(c) The exact terms of subpara (c) are known.
80 The statement by Messrs Colquhoun "they had effectively a further rent-free period until January 2003" is a correct interpretation and accords with subcl 51(b). In my opinion it should not be found that the payments referred to in subcl 51(c) totalling $10,350 were agreed to between Mr Deevey and Mr Sgro as a rental rebate and were disguised as a payment for turnover figures. However Mr Sgro's evidence shows that he had no real interest in obtaining turnover figures. In substance this amount was paid by Boyana and Mr Sgro as a concession to Jo-Al's and Mr Deevey's difficulties, not specifically as a rent rebate.
81 Additional Condition 51 qualified what cl 14.2 of the lease indicated, because AC 51 disclosed other arrangements between the parties to the lease which did not appear in the lease. The reader of the lease was told that the lease contained the whole terms of the relationship; this was not correct; Additional Condition 51 had overcome this, and its withdrawal was the withdrawal of disclosure of a respect in which the terms of the contract including the attached lease were misleading.
82 Redrafting the draft contract to be shown to intending purchasers so as to leave out Additional Condition 51 was part of a new initiative which R & H suggested, after they had had experience over many months and had contacted many prospective purchasers and brought about serious consideration by several: with this experience R & H expressed the view that the provisions of Additional Condition 51 were confusing. What was referred to as confusion was pursuit of information relevant to what Additional Condition 51 disclosed and consideration of what the disclosures and information meant for the interests of a purchaser. The lease a copy of which was annexed to both forms of the draft contract disclosed an initial rent holiday which ran from April 2002 to September 2002. Additional Condition 51 disclosed (and the terms of the lease did not disclose) that the lessor allowed another advantage of $100,000 which had been applied so as in effect to extend the period during which rent was remitted until January 2003. (This is rather different to its being applied for fit-out). Mr Sgro did not accept the characterisation of this allowance, but its substance was as I have stated. Extension of the rent holiday after the tenant had taken possession and entered on business has different implications to initial allowance of a rent holiday as an inducement to the tenant to enter into the lease. By May 2004 when the draft contract was sent to Mr d'Albora the tenant had had a rent holiday for nine months of the 25 months he had been there, a very significant proportion. What R & H referred to as confusion should in my view be interpreted as a reasonable response by prospective purchasers to the whole body of material put before them, including the brochure, terms of the lease and the terms of Addiitonal Condition 51.
83 In 2004 Mr Grassi was of the view that the arrangements relating to rent holiday were in the past and were no longer relevant in a way which required them to be disclosed in the contract itself. Mr Grassi's point of view as a solicitor addressing what provisions the contract should contain is not the same as the point of view of R & H as the selling agent which had been making presentations including Additional Condition 51 to many prospective purchasers without success, and changed their approach and made some but not all of of that presentation to Mr d'Albora. Mr Grassi's endorsement of the amendment of the draft contract does not have any impact on whether the representations made to Mr d'Albora were, as a matter of fact, misleading or deceptive. I do not criticise Mr Grassi's view that it was no longer appropriate to make the disclosure in Additional Condition 51 in the terms of the proposed contract. Mr Grassi was not trying to sell the property and was not distributing the brochure: his attention went to what the contract needed to say. There was misleading conduct of R & H in continuing to make the disclosures in the brochure but no longer making the disclosures which had earlier been made in Additional Condition 51, the absence of which contributed to the tendency to mislead or deceive. Like the work of JMW Turner on Varnishing Day, the picture was transformed by deft omission.
84 The terms of the disclosures in Additional Condition 51, the enquiries which had resulted from those disclosures, expressions of disinterest relating to them from prospective purchasers and the part taken by R & H in the removal of Additional Condition 51 and its disclosures strongly reinforce other proofs that the disclosures that were made to Mr d'Albora, in the brochure and otherwise, were misleading because they depicted the relationship as it would appear if the matters disclosed in Additional Condition 51 had not happened; as well as depicting it as if the lengthy correspondence, grievances and litigation had not happened. In so far as it is relevant, it is clear to me that while R & H may not have known all the circumstances which made the disclosures to Mr d'Albora misleading or deceptive, they knew a substantial part of them, quite enough to demonstrate to R & H, if an objective view had been taken, that the conduct in which they were engaged was misleading and deceptive. The position is much the same whether or not Mr Shatford had ever read Additional Condition 51; his evidence was to the effect that he knew of its contents vaguely, it is clear that he knew sufficient of its contents to seek its removal, and in my finding he had an altogether sufficient understanding of what it said.
85 I received a number of submissions relating to the Petraccas proceedings but I do not regard them as presently significant.
86 The character of the brochure as a statement by R & H carries with it the meaning that R & H knew facts which justified the statements and did not know any facts which would require the statements to be modified or qualified. There is no indication of the existence of any risk that the expectation of long-term security and income and the advantages of a highly experienced operator could not be fulfilled. The brochure was appropriate to give rise to a reasonable expectation that if relevant facts impacted on the matters stated in the brochure they would be disclosed.
87 In Fraser v NRMA Holdings Ltd (1995) ATPR 41-374 at 40,143 the Full Court of the Federal Court of Australia (Black CJ, von Doussa and Cooper JJ) said:
Whilst s 52 does not by its terms impose an independent duty of disclosure which would require a corporation or its directors to give any particular information to members asked to consider a motion in general meeting, where information for that purpose is promulgated, unless the information given constitutes a full and fair disclosure of all facts which are material to enable the members to make a properly informed decision, the combination of what is said and what is left unsaid may, depending on the full circumstances, be likely to mislead or deceive the membership.
88 In my view consideration whether there was an implied representation by silence is not a very useful approach to the question whether there has been a breach of s 52(1) of TPA and whether a person has engaged in conduct that is misleading or deceptive or is likely to mislead or deceive. Better directed to the terms of s 52(1) is an approach in which the conduct including any representation is established, and it is considered whether the conduct is misleading or deceptive having regard to the facts and circumstances which existed, including facts that were disclosed and facts that were not mentioned. What representations were made and what the representations which were made implied is part, usually an important part of the facts which have to be considered when addressing whether conduct was misleading or deceptive. Representations get misleading character not only from their terms but also from facts and circumstances which they may not refer to. Overall, I see Jainran's case not as based on failure of the defendants to comply with some duty to disclose more matters than were disclosed, but as based on the misleading and deceptive character of the defendants' conduct including the representations which were made, when viewed in the light of relevant circumstances including many which were not communicated.
89 The misleading and deceptive character of conduct in which an estate agent circulates a comment that property is a "solid investment, leased to a highly experienced operator" and "great opportunity for long-term security and income" without mentioning that the same operator is currently suing the vendor and making allegations that he entered into the lease as a result of misrepresentation is clear. The contrary is a proposition which could have few friends or upholders, and I find it surprising that this litigation was as protracted as it was. I cannot see how an honest person could mention "great opportunity for long-term security and income" without mentioning the known fact that the tenant is complaining about the rent in a current lawsuit.
90 Mr Sgro is and was the only director of Boyana, it has no other officer, manager or other staff. Mr Sgro is the only possible source of instructions upon which the contract was prepared; and he signed the contract on behalf of Boyana. His position is quite unlike that of a manager, sales representative or other employee of a corporation who takes some part in its affairs which brings him under consideration for his engagement in misleading or deceptive conduct. Mr Sgro is the human embodiment of the company and all its actions were his actions; in particular, putting the form of contract forward for exchange, signing the duplicate original and participating in the exchange was all conduct in which both of Boyana and Mr Sgro engaged, and representing all facts represented by the terms of the document was conduct in which both of them engaged. Unless Mr Sgro had done these things there would have been no exchange of contracts; the conduct in which Mr Sgro engaged was directly causative of Jainran's entering into the contract, with all the representations of fact in it.
91 Mr Sgro saw the contract and signed it, with its inherent deficiencies, and he was of course fully aware of the true facts relating to those deficiencies; the existence of legal proceedings, the road widening proposal and the difference between the provisions of the lease relating to rent and the arrangements which had actually had effect. Mr Sgro cannot escape liability for his engagement in misleading and deceptive conduct by showing that he did not know of the inclusion of the requisitions and answers, or of the Planning Certificate in the contract; his evidence was to the effect that he had no recollection of their inclusion and that he had no awareness of the reference to the road widening affectation. He no less engaged in the conduct of putting forward the contract in the terms it had and entering into the contract whether or not he had a full understanding of what he was doing; he can no more escape on this ground than Boyana can. The conduct was misleading and he engaged in it. Limited understanding of what he was doing is not relevant, his liability is the product of its own conduct, and not only of the provisions of s 75B of the Trade Practices Act relating to aiding, abetting, counselling and procuring conduct. If not otherwise liable Mr Sgro would in my opinion be liable as an abettor under section 75B.
92 Representations made by R & H, whether in writing or orally, should be attributed to Boyana and Mr Sgro, and in so far as they are misleading or deceptive, Boyana and Mr Sgro engaged in misleading or deceptive conduct in making them. In their representations the characteristics of the tenant were put forward as advantages associated with the property and with ownership of it, without any hint of qualification. The brochure was headed "An outstanding investment 20 year lease. Net income $257,200 per annum." Positive aspects associated with the tenant were referred to by saying, in the brochure:
Tenant fully responsible for full and comprehensive outgoings and operating expenses.
Final agreement with Caltex T/as Spar Express Supermarket.
Comments. Solid investment leased to highly experienced operator. … Great opportunity for long-term security and income.
True net lease - all costs paid by tenant.
Net income $257,200 per annum. NB - CPI annual review falls due April 2004.
93 Accompanying the brochure was a copy of the Reference Schedule in the lease which summarises significant obligations of the tenant. An extract from the tenant's curriculum vitae also accompanied the brochure. R & H had edited out some parts of the curriculum vitae provided by Mr Deevey to Mr Sgro several years earlier; the details edited out did not make what remained of the CV misleading. On a careful reading the document dealt with Mr Deevey's career up to 1999, not including his tenancy of the subject property. The curriculum vitae showed the tenant as well qualified by experience and training and as having a long association with business successes.
94 The documents sent to Mr d'Albora project a serene picture of an outstandingly good investment in which the returns referred to are unqualifiedly available. Positive characteristics of the tenant are prominent parts of this serene picture. No aspect of doubt about the tenant's willingness or ability to meet obligations associated with this "solid investment leased to highly experienced operator" is referred to; nor hinted at in any way.
95 The expectation that the rent - net income - referred to in the brochure could be expected actually to come in was central to the force of statements in the brochure.
- outstanding investment
- net income of $257,200.00 per annum
- tenant for the responsible
- highly experienced operator
- great opportunity for long-term income
96 The characteristics of the tenant were put forward in close association with claims about the net income. The omission of any facts showing dispute or contention by the tenant about whether the income could or should be paid was misleading. So too for not referring to the litigation. So too for not referring to the further $100,000 rent free period, which showed that the lease clause 19 was less than the whole truth about rent relief, as there had been an extra four or five rent-free months, about nine or 10 months in 25 months.
97 While nothing in the brochure can be said to be untrue or fraudulent, the conduct in communicating the material without qualification to Mr d'Albora was, in my judgment, misleading and deceptive having regard to an array of facts known Mr Sgro, R & H and in most cases to both which seriously qualify the accuracy of the picture so projected.
98 Additional Condition 37.3 of the Contract provides:
37.3 No representations
Without limiting the generality of the preceding paragraph, the Purchaser acknowledges that neither the Vendor nor anyone on behalf of the Vendor has made any representation or warranty upon which the Purchaser relies as to the fitness or suitability for any particular purpose or otherwise in respect of the property or any part thereof or of any financial return or income to be derived there from.
99 Additional Condition 37.3 has contractual force only between Jainran and Boyana. It has no contractual force and no other force as between Jainran and Mr Sgro, or as between Jainran and R & H.
100 In addressing Additional Condition 37.3 of the Contract it is important that enforcement of s 52 is not enforcement of contractual obligations. The Trade Practices Act gives remedies where damage occurs by conduct which is misleading or deceptive, and does so notwithstanding that the conduct complained of caused the plaintiff to enter into a contract according to the terms of which he has no remedies or his remedies are qualified. Entering into a contract with a clause like Additional Condition 37.3 is an illustration of the potency of misleading and deceptive conduct. Courts administering the Trade Practices Act have taken this approach consistently and from the beginning, a notable early instance being Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83. Cross-examinations of Mr d'Albora on Additional Condition 37.3 provided scenes of his embarrassment, scenes of kinds which in no doubt have been enacted many times in litigation under the Trade Practices Act; but their main force in my mind was their illustration of the damage which misleading and deceptive conduct can do. Cross-examination established that Mr d'Albora read and understood cl 37.3, and understood its effect on his contractual entitlement. Counsel made a number of submissions which relied on the limiting effect of Additional Condition 37.3, but sought the benefit of the limitations so imposed on Jainran's contractual entitlements as in some way an answer to its statutory remedies; which they cannot be.
101 The difference between Jainran's position tested according to its contractual entitlements and its position tested according to its rights under the Trade Practices Act is well illustrated by this passage from Mr d'Albora's evidence (at t 53):
Q. And you also understood by reason of cl 37.3 that the purchaser in entering into the contract was not relying upon anything that the vendor, Boyana, or its agent had said, in relation to such matters as to the success or otherwise of the business being carried out?
A. Yes.
Q. And in fact not relating at all in relation to any matters relating to the financial return or income it derived from the property?
A. Yes, although I did take it when I asked those questions, I took it what they told me as being correct.
Q. But you also understood, I suggest, no matter what you had been told that you were agreeing that you or the purchaser was not going to rely upon such statements as a basis for entering into the contract, correct?
A. Agreed, although I didn't expect to be misled either.
102 These answers well illustrate a result which remedies under the Trade Practices Act achieve notwithstanding contractual entitlements.
103 In my opinion the presence of Additional Condition 37.3 and Mr d'Albora's knowledge of it have no effect on the meaning and effect of the brochure, or on the brochure's characterisation as being or not being passed on by R & H as a mere conduit. Counsel for R & H placed considerable reliance on a passage in evidence (t. 93) dealing with Mr d'Albora's understanding of the effect of disclaimers when included by real estate agents in material they published. I derived no assistance from the following question and answer (t93, l.43) on which counsel based great store:
Q. In essence you were taking whatever Mr McGarrity says he has prepared or Mr Shatford, whoever prepares the brochure, was to go with due care, that you were possibly to make your own inquiries, correct?
A. Yes.
104 Counsel referred me to a number of decisions in which caution is expressed about the acceptance of evidence of reliance upon representations; counsel's expression was "opportunistic evidence". Counsel referred to a number of judicial decisions which have shown the caution with which such assertions should be approached. It is necessary to have regard to the surrounding circumstances as well as to evidentiary assertions about reliance, and it is necessary to consider the probabilities. In the present case the surrounding circumstances furnish a clear and strong basis for finding that the conduct complained of caused Jainran to exchange contracts. Mr d'Albora's evidence, in which he expressed qualifications where appropriate, indicating his sincerity as a witness which his demeanour appeared to confirm, is not a large part of the basis of this finding. There is usually little difficulty in finding causation where an intended outcome occurs, and that is so here. Representations to Mr d'Albora, both written and oral, were intended to bring about entry by Jainran into the contract, and were a very large part of the information, almost the only information before Mr d'Albora; the only other material was whatever observations he made on the occasion when he parked his car on the opposite side of the road and observed the premises, and whatever observations he may have made on his inspection in the company of Mr McGarity. There is no real alternative to finding that the conduct in which R & H, Boyana and Mr Sgro engaged caused Jainran to exchange contracts, as their conduct was obviously intended to do.
105 It was no more than speculation to contend that the representations in the contract were not causative; that is, that Jainran would have entered into the contract even if the representations had not been contained in it. Neither Mr d'Albora nor Mr Callinan took any particular notice of the representations in the contract; that is the ordinary way to act if they are there conveying assurance; but if they had not been there and in particular if there had been no section 147 certificate with a statement about there being no road proposals, it is obvious that there would not have been an exchange of contracts.
106 Counsel referred me to a passage in the judgment of Beaumont J in Karawi Constructions Pty Ltd v Bonfind Pty Ltd (1993) 8 TPR 41265 at 41570; his Honour said to the effect that when consideration is given to all the circumstances a failure to check or verify a representation may negate reliance on the replication. What his Honour said is undoubtedly correct, it is also correct that when consideration is given to all the circumstances failure to check or verify a representation may demonstrate that reliance is complete. I have found valuable guidance in this passage from the judgment of McDougal J in Ingot Capital Investment & Ors v Macquarie Equity Capital Markets & Ors [No.6] 2007 NSWSC 125 at 457 and 458:
457 Of course, Beaumont J was not seeking to lay down a rule of general application. His Honour was making the point that the question, whether reliance has been established, is something that needs to be considered on the whole of the available material (including, as I have said above, the nature of the representations found to have been made and what happened after they were made); and that, in some circumstances, an inference, adverse to reliance, may be drawn from a failure to check or verify a representation.