Di Sisto & Ors v Skyworld Development Pty Ltd & Ors

Supreme Court of NSW|2005-07-14|Before: Palmer J

CITATION : Di Sisto & Ors v Skyworld Development Pty Ltd & Ors [2005] NSWSC 723

DECISION : Judgment for Plaintiffs on Amended Statement of Claim; Cross Claim stood over generally.

CATCHWORDS : CONTRACT - FRAUDULENT MISREPRESENTATION - Whether purchaser induced vendors to rescind contract for sale of land by fraudulent misrepresentation. - SOLICITORS - NEGLIGENCE - Whether vendors' solicitor negligent in failing to advise completion of two contracts for sale of adjoining properties to development should be interdependent.

LEGISLATION CITED : Trade Practices Act 1974 (Cth) - s.52, s.82, s.87

Briginshaw v Briginshaw (1938) 60 CLR 336 CASES CITED : Gould v Vaggelas (1985) 157 CLR 215

Pasquale Di Sisto - First Plaintiff/1st Cross Defendant Angela Di Sisto - Second Plaintiff/2nd Cross Defendant Susanne More Di Sisto - Third Plaintiff/3rd Cross Defendant PARTIES : Skyworld Development Pty Ltd - First Defendant/Cross Claimant Stamfords Constructions Pty Ltd - Second Defendant William Jun Zhi Feng (aka Zhi Jun Feng) - Third Defendant Timothy John Heenan - Fourth Defendant

C.M. Harrris - Plaintiffs COUNSEL : I. Mescher - First Defendant B. McManus - Fourth Defendant

Willis & Bowring - Plaintiffs SOLICITORS : Andrew Lui Lawyers - First Defendant Colin Biggers & Paisley - Fourth Defendant

1 By separate contracts for sale the Plaintiffs sold two adjoining parcels of land to the First Defendant. Before completion, at the First Defendant's request, they rescinded one of the contracts and entered into a replacement contract to sell the subject land to the Second Defendant. The Second Defendant has not completed its contract with the Plaintiffs and has been found to be a corporation of no substance. The Plaintiffs have refused to complete the contract for sale of the other parcel of land to the First Defendant. 2 The Plaintiffs seek an order setting aside the Deed of Rescission whereby they rescinded one of the contracts for sale to the First Defendant. They say that the Deed of Rescission was procured by the fraud of the First Defendant or by conduct of the First Defendant which was in breach of s.52 Trade Practices Act 1974 (Cth) ("TPA"). Additionally, or in the alternative, the Plaintiffs seek damages from the First Defendant and damages for negligence against the Fourth Defendant, who is the solicitor who acted for them in the transaction. 3 The First Defendant denies that it is guilty of any wrongdoing in procuring the Deed of Rescission. By its Cross Claim it seeks specific performance of the remaining contract for sale to it. 4 The Fourth Defendant denies negligence.

did the First Defendant, in a letter dated 1 April 2003 from its solicitors to the Plaintiffs' solicitors, make representations which were fraudulent or misleading and deceptive and in breach of s.52 TPA;

did the Plaintiffs act in reliance upon the representations in entering into the Deed of Rescission and in entering into a contract with the Second Defendant;

if the making of the representations was conduct on the part of the First Defendant in breach of s.52 TPA, have the Plaintiffs suffered, or are they likely to suffer, loss or damage by that conduct within the meaning and for the purpose of s.87 TPA;

are the Plaintiffs entitled to an order under s.87 TPA setting aside the Deed of Rescission;

are the Plaintiffs entitled to damages at common law or under s.82 TPA against the First Defendant;

did the Fourth Defendant breach his contractual and tortious duty of care to the Plaintiffs in:

failing to ensure that the Plaintiffs' obligations to complete the two contracts for sale to the First Defendant were inter-dependent;

failing to advise the Plaintiffs not to agree to rescission of one contract with the First Defendant unless completion of the replacement contract with the Second Defendant was made inter-dependent on completion of the remaining contract with the First Defendant;

if the Fourth Defendant is guilty of negligence, have the Plaintiffs suffered loss thereby;

is the First Defendant entitled to specific performance of the existing contract for sale between it and the Plaintiffs. 6 No relief is now sought against the Second Defendant or the Third Defendant, a person said to be a director of the Second Defendant. Neither of those Defendants can be found and they have not been served with the proceedings. 7 It has been agreed that if the Plaintiffs are found entitled to damages against the First or Fourth Defendants, there should be an enquiry as to damages before an Associate Judge.

8 The First and Second Plaintiffs ("Mr and Mrs Di Sisto") are the registered proprietors of a residential property at 33 Petersham Road, Marrickville. Mr and Mrs Di Sisto and their daughter, Susanne, are the registered proprietors of a residential property at 126A and 126B Livingstone Road, Marrickville. The two properties adjoin and they have for many years been seen by Mr and Mrs Di Sisto as having potential for redevelopment as an amalgamated site. For convenience, I will refer to the two properties as No 33 and No 126 respectively. 9 Mr Di Sisto has at all times acted on behalf of his wife in negotiations and in giving instructions to solicitors and others relating to the two properties. 10 The First Defendant ("Skyworld") is a real estate developer. In the transactions now in question, Skyworld acted through one of its directors, Mr Wilson Hu. 11 In mid-September 2002, Skyworld was interested in acquiring No 126 as a development site for townhouses. According to Mr Hu, Skyworld was also interested in acquiring from a third party a property adjoining No 126, namely, 124 Livingstone Road. Again, for convenience, I will refer to the latter property as No 124. 12 Negotiations took place between Mr Di Sisto and a real estate developer on behalf of Skyworld for the acquisition of No 126 alone. Mr Di Sisto says, and I accept, that he would not sell No 126 alone and wanted $2.1M for No 33 and No 126, sold together. Mr Di Sisto says, and I accept, that he believed that the two properties together, as an amalgamated site for development, were worth more than they would be worth if sold as separate sites. 13 On 13 December 2002, the real estate agent representing Skyworld came to Mr Di Sisto's office for further discussions. Mr Di Sisto sought assistance in the negotiations from his accountant, Mr Fielding. Mr Fielding came at once to Mr Di Sisto's office. After some further discussion, the agent on behalf of Skyworld agreed to a price of $2.1M for the two properties. 14 Mr Fielding then rang the Fourth Defendant, Mr Heenan, who had previously acted as the solicitor for the Di Sisto family. Mr Fielding conveyed instructions to Mr Heenan for the preparation of contracts for sale of the properties. There is disagreement between Mr Di Sisto, his daughter Susanne and Mr Fielding on the one hand, and Mr Heenan on the other hand, about the content of the instructions which were conveyed to Mr Heenan. I will return to this issue shortly. 15 Two contracts for the sale of the properties to Skyworld were prepared by Mr Heenan. The vendors in the contract for sale of No 33 were Mr and Mrs Di Sisto and the purchase price of that property was $1.1M. The vendors in the contract for sale of No 126 were Mr and Mrs Di Sisto and Susanne and the purchase price for that property was $1M. Both contracts required completion on 31 July 2003 but completion of one contract was not made dependent upon completion of the other.

16 Mr Hu says that on 23 December 2002, while he was on a visit to China, he met a man whom he knows only as "William" or "Mr Feng". William said that he was a migrant to Australia and was involved in the construction business. Mr Hu says that he told William that he had a property development business in Australia and the suggestion was made that the parties might work together in Australia. 17 Mr Hu says that on his return to Australia William contacted him and they met in January 2003 for a discussion. In the course of that discussion Mr Hu asked whether William would be interested in purchasing No 33 and suggested that he might also be able to purchase No 35 Petersham Road, so that he would be able to use both sites for a development. He says that he told William that he had entered into a contract for the purchase of No 33 for $1.1M. 18 Mr Hu says that after this first meeting with William in January 2003 he had about two or three other meetings with William outside No 126. In those conversations, he says, they discussed the supply to Mr Hu of building materials by William and the possibility of William purchasing No 35 Petersham Road. 19 Mr Hu says that in March 2003 he went with William to see a Mr Jimmy Fung, a paralegal employed by V. Gazdik, solicitor. Mr Fung had acted on the entry by Skyworld into the contracts for the purchase of Nos 33 and 126. 20 Mr Hu's affidavit evidence as to this meeting with William and Mr Fung is as follows: "I recall saying to Mr Fung: 'I want a new purchaser for 33 Petersham Road, Marrickville. The new purchaser will be William.'

Prior to the meeting with Jimmy Fung referred to above, I recall having a further meeting with William outside 126A and 126B Livingstone Road, Marrickville. I recall at this meeting William saying to me: 'I will buy the property at 33 Petersham Road, Marrickville.'

I then recall William asking Jimmy Fung: 'How much will the conveyancing cost?'

I recall Jimmy Fung giving a quote to William but I can't recall how much this was for.

I then recall William saying to Jimmy: 'I will get back to you later'.

To the best of my recollection, the meeting then ended." 21 Some time after this meeting, Mr Hu says, William rang him and told him that he would be engaging separate solicitors to act for him in entering into the contract for No 33 and that he would acquire the property through a company called Stamfords Constructions Pty Ltd ("Stamfords"). 22 Mr Hu says that, shortly afterwards, Mr Fung rang him and told him that it would be necessary to rescind Skyworld's existing contract for the purchase of No 33 and for Stamfords to enter into a new contract to purchase that property. 23 On 2 April 2003, a letter dated 1 April 2003 from V. Gazdik, solicitor, to Mr Heenan was sent by facsimile by Skyworld's real estate agent to Mr Di Sisto at his office. Also attached was a copy of a development application to the council in respect of Nos 33 and 126, showing Skyworld as the applicant. The application was for development consent for the construction of ten townhouses on Nos 33 and 126. 24 The letter dated 1 April 2003 was in the following terms: "Re: STAMFORDS CONSTRUCTIONS P/L PURCHASE FROM DI SISTO P'pty: 33 PETERSHAM RD, MARRICKVILLE NSW

We have been instructed by the purchaser, Skyworld Development P/L that its business partner namely Stamfords Constructions P/L will join in its project relating to the developments in the above property and the other property known as 126A & 126B Livingstone Rd, MARRICKVILLE NSW.

We were also instructed by Skyworld Development P/L that Stamfords Constructions P/L requires a new contract contains [sic] the same terms and conditions of our contract dated 20th December, 2002 and Stamfords Constructions P/L is to be the sole purchaser thereby, which may now be exchanged with the vendor's. The 5% deposit paid by Skyworld Development P/L will form part of the deposit and Stamfords Constructions P/L will pay another 5% deposit so that the full 10% deposit is to be paid on exchange and the contract between the vendor and Skyworld Development P/L may be rescinded thereby.

Should the above arrangement be agreed by the vendor, Skyworld Development P/L consents to pay the vendor's extra legal costs and expenses relating to obtaining instructions, issuing a new contract and exchange for the purchase by Stamfords Constructions P/L and its rescission of the contract at the new exchange.

The letter had been prepared by Mr Fung, as appears from the reference on it. 25 The letter and the development application were seen by Mr Di Sisto's daughter, Maria, who rang Mr Fielding for advice. Mr Fielding came to Mr Di Sisto's office and read the letter from Skyworld's solicitor. After some discussion with Mr Di Sisto, Mr Fielding dictated to Maria a facsimile covering letter which was sent to Mr Heenan together with the letter dated 1 April 2003 from V. Gazdik and the development application for Nos 33 and 126. The covering facsimile requested Mr Heenan to review the attached documents "and let us know your thoughts" . The facsimile continued: "In addition, do you think it's possible that

The additional 5% Deposit to be paid on exchange can be released immediately on the same terms as previous.

Can we obtain some proof of settl ability to settle by Stamfords Constructions." (sic) 26 There can be no doubt that Mr Di Sisto, Mr Fielding and Mr Heenan accepted without question the assertions made in the letter dated 1 April 2003. They were concerned, not with the truth of the assertions contained in that letter, but rather with the financial ability of Stamfords to complete the purchase of the proposed new contract for the acquisition of No 33. 27 Mr Heenan prepared a Deed of Rescission and a new contract for the sale of No 33 to Stamfords. The new contract included the following special conditions: "PURCHASE BY CORPORATION

The purchaser being a body corporate, that is a proprietary company under the Corporations Law, it is agreed that on the said purchaser executing this contract two (2) directors of the purchaser company shall sign the contract as guarantors and those directors expressly agree in further consideration of the vendors agreeing to sell the property to the purchaser that they the guarantors accept joint and several liability for the performance of this contract by the purchaser.

The purchaser warrants that it has a current loan approval and will deliver to the vendors on exchange of contracts an original letter from its lending Bank confirming that the Bank will lend to the purchaser sufficient funds to enable the purchaser to complete this contract.

The deposit paid to the vendors by the purchaser Skyworld Development Pty Limited ACN 100918269 pursuant to contract for the sale of land between that purchaser and the present vendor dated the 31st of July 2003 (and which was unconditionally released to the vendors pursuant to special condition 12 of that earlier contract) shall form part of the deposit paid pursuant to this contract and the purchaser on exchange of this contract will pay in accordance with the terms of the contract the balance of the deposit so that the total amount paid is ten per centum (10%) of the purchase price." 28 On 19 May 2003, the Deed of Rescission of the contract for No 33 with Skyworld was executed, the new contract for No 33 with Stamfords was exchanged, and the sum of $55,000 was paid by way of additional deposit under that contract. The new contract provided for completion of the purchase on 31 July 2003, which was the date for completion specified in the existing contract with Skyworld for the purchase of No 126. 29 However, there was no provision in the new contract with Stamfords making completion of that contract dependent upon completion of the contract with Skyworld for the purchase of No 126. Mr Heenan concedes that upon exchange of the Deed of Rescission and the new contract with Stamfords, he did not seek and obtain guarantees of the directors of Stamfords or a letter of approval of finance from Stamfords' bank, as required by Special Conditions 14 and 15 of the contract. Mr Heenan concedes that in this regard, he failed to comply with his instructions to obtain proof of Stamfords' ability to complete the contract. 30 When the time to complete both contracts arrived, i.e. 31 July 2003, Skyworld was ready and willing to complete the purchase of No 126 but Stamfords and its directors could not be found or traced. A firm of solicitors which had acted for Stamfords on the exchange of the contracts for No 33 had no instructions and did not know how to contact their client. 31 A search of ASIC's records showed that Stamfords had been incorporated on 1 April 2003 and that its registered office and principal place of business was an address at Canley Vale. Enquiries revealed that that address was a residential property and that its long term occupants had never heard of Stamford, its officers or its business. 32 The sole director of Stamfords was shown in ASIC's records as Zhi Jun Feng. His residential address was given as 32 Powell Street, Neutral Bay. His date of birth was shown as 21 October 1958 and his place of birth as Guangdong in China. Enquiries revealed that the residential address of Mr Feng stated in ASIC's records does not exist. Attempts to trace Mr Feng have failed. 33 Mr Hu says that he took Mr Feng, whom he knew only as "William", to see the paralegal, Mr Fung, in March 2003, as has been recounted. Mr Fung has not been called as a witness by Skyworld. Mr Fung is still resident in Sydney and until a short time ago he was acting as the legal representative of Skyworld in these proceedings. Although Mr Hu was given an opportunity to explain Mr Fung's absence as a witness, he could give no explanation other than that if anybody else wanted him as a witness that party could subpoena him. 34 Two other possible witnesses as to the reality of William's existence and identity might have been produced. One was Mr Colin Murphy, the solicitor who acted for Stamfords on the exchange of the contract for No 33 on 19 May 2003. The other was the person from the firm of accountants which procured the incorporation of Stamfords and, presumably, took instructions for the particulars as to directors to be inserted in the documents to initiate incorporation. That firm happens to be the firm which has been the accountants for Mr Hu and his interests for some eight years. Neither Mr Murphy nor anyone from the firm of accountants which procured incorporation of that company has been called by Skyworld to verify the existence and identity of William. No explanation for their absence has been offered by Skyworld. 35 The time for completion of the contracts for sale of No 126 to Skyworld and No 33 to Stamfords has passed. Mr and Mrs Di Sisto have refused to complete the contract for No 126 without simultaneous completion of the contract for No 33. Skyworld says that the two contracts are independent and it has issued a Notice to Complete its contract for No 126. That Notice has expired and Skyworld, by its Cross Claim, now seeks specific performance of the contract for the purchase of No 126.

36 The Plaintiffs say that rescission of the contract for sale of No 33 to Skyworld and the entry into the contract for sale of that property to Stamfords was procured by fraudulent misrepresentation of Skyworld or, alternatively, by representations which were misleading and deceptive, in breach of s.52 TPA. 37 The fraudulent or misleading statements relied upon by the Plaintiffs are contained in the letter from Skyworld's solicitor dated 1 April 2003 and the attached development application. They say that those two documents together contained the following representations:

Skyworld had a business partner called Stamfords;

Stamfords wanted to join in Skyworld's currently existing project for the construction of ten townhouses on Nos 33 and 126, as shown in the development application attached to the 1 April letter;

although the deposit of 5% paid under Skyworld's contract to purchase No 33 would be applied to the new contract with Stamfords, Stamfords would pay an additional 5% deposit under the new contract. 38 The Plaintiffs say that each of these representations was false, to the knowledge of Skyworld. 39 The Plaintiffs say that these statements were made because Skyworld did not wish to continue with its acquisition of No 33. It had always wanted to purchase only No 126 because it had been negotiating with a third party for the acquisition of the adjoining property, No 124, and it wished to carry out a profitable development for nineteen townhouses on the amalgamated sites of Nos 124 and 126. However, Mr Di Sisto would not sell No 126 on its own and insisted that No 126 be purchased as part of a parcel incorporating No 33. 40 Accordingly, the Plaintiffs say, Skyworld had to contract to purchase No 33 as the price of the contract to purchase No 126. Shortly afterwards, when it succeeded in entering into a contract for the purchase of No 124, it evolved a scheme to extract itself from the contract to purchase No 33. It persuaded Mr and Mrs Di Sisto, by false representations in the letter of 1 April 2003, to rescind the contract for No 33 with Skyworld, a company of substance, and to replace that contract with a contract with Stamfords, which it knew was nothing more than an empty shell. Skyworld intended that it would then insist on performance of the contract for the purchase of No 126 while leaving Mr and Mrs Di Sisto to pursue a fruitless remedy against Stamford for breach of its contract to purchase No 33. 41 Skyworld says that:

the statements made in the letter of 1 April 2003, when reasonably read, are neither untrue nor misleading;

in any event, there is no evidence that Mr and Mrs Di Sisto relied on any representations made in the letter;

even if the representations were false and even if Mr and Mrs Di Sisto relied upon them, no loss was caused to them thereby: but for the negligence of Mr Heenan in failing to require proof of Stamfords' ability to complete the contract for No 33, Stamfords' lack of substance would have been exposed and the contract for the sale of No 33 to Skyworld would never have been rescinded.

42 I am conscious, of course, that a finding of fraud, like any finding of serious misconduct, should not be made upon vague and inexact proofs: Briginshaw v Briginshaw (1938) 60 CLR 336. However, in the present case I am of the view that the Plaintiffs' allegation of fraud is fully established. My reasons are as follows. 43 First, the fact that the incorporation of Stamfords was procured on the basis of false particulars of the residential address of the director, William or Mr Feng, and false particulars of the registered office and place of business indicates that the company was established for a fraudulent purpose and to disguise the identity of those who wished to use it for that fraudulent purpose. 44 Second, no one apart from Mr Hu has been produced to testify to the existence of William and that William is not Mr Hu or some other person associated with Skyworld. As I have noted earlier, there are three such persons who could have been called to establish William's existence and identity: Mr Fung, Mr Colin Murphy and the person from the firm of accountants who took instructions for the incorporation of Stamfords. None of these persons has been called and no explanation for that failure has been proffered. 45 Third, the firm of accountants who had been acting for Mr Hu and his interests for some eight years previously and had procured incorporation of Skyworld also procured the incorporation of Stamfords. Mr Hu denied having introduced William to that firm but he had no explanation as to how that firm could have come to be acting for William in incorporating Stamfords. 46 Fourth, each of the three statements in the letter of 1 April 2003 said by the Plaintiffs to be a misrepresentation is unquestionably false, even on evidence of Mr Hu. 47 Mr Hu said that he did not know where William lived, he did not know where the building supply business alleged to be conducted by William was located, he had never entered into any agreement with William, written or oral, for the supply of building materials or for any other business venture. He said that he had been given a business card by William on the first or second occasion when he met him in December 2002 in China and that the business card had the name of Stamfords on it. But Mr Hu said that he could not now find the business card. Further, it is improbable that the business card which Mr Hu said he had received in December 2002 had the name of Stamfords on it when that company was incorporated only in April 2003. 48 A reasonable reading of the 1 April letter would lead a reader in the position of Mr and Mrs Di Sisto to believe that as at that date Skyworld was in an existing partnership in business with Stamfords. In the light of the evidence to which I have referred above, that representation was false, to the knowledge of Mr Hu, even if it is true that William exists. 49 A reasonable reading of the 1 April letter would lead a reader in the position of Mr and Mrs Di Sisto to believe that Stamfords wished to join in Skyworld's project for the development of ten townhouses on Nos 33 and 126, and that that project was still on foot. That representation would have been conveyed not only by the terms of the first paragraph of the letter but by the forwarding of a Development Application showing Skyworld as applying for the development of ten townhouses on Nos 33 and 126. 50 However, on Mr Hu's own evidence, that representation was false, even if William exists. Mr Hu said that his proposal to William was that William alone would acquire and develop No 33. There was no suggestion that William or Stamfords would participate in developing No 126. 51 A reasonable reading of the 1 April letter would lead a reader in the position of Mr and Mrs Di Sisto to believe that Stamfords itself would pay the additional deposit of $55,000 on exchange of the new contract for the purchase of No 33. The fact that Stamfords would be paying the deposit would give the impression that it was a company of some financial substance. 52 However, on Mr Hu's own evidence, extracted only in cross examination, this representation and the impression it created were false, even if William exists. Mr Hu says that he had agreed with William that Skyworld would pay the additional deposit of $55,000 on behalf of Stamfords. In fact, unknown to the Plaintiffs, Skyworld provided this sum as the deposit on the exchange of the new contract with Stamfords. 53 Fifth, Skyworld had a powerful motive for procuring its release from the contract for purchase of No 33. As the Plaintiffs have submitted, prior to entering into the contract with the Plaintiffs in December 2002 Skyworld had been negotiating with a third party for the purchase of No 124; the acquisition of the adjoining No 126 from the Plaintiffs would have given it a site on which it could develop nineteen townhouses. Skyworld had, earlier in 2002, tried to acquire No 126 alone from the Plaintiffs but the Plaintiffs had made it quite clear that they would sell No 126 only as part of a package including No 33. 54 When Skyworld succeeded in acquiring No 124 in February 2003, the retention of No 33 was clearly unnecessary and unprofitable. According to Mr Hu's own calculations, a development of ten townhouses on Nos 33 and 126 would have produced a profit of about $200,000 for a land acquisition cost of $2.1 M , whereas for a land acquisition cost of $2.3 M a development of nineteen townhouses could have been undertaken on Nos 124 and 126, which would have produced a profit of about $1.4 M . 55 Mr Hu acknowledged in cross examination that his agreement with William that Skyworld would pay on Stamfords' behalf the additional deposit of $55,000 on exchange of the new contract for No 33 produced a loss for Skyworld of at least $110,000 on the transaction with the Plaintiffs. However, Mr Hu said that that loss was worthwhile in order to make a much greater profit on the development of Nos 124 and 126 alone. 56 This evidence is very understandable in light of the fact that by March 2003 it had become evident to Skyworld from its enquiries at the Council that No 33 could not, in any event, be used as part of the development of No 126; No 33 was simply too narrow. 57 In short, by 1 April 2003 it had become clear to Skyworld that No 33, for which it had agreed to pay $1.1 M , was worthless to it as part of the development which it proposed to carry out on Nos 124 and 126. To pay an extra $55,000 to induce the Plaintiffs, by a deception, to release it from a very large loss-making contract would have made very good business sense. 58 Sixth, I am unable to accept Mr Hu as a witness of credit. Quite apart from the inconsistencies and improbabilities to which I have drawn attention above, it was clear that he gave instructions to Mr Fung to write the letter of 1 April containing statements which he clearly knew to be false, even if one accepts the existence of William. Mr Hu has not said that the statements in that letter were not in accordance with the instructions which he gave to Mr Fung. 59 Further, I cannot accept Mr Hu's evidence generally as reliable. His first language is Cantonese and he gave his evidence through an interpreter, saying that he could speak only a little English and that he could not write English. 60 However, Mr Hu has been a resident in Australia for sixteen years, having arrived when he was twenty-three years old. During that time, he has owned two businesses which have dealt with Australian customers. He dealt with the architects for the project at Nos 124 and 126 in English; he received letters from those architects in English; he went alone to the Council on two occasions to discuss in English the development proposal; he wrote in a clear and confident style in English a memorandum to his younger brother concerning the project; he wrote in English the details which were to be inserted into the Development Application sent to the Plaintiffs in April 2003. 61 Further, Mr Hu is fluent enough in English to have responded to certain questions in cross examination without the aid of an interpreter and without apparent difficulty. Indeed, on one occasion, when the interpreter was translating into English an answer which Mr Hu had just given in Cantonese, Mr Hu interrupted the interpreter and corrected his translation. 62 In short, it was very apparent to me that while Mr Hu was doubtless more comfortable in Cantonese than in English, his command of spoken and written English was much greater than he had said it was. 63 I do not, therefore, accept the evidence of Mr Hu on any matter in contention unless the evidence is supported by other credible evidence or is inherently probable. 64 For the reasons which I have given, I hold that the three misrepresentations in the 1 April letter to which I have referred above were material and were fraudulently made by Skyworld in order to induce Mr and Mrs Di Sisto to rescind the contract with Skyworld for the purchase of No 33 and to enter into a contract for sale of that property to Stamfords, a company which Skyworld knew to be without substance. To put it bluntly, the whole transaction with Stamfords was procured by calculated trickery on the part of Mr Hu and Skyworld.

65 I do not accept the submission by Skyworld that there was no reliance by Mr and Mrs Di Sisto on the misrepresentations contained in the letter of 1 April. 66 First, there is direct evidence from Mr Fielding, on whose advice Mr and Mrs Di Sisto relied, that he relied on the accuracy of what was contained in the letter of 1 April and that he believed that Skyworld had a business partner which would be involved in the project to be carried out on Nos 33 and 126. He said that if he had been aware prior to execution of the Deed of Rescission that Skyworld intended to develop only Nos 124 and 126, not No 33, he would have advised Mr and Mrs Di Sisto not to have executed the Deed. 67 Second, there was no reason for Mr and Mrs Di Sisto to agree to rescind the contract for the sale of No 33 to Skyworld and enter into a new contract with Stamfords, except to accommodate the request of Skyworld on the basis of the statements made in its letter of 1 April. Reliance on those statements is, therefore, self-evident. As was said by Wilson J in Gould v Vaggelas (1985) 157 CLR 215, at 238: "Where a plaintiff shows that a defendant has made false statements to him intending thereby to induce him to enter into a contract and those statements are of such a nature as would be likely to provide such inducement and the plaintiff did in fact enter into that contract and thereby suffered damage and nothing more appears, common sense would demand the conclusion that the false representations played at least some part in inducing the plaintiff to enter into the contract. However, it is open to the defendant to obstruct the drawing of that natural inference of fact by showing that there were other relevant circumstances." 68 Here, Skyworld has not been able to show any circumstance which would suggest that the natural inference of reliance by Mr and Mrs Di Sisto on the statements in the letter of 1 April should not be drawn.

69 Because of my finding that the Deed of Rescission and the contract with Stamfords for the sale of No 33 were procured by the fraud of Skyworld, I am satisfied that the Deed and the contract should be set aside under the common law as void ab initio. If it had been necessary, I would have made an order to the same effect under s.87(2) TPA. It follows that Mr and Mrs Di Sisto are entitled to a declaration that the contract for the sale of No 33 to Skyworld remains on foot. 70 If Skyworld performs the contract for the purchase of No 33 and completes the purchase of that property, Mr and Mrs Di Sisto will have suffered no loss by reason of the deceit practised on them by Skyworld. They will have incurred expense in the litigation of this case but that expense will be the subject of the appropriate costs order. If Skyworld breaches its contract and fails to complete the purchase of No 33, it will be liable to Mr and Mrs Di Sisto in damages, but damages for breach of contract, not damages for fraudulent misrepresentation. 71 It is, therefore, unnecessary to consider in these proceedings what damages may be payable by Skyworld to Mr and Mrs Di Sisto by reason of the fraudulent misrepresentations made by Skyworld.

72 Because the two contracts for sale to Skyworld are not interdependent, Skyworld may complete the contract for the purchase of No 126 but may fail to complete the contract for the purchase of No 33. If No 33 alone is placed on the market, it may not sell for as much as the contract price stipulated in the sale to Skyworld because No 33 has no development potential except as a site amalgamated with No 126. A successful action against Skyworld for damages for breach of contract may result in a judgment which is not fully satisfied. If Mr Heenan has been negligent in his conduct of the transactions on behalf of the Plaintiffs, will he be liable for the loss which the Plaintiffs may suffer thereby? 73 The negligence alleged against Mr Heenan is that:

i) he failed to ensure that completion of the contracts for the sale of Nos 33 and 126 to Skyworld were interdependent;

ii) he failed to ensure that completion of the contract for the purchase of No 33 by Stamfords was dependent on completion of the contract for the purchase of No 126 by Skyworld;

iii) he failed to insist on contractual safeguards as to the financial ability of Stamfords to complete the purchase of No 33. 74 As the Deed of Rescission and the contract for the purchase of No 33 by Stamfords will be set aside so that the parties are restored to the positions in which they were prior to the execution of the Deed of Rescission, no loss to the Plaintiffs will flow from negligence on the part of Mr Heenan under grounds (ii) and (iii). Indeed, if Skyworld performs its obligations under the contract for the purchase of No 33, the Plaintiffs will suffer no loss at all. 75 As I have noted, Mr and Mrs Di Sisto are exposed to loss by reason of negligence on ground (i) only if Skyworld completes the contract for the purchase of No 126 but fails to complete the purchase of No 33 and a judgment against it for breach of contract is not fully satisfied. 76 It is, therefore, necessary to consider whether Mr Heenan breached his contractual or tortious duty of care to Mr and Mrs Di Sisto in failing to ensure that the completion of both contracts with Skyworld was interdependent. 77 There is conflict in the evidence as to what instructions were given to Mr Heenan by Mr Fielding on 13 December 2002. According to Mr Fielding, he told Mr Heenan that a purchaser had been found for the Di Sisto family's properties at Nos 33 and 126; they wanted to sell the properties together because No 33 was much more valuable as a development site in conjunction with No 126 than as a property by itself; the properties were to be sold for $2.1 M ; and it was important that contracts be exchanged before Christmas. 78 Mr and Mrs Di Sisto's daughter, Susanne, was present in Mr Di Sisto's office during the telephone conversation between Mr Fielding and Mr Heenan. She gives substantially the same account of the conversation as does Mr Fielding but she says that Mr Fielding said that it was important that the contracts settle together. 79 Mr Di Sisto does not give an account of the conversation in his affidavit. 80 Mr Heenan denies that Mr Fielding told him in this conversation that Mr Di Sisto wanted to sell both properties together because No 33 was much more valuable as a development site in conjunction with No 126. He agrees that he was told that the purchase price would be $2.1 M . 81 I think it is fair to say that, generally, Mr Heenan could remember little about conversations regarding the transaction apart from what appeared in his diary notes. The diary notes for the discussion on 13 December 2002 record that 31 July 2003 was to be the date for settlement of both contracts. From this I infer that Mr Heenan was told that the contracts were to be settled on the same date. Mr Heenan says that he knew that both contracts were to be exchanged on the same date. 82 The diary note records that the contracts were to provide that the vendors were to consent to a development application. From this I infer that Mr Heenan was told that the properties were to be sold for development. He said that he understood that as far as the Plaintiffs were concerned "this was one transaction that had to be effected by two different contracts" . 83 As to whether Mr Heenan was told that the properties had to be sold together because No 33 was worth less on its own than in conjunction with No 126, I prefer the evidence of Mr Fielding. Mr Fielding's evidence was clear and consistent and it was in accordance with an attitude which the Di Sisto family had taken over a number of years in attempting to sell both properties together. 84 On the other hand, it may well be the case that Mr Heenan did not make a diary note of this statement in the conversation, and has no recollection of it, because at the time of this transaction he had no experience in acting on sales of land to developers. Although he had been in practice for twenty years as a sole practitioner, 60% of his work was criminal work and the remainder was a general practice. He said that he would have had on average only about four to eight conveyances in any year and that they were conveyances of residential property for residential purposes. 85 Mr Heenan said that at the date of these transactions he was not aware that when land available for development consists of several parcels, the market value of the parcels taken as one site may exceed the total of their market values if sold as separate lots. It may well be the case, therefore, that although Mr Heenan was told the reason that the contracts had to be settled on the same date, he did not appreciate and digest the reason which Mr Fielding gave him for that instruction. 86 The Plaintiffs called as a witness Mr Neville Moses, a well known expert on conveyancing law and practice. Mr Moses said that when a vendor is selling adjoining properties to a purchaser or purchasers who are acquiring them for development and the sale is effected by more than one contract, as sometimes occurs, it is the standard practice of prudent and competent solicitors acting for such vendors to seek instructions from the vendors as to whether they require completion of the contracts to be interdependent. The reason, as given by Mr Moses, is: "In view of the fact that in most such situations it is the combination of the properties which makes them especially desirable for development it is obviously important for the vendor to ensure that he, she or it are not left with one of the properties unsold thereby losing the benefit of the increased value of that property when sold in conjunction with the other or others of them." 87 Mr Moses' evidence was not seriously challenged in cross examination. No expert witness was called by Mr Heenan to contradict him. I accept Mr Moses' evidence without qualification. 88 Bearing in mind that Mr Heenan knew that the subject properties were adjoining and were being sold for development, that the contracts were to be exchanged and completed at the same time, and that they were regarded by the Di Sisto family as "one transaction to be effected by two different contracts" , I have no doubt that, in accordance with the standards of a prudent and competent solicitor, Mr Heenan ought reasonably to have recognised a paradigm case which required him to expressly enquire from Mr and Mrs Di Sisto whether they wished the contracts to provide that settlement of the sales be made interdependent. There can be no doubt that if Mr Heenan had sought such instructions, they would have been given. Indeed, I would say that a prudent and competent solicitor would have realised from what had been said to him by Mr Fielding on 13 December 2002 that it was implicit in his instructions that settlement of the two contracts be made interdependent. 89 Accordingly, I hold that in failing either to seek instructions from Mr and Mrs Di Sisto as to whether the contracts for sale of Nos 33 and 126 to Skyworld should be made interdependent or in failing to suggest that such provision should be included in the contracts, Mr Heenan failed to act in accordance with the standards of a prudent and competent solicitor so that he was in breach of his contractual and tortious duty of care to Mr and Mrs Di Sisto. 90 As I have indicated above, Mr Heenan's negligence may not occasion loss to Mr and Mrs Di Sisto: Skyworld may fully perform its obligations under the contract for the sale of No 33 as well as performing its obligations under the contract for the sale of No 126. However, if Skyworld completes only the contract for No 126 and if a judgment against it for breach of contract for the sale of No 33 cannot be recovered in full, Mr Heenan will be liable for the loss, if any, which Mr and Mrs Di Sisto suffer thereby. Had the two contracts been interdependent, Skyworld would not have been able to put Mr and Mrs Di Sisto in the position of having to re-enter the market to sell No 33 on its own rather than in conjunction with No 126. 91 In those circumstances, the parties have agreed that the assessment of the damages for which Mr Heenan may be liable to the Plaintiffs should abide performance of Skyworld's obligations under both contracts. I think that that is an appropriate course. Cross Claim

92 Skyworld seeks an order that Mr and Mrs Di Sisto specifically perform the contract for the sale of No 126. 93 However, Mr and Mrs Di Sisto have refused to complete the contract for No 126 only because of the fraud practised on them by Skyworld in procuring them to rescind the contract for No 33, which was to be settled at the same time as the contract for the sale of No 126. Mr and Mrs Di Sisto clearly wished to abide the result of these proceedings and, in refusing to settle the contract for No 126 before then, they were in my view taking a reasonable attitude. 94 Now that the contract between Mr and Mrs Di Sisto and Skyworld for the purchase of No 33 is reinstated, there is no suggestion in the evidence that Mr and Mrs Di Sisto will refuse to perform either of the two contracts according to their terms. 95 The two contracts are, of course, not interdependent and if Skyworld now refuses to complete the contract for the purchase of No 33 while proffering completion of the contract for the purchase of No 126, Mr and Mrs Di Sisto will not be entitled to refuse performance of the contract for No 126. 96 However, that situation has not yet arisen and it may never arise. As I have said, in my view, Mr and Mrs Di Sisto were justified in taking the attitude which they did to settlement of the contract for sale of No 126 up to the present time. In those circumstances, and bearing in mind that the difficulty in which Mr and Mrs Di Sisto were placed arose entirely out of the fraudulent conduct of Skyworld, I do not think that, as a matter of discretion, it is appropriate now to make any of the orders sought in Skyworld's Cross Claim. 97 The Cross Claim will therefore be stood over generally to abide performance of Skyworld's obligations under both contracts. If Mr and Mrs Di Sisto persist in refusing to perform the contract for the sale of No 126, the Cross Claim may then be pursued by Skyworld. Orders

98 I will stand these proceedings over for a short time to enable the Plaintiffs to bring in Short Minutes of Order reflecting these reasons for judgment. I will then hear argument as to costs. ~ oOo ~

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

Trade Practices Act 1974(Cth)

At a glance

Court

Decision date

Before

Source

Judgment (52 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (2)