Trade Practices - misleading and deceptive conduct - representations as to prospective rental returns made prior to purchase - whether representations of current belief as to future matter is a representation with respect to a future matter - whether application to amend pleadings after evidence closed and written submissions filed should be granted.

Fair Trading Act 1987 (NSW): s.42

Trade Practices Act 1974 (Cth): ss.51A, 52.

Gregory v Federal Commissioner of Taxation [1971] HCA 2; (1971) 123 CLR 547; applied.

Ketteman v Hansel Properties Ltd (1987) 1 AC 189; applied.

Jacques v Cut Price Deli Pty Limited (1993) ATPR 46-102; distinguished.

Smith v Federal Commissioner of Taxation [1987] HCA 48; (1988) 164 CLR 513; applied.

Counsel and Solicitors for Applicants: Mr RK Eassie instructed by

Atkinson and Vinden

Counsel and Solicitors for Respondents: Mr FM Douglas QC and Mr George

instructed by Murray

Stewart and Fogerty

1. Application dismissed.

2. Applicants to pay respondents' costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

HILL J Mr and Mrs Ting ("the applicants") seek declarations and orders under the provisions of the Trade Practices Act 1974 (Cth) ("the Act") and the Fair Trading Act 1987 (NSW) as well as at common law in respect of representations said to have been made by Ms Blanche, a director of Ultimo-Pyrmont Real Estate Pty Limited ("the agency"), the second respondent.

2. In their statement of claim the applicants allege that between February 1990 and 7 March 1990, Ms Blanche and the agency, or alternatively Ms Blanche on behalf of herself and the agency, made the following representations to the applicants:

"(a) if the Applicants purchased the property

the Respondents would be able to lease it

without too much trouble for about $8.00

per square foot;

(b) in order to achieve that figure it would

not be necessary to do much to the

property other than just clean it and tidy

it up;

(c) because the property was in such a good

position there would be no problem in

obtaining $8.00 per square foot or

something very close to it;

(d) the Respondents would be able to rent the

property fairly easily;

(e) $8.00 per square foot was a realistic

figure and the Respondents would certainly

be able to obtain a rental for the

Applicants very close to that figure."

3. It is alleged that these representations were made orally by Ms Blanche to Mr Ting during the course of inspections of a property at 208 Bridge Road, Glebe ("the property"). It is also alleged in the statement of claim that on or about 23 March 1990 the respondents represented to the applicants that the respondents were confident that they could find a tenant for the property at a net rental of $80,000 per annum.

4. Shortly stated, the applicants' case is that the representations said to have been made were representations made with respect to a future matter so that the provisions of s.51A of the Act applied, with the consequence that it was incumbent upon the respondents to prove that they had reasonable grounds for making those representations. Failure so to prove had the result that the representations would be taken to be misleading and accordingly to constitute a breach of s.52 of the Act.

5. In early 1990 Mr Ting was interested in acquiring a parcel of commercial real estate. He telephoned Ms Blanche after seeing an advertisement placed by the agency in the Sydney Morning Herald of 24 February 1990. Around the same time he also rang other agents seeking information about other properties offered for sale. At some later time he made notes for himself of these conversations. The property advertised by the agency was a warehouse building at 208 Bridge Road, Glebe. It was an old building that at this time was without toilets, adequate roofing or adequate security and, save in so far as the building itself could be used for this purpose, there was no provision for off-street parking. The building fronted a main road in Sydney and was zoned Residential 2(b2); a zoning permitting public buildings and residential flat buildings to be erected with development consent. The property was owned by Hurlna Pty Limited, a company associated with a Mr Adam who conducted a business under the name "Adam Signs".

6. Ms Blanche had accepted instructions from Mr Adam to list the property for sale, those instructions being given around January 9 and January 10 of that year. According to Ms Blanche, Mr Adam had telephoned her initially asking her to sell the property. In the course of this conversation he told her that the property had been passed in at auction for $760,000 in November 1989 and that at that time there had been a reserve price set of $900,000. Mr Adam made an appointment to meet Ms Blanche at the property the next day.

7. At this next meeting Ms Blanche arranged to have Mr Adam sign a sales agency agreement. Mr Adam instructed her to list the property at $900,000. According to Ms Blanche, she expressed a view to Mr Adam that the price was too high. This evidence does not, however, sit well with a clause in the agency agreement which Ms Blanche signed in which she, on behalf of the agency, expressly stated that in her opinion the current reasonable selling price of the property was $900,000. According to Ms Blanche, Mr Adam at this meeting, when asked whether there had been any interest in leasing the property, replied that there had been a great deal of interest and that he had knocked back an offer of $7.50 per square foot for rental of the property. A Mr Scott, whose offer that was, was called to corroborate the making of the offer. I see no reason to doubt that Mr Adam made the statement attributed to him.

8. Mr Ting and Ms Blanche met for the first time on 27 February by appointment. According to Mr Ting, he had had a prior telephone conversation with Ms Blanche during which he had sought particulars of the property including its asking price and whether vacant possession was available. In oral evidence Mr Ting referred to a note which he said he had made of the conversation shortly after that had finished. That note, which was admitted into evidence, showed "8/sf" in connection with the property. Ms Blanche denied that she had, in this initial conversation, ever referred to the rental potential of the property.

9. At a pre-arranged time, Ms Blanche showed Mr Ting over the property. There was some discussion about the development potential of the site, its price, prospective rental and lettability. It is in the course of this conversation that the alleged representations were made.

10. In his initial statement filed in the proceedings, Mr Ting said the conversation proceeded in substance as follows:

Ms Blanche: "If you bought the property we would be able to lease it

without too much trouble for about $8 per square foot."

Mr Ting: "Do you think you can get that much for it? It is an

older building. Would I have to do much to it to get

that figure?"

Ms Blanche: "No, just clean and tidy it up. Because it is in such a

good position there would be no problem in obtaining $8 per

square foot or something very close to it. I am sure we

will be able to rent it fairly easily."

11. That statement records as well a later conversation on another day when Mr Ting had again gone to inspect the property. On this occasion Mr Ting, according to the statement, asked Ms Blanche whether she was sure the property would lease at $8 per square foot, to which she replied:

"$8 per square foot is a realistic figure and we

would certainly obtain a rental very close to that."

12. Ms Blanche in her statement recalled the conversation in the following terms:

Mr Ting: "If I rented it out what could I get?"

Ms Blanche: "The owner's (sic) had lots of interest. He knocked back

seven dollars fifty."

Mr Ting: "What's the maximum you could get for me?"

Ms Blanche: "If he's knocked back $7.50 you might get $8 but you'd have

to be prepared to do some work on it. You'd have to put in

the toilets and give it a spruce up."

13. Mr Ting filed a second statement after reading Ms Blanche's evidence in which he revised his recollection of the conversation to the following:

Mr Ting: "If I rented it, what is the maximum I could get,

and how quickly could it be leased?"

Ms Blanche: "The owner has had lots of interest. He knocked back $7.50,

so you could get $8. I shouldn't have any problem leasing

it."

Mr Ting: "Are you sure? That sounds a pretty high rental. Are

you sure about that figure?"

Ms Blanche: "Yes, I shouldn't have any problem leasing it."

14. Cross-examined by senior counsel for the respondents, Mr Ting in his oral evidence agreed that he had asked Ms Blanche what the maximum rental was she could get for him and that she had replied that if the vendor had knocked back $7.50 Mr Ting might get $8, although he would have to do some work to get the $8. Mr Ting, however, went further than this. He said that he would have been happy with any rental between $7-$8. Cross-examination on this topic proceeded as follows:

"Well you knew very clearly from what she told

you that $8 per square foot was the best

possible scenario?--- Or something close to it,

she said.

...

You knew that $8 per square foot was the best

possible scenario? - - -

Yes.

- - - before you agreed to buy this property on

7 March? --- That's yes, yes. That is what she

told me the property was -was achievable, yes.

...

You knew before you agreed to buy the property

on 7 March that $8 per square foot was the best

possible scenario? - - -

Yes, in the words of Miss Blanche; that's right.

And you knew, for example, it may only be

possible to achieve $6.50 or $7 per square

foot?---$7 was the - was the minimum that she -

she thought she would get for it and I would

have been quite happy with $7.

...

Is it your evidence that she told you that $7

per square foot was a minimum which was

achievable?---Yes. Yes."

15. Between this first meeting and the time contracts were exchanged, namely, 7 March 1990, Ms Blanche came to learn that the mortgagee of the property had gone into possession. She did not, however, convey this information to Mr Ting. There was some dispute in the evidence as to precisely when Ms Blanche learnt of the mortgagee going into possession. It was, she said, some time between 28 February and 1.15pm on 2 March. Her only interest in this matter seems to have been to secure her commission in the event of sale from the mortgagee.

16. After exchange but before settlement, which took place on 10 May 1990, Mr Ting asked Ms Blanche for a letter which he could produce to his bankers. There is a conflict as to the conversation which elicited this letter. According to Mr Ting's first statement, the bank had asked him to provide evidence from an estate agent of the realistic rental potential of the property. He asked Ms Blanche to provide this and she said words to the effect:

"As I've previously advised you, the property

should be easily let for $8 per square foot or

approximately $80,000 nett per annum. I'll give

you a letter to this effect."

17. According to Ms Blanche's version of the conversation, the following words were used:

Mr Ting: "I need a letter to take to the bank."

Ms Blanche: "Why? I thought you didn't need finance?"

Mr Ting: "I don't need much but I've told the bank I can get

$80,000 net rental. Could you give me a letter to

this effect?"

Ms Blanche: "Well, okay, but you know that that is the best possible

scenario?"

Mr Ting: "Yes, I know, but it doesn't hurt to present a

property in the best light to a bank."

18. The version of the conversation in Mr Ting's second statement approaches closer to that of Ms Blanche. According to this second statement the conversation proceeded as follows:

Mr Ting: "I need a letter to take to the Bank regarding

possible rental income. I've told the Bank that the

agent said I can get $70,000 to $80,000 nett rental.

Could you give me a letter stating what you could

lease the property for?"

Ms Blanche: "Well, OK, but you know that is the best possible scenario."

Mr Ting: "That's OK, as long as you think you can get that

amount."

19. In cross-examination Mr Ting agreed that he had probably said:

"I don't need much, but I've told the bank I can

get $80,000 net rental, could you give me a

letter to this effect?"

He agreed further that Ms Blanche had then said:

"Well, okay, but you know that it's the best

possible scenario."

20. According to Mr Ting's oral evidence, Ms Blanche had said to him, when he asked her for a letter:

"What amounts do you want me to put on it?"

Mr Ting then said that he had replied:

"Well whatever you think, you know, what you can

rent the property for. That's all I want."

21. Ms Blanche said she had not qualified the letter expressing a view that the rental of $80,000 was attainable because, she said, Mr Ting wanted her to put the best possible case to the bank. She said that she did what Mr Ting wanted her to do to oblige him. She said that it was a PR thing on her part to help him.

22. The actual letter, which was dated 23 March 1990, was short. Omitting formal parts it said:

"We are confident that we can find a tenant for

the above premises at a net rental of $80,000 per annum."

23. As the rentable area was approximately 10,000 square feet, the figure of $80,000 per annum amounted to $8 per square foot.

24. As already indicated, the property was in poor order and there was a considerable amount of building rubbish and other material lying around. At the first meeting Ms Blanche pointed out to Mr Ting that toilets would need to be installed and the area where they should be installed. During the course of the conversation, Mr Ting enquired whether town houses could be put on the site. Subsequently Mr Ting made enquiries of the council to confirm the zoning and to confirm, so he said, the number of units that could be built on the site, rather than whether units could in fact be built.

25. The next day, according to Ms Blanche, there was a conversation about settlement and also about clearing the premises and erecting an amenities block. In the course of this conversation Mr Ting said he would like immediate access to the premises for leasing. Mr Ting told Ms Blanche that he was going overseas and that this would delay the settlement. He told her that he wanted to start trying to lease the building at $8 per square foot. Mr Ting instructed Ms Blanche to make an offer for the purchase of the property at $620,000, with the vendor being responsible to install toilet facilities and clear the rubbish. Mr Ting subsequently agreed to pay $630,000 but the vendor, while agreeing to clean out the building, refused to contribute to the cost of the toilets.

26. On 1 March 1990, Mr Ting instructed Ms Blanche to attempt to commence to rent the property and signed a leasing agency agreement. Thereafter Mr Ting dealt with a Mr Panopoulos, who worked for the second respondent. Mr Panopoulos did not give evidence. However, endeavours to rent the property at $8 per square foot were unsuccessful. According to Ms Blanche, she became concerned with the fact that the property had not been leased. According to her evidence, she had been told by Mr Panopoulos that not having the toilets completed was a distinct disadvantage in letting the property. According to Mr Ting's evidence, he left it up to Mr Panopoulos to lease the property and gave him some time to do so, until approximately September/October 1990. The only offer received during that time was for one half of the total area at $5 per square foot. The property was advertised a number of times during this period. The toilet block was not completed until late August or early September 1990. According to Mr Ting he had lodged a development application on or about 6 June 1990 and had a receipt showing his payment of fees on that day. The receipt was never produced. Ms Blanche had, in July, contacted the council and been told that no development application had then been lodged. According to Mr Ting the delay lay in the hands of the council.

27. In November 1990 Mr Ting suggested to Mr Panopoulos that the rental sought should be lowered and thereafter the premises were offered at $7 per square foot, still without success.

28. In early 1991 Mr Ting advised Mr Panopoulos that he would accept $5 per square foot. It seems that the property was not able to be let, even at that figure, and ultimately Mr Ting decided to sell the property, exchanging contracts for the sale on 17 September 1991 at a price of $440,000 with a mortgage back in the sum of $435,600 with interest only (at 15.5%) being payable.

29. Mr Ting agreed that he had not made any complaints to Ms Blanche about the difficulties of letting the premises at $8 per square foot, although he said that he had made some complaints to Mr Panopoulos. Although Mr Ting had made some approach to another agent in December 1990, it appears not to have been until April 1991 that he had sought assistance from other city agents to let the property. The second respondent had, in December 1990, also appointed two or three other agents as conjunction-agents. All these efforts were, however, without success.

30. In these circumstances the following issues arise:

(1) Did Ms Blanche make the representations alleged?

(2) If so, were these representations within s.51A

of the Act?

(3) If so, have the respondents shown that there

were reasonable grounds for making those

representations?

31. As can be seen from the facts recited, there was ultimately not a great deal of difference between the parties as to the conversations on 27 February 1990. To the extent to which there was a conflict, I should make some comments on the credit of each of Mr Ting and Ms Blanche.

32. Mr Ting was in some ways not a particularly impressive witness. There were times when it was uncertain whether he was giving evidence of what happened, or whether he was merely agreeing with senior counsel for the respondents, during the course of cross-examination. I do, however, think that Mr Ting endeavoured to give his evidence as truthfully as his recollection permitted. Despite a submission made by his counsel, I can not, however, discount admissions made by him in cross-examination as being misunderstandings on his part, or as flowing from his apparent desire to agree with everything which was put to him in cross-examination. These admissions could equally proceed from a desire to tell the truth.

33. It is true that various versions of conversations deposed to by Mr Ting in statements differed from each other and differed from the versions of the same conversations which he gave under oath in cross-examination. To the extent to which these versions differed, I would find that the version given by Mr Ting in cross-examination was the most probable version of the conversations.

34. Ms Blanche gave her evidence with great confidence. Her credit was somewhat damaged by the letter of 23 March 1990 given for production to the bank. It was further damaged by the conflict between the expression of opinion given by her in the agency agreement as to the current reasonable selling price ($900,000) and her expression of opinion in evidence that $900,000 was too high an asking price. She might also be criticised for listing the property at $8 per square foot rent if she did not in fact believe that this was an attainable rental. Ms Blanche's evidence was, I think, given with an eye to her own reputation and to the extent to which her evidence conflicts with that of Mr Ting, I would prefer the evidence of Mr Ting. In so saying I do not for a moment suggest that Ms Blanche was consciously departing from the truth.

35. But even accepting Mr Ting's evidence to the extent I have, and preferring it to that given by Ms Blanche, it is difficult to see that the applicants have succeeded in proving that Ms Blanche made the representations pleaded. I find that Ms Blanche made the following representations to Mr Ting:

1. If the applicants purchased the property they could rent the

property out and there would be a range of rentals from $70,000 to

$80,000, with $80,000 the best possible scenario and $70,000 as a

minimum.

2. To rent the property it would be necessary to clean and tidy it up

and to provide toilet facilities, although these facilities would

not necessarily need to be built before tenants signed a lease,

provided the lease was subject to these matters being attended to.

3. That the respondents would be able to rent the property fairly

easily.

36. Of these representations, only the last was directly pleaded.

37. Counsel for the applicants submitted that the first two representations which I have found were substantially the same as the representations (a), (b), (c) and (e) pleaded. With respect to this submission, it is difficult to see that a representation that rental would be in a band between $7 and $8 per square foot is the same as the representation that the property could be leased at about $8 per square foot. The word "about" would, in my view, have conveyed to a person in the position of Mr Ting, to whom it was addressed, a figure not much different from $8 and perhaps in a range of say $7.50 or $7.75 to $8.00.

38. It is ironical that if Ms Blanche's evidence had been accepted, the representation so found would have been closer to that pleaded in the statement of claim.

39. After the evidence had closed, and indeed after written submissions had been filed by both sides, I raised this difficulty with counsel for Mr Ting. After some deliberation and on instructions from his clients he sought amendment of the statement of claim to re-plead the representations so that they might more recognisably conform to the evidence. Counsel recognised, of course, the lateness of the application.

40. Although in modern litigation pleadings are often perceived as a technicality they retain their significance as defining the issues between the parties. If amendment were now to be allowed the respondents would, or at the very least could, unless allowed to reopen their case, suffer prejudice, because the case had been fought on the basis that the issue was whether a particular set of representations were made, when the issue in the event of amendment of the pleadings would become whether an entirely different set of representations were made. As the applicants submitted, it would be possible, even at this late stage, to reopen the evidence, thereby removing this prejudice or potential prejudice, subject, perhaps, to an appropriate cost order. However, I am of the view that I should not exercise my discretion to permit this to be done. I must take into account in so doing the public interest in finality of litigation as well as the private interests of the parties in endeavouring to do justice as between them: cf Autodesk Inc v Dyason (No 2) [1993] HCA 6; (1993) 67 ALJR 270 per Brennan J at 274, 275, and Holcombe v Coulton (1988) 17 NSWLR 71 at 77. Although the amendment was not of the kind sought to be made by the second and third defendants in Ketteman v Hansel Properties Ltd (1987) 1 AC 189, the words of Lord Griffiths (at 220) are apposite:

"Whether an amendment should be granted is a

matter for the discretion of the trial judge and

he should be guided in the exercise of the

discretion by his assessment of where justice

lies. Many and diverse factors will bear upon

the exercise of this discretion... But justice

cannot always be measured in terms of money and

in my view a judge is entitled to weigh in the

balance the strain the litigation imposes on

litigants, particularly if they are personal

litigants rather than business corporations, the

anxieties occasioned by facing new issues, the

raising of false hopes, and the legitimate

expectation that the trial will determine the

issues one way or the other. Furthermore to

allow an amendment before a trial begins is

quite different from allowing it at the end of

the trial to give an apparently unsuccessful

defendant an opportunity to renew the fight on

an entirely different defence.

Another factor that a judge must weigh in the

balance is the pressure on the courts caused by

the great increase in litigation and the

consequent necessity that, in the interests of

the whole community, legal business should be

conducted efficiently. We can no longer afford

to show the same indulgence towards the

negligent conduct of litigation as was perhaps

possible in a more leisured age. There will be

cases in which justice will be better served by

allowing the consequences of the negligence of

the lawyer to fall upon their own heads rather

than allowing an amendment at a very late stage

of the proceedings."

41. I hasten to add that in adopting the words of Lord Griffith I am not to be taken to be suggesting that in the present case counsel or his instructing solicitors were in any wise negligent in pleading the case they did.

42. It was simply too late for an amendment to the pleadings to be made after the evidence had closed and submissions were virtually completed where the amendment of necessity required the evidence to be reopened.

43. The failure of the applicants to prove that the respondents had made the representations pleaded must inevitably result in the application being dismissed.

44. For the purpose of this issue I will assume that the representations in fact made accorded with those pleaded.

45. Section 51A of the Act provides:

"(1) For the purposes of this Division, where a

corporation makes a representation with respect

to any future matter (including the doing of, or

the refusing to do, any act) and the corporation

does not have reasonable grounds for making the

representation, the representation shall be

taken to be misleading.

(2) For the purposes of the application of

sub-section (1) in relation to a proceeding

concerning a representation made by a

corporation with respect to any future matter,

the corporation shall, unless it adduces

evidence to the contrary, be deemed not to have

had reasonable grounds for making the

representation.

(3)...".

46. The section is but an interpretation section; it does not of itself create a cause of action, nor define a norm of conduct. The relevant cause of action is to be found in s.82(1) of the Act by reference to the norm of conduct laid down in s.52 of the Act. What s.51A does, in a practical sense, in cases where it applies, is to cast the burden of proof upon the respondent corporation who has made a representation about a future matter to show that in making that representation it had reasonable grounds for so doing. In the language of Sheppard and Neaves JJ in Cummings v Lewis (1993) ATPR (Digest) 46-103, s.51A is "designed to facilitate proof" (at 53,450).

47. Representation as to future facts may, of course, constitute conduct which is misleading or deceptive or likely to mislead or deceive within s.52 of the Act, irrespective of the operation of s.51A. However, without the intervention of s.51A the burden would remain upon the applicant to show that the representation, in whatever form it took, was misleading or deceptive or likely to mislead or deceive. In the ordinary case where a representation as to future conduct or events is alleged to have been made, that means that the burden would be upon the applicant to show not merely that the conduct or event has not come to pass but also that at the time the representation was made the respondent did not believe that the conduct or event would come to pass or that there was no basis for a belief that the conduct or event would come to pass: James v ANZ Banking Group Ltd [1986] FCA 41; (1986) 64 ALR 347, Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd [1984] FCA 180; (1984) 2 FCR 82 at 88.

48. It will be readily apparent that a representation as to future conduct or a future event will generally imply (and sometimes explicitly state) that the maker of the representation was of a particular state of mind as to the future conduct or event as at the time the representation was made. A representation that a particular occupancy rate for a hotel might in the future be achieved, or, as alleged here, that a particular rent for nominated premises could be achieved in a future letting, impliedly involves a representation that the maker of the representation believed that the occupancy rate or rental could be achieved. It would be no less a representation as to the future by virtue of this implication. If the actual term of the representation is that the maker of the representation is of the view at the time that the occupancy rate or rental nominated could be achieved in the future, does that express statement turn a representation as to the future into a representation as to existing fact?.

49. I was referred to the decision of Spender J in Jacques v Cut Price Deli Pty Ltd (1993) ATPR Digest 46-102 in support of a submission that the representations pleaded were not representations as to future fact. In that case the representations alleged in the statement of claim related to turnover in the future in a shopping centre of a shop operating under a franchise from the respondent to the applicant then under negotiation. There was also a specific representation as to the respondent's state of mind as to that future turnover. As Spender J put it (at 53436):

"Insofar as turnover is concerned, the

allegation is first, a representation as to a

future matter, namely, that the future turnover

would be of a certain order and, secondly, a

representation as to present fact, namely, a

present belief as to the trading potential of

the shop."

50. The first of these representations, his Honour held, was a representation with respect to a future matter to which s.51A applied. However, the representation as to present state of mind of the respondent was a representation, so his Honour held, to which s.51A had no operation.

51. Whatever may be the case where there is an express representation as to the maker's state of mind concerning a future matter, it is not, in my opinion, correct to treat a representation as to an event or conduct in the future, be that in the form of a prediction or otherwise, as not being a representation with respect to a future matter merely because it implies a representation as to the maker's present state of mind. The language of s.51A is very wide and the words "with respect to" are, like the words "in respect of" discussed by Dickson J, delivering the judgment of the Supreme Court of Canada in Nowegijick v The Queen (1983) 144 DLR (3d) 193 at 200, (a discussion cited with approval by Toohey J in Smith v Federal Commissioner of Taxation [1987] HCA 48; (1988) 164 CLR 513 (at 533):

"...words of the widest possible scope. They

import such meanings as 'in relation to', 'with

reference to' or 'in connection with'. The

phrase 'in respect of' is probably the widest of

any expression intended to convey some

connection between two related subject-matters."

52. A representation as to future rental, for example, will be a representation with respect to a future matter, even if also, impliedly, a representation as to the existing state of mind of the maker.

53. Section 51A of the Act is limited to representations made by corporations. To the extent that the applicants claim against Ms Blanche personally, relying upon her having personally made the representations complained of, s.41 of the Fair Trading Act is in identical terms, save that it is not predicated upon the representation having been made by a corporation.

(3) Have the respondents shown the existence of reasonable grounds?

54. In support of the respondents' case that the rental value of the property was between $7.50 and $8.00 per square foot, the respondents relied on three matters. First, the respondents relied upon the conversation between Ms Blanche and Mr Adam that Mr Adam had "knocked back 7.50". That evidence on its own would hardly be compelling. Evidence of an offer is not evidence of value for the simple reason that offers may be made in all sorts of circumstances but not come to fruition. For example, the person who made the offer may have been a person of little financial substance and hence unable to pay the rent. Indeed, it emerged in cross-examination that Mr Scott, who turned out to be the ultimate purchaser from Mr Ting, had defaulted in payments under a mortgage back.

55. The point is made, albeit in a somewhat different context, by Gibb J, as his Honour then was, in Gregory v Federal Commissioner of Taxation [1971] HCA 2; (1971) 123 CLR 547 at 562:

"Authorities in this Court establish that in

determining the value of land or shares evidence

of a price offered for the property in question,

in the course of negotiations which do not

result in a concluded contract is not

admissible: McDonald v DFC of Land for New South

Wales [1915] HCA 54; (1915) 20 CLR 231; James Patrick and Co Pty

Limited v Minister of State for the Navy (1944)

50 ALR 254; (1945) 51 ALR (CN) 501."

56. It is of course different if the offer is followed by a concluded contract. The comments made by his Honour are, in my view, equally applicable to the determination of a fair market rental as they are to the determination of the fair market value of the underlying property.

57. Counsel for the applicants submitted that the respondents could not, in any event, rely upon any information given to them by Mr Adam. This submission proceeded upon the basis that Mr Adam was in financial difficulties, as Ms Blanche well knew, and that these financial difficulties were confirmed by the fact that the mortgagee had ultimately entered into possession of the property shortly before the consummation of the sale to the applicants. Quite why this followed was never clear to me. The fact that a mortgagee goes into possession does not lead to the conclusion that one must disbelieve what is said by the mortgagor. It seems to me to be a non sequitur.

58. The second matter upon which counsel for the respondents relied was evidence of rental of comparable premises.

59. There was evidence of a lease negotiated by Ms Blanche for a rental of $2,500 a month equivalent to $7.50 a square foot. That related to premises at 22l Harris Street, Pyrmont, a property zoned 3B. In a note which appeared to relate to that transaction, Ms Blanche had written the words "too dear". Ms Blanche denied that those words related to the rental of that property and in any event asserted that the premises had in fact been rented at that figure.

60. In her statement Ms Blanche referred also to having arranged a lease in January 1989 of part of a property at 609 Harris Street, Ultimo, in poor condition but otherwise, so she said, comparable to the property, with an area of 8,600 square feet, let out at $7.90 per square foot. There was no evidence to assist one way or the other as to how comparable the properties were. Comparability was asserted by Ms Blanche and there being no evidence to contradict it and zoning not appearing to make any difference on her evidence, I must accept that a rental of $7.50 per square foot may well have been achievable.

61. The third matter relied upon was what was referred to as Ms Blanche's experience in the real estate industry. In her statement Ms Blanche said that she had been involved in leasing of similar property in the vicinity and that her view that $7.50 per square foot was achievable was based upon that knowledge. There was little cross-examination of Ms Blanche on this point perhaps because it was conceded that that statement amounted to no more than a statement by Ms Blanche that she had been involved in leasing the two properties to which reference has already been made.

62. Ms Blanche had commenced working in the real estate industry in 1975 and had been working with the second respondent since January 1987. She said she had been involved in sales, leasing and property management of commercial, industrial and residential property in the Ultimo/Pyrmont peninsula since that time.

63. There was, as I have already intimated, little cross-examination going to the question of Ms Blanche's expertise, which does however seem mainly to have been in the area of buying and selling development properties rather than leasing properties. Although she had been involved, inter alia, in leasing commercial properties, most of the properties the leases of which she had arranged were, she conceded, relatively small in value. But given that there was some evidence adduced by the respondents and no evidence of value at all adduced by the applicants, it is difficult to see that the respondents have not succeeded in demonstrating that a market rental of the property was in the order of $7.50 per square foot. Should it be possible to construe a representation as to future rental being "about $8" as encompassing a rental of $7.50 or better, then the respondents have satisfied the burden of showing that that representation was made on reasonable grounds. It, of course, goes without saying that it follows that the respondents have shown that the representations in fact made were equally made on reasonable grounds.

64. Ms Blanche did not in her evidence specifically deal with the question of lettability. It must, in any event, be implicit from a finding that the respondents have shown that a representation that a rental of $7.50 was achievable was a representation based upon reasonable grounds that a representation that the property was lettable, was equally made upon reasonable grounds.

65. It follows that the applicants have not only failed to show the representations pleaded were made, but also the respondents have shown that even if representations were made as pleaded, a figure of $7.50 at least was reasonable as a rental figure for the property.

66. The respondents submitted further that on the evidence I should find that the applicants had not relied upon any representations of the respondents in purchasing the property. This submission proceeded upon the basis that Mr Ting had really purchased the property as a development proposition and was not at all interested in rent. I do not accept this submission. While I have no doubt that Mr Ting was interested in an ultimate development of the site, I accept his evidence that he was concerned to obtain a rental sufficient to cover all outgoings, particularly interest, and that accordingly representations as to rental were of significance to him. It goes without saying that the respondents could not rely (other than on the issue of Mr Ting's credit) upon the standard clause in the contract of sale excluding representations to defeat a claim of the applicants brought under the Act: see eg Byers v Dorotea Pty Ltd (1987) 9 ATPR 40-760, Keen Mar Corp Pty Ltd v Labrador Park Shopping Centre (1989) 11 ATPR 46-068 at 53162 per Spender J.

67. The application will, accordingly, be dismissed and the applicants must pay the respondents' costs of it.