Q. Well, can you explain why it had no impact then, but when you read it the next time, it did have an impact?
A. I can't explain why, other than I read it with a purpose in mind, much clearer purpose in mind, sir.
51 I do not accept Mr Tayles' belated attempt to suggest that he did not understand the impact of the special conditions on pre-contractual representations when he first read the contract, yet did so when he read it a second time after exchange. He was an uncommonly careful and cautious witness, who took great care to ensure that he understood questions before answering them. As the further cross-examination showed, the context of the question and answer that he later sought to qualify was quite clear; the timeframe to which it was addressed was plainly pre-auction, when he first read the contract; and there is no possible basis on which it could have been misunderstood, as Mr Tayles later claimed, as being referable to a second post-contractual reading of the contract. Moreover, his original cross-examination, which naturally preceded the answer in re-examination which he sought to explain away, contained similar statements plainly referable to a time before he executed the contracts: see the italicised passages in the extracts from his cross-examination in para 47 above. Accordingly, I conclude that Mr Tayles entered into the contracts believing that he was not entitled to rely on pre-contractual representations dehors the contract.
52 Mr Tayles suspected that there was a shortfall in croppable land as early as 5 June 2007, but he said nothing of it; he kept his thoughts to himself. Indeed, he effectively told the Vendors that the only impediment to settlement was the chattels dispute. He did not raise complaint about any shortfall of croppable land, despite agitation of other matters with the Vendors, until 10 March 2008, the date due for completion under the notice to complete - he says because only then did he receive legal advice that under the Trade Practices legislation he might be entitled to raise the matter notwithstanding the special condition. Yet he had not refrained from advancing all manner of other complaints, ill-conceived or not, and it is quite remarkable that they contained no word about the shortfall in croppable acres. Although he claimed that this was because he thought he was precluded by the contract from doing so, he felt no inhibition in raising the alleged "oral" deal in respect of plant and equipment, and his protestation that he did not raise the issue of croppable land because he thought he was precluded by the contract from doing so is not credible.
53 I accept that Mr Tayles entered into the contracts influenced by a belief that there were 7,000 croppable acres available. However, although that belief was initially generated by the advertisements in The Land and in Stock & Land, Mr Tayles knew that he had to rely on his own inquiries, and by the time of the auction his relevant belief was founded on what he had ascertained by inquiry from Mr Kerr and Mr Macleod and by inspection. Moreover, he believed from the contractual provisions that he was not entitled to rely on representations dehors the contract, and that he did not do so is confirmed by the absence of complaint on his part until the completion date - despite his discovery that there was a shortfall against his expectations as early as June 2007, and despite his having raised all other manner of complaints with the Vendors. He did not rely on the contravening conduct complained of in the proceedings, namely the advertisement in Stock & Land, and that conduct was therefore not productive of loss or damage.
Should the contract be avoided?
54 Had Mr Tayles relied on the contravening conduct in entering into the contracts, it would have been necessary to consider whether it was appropriate to avoid the contract under s 72(2) and (5)(a). At this point two main questions would have arisen: would such an order compensate for, prevent or reduce loss or damage caused by the contravening conduct, and whether, as a matter of discretion, avoidance would be an appropriate remedy.
55 As to whether avoidance would compensate for, prevent or reduce loss or damage resulting from the contravening conduct, prima facie, the damage suffered by a purchaser whose entry into the contract is procured by a misrepresentation is the difference between the purchase price and the true value of the subject matter; this method of measuring damage assumes affirmation of the contract [Toteff v Antonas (1952) 87 CLR 647, 651; McAllister v Richmond Brewing Co (NSW) Pty Ltd (1942) 42 SR (NSW) 187, 192; Alati v Kruger (1955) 94 CLR 216, 222; Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274, 280-1; 84 ALR 700, 706]. In addition, where a purchaser of a business, having gone into possession, continues for sufficient reason to trade and incurs losses, the purchaser may also recover damages in respect of losses so incurred, to the extent that they are not taken into account in the diminished value of the business [Gould v Vaggelas (1985) 157 CLR 215, 221-2; Munchies v Belperio, 707] - although the mere fact that a purchaser incurs losses following completion of a contract induced by a misrepresentation does not mean that those losses are attributable to the misrepresentation; they may result from "some supervening cause such as the folly, error or misfortune of the purchaser" [Gould v Vaggelas, 222].
56 There is no evidence that the subject matter of the land contracts was worth less than the contractual purchase price, and thus no basis for finding that the Purchasers suffered or would have suffered damage attributable to the contravening conduct had they completed the contracts. Accordingly, it is not established that avoidance would compensate for, prevent or reduce loss or damage caused by the contravening conduct. The Court could not declare the land contracts void, because a condition of that power in s 72 is not satisfied.
57 As to discretion, it is well-established that, although affirmation may not necessarily be fatal to a claim for statutory avoidance under Trade Practices Act, s 87, and its equivalents, nonetheless the equitable principles concerning rescission provide safe if not exclusive guidance as to the exercise of the discretion given by that section [Yorke v Ross Lucas Pty Ltd (No 2) (1982) 45 ALR 299; (1982) 69 FLR 116, 134-5; Myers v Transpacific Pastoral Co Pty Ltd (1986) ATPR 40-673; Crisp v Australia and New Zealand Banking Group (1994) ATPR 41-294, 41,942; Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546, 564-5; (1988) 79 ALR 83, 102-3; Munchies v Belperio, 705, 714].
58 Assuming that reliance had been established, then - had a claim for avoidance been brought unequivocally, and before termination of the contracts - it may have been on strong ground. However, the Purchasers advanced no such claim before termination. To the contrary, far from rescinding the contracts when they discovered the shortfall in croppable land compared to what they had expected, they repeatedly affirmed them. Having gone into possession, they remained in possession, and asserted that they were entitled so to do. They cultivated the land, harvested the crops, and asserted that they were entitled to their proceeds. They lodged a caveat claiming an interest in the land. They sued for specific performance of the contracts (albeit at a reduced purchase price). They first mentioned rescission only much later, in their opening address at the final hearing on 16 March 2009; until then they maintained that they were ready, willing, able and entitled to complete the contracts.
59 In that context, the Purchasers must be taken to have elected to affirm the contracts and sue for any damages occasioned by the misrepresentation - which, as already mentioned, are prima facie the difference between the contract price and the true value of the subject matter. It would be inappropriate now to permit rescission, in circumstances where it would properly be characterised as not being for the purposes of avoiding the consequences of the contravening conduct, but for the purposes of avoiding the consequences of a default attributable not to the misrepresentation but to the Purchasers' inability or refusal to complete, in accordance with their terms or at all, the contracts that they had elected to affirm.
60 As I am not prepared to make an order avoiding the contract, it follows that the prima facie entitlement of the Vendors to terminate is sustained. Other than the relief sought under the Fair Trading Act, no basis was advanced on which the Vendors might not be entitled to terminate. It follows that the Vendors have validly and effectively terminated the contracts for default by the Purchasers, and have forfeited the deposits (subject to the claim for relief against forfeiture under s 55(2A), addressed below.
Is any additional or alternative monetary remedy appropriate?
61 Do the Purchasers nonetheless have a monetary remedy, for damages caused by or arising from the misrepresentation?
62 Where a purchaser rescinds for misrepresentation, equity will exercise its powers, including to direct accounts and inquiries, to ascertain what adjustments may be necessary to achieve what is practically just by way of restitution, even if practical restitutio in integrum cannot be achieved simply by returning the subject matter and purchase money [Alati v Kruger, 223-4; Munchies v Belperio, 709-10]. Typically, the vendor must pay interest on any purchase money received, the purchaser must account for rents and profits or the use of the property whilst in possession, and (but only in a case of fraudulent misrepresentation) any loss directly occasioned to the purchaser must be made good (including expenses incurred in effecting the purchase, the value of improvements made by the purchaser before notice of the fraud, and any other detriment suffered as a direct consequence of the fraud [McAllister v Richmond Brewing Co (NSW) Pty Ltd, 192; Newbigging v Adam (1886) 34 Ch D 582, 592; Munchies v Belperio, 710-711]. Underlying these heads of damage is the assumption that, but for the misrepresentation, the purchaser would not have entered the contract, and has wasted those expenses by performing the contract until rescission; effective rescission is therefore an essential pre-condition to recovery of such damages.
63 The approach of the common law and equity to the remedies of damages and rescission for misrepresentation informs the application of the similar statutory remedies provided by the Fair Trading Act [Munchies v Belperio, 712-4], except that in respect of the statutory remedy of avoidance under the Trade Practices Act, fraud is not a necessary precondition to the award of damages in addition to restitution, although it may bear on the remedy as a matter of discretion [Munchies v Belperio, 713-4].
64 As already observed, there is no evidence that the subject matter of the contracts was worth less than the contractual purchase price, and thus no basis for finding that the Purchasers suffered or would have suffered damage attributable to the contravening conduct had they completed the contracts. Even if there were, then the effect of affirmation was that the Purchasers acquired a right to claim such damages upon completion of the contract. Ultimately, they did not complete; the Vendors terminated for the Purchasers' default, and the Purchasers thereupon lost their incipient right to damages on this basis - not as a result of the misrepresentation, but because of their own default.
65 The Purchasers incurred trading losses while they were in occupation, which they would not have incurred had they never entered into the contracts. These might have been recoverable (a) in addition to damages measured by the deficiency of value under the purchase price upon completion, to the extent that they were not taken into account in striking that value; or (b) in connection with restitution upon rescission. However, the basis for any such claim as in (a) has been destroyed by the Vendors' termination for the Purchasers' default; and the basis for any such claim as in (b) is dependent upon rescission, which I have refused. By electing to affirm the contracts, the Purchasers elected to assume the risk of ongoing trading losses [cf Munchies v Belperio, 714 (where the Vendors were held to have so elected by not accepting the return of the subject matter when the Purchasers communicated their election to rescind)]. Alternatively put, such losses were not attributable to the contravening conduct.
66 Assuming that the Purchasers had relied on the contravening conduct in entering into the contracts, the position may be summarised as follows: