Consideration
297Whether the sale itself was conduct in trade or commerce is not the true issue here. The true issue is whether the conduct complained of, namely misrepresentations which played a part in inducing the sale, thereby causing the Pisanos' loss, was in trade or commerce.
298If the sale itself is conduct in trade or commerce, advertising it would undoubtedly also be. If, however, the sale itself is not in trade or commerce, it does not necessarily follow, in my view, that advertising it is also not.
299In this case I am satisfied that the sale itself was a transaction in trade or commerce. It follows, from this alone, that so was the conduct complained of.
300However, and separately, I am satisfied that, on its own, the advertising of the sale, at least by way of the web advertisement, was also conduct in trade or commerce.
301As to the sale of the house itself, in support of his submission that the sale by an owner of his or her private dwelling is not in trade or commerce, counsel for Williams referred to two decisions: Actic Pty Ltd v Cabool [2004] NSWSC 302, in which Smart AJ said at [126]: "Sale of a residential property by an individual is not a transaction in trade or commerce" and Butcher v Harkins [2001] NSWSC 15 in which Austin J concluded that the sale of the domestic residence in that case was intrinsically not conduct in trade or commerce.
302The unqualified articulation by Smart AJ in Actic, that sale of a residential property by an individual is not a transaction in trade or commerce, is clearly wrong. So too, I respectfully suggest, is Austin J's statement in Butcher v Harkins that the sale of a domestic residence is not in trade or commerce because of some intrinsic quality.
303In Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 at 119, Hill J considered that "[i]t could scarcely be said that a person who sells his home, whether by private treaty or by auction and whether he conducts the negotiations personally or by real estate agent, is undertaking what he does in the course of a trade or business or in a business context".
304In Franich v Swannell (1993) 10 WAR 459, Seaman J, at 479, (with whom Murray J agreed) considered that the sale of a private house without any business character was not in trade or commerce. At 481 Ipp J said, after referring to O'Brien v Smolonogov (1983) 53 ALR 107, that "the sale by an owner of his private house, unconnected with any larger transaction or series of transactions or business operation, is not in trade or commerce".
305In Nelson v Bellamy [2000] NSWSC 182, Simos J concluded that the sale of a private dwelling in which the vendor lived which was specifically built for resale at a profit, albeit that the profit was used to reduce the debts of the vendor, and where the vendor lived in it for a limited period of time but always with the intention of living in another building, was activity in trade or commerce.
306In ACCC v Gary Peer & Associates Pty Ltd (2005) 142 FCR 506, Sundberg J found that there was nothing in the evidence to suggest that vendors were doing anything more than attempting to sell their family home because, at the time, they no longer wished to reside in it and that this did not establish conduct in trade or commerce.
307In Kelly v Wilson [2012] WASC 146, Beech J considered that whether the sale by a private owner of his or her residence is in trade or commerce turns on "whether there are elements in the transaction and the activities and character of the parties that import a trading or commercial character to the negotiation for the sale of the property". His Honour was satisfied that the seller's conduct there was in trade or commerce. The transaction was not a conventional sale and purchase by exchange. It involved vendor finance for more than half of the purchase price; the property did not simply comprise a home, it had six chalets that had been rented out by the seller, both the seller and the buyers employed a caretaker of the property, and the parties discussed the prospect of developing the property in the period before entering into the contract.
308More recently, in Rasch Nominees Pty Ltd v Bartholomaeus [2013] SASCFC 23 at [69] and [86], Gray J (with whom Sulan J and Stanley J agreed) considered that there is no principle that a vendor of domestic land does not engage in trade or commerce unless in the business of doing so and that the relevant question is how to characterise the conduct in each particular case and whether the dealings concerned of their nature bear a trading or commercial character.
309On the approach taken in these authorities, a transaction involving the sale of a domestic residence will be in trade or commerce if, in all of the circumstances in which it occurs, it discloses a commercial or business character. This is a question of fact in each case and involves characterising the particular conduct in question.
310As to the facts, I am satisfied that Dandris and Williams renovated not to create a house for their personal use but because they viewed it as an investment property. I find that their intention was to improve the house for resale for financial gain and I find that the sale, including its advertising, was the carrying into effect of their investment strategy.
311I do not believe them when they say that they intended to live in the renovated house long term as their domestic residence. Their objective conduct is at odds with this.
312I find that Dandris and Williams never intended to live in the renovated house for any meaningful period of time and certainly not permanently.
313Under cross-examination, Dandris accepted that if it was going to be their family home she would want to ensure that it was going to be constructed properly and without any shortcuts. One might think that this would particularly be the case if they intended the house to be the "entertainer's home" which Williams says he had in mind. Yet, Dandris cut important corners for financial reasons.
314She took the cheap option offered by the builder, she dispensed with necessary drainage grates in front of glass walls and doors, she did not demolish walls which Mr Yoganathan directed should be demolished and she did not obtain the survey required by the local authority as at the date of commencement of construction.
315In 2008, as soon as they obtained development consent, they listed the house for sale (they were, however, unable to sell it).
316In applications for mortgage finance in 2010 they described the house as an investment property (I do not believe their evidence that this was in error).
317Pisano gave evidence, which I accept, that in March 2012 when he complained about the faulty hot water system, Dandris replaced it and said of the old hot water system "I'll just use this on my next project".
318Dandris described herself on her business card as an interior designer. In a testimonial for a kitchen construction company she referred to herself as having done interior design for houses. She must have had this house in mind because, according to her evidence, it was the only candidate.
319The house was furnished only with hire furniture of the type commonly used or put in place for the purposes of selling. They occupied the house for a very short period of time.
320Although they say the house was sold because of financial pressure, barely six months later, Dandris and Williams purchased another house at 178 Military Rd Dover Heights for $2,090,000 which had a development approval which they sought to amend so as to carry out renovations.
321Williams tendered a tax return which reflected no deductions claimed for costs incurred in carrying out the renovations, on the footing, as I understood it, that this was an indication that he did not have a profit motive. The absence of such a claimed deduction says nothing of the absence of a profit motive if, as one would ordinarily expect with a house, the expected profit is of a capital nature.
322Additionally, I am satisfied that the project was part of an interior design business that Dandris wanted to develop and that the conduct complained of, both by her and Williams, was in furtherance of that endeavour. This, on its own, is sufficient to render their conduct in trade or commerce.
323As to the web advertisement, it is to be observed that O'Brien v Smolonogov was decided more than 30 years ago, Argy v Blunts nearly 25 years ago and Franich v Swannell nearly 20 years ago. At that time, advertising of residential properties on the worldwide web either did not exist or was not the norm as it is now.
324Houghton v Arms (2006) 225 CLR 553 establishes that a representation can be made in trade or commerce, even though it is not in the trade of the person making the representation, so long as it is in the trade of the person to whom the representation is made.
325The representations in the web advertisement were made by Dandris and Williams via a commercial website to which the world at large, including those who would read it in their trade or business, has access. In my view, this is conduct in trade or commerce. I consider that this is so irrespective of the fact that those who were attracted, to their detriment, by the advertisement, read it or relied upon it albeit not in the course of any trade or business of their own.
326In coming to their view that a sale by private treaty or auction does not involve conduct in trade or commerce despite it being negotiated by an agent, neither Hill J in Argy v Blunts nor the members of the Bench in Franich v Swannell had this type of pre-sale advertising in mind.
327I should add that although, because of the findings I have made it is not necessary to consider it further, it is not readily apparent, I respectfully suggest, why the sale of a domestic residence by way of an advertised arms' length transaction at full price is not in any event a transaction in commerce.
328The falsity of the representations has been established.
329The two overlapping questions which arise are: first, when viewed together with the disclaimers, the conditions of the contract, the DS Report, the Pisanos' inspection, their election not to have their own professional pre-purchase inspection and the fact that they had an experienced solicitor, was the conduct of Dandris and Williams misleading or deceptive? Second, do all or any of those matters evidence non-reliance and the want of a causal link between the misrepresentations and the loss or damage flowing from the Pisanos entering into the contract?
330In my opinion, the first question is to be answered in the affirmative and the second question is to be answered in the negative.
331The mis-statements made in the advertising material are direct and undoubtedly intended positively to influence the reader to buy.
332The disclaimers are barely noticeable, let alone prominent. Pisano gave evidence, which I accept, that he did not see the disclaimer on the online version and did not read the disclaimer on the brochure. It was not established that Sia Pisano read either disclaimer.
333The disclaimers are by the agent, not the vendors. The agent's oral misstatements were not accompanied by any disclaimer. The agent reports that the information provided has been furnished by the vendors and that "all interested parties should make their own enquiries in order to determine whether this information is in fact accurate". Dandris and Williams were the source of this information. Had the Pisanos enquired of them, it can be inferred that they would have been given the same information.
334I should add that I am satisfied that Dandris and Williams knew that the house leaked before they sold it. Apart from what she told Pisano, she installed awnings to shelter the house from prevailing rain and winds. Dandris knew that important details had been spared and significant corners had been cut to save costs. She was the one that determined that this should be so. She and Williams knew that she was no master builder. Indeed, they knew that she was no builder at all.
335In all the circumstances, it can scarcely be said that the disclaimers denude the misinformation, disseminated by Dandris and Williams, of its misleading character.
336The same can be said with respect Special Condition 1 and the DS Report.
337The misleading conduct preceded, and was a material factor inducing the Pisanos to enter into, the contract.
338Special Condition 1 records that the Pisanos relied on their own inspections. This, to some extent, they undoubtedly did. But the perceptions of the house which they gained via their inspections were coloured by the misleading and deceptive conduct of Dandris and Williams.
339Pisano gave unchallenged evidence that based on the brochure and what was said by the agent he was under the impression that the home was meticulously built by a professional master builder who had experience in building the sort of home that was being presented to them and that no expense had been spared. Sia Pisano gave unchallenged evidence that based on the brochure and the agent's statements she formed the view that the home was solid, well built and something she could be proud of for a long time. She believed it was newly built by a professional builder as their family home. She gave unchallenged evidence of a conversation with Pisano that the house was brand new and there was nothing for them to do.
340Special Condition 1 acknowledges non-reliance on statements other than as set out in the contract. The DS Report is incorporated into it.
341The DS Report, misleadingly, discloses only one minor defect; namely, water ponding in the ground floor dining room recessed door track. It recommends that the "track be sealed water tight and a grated drain be installed to the external threshold of the door assembly". In Attachment A, which is entitled "Home Owner's Warranty Defects Report Carried Out For 53 Blake Street, Dover Heights for Mrs G. Williams" the only repairs identified as being necessary are the same repairs. Immediately below the report goes on to say that "All other works were found to be completed in a good workmanship like manner and finished in good order".
342Paragraph 2.0 of the DS Report recommends that "a more comprehensive service be sought on areas/queries in this report", but apart from the minor water ponding, the DS Report identifies none. It describes itself as a "reasonable attempt to identify any obvious or significant defects at the time of inspection" and goes on to identify only the one minor defect. It can be scarcely be said that Special Condition 1, or for that matter the DS Report, denude the misinformation of its misleading character. If anything, they exacerbate it.
343In general, where there is a reasonable opportunity for inspection which would unearth the defect this may break the chain of causation: Baxall Securities Ltd v Sheard Walshaw Partnership [2002] EWCA Civ 9. But that is not this case.
344Leaving aside questions of taste, the house at first blush gives the impression of no expense having been spared. However, very significant defects, in particular those which make the house pervious to water, are not visible to the naked eye. One cannot see that flashings inside cavity walls have been omitted. It is not apparent that 19 out of the 23 windows would leak or that the relative levels will not ensure appropriate run-off.
345The misrepresentations, backed up by the misleading DS Report, provide a reasonable and rational explanation for why the Pisanos forwent any further pre-inspection report in relation to what was held out to be a newly master-built, no-expense-spared house.
346The matters relied upon by Dandris and Williams including that a solicitor acted for the Pisanos on the sale, neither assuage their misleading and deceptive conduct nor bring about any break in the chain of causation between that conduct and the actions of the Pisanos in reliance upon it.
347The actions of the Pisanos can hardly be described as cavalier. It does not fairly lie in the mouth of Dandris and Williams to describe it as such.
348I turn to the question of damages.
349I have found that the misrepresentations of Dandris and Williams played a significant part in inducing the Pisanos to buy the house.
350I have made findings as to the reasonable and necessary cost of fixing it.
351The Pisanos claim this as the loss suffered because of the misrepresentations.
352However, Dandris and Williams submit that this is not the quantity of the actual loss suffered. They submit that the only appropriate quantification is the difference, in financial terms, between the position the Pisanos are now in and the position they would have been in had they not bought. This, they put, is the difference between the price which the Pisanos paid (which they accept would have been the market value of the house free of defects) and the true market value of the house with the defects. They put that the Pisanos have not established the second component (having led no evidence as to the market value of the house with the defects) and have therefore not established the amount of the loss they suffered.
353I reject this submission.
354That the justice and equity of this particular case requires the Court, in my opinion, to select as the measure of damages the reasonable and necessary cost of fixing the house, is demonstrated by the following.
355The Pisanos bought the house to live in and intend to continue living in it. But for the defects, they could do so. It will cost $1,171,124 to fix. They bought the house for $3,350,000.
356If the market value of the house with the defects is less than $3,350,000 minus $1,171,124, awarding them the difference between that figure and the purchase price paid would give them a windfall because they would have more than the sum of what they paid for the house and the amount they need to fix it. If the market value of the house with defects is greater than $3,350,000 minus $1,171,124, awarding them the difference will not give them enough to pay for the necessary repairs.
357Additionally, no basis was put as to why the true market value of the house was not the price the Pisanos paid less what it will cost to fix it.
358The factors identified by Williams as warranting apportionment against Dandris relate to Williams' lack of participation in the renovation itself rather than anything relevant to the misleading conduct in which he engaged. In this, he was an equal participant with Dandris. Those factors may, perhaps, have been relevant to an apportionment against Dandris in the negligence claim referred to below.
359Williams made precisely the same misrepresentations as Dandris. Intention is not an element of his liability. They were both vendors of the house.
360Each bore equal responsibility for the Pisanos' loss and damage. Justice does not require that Williams be treated differently and more beneficially than Dandris.