The Misrepresentation Questions
29 Mr Ireland QC acknowledged that the vendor was legally responsible for any misrepresentation in the contract or the brochure. It was common ground that the purchasers did not elect to rescind the contract before the vendor terminated it for their breach. The remaining issues on the vendor's appeal are his challenges to the order for the return of the deposit and the order for costs. It will be convenient to defer consideration of these issues and to deal with the misrepresentation case against the agents.
30 There is no doubt that the brochure, by incorporating a copy of the Hannagan survey diagram, conveyed a representation by the vendor about the location of the swimming pool in relation to the title boundary. The agents had been given a copy of the Hannagan survey by the vendor. They denied that its use in the brochure constituted misleading or deceptive conduct on their part or that they had made any representation that the survey diagram was accurate. The Judge held that the class of potential purchasers of waterfront homes in a price bracket above $1M, independently advised by their own solicitors, would be unlikely to be misled by the brochure read as a whole having regard, in particular, to its disclaimer provisions.
31 He found that the agents were entitled to rely upon the survey diagram provided by the vendor without attempting to verify its accuracy. He also found that even if the brochure had been misleading or deceptive the agents had done no more than pass on the survey diagram making it clear that they were not the source of the information. The Judge said that if he had found that the brochure was misleading or deceptive he would probably have found that the agents had not engaged in misleading or deceptive conduct because of their limited role as agents.
32 Having found, against the vendor, that the brochure conveyed a representation as to the location of the pool within the freehold (pars 115, 128-130), and that the vendor's conduct in that respect was misleading or deceptive (par 144), it was not open to the Judge to find in favour of the agents that the brochure was not misleading or deceptive (pars 170-1). It is well established that conduct cannot be misleading or deceptive unless it conveys a misrepresentation. Taco Co of Australia Inc v Taco Bell (1982) 42 ALR 177, 202, Global Sportsman Pty Limited v Mirror Newspapers (1984) 2 FCR 82, 88 and Argy v Blunts & Lane Cove Real Estate Pty Limited (1990) 26 FCR 112, 131 (Argy). The converse must also be true in cases such as the present.
33 The Judge found that the purchasers reasonably relied on the diagram in the brochure (par 145) and that they did not see the contract prior to the auction. However their solicitor, Mr Zuur, received a copy of the contract the day before (par 31) and explained it to them (par 179). Thus they relied through their solicitor on the survey report and diagram annexed to the contract.
34 The findings that the agents acted reasonably in using the survey diagram in their brochure (pars 171, 175) merely passed on information they had obtained from the vendor, had no intention to deceive, and were not personally at fault, do not establish that their conduct, viewed objectively, was not misleading and deceptive. In Yorke v Lucas (1985) 158 CLR 661 Mason CJ, Wilson, Deane and Dawson JJ said at 666:
"It is, of course, established that contravention of [section 52] does not require an intent to mislead or deceive and even though a corporation acts honestly and reasonably, it may nonetheless engage in conduct that is misleading or deceptive or is likely to mislead or deceive".
35 Thus the reasons given by the Judge for holding that the agents had not engaged in misleading and deceptive conduct cannot be supported. He added (par 181):
"The information about the location of the mean high water mark was supplied by [the vendor] and the [agents] did no more than pass that information on, making it clear by the wording of the disclaimer that it was not the source of the information. In those circumstances it is probable, in my view, that the company would not have engaged in misleading conduct even if the content of the brochure had been misleading (contrary to my finding)".
36 In view of my conclusions it is necessary for this Court to decide this question.
37 Under the general law a representation communicated by a disclosed agent with the authority of his principal was for all purposes a representation by the principal. Barwick v English Joint Stock Bank (1867) LR 2 Ex 259, 266-7. That being so it was seldom necessary to determine whether the agent himself made the same representation, or whether in appropriate circumstances he should be understood as making a more limited one in his own right. However it was recognised that someone who did no more than state as information received such information as he has makes no representation as to the truth of that information. The point was made by Lord Cairns in In re Reese River Silver Mining Company, (Smith's case) (1867) LR 2 Ch App 604, 615:
"If they had been content to say 'we ourselves know nothing about the state of the mine, but we have been told it is a very valuable mine largely worked at present' and if they had, in point of fact, been so told, no person could have complained of the prospectus as calculated to mislead; but in place of repeating as hearsay what they had been told, they affirm it as a positive fact".
38 See also Moens v Heyworth (1842) 10 M & W 147 [152 ER 418] and Craig v Phillips (1876) 3 Ch D 722, 734.
39 Until relatively recently an agent making a representation on behalf of his principal within his authority incurred no liability to a third party for any misrepresentation unless he was guilty of fraud. The agent's knowledge that the representation was false would establish that he intended to convey that representation. The Court would not find, in favour of a fraudulent agent, that his representation should be given a restricted meaning. Even if the Court did so find the agent would still be guilty of fraud because of his implied representation of honest belief in the truth of the statement made on behalf of his principal. Compare Spencer Bower, Turner & Handley "Actionable Misrepresentation" pp 12-14.
40 The Misrepresentation Act 1967 did not alter this state of affairs in England because the Act does not impose any liability on an agent. See Resolute Maritime Inc v Nippon Kaiji Kyokai [1983] 1 WLR 857. However an agent's immunity for innocent misrepresentation has changed in recent years with the development of liability for negligent misrepresentation as a result of Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 and the introduction of s 52 of the Trade Practices Act 1975.
41 It is well established for the purposes of s 52 and its equivalents that a disclosed agent conveying a representation on behalf of his principal may properly be understood as conveying a more limited representation in his own right. Thus in Yorke v Lucas (1985) 158 CLR 661, 666 the joint judgment, having said that a person may engage in misleading or deceptive conduct although he acted reasonably and had no intention to deceive, continued:
"That does not, however, mean that a corporation which purports to do no more than pass on information supplied by another must nevertheless be engaging in misleading or deceptive conduct if the information turns out to be false. If the circumstances are such as to make it apparent that the corporation is not the source of the information and that it expressly or impliedly disclaims any belief in its truth or falsity, merely passing it on for what it is worth, we very much doubt that the corporation can properly be said to be itself engaging in conduct that is misleading or deceptive".
42 Any implied disclaimer of a belief in the truth of information passed on to another would have to be quite clear because of the general principle established in Derry v Peek (1889) 14 App Cas 337, 374 per Lord Herschell: "to prevent a false statement being fraudulent there must, I think, always be an honest belief in its truth".
43 This dictum in Yorke v Lucas has been followed by the Federal Court. In The Saints Gallery Pty Limited v Plummer (1988) 80 ALR 525 the Full Court said at 530:
"The reference in Yorke v Lucas … to an express or implied disclaimer of belief in an instruction conveyed by an agent does not involve that an agent who does believe his client, and makes that fact apparent, may not at the same time impliedly disclaim personal responsibility for what he conveys".
44 See also Lezam Pty Ltd v Seabridge Aust Pty Ltd (1992) 35 FCR 535, 552-3, and John G Glass Real Estate Pty Limited v Karawi Constructions Pty Limited [1993] ATPR 41,356, 41,358. The case which is most relevant is Argy (1990) 26 FCR 112, which also arose out of the sale of valuable real estate. The solicitors for the vendor were sued for misleading and deceptive conduct arising from the annexation of an incomplete s 149 certificate to the contract of sale where the missing page referred to significant restrictions upon the development of the land. Hill J said at 131-3:
"… I have difficulty with the submission that the inclusion of a s 149 certificate in a contract constitutes … a representation by the person who prepares the contract that the zoning is in accordance with the terms of the certificate. … in my opinion it merely constitutes a representation by that person that the certificate annexed is the certificate of the relevant statutory authority … I am however of the view that the annexation of a certificate to a contract by the person preparing it can be seen to be a representation by that person not only that the certificate is the certificate issued by the Council but that it is the whole of that certificate so that where, as here, the certificate is incomplete … there is a misrepresentation made by the person preparing the contract carrying with it the capacity to deceive.
The applicant's case against [the estate agents] so far as it depends upon the contract to constitute misleading and deceptive conduct, is even more difficult. It is hard to see why a contract prepared by a solicitor constitutes a representation by an estate agent going to matters contained in the contract because the name of the agent is shown in the contract or because the agent distributes … it to prospective purchasers. In making the contract available to prospective purchasers the agent can be taken, at least in the ordinary case, to have represented that the contract so distributed by him is as prepared by the solicitor whose name appears in the contract but not that each matter disclosed in the contract is correct … [the solicitors] were … engaged in misleading and deceptive conduct but only in the sense that the contract … can be seen to be a … representation made by them as the persons responsible for the preparation of the contract that the s 149 certificate annexed thereto was, so far as relevant to the land the subject of it, a copy of the complete certificate as issued by the Council".
45 In Dean v Allin [2001] 2 Lloyd's Rep 249 Lightman J, delivering the principal judgment in the Court of Appeal, made the same point, saying at 257-8:
"The greatest caution is required in treating statements made by a solicitor in the course of conveyancing transactions and the like on or in accordance with the instructions of his client as representations made by the solicitor rather than as 'conveyed' by him as (in effect) a medium of communication or messenger for his client, for this may readily be assumed to be understood to be part of his role in the transactions. The solicitor's position in such a situation is to be contrasted with his position … where [he] makes an express unequivocal statement to a third party which is not attributable simply to performing his role as the client's adviser: for in the latter case the adviser may readily be held to have assumed responsibility to the third party, since the explanation of his acting merely as a messenger would be inapplicable".
46 There is no reason why these principles should not apply to other agents as well. The agent's brochure carried disclaimers in fine print at the foot of the front and back pages, but I would not accord these decisive significance on the present question. They are however relevant as showing that the agents did not accept responsibility for the accuracy of the information in the brochure.
47 The only representation in the brochure as to the location of the pool in relation to the title boundary was that conveyed by the diagram reproduced on the back. The text contained nothing of relevance for present purposes. The diagram purports to be a copy of an original prepared by a professional surveyor. The agents represented that the reproduction was an accurate copy of what they believed was a genuine and correct survey diagram. In my judgment they made no representation as to its accuracy. The question can be tested by supposing that they handed copies of the survey report and diagram to prospective purchasers telling them, without more, that it was a copy of a survey they had obtained from the vendor. The recipients would know that the agents did not hold themselves out as professional surveyors, and had not carried out the survey themselves.
48 The agents by proffering copies would be impliedly representing that they had an honest, or perhaps honest and reasonable, belief that the copies were genuine and recorded the surveyor's opinion on the matters disclosed. See Spencer Bower, Turner & Handley "Actionable Misrepresentation" pp 13-14. They would also impliedly represent their belief that the report and diagram were accurate (op cit pp 11-13), but I see no good reason why they would intend to represent that it was in fact accurate, or why the recipients would think that the agents were making any such representation. In my judgment the situation is indistinguishable from that considered in Argy.
49 Mr Moore, who appeared for the purchasers, relied strongly on John G Glass Real Estate Pty Limited v Karawi Constructions Pty Limited (1993) ATPR 41-249, a decision of the Full Federal Court. The appellant had prepared and distributed a typed document which stated that the net lettable area in a commercial building under construction was 180m². The agents obtained this information from the vendor's consultants and believed it to be true. They provided the purchaser with a bound dossier which included a letter from the vendor's management consultants, a copy of their typed document, a summary of a quantity surveyor's report, a copy of the building plans, a copy of the building approval and a feasibility study. The inside cover stated that the agents specialised in "real estate investment consultants to Institutional investors and to developers of major properties" (sic). There was a disclaimer at the back.
50 The typed document did not reveal the source of the information although the purchaser knew that it had been obtained from the vendor, and "he did not think that the [agents] had verified the statements about the net lettable area" (supra at p 41,358).
51 The Full Court referred to Yorke v Lucas, and the resulting line of authority in the Federal Court, and said (41,359):
"In our opinion an estate agent which holds itself out as, amongst other things, 'consultants to institutional investors and to developers of major properties' would not be regarded by potential purchasers … as merely passing on information about the property 'for what it is worth and without any belief in its truth or falsity'.
… We think a purchaser like Karawi would ordinarily expect … that the agent had no reason to doubt the completeness or accuracy of the information provided.
… the appellant adopted the information in question and incorporated it as a central and prominent feature of their selling effort on behalf of the vendor. … As part of its ordinary business the agent was providing information in a persuasive form with a view to achieving a sale of its principal's property and of course earning commission. It was this conduct which the learned trial Judge, correctly in our opinion, held to be misleading and deceptive".
52 In that case the agents claimed relevant expertise, adopted the figures as their own, and put them forward without any reference to their source. In the present case the agents claimed no relevant expertise, and the diagram itself indicated that it was the work of a professional surveyor. In these circumstances that decision is distinguishable and does not determine the outcome in the present case. In my judgment the purchasers' claim against the agents based on the brochure fails because the relevant conduct by the agents was not misleading or deceptive.
53 The other claim against the agents was based on representations by Mr Spring and Mr Elder to Mr Butcher, one of the purchasers, that he and his partner could expect to sell their existing property at Calvert Parade, Newport for $1.3M. The Judge held that these allegations were not supported by the evidence. On 12 February, after Mr Spring had inspected the Newport property, he completed a residential listing which stated that in his opinion its market value was $1.2M. He gave evidence, which the Judge accepted, that in forming that view he had regard to sales of other properties. Mr Spring told Mr Butcher that he felt "really comfortable" with the sale price of $1.2M-$1.3M. Mr Butcher said he would be comfortable with $1.25M, but asked Mr Spring to obtain an opinion from Mr Elder.
54 On 14 February Mr Butcher and Ms Radford met Mr Elder at the Newport property. Mr Elder predicted a sale price of "absolute dead set minimum $1.2M" and up to $1.3M or even more. The Judge accepted that evidence. Relying on this advice the purchasers bid $1,360,000 for the Rednall Street property and signed a contract at that price.
55 The agency agreement entered into between the purchasers and the agents a few days after the auction contained a statement that the agent's opinion as to the current reasonable selling price was $1.3M. The Judge said that it was clear that this figure, and the figures given orally, were estimates rather than valuations and Mr Butcher conceded that the figure of $1.3M was an indication rather than a guarantee.
56 The agents marketed the property from mid-March onwards and received a number of offers which were passed on to the purchasers but rejected. They eventually sold the property for $1.1M on 24 June 1997. This represented 85% of the price stated in the agency agreement and 88% of the minimum of $1.2M mentioned by Mr Spring and the "absolute dead set minimum" mentioned by Mr Elder. However in April, prior to the first auction date, the agents passed on to the purchasers an offer from a Mr Adams of $1,175,000, which represented 98% of the minimum figure of $1.2M. The purchasers rejected that offer.
57 The representations by Mr Spring and Mr Elder were statements of opinion by experienced real estate agents familiar with the market for such homes. Their statements imported representations that they held those opinions and had reasonable grounds to support them. See Spencer Bower, Turner & Handley, pp 15-16. In any event s 51A(1) of the Trade Practices Act provides that where a corporation makes a representation with respect to any future matter and does not have reasonable grounds for doing so, it shall be taken to be misleading. Sub s (2) provides that a corporation shall be deemed not to have had reasonable grounds for making such a representation unless it adduces evidence to the contrary.
58 The honesty of Mr Spring and Mr Elder was not challenged and the Judge found they had a reasonable basis for their estimates. Within a month of the start of marketing the agents secured an offer representing 98% of their lowest estimate. In these circumstances, as the Judge found, there was really no evidence that the agents had engaged in misleading and deceptive conduct. This conclusion is reinforced by Mr Butcher's concession that the figure of $1.3M he had been given was an indication and not a guarantee. This claim by the purchasers also fails and their appeal against the judgment in favour of the agents must be dismissed with costs.