[49] It is necessary, then, to determine whether the value of what was acquired is less than what was paid. How is value to be assessed? It is to be assessed objectively, not according to what either or both of the parties to the contract believed that it would obtain from the contract. That is, the value of what in fact was acquired is to be identified according to what price freely contracting, fully informed parties would have offered and accepted for it. It is only by comparison with the value assessed in this way that there can be an assessment of whether the party that is misled could have obtained some greater benefit or incurred less detriment. What is important is what that party could have done, not what it might have hoped for or expected." (Citation omitted)
64 The question of low 'value' was determined also in HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640. The facts in that case are closer to the present case. There, the respondent obtained advice from the appellant valuer about the local retail tenancy market before purchasing a small shopping arcade. The respondent did not ask the valuer about the value of the arcade itself. The valuer advised that the construction of a new shopping centre nearby was not likely to adversely affect existing retail tenancy levels. The purchaser thus bought the small arcade. After the opening of the new shopping centre, the arcade suffered a collapse in gross rental value, with a concomitant fall in its value. The purchaser tried to sell the arcade without success.
65 The matter in issue before the High Court was the measure of damages to which the respondent was entitled. The Court characterised the nature of the case as one being the purchase of an asset at an overvalue. At first instance, it had been argued that the correct measure of damages, apart from consequential losses, was to deduct the value of the shopping arcade at the date of acquisition from the purchase price.
66 The Court observed, at [35], that the approach of subtracting value from price was commonly employed where the acquisition of land, chattels, businesses or shares was induced by deceit. Their Honours observed that this approach, which was sometimes described as the rule in Potts v Miller [1940] HCA 43; (1940) 64 CLR 282, had also commonly been employed under s 82 of the Trade Practices Act 1974 (Cth): see Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3; (1986) 160 CLR 1; Kizbeau Pty Ltd v W G & B Pty Ltd [1995] HCA 4; (1995) 184 CLR 281. However, that rule, even in the well-accepted areas to which the Court had referred, was not universal or inflexible. Rather, it was a rule of practice: see McAllister v Richmond Brewing Co (NSW) Pty Ltd (1942) 42 SR (NSW) 187 at 192 per Jordan CJ.
67 At [36], the Court noted, relevantly for present purposes, that one of the key qualifications of the rule was that it did not depend:
"… on the difference between price and 'market value', but price and 'real value' or 'fair value' or 'fair or real value' or 'intrinsic' value or 'true value' or 'actual value' or what the asset was 'truly worth' or 'really worth' or 'what would have been a fair price to be paid ... in the circumstances ... at the time of the purchase'." (Citations omitted)
68 Their Honours noted that the distinction was sometimes difficult to draw, but was "old and fundamental". Their Honours, at [37], noted a second qualification to the rule, which it said flowed from the first, namely, that the distinction between a value which answers one of the tests stated and "market value", meant that "market value" could be disregarded if it was delusive or fictitious or was a result of fraudulent or manipulative practices of the market.
69 In this case, there was no evidence of any value of the property as at the date of purchase. There was no evidence of market value, nor evidence of what Greenvale was 'really worth'. All that is known is that there were a number of offers, only one of which appears to have been not in response to a false representation, that is, Mr Cochrane's initial offer of $780,000 including equipment. The appellant has confined her case to a claim between her own offer of $818,000 which, as I have indicated, was made in response to a misrepresentation, and the amount of $920,000. However, even accepting that $818,000 was the amount the appellant was prepared to pay and that she would not have paid $920,000 but for Mr Butler's false representation, that is not sufficient, in my opinion, to establish that she has suffered damage in that amount. It does not satisfy the proper approach to the assessment of damage in a case such as this, in accordance with the principles stated in Marks and HTW Valuers. Accordingly, the trial judge was correct in concluding the appellant had not established damage.
70 It follows, on my conclusion, that the appeal should be dismissed with costs.
71 BASTEN JA: On 18 June 2002, Ms Anna Borzi, the principal of Borzi Smythe Pty Ltd, offered to purchase a property known as "Greenvale" at Kangaroo Valley for $818,000. The offer was conveyed through her buying agent, Mr Byron Rose of Rose & Jones Pty Ltd, to the vendor's agent, Mr Neil Campbell, the principal of Campbell Holdings (NSW) Pty Ltd which traded as Ray White (Gerringong), real estate agents. The vendor was Ruth Butler, but all arrangements for the sale of the property had been entrusted by her to her son, John Butler.
72 Since approximately September 2000, a neighbour, Maxwell Cochrane, had leased "Greenvale" (or part thereof) for the purpose of running cattle. He too had expressed an interest in purchasing the property and had dealings with Mr Butler directly from a time which pre-dated the engagement of Mr Campbell's business as vendor's agent.
73 Although Ms Borzi was initially told that her offer of $818,000 had been accepted, Mr Butler apparently changed his mind and notified Mr Campbell that Mr Cochrane had offered $900,000 and that Ms Borzi would need to better that offer in order to clinch the deal. She then instructed Mr Rose to offer $920,000. That offer was accepted by the vendor and the sale was effected.
74 Mr Cochrane denied making any offer over $800,000 and the trial judge accepted that he had "never offered $900,000 for the property": at [12]. He accepted, however, that Mr Butler had told Mr Campbell that such an offer had been made and that Mr Campbell believed such an offer to have been made. His Honour described Mr Butler's conduct as "merging [verging?] on the dishonest and fraudulent": at [10].
75 The purchaser, Ms Borzi's company, sued Mr Campbell and his company for misleading and deceptive conduct under the Trade Practices Act 1974 (Cth), s 52 and pursuant to the Fair Trading Act 1987 (NSW), s 42. It identified its loss as an amount of $102,000, being the difference between the price paid for the property and that which had been accepted, prior to the false representation. No claim was made against Mr Butler.
76 In order to succeed, the plaintiff needed to establish that the information conveyed by Mr Campbell was a representation that an offer had been made and not merely a statement that Mr Butler had told Mr Campbell that an offer had been made. In other words, the first question was whether Mr Campbell's communication indicated that he was the source of the information, or was a conduit for information supplied by others. To determine that matter, it was necessary to look at all the circumstances, including contextual matters such as the knowledge and experience of the relevant parties and the course of their communications.
77 That Mr Campbell was in fact supplying information conveyed to him by Mr Butler is not relevant: the question is whether his communication to Mr Rose, taken in context, made it sufficiently clear that there was another interested party dealing directly with the vendor. If that were not made clear, the natural inference from a statement by the vendor's agent that a particular offer had been forthcoming, would be likely to be understood by a purchaser as a statement that the offer had been made to the vendor's agent.