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[1999] FCA 39
Federal Court of Australia
1995-08-03
Original judgment source is linked above.
5.1.1 The inspections 43 Christofidellis alleged that the representations on which he relied were made by Pfeiffer at the inspections of the property which they attended together. There was a significant dispute as to these inspections. Christofidellis' version 44 Christofidellis claimed that after Pfeiffer had mentioned that the property might be for sale in early January 1995, he first of all drove past in order to look at the outside of it. He claimed that after this initial cursory inspection from the road, which he undertook by himself, he attended four inspections with Pfeiffer, the first of which allegedly took place in mid-January and involved only the two of them. At this point access to the house was not available and the two men simply walked around the property. This was the first occasion on which Pfeiffer is said to have told Christofidellis of its dimensions. At the conclusion of the inspection, Christofidellis asked Pfeiffer to organise another one. 45 The second inspection allegedly took place at the end of January and involved both applicants and Pfeiffer. Again the inspection was of the property only, as access to the house was still not available. The applicants recalled that this inspection was on a weekday, and that they met Pfeiffer at the office of TPRE and then went with him to the property. Mrs Christofidellis pinpointed the date as 27 January 1995 on the basis of an entry on that date in her diary which read: Terry Pfeiffer 3.00pm 46 The relevance to the case of whether this inspection occurred or not is not clear as there is no allegation that any relevant representations were made on this occasion. Pfeiffer claimed that this inspection did not take place. He stated that he took the applicants to inspect a property in Bowden Crescent on that afternoon, which is supported by an entry in the TPRE day book on that date referring to Bowden Crescent and to the Christofidellises. Although the entry is not exclusive of the possibility that they were also shown 117 Kyle Parade on the same afternoon, it does explain the entry in Mrs Christofidellis' diary which is used to found her recollection as to the date of the inspection. One of the rare examples of common ground in the case was that the Christofidellises were shown a number of properties in the local area at around this time and in my view there is a strong possibility that Mrs Christofidellis is mistaken in her recollection that on 27 January 1995 she visited number 117. I am fortified in this view by her inability to accurately recall inspections that definitely did take place. 47 The third inspection allegedly took place in mid to late February and involved Pfeiffer and the two applicants. In his affidavit Christofidellis deposed to meeting Pfeiffer at his office and then driving to the property where they were met at the front door of the house by Mrs Zdrilic. Mrs Christofidellis deposed to the same facts. After Mrs Zdrilic filed an affidavit contradicting this assertion, both applicants filed further affidavits conceding that they had been mistaken and amending their evidence. I have already pointed out how Christofidellis eventually and reluctantly admitted that it had in fact been Mrs Zdrilic's teenage daughter who answered the door and that he went on to admit that he did not meet Mrs Zdrilic until after the exchange of contracts. Mrs Christofidellis admitted to having been similarly confused about this inspection. 48 However, not only did Christofidellis wrongly depose that he was met by Mrs Zdrilic at this inspection, but he deposed to a detailed conversation with her which cannot possibly have been correct. If the conversation is placed in its correct time frame, which Christofidellis eventually agreed was after exchange when he went to the property to attempt to extract consent to lodge a development application prior to settlement, it cannot have taken place in the terms set out by Christofidellis. He stated that he said to Mrs Zdrilic: I know I shouldn't be saying this in front of the agent… 49 The agent, Pfeiffer, was not present on the one occasion when Christofidellis met with Mrs Zdrilic. This statement must have been a fabrication. Further, Christofidellis deposed that Mrs Zdrilic stated: We haven't been able to find anything in our price range yet. 50 But at the time he actually met Mrs Zdrilic, she and her husband had already exchanged contracts on their new property. 51 The applicants submitted that these errors were inconsequential. The details themselves may have been quite trivial but the vice lies in the fact that in both these respects Christofidellis clearly created the details of a conversation which did not occur in order to make plausible what he claimed was his genuine recollection of events. Not only did this error expose his faulty memory of events and their timing, but also his willingness to embellish and fabricate facts to bolster his case. In a case where the alleged representations are said to have been verbal, it did not bode well for the case of the applicants that he would simply make up details of conversations that never happened. 52 The applicants claimed that they again inspected the land with Pfeiffer who made various representations regarding the dimensions and subdivisibility of the property. I shall recount the details later. Pfeiffer agreed that this inspection did take place, but its important aspects, including the alleged representations, were disputed. In my view, as already set out in the discussion of the applicants' credibility, the fundamental error made by both of them in relation to this inspection not only casts doubt on their recollection of this event but on their entire version of what happened. It certainly cast doubt on all their evidence regarding the inspections. The disturbing fact that Mrs Christofidellis' evidence revealed precisely the same error and was corrected in precisely the same way, obviously made it particularly difficult to accept her evidence on this issue. Far from providing corroboration of her husband's version, it created great suspicion about the applicants' claims. 53 According to Christofidellis, the fourth inspection took place at some time during March 1995 and was attended by himself, Pfeiffer and Kitas. Kitas' evidence was that he inspected the property at Christofidellis' invitation to ensure that he didn't get 'ripped off'. I found it difficult to accept that Christofidellis needed a "bodyguard" to protect his money. Kitas deposed that he accompanied Christofidellis to the Kyle Bay and Connell's Point areas and inspected several properties, including number 117. According to Kitas, this was the first occasion on which he had met Pfeiffer. He stated that after looking at the block and being told of its subdivision potential by Pfeiffer, he was interested in purchasing one of the two resulting blocks because the deep water frontage could accommodate a large boat. He went on to state that he asked Pfeiffer to show him some other properties in the area to demonstrate that the price of the property was realistic. 54 Pfeiffer gave evidence that he did not meet Kitas until 3 May 1995 in accord with his diary which revealed the first entry relating to Kitas as an appointment on that afternoon with him and Christofidellis. Pfeiffer's evidence was that he showed Kitas, not number 117, but several other waterfront properties in the area and that Kitas actually made offers to purchase at least two of them. These offers on other properties conflicted with his stated desire to purchase one of the subdivided blocks at number 117. His evidence that he asked Pfeiffer to show him other properties simply to confirm the price of number 117 smacked of an attempt to explain his actions ex post facto in a manner that suited the case brought by Christofidellis. On Kitas' evidence he had no reason to think that number 117 was not subdivisible and therefore no reason to believe he would not be able to purchase one of the blocks. Given Kitas' unimpressive presentation and past close association with Christofidellis, I am not prepared to accept his evidence that he attended an inspection of the property as he deposed. Pfeiffer's version 55 Pfeiffer claimed that in January 1995, after showing Christofidellis several properties in the area, he drove with him to the property and stopped on the road outside. He claimed that as it was raining heavily they did not get out but simply looked at the property from inside the car. Christofidellis expressed interest and asked Pfeiffer to arrange an inspection. Mrs Pfeiffer indirectly supported this evidence, as she stated that she recalled Pfeiffer showing Christofidellis several properties on a particularly wet day and his saying on his return that they had stopped outside number 117 and that Christofidellis was interested in purchasing it. A court ought, however, not rely on second hand or hearsay evidence from the wife of one of the parties. 56 Pfeiffer stated that the only other inspection at which he was present was on a Saturday in late January or early February. As already explained, it was agreed that this inspection did take place and that the Zdrilics' daughter allowed them access to the house. Pfeiffer denied having been present on any other occasion when Christofidellis, his wife or Kitas inspected the property. 57 Prima facie, Zdrilic's evidence supported Pfeiffer's claim that only one substantive inspection was made because he stated that he only gave permission for one inspection of the property. However, the applicants relied on Zdrilic's evidence that the permission he did give was only for an inspection of the land and not the house. Based on this evidence, they submitted that Pfeiffer's actions in taking the Christofidellises through the house, when only the Zdrilics' daughter was present, gave rise to the inference that he would not have hesitated to conduct other unauthorised inspections. They also submitted that his professionalism was tainted by his offering the property for sale without a formal agency agreement in breach of the real estate industry's code of practice. However, this particular submission was easily rebutted by Zdrilic's evidence that the arrangements in relation to the sale of the property arose through his friendship with Pfeiffer. 58 In my view, any breach of the industry guidelines in this respect was technical and certainly not malicious, reflecting an intention on Pfeiffer's part to serve the best interests of not only his friend and neighbour, but also of Christofidellis, a valued client. The question whether Pfeiffer would have conducted unauthorised inspections is difficult to determine, as inferences are available favourable to each side. He submitted, for example, that it would have been unlikely for an agent to conduct three separate inspections of only the land without access to the house. The applicants submitted that Christofidellis was highly likely to have only inspected the land, firstly because the block's size and position were the features of the property of interest to him as potential purchaser rather than the dwelling, and secondly, because without the permission of the owners he could not go inside the house. Conclusion on inspections 59 Having weighed all the evidence, I think it unlikely that Pfeiffer would have conducted three unauthorised inspections of land even though it belonged to his friend and neighbour. The consequences of being revealed to have conducted unauthorised inspections does not compare with the consequences of misleading the Court. Moreover, there does not appear to be a significant advantage in Pfeiffer denying that these inspections took place if they did in fact occur. Although the more inspections of the land there were, the more likely was the emphasis on subdivisibility, the case concerns not subdivisibility but representations by Pfeiffer as to dimensions and area. Additional inspections say little about that question except opportunity. 60 It is thus not necessary or relevant to decide how many inspections Christofidellis might have made of the property either on his own or with his wife or with Kitas, but rather the number of inspections which both Pfeiffer and Christofidellis attended together, for it is only on these occasions that the alleged representations could possibly have been made. Given the doubts I have expressed in relation to the evidence of the applicants and Kitas, I am not persuaded that four joint inspections took place. Despite some misgivings about the evidence of Pfeiffer, I do not accept that Pfeiffer and Christofidellis were both present at more than one inspection prior to the exchange of contracts. 61 Looking at his evidence benignly, it may be that Christofidellis confused the timing of the inspections he deposed to and the people who attended them, as was manifestly obvious in respect of the third inspection about which he gave evidence. In an effort to recall these events, he may have convinced himself that there were more joint inspections than was the fact. Less benignly, he may have thought that it was more credible to assert that more inspections of a $1+ million property took place prior to exchange or that Pfeiffer was present when he had in fact gone to the property alone or with his wife or with Kitas. Either way, I find that there was only one inspection at which Pfeiffer was present, that it took place on a Saturday in late January or early February, and that it involved going through the house and over the land.
5.1.2 The making of the representations 62 Because Christofidellis' evidence about this one inspection is fundamentally flawed, there must therefore be considerable doubt as to the accuracy of his evidence regarding the representations made. He stated in his first affidavit that, after inspecting the house and talking to Mrs Zdrilic (a happening he later conceded was wrong), his wife asked Pfeiffer: How big is the block? 63 According to Christofidellis, Pfeiffer replied: It's 65 foot street frontage, 130 foot water frontage, 300 feet one side of the property and 270 foot on the other side, it's approximately 2500M2 64 There was then some discussion of the price, which culminated in Mrs Christofidellis stating: That's a lot of money. 65 Pfeiffer allegedly replied: Steve, this block can be subdivided. 66 According to Christofidellis, there was then some discussion about how subdivision might be achieved and Pfeiffer pointed out the block next door, which he said he had sold to a local doctor who had subdivided it. Christofidellis stated that they then walked to the top of the block and Pfeiffer explained by reference to the driveway of the property next door how the doctor had subdivided his property and implied that the same process might be possible on number 117. Christofidellis stated that they then drove across the bay to Baldface Point from where Pfeiffer pointed out number 117 and the property next door by reference to the driveway which he had already pointed out and explained again how the subdivision had been done to allow both properties access to the waterfront. 67 Mrs Christofidellis' evidence of the representations made by Pfeiffer on this occasion was generally corroborative of her husband, although in far less detail. She deposed to Pfeiffer stating that the block could be subdivided but did not detail the context in which that statement was made. She also stated that Pfeiffer mentioned the dimensions of the property but stated she could only remember two of them - the "65 foot" street frontage and the "300 foot" side boundary. She failed to mention, as her husband had stated, that these dimensions were apparently given by Pfeiffer in response to a question from her. This strange omission added to the misgivings I have expressed regarding Mrs Christofidellis' evidence and the significant doubt attending her recollections of this inspection and the statements made during it. 68 Pfeiffer stated that during the inspection of the property he said words to the effect: I sold this property to the owners many years ago. It is one of the widest water frontages around. I think the water frontage is about 127 feet and the street frontage around 60-65 feet, but, being so long ago, you will have to check. 69 In his evidence he stated: At no stage did I indicate the length of the property to Mr Christofidellis. I had no recollection of the length. I did not consider the length of the property to be a feature of it. The length of the property was never discussed. 70 In regard to discussions with Mrs Christofidellis, he stated: I recall that there was virtually no conversation between myself and Mrs Christofidellis except at one stage I said to her: "What do you think of it?" She replied: "I love the view." 71 As Pfeiffer, Christofidellis and his wife were the only three people present, their accounts were the only direct evidence of what actually occurred and what representations were actually made. All three accounts related basically the same events. It was agreed that an inspection of the house and the land took place. It was agreed that there was some discussion of dimensions and that there was some discussion of the property next door and the fact that it was owned by a local doctor. It was also agreed that after the inspection the three travelled to Baldface Point and looked at the property from across the river, and that there was some discussion about the property next door owned by the doctor. The essential question, whether certain representations as to dimensions, area and subdivisibility were made, was not agreed. On their face, both accounts might conceivably be an accurate depiction of the events, but as they are diametrically opposed on the essential question, the Court must determine which version of events is to be accepted on the basis of inferences drawn from the surrounding circumstances and the witnesses' credibility, bearing in mind the onus on the applicants to prove their case on the balance of probabilities. 72 Pfeiffer submitted that he would not have professed such detailed and unqualified knowledge of dimensions when he had had no opportunity to refresh his memory dating back eight years to when he had sold the property to the Zdrilics. Also, he claimed it was likely that he would have remembered the width of the property as the long water frontage was a distinguishing and attractive feature. Thirdly, Pfeiffer stated that he never used metric measurements and that it is therefore inherently unlikely that he would have given the dimensions in feet and the area in square metres. Somehow he relied on this submission to show that it was therefore unlikely that he gave any dimensions at all. 73 None of these arguments were particularly cogent or persuasive and are easily negatived. Pfeiffer did profess to be very familiar with the property and admitted to giving some dimensions, in precise detail, from memory, which does not sit comfortably with his submission that he would not have done so in respect of the other dimensions. Similarly I do not accept, as was suggested, that it follows that simply because Pfeiffer was an experienced real estate agent he would not have given out precise dimensions without checking them first. On the contrary, the dimensions of an expensive property might be information that a prospective purchaser would expect an experienced agent to have available on inspection. It is common ground that the property was regarded as one of the best properties in the area so that its dimensions or approximate dimensions may well have been available to and remembered by Pfeiffer. Furthermore, experienced realtors would be in a better position than most to provide reasonable estimates from simple observations. 74 The applicants submitted that their evidence should be believed because they both had much greater reason to remember what was said to them about this property. It was their first waterfront purchase and would be their family home and so was much more important to them than to any of the respondents. It could no less be said that they also have the most to gain from remembering events in the light most favourable to their case. They also pointed to the internal consistency of their evidence. It certainly was consistent - to the point of important identical error - but this feature is only beneficial to them as long it is not concluded that the internal consistency is a result of contriving to produce identical evidence in an effort to mislead the Court, a possibility canvassed earlier. Similarly, the applicants submitted that their preparedness to concede flaws in their evidence and make necessary corrections stood them in good stead as credible witnesses. Alternatively, it might be put that these errors merely show that in fabricating their evidence, they have made mistakes which have been corrected only in the face of incontrovertible rebutting evidence. 75 The strongest indirect evidence supporting the applicants' contention that Pfeiffer represented the incorrect dimensions to them came from Phillip Perrie, the architect retained by Christofidellis. Perrie's evidence was that Christofidellis approached him in March 1995 and stated that he had the opportunity to purchase the property and asked him, next time he was looking at 67 Kyle Parade, to 'check the lay of land' at number 117. Perrie then stated: Approximately one week later on about Thursday 30 March, 1995 I viewed the property at 117 Kyle Parade. At about 11:30am on that day I telephoned Terry Pfeiffer. We had a conversation to the following effect: I said:- "Can you provide me with a survey or the dimensions, including the area of the property at 117 Kyle Parade?" He said:- "The property has a 65 foot frontage to the street, 130 feet frontage to the water, from the street the left side boundary is 270 foot and the right side boundary is 300 foot." I prepared a plan of the property using these dimensions with the dimensions also converted into metres. I also drew on the plan as possible arrangement as to how the land could be subdivided. 76 In cross-examination, Perrie claimed that the conversation referred to took place when he rang Pfeiffer from his mobile phone while he was at number 117. The plan referred to was annexed to Perrie's affidavit and did show that the dimensions used by Perrie corresponded to those he stated he had been given by Pfeiffer. These were the same dimensions Christofidellis claimed Pfeiffer had given him at the inspection. Although this is certainly not direct evidence of anything Pfeiffer may have said to the applicants, it leads, if it is accepted, to an inference that Pfeiffer had the particular dimensions in his mind or otherwise readily available and was prepared to give them to people who asked without checking a survey. 77 Pfeiffer denied that the telephone conversation with Perrie ever took place, a claim that was supported in part by Perrie's mobile telephone call records, produced on subpoena. These records did not reveal any calls to Pfeiffer in the relevant period. It was Pfeiffer's case that Perrie was mistaken and that Christofidellis had given Perrie the dimensions either when he was at his office earlier in the week or by telephone at around this time. Perrie's mobile telephone records do reveal several calls to Christofidellis during this period. Although these records are not conclusive, they do cast some doubt on Perrie's assertions. Pfeiffer also gave evidence that it was his usual practice, if someone asked for a survey, to either check the contract or refer the inquiry to the vendor's solicitor. This fact, true or otherwise, would not be relevant if Pfeiffer thought he knew the dimensions of the property he was being asked about. 78 In maligning the evidence of Pfeiffer, the applicants submitted that in order to find that the alleged representations were not made, the Court must positively disbelieve the sworn evidence of both Christofidellises, Kitas and Perrie. It is true that the applicants called a number of witnesses in support of their case whereas Pfeiffer relied simply on his own word and indirectly on that of his wife. Nevertheless, numbers alone do not prove facts, and in the circumstances of this case, it is not difficult to disbelieve, or at the very least remain unpersuaded by, the applicants and their witnesses, especially if one assumes that Perrie is simply mistaken rather than fabricating evidence. His motive for lying was, and remains, a mystery to me.
5.1.3 Conclusion on the representations 79 The Court is in a particularly invidious position in this case. It is simply not realistic to expect, after essentially verbal reconstructions of events over three years later, in the context of litigation, with both money and reputations at stake, that the truth could be determined to the parties' satisfaction. Only the people actually involved in this matter know precisely what happened, and, so long after the events, with so much emotion invested in these proceedings, perhaps even the parties themselves are not now precisely sure what occurred. Nevertheless, the Court must determine the dispute before it in accordance with the law. I would add that the majority of the factual material placed before the Court and vehemently disputed, while perhaps relevant to the parties' credibility, does not bear on the fundamental question which is a relatively narrow one, namely whether the representations as to dimensions and area, relevant to subdivisibility, were made. 80 The evidence relating to the parties' dealings over 67 Kyle Parade highlights the difficult and, at times absurd, nature of this case. Nothing that happened in relation to 67 Kyle Parade had any direct bearing on whether the Christofidellises were misled and deceived by Pfeiffer in their entry into the contract to purchase number 117. Yet every single fact relating to that course of dealing was disputed and fought tooth and nail. It was Christofidellis' initial intention to build a dual occupancy on number 67. The parties disputed who first raised this possibility. Eventually Christofidellis conceded that he had, but his original claim that it had been Pfeiffer was designed to show that Pfeiffer was likely to offer his opinion on possible future uses of properties he was showing to prospective purchasers. This fact, if proven, was to have shown that Pfeiffer would have been more likely to make representations about the subdivisibility of number 117. As the assertion was ultimately conceded to be untrue, Pfeiffer claimed that the contrary claim tended to show a willingness on Christofidellis' part to project onto others thoughts and ideas that had been his own, if it was to his advantage to do so. 81 Similarly, there was a direct dispute over the sale of number 67. Christofidellis bought it for $450,000 before auction in 1994. Pfeiffer claimed that Christofidellis instructed him that he wanted $650,000 for it in 1995. Pfeiffer said that he told Christofidellis that this was unrealistic and that $520,000 was more likely but that Christofidellis insisted on attempting to achieve the higher price. Pfeiffer stated that he received an offer of $520,000 which he communicated to Christofidellis but which was rejected. Christofidellis' account was that he only wanted around $520,000 and that when Pfeiffer told him that he expected the property would achieve $650,000, he thought that he was being too optimistic. Christofidellis denied that Pfeiffer ever told him there had been an offer of $520,000 and claimed that he would have accepted it had he been informed. The only agreed fact was that the property went to auction in mid-1995 at which the highest bid was $484,000 - an unsurprising result given the purchase the year before for $450,000. 82 Thus the accounts given by Pfeiffer and Christofidellis were diametrically opposed on who was the source of the expectation which was ultimately too high, on whether the offer of $520,000 was communicated to Christofidellis, and on whether advice was given to accept or reject it. Christofidellis relied on his version of events to ground a submission that Pfeiffer was an agent who lacked professionalism and made representations which were unfounded and to the detriment of his clients. Pfeiffer relied on his version of events to show that again Christofidellis projected fanciful ideas of his own onto others when it became clear that they were wrong. If the sale of number 67 had been at the centre of the action, this dispute would have been unremarkable. The absurdity lies in the situation that the Court was asked to determine which was the correct version of events (presumably using credibility as a factor), only to use the fact thereby established to draw an inference as to credibility which could then be used in assessing a factual issue which is actually related to the case. 83 It is my view that an experienced real estate agent like Pfeiffer would not have led his client to believe that a property could be sold for a 50% capital gain in just one year. I therefore determine this particular factual issue (only a small part of the disputed events as to number 67) in Pfeiffer's favour and find that Christofidellis cast on to Pfeiffer a mistaken judgment of his own that the property was worth more than he thought. That conclusion therefore activated Pfeiffer's submission that Christofidellis should not be believed when he alleged that Pfeiffer had made representations about the dimensions of number 117 as these allegations were a further example of Christofidellis' tendency to blame others for his own mistakes. All I can respond is that the weight to be given to this submission and any similar reasoning is minimal. The facts do not reflect well on Christofidellis but, despite their volume and the time they took at the hearing to prove, they were just too far removed from the facts concerning number 117, and were of little assistance in determining the central question in this case whether the alleged representations were made. 84 On this fundamental issue, there is significant doubt about much of what occurred, as would be expected when the dispute is over the precise words used many years ago, and now overlaid by litigation and the inevitable attendant emotion. However, the applicants brought this case, and they bear the onus of proving it on the balance of probabilities. For the reasons already set out, and bearing in mind the words of McLelland J in Watson v Foxman, I am not satisfied that the applicants have done so. Accordingly I cannot conclude that the alleged representations were made. The direct evidence of the applicants is not convincing because of serious doubts as to their veracity. The indirect evidence from other witnesses is contradictory and inconclusive and it is impossible to draw useful inferences from much of the remaining material. I have already outlined some of my concerns about the evidence of Pfeiffer and his wife, and my finding that the representations were not made is not an endorsement of their evidence or their version of events, but simply a recognition that the applicants have failed to discharge the legal onus which they took upon themselves when they brought this action. 85 Although the applicants cannot therefore succeed in their action against Pfeiffer and TPRE, in light of the bitterly contested factual disputes in this matter, it is, in my view, prudent that I consider the other elements of the action, if only briefly. 5.2 Reliance on the representations 86 As I have previously observed, the applicants pleaded five representations on which they claimed they had relied. Four related to dimensions and area and the fifth was that the property was subdivisible. During the case, they expressly disavowed reliance on the representation as to subdivision, on the basis that any reliance on what Pfeiffer had said about subdivision was displaced because Christofidellis had independently checked with his architect on this matter and relied on his professional adviser's opinion. The applicants' case was therefore that they relied on Pfeiffer's representations as to the dimensions of the property only. 87 The respondents submitted that Christofidellis was not in fact concerned with subdivision at all. They argued that he purported to rescind the contract, not because he discovered that the property was not subdivisible, but because his financial position had deteriorated so that it was not possible for him to complete. If this were true, there would be no reliance on a representation as to subdivision, let alone reliance on representations as to dimensions. However, on balance I am of the view that subdivision probably was important to him in entering the contract. According to the evidence of Zonaras, his accountant, Carrick, his bank manager, Perrie, his architect, and even Di Bello, his solicitor, he mentioned subdivision to each of them and at least some of these professional advisers informed him of the importance of subdivision in order to raise the value of the property to facilitate finance. 88 In respect of the applicants' claim of reliance on Pfeiffer's representations as to dimensions but not subdivision, the respondents claimed that this was an attempt to steer a course between Scylla and Charybdis; that is, to avoid the implausible proposition that the applicants had relied, in purchasing a $1.2 million property, on a real estate agent's opinion as to subdivisibility on the one hand, while on the other not having sued the person on whom they did rely in respect of subdivision, namely Perrie. The applicants submitted that the dimensions were crucial in determining subdivisibility and so reliance on the dimensions was sufficient to found a cause of action. The reliance allegedly arose in two ways; firstly, Christofidellis relied directly on the dimensions himself, and secondly, he relied on them through Perrie, who was allegedly given the same dimensions by Pfeiffer and based his subdivisibility calculation on them. 89 In my view, Christofidellis could not have relied directly on any representations made by Pfeiffer at all. The dimensions were only relevant to subdivision and Christofidellis did nothing with them himself. He certainly did not go to the local council before exchange to obtain their subdivision code and attempt to determine whether the property was subdivisible based on the dimensions he claimed to have been given. He said that he did so after exchange but this is irrelevant to the question of reliance in entering a contract. 90 To illustrate their point, the applicants used an analogy: …if an agent of land said to a potential buyer who wished to build a home, that the land was virgin soil, never touched, but in fact was a disused garbage dump which could never be built on, could it seriously be suggested that the agent's representation was irrelevant because the owner was not interested in whether the soil was virgin, but only whether it could be built on? 91 Like many analogies, this one was unhelpful because in a fundamental respect it is unrelated to the facts at hand. The crucial factor in the garbage dump analogy is whether the land could be built on. The misrepresentation was that the land was virgin. The correct representation is that the land is a disused garbage dump. If the correct representation regarding the garbage dump had been made instead of the claim of virginity, it would be immediately obvious to the representee that the crucial factor, the ability to build on the land, was not achievable. In the present case, if the correct dimensions had been given to Christofidellis by Pfeiffer, it still would not have helped Christofidellis in establishing whether the property could be subdivided, because he did nothing with the dimensions himself until after exchange. Moreover, the applicants did not call the Council officer who could have established the facts even though he was apparently available. 92 The only reliance that Christofidellis could possibly have had on the dimensions is through Perrie. The applicants submitted that by relying on Perrie to check the subdivision based on dimensions supplied by Pfeiffer, either directly to Perrie or through Christofidellis, there was reliance by Christofidellis himself on the dimensions. The respondents submitted that this involved reliance by Perrie on the dimensions and reliance by Christofidellis only on Perrie's opinion as to subdivisibility. 93 I am quite doubtful that Christofidellis could be found to have relied on the dimensions in this way as a matter of law or logic but if he could, there are several other factors to consider. The first is that Perrie pointed out to Christofidellis that the dimensions did not meet his recollection of the lay of the land: Mr Perrie: It seems okay for subdivision. I've prepared a rough plan. Mr Christofidellis: I'll pick it up in the morning. Mr Perrie: These dimensions Pfeiffer gave me don't seem to meet my recollection of the lay of the land. He told me the dimensions were 65 foot at the street, 130 foot at the water and 270 foot and 300 foot on the sides. Mr Christofidellis: Those are the same dimensions I was told by Pfeiffer. Mr Perrie: Well you could check them again with him. 94 It is clear that Perrie doubted the accuracy of the dimensions given to him and on which he based his subdivision calculations. As it happens, the plan was not picked up by Christofidellis as promised, nor did he check the dimensions which Perrie had used. However, the explanation of this evidence proffered by Christofidellis, which involved a complicated discussion of the nuances of the phrase "lay of the land", was convoluted and I do not accept it. In the context in which Perrie gave his evidence, it is clear that he was talking about dimensions. Christofidellis did not ask Pfeiffer further or again about the dimensions. He did not approach his solicitor to check a copy of the survey attached to the contract. He did not approach the vendor's solicitor for a survey. All these facts cast the gravest doubt on Christofidellis' concern about subdivision. Although I have found that it was important to him, I must conclude that he was simply careless in the extreme in protecting his own interests in the matter, even so far as to ignore the advice of his professional advisers. In my view, Christofidellis cannot be held to have relied on any representations by Pfeiffer as to dimensions. 5.3 Misleading or deceptive 95 It is not necessary to delve at length into the intricate and difficult question of whether or not the property was in fact legally capable of subdivision, principally because it is not relevant to the way in which this case was finally presented. The representations said to found this case were about dimensions and area. In my view, if the alleged representations had been made and relied on, they were misleading or deceptive, simply because they were incorrect in material respects. 5.4 Damages 96 The final element which the applicants would have had to prove if they had been successful in establishing the other parts of their claim is that reliance on the misrepresentations caused them loss and damage. The applicants submitted that their loss should be quantified by reference to the $330,000 they paid to settle their claim with the Zdrilics. They claim that they are entitled to this sum plus interest which resulted from the misleading and deceptive conduct of the respondents. Pfeiffer submitted that the correct basis for determining damages was in accordance with the High Court's decision in Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281, that is the difference between the price paid for the property and the actual value at the time of purchase. In my view, Pfeiffer's contention is correct. The settlement between the applicants and the Zdrilics is irrelevant to the quantification of damages arising from the misrepresentations of Pfeiffer. The case is slightly anomalous in that the applicants refused to complete the contract and so did not pay the balance of the purchase price, but then proceeded to commence litigation themselves. Therefore they did not pay price fixed by the misrepresentation from which would be subtracted the actual value of the property in the normal case. 97 I am of the opinion that the correct method to determine any damages is the difference between the contract price and the value of the property. In my view the damage suffered cannot be greater than it would have been if the contract had gone ahead on the basis of the misrepresentation. 98 The undisputed fact is that the applicants contracted to purchase the property for $1.2 million. They relied on the fact that the property sold for $940,000 at auction in December 1995 as indicative of the market value. They also relied on a retrospective valuation of $900,000 which they commissioned. The respondents submitted that on Christofidellis' own evidence he received at least two appraisals from real estate agents which valued the property at $1.1 million to $1.2 million at the time he rescinded the contract. They also rely on his evidence that he told Di Bello he could "probably get $1.1 million for the property". 99 In my view, the weight to be given to valuations must be considered carefully even in the most propitious circumstances, but when the valuation in question is retrospective and carried out by a valuer who has a close relationship with the applicant, even more caution is required. The valuer relied on by the applicants was after all the same valuer who affirmed a valuation of $650,000 for 67 Kyle Parade after an auction at which the highest bid was $484,000. Whether this significant discrepancy was because of a lack of care or a deliberate attempt to mislead, it does not inspire confidence about the retrospective valuation of number 117 made in the context of litigation. 100 There are several factors which cast doubt on whether the auction of number 117, which resulted in its sale by the Zdrilics for $940,000, realised the best possible price. The auction was conducted in mid-December, a traditionally poor time to sell real estate in Sydney. The applicants submitted that the auction was conducted properly with a good campaign in advance and that the Zdrilics were willing but not anxious vendors. The auction campaign may indeed have been adequate but in my view the entire operation was not ideal. The Zdrilics had committed themselves to purchasing another property and although Mr Zdrilic stated that he could have re-financed and kept number 117, this was obviously an option they would have been very keen to avoid. Although it is not necessary in the circumstances for me to make a definitive finding on the matter, I have formed the clear view that if damage was suffered by the applicants, it was minimal. In my opinion, if the contract had been completed, the applicants could have resold the property for an amount close to that which they would have paid. 6. NEGLIGENCE 101 The applicants' case in negligence against Di Bello was put on two bases. Firstly, that he failed to carry out a specific instruction given by the applicants to 'check the area' of the property before exchange, and secondly, that he failed to adequately explain the contract to the applicants before they signed it. Di Bello submitted that the applicants' case turned entirely on whether his retainer included a term that he 'check the area'. I reject that contention. Both the statement of claim, the evidence and the applicants' submissions clearly advanced both this ground and the allegation that the contract was not adequately explained to them. 102 To establish their case in negligence, the applicants must show that Di Bello owed them a duty of care, that the duty was breached, that they suffered foreseeable damage, and that the damage was caused by the breach. 103 There is no doubt that solicitors owe their clients a duty of care in acting for them on the purchase of a property. Similarly, there is no doubt that this duty includes an obligation to adequately explain the contract into which the clients are entering prior to their signing it: Fox v Everingham (1983) 50 ALR 337. The only question in this case that relates to the scope of Di Bello's duty, therefore, is whether his retainer included a term that he 'check the area' of the property.
6.1 "Check the area" 104 Christofidellis claimed that he went to see Di Bello at some time during March 1995 after inspecting the property, told him about it and drew a diagram on which he marked the dimensions and explained how it might be subdivided. Christofidellis' evidence was: I then recall drawing on a piece of paper, in his presence, a plan of the property with the dimensions provided to me by Terry Pfeiffer. I said to him:- "Terry Pfeiffer, the agent, gave me these dimensions and told me it can be subdivided in this manner (referring him to the diagram)." When I was drawing the front boundary of the property I said:- "Tino, 67 Kyle Parade has a 50 foot frontage. This one has got 65. The two sides of 67 Kyle Parade are both 250 foot long. This one has 300 feet on one side and 270 feet on the other. 67 has a back boundary of of 50 feet. This one has water frontage of 130 feet." … I also said:- "Please check the area of the property and its zoning." 105 Di Bello gave evidence that prior to exchange, Christofidellis had only mentioned the property to him twice. On the first occasion, in mid-March 1995, Di Bello claimed that Christofidellis stated: I have bought a waterfront house at 117 Kyle Parade. Terry Pfeiffer will give you the details and get the vendors' solicitors to contact you. 106 On the second occasion a week or so later, Di Bello claimed Christofidellis told him: This is going to be my dream home - I am going to settle in this house. This will make Marcia happy at last. 107 Di Bello denied that prior to exchange Christofidellis ever mentioned subdivision of the property, drew a diagram of the property, told him the dimensions of the property, or asked him to check anything in relation to the property. Di Bello did state that four to six weeks after exchange, when in his office on another matter, Christofidellis drew a diagram of the property, mentioned the dimensions and indicated how the property might be subdivided. However, Di Bello denied being asked to check the area of the property even then. 108 In my view, as Di Bello was dealing with an experienced client with whom he had many previous dealings on property transactions, he would not have been under a duty to check the area of the property unless he was specifically asked to do so before exchange took place. I accept Di Bello's evidence that Christofidellis usually undertook all council inquiries himself to ascertain the use which could be made of a property and that he had never previously asked Di Bello to undertake such inquiries on his behalf. The evidence of the expert solicitors called by both sides was that it would be unusual for a solicitor to be asked to check the area of a property. In the absence of any specific request to do so, there would be no duty to check the area of the property the subject of the transaction. 109 The Court must therefore determine whether Christofidellis did ask Di Bello to check the area. Di Bello submitted that the evidence supported a conclusion that Christofidellis had not done so. First and foremost, he stated that had such a request been made, he would have followed it up and given Christofidellis an answer. He claimed that the fact he had not done so indicated that he had not been asked to. Further, Di Bello relied on Christofidellis' evidence that it was his usual practice to persistently follow up any requests made of his expert advisers, including his solicitor, in order to ensure that they had complied with them. There was no dispute that Christofidellis had not followed up this particular request nor that he had asked Joy Khan to follow it up. Di Bello submitted that this lack of follow up in accordance with Christofidellis' usual practice indicated that the request had never been made. He also cast doubt on the timing of the conversation by reference to Christofidellis' alleged discussion of the subdivision potential of the property. He stated that it would have been contrary to Christofidellis' usual practice to inform him of any plans to subdivide before exchange, as he regarded such matters as secret. 110 Christofidellis submitted that his recollection was more reliable as this transaction was more important to him and he therefore would have remembered the details. Given my earlier findings regarding Christofidellis' credibility, this argument is not persuasive. I am not satisfied that Christofidellis did ask Di Bello to check the dimensions or area of the property prior to exchange. In my view, it is significantly more likely that the conversation occurred as deposed to by Di Bello, that is, that Christofidellis approached him and drew a diagram of the property on an occasion when he was in Di Bello's office on another matter after exchange of contracts. In the circumstances, I cannot therefore find that checking the area formed part of his retainer. 111 Even if Christofidellis had instructed Di Bello in the precise terms he deposed to in his affidavit, there is still significant doubt as to whether this would have imported a term into Di Bello's retainer that he check the area. The factors to consider would include that the request was made some two weeks prior to any contract being finalised, in circumstances where the majority of the terms, including the price, had yet to be determined. Also, the request would have been made in the context of a discussion regarding a completely separate matter and was not subsequently followed up or queried by Christofidellis when Di Bello received a contract from the vendors' solicitor and the transaction truly moved forward. 6.2 Explaining the contract 112 In any event, the result is that, in my view, Di Bello owed only a general duty to his clients to adequately explain the contract they were entering, in accordance with the principle in Fox v Everingham at 341: At the least that obligation [to act generally in the clients' interests] required the [solicitors], either themselves or by an employee qualified to do so, to go through the contract with the [clients] and explain the salient points to them. In this way their principal rights and obligations under it would be explained as would the general course the matter might be expected to take. The respondents were also under an obligation to explain to the [clients] provisions of the contract which were in an unusual form and which might affect their interests as they were known by the [solicitors] to be. 113 Despite Di Bello's submission to the contrary, it is necessary to determine the factual dispute as to the circumstances of the signing of the contract by the applicants, as this conclusion will play an integral role in determining whether an adequate explanation was given to them in discharge of his duty. 114 Di Bello claimed that both applicants attended his office on the evening of 4 April 1995. He claimed that they sat together, across his desk, and he explained the contract to them, after which they signed it. Di Bello stated that he particularly recalled this occasion because it was a rare event for him to be able get both the Christofidellises there at the same time, as they were extremely hard to dovetail. Although he did not specifically recall the words he had used, Di Bello's evidence was that he would have explained the contract to the applicants in accordance with his usual practice, which involved drawing their attention to the important terms and making sure that they were understood. 115 Christofidellis put a completely contradictory version of events. He claimed that he signed the contract on 30 March 1998 and at the same time left with Di Bello a cheque for $30,000 for the 2.5% deposit. He claimed that he initialled each page of the contract by turning up only the bottom left hand corner, and that he neither read, nor had explained to him, any terms of the contract or documents attached to it. Mrs Christofidellis also asserted that she did not sign the contract in the circumstances deposed to by Di Bello. She said that although she attended his office on the afternoon of 4 April 1995, she signed the contract in front of Joy Khan, not Di Bello, and nothing about the contract was explained to her at all. 116 As with many of the other aspects of this case, this is a difficult question for the Court to determine with any confidence. In contrast to other parts of the case, however, there are some undisputed facts. On about 17 March, agreement was reached on a price of $1.2 million and a contract was prepared by John Jeweller of Jeweller Peetz, who was acting for the Zdrilics on the sale of the property. On about 31 March, Joy Khan noted on the file that the Zdrilics had agreed to a reduced deposit and a delayed settlement, at the request of Christofidellis. On 3 April, she sent a letter to Jeweller Peetz setting out certain changes that Christofidellis had requested be made to the contract, including a term allowing him to nominate a different purchaser after exchange and a term allowing him to put to Council a development application prior to settlement. On the same day, Jeweller Peetz responded by facsimile stating that no changes would be made to the contract and that if the Christofidellises were not prepared to proceed on the contract as submitted, then the transaction would be at an end. 117 There is no dispute that contracts were exchanged on 5 April. There is in evidence the contract signed by both applicants, which is dated that day. Attached to the standard contract are several pages of special conditions, which have been signed only by Christofidellis. All of the other annexures to the contract were initialled by both applicants. On the front page of the contract, in the section which states the price and deposit to be paid, a handwritten change was made, crossing out the 5% deposit provision and making it 2.5%. This change was initialled only by Di Bello who also signed and attached to the contract a section 66W certificate stating that he explained the contract to the purchasers including that the certificate removes any cooling off period that would otherwise be applicable. Also in evidence was the deposit cheque from Christofidellis for $30,000, which was dated 30 March. 118 This undisputed evidence revealed several anomalies which both sides submitted supported their version of events. The first is the date of the deposit cheque. Christofidellis submitted that because the cheque was dated 30 March, it supported his claim that he visited Di Bello's office on that date and signed the contract while he was there, leaving the cheque with Di Bello for exchange. Di Bello submitted that the date on the cheque was certainly not determinative of the issue of when the contract was signed. He stated that it was completely in accordance with Christofidellis saying on 30 March that a 2.5% deposit was all he would give to the vendors and that if they did not accept it, then the contract would not proceed. This does accord with Christofidellis' practice as a developer in purchasing properties, in that writing the cheque for the 2.5% deposit could have amounted to pressure on the vendors to accept the reduced amount, which they in fact did the next day, according to Joy Khan's file note. It is also true that simply writing a cheque on 30 March does not exclude the possibility that he did return on 4 April to sign the finalised contract. 119 A further fact which Christofidellis claimed supported his version of events was that he did not initial the handwritten change to the front page of the contract. The evidence revealed that it was a requirement imposed by the vendors that every page and all changes be initialled by both purchasers. Joy Khan's evidence was that the acquiescence of the vendors to the reduced deposit was not negotiated until 31 March. These facts are consistent with Christofidellis' claim that he had been in to sign the contract before the reduced deposit was agreed and that he did not return after that, otherwise he would have initialled the change himself and it would not have been left to Di Bello to do so. 120 Di Bello claimed that as the terms of the contract had not been finalised by 30 March, as shown by the evidence of Joy Khan, it would have been inherently unlikely for Christofidellis to have signed a contract not yet in a form acceptable to him. In my view, it is not unlikely that a cavalier developer like Christofidellis would sign a contract before the terms had been completed, merely to save himself from having to return to his solicitor's office on another occasion. The arrogance required to assume that the terms would be worked out to his satisfaction, and that he need not bother with such troublesome and trivial details of conveyancing as signing the completed contract, was amply demonstrated during the course of this hearing. However, if this is what occurred, it would also reflect rather poorly on Di Bello's practice as a solicitor. Even if an explanation had been given on 30 March, it is difficult to see how it could possibly have been adequate, given that the terms had yet to be finalised. Of course, Mrs Christofidellis was also not present then. 121 Di Bello also submitted that it was unlikely that Christofidellis' story was correct because it meant that he had signed the special conditions on 30 March when he had given instructions to seek two more special conditions, namely the development application consent and the right to nominate a different purchaser after exchange. On the issue of signing the special conditions, Christofidellis stated that if Di Bello's version was correct, and both he and his wife had sat together and gone through the contract and then signed it, it would be highly unlikely that Mrs Christofidellis would have failed to sign the special conditions, as the vendors required, when he did sign them. 122 Mrs Christofidellis relied on the same arguments to support her claim that she had been on her own on 4 April when she attended Di Bello's office to sign the contract. She flatly denied having been given any explanation by Di Bello as she claimed not to have seen him on this occasion. Joy Khan stated that it was her practice not to witness clients signing contracts and that she left this to Di Bello as a qualified solicitor. She also claimed that she left early on 4 April because it was her birthday and so she would not have been in the office to witness Mrs Christofidellis signing the contract. Although neither of these arguments are conclusive, they do generally support Ms Khan's claims. Mrs Christofidellis' credibility and memory have both been severely impugned in the course of this case, and she did admit to having seen Di Bello personally before on at least one occasion in relation to a property transaction. In my view, it is a distinct possibility that Mrs Christofidellis was mistaken in her recollection of the events concerning the signing of the contract and has reconstructed what happened, whether subconsciously or otherwise, in a manner favourable to her case. 123 Having considered all the evidence, I find on the balance of probabilities that Christofidellis did sign the contract on 30 March and that Di Bello must have been mistaken in his recollection of events, unaided as he was by any relevant diary entries or file notes recording meetings with Christofidellis. I find that Mrs Christofidellis signed the contract on 4 April in the presence of Di Bello. 124 These findings do not, however, lead to a judgment against Di Bello for negligence. The fact that the applicants did not sign the contract in the circumstances deposed to by Di Bello does not mean that they were given no explanation of the contract when they did in fact sign it. As well as having regard to the explanation given by Di Bello, the Court must take into account, as both expert conveyancing witnesses stated, that different considerations apply to different clients in explaining contracts. In this matter, Christofidellis was an experienced property developer who had been involved a number of property transactions with Di Bello acting as his solicitor in the three years prior to this transaction. It was Christofidellis' evidence that he undertook most of the necessary council enquiries himself in relation to the properties he bought and that he was conversant with reading surveys. Further, it was not put to Di Bello that his section 66W certificate stating that he had explained the effect of the contract to the purchasers was false. In cross-examination, Mrs Christofidellis did not deny receiving an explanation but rather stated that she did not recall one. In all the circumstances, I find on the balance of probabilities that an explanation was given by Di Bello and that his explanation was adequate. Consequently I find that he did not breach the duty owed to the applicants as his clients. 6.3 Damages 125 Even if Di Bello had breached his duty of care to the applicants, there would have been several significant obstacles standing in the way of their recovering damages. The first is the issue of causation. I am certainly not convinced that Mrs Christofidellis would have decided not to sign the contract to purchase the property whatever the explanation or lack of explanation had been given by her solicitor. She was acting on her husband's instructions in a property transaction which would result in the purchase of the new family home. Her evidence was that she wanted a 'big block'. Even if she had been told the dimensions, it is doubtful in the extreme that her reaction would have been not to sign because the property was not as big as she thought. As for her husband, my impression was that he would not have listened to or taken the slightest notice of any explanation proffered. Indeed, I suspect that he might have been the person doing most of the "explaining". 126 A further problem would have been remoteness of damage. The damage claimed by the Christofidellises is the amount paid by them to settle a claim with the Zdrilics. It could be argued persuasively that this damage was materially caused by their decision to settle on those terms and that to sheet home blame to Di Bello is simply too remote. Certain it is that the Christofidellises determined to rescind the contract and begin litigation rather than complete, as Christofidellis claimed to have been able to do, and then seek redress in one form or another. 127 Another issue would be contributory negligence. If there was damage suffered, it would certainly have to be determined to what extent Christofidellis' actions impacted on that damage. On this matter, the onus of proof would have fallen on Di Bello but, as has been seen, there was ample evidence that Christofidellis was a substantial architect of any losses he suffered.
Counsel for the Applicants: Mr M. Cranitch SC and Mr P. Taylor
Solicitor for the Applicants: GELLS Solicitors
Counsel for the Second and Third Respondents: Mr P. Angyal
Solicitor for the Second and Third Respondents: Holman Webb
Counsel for the Fourth Respondents: Mr T. Castle
Solicitor for the Fourth Respondents: Phillips Fox
Dates of Hearing: 28, 29, 30 & 31 July 1997 1, 4 & 5 August 1997 7 & 8 October 1997
Written Submissions completed: 3 April 1998
Date of Judgment: 19 January 1999
Christofidellis
Zdrilic
(1983) 50 ALR 337
(1995) 184 CLR 281