B THE WAY HARVARD PUT ITS CASE BELOW
5 Harvard relevantly sought the following orders in its amended originating application:
A. Pursuant to section 237 of the Australian Consumer Law, an order under section 243 of the Australian Consumer Law declaring the Lease made on 8 February 2019 between [Harvard] and [Mr Tiller and Dimension] to be void, alternatively an order requiring [Mr Tiller and Dimension] to execute a deed terminating the Lease.
B. Pursuant to section 237 of the Australian Consumer Law, an order under section 243 of the Australian Consumer Law requiring [Mr Tiller and Dimension] to deliver up forthwith vacant possession of the Farms to [Harvard].
C. An order requiring [Mr Tiller and Dimension], whether by themselves or by their officers, employees or agents, to remove forthwith from the Farms all plant, equipment and chattels delivered to the Farms by [Mr Tiller and Dimension], save for fixtures, fittings or improvements to the Farms made by [Mr Tiller] and [Mrs Tiller] prior to 8 February 2019.
D. An order requiring [Mr Tiller and Dimension], as caveators, to remove caveat numbers O121200 and O121201 lodged on 29 March 2019 over the Farms.
E. As against each of [Mr Tiller, Dimension, Mr Nicoletti and Mr Bryce]:
(a) damages pursuant to section 236 of the Australian Consumer Law;
(b) interest on such damages as may be awarded to [Harvard] at the rate of 6% per annum calculated from 8 February 2019, alternatively 20 April 2019, to payment.
6 A number of things should be observed immediately about the relief sought by Harvard and its relationship to the pleaded case.
7 First, all the relief sought was entirely statutory in nature relying on Pt 5-2 of the Australian Consumer Law (ACL) and, more specifically, Div 4 which deals with compensation and other orders for injured parties (ss 237 and 243) together with Div 3, which deals with actions for damages in the nature of statutory compensation.
8 Secondly, the way the relief was framed was not in the alternative; the claim for statutory compensation (prayer E) was supplementary to the order sought by prayer A under s 243 of the ACL declaring "the Lease … to be void" (statutory rescission), and the orders sought by prayers B and C, which give effect to the claim for statutory rescission (further orders).
9 Thirdly, prayer A spoke in terms of "the Lease" but, as explained above, there were two New Leases and the argument proceeded on the basis that relief was sought in relation to both the New Leases.
10 Fourthly, prayer C only made sense because the other transactions made to allow the New Leases to be put in place were not sought to be interfered with by the statutory rescission or the further orders, including the assignment of Mammoth's head lease of Howick Farm (as explained above, Mr John Caratti and Mr Allen Caratti were registered proprietors of Howick Farm and Harvard only had an entitlement to possession of the Howick Farm pursuant to the assigned head lease from Mammoth); further, no relief was sought in relation to the Tiller Subleases because, obviously enough, the rights of the Tillers under those conveyances had been long surrendered in order to allow the New Leases to be put in place.
11 Fifthly, the relationship between the statutory relief sought and the pleading (unusually described as the "further further (sic) amended statement of claim" (SOC)) was opaque, as was the position of Harvard as to whether it had validly rescinded the New Leases as at 2 April 2019. Somewhat surprisingly, no relief was sought in the application for declaratory relief to the effect that the New Leases had been validly rescinded at common law as at 2 April 2019 or for any equitable relief, despite the fact that at SOC [18] it was alleged that Harvard "gave notice of rescission of the New Lease" and in the particulars subjoined to SOC [23], it was contended at (a) that Mr Tiller and Dimension "have refused to accept [Harvard]'s rescission of the New Lease". This confusion was amplified by the fact that the SOC advanced an alternative case that the New Leases were not validly rescinded but rather survived 2 April 2019, because it was said that if Harvard had known the true position as at 5 April 2019, Harvard would have elected to terminate the New Lease (SOC [34]) and that this course would have been advised "instead of seeking rescission of the New Lease" (SOC [31(c)]).
12 Sixthly, as will be explained in more detail below, given the absence of any relief sought in equity or at common law, the "gateway" to the granting of statutory rescission or the further orders required proof by Harvard of loss or damage (actual or potential in the sense of "likely") "because of" the contravening conduct.
13 It is next convenient to identify how Harvard put its case as to actual loss for the purposes of the claim for statutory compensation. This claim at SOC [23] was particularised as follows:
Particulars
(a) [Mr Tiller and Dimension] have refused to accept [Harvard]'s rescission of the New Lease;
(b) [Mr Nicoletti] has caused workers formerly employed by [Mr Nicoletti] on other farms to relocate to the Farms and commence farming operations on them, rather than give up vacant possession as demanded, with the intention and purpose of planting a crop for harvesting in order to secure benefit to each of [Mr Tiller, Dimension, Mr Nicoletti and Mr Bryce];
(c) [Harvard] lost the benefit of the [Fowler Lease];
(d) Further particulars may be provided before trial.
14 As anticipated by particular (d), further particulars were then provided. As the primary judge noted (at PJ [505]), they specified that Harvard's loss and damage resulting from the lost benefit of the Fowler Lease was $1,150,000 (that is, the rent for the first year of the Fowler Lease of $1,950,000 (plus GST), less the $800,000 which Mr Tiller and Dimension paid under the New Leases up to 1 March 2020).
15 As is evident from both the detailed reasons of the primary judge and the way the case was advanced by Harvard below, the claim for statutory compensation pressed was the loss of the benefit of the Fowler Lease. As the primary judge put it (PJ [506]-[509]):
506 So, Harvard submitted, the existence of the New Leases is fundamental and material to Mr Tiller's and Dimension's refusal to accept rescission and deliver up vacant possession to enable the Farms to have been leased under the Fowler Lease by 1 May 2019. Harvard has thus pleaded a causal nexus between the misleading conduct which took place on 31 January 2019, and a state of affairs in which Mr Tiller's and Dimension's refusal to deliver vacant possession of the Farms, based on the New Leases, prevented Harvard from receiving the $1.95 million rent which would have been payable for the first year under the Fowler Lease.
507 Harvard has also established this causal nexus on the evidence. I have found that Mr Caratti relied on Mr Tiller's misleading conduct in causing Mammoth and Harvard to enter into the transactions which resulted in Harvard leasing the Farms to Mr Tiller and Dimension under the New Leases. And the New Leases were the basis for Mr Tiller's and Dimension's refusal to deliver up vacant possession of the Farms … That is enough to make the misleading conduct which resulted in the existence of the New Leases a material contributing factor to Harvard's inability to obtain vacant possession without an order of the court under s 243. A causal connection of that sort can be sufficient for the purposes of s 236 or s 237, even if there are other causal or contributing factors: I & L Securities [Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109] at [33], [57], [62]; and Henville v Walker [2001] HCA 52; (2001) 206 CLR 459 at [14], [60]-[62], [106], [109].
508 Other facts material to the causal nexus between the contravening conduct and the current state of affairs have also been established. The Fowler Lease was executed on 17 April 2019 and does provide for rent of $1.95 million for the first year. The annual rent under the New Leases is only $800,000. There is a question about whether the sum of $1.95 million or the difference between it and $800,000 should be discounted on the basis that Harvard has only established that it has lost the opportunity to lease the land to the Fowlers, but that may be set aside for now. Plainly, Harvard would have been better off from the start of the 2019 farming season had it been able to give vacant possession of the Farms to the Fowlers.
509 Nevertheless, just because a causal link can be described between contravening conduct and a particular state of affairs, it does not follow that the state of affairs involves loss or damage which has been suffered, or is likely to be suffered, because of the conduct, within the meaning of s 236 or s 237 of the ACL. It may be accepted that Harvard would be better off if it could give vacant possession to the Fowlers, but is its inability to do so 'because of' the contravening conduct, in the sense contemplated by the provision?
16 As can be seen, the primary judge proceeded, in this part of his reasons, on the basis that the loss and damage relied upon to found the claim for statutory compensation under s 236 of the ACL was the same loss and damage which was relied upon in order to enliven the power to make the statutory rescission order and the further orders pursuant to s 237 (and s 243).
17 In the end, his Honour was not satisfied that the loss and damage resulting from the lost benefit of the Fowler Lease was established because the Tiller Subleases, the existence of which preceded the contravening conduct, prevented the precondition of vacant possession being obtained in order to allow the Fowler Lease to proceed. It will be necessary to return to this reasoning below, but it is first necessary to revisit the point (see [12] above) as to why this is important; and secondly, to examine the contention of Harvard that the loss or likely loss relied upon in order to ground the statutory rescission (and the further orders) under s 237 was not the same as the actual damage said to be recoverable pursuant to an award of statutory compensation pursuant to s 236.
18 The focus on loss or likely loss was critical because, as noted above, contrary to the position that would have arisen if relief had been sought at common law and/or in equity, the establishment of loss or likely loss was a pre-condition to relief. In this regard (and recalling the proven misleading and deceptive conduct was contrary to s 18 of the ACL, located within Chapter 2 of the ACL), s 236(1) relevantly provides:
236 Actions for damages
(1) If:
(a) a person (the claimant) suffers loss or damage because of the conduct of another person; and
(b) the conduct contravened a provision of Chapter 2 …;
the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.
19 Section 237 relevantly provides:
237 Compensation orders etc. on application by an injured person or the regulator
(1) A court may:
(a) on application of a person (the injured person) who has suffered, or is likely to suffer, loss or damage because of the conduct of another person that:
(i) was engaged in a contravention of a provision of Chapter 2, ...
make such order or orders as the court thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct.
Note 1: …
Note 2: The orders that the court may make include all or any of the orders set out in section 243.
(2) The order must be an order that the court considers will:
(a) compensate the injured person, or any such injured persons, in whole or in part for the loss or damage; or
(b) prevent or reduce the loss or damage suffered, or likely to be suffered, by the injured person or any such injured persons.
20 Section 243 relevantly provides:
243 Kinds of orders that may be made
Without limiting section 237(1) …, the orders that a court may make under any of those sections against a person (the respondent) include all or any of the following:
(a) an order declaring the whole or any part of a contract made between the respondent and a person (the injured person) who suffered, or is likely to suffer, the loss or damage referred to in that section, or of a collateral arrangement relating to such a contract:
(i) to be void; and
(ii) if the court thinks fit - to have been void ab initio or void at all times on and after such date as is specified in the order (which may be a date that is before the date on which the order is made);
…
(e) except if the order is to be made under section 239(1) - an order directing the respondent to pay the injured person the amount of the loss or damage;
…
(h) an order, in relation to an instrument creating or transferring an interest in land, directing the respondent to execute an instrument that:
(i) varies, or has the effect of varying, the first mentioned instrument; or
(ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the first mentioned instrument.
21 As the primary judge observed (at PJ [489]-[500]), the statutory rescission and further orders Harvard sought are of a kind contemplated in ss 243(a), 243(e) and 243(h)(ii) and, in any event, s 237(1) confers a wide power to make such order or orders as the court thinks appropriate. But the power to make such an order is relevantly confined by two matters: first, it only arises on the application of Harvard if it had suffered, or had been likely to suffer, loss or damage because of the contravening conduct; and secondly, the order must be one that the court considers will compensate Harvard, in whole or in part for the loss or damage, or prevent or reduce the loss or damage suffered, or likely to be suffered: see s 237(2).
22 As noted above, it was the first of these "gateways", or pre-conditions, which the primary judge found was not established, that was fatal to Harvard's claim for relief below and, as a consequence, was the focus of the appeal.
23 At this point it is necessary to turn to the way in which the case as to loss or likely loss under s 237 was put by Harvard at the hearing. There was no separate pleading in the SOC identifying loss or likely loss for the purposes of s 237. At the request of the Full Court, the appellant was asked to identify how it is said that Harvard's case was not limited to the economic loss the primary judge identified. The following extract from Harvard's submissions in reply on the appeal identify why it says that Harvard's case was not so limited:
14. In relation to the question whether Harvard's case was limited to economic loss, the case as run plainly involved the contentions that:
(a) …
(b) it was not necessary for Harvard to demonstrate monetary loss in order to obtain the relief in the nature of rescission/termination, as opposed to damages, and Harvard suffered loss or damage by committing itself to contractual obligations it would not otherwise have had (see, e.g., Harvard's Opening Submissions at [1]-[7], Harvard's Submissions on Pleading Causal Nexus at [9]-[15], Harvard's Closing Submissions at [19]; Harvard's oral opening submissions: Transcript at [8] line 20, [9] line 31, [75] lines 10-20. Harvard's oral closing submissions: Transcript at [394] line 40, [396] lines 5-10 and 41-43, [399] lines 6-8, [400] line 14; [PJ] at [517], [548]-[565]).
24 Regrettably, given the importance of understanding how Harvard put its case below, it is necessary for each of these extracts from the submissions, the reasons of the primary judge and the trial transcript to be extracted, and for some observations to be made about each of them.
25 The first extract relied on is from Harvard's written opening submissions:
Harvard's Opening Submissions:
4. [Harvard's] complaint is that control of the Farms passed from someone it was prepared to support in times of difficulty to someone who deserved no such support, and the circumstances in which that took place was effectively through the auspices of [Mr Tiller, Mr Nicoletti and Mr Bryce] acting in concert to give Harvard the misleading impression that he would be assisting [Mr Tiller] at a time of personal crisis when, in reality, he would be providing assistance to [Mr Nicoletti], whom he knew and did not wish to assist in any way at all.
5. In this case, the Respondents try to show that Mr Nicoletti is a reasonable person and a good farmer, as if that somehow exculpates the Respondents from engaging in misleading and deceptive conduct. The subjective intention, or character, of those contributing to a misleading impression is irrelevant: Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre (1978) 140 CLR 216. [Harvard's] case does not rest on any finding that Mr Caratti's attitude on behalf of [Harvard] about Mr Nicoletti impacts at all on [Harvard's] right to determine who should or should not enter onto the Farms and exploit them for profit. [Harvard] has an absolute right to decide who can operate its Farms and it should not even inadvertently be misled about it.
…
7. [Harvard's] case essentially rests on four propositions:
(a) Proposition 1 - [Harvard] had an absolute right to decide who could farm its land and had intended on 8 February 2019 only to have Mr Tiller do so with his company, Dimension Agriculture Pty Ltd;
(b) Proposition 2 - from mid-January 2019, Mr Nicoletti wanted to operate the Farms in place of Mr Tiller, and set about doing so in combination with Mr Tiller and Mr Bryce in a way which concealed Mr Nicoletti's intended involvement from the Applicant on 8 February 2019;
(c) Proposition 3 - After securing his entry on the Farms, Mr Nicoletti, with the help of Messrs Tiller and Bryce, used Dimension Agriculture in March and April 2019 to pretend that Mr Tiller remained involved in the management of the Farms, withholding facts which, if disclosed, would have enabled [Harvard] to have a lawful basis for exercising its right to terminate the new leases and re-take possession of the Farms in early to mid-April 2019;
(d) Proposition 4 - the measure of loss caused by the misleading and deceptive conduct of the Respondents is the difference between the rent which [Harvard] would have enjoyed from the first Fowler Lease if vacant possession had been delivered to [Harvard] when [Harvard] sought to rescind the new leases, and rent payable purportedly under the new leases from the date which the first Fowler Lease would have commenced if vacant possession had been given, on 1 May 2019.
26 It is worthwhile interpolating that on appeal, out of these four propositions identified in opening, only Proposition 4 remains controversial. Further, these opening submissions do not clearly advance a case that the loss or likely loss relied upon to operate as a "gateway" for the statutory rescission and further orders was somehow different from the loss and damage said to give rise to statutory compensation.
27 The next extract relied upon is a further submission provided to the Court by Harvard during the course of the hearing:
Harvard's Submissions on Pleading Causal Nexus:
9. Further and alternatively, at the same time as rejecting the rescission of [Harvard] by its letter dated 5 April 2019, the non-disclosure of the Deed of Assignment dated 15 February 2019, coupled with the factual assertions that Mr Tiller was, and would remain, "in control" of the Farms, and therefore continued to possess them, with [Dimension] merely financially backing him, [Harvard] was misled into believing there was a genuine factual dispute about the role of [Mr Tiller and Dimension], which precluded it from exercising a right of termination it had under clause 16 of the New Leases, because the Deed of Assignment made it clear that Mr Tiller had assigned his leasehold interest to [Dimension] and was no longer "in control" of the Farms in the sense that he determined all decisions regarding the farming operations, or was even permitted to access the Farms to do so (paragraphs 24 to 35).
10. Therefore, the second act of misleading and deceptive conduct precluded a lawful exercise of a contractual right by [Harvard], which would have avoided any need for litigation, and would have delivered up vacant possession by a lawful re-entry onto the Farms in time to deliver vacant possession to the Fowlers by 1 May 2019, as their formal lease instrument required.
11. Accordingly, in either case, the misleading and deceptive conduct of the Respondents in February and in April caused [Harvard] to suffer commercial loss by being unable to deliver up vacant possession of the Farms to the Fowlers by 1 May 2019. There is no break in that chain of causal nexus in any respect, and each material fact relevant to establishing that causal nexus has been pleaded and is, or will be, in evidence.
12. The relief sought by [Harvard] in this respect reflects the relief sought by the Applicant in Metz Holdings Pty Ltd v Simmac Pty Ltd (No. 2) [2011] FCA 981, where the purchaser of a business claimed it had been misled into buying it, and when it found out, and sought to rescind its contract, the vendor of the business refused to accept the rescission. The purchaser was then forced to decide whether it should therefore act on its rescission and expose itself to a damages claim in the event of a factual dispute about such matters, or issue proceedings for an order from the Court confirming its right of rescission, and granting it damages for all losses suffered by the conduct of its business in the meantime. The Court found in favour of the Applicant, confirmed that it was entitled to rescission, and ordered that the question of damages be determined at a later date.
13. That approach is consistent with the principle set out in Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274 at 286-8, that damages are claimable along with rescission, if the conduct is a material (not sole) cause of its losses.
14. Another question which has arisen is the standing of [Harvard] to claim damages. Although it is pleaded that the Mammoth and Harvard transactions were entered into "in reliance" upon the Representations pleaded, [Harvard] does not seek rescission of those transactions. That is, [Harvard] has neither sought to rescind those transactions made on 5 February 2019, nor has made claims that it suffered any damages in respect of those transactions. Therefore, whilst it was true that the transactions made on 5 February 2019 were essentially undertaken in anticipation of the New Leases, so that [Harvard] would be the relevant "lessor" under the New Leases, those transactions remain intact, and not impugned.
15. Accordingly, [Harvard] had the relevant right of rescission it sought to exercise by letter from Hotchkin Hanly dated 2 April 2019, and it was the entity which suffered loss and damage by its inability to procure vacant possession because the Respondents asserted their right to exclusive possession on the strength of the impugned New Leases, raising a factual dispute which appeared contestable in circumstances where they did not disclose the Deed of Assignment which established otherwise.
(Emphasis added.)
28 The highlighted part of these submissions suggests that it was being contended that both statutory rescission and statutory compensation were being sought. Given that any quantification of any actual damage under s 236 would necessarily be affected by whether rescission had been granted (and potentially the terms upon which any such order was made), it necessarily followed, although it was not stated expressly, that the loss or likely loss for the purposes of s 237 was different to the actual loss that could be recovered as damages under s 236.
29 Harvard then pointed to aspects of its oral submissions:
Oral opening submissions:
• What matters and what falls only for your Honour to consider are the circumstances in which the identity of Mr Nicoletti as the person behind the company was firstly withheld from my client and ultimately disclosed and whether, in all of those circumstances, an actionable representation was made that calls for relief under the Australian Consumer Law: T8.19-23.
• [C]onsistent with what we say is the primary right of all landlords to refuse whoever they didn't want to enter on their land and exploit it for their own commercial gain, the prohibition in both of the relevant leases that I will take your Honour to was absolute: T9.31-4.
• We say that either or both the initial misleading and deceptive conduct that took place in early February that led to us accepting the surrender in the leases and/or the subsequent conduct on 5 April caused our client in the first to agree to commit to transactions which it would never have committed to and in the second place, not terminate those transactions when it could have and instead, sought the assistance of the court in determining what its rights were, during which it has lost capacity to enjoy higher rent from a - from the neighbouring tenant, the Fowlers, who made an offer subject to vacant possession on 1 May. So, the claim for damages operates from 1 May and either of the two instances or events of conduct about which the applicant complains would give the right to recover damages from that point in time. And, your Honour, we say in any event, rescission would give us vacant possession and we certainly advocate first and foremost for rescission of the leases: T75.11-22.
Oral closing submissions:
• When we found out it wasn't Mr Tiller, it was M[r] Nicoletti, we immediately examined what else was available and what we did do in - on 17 April after an initial approach in late March by the Fowlers, was we signed them up to a lease that provided for vacant possession by 1 May: T394.37-40.
• Your Honour, one of the points [Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31] really resolved, which wasn't addressed by my learned friend but really is a ready and immediate answer to their submission was that the availability of rescission arises regardless of establishing any damage. That is that merely entering into a contract, in and of itself, establishes a loss in the sense that you commit yourself to contractual obligations you wouldn't otherwise have and that was regarded by the Full Court in this case as a loss or damage. That is, you've got a suite of obligations that you never intended to meet with - either in - on their terms or any of their terms or with the people you are contracting with: T396.4-12
• [W]e say they are [a disadvantageous transaction], and we say it for this reason: we would have an unqualified, unconditional right to obtain vacant possession of premises to lease it to someone else. The only reason we could not do so here was the asserted authority that we had conferred on them by these impugned transactions. That's all they rely on. They don't rely on any other basis for occupying the farm and for farming it: T396.41-6.
• [The New Leases were] [d]isadvantageous in the terms that we - the two terms on which it might be said. One is that it was for rent that was far too low, and the other was that it was to someone who we didn't want to lease the farm to. It was disadvantaged in both of those senses: T399.5-8.
• [The prejudice or disadvantage arises as a result of altering the position] [b]ecause it was given to someone we didn't want on the farm: T400.14.
(Emphasis added.)
30 In the appeal hearing, Harvard also pointed to this extract from its oral closing submissions at trial:
It might, but the mere entry into that contract gave possession of the premises to someone we didn't want to have possession of. And the mere existence of signed documents gave them the prima facie authority to resist our claim for rescission and demand for vacant possession. In that sense, we were clearly disadvantaged by entry into those leases. They clearly had a continuing operative effect because when we sought vacant possession of the property so that we could put the Fowlers in, it was resisted for that reason alone. T399.26-32.
31 Harvard also pointed to a paragraph of its written closing submissions:
Harvard's written closing submissions:
19. It is open to the Court to grant both rescissionary relief and damages, when an injured person's election to rescind is refused by the offender: see Metz Holdings Pty Ltd v Simmac Pty Ltd (No. 2) [2011] FCA 981. Rescissionary relief may be granted even if no loss is suffered in a monetary sense: Demagogue Pty Ltd v Ramensky (1992) 110 ALR 608. The remedy is flexible and suited to serve the justice of the case, Metz, op. cit, at [855] - [868], without being constrained by general law notions of misrepresentation.