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.