41 NSWLR 353 at 364-367. Involved in that rule of responsibility is the public policy of protection of people in trade and commerce from being misled, and the width of the powers given by the TPA that are apt to be employed in a manner conformable with the just compensation or protection of the representee. Whether or not to grant a form of rescission under s 87, or to limit a plaintiff to damages under s 82, is a question in the nature of a discretion to be approached by reference to the facts of the particular case, the policy and underpinning of the TPA and the evaluative assessment of what is the appropriate relief to compensate for, or to prevent the likely suffering of, loss or damage "by" the conduct: see Kizbeau Pty Ltd v WG & B Pty Ltd [1995] HCA 4; 184 CLR 281 at 298; I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; 210 CLR 109 at 117-120 [19]-[29], 127-128 [52]-[57] and 142 [106]; and Akron Securities v Iliffe. An approach that is limited mechanically around a but for causation enquiry will be likely not to involve a full evaluative assessment of the appropriate relief.
44If a defendant has contravened the norm of the statute and made misleading or deceptive representations that are operative to induce the representee to enter a contract, many factors may influence the question of relief. One of them could be the weight of the influence of the impugned conduct. It is not, however, a determinative factor upon which relief under s 87 turns. To view the matter thus is to constrict the exercise of power contemplated by the TPA. This is how the primary judge appears to have approached the matter. With respect, that was an error.
45Here the findings of the primary judge were not that the Awads would still have purchased the land. Rather, he was unpersuaded that they would not have done so. The attempt to disentangle these kinds of operative factors on the mind of a representee in respect of the relevant decision may often be an unrewarding exercise. In some cases, however, the relevance of the impugned conduct may be seen only to have affected price, rather than entry at all into a contract. Each case must be assessed individually. Here, though the Peppers representation was not necessarily decisive, there was considerable difficulty in assessing any reliable sum for the value attributable to it. The somewhat unsatisfactory evidence of Mr Foley-Jennings reflects that difficulty. Ascribing a value to a vague but (on the findings) material inducement of this character to enter into a contract may also be an unrewarding task. The difficulty of extracting from the various inducing considerations a value for one ephemeral (though material) consideration may militate against the appropriateness of the task and in favour of an order in the nature of rescission. This might be seen to be particularly so where damages are reduced to reflect the operative contribution of the solicitor found to be negligent.
46In the circumstances here, if I be wrong in relation to the Peppers representation, I would allow the second aspect of the Awads' appeal and make an order under s 87. The representation was operative; it was intended to be material; and it contributed to the decision to purchase. It was accepted that there was some loss or damage. It would be appropriate, in my view, to give relief conformable to the rule of responsibility and relieve the Awads of the purchase that they were induced to enter into by misleading or deceptive conduct, in particular where ascription of value is so difficult. Any such grant of relief would be subject to counter restitution being able to be made by them.
47The orders that I would make are:
1.Appeal dismissed with costs.
2.Cross-appeal allowed.
3.Set aside the orders made by the Supreme Court on 30 June 2011 and entered on 4 July 2011 and in lieu thereof order that judgment be entered for the defendant and that the plaintiffs pay the defendant's costs.
4.Cross-respondents pay the cross-appellant's costs of the cross-appeal.
48MACFARLAN JA: I agree with Allsop P.
49SACKVILLE AJA: I agree with Allsop P.
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Decision last updated: 03 July 2012