First Plaintiff Second Plaintiff v First Defendant Second Defendant Third Defendant Fourth Defendant

First Plaintiff Second Plaintiff v First Defendant Second Defendant Third Defendant Fourth Defendant - [2012] VSC 239 - VSC 2012 case summary — Zoe

[85]

242 Sunland submitted that the payment made by Sunland was not a "spotter's fee", an "introduction fee" or a "consulting fee". This was, as indicated, contrary to the evidence particularly as Sunland's in-house lawyer, Clyde-Smith, had used terminology such as "spotters fee" and other descriptions inconsistent with this submission had been applied by both Brown and Abedian. Rather, Sunland suggested that a seminal description was provided by Reed in an email to Sinn of 17 September 2007[864] when Reed described the payment as a "consulting fee to walk away". "Walk away with what?", was the rhetorical question posed by Sunland.[865] As submitted against Sunland, it is unclear what point was sought to be made of this; the so-called seminal description of the fee, "a fee to walk away", was also one of the various descriptions used by both Brown and Abedian.[866] If Sunland was in doubt as to what Reed and the Prudentia parties were walking away from and what Sunland believed was obtained as a consequence of payment of the "fee", the issue could have, and should have, been clarified with Brown and Abedian in re-examination. In any event, as discussed previously, it is clear, in my view that Sunland's commercial imperative was to obtain Plot D17 exclusively so that Sunland, and Sunland alone, would enjoy the very significant returns it anticipated on the development of that land.[867] In further support for this submission Sunland made reference to its willingness to increase the sum it was offering to pay to Prudentia, and ultimately Hanley. This does not, however, affect my assessment of the position. The profit Sunland expected to enjoy from the development of Plot D17 remained extremely attractive. In this context the increase in the sum offered by Sunland remained insignificant - both as to the increase itself and the total sum offered, as increased. Sunland also submitted that the absence of "any process of real negotiation where they [Sunland] try and beat Mr Reed or Prudentia down ..."[868] is evidence in support of the proposition it advances. I am, however, of the opinion that this is but further evidence in support of the view I have formed in this respect - namely that acquiring Plot D17 solely by Sunland was such an attractive commercial proposition for it that the money it was contemplating paying to Prudentia, and ultimately Hanley, was insignificant. Again the answer to the, so called, "rhetorical question" is clear - and it does not involve Sunland's allegations, the Representations or the Hanley Representations.

[87]

"2.2.8 The Sunland parties maintain that their case does not require the finding that the representation was to the effect that there was a formally binding contract entitling Reed or Prudentia to the plot. Rather, in submissions the Sunland parties contended the alleged representation amounted to what is the vague and undefined ... agreement which conferred upon Prudentia a 'right' which was capable of transfer to Sunland[870].

2.2.9 A right to negotiate is no less a right where conferred in personam between contracting parties in joint venture pursuit of a land development opportunity where one party (Prudentia) allows the other party (Sunland) to negotiate in the proposed venture to secure an assent of their venture. That Sunland would exercise the negotiation rights with DWF was an agreed and central term of the MOU agreements exchanged between them. Such a right conferred in personam is distinguishable from and is in no sense dependent upon Prudentia having an enforceable 'agreement' with DWF in respect to D17 and is not inconsistent with Prudentia having 'a limited right of negotiation'.

2.2.10 The facts show that what Prudentia offered as a funding party to Sunland joint venture model and brought to the table in terms of its hold in respect of a development proposal was sufficient to engage Sunland in negotiation with Prudentia whereby, over time, Sunland could fully evaluate the feasibility of the project and its willingness to enter a JV with Prudentia. A right to negotiate final terms of the SPA, the legal terminology and the planning and timing and technical issue[871] in respect of a plot of land not finally configured and having the status of a design plan is consistent with the terminology and utility of hold over D17 used by Austin (and noted by Brown) on 15 August 2007.

2.2.11 Sunland obtained and exploited that hold as a matter of fact pursuant to Brown's 'put our foot on it' proposal, which Reed accepted ('go for it') and by which he entrusted Brown to secure D17 on the basis that inter alia:

[145]

"374. In his cross-examination Abedian acknowledged (as he had to) that the email was never sent to his email address. Nevertheless, he was determined to give evidence that he had seen it and relied heavily upon it. To that end he fabricated a convoluted and fanciful story about a hard copy of the email he kept in his desk. This story fell apart as he was telling it.[962]

375. Brown himself had no recollection of showing the email to Abedian, much less printing off a copy and handing it over to Abedian at a meeting.[963]

376. Similarly, in his witness statement Abedian had given no evidence of being provided with a hard copy of the email that was of such importance that he showed it around the office to his wife and kept in his top drawer thereafter. Nevertheless, this was the story Abedian told in the witness box.

377. Abedian gave evidence that Brown brought in a hard copy of this email for him to see on either 16 or 17 August 2007. Abedian swore he kept this hard copy email in his drawer in his office in Dubai. He also swore that he showed this document to his wife on or around 16 August 2007. If this was not enough he then swore that he showed it to his external local lawyer in Dubai, Mr Bin Haider, after the Dubai authorities started investigating the matter in early 2009 and he also showed it to his internal lawyer, Georgia Carter, at a date that he could not recall. Finally, Abedian also swore that he showed this hard copy document to Joyce's wife, Angela, when she supposedly visited Sunland's office in or around late January 2009.[964]

378. Of course, no well-worn hard copy email was ever discovered by Sunland as being the email Abedian had carefully preserved for years in his top drawer. When questioned about this, Abedian swore that he disposed of the hard copy document when Sunland had an office move in Dubai. When asked, Abedian swore that this office move occurred at the end of 2007.[965] This was, of course, more than a year before the date he had just sworn he had shown the document to three other individuals.

379. Thus, Abedian invented the story of the hard copy email and unwittingly exposed it as a lie. If the matters in issue in this proceeding were not so serious, if Mr Abedian's position at Sunland (a listed public company) was not so senior and if the obligation to tell the truth under oath was other than fundamental, Abedian's evidence might be seen as farcical. However, for all these reasons these lies cannot be so easily dismissed. Further, they are but part of a dishonest scheme by Abedian and Brown to pervert the course of justice in two separate jurisdictions.

380. Abedian eventually realised the mistake he had made and, as with other unhelpful evidence, (such as the meaning of 'house arrest') tried to backtrack and became more evasive and untruthful. This ultimately required the intervention of His Honour[966] to direct Abedian to answer a very simple question regarding the disposal of the hard copy of the 16 August email. Abedian ultimately claimed that he could not recall when he disposed of the email.[967]"

[147]

271 On 15 August 2007 when Austin allegedly said to Brown that Reed had a "hold on the plot", Brown never asked what that meant.[970] It was submitted against Sunland that this could only be explained on the basis that Brown well understood from the outset that Reed had no rights over Plot D17. Brown's contacts with DWF from June to August 2007 were mainly with Lee, Brearley and Austin and not Joyce.[971] Brown took advice from Lee and Brearley about Plot D17[972] and the evidence indicated an established pattern, on the part of Sunland, of checking the legal position with Brearley.[973] According to Brown's, apparently very careful answer during cross-examination, when Clyde-Smith spoke to Brearley about Prudentia, all he said was that "we should be comfortable with Prudentia",[974] a comment which she passed on to Brown. As submitted against Sunland, this is quite different to the account contained in Brown's witness statement[975] in which asserted that Clyde-Smith confirmed Brearley had said Prudentia had "development rights" over Plot D17. Clearly, Brearley's statement or comment in relation to Prudentia did not amount to confirmation that Prudentia owned Plot D17 or had any rights to that plot, even assuming such a question had been asked. It does, however, appear far more likely that Brearley's comment or statement was a response to an inquiry about Prudentia as a possible joint venture party. None of the defendants are, of course, responsible for this comment or statement by Brearley, even assuming it were to be construed in a manner asserted by Brown. In any event, Brown did not ask Reed for any documents that showed that Reed had a right to Plot D17.[976] This is in marked contrast to the situation when Brown and Clyde-Smith were investigating the purchase of Plots A10C and A3B with DWF where they made numerous email enquiries of Stewien and Brearley to check who owned those plots and the nature of their interest.[977] For example, on 1 July 2007, Brown sent the following email to Lee (copied to Abedian, Clyde-Smith, Stewien and Brearley) regarding Plot A10C:[978]

[160]

275 It must follow that if Brown believed that Reed or Prudentia had a legal interest in Plot D17 (or for that matter any other "right" or "control" with respect to that land), this advice from Lee and Brearley would, having regard to their positions in DWF, have come as a complete surprise. In my view, it is clear that any fair reading of Brown's email, which recorded Lee and Brearley's words, is that Plot D17 was "up for grabs" and available to be sold by the "marketing people" of DWF to any willing purchaser. Brown did accept in cross-examination that a "general explanation" of having to put your foot on the plot would be that your foot was not yet on the plot.[989] It would then follow that Brown would have been asking some very serious and pressing questions of Brearley, Lee and Reed about how such a sale could possibly occur if Reed or Prudentia had "control" or "rights" in respect of Plot D17 if he really believed that Reed or Prudentia (or, possibly more accurately, Och-Ziff) had any such "right" or "control". Brown did no such thing and responded, in cross-examination, that "I can't recall why I didn't ask that" when this was put to him.[990] Instead of asking questions and making enquiries as one might have expected had Brown held the belief he claimed, he quickly prepared a draft email to Reed, for approval by Clyde-Smith, which recounted the conversation and referred to the advice that "we immediately 'put our foot on the Plot' to secure it".[991] Clyde-Smith clearly regarded this draft email as appropriate, as it was, after being sent to her for approval, sent unaltered by Brown to Reed, copied to Abedian.[992] Neither she nor Abedian apparently raised any issue or surprise about it the need to "put our foot on the Plot to secure it". Neither Brown nor Abedian could give any credible explanation as to why they did not raise any concern at this time about the message from Nakheel through DWF that neither Reed nor Prudentia had any "control" or "right" in respect of Plot D17.[993] In my opinion, the only rational and reasonable explanation for this failure to act or inquire is that Brown and Abedian well understood that neither Prudentia, nor Reed, had secured Plot D17 in any enforceable sense and, consequently, did not therefore control it; and nor did they enjoy an "right" with respect to the land on any other basis. In any event, it must also follow that, had they been labouring under any misapprehension in this respect, that this apprehension was clearly and decisively dispelled by this conversation with Lee and Brearley, as evidence by Brown's "put your foot on it" email.

[167]

282 Sunland sought to rely upon the use of the word "premium" in various communications between Reed and Clyde & Co (Dubai legal advisers to Prudentia in 2007) in the context of a potential "on-sale" and then to draw the implication that this is the sense in which Reed used the word "premium" in email correspondence with Brown - though the emails referred to are all from Brown, rather than to Brown.[1012] Reliance was also placed on the manner in which Reed and Prudentia were also said to have used the word "premium" to describe the Sunland payment in various emails with Prudentia personnel and its Melbourne solicitors, and in drafts of the Implementation Agreement or MOU.[1013] In my view, these submissions and the documents referred to do not advance Sunland's case. Regardless of whether Reed or Prudentia hoped to purchase Plot D17 from DWF, sign a SPA, and on-sell it at a "premium" to Sunland[1014] in the manner apparently common in Dubai, this did not occur. An important question is whether, if the word "premium" was used in communications with Sunland, how it was understood by the recipient. Brown has answered this question consistently with my view of Sunland's understanding of the position - which is that it was under no illusions that the Prudentia parties had any interest in Plot D17, proprietary or contractual or other relevant "right". In all the circumstances, it would also be implausible, in my view, to think that Sunland would have thought the use of the word "premium" in the drafts and final form of the Implementation Agreement or MOU indicated a contrary position. It knew the position and, in any event, the provisions in these drafts indicate, clearly in my view, that the fee to be paid under the Implementation Agreement or MOU was for a "right" to negotiate only. This "right was clearly accepted by the parties as a rather nebulous concept, based on no legal entitlement. As discussed, it was, in reality, a payment to the Prudentia parties to "go away".[1015]

[206]

294 The agreement with Hanley was in the same form as the signed agreement with Prudentia, save for the replacement of Prudentia with Hanley as the contracting party.[1056] The late introduction of Hanley and the failure of anyone at Sunland to raise any concern about this change in the contracting party is, as I have indicated, completely inconsistent with Sunland believing that Prudentia (or Reed) had any legally enforceable rights to Plot D17 (or, for that matter, any "right" or "control" with respect to that land). If Sunland had thought that Prudentia (or Reed) had any such rights, very different contractual documents would have been prepared, addressing that issue, and with Prudentia (and possibly Reed) as a necessary party (or parties) to convey its (or his or their) contractual, proprietary or other rights to Hanley so that they could, in turn, be dealt with by Hanley by way of transfer to Sunland. In other words, if any of Brown, Abedian or Clyde-Smith had believed that Prudentia (or Reed) had any right with respect to Plot D17, then one would also have expected them to have satisfied themselves that that the "right" or "rights" had been vested in Hanley at the time the agreement was entered into with Hanley. However, neither Brown nor Abedian gave any evidence that, or to the effect, that they did any such thing. [1057] There are no contemporaneous documents that show that either Brown or Abedian, or Clyde-Smith, made any enquiries to ensure that Hanley held any "right" which Brown and Abedian claim they thought Prudentia (or Reed) had with respect to Plot D17. Brown could not even recall the details of any conversation with Abedian or Clyde-Smith about the substitution of Hanley.[1058] I accept that it follows that the reason why the substitution of Hanley did not trouble Sunland was because the fee was in fact paid in return for the Reed and the Prudentia parties walking away from Plot D17 and not for the purchase of any legally enforceable right, proprietary or contractual, or any other "right" In my view the steps that were taken (or, rather, not taken) in relation to the substitution of Hanley make this position absolutely clear.

[216]

"215. Why did Sunland agree to pay Prudentia $13.5 million, and what was it getting for that amount? What type of rights in relation to a $59 million purchase would be worth $13.5 million, i.e. nearly 23% of the purchase price? If Prudentia was merely a competing negotiator, why wouldn't Sunland have at least attempted to negotiate directly with DWF, from whom it had previously purchased plot D5B. There is no evidence that Sunland ever negotiated with or ever contemplated direct negotiations with Dubai Waterfront to buy the Plot. As experienced developers and having negotiated for many development sites previously they would have certainly commenced negotiations with Dubai Waterfront directly if they believed it was possible to do so. The fact that Sunland did not do this is only consistent with a continuing belief that Reed or Prudentia had some right or control over the land.

216. Or putting the question the other way, if the representations were made to the plaintiffs, but they did not rely on them in dealing with the Prudentia parties, what did the plaintiffs rely on? There is no evidence that they relied on anything else.

217. Mr Collinson SC suggested to Mr Brown that the payment was purely for an introduction (in the strict sense) - unsurprisingly Brown rejected the suggestion.[1067] Why would Sunland pay $13.5 million merely for an introduction to a property that it already knew about?

218. The Dubai investigators had no difficulty in reaching the obvious conclusion: 'The Financial Audit Department thinks that the consultancy fees required to be paid by Sunland are exaggerated, as they amounted to 44,105,780 dirhams, equal to 22.9% of the plot price, confirming that such amounts were paid to acquire the plot'.[1068] They do not think that Sunland paid $13.5 million for meetings or advice or an introduction. They understand that such a substantial premium (on percentage terms) would only be paid by someone who believed that were paying it in order to acquire a right to the land.

219. In answer to a question from your Honour as to the explanation for Prudentia's control, Mr Brown stated that 'Austin started by telling us they had a hold; Joyce told us he was the contact for that plot; later said [sic] to us an email that we had to reach agreement with Prudentia before we could deal with Nakheel; the Prudentia documents all referred to that they had reached agreement with the master developer to acquire and develop the plot; and then it was confirmed by Brearley as well.'[1069]

220. Brown's evidence was that although he did not know whether the Prudentia parties' hold on the plot was contractual, the context was the conduct of real estate transactions in Dubai[1070] and at that 'we knew at that time that there was all sorts of ways of putting holds on plots in Dubai, because we had come across some of them in negotiating other potential properties' including letters between parties that were not formal contracts.[1071] Although Mr Brown said in his first statement (para 22) that he had not heard of reservation agreements at the relevant time, in cross-examination he was shown an email that showed he may well have been aware that a reservation agreement was another way of putting a hold on a plot.[1072]

221. Reference should also be made to the internal Dubai Waterfront email from Marcus Lee to Joyce dated 20 August 2007 and disclosed by Joyce (MJJ.008.001.0066, [Tab 30]), which refers to Brearley and Lee telephoning Brown and putting 'pressure' on Brown, and recording that Brown told them that Sunland 'would sign right away if they could get in there now independently'. This is important contemporaneous evidence that Brown and Abedian believed and relied on the representations that they had to reach an agreement with Reed, and that but for those representations, Sunland would have sought to sign an agreement to purchase D17 directly from Dubai Waterfront, i.e. Sunland would 'get in there now independently'."

[348]

"[10] The following principles are worth restating.

1. A contravention of s 52(1) of the TPA is established by 'conduct' which is misleading or deceptive or likely to mislead or deceive: Global Sportsman Pty Ltd [1984] FCA 180; 2 FCR 82, 87. The 'conduct', in the circumstances, must lead, or be capable of leading, a person into error (Hannaford (t/as Torrens Valley Orchards) v Australian Farmlink Pty Ltd [2008] FCA 1591 at [252] citing Taco Company of Australia Inc v Taco Bell Pty Ltd [1982] FCA 136; (1982) 42 ALR 177 at 200; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191 at 198) and the error or misconception must result from 'conduct' of the corporation and not from other circumstances for which the corporation is not responsible: Global Sportsman Pty Ltd [1984] FCA 180; 2 FCR 82, 91. 'Conduct' is likely to mislead or deceive if there is a 'real or not remote chance or possibility regardless of whether it is less or more than fifty per cent': Global Sportsman Pty Ltd [1984] FCA 180; 2 FCR 82, 87.

2. Section 52(1) is concerned with the effect or likely effect of 'conduct' upon the minds of that person or those persons in relation to whom the question of whether the 'conduct' is or is likely to be misleading or deceptive falls to be tested. The test is objective and the Court must determine the question for itself: Global Sportsman Pty Ltd [1984] FCA 180; 2 FCR 82, 87. Section 52 is not designed for the benefit of persons who fail, in the circumstances of the case, to take reasonable care of their own interests: Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd [1987] FCA 332; (1987) 78 ALR 193 at 241. Moreover, it would be wrong to select particular words or acts which although misleading in isolation do not have that character when viewed in context: Elders Trustee [1987] FCA 332; 78 ALR 193 at 241 citing Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191 at 199.

3. 'Conduct' can, of course, include making a statement which is misleading or deceptive or likely to mislead or deceive: Global Sportsman Pty Ltd [1984] FCA 180; 2 FCR 82, 88.

4. By making a statement of past or present fact, a corporation's state of mind is irrelevant unless the statement involved the state of the corporation's mind: Global Sportsman Pty Ltd [1984] FCA 180; 2 FCR 82, 88. Contravention of s 52(1) does not depend upon the corporation's intention or its belief concerning the accuracy of the statement of fact but upon whether the statement conveys a meaning which is false. A false meaning will be conveyed if what is stated concerning the past or present fact is inaccurate but also if, although literally true, the statement conveys a meaning which is false.

5. Precisely the same principles control the operation of s 52(1) to statements involving the state of mind of the maker when the statement was made (eg promises, predictions and opinions). A statement which involves the state of mind of the maker ordinarily conveys the meaning (expressly or impliedly) that the maker of the statement had a particular state of mind when the statement was made and, commonly, that there was a basis for that state of mind: Global Sportsman Pty Ltd [1984] FCA 180; 2 FCR 82, 88.

6. A statement of opinion will not be misleading or deceptive or likely to mislead or deceive merely because it turns out to be incorrect, misinforms or is likely to do so: Elders Trustee [1987] FCA 332; 78 ALR 193, 242 and Bateman v Slatyer (1987) 71 ALR 553 at 559. An incorrect opinion does not of itself establish that the opinion was not held by the person who expressed it or that it lacked any or any adequate foundation: Global Sportsman Pty Ltd [1984] FCA 180; 2 FCR 82, 88. An expression of an opinion which is identifiable as an expression of opinion conveys no more than that the opinion is held and perhaps that there is a basis for the opinion. If that is so, an expression of opinion however erroneous misrepresents nothing: Global Sportsman Pty Ltd [1984] FCA 180; 2 FCR 82, 88.

7. However, an opinion may convey that there is a basis for it, that it is honestly held and when it is expressed as the opinion of an expert, that it is honestly held upon rational grounds involving an application of the relevant expertise. If the evidence shows that the opinion was not held or that it lacked any or any adequate foundation, particularly if the opinion was expressed as an expert, a statement of opinion may contravene s 52 of the TPA: Elders Trustee [1987] FCA 332; 78 ALR 193, 242, proposition (4): see also Hannaford [2008] FCA 1591 at [253] and RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd [1993] FCA 92; (1993) 41 FCR 164; Murphy v Overton Investments Pty Ltd [2004] HCA 3; (2004) 216 CLR 388; NC Seddon and MP Ellinghaus, Cheshire and Fifoot's Law of Contract (9th Australian Edition, 2008), [11.116]."

[350]

"27. The principles that assist this Court in applying section 52 of the TPA are as set out below:

(a) Section 52(1) is concerned with the effect or likely effect of 'conduct' upon the minds of that person or those persons in relation to whom the question of whether the conduct is or is likely to be misleading or deceptive falls to be tested. The test is objective and the Court must determine the question for itself.[1242]

(b) Reasonable inferences, reasonable assumptions and reasonable expectations arising from objectively determined circumstances will be in the constructive knowledge of the parties. An objective test excludes from consideration subjective matters (knowledge, intention) not known to the parties.[1243]

(c) The 'conduct', in the circumstances, must lead or be capable of leading a person into error[1244] and the error or misconception must result from conduct of the alleged contravenor and not from other circumstances for which the alleged contravenor is not responsible.[1245]

(d) Conduct is likely to mislead or deceive if there is a 'real or not remote chance or possibility regardless of whether it is less or more than fifty per cent'.[1246]

(e) It is wrong to select some words or acts which although misleading in isolation do not have that character when viewed in context.[1247] The identification of the impugned conduct and what it conveys or communicates to the persons to whom it is directed must be assessed with regard to all relevant surrounding circumstances. Not all circumstances are relevant: conduct cannot be attributed to a defendant unless he or she had actual or constructive knowledge of the circumstances that affect its content. That means that contextual circumstances of which a defendant had no actual or constructive knowledge that alter the scope of what would otherwise be attributed to him or her, are irrelevant.[1248]

(f) As a general proposition, s 52 does not require a party to commercial negotiations to volunteer information that will be of assistance to the decision-making of the other party. It does not impose on a party an obligation to volunteer information in order to avoid the consequences of the careless disregard for its own interests of another party of equal bargaining power and competence.[1249]

(g) By making a statement of past or present fact, the state of mind of the person who makes that statement is irrelevant unless the statement involved the state of that person's mind.[1250]

28. Whether particular conduct is likely to mislead or deceive involves considering a notional cause and effect relationship between the conduct and the state of mind of the relevant person. The test is necessarily objective.[1251] In this case, one asks what the reasonable person in the position of Sunland would have understood by the alleged conduct of Joyce, against the context of all relevant surrounding circumstances. Any error must result from conduct of Joyce and not from other matters for which he is not responsible.

29. In characterising the alleged conduct of Joyce in relation to the plaintiffs, one must bear in mind what matters of fact each knew about the other of them as a result of the nature of their dealings and the conversations between them, or which each may be taken to have known.[1252] Relevant considerations include that each of Joyce, Brown and Abedian were sophisticated and experienced businessmen.[1253]

30. A person does not avoid liability for breach of s 52 because the person who has been the subject of misleading or deceptive conduct could have discovered the misleading or deceptive conduct by proper inquiries.[1254] However, depending on the circumstances, other related conduct may have the effect of modifying or erasing whatever is misleading in the conduct complained of.[1255]

31. For example, the fact that the plaintiffs in this case had the opportunity to but did not take steps which might or would have corrected a misapprehension or wrong assumption can be relevant to an inquiry as to whether conduct should be characterised as misleading or deceptive.[1256]"

[373]

'Having made those findings [i.e. as to the fraudulent misrepresentations made by Mr Vaggelas], the trial judge proceeded to deal with the submission strongly advanced at the trial by Mr. Pincus and maintained both before the Full Court and this Court that a misrepresentation is no ground for relief unless it induces the representee to enter into the contract and that on the evidence the Goulds had failed to establish the fact of inducement. His Honour correctly elucidated ... the applicable principles, which can be re-stated as follows:

1. Notwithstanding that a representation is both false and fraudulent, if the representee does not rely upon it he has no case.

2. If a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract there arises a fair inference of fact that he was induced to do so by the representation.

3. The inference may be rebutted, for example, by showing that the representee, before he entered into the contract, either was possessed of actual knowledge of the true facts and knew them to be true or alternatively made it plain that whether he knew the true facts or not he did not rely on the representation.

4. The representation need not be the sole inducement. It is sufficient so long as it plays some part even if only a minor part in contributing to the formation of the contract.

... However, decisions of this Court leave no room to doubt that the ultimate onus of proving inducement rests upon the party seeking relief in respect of the fraudulent misrepresentation. ...

... At the same time, one can readily understand why it is in cases of deceit that a tribunal whose duty it is to find the facts may require a defendant to make some answer to the case that is put against him. Such cases are of a kind where in the general experience of mankind the facts speak for themselves. 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. Examples commonly given of such circumstances are that the plaintiff not only actually knew the true facts but knew them to be the truth or that the plaintiff either by his words or conduct disavowed any reliance on the fraudulent representations. It is entirely accurate to speak of an onus resting on a defendant to draw attention to the presence of circumstances such as those I have described in order to show that the inference of the fact of inducement which would ordinarily be drawn from the fraudulent making of a false statement calculated to induce a person to enter into a contract followed by entry into that contract should not in all the circumstances be drawn. But it is no more than an evidentiary onus - an obligation to point to the existence of circumstances which tend to rebut the inference which would ordinarily be drawn from the primary facts. When all the facts are in, the fact-finding tribunal must determine whether or not it is satisfied on the balance of probabilities that the misrepresentations in question contributed to the plaintiff's entry into the contract. The onus to show that they did is a condition precedent to relief and rests at all times on the plaintiff. ...

... Once it be established, as was found by the trial judge, that without any assurance whatever of the profitability of the resort save that which was fraudulently misrepresented to them by Mr Vaggelas the Goulds were prepared to pay more than two million dollars for the property the conclusion that those misrepresentations played some part in persuading them to engage in the transaction is well-nigh irresistible. The members of the Full Court were unanimous in upholding the decision of Connolly J. I respectfully agree with them.'[1288]

[450]

401 The TPA does specifically provide for its extraterritorial operation, particularly in sub-s 5(1) as extending the reach of its provisions to companies incorporated or carrying on business in Australia, Australian citizens or persons ordinarily resident in Australia. As noted previously, Joyce was and is an Australian citizen. The effect of these provisions is that in spite of the fact the conduct of Joyce relied upon by Sunland took place outside Australia, it is the conduct of an Australian citizen within the scope of s 5(1) of the TPA and if the necessary prohibited elements were established, within the prohibition of s 52 of that Act. Consequently, there is potentially some tension between the operation of ss 5 and 6 of the TPA in relation to the extension of the reach of this legislation. The relationship between these provisions is, however, unsettled.[1360] In the present circumstances it is not necessary to attempt to resolve this position as the point was not pressed on behalf of Joyce, but left on the basis that whether or not sub-s 5(1), 6(2) or 6(3) of the TPA extends the operation of s 52 of that Act to the conduct of Joyce, Sunland must still establish the various elements of s 52 for liability to attach to him. In my opinion, this was an entirely appropriate concession as a basis on which to proceed, particularly as I am inclined to the view, without deciding, that the effect of ss 5 and 6 of the TPA is expansive, rather than limiting, in terms of the extended operation of that Act. Nevertheless, the "trade or commerce" dimension and the extraterritorial effect of s 52 of the TPA, by means of sub-s 5(1) and the modifying effect of sub-s 6(2), both require that the relevant conduct occur in "trade or commerce". In relation to sub-s 5(1), this is because the language of s 52 of that Act requires that the conduct be "in trade or commerce". Insofar as sub-s 6(2) is concerned, this limitation follows because these provisions confine the extended operation of s 52 of that Act with respect to natural persons by reference to the "trade or commerce" requirement with respect to the particular conduct. In Bright v Femcare,[1361] Lehane J explained the extraterritorial operation of s 52 of the Act as follows:

[483]

413 Although the provisions of the FTA do not mirror those of the TPA in terms of extraterritorial operation, the discussion and my findings in relation to the latter legislation significantly informs the position with respect to the application of the FTA. In my opinion, any relevant conduct which might be relied upon by Sunland for the purposes of the prohibitions provided for under the FTA is, as indicated previously, primarily, if not exclusively, conduct which took place in Dubai; in relation to land in Dubai.[1375] There are, however, some connections with Victoria. If the evidence established that Hanley had engaged or used a Victorian firm of solicitors, then it may be that this would have provided a sufficient connection with Victoria for the purposes of the FTA, though not under the provisions of the TPA. However, as discussed previously, there is no evidence of the retainer of the Victorian legal firm, Freehills, by Hanley and so the issue does not arise under the FTA.[1376] In relation to telephone conversations and transmission of communications through computer servers located from and in Victoria, I am of the opinion that absent a provision such as sub-s 6(3) of the TPA, it should not be assumed that this, on its own, necessarily provides a sufficient connection with Victoria to enliven the application of the FTA. In my view, the contrary follows from the decision of Morris J in Law v MCI Technologies Pty Ltd.[1377] Indeed, to construe the requirement of a connection so liberally would be to give the State legislation a significantly broad extraterritorial operation because almost any email or internet communication with or involving Victoria would enliven the jurisdiction.[1378] In my view, the Victorian legislature could not have intended such a potentially world-wide operation for the FTA; or the uncertainties which would flow from the need to consider some incidental connection with Victoria as a result of the use of internet servers or other telecommunications equipment in Victoria.

[1471]

"242. Accordingly a number of IT witnesses made statements to the effect that the relevant emails would have passed over internet cable infrastructure located in Australia, en route from Prudentia's email server in Melbourne to Sunland's email server on the Gold Coast, and from Joyce's computer in Dubai to Sunland's email server on the Gold Coast.

243. Mr Vitali Parkhomenko is an IT manager at DLA Phillips Fox, the plaintiffs' former solicitors. He has 13 years' experience in the IT industry, and holds a masters degree in mathematics from the State University, Rostov-on-Don in Russia. He used publicly available search tools, and a document discovered by the first respondent entitled 'Prudentia Investments Computer System Documents', to conclude that the first respondent's email server was physically located in Dorcas Street, Southbank, Melbourne when the relevant email was sent by Reed.

244. In relation to the receipt of Joyce's email and Reed's email by Brown, Mr Dumka gave evidence that prior to June 2008, all email to or from Sunland employees, wherever in the world they were, passed through Sunland's Exchange mail server located in Sunland's offices on the Gold Coast. He states that the only internet service provider used by Sunland for its Gold Coast premises was GCOMM.

245. Mr Michael Bellears of GCOMM has worked in the IT field for over 13 years. His evidence is that in August 2007, all of Sunland's internet traffic passed through two cable services, known as x.163 or E1 services, which GCOMM provided to Sunland, having obtained them from its wholesale supplier, a company called PacNet, which was previously known as AsiaNetcom.

246. Mr Craig Deutscher of GCOMM has over 14 years' experience in the IT industry. Mr Deutscher's evidence is that he personally configured and maintained Sunland's email server, and so knew that it was physically located at Sunland's Gold Coast offices during 2007. His evidence is that any email sent to Brown's email address dbrown@sunlandgroup.com.au in August 2007 would have passed through GCOMM's cable infrastructure between GCOMM's data centre and Sunland's premises.

247. Notice was given before and during the trial of an intention to subpoena a witness from PacNet, to give evidence to the effect that the cable infrastructure for the x.163 or E1 services provided to Sunland's offices is ultimately owned by Telstra, but leased by PacNet for on-sale to its customers, and a statement of anticipated evidence (SUN.013.002.0001) was served on 14 July 2011.

[1515]

[1397] IMC Aviation Solutions Pty Ltd v Altain Khuder LLC [2011] VSCA 248; (2011) 253 FLR 9 at [25].
[1398] Neilson v Overseas Projects Corporation of Victoria Ltd [2005] HCA 54; (2005) 223 CLR 331 at [116].
[1399] Paragraph 3.3 of the Witness Statement of Ali Al Aidarous dated 20 March 2011 - being a paragraph with which Ms Hamade for the plaintiffs did not disagree (cf Plaintiffs' Reply to the Supplementary Written Submissions of the Defendants, paragraphs 202 and 203 where it is submitted that if Hamade adopted parts of Al Aidarous' opinion as being accurate statements of UAE law, those parts of the opinion are in her evidence; but that the rest of Al Aidarous' opinion is not evidence other than for the limited purpose of providing context to the comments of Hamade in responding to that report - and further that if the report is in evidence it is of no weight. In my opinion, this is a somewhat artificial position and does not take account of the nature of the Hamade report which does raise the inference of agreement with respect to matters not responded to. In any event, the point made does not appear to lead anywhere, given Sunland's submissions on the proper approach to be adopted with respect to the tort of deceit (see above, paragraph 417) and my findings with respect to this issue). See also Transcript, p 506.09 - .30 and the last paragraph of point 5.1 of the Witness Statement of Diana Hamade.
[1400] Hamade Statement, paragraph 5.1
[1401] Hamade Statement, Appendix 7, page 196 (being Whelan J, "UAE Civil Code and Ministry of Justice Commentary - 2010", Sweet & Maxwell, ISBN: 9780414046450). See Transcript, page 508 at lines 7 to 13: although those comments were made regarding Article 185 of the Code, they apply equally to Article 285: Hamade Statement, paragraph 5.1. The evidence of Ms Hamade with respect to conduct that would amount to "gross cheat" under Article 187 of the UAE Civil Code does not take matters further as she assumed for the purposes of her expert evidence that the conduct alleged by Sunland had in fact occurred, the critical issue within the province of this Court, not an expert witness. As to this assumption, see Plaintiffs' Address, paragraph 270.
[1402] Hamade Statement, paragraphs 5.1 and 5.2. Hamade Statement, Appendix 7, pages 199 to 201.
[1403] Hamade Statement, Appendix 7, page 191.
[1404] Hamade Statement, Appendix 7, page 199. Hamade Statement, paragraph 6(a).
[1405] Hamade Statement, Appendix 7, page 199. Hamade Statement, paragraph 6(b).
[1406] Hamade Statement, paragraph 6(b).
[1407] Hamade Statement, paragraph 5.2.
[1408] Hamade Statement, paragraph 5.2.

Parties

Applicant/Plaintiff:

# Sunland Waterfront (BVI) Ltd & Anor

Respondent/Defendant:

Prudentia Investments Pty Ltd & Ors

Legislation Cited (56)

Fair Trading Act 1999(Vic)

Practices Act 1974

Trading Act 1999

Land Act 1958

Land Act 1962

Trading Act 1987

Transactions Act 1999

Fair Trading Act 1999(Vic)

Practices Act 1974

Trading Act 1999

Land Act 1958

Land Act 1962

Trading Act 1987

Transactions Act 1999

Fair Trading Act 1999(Vic)

Practices Act 1974

Trading Act 1999

Land Act 1958

Land Act 1962

Trading Act 1987

Transactions Act 1999

Fair Trading Act 1999(Vic)

Practices Act 1974

Trading Act 1999

Land Act 1958

Land Act 1962

Trading Act 1987

Transactions Act 1999

Fair Trading Act 1999(Vic)

Practices Act 1974

Trading Act 1999

Land Act 1958

Land Act 1962

Trading Act 1987

Transactions Act 1999

Fair Trading Act 1999(Vic)

Practices Act 1974

Trading Act 1999

Land Act 1958

Land Act 1962

Trading Act 1987

Transactions Act 1999

Fair Trading Act 1999(Vic)

Practices Act 1974

Trading Act 1999

Land Act 1958

Land Act 1962

Trading Act 1987

Transactions Act 1999

Fair Trading Act 1999(Vic)

Practices Act 1974

Trading Act 1999

Land Act 1958

Land Act 1962

Trading Act 1987

Transactions Act 1999

Cases Cited (74)

[2012] VSC 239

TRADE PRACTICES - Misleading or deceptive conduct - whether any representations were made by the Defendants in respect to the status, purchase and development of land in Dubai - execution of contract and payment of a fee by the Plaintiff - whether any conduct of, including any representations, of the Defendants was misleading or deceptive or otherwise in breach of statutory prohibitions - whether the Plaintiff relied on any conduct including misrepresentations to its detriment - causal connection between the conduct of the Defendants and the misapprehension of the Plaintiff - no reliance by the Plaintiffs on the alleged misrepresentations - whether First to Third Defendants a 'person involved' in a contravention for the purposes of accessorial liability - failure of Plaintiffs to establish loss or damage - Gould v Vaggelas [1984] HCA 68; (1985) 157 CLR 215; Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592; ACCC v Dukemaster Pty Ltd [2009] FCA 682 - Trade Practices Act 1974 (Cth) ss 5(1), 6(2), , , 53A, 75B, - (Vic) ss 9, 12, 158, 159.

At a glance

Court

Decision date

Before

Source

Judgment (1543 paragraphs)

Parties

Legislation Cited (56)

Cases Cited (74)