CAREY -v- COMMISSIONER FOR CONSUMER PROTECTION [2012] WASC 8 (10 January 2012)

Supreme Court of WA|2012-01-10|Before: Murray J

1 By a prosecution notice dated 10 November 2008, the respondent laid a number of charges of offences under s 12(2)(b) and s 81(1) of the Fair Trading Act 1987 (WA) (FTA). Five charges went to trial and they are identical in form. Each charge related to a particular lot on an identified strata plan, and each related to a particular date of offence.

2 A company, Westpoint Realty Pty Ltd (Westpoint) was alleged, in trade or commerce, in connection with the disposal or possible disposal of an interest in the identified piece of land, on the particular date given, to have made a false or misleading representation concerning the use to which the land was capable of being put, contrary to s 12(2)(b) and s 69 of the FTA.

3 It was alleged that the appellant, Mr Carey, and a Mr Niven, as directors of Westpoint, and a Mr Rundle, as the secretary of Westpoint, were guilty of the same offence pursuant to the FTA, s 81(1).

4 A subsidiary of the Westpoint group of companies, Lanepoint Enterprises Pty Ltd (Lanepoint) bought a piece of land in Rivervale, fronting on to the Great Eastern Highway. The land at that time, as I understand it, was occupied by a motel known as The Regency. The land, including a redevelopment of the original motel building, was to be developed in stages into residential units. Stage One A was to be the redeveloped motel units, converted into residential units, and a new residential building providing additional units was to be Stage One B.

5 There were actually five lots on separate certificates of title which had been acquired in that way. The motel units were on one or two of the lots, and the rest of the land was vacant. As I understand the evidence, Stage One A was to provide 40 residential units on two levels. The new building, also of two levels, which was to be constructed on the site, was to yield a further 12 residential apartments. Ultimately, a complementary apartment development was to be added to a portion of the land which was vacant and was to be left vacant during the Stage One construction and sale process. As I have said, this was to be a strata title development, pursuant to the Strata Titles Act 1985 (WA) (STA).

6 It is unnecessary to discuss it in detail, but, in November 2004, an application was made to the City of Belmont for approval of the development which would constitute Stage One of the project, ie, the construction and sale of the 52 residential apartments to which I have referred above. In the meantime, apartments which were to be part of Stage One A were being sold 'off the plan'. Westpoint had been given the task of selling the units which were to comprise the development which was to be known as 'Regent Apartments'. Real estate agents had been engaged. The people concerned as agents were Messrs Lewis, Egan and Haynes.

7 As I understand it, they were also charged with offences of making false or misleading representations in connection with the disposal of the strata title units, which was the relevant land. I digress to observe that the FTA, s 5(1), contains a definition of 'interest, in relation to land' which gives it the meaning, among other things, of, 'a legal or equitable estate or interest in the land'. The relevant interest in the land in relation to these prosecutions was the interest which a prospective purchaser would acquire on entering into a contract for the purchase of a strata title unit.

8 In February 2005, as I understand it from the uncontested findings of the magistrate and the evidence before him, the City of Belmont, speaking by its planning officers, were unhappy with that part of the development which would constitute Stage One B, a building to contain 12 apartments to be constructed on two levels fronting Great Eastern Highway. The City had a policy which would not be reflected adequately by such a building. A building which was to provide a more grand statement was preferred. Indeed, it was suggested that a building of five stories with a gabled roof, equivalent to a sixstorey building, was a development likely to be approved.

9 It seems that interim development approval was granted in respect of Stage One A and the 40 strata title apartments which were being sold off the plan, but the City did not approve the balance of the development proposal. The balance of the proposal, not being approved when the relevant time expired, that constituted a deemed refusal, against which Lanepoint was able to appeal to the State Administrative Tribunal.

10 Those proceedings were settled, as I understand it, by the end of July 2005. It was ultimately agreed and approved that a landmark building would be constructed. It would be of a size and in a form which would increase the number of units in Stage One B from 12 to 20, and it was proposed by those involved in Westpoint that the development would then proceed upon that basis.

11 It created a problem, however, in relation to the contracts entered into for the purchase of units in Stage One A. The area of land had not changed, but people had purchased units, and entitlements under the STA to the common property in respect of a development having a total of 52 units, whereas the development which was to proceed would be for a total of 60 units. Their interest was thereby diminished, and so the purchasers could no longer be provided with the interest which they had contracted to buy on particular financial terms.

12 It is convenient to note in passing that the agents to which I have referred above were, upon their pleas of guilty, convicted of offences of making false or misleading representations concerning the nature of the interest in the land to which I have referred. This appeal does not concern those cases. Indeed, it does not directly concern the convictions which were recorded against Westpoint. This appeal concerns only the convictions recorded against Mr Carey. Messrs Niven and Rundle were both acquitted on grounds which have no relevance to this appeal.

13 The charges which proceeded and, in respect of which convictions were recorded against Westpoint and Mr Carey, were in relation to representations made on the following dates in respect of the following strata title lots:

18 November 2005, lot 14, in respect of which the unit entitlement was reduced by 19.5%.
18 November 2005, lot 24, in respect of which the unit entitlement was reduced by 18%.
19 November 2005, lot 39, in respect of which the unit entitlement was reduced by 16.8%.
21 November 2005, lot 29, in respect of which the unit entitlement was reduced by 18.8%.
17 December 2005, lot 35, in respect of which the unit entitlement was reduced by 8%.

14 As I have noted, it took a while before the charges were brought by the prosecution notice dated 10 November 2008. There was a further delay before the matter came before Magistrate Malone in the Perth Magistrates Court for trial. It was heard on 15 17 November, 22 26 November and 29 November 2 December 2010. His Honour came to a decision and gave his reasons, much more promptly than I have been able to accomplish, on 11 February 2011. As I have said, Mr Carey was convicted of five offences in relation to the contracts for the purchase of strata title interests in the land to which I have referred.

15 Mr Carey's appeal is brought on the following grounds:

The learned Magistrate erred in law in finding that the Appellant did not have a defence available to him under s.81(j) of the Fair Trading Act (1987) ('the Act').

The Appellant was convicted of five charges of false or misleading representations under s12(2)(b) and 81(1) of the Act.
The charges related to the terminated sale of several units in the Regency Apartment development in Belmont by Westpoint Realty Pty Ltd.

Daniel Anthony Egan, David Martin Lewis and Thomas Haynes ("the Agents") were employed by acting for Westpoint Realty Pty Ltd as agents to sell the Regency Apartment units. Between the three of them the Agents later terminated the sales of the units which were the subject of the charges.

The Agents were charged under s.l2(2)(b) of the Act for making false or misleading representations in respect of the above units and each pleaded guilty before the trial commenced.
By reason of the Agents' pleas of guilty, Westpoint Realty Pty Ltd and its directors were also liable to be found guilty unless a defence under s.81(1) of the Act could be established.
The Appellant was found by the learned Magistrate (at pg 98 of his reasons) to have been involved in the process whereby the false or misleading representations were made by the Agents to the purchasers of the above units.
However, (at pg 93 of his reasons) the learned Magistrate found that, as a group, the Agents discussed the best process in relation to talking to clients about cancelling the contracts and as a group they decided to say that delays caused the cancellation.
The learned Magistrate (at pg 98 of his reasons) found that there was no evidence that the Appellant authorised the Agents to make the false or misleading representations that the Agents made;
The learned Magistrate (at pg 98 of his reasons) found that there was no evidence that the Appellant permitted the Agents to make the false or misleading representations that the Agents made; and
In the circumstances, it was not open to the learned Magistrate to be satisfied that the Appellant had not established on the balance of probabilities one of the defences available to him under s.81(1) of the Act.

The learned Magistrate erred in law in finding the charges proved against the Appellant under s.8l(l) of the Act without making any finding as to whether the Appellant knew that the offences would be committed by the Agents.

The learned Magistrate (at pg 97 of his reasons) made no definitive finding as to whether the Appellant knew that the Agents would commit the offence.
Given the findings in favour of the Appellant particularised in Ground I hereof, it was not open to the learned Magistrate to be satisfied beyond reasonable doubt that the Appellant knew that the offences would be committed by the Agents.

The learned Magistrate erred in law in finding that the Appellant could have prevented the offences by the exercise of due diligence.

Particulars

Having regard to the findings in favour of the Appellant particularised in Ground 1 hereof, it was not open to the learned Magistrate to be satisfied beyond reasonable doubt that the Appellant could have prevented the offences through the exercise of due diligence.

The learned Magistrate erred in law in relying upon or taking into account decisions made or directions given by the Appellant in his capacity as a director of Lanepoint Enterprises Pty Ltd (the developer, owner and vendor) and as a director of Westpoint Corporation Pty Ltd (Lanepoint Enterprises Pty Ltd's project manager) to convict the Appellant, when those decisions were irrelevant to his conduct as a director of Westpoint Realty Pty Ltd, the company which the learned Magistrate found to be guilty of the offences.

Lanepoint Enterprises Pty Ltd was not obliged either under the Act or otherwise to re-offer units to purchasers on new and different contracts once the original contracts to purchase those units had become frustrated and/or were incapable of performance.
The learned Magistrate should have found that decisions made by the Appellant in his capacity as a director of Lanepoint Enterprises Pty Ltd and Westpoint Corporation Pty Ltd were irrelevant to the issue of whether the Appellant acting in his capacity as a director of Westpoint Realty Pty Ltd was guilty of the charges against him.

The learned Magistrate erred in law in failing to find that prior to the making of any false or misleading representations the contracts entered into by the purchasers the subject of the charges were incapable of being legally completed and that the subject property to which each contract related could not be lawfully transferred to the purchasers, alternatively, that the contracts had been frustrated and as such at the time the false or misleading representations were made they were not made in connection with any relevant interest in land as required by s.12(2)(b) of the Act.

The contracts entered into between Lanepoint Enterprises Pty Ltd and the purchasers specifically described the property being sold (including unit number and unit entitlement) and were based on a specific strata plan relating to 52 strata titles.
On 29 July 2005, following a deemed refusal by the City of Belmont of the original 52 lot strata plan, the State Administrative Tribunal, following a consensual settlement between the City and Lanepoint Enterprises Pty Ltd, ordered that there be a 60 unit development on the certificate of title the subject of the original 52 unit strata plan.

The consequences of that order were that the 52 unit development could no longer be legally built and the contracts entered into by the purchasers (based on the original 52 unit development) could not legally be performed and/or were frustrated.

After the 29 July 2005 SAT decision there was no recognisable interest in land held by the relevant purchasers which was capable of being disposed of.
The learned Magistrate found (at pg 59 of his reasons) that "the original contracts were untenable within their terms" after the 29 July 2005 SAT decision.

The learned Magistrate erred in law in finding that the false or misleading representation that a purchaser could have no opportunity to acquire the property he or she had purchased under the contract was a false or misleading representation concerning the use to which land is capable of being put within the meaning of s.l2(2)(b) of the Act.

The Particulars at Ground 5 are repeated.
In the circumstances, as a matter of law the purchasers could not acquire the property they had purchased under the contract the subject of the charges.

The false or misleading representation concerned a right or legal entitlement under a contract to purchase the land and did not relate to the use to which the land the subject of the contract could be put.

The learned Magistrate erred in law in convicting the Appellant of a breach of s12(2)(b) of the Act on grounds which were not part of the Respondent's case against him.

(a) the charges were not particularised prior to the trial;

(b) in her opening submissions at the commencement of the trial senior counsel for the Respondent identified the alleged misrepresentations as the statement by the Agents that Stage 1A of the development would not proceed at all and that this had been caused by the City of Belmont's requirements and demands developer;

(c) the Respondent was bound by the case particularised in its opening submissions;

(d) notwithstanding the above matters the learned Magistrate found that the Agents had misrepresented purchasers in two respects, namely, that Stage 1A was not going ahead and that the purchasers had no opportunity to acquire their apartments;

(e) the alleged misrepresentation regarding purchasers not having the opportunity to acquire their apartments was not part of the Respondent's case against the Appellant;

(f) it was therefore not open to the learned magistrate to rely on that alleged misrepresentation to convict the Appellant.

16 The appeal was instituted on 4 March 2011, on grounds which were then provided, substantially the first six grounds of appeal. On 8 April, Hall J granted leave to appeal in respect of those grounds. Ground 7 is new. It was added at the hearing of the appeal on 6 July. Strictly speaking, therefore, leave is required in respect of that ground. It is convenient that I should grant that leave and, in due course, deal with the merits of the ground.

17 It is important at the outset to understand the way in which the statutory scheme is constructed. Section 12(2)(b) of the FTA provides:

(2) A person shall not, in trade or commerce, in connection with the disposal, or the possible disposal, of an interest in land or in connection with the promotion by any means of the disposal of an interest in land -

(a) ...

(b) make a false or misleading representation concerning the nature of the interest in the land, the price payable for the land, the location of the land, the characteristics of the land, the use to which the land is capable of being put or may lawfully be put or the existence or availability of facilities associated with the land;

(c) ...

(d) ...

18 At trial there was no contest that Westpoint was a person within the meaning of the Act, nor was there any question that its relevant conduct was 'in trade or commerce, in connection with the disposal, or the possible disposal, of an interest in land'. It is noteworthy that the charges in the prosecution notice all focused upon the alleged making of a false or misleading representation concerning the use to which the land was capable of being put, not the making of a false or misleading representation concerning the nature of the interest in the land which was to be disposed of.

19 Relative to the present proceedings, s 12(2) imposes the duty, in this case, upon Westpoint. If that section is breached, the offence is created by s 69 of the FTA. The offence committed by Westpoint is a crime, but it may be punished summarily and here, as has been seen, the trial was conducted in the Magistrates Court before his Honour Magistrate Malone. The applicable penalty is irrelevant for present purposes.

20 So far as Mr Carey is concerned, his liability, if established, is derivative. Section 81(1) of the FTA provides:

(1) Where a corporation within the meaning of the Corporations Act 2001 of the Commonwealth or any other body of persons, corporate or unincorporate, is convicted of an offence against this Act, each person who, at the time of the commission of that offence, was a director of the corporation or was the manager, secretary or other similar officer of that body, or who purported to act in any such capacity, is also guilty of an offence unless he proves -

(a) that the offence was committed without his knowledge, or that he did not authorise or permit the commission of the offence; and

(b) that he was not in a position to influence the conduct of that corporation or body or, being in such a position, could not by the exercise of reasonable diligence have prevented the commission of the offence,

and is liable to a penalty not exceeding the penalty prescribed for the offence of which the corporation or body was convicted.

21 There are a number of matters which must be borne in mind. In the first place, of course, having regard to s 12(2)(b), in this case it was necessary to prove beyond reasonable doubt that Westpoint, acting by a real estate agent (FTA, s 82(2)(a)), made, in respect of each charge, a false or misleading representation concerning the use to which the land was capable of being put. If that was established, as his Honour the magistrate found, then so far as Mr Carey was concerned, he was guilty of the offence as a director and the onus shifted to him.

22 He was obliged to prove, on the balance of probabilities, firstly that the offence was committed without his knowledge or that he did not authorise or permit the commission of the offence by Westpoint and, additionally, relative to this case, that although as a director of Westpoint he was in a position to influence its conduct in respect of the instructions given to its agent, Mr Carey 'could not by the exercise of reasonable diligence have prevented the commission of the offence'. I shall return to these matters, so far as they are raised by the grounds of appeal, shortly.

23 In the leadup to the proceedings in the Magistrates Court, it would seem that statements of material facts were provided to the defendants. I was shown a document dated January 2009 in relation to Lanepoint. A document bearing that date, in relation to Westpoint, would appear to have been referred to when the prosecution case was opened at the trial in relation to these proceedings. I was also shown a very similar document dated 14 September 2010 in relation to the prosecution of the agent, Mr Lewis.

24 When the trial commenced on 15 November 2010, counsel for Westpoint said that apart from entering a plea of not guilty, Westpoint proposed to take no part in the trial. Counsel sought the leave of the court to be excused further attendance and that was granted.

25 As to the defendants before the court, including Westpoint and Mr Carey, senior counsel prosecuting opened the case. In the course of her opening she referred briefly to the representations made in respect of each of the five units purchased off the plan which were the subject of the charges of which Westpoint and Mr Carey were convicted. The statements were made on 15 November 2010: ts 21 23, as follows:

The purchasers of lot 14 were a Mr and Mrs Hall. On 18 November 2005, Mr Lewis told them that the development may not be proceeding due to various delays which would increase costs. The whole project may not proceed. There had been problems obtaining the approval of the City to the development. They were encouraged to cancel their agreement. About a month later, the unit was sold to another purchaser at a substantially increased price.
The purchasers of lot 24 were a Mr and Mrs Notarangelo. On 18 November 2005, the agent, Mr Haynes, told them that the development would not proceed or would not be going ahead at that stage; that the City had put pressure on the developers to make additions to the units and the development may never be finished. They executed a termination agreement and the money they had invested in the purchase of the unit was refunded to them. Again, about a month later, it was resold to another purchaser for a substantially increased price.
The purchaser of lot 39 was a Mr McCabe. On 19 November 2005, the agent, Mr Lewis, told him that the City wanted to put a landmark building on the site. The developers could not afford to do so and were pulling out of the project. He signed a termination agreement cancelling the contract to purchase the unit, which was resold at a substantial profit 3 months later.
The purchaser of lot 29 was a Ms Hutchins. On 21 November 2005, Mr Lewis told her that the City would not accept the developer's plans because they wanted a landmark building included. The project was indefinitely delayed and was unlikely to proceed because the demands and requirements of the City were too expensive. She was advised to terminate the agreement and did so. The property was resold to another purchaser on 6 December 2010 for a substantially greater sum.
The purchasers of lot 35 were a Mr and Mrs Ingham. On 17 December 2005, which was after the contracts in respect of some of the units had been terminated and the units had been resold, Mr Egan told them that the development might not be going ahead because the City was 'holding things up'. Again there was a reference to the much bigger landmark building that was not part of the original plan. They were told that, provided they terminated promptly, they would get a refund. They did so, and a month later the property was resold to another for a higher price.

26 Counsel concluded this aspect of her opening address by summarising the prosecution case: ts 24. At the conclusion of that opening, Mr de Kerloy, for Mr Carey, said (ts 26), that he accepted that the nature of the case was as demonstrated by the opening which seemed to him to be in accordance with the statement of material facts with which he had been provided, from which he thought that prosecuting counsel was reading. Indeed, he went on to say that if the prosecution wished to tender that document to give succinct written expression to the prosecution case, the defence would have no objection.

Westpoint was a corporate person.
It acted in trade or commerce by those who were its guiding mind and will.
It acted in connection with the disposal or the possible disposal of interests in land. Those interests were the legal or equitable estate or interests in the land to be conveyed to purchasers of strata title lots pursuant to the contracts into which they had entered (FTA, s 5(1), definition of 'interest', par (a)).
By the real estate agents it engaged, it made false or misleading representations concerning the use to which the land was capable of being put.
The conduct of the agents in making the representations was the conduct of Westpoint because they were acting within the scope of their actual or apparent authority (FTA, s 82(2)(a)).
The representations concerned the use to which the land was capable of being put because they were representations of the practical incapacity of the development to proceed and that the purchasers were unable, or unlikely to be able, in the foreseeable future, to proceed with their contracts of purchase of strata title interests in the land.
The representations were in fact false or misleading because the City of Belmont were not, in fact, making demands with which Lanepoint was not prepared to comply; the project was not in fact stalled or unlikely to proceed. In fact, it did proceed, although the purchasers who terminated their contracts were not offered the opportunity to buy the newly created strata title lot corresponding with that which they had originally purchased.
Mr Carey was a director of Westpoint and, Westpoint having offended, he was therefore guilty of that offence under s 81(1) unless he could prove that he had the defence which that subsection provided.

28 Putting to one side for the moment the question of whether or not Mr Carey was able to establish a defence under s 81(1), his Honour the magistrate, in carefully constructed reasons, found the prosecution case to be proved. Indeed, much of the factual material was uncontested and is unchallenged on the appeal. His Honour provides a succinct summary of the representations that were established by the evidence in his judgment, pp 51 52. The findings he makes were in line with the way in which the prosecution case was opened. In other words, the evidence did not, in substance, depart from the way in which the case was opened.

29 As to the falsity of the representations, his Honour's conclusion that they were false is unimpeachable. I can do no better than set out the relevant portion of his Honour's judgment at pp 52 53:

Were the representations false?

It was false that Stage One A was not going ahead

Bearing in mind the provisions of the Fair Trading Act 1987 (set out at pages 21 and 22) I conclude that, in each case, there were false representations.

The evidence did not support any proposition that, as at the date the representations were made, Stage One A of the Regents Apartment project was not going ahead, might never be finished, was indefinitely delayed, was not going anywhere or was not going ahead.

The evidence was completely contrary to that. Council approval for Stage One A had been obtained in April 2005 (with a separate approval on 29 July 2005). The building licence had been obtained and the building was at least 60 to 70% finished.

While Mr Carey's instructions might have cast doubt on the future of Stages One B and Stage Two he did not suggest that Stage One A was not going ahead or might never be finished.

It was false that the purchaser could have no opportunity to acquire their Unit

While the representations were false as to the overall project they were also false in respect of the individual units.

None of the purchasers were offered the opportunity to continue on with the purchase of their respective unit whether on the basis of a new contract or otherwise.

This was clearly false in that it was understood by everybody on the Westpoint side of things that the units would be immediately re-sold and that is what happened.

It can be accepted that purchasers were offered the opportunity to acquire other Westpoint properties but that was part of the falsity. It was suggesting that the Stage One A properties were unavailable no matter how long the purchasers might be prepared to continue to wait. This was not the case and the evidence showed they were put up for re-sale as soon as new contracts were prepared.

30 It seems to me to be abundantly clear that the case opened by the prosecution was that the false or misleading representations made to the purchasers were to the effect that the project was effectively stalled. The requirements of the City of Belmont before the development would be approved were to blame. It was likely that the project would not proceed and that their contracts to purchase strata title lots could not be performed. The result was that they were offered the opportunity to terminate those contracts and to have returned to them the money that they had thus far paid. They were not given the opportunity to vary the original contracts or to enter into new contracts with respect to the same unit interest in the land. That was a part of the falsity of the representation.

31 The evidence accepted by the magistrate was capable of establishing that the representations were made and that they were false. The evidence did not depart materially or in any substantive way from the way in which the case was opened. The case was fought on that basis. No complaint was made that the defence were taken by surprise, nor could there have been any such complaint. The focus of the appellant was to seek to establish a defence under the FTA, s 81(1).

32 Again his Honour, in his judgment, discusses thoroughly the evidence which bore on the question whether the appellant had discharged the onus which rested upon him to establish the matters of defence arising under s 81(1) on the balance of probabilities.

33 Again, it is appropriate to set out the manner in which his Honour expressed his conclusions that the defence had not been made out, at pp 112 113 of the judgment:

When I return to the considerations required by section 81(1) I make the following conclusions.

Mr Carey knew and intended that the agents would speak to the Stage One A purchasers named in the remaining complaints.
Mr Carey knew and intended that the agents were to secure the terminations of each of the respective contracts so that each of those properties could be resold with new contract documentation.
There is no evidence that Mr Carey actually told the agents to say that the Stage One A of the Regents project was not going ahead or was indefinitely delayed.
There was evidence that Mr Carey raised grounds for the termination of the contract which were not true. Some of the aspects of these matters were reflected to some extent in what some of the agents said.
Mr Carey was in a position to influence the conduct of Westpoint Realty.
Mr Carey could have by the exercise of reasonable diligence prevented the commission of the offence. If Mr Carey wanted the existing Stage One A purchasers to resign new contracts for their units those new contracts simply had to be prepared and the clients invited in to discuss the situation. If they were happy to sign on the basis of the new Stage One A proposal and the changed entitlements, they did so. If they were not they could have been told to get legal advice or accept the termination of their existing contract.
It is clear from the correspondence that Westpoint looked to Mr Carey to make the decisions and then implement them.

34 Before turning to the grounds of appeal, I need to refer in a little more detail to the evidence and the findings made by his Honour the magistrate in relation to the question whether Mr Carey had established a defence under the FTA, s 81. The appellant's capacity to establish such a defence suffered a little when the magistrate viewed unfavourably Mr Carey's credibility as a witness. But significant elements of the evidence were contemporaneous documents of which Mr Carey was either aware or of which he was the author.

35 On 17 October 2005, a lawyer acting in the matter sent a memorandum to a number of people, including Mr Carey. It discussed the Stage One A development and observed that Lanepoint, she had been told, wished to terminate every contract entered into for Stage One A, 'and then resell at a higher price'. She went on to express concern about the question whether there was a clear basis to terminate the contracts entered into. She advised an alternative course which, in fact, would amount to an agreed variation of the contract of purchase in each case.

36 Mr Carey's evidence was that he paid little attention to the content of this document. On 27 October 2005, he circulated a memorandum to those involved in Westpoint and copied it to the agents. His authorship of the memorandum was as the development manager and a director.

37 In summary, in the document he adverts to the terms of the approval obtained in relation to Stage One B, and mentions that, in his view, it will have a negative impact on the Stage One A development. He says that, on the basis of the terms and conditions of the planning approval in respect of Stage One B, Lanepoint could legally terminate all the current contracts of purchase. He added:

I cannot advise you whether Lanepoint will proceed with Stage One B at this time, as there are many issues relating to the feasibility and viability of this stage that have arisen as a consequence of the significant changes required by the City of Belmont. As a result, I cannot tell you when this stage will proceed or whether it will ever proceed in the approved form. The best I can do is keep you advised.

38 In the memorandum, Mr Carey then turned his attention to Stage Two of the development proposal and made the similar observation that for the same reasons he was unable to say whether Stage Two would ever proceed. He then discussed the delay in proceeding to the settlement of contracts of purchase of strata title units in Stage One A and the potentially negative impact upon the profitability of an investment in that part of the development, which might occur consequently upon such a delay.

39 He advised that there should be a meeting held as soon as possible with each purchaser of a unit in Stage One A, and that these matters should be put before them, including a reference to the need for variation of the current contracts of purchase. They should be offered, 'the option to terminate their contracts if they are not happy to proceed to settlement'. He concluded the memorandum by saying that purchasers who were not willing to proceed to settlement would need to sign a termination document and:

In the event that purchasers opt to terminate their contracts, Lanepoint requires these apartments to be resold as soon as possible.

40 The appellant's evidence was that he did not himself speak to the agents to whom, of course, he had copied his memorandum. He left that task to Messrs Niven and Worthington of Westpoint. It seems to be clear that in the process that followed, the understanding given to the agents was that the existing contracts of purchase were to be terminated without the option of entering into a new contract to purchase the unit in question. That was the evidence of the agents, accepted by his Honour, and that was his finding. Further there is and can be no challenge to the finding that the appellant envisaged that it was likely that the agents would secure the termination of those contracts and the resale of the units.

41 Although his Honour did not find that the appellant gave any instruction that the agents were to say that the project as a whole was stalled and at least indefinitely delayed, leaving them no option but to terminate their contracts without the prospect of repurchase, such representations would flow naturally from the concerns expressed by the appellant, and those were the representations in fact made. His Honour also found that subsequent legal advice received by the appellant was that the contracts should be terminated, whether or not a new contract was thereafter entered into.

42 It will be noticed that in relation to the availability of the defence under s 81(1) of the FTA, when summarising his conclusions his Honour does not directly resolve the question whether the misrepresentations were proved by the appellant to have been made without his knowledge. His Honour adverts to the question at p 97 of his reasons. He does not make an express finding, but in my view it is clear from his Honour's judgment that he is proceeding upon the basis that the first limb of the s 81(1) defence was made out, that the agents made the representations of which complaint was made without the appellant's knowledge.

43 In any event, his Honour expressly made findings which were tantamount to the conclusion that, there being no evidence that the appellant had authorised or permitted the commission of any offence with which he was charged, he had proved that he did not authorise or permit the commission of any such offence. The logic is perhaps a little suspect, but I think it is clear that his Honour intended to make the finding that the appellant had proved that he did not authorise or permit the commission of the offences.

44 His Honour then turned his attention to the second limb of the defence, holding that Mr Carey was in a position to influence Westpoint and the agents who acted in the matter and made the representations. I would, with respect, agree with his Honour when he said that there was no doubt that that was the position.

45 The question, therefore, upon which the availability of the defence depended was the question whether the appellant had proved that he could not, by the exercise of reasonable diligence, have prevented the commission of the offence. The effect of his Honour's findings, consistently with the evidence, is that Mr Carey was the person who, for Lanepoint and Westpoint, was driving the process of the termination of the contracts. His Honour found that had Mr Carey simply wished to have the purchasers resign new contracts for their units, such contracts could have been prepared and Mr Carey could have ensured that the purchasers were invited to resign, having regard to the new entitlements attached to their participation in Stage One A of the development.

46 Rather than leave the matter with the agents to determine how they were to deal with the purchasers, having regard to the concerns he ventilated in his memorandum, the appellant, his Honour found, could have ensured that the process of termination fairly offered the purchasers the option to repurchase, rather than that they were simply to walk away from the purchase so as to leave the properties available for resale at what it was anticipated would be higher prices, given the general view that the development had originally been undervalued, from the developer's point of view.

47 His Honour rejected the appellant's evidence that when the legal advice changed and it seemed that existing contracts would need to be terminated and new contracts entered into, he took steps to see that existing purchasers were to be offered those new contracts. His Honour characterised the appellant's evidence in that regard as being 'untruthful' (judgment p 112).

48 This ground cannot be upheld. As has been seen the charges were particularised prior to the trial and the opening of senior counsel for the prosecution was in accord with the substance of those particulars. It was not confined to an alleged representation that the development would not proceed at all because of the demands made by the City of Belmont which the developer was not prepared to accommodate to obtain planning approval. It was part of the representation made that the individual purchasers of strata title units ought to terminate on that ground their contracts of purchase and take by way of compensation the repayment of the money they had invested, without the purchasers being invited to sign a new agreement and so to renew their investment.

49 In any event, the evidence ranged across all the circumstances surrounding the representations made and referred completely to those representations. This was done without objection. He endeavoured to meet the case thus put against him by seeking to establish the defence under s 81(1). There was and could be no complaint that he was taken by surprise and suffered any injustice as a result of the way in which the case was fought at trial.

50 The ground does not complain of the failure to properly particularise the respondent's case. It may be accepted that the law is that, ordinarily subject to the way in which the case is fought at trial, the purpose of particularisation of the prosecution case by way of particulars provided in writing by the prosecution notice or otherwise before the trial, is to inform the accused of the alleged defence, 'in enough detail to enable the accused to understand and defend the charge': Criminal Procedure Act 2004 (WA) s 23 and sch 1 cl 5.

51 The law is that the prosecutor is bound by those pleaded particulars, unless of course the case ranges more widely at trial and the accused is able to meet it as presented without there being any miscarriage of justice. The cases relied upon by the appellant, in particular Kirk v Industrial Relations Commission of New South Wales [2010] HCA 1; (2010) 239 CLR 531, 557 [26] and the earlier Full Court decision of Interstruct Pty Ltd v Wakelam (1990) 3 WAR 100, are not authority for the proposition advanced by the appellant that the court of trial is forever bound by a strict view of the pleaded particulars and is precluded thereby from considering whether the guilt of the accused is established by the evidence accepted by the court without demur by any party. Ground 7 is dismissed.

52 Grounds 1, 2 and 3 may be taken together. I have discussed the way in which the case developed and the relevant facts as found by the magistrate and as supported by the evidence which he accepted. I need not canvass that ground again but I note that apart from the point raised by ground 2, grounds 1 and 3 make no complaint that his Honour the magistrate, overlooked any evidence or misconceived the questions posed for him, upon which the appellant bore the onus to satisfy him on the balance of probabilities if the appellant was to make out the defence under s 81(1).

53 Ground 2 complains that the magistrate made no express finding of lack of knowledge of the commission of the acts, the making of the representations which constituted the commission of each offence. It is as well to reiterate the way in which s 81(1) is constructed. An offence under s 12(2)(b) of making a false or misleading representation of the kind described by that paragraph, having been committed by Westpoint by the representations made by its agents for whose conduct it was liable under s 82(2)(a), the appellant was liable to be convicted also of that offence, simply because at the relevant time he was a director of the offending corporation: s 81(1).

54 The first limb of the defence provided by s 81(1) may be established by proving either that the offence was committed without the director's knowledge or, that the director did not authorise or permit the commission of the offence.

55 Therefore, if the court is unable to find that the director has proved that the offence was committed without his knowledge, the director may still have the advantage of establishing the first limb of the defence, by proving that he did not authorise or permit the commission of the offence.

56 On that basis alone, ground 2 can be seen to be without merit. The magistrate would not err in law by making no finding as to whether the appellant knew that the offences would be committed by the agents. However, as I have said, in my view, properly understood, although with respect not particularly well expressed on this point, his Honour's reasons show that he accepted that the appellant did not know that the agents were making the representations directed to having the contracts of purchase terminated, thereby freeing the strata title units to be resold to others at an increased price.

57 As to grounds 1 and 3, it is clear that his Honour the magistrate did find that, having regard to the evidence and his Honour's findings to which I have referred above, the appellant was in a position to influence the conduct of Westpoint, no matter with what legal authority, as a director of any of the companies involved in the development and the sale of the units, he was clothed. It was he who had the obligation to implement the decision to seek to persuade the purchasers to terminate their contracts without recourse to fresh agreements. I have described that conclusion by his Honour as being undoubtedly correct.

58 The crucial question in relation to the availability of the defence under the second limb of s 81(1), was whether the appellant had proved that he could not by the exercise of reasonable diligence have prevented the commission of the offences. The appellant had to prove that it was more probable than not that that was the case. Whether by the exercise of reasonable diligence he could have prevented the commission of the offence, was a question of judgment depending upon the factual circumstances as they were found to be by the court of trial.

59 To put the matter briefly, his Honour the magistrate found that the appellant had the responsibility to resolve the question of the termination of the purchasers' contracts. He generated the memorandum of 27 October 2005 to express his concerns in that regard. It was clearly expected that the agents would respond. At that time the appellant was talking in terms of variation of the contracts. It seems that later he was advised that they should be terminated and new contracts signed whether by the purchasers or others. The fair process would obviously be to give the purchasers the option to renew their contractual relationship for the acquisition of the units in which they had expressed an interest.

60 As his Honour held, the appellant had contact with the agents as they dealt with this issue. He need not have left them to their own devices as to the representations they made for the purpose of achieving the termination of the contracts. He could, his Honour the magistrate found, have given more specific instructions as to the procedure to be followed and the representations to be made. He did nothing and yet it must have been a realistic possibility that the agents might, as they did, take a course of action and make representations which reflected the concerns expressed in his memorandum, false and misleading in material respects as those concerns proved to be.

61 In those circumstances, in my view, it was well open to his Honour the magistrate to find, as he did, that the appellant could have done more, that he had failed to prove that he could not by the exercise of reasonable diligence have prevented the commission of the offences. Grounds 1 and 3 of the appeal are not made out.

62 As to ground 4, I would simply say that whether, in respect of his involvement in the commission of the offences by the agents, the appellant was acting strictly as a director of Lanepoint at some times, or whether he was at all times also acting as a director of Westpoint, seems to me to be irrelevant. Whether or not the appellant had a defence available to him did not depend upon the capacity or legal authority with which he was clothed at any relevant time. In this case it depended upon whether he was in fact not in a position to influence the conduct of Westpoint, or whether, if he was in that position, he could not by the exercise of reasonable diligence, had prevented the commission of the offences.

63 The only directorship which was relevant to the case was his directorship of Westpoint the convicted corporation. As has been seen that was relevant because under s 81(1) if the corporation was convicted, then, unless the statutory defence was proved, each person who was a director of the corporation (among other officers of the corporation), was guilty of the offence, whether or not he played any part in its commission. Ground 4 is dismissed.

The question whether the false or misleading representations concerned the use to which the land was capable of being put

64 Grounds 5 and 6 raise this issue and they may be taken together. The point is said to be that, following the settlement of the approval process between the City of Belmont and Lanepoint, substituting a 60unit development for the original 52unit strata plan, those who were the purchasers of individual strata units, had contracts which had been frustrated and which had become impossible of performance. There was therefore, so it is argued, no existing interest in the land commensurate with the purchasers' interest under their contracts.

65 Therefore, it is argued, the false and misleading representations when made, did not concern the use to which the land was capable of being put, because under the contracts, frustrated and incapable of performance as they were, no interest in the land was conferred. The representations could not therefore in truth relate to the question whether the contracts as they existed, were capable of performance so as to convert the equitable interest of the purchasers under their contracts into legal strata title interests, upon settlement and the performance of the contracts.

66 These grounds do not stop there because ground 6(c) directly puts the proposition that in respect of each purchaser, each unit and each representation:

The false or misleading representation concerned a right or legal entitlement under a contract to purchase the land and did not relate to the use to which the land the subject of the contract could be put.

Viewed in that way, if there is any difference from the terms of the allegation made by the prosecution notice, when the matter is so expressed, it is perhaps tantamount to the proposition that the representations concerned the nature of the interest in the land, if any, under the contracts which had been made.

67 I note in that regard, that s 12(2)(b) prohibits the making of a false or misleading representation in connection with the disposal or possible disposal of an interest in land, 'concerning the nature of the interest in the land'. That is, the case might be one in which, the appellant would say, the nature of the false or misleading representations was as to whether the purchasers had acquired or could acquire a strata title interest in the unit which they had purported to purchase, given that the development might never proceed, and noting the terms of the definition of the word 'interest' in relation to land, contained in s 5(1).

68 As will appear I think these grounds cannot be made good, but before giving my reasons for that conclusion I note that, if the proposition advanced by these grounds was correct, it would inevitably be the case that Westpoint, which corporation, it will be remembered, simply pleaded not guilty and then took no part in the trial, could not lawfully be convicted, although no proposition of this kind was, so far as I can see, put against the prosecution by the appellant or Westpoint.

69 These grounds do not concern the availability to the appellant of the defence provided by s 81(1). I have dealt with the grounds raised in that regard and found against him in respect of the establishment of that defence.

70 If the appellant was to succeed on the basis of the matter raised by grounds 5 and 6, he would do so on the basis that Westpoint could not lawfully be convicted. In my opinion he cannot raise that proposition in the context of appellate proceedings which, at their conclusion, will leave Westpoint convicted, because to do so would impugn or undermine the conviction of Westpoint.

71 That is simply impermissible having regard to what has come to be called the principle of incontrovertibility, which involves the proposition that it is in the public interest that there be finality of litigation and that a party cannot therefore set at nought by collateral challenge, the decision of the court in relation to a third party except by appellate review of the decision affecting that third party.

72 I had occasion to examine this principle in some depth in Lancee v Willert [2008] WASCA 120, in a judgment with which Miller JA agreed. Leave to appeal to the High Court was in due course refused. At [40] [53], I considered and discussed a number of the decided cases, including Rogers v The Queen [1994] HCA 42; (1994) 181 CLR 251; R v Carroll [2002] HCA 55; (2002) 213 CLR 635; D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1; and Island Maritime Ltd v Filipowski [2006] HCA 30; (2006) 226 CLR 328.

73 It is sufficient for present purposes to recall again the joint judgment of Gummow and Hayne JJ in Filipowski (343 344) [41] [43], where their Honours considered that underpinning the application of the incontrovertibility principle were three long accepted maxims. The first was that it was in the interests of society that there be an end to litigation. The second was that what has been adjudicated is, unless set aside or reversed, to be taken as true. The third is that no person should be twice vexed for one and the same cause.

74 In this case it is sufficient to note that the guilt of Westpoint has been adjudicated and has resulted in the conviction of that entity, having regard to the terms of the FTA s 81(1). It follows that in these proceedings the conviction of the appellant must be upheld unless his Honour the magistrate erred in holding that the statutory defence was not available to the appellant.

75 However, on the merits grounds 5 and 6 cannot be made out. The contracts of sale which had been entered into by Lanepoint with the relevant purchasers were governed by the STA, Pt V of which contains a series of provisions for the protection of purchasers. A vendor or intending vendor must ensure that a purchaser or intending purchaser is given the notifiable information described by s 69A and s 69B before a contract to buy a strata title lot or proposed lot is entered into: s 69.

76 That includes the unit entitlement of every lot and the proposed bylaws for the scheme, so that the proposed purchaser's unit entitlement and rights to common property are clearly known. If any variation occurs in those matters the vendor must inform the purchaser. The change in the unit entitlement which occurred in this case was required to be notified to the individual purchasers: s 69C. But that did not vacate their contracts. Under s 69D, a failure to substantially comply with s 69C by giving the required notice, entitles the purchaser to avoid the contract.

77 Further, if the required notice of any such variations is given (and it is unnecessary in this case to enter into any consideration as to whether an effective notice was given to each of the affected purchasers) if the purchaser is able to prove that he has been materially prejudiced by any variation in the notifiable information, then the purchaser may avoid the contract: s 69D. The vendor remains bound by the terms of the contract. The right of avoidance is given to the purchaser because the effect of avoidance is to entitle the purchaser to be repaid all moneys paid under the contract: s 69E.

78 In my view that statutory scheme makes it unnecessary to have regard to what the position might be under the general law, unaffected by the provisions of the STA, even having regard to the provisions of s 122 of the STA, which provides that nothing in the STA derogates from any rights or remedies that the owner of the land (among others) would have under the common law, because in a case such as this, the variation which occurred, was not of a kind which at common law would frustrate the contract or materially prejudice the developer in its performance. Indeed, the availability of a greater number of units which might be sold was obviously to Lanepoint's benefit.

79 Further, it would seem to me to be fundamentally wrong to suppose that in the events which occurred in this case, Lanepoint could rely on the proposition that it could not convey the more complete strata title interest originally contracted for, to avoid the performance of a contract in favour of a willing purchaser, despite the fact that that purchaser's interest might be of less value than originally contracted for, so as to enable the vendor to resell the strata title unit without offering it again to the original purchaser at a greater price than was paid by the original purchaser, who would have been divested of his interest in the land.

80 Finally in respect of these grounds, I consider them to be misconceived because having regard to the terms of the FTA, s 12(2)(b) and the definition of 'interest' in relation to land under s 5(1), if it was the case that the terms of the planning approval granted by the City of Belmont and the variation imposed upon the strata title scheme, meant that the contracts previously entered into were frustrated and automatically terminated, the false or misleading representations, when made thereafter, were still capable of breaching the FTA in the manner alleged in the charges contained in the prosecution notice.

81 If the assumption is made that the contracts had been frustrated in their performance and terminated as a matter of law, at some time associated with the final obtaining of planning approval, so that the representations were made after that time, they were still false or misleading representations in that, they were to the effect, as particularised by the respondent in the ways discussed above, that the project would in all likelihood not proceed or at least would not proceed in the foreseeable future, leaving the purchasers no option but to terminate their contracts without the capacity to renew a contract to purchase the strata title unit in which they had originally been interested.

82 Properly interpreted, it would seem to me that even in that case the representation made to each purchaser concerned the use to which the land was capable of being put, in the sense that it concerned the capacity to acquire an interest in the land by the purchaser, as a strata title unit, in the manner originally desired. It seems to me that it would not matter in that regard that the purchaser's interest in the land did not at that time exist as a legal or equitable estate or interest in the land. Further, the representation would, even in the circumstances now supposed, be made in connection with the possible disposal at least, of a strata title estate or interest in the land. I do not uphold grounds 5 and 6.

83 The appeal is dismissed and the respondent should have the costs of the appeal to be taxed if not agreed.

At a glance

Court

Decision date

Before

Source

Judgment (117 paragraphs)

Legislation Cited (2)

Cases Cited (6)