BENCROSS PTY LTD v MUNSAMI

"Put the house on the market, it will fetch its reserve." Mr Weinberg said: "Put it on the market, it will pour with offers, it will rain with offers." To which the respondent replied: "What do you mean?" Mr Weinberg said: "You'll get a bigger price for it", and continued to exhort the respondent to put the house on the market.

The respondent accepted this advice. The property was put on the market but bidding only rose to $201,000. It was knocked down at this price. Initially the respondent declined to sign the contract but, after taking legal advice, he did so.

In the District Court, Judge Herron QC found the appellants liable in contract, tort and for breaches of the Trade Practices and Fair Trading Acts. The essence of their liability was negligence and misleading conduct in that the respondent was induced to abandon his reserve price and submit his property to "the market". This advice lacked a reasonable basis and caused the respondent to act to his detriment. To me it is somewhat unclear how liability for misleading conduct was established, but the detail does not matter. The findings of liability and the consequential obligation in each appellant to pay damages assessed on a compensatory basis is no longer in dispute.

The appeal is now confined to the issue of damages. The learned trial judge held that the respondent was entitled to recover the difference between the market value of the property (found to be $235,000) less the auction price ($201,000), ie $34,000, plus $4,020 the commission paid. Interest was added to the resultant figure of $39,020.

The single issue in the appeal is a challenge to the finding that the land had a market value of $235,000 on the day of the auction. This finding involved acceptance of the only expert evidence called in the case, that of a registered valuer, Mr K J McCarney. That evidence was given in a report and tested in cross examination spanning forty-four pages of transcript.

The report cited three sales as comparable evidence of value. They did not include the subject property. In cross-examination Mr McCarney indicated that he had been unaware that the property had been auctioned. A short time later the cross-examiner put the following question and got the following answer at AB 175:

Q. "And you'd agree with me wouldn't you that where there is an actual sale of the subject property which is not tainted by any of the vitiating factors that we discussed earlier that that sale is to be accorded particular significance?

A. If it can be shown that it was a reflection of fair market value and there was no adverse circumstances."

I emphasise the questioner's reference to "particular significance" and the qualifications in the answer.

In further questioning Mr McCarney adhered to the opinion that a contemporaneous sale price of the subject land was not necessarily determinative of its value. He stated that one would have to consider whether there were:

"adverse circumstances... [At] the end of the day... you must still have regard to surrounding evidence and they (sic) may well show that the auction sale was cheap". (AB 175)

The bulk of the remaining cross-examination related to methodology, the valuer's knowledge of the property to be valued, and the characteristics of the properties nominated by the valuer as comparable.

Towards the end of the cross-examination, Mr McCarney was pressed to resile from his opinion as to value in the light of an assumption that the subject land was sold at auction for $201,000. He declined to do so, apparently for two reasons. He did not know the circumstances of the auction and he remained of the view that his three comparable sales supported the figure he had written (AB 211 M). Later he elaborated on the former consideration, suggesting that it was possible that the hypothetical vendor may well not have been astute in allowing the property to be put on the market (AB 212 J). In such a situation, the hypothetical buyer would have got a bargain.

Having examined this cross-examination, I am quite satisfied that it was open to the trial judge to arrive at the conclusion he did. There was no contrary expert evidence. In these circumstances I need not trouble with considering whether the conclusion was also supported by (a) the agent's own opinion given less than a month before the auction that the "current reasonable selling price" was $200,000 to $220,000 "subject to market"; and (b) an opinion expressed by a Mr Jaksic, a real estate agent, that as at September 1991 the property had a fair market value of between $230,000 and $240,000.

Even if it might be appropriate to regard contested expert evidence differently to lay evidence as regards the application of the principles in Abalos v Australian Postal Commission (1990) 23 NSWLR 288) and I am not suggesting that it would be, but compare Jackamarra v Krakouer [1998] HCA 27 at 66 per Kirby J, the trial judge's acceptance of Mr McCarney's evidence was as proper as it was virtually inevitable.

The appellant's challenge bases itself upon statements in reported cases and valuation text books. We were referred to Spencer v Commonwealth (1907) 5 CLR 418, especially the well known references to a willing but not anxious vendor. It was submitted that the respondent was in this category, because he did not have to sell on the day of the auction, an anticipated purchase of an alternative property with the sale proceeds having fallen through.

However, the respondent was committed in the sense that he had incurred $1,200 advertising expenses in relation to the auction. More importantly, the very conduct of the appellants which represented breaches of their tortious, contractual and statutory duties had, it was held, undermined his judgment by creating the false impression that it would "rain with offers". The legal advice

that the respondent was bound to sign the contract failing which it would be signed on his behalf by the auctioneer hardly put him in the position of the hypothetical free agent.

The appellants also pointed to judicial statements to the effect that a sale of the subject land, or of comparable land, affords the best means of arriving at the value of the land (see Jowett v Federal Commissioner of Taxation (1926) 38 CLR 325 at 329; Chapman v The Minister [1966] 2 NSWR 65 at 69). But to say that such a sale is good evidence, even the best evidence, is not to say that a court is driven as a proposition of law to regard it as conclusive evidence. The expert evidence given in the present case, to which I have referred, gives reasons why it could not be so. The valuing tribunal cannot escape the need to determine whether the vendor was "willing, but not anxious" and that is a question of fact in the particular case.

In my view the appeal should be dismissed with costs.

Powell JA Although it seems to me that the findings made by the learned trial judge did not support his conclusion that the appellants had committed breaches of s52 of the Trade Practices Act and s42 of the Fair Trading Act, that is not a matter of any consequence since as the President has pointed out, liability in contract or in negligence is not now disputed. I agree with the President's conclusion that the appeal should be dismissed with costs.

Solicitors for the appellants: Murray Stewart & Fogarty Counsel for the respondent: J B Pender