[1916] HCA 14
Westpac Banking Corporation v Jamieson [2016] 1 Qd R 495
[2015] QCA 50
Wyzenbeek v Australasian Marine Imports Pty Ltd (in liq) (2019) 272 FCR 373
Judgment (10 paragraphs)
[1]
Background
Each consumer purchased from Jonval, either individually or with their spouse, a "moveable dwelling" which was known as a "Marina Villa" in the Tweed River Hacienda Holiday Park operated by Hacienda. Each dwelling had been installed at the caravan park in 2005 or 2006, placed on footings and connected to various services. It seems that none has ever subsequently been moved. Each appears to have provided 2 bedroom accommodation.
Each consumer entered into two contracts: a sale agreement with Jonval and an occupation agreement with Hacienda. The purchase prices of the moveable dwellings, being villas 2, 5, 6, 7, 8, 9, and 10, were in the order of $200,000. The occupation fees were modest, seemingly in the order of $175 per week (they have risen to around $230-$250 per week). The evidence concerning the occupation agreements was incomplete, but they appeared for the most part to be for a term of 2 years and were thereafter rolled over. They contained important terms limiting the occupation on those sites. In particular, the occupant was not permitted to live on site for any continuous period greater than 28 days without Hacienda's prior permission, and in no circumstances for more than 180 days each year. Those conditions corresponded with a condition of the local Council's development consent that the sites not be used for permanent accommodation.
The essence of the contravening conduct alleged by the Commissioner and found by the primary judge was that the consumers were told that the contractual terms and planning conditions would not be enforced. Most of the consumers gave evidence that they intended to live in the dwellings permanently, and would not have bought if they had known of the planning restrictions. Exceptionally, one had chosen to live in South Australia in order to be closer to her family, but returned to the villa at various intervals. She gave evidence that she would never have bought the Marina Villa if she had known she could not live there continuously for periods exceeding 28 days. There was no challenge to those findings.
The consumers purchased the moveable dwellings between around 2009 and 2012. The primary judge found at [539] that each consumer had suffered stress and anxiety "after they learnt of the precarious situation of their occupation". There was no challenge to that finding.
The consumers' complaints led to the Commissioner bringing proceedings on their behalf commenced in 2015. Why the proceedings took so long to go to trial does not appear from the appeal books. It appears that, save in the case of the consumer who now lives predominantly in South Australia, the consumers have continued to reside in the villas since their purchases, paying the agreed occupation fee to Hacienda.
The primary judge ordered that the appellants were jointly and severally liable to pay compensation and pre-judgment interest to the consumers, in amounts ranging from $224,380.63 to $387,883.62. Each consumer had provided a written undertaking to the Court that upon payment of those amounts they would transfer ownership of their villa to Jonval. The amounts were calculated as the sum of (a) the purchase price, (b) 85% of the cost of renovations and improvements undertaken by the consumers and (c) pre-judgment interest at court rates. (In two cases, there was also a component for a small amount of loan repayments, but no separate submissions were directed to that, and I shall omit reference to it in what follows.) Contrary to the Commissioner's case at trial, the amounts did not include the occupation fees which the consumers had paid over the previous decade, nor in the case of one consumer did it include any amount for psychological injury which the primary judge found had been sustained.
The grounds of appeal divide into two groups. The first group of grounds focusses on the remedies. It was said that, accepting the findings of statutory contraventions, the primary judge had erred in making orders under s 72 of the Fair Trading Act and s 237 of the ACL. The second group of grounds challenged the findings of unconscionable conduct by Mr Willmott. It is convenient to follow the order adopted in the notice of appeal and in the parties' submissions, and address the grounds dealing with remedies first. They constitute the main point on appeal.
[2]
Grounds 1, 2 and 4 - "Other" orders
Section 72 of the Fair Trading Act has been repealed, but continues to apply to conduct occurring prior to 1 January 2011 - see Sch 5, cl 16(1)(a). Section 72(1) provides:
"72 Other orders
(1) Without limiting the generality of section 65, if, in a proceeding instituted under this Part, or for an offence against Part 3, 4, 5, 5B, 5C, 5D, 5F or 8, the Supreme Court finds that a person has sustained, or is likely to sustain, loss or damage by conduct of another person that contravened a provision of Part 3, 4, 5, 5B, 5C, 5D, 5E, 5F, 5G or 8, the Court may, whether or not it grants an injunction under section 65 or makes an order under section 67 or 68, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders specified in subsection (5)) if the Court considers that the order or orders concerned will compensate the first-mentioned person wholly or in part for the loss or damage or will prevent or reduce the loss or damage."
Section 237 of the ACL 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, 3 or 4; or
...
(b) on the application of the regulator made on behalf of one or more such injured persons;
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.
(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."
For concision, and consistently with the way the appellants advanced their submissions, it suffices to refer to the paragraphs and subparagraphs of s 237, noting that a substantially identical analysis applies to s 72.
[3]
Appellants' submissions
The appellants submitted that there was no evidence of the value of the Marina Villas at the time of the purchase, or at the present time, so that there was no evidence of any loss suffered by the consumers. There was also, it was submitted, no evidence of alternative retirement dwellings available to the consumers, nor any evidence of the value to the consumers of the improvements they chose to make to their villas, or the extent of depreciation of the villas over the period of the consumers' occupation, or the cost of moving the villas to other locations. The appellants submitted that the consumers also enjoyed, at least in theory, the rights to (a) sell the moveable dwellings to another owner, or to the park operator, or to Jonval, or (b) relocate the villas elsewhere, either within or outside the caravan park. The consequence of all of those matters was that there was no evidence of any loss by any of the consumers, and that this was fatal to the power to make orders under s 237 (or s 72).
The appellants' fundamental submission proceeded on the basis that preconditions to the making of orders under s 237 (or s 72) were findings of identified loss or damage (or likely loss or damage) and the quantification of such loss or damage. They identified a textual basis for this submission in the reference to "the" loss or damage in s 237(2) and the concluding words of s 72(1); their point was that the orders available to the Court were confined to those which "will compensate [the consumer] in whole or in part for the loss or damage" or will "prevent or reduce the loss or damage". The appellants also relied on what had been said in Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69 at [43]-[55], where relief under the similarly worded s 87 of the Trade Practices Act 1974 (Cth) was refused to borrowers who had been misled into entering loan facilities which were less advantageous than they had been told. The joint judgment concluded this aspect of the analysis thus:
"This is not to be taken as confining the operation of s 87 to cases where loss or damage has been sustained. It is not confined in that way; it applies to cases in which it is shown that a person is likely to suffer loss or damage. But the inquiry remains an inquiry about whether it is likely that as a result of the contravention the party concerned will suffer some prejudice or disadvantage. If, as we consider to be the case, the bare fact that making a contract different from what was represented is not loss or damage, something more must be shown to be likely to occur in the future before it can be said that it is likely that loss or damage will be suffered.
Ordinarily this will present the plaintiff with no difficulty. It will be rare that the difference between what was represented and what was given will not be reflected in some difference in value or other manifestation of actual loss to the party that was misled either now or in the future. But if it does not, we consider that neither s 82 nor s 87 relief is available. To the extent that the contrary was held in Demagogue Pty Ltd v Ramensky, we consider it to be wrong."
[4]
Consideration
There was, with respect, a deal of confusion in the cases presented at trial, especially that advanced by the Commissioner, some of which contributed to the issues raised on appeal.
First, the Commissioner was suing on behalf of the consumers pursuant to s 237 (and Fair Trading Act, s 72(4)). It necessarily followed that she was not suing for damages pursuant to s 236. Instead, she was seeking "other" orders which she might persuade the court to consider would compensate the consumers, or prevent or reduce their loss or damage.
Secondly, those orders could not include damages for the depression suffered by one consumer. The conduct relating to that consumer took place in October 2010, and was therefore governed by the Fair Trading Act. Section 72(1A) of that statute excluded personal injury. The Commissioner's submissions appear not to have addressed the limitation in s 72(1A). The primary judge would have erred had his Honour accepted this submission.
Thirdly and more importantly, because it gave rise to a substantial issue on appeal, the Commissioner advanced at trial an elaborate submission based on damages for a "no transaction" case.
The Commissioner's closing submissions at trial attached a document styled "Plaintiff's Quantification of Damages". While the submissions on compensation correctly commenced with reference to compensation pursuant to s 237 of the ACL and s 72 of the Fair Trading Act, they asserted that a refund of the purchase price and the occupation fees was "an orthodox remedy in a 'no transaction' case", and thereafter addressed at length the principles governing "the causal nexus between the contravening conduct and the damage claimed", with extensive reference to decisions based on claims for damages. That led to lengthy submissions from senior counsel then appearing for the appellants on the principles governing damages and "no transaction" cases. The Commissioner's reply submissions at trial referred to three appellate "no transaction" cases (Westpac Banking Corporation v Jamieson [2016] 1 Qd R 495; [2015] QCA 50, Cummins Generator Technologies Germany GMBH v Johnson Controls Australia Pty Ltd [2015] NSWCA 264; 326 ALR 556 and Addenbrooke Pty Ltd v Duncan (No 2) [2017] FCAFC 76; 348 ALR 1), in all of which the sole pecuniary remedy was damages. The parties' oral submissions reflected these exchanges. It is not altogether surprising that from time to time the primary judge repeated the parties' looseness in terminology and referred to "damages" (for example, at [538] in recording that "[t]he defendant submits that the Court should not award damages, because the occupiers have 'enjoyed' the benefits of their purchase and can continue to 'enjoy' the benefits, because the restrictions are not 'policed'").
[5]
Rescission in equity for fraudulent misrepresentation
It will be useful to recall how rescission in equity for fraudulent misrepresentation operates. The historical and continuing differences between rescission at common law and rescission in equity were considered in Nadinic v Drinkwater (2017) 94 NSWLR 518; [2017] NSWCA 114 at [23]-[33] and need not be repeated here. Plainly common law could not achieve restitutio in integrum so as to place Jonval, Hacienda and the consumers in the same position they had been in a decade before (it suffices to note the renovations and improvements made to the moveable dwellings), and so it is sufficient to address rescission in equity.
Equity takes a broader approach to achieving "practical justice", even if the parties cannot be restored to precisely their previous position. As Lord Blackburn explained in Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218 at 1278-9, while a Court of Equity could give no damages, and, unless it could rescind the contract, could give no relief:
"[O]n the other hand, it can take accounts of profits, and make allowance for deterioration. And I think the practice has always been for a Court of Equity to give this relief whenever, by the exercise of its powers, it can do what is practically just, though it cannot restore the parties precisely to the state they were in before the contract."
The process of rescission in equity by a purchaser was described by Jordan CJ in McAllister v Richmond Brewing Co (NSW) Pty Ltd (1942) 42 SR (NSW) 187 at 191-192:
"The former course [scil rescission] is available only if the parties can be restored substantially to their former position - as if the fraud had never been perpetrated or acted on. For this purpose, the defrauded purchaser must return the property to the vendor, and is entitled to recover from him so much of the price as he has paid. All other adjustments must be made which are necessary to restore the parties to the status quo ante. The vendor must pay interest on any purchase money which he has received. The purchaser must account for the rents and profits or the value of the use of the property whilst he had it. Any loss directly occasioned to the purchaser by the fraud must also be made good to him, as part of the process of restitutio in integrum. The vendor must, for example, recoup to him any expenses incurred in effecting the purchase. He must recoup the value of any improvements reasonably made to the property by the purchaser before notice of the fraud: Brown v Smitt (1924) 34 CLR 160; 9 Austn Digest 291. He must also make good to the rescinding purchaser any other detriment which he has suffered as the direct consequence of the fraud."
[6]
No need to quantify loss as a precondition to make s 237 orders
Turning now to the appellants' submissions, the absence of evidence of value of the Marina Villas, and the cost of alternative accommodation, and the other evidentiary matters on which the appellants relied may be accepted (and appears to be correct). So too are the options which were, at least in theory, available to the consumers, to relocate or sell their moveable homes (although there was evidence as to the expense of doing this, the need to divide the home into two, and either use a low loader or hire a barge so that it could be removed on water). But the answer to this submission does not turn on those facts.
It is necessary before making orders pursuant to s 237 of the ACL (or the former s 72 of the Fair Trading Act) to identify the actual or likely sustaining of loss or damage caused by contravening conduct. It is also necessary for the orders to be such as the Court considers will compensate the injured person for that actual or likely loss or damage, or prevent or reduce that actual or likely loss or damage. But it is not necessary to quantify that loss or damage.
This follows directly from the statutory text. It is necessary to quantify loss or damage before making an order for damages, which is available as of right. It is useful to contrast s 237 with the right to damages conferred by s 236(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 or 3;
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."
Section 237 of the ACL (and the former s 72 of the Fair Trading Act and their common ancestor, s 87 of the Trade Practices Act) are quite different from s 236. Those sections confer a discretionary power to make orders which will compensate for loss, or prevent or reduce loss. In contrast, the right to damages created by s 236 (and its predecessors) is not discretionary, and entitles a claimant to judgment in a pecuniary amount if it can be shown that that was the loss or damage suffered because of contravening conduct. The notion of a claimant having an entitlement as of right to damages and the possibility of discretionary relief is not unfamiliar: consider for example damages and specific performance following breach of a contractual obligation, or damages and account of profits for copyright infringement (see the analysis by Lockhart J in Masterton Homes Pty Ltd v LED Builders Pty Ltd (1996) 33 IPR 417 at 424-425).
[7]
Remaining submissions
The parties exchanged submissions in this Court based on the need to establish an alternative transaction, in order to make out a "no transaction" case. That led to a challenge to what the primary judge had said about establishing a "no transaction case", and in particular whether his Honour had (at [546]) correctly applied Westpac Banking Corp v Jamieson and the effect of a recent decision on which his Honour had not relied, Wyzenbeek v Australasian Marine Imports Pty Ltd (in liq) (2019) 272 FCR 373; [2019] FCAFC 167. But those were decisions on damages. The Commissioner was not seeking damages on behalf of the consumers. She was seeking orders pursuant to statute, akin to rescission, for the return of amounts paid by the consumers, and compensation for expenditure incurred, on terms that the consumers return title to the moveable dwellings to Jonval.
The submissions proceeded on a false premise. To the extent the primary judge addressed them, his Honour was dealing with an issue which did not arise. It is inappropriate for this Court to address them.
The appellants made three further discrete points in connection with the orders made by the primary judge. These were based on the fact that the orders made no allowance for the enjoyment by the consumers of occupation of the moveable dwellings for some ten years, or the depreciation of those buildings, or the value (as distinct from cost) of the improvements.
The first submission turned upon the proposition that the occupation fee was the right to occupy the site as distinct from the right to use the building which, while it was affixed to the site, was actually owned by the consumers. It was said that the primary judge erred in referring to "rent", notably in [540]:
"More importantly, each of the occupiers has paid rent to Hacienda for the occupation of the Villas. That rent is the payment for the occupation of the site and adequately compensates, in the circumstances, for the 'benefit' that the occupiers have 'enjoyed'. The level of rent is greater than for other sites, of which evidence has been adduced. The Council requirements provide that those Villas be owned by Hacienda Park and rented casually, if the 180 day limit, contained in the Occupation Agreement, is to apply."
In relation to the second aspect, there was in fact no evidence one way or another of the value of the moveable dwellings other than the purchase price actually paid. The moveable homes were installed in 2005 or 2006, and thus were at least 3 or 4 years old when purchased by the consumers. Their value a decade later is not known.
[8]
Grounds 6-8: Unconscionable conduct by Mr Willmott
Grounds 6 and 7 alleged error by the primary judge in finding that Mr Willmott engaged in conduct that was unconscionable, either personally or through being "knowingly concerned" in a contravention by Jonval or Hacienda. Ground 8, consequentially, maintained there was error in the order that Jonval, Hacienda or Mr Willmott be jointly and severally liable to pay the compensation.
Ground 9 challenged the declaration that Mr Willmott had engaged in conduct contravening s 42 of the Fair Trading Act and s 18 of the ACL. This ground was conceded in written submissions supplied well in advance of the hearing, and need not be pursued here. It was based on a minor error as to parties when orders were formulated. It results in an amendment to one of the declarations, which should apply to Jonval and Hacienda, rather than to Hacienda and Mr Willmott.
It is convenient to reproduce the entirety of what was submitted orally in support of grounds 6, 7 and 8:
"We move now to the finding of unconscionable conduct concerning Mr Willmott. The pleaded case against Mr Willmott was that knowing that the consumers could not lawfully occupy their respective villas on the sites on which they were located, he permitted them to purchase them from Jonval Builders on terms including an implied term that the local authority consents and approvals necessary to permit the consumers to provide their penalty were in place, and similarly with the occupancy agreements.
The unusual features of this case, however, which we have already enumerated, must, we submit, have a bearing upon this question of unconscionability. The consumers have lived there uninterrupted for in the order of a decade. The agreements give them the freedom to leave now and that in the absence of proof that this conduct has had a deleterious effect in that in terms of causing them to suffer loss connected with the villas or the structures that we've spoken of, the conclusion that there was present here the necessary moral [obloquy], or the sufficient deviation from the acceptable standards of practice, simply don't exist. They're our submissions."
The written submissions were also brief, although they had a slightly different focus. They turned on the pleaded case and the evidence available to attribute the making of representations by employees and agents of Jonval and Hacienda to Mr Willmott.
[9]
Conclusion and orders
For those reasons, those grounds of appeal which were pressed and contested fail.
Ground 9, which was conceded in advance of oral submissions, involves the correction of an obvious slip. While this could have been resolved by application to the primary judge, it may just as conveniently be rectified by this Court.
The Court heard short submissions at the beginning of the hearing of the appeal in support of the Commissioner's motion seeking relief in the nature of a mandatory injunction for the payment into Court of the amounts ordered to be paid to the consumers, upon which payment the judgment would be stayed pending the outcome of the appeal. There was evidence that there had been negotiations concerning a stay of execution, which had broken down. The Court was told by Mr Stewart that his instructions were that the agreed payment into Court as the price for a stay was imminent.
But nothing turns on whether or not there was an agreement between the parties, or (if agreement was reached) whether or not funds were paid into Court in accordance with its terms. The notice of motion was, with respect, misconceived. As was raised during the hearing, either there was or was not a stay. If there was not, the Commissioner could enforce the judgment in the usual way. But the Commissioner having obtained judgment on behalf of the consumers, it was not open for the Commissioner to obtain a mandatory injunction compelling payment of the amount into Court as the price of a stay of execution. That would be to create a novel form of execution. The notice of motion should be dismissed.
The costs of the appeal and the costs of the notice of motion would appear to be readily severable. In each case, there is no reason for costs not to follow the event.
I propose the following orders:
Appeal dismissed, with costs.
Notice of motion filed 17 July 2020 dismissed, with costs.
Pursuant to the slip rule in UCPR r 36.17, vary order 3 made on 17 March 2020 by replacing "second and third" by "first and second".
[10]
Amendments
12 May 2021 - Coversheet: Spelling correction in Representation field.
21 May 2021 - [17] - "of the type which of the type which can" changed to "of the type which ... can" in the quote.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 21 May 2021
34 Ch D 582
Park v Murray Irrigation Ltd [2018] NSWCA 166
Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; 77 ALJR 768
PT Ltd v Spuds Surf Chatswood Pty Ltd [2013] NSWCA 446
Sibley v Grosvenor (1916) 21 CLR 469; [1916] HCA 14
Westpac Banking Corporation v Jamieson [2016] 1 Qd R 495; [2015] QCA 50
Wyzenbeek v Australasian Marine Imports Pty Ltd (in liq) (2019) 272 FCR 373; [2019] FCAFC 167
Category: Principal judgment
Parties: Jonval Builders Pty Ltd (First Appellant)
Hacienda Caravan Park Pty Ltd (Second Appellant)
John Allan Willmott (Third Appellant)
Commissioner for Fair Trading (Respondent)
Representation: Counsel:
M Stewart QC, L Jurth (Appellants)
G Kennett SC, R Francois, S Jayasuriya (Respondent)
Solicitors:
Worcester & Co (Appellants)
Legal Services, NSW Fair Trading, Department of Finance, Services and Innovation (Respondent)
File Number(s): 2020/00111572
Publication restriction: Nil
Decision under appeal Court or tribunal: Supreme Court of New South Wales, Common Law Division
Jurisdiction: Civil
Citation: [2019] NSWSC 1893
Date of Decision: 31 December 2019
Before: Rothman J
File Number(s): 2015/291362
HEADNOTE
[This headnote is not to be read as part of the decision]
Between 2009 and 2012, several consumers purchased from Jonval, the first appellant, villas called "moveable dwellings" attached to land in a holiday park operated by Hacienda, the second appellant. Each consumer entered into both a sale agreement with Jonval and an occupation agreement with Hacienda. The occupation agreements contained terms requiring Hacienda's prior permission for occupation of the villas for any period greater than 28 days, and limiting occupation to no more than 180 days per year in any circumstances. These terms corresponded with a condition of development consent that the sites not be used for permanent accommodation.
The Commissioner for Fair Trading brought proceedings in 2015 seeking orders for the compensation of the consumers under the former s 72 of the Fair Trading Act 1987 (NSW) and s 237 of the Australian Consumer Law, alleging that the consumers had only purchased the villas because of misleading or deceptive or unconscionable conduct by Jonval, Hacienda and the third appellant, who was a director of both Jonval and Hacienda. The essence of the alleged contravening conduct was that the appellants told the consumers prior to purchase that the contractual terms and planning conditions would not be enforced. Most of the consumers gave evidence that they intended to live in the villas permanently. All gave evidence that they would not have purchased them had they known of the restrictions on occupation.
The primary judge found that the appellants' misleading and deceptive and unconscionable conduct had caused the consumers to enter into the contracts, and ordered that the appellants were jointly and severally liable to pay compensation to the consumers, in amounts calculated relevantly as the sum of the purchase price and 85% of the cost of improvements to the villas undertaken by the consumers, on condition that the consumers reconvey the moveable dwellings to Jonval. The appellants appealed, challenging the compensation orders made under s 72 of the Fair Trading Act and s 237 of the Australian Consumer Law, and challenging the primary judge's findings of unconscionable conduct by the director.
The issues in the appeal were:
i) What preconditions exist to the making of orders under s 72 or s 237, and whether such preconditions were satisfied;
ii) Whether the orders made by the primary judge were authorised by s 72 and s 237;
iii) Whether the primary judge erred in finding that the director engaged in unconscionable conduct.
The Court held, dismissing the appeal:
As to issue (i):
The Commissioner was suing on behalf of the consumers for compensation, not for damages. Whereas the statutory right to damages entitles a claimant to judgment in a pecuniary amount, s 72 and s 237 confer a broader discretionary power to make orders which will compensate for loss, or prevent or reduce loss: at [1], [2], [19], [40]-[45].
The dependence of these submissions on loss which was quantified, in addition to being identifed, was made clear in oral submissions:
"BATHURST CJ: Do you essentially say that it's essential to in fact quantify the loss before you can resort to the remedies provided by s 237 and the associated sections?
STEWART: In this instance, yes, because the consumers acquired an asset, and there is no evidence to suggest that their acquisition of that asset, the structures, involved them suffering any loss at all. Insofar as the loss that your Honour the Chief Justice has described is concerned, that is something that is capable of being dealt with and any loss flowing from it terminated, extinguished, by them terminating the agreements and moving away. So our submission is that even in the circumstances posited by your Honour the Chief Justice, without this additional evidence we have identified, loss of the type which ... can be compensated and which must be identified before a compensation order can be made has not been established."
The primary judge engaged with the submissions concerning a "no transaction" case, including at [544]-[545]:
"The major aspect of the opposition to damages and/or compensation that repays the price of the Marina Villas is that the defendants submit that the measure of damages cannot be on the basis that the purchase of each and [every] registrable movable dwelling is to be 'void ab initio'. This submission is put on two bases: first, it is not possible to postulate a hypothetical alternative scenario (see Gates v City Mutual Life Assurance Society Limited (1986) 160 CLR 1, at 13-14; [1986] HCA 3).
Secondly, it is not possible to do so on the basis of a hypothetical alternative scenario, because there is no evidence suggesting what any of them would have done. In so submitting, the defendants maintain the proposition that the plaintiff is seeking damages on the basis of a 'no transaction' case in circumstances where that which is alleged is that each occupier and/or purchaser would not have entered into 'this specific transaction' to which, the defendants allege, the 'no transaction' rules do not apply."
But these submissions proceeded, with respect, on a false premise.
There was never a claim for damages. There never could be a claim for damages under s 236 in proceedings brought by the Commissioner pursuant to s 237, as opposed to proceedings brought by the consumers personally. In the sense used at trial, a "no transaction" case is a short-hand reference to a way of calculating damages when it is said that but for the breach of contract or contravening conduct, no transaction would have been entered into and damages are to be assessed on that basis. It may be contrasted with a claimant's case that a transaction would have proceeded in the absence of the contravening conduct, but on different terms (typically, that a lower price would have been paid).
But in this litigation, the Commissioner had obtained undertakings from each consumer to reconvey title to the moveable dwellings upon payment of compensation as ordered pursuant to s 237. Both in form and in substance, the Commissioner was seeking orders in the nature of rescission, with appropriate adjustments having regard to the outgoings incurred and benefits received by the consumers in the meantime. Neither in form nor in substance were damages being sought.
Despite the distracting submissions concerning the elements of a "no transaction" case, that was the point to which the primary judge returned at [551]:
"Further, the plaintiff is not seeking, on behalf of the purchasers/occupiers, damages that would put them into, or enable them to pay for, similar accommodation on a similar site in a similar location. Rather, the plaintiff is, on behalf of the purchasers/occupiers, seeking to obtain the purchase price of the Marina Villas, which purchase price was paid as a result of the representations made by, and the unconscionable conduct of, the defendants."
As was explained in Alati v Kruger (1955) 94 CLR 216 at 223-224; [1955] HCA 64:
"[E]quity has always regarded as valid the disaffirmance of a contract induced by fraud even though precise restitutio in integrum is not possible, if the situation is such that, by the exercise of its powers, including the power to take accounts of profits and to direct inquiries as to allowances proper to be made for deterioration, it can do what is practically just between the parties, and by so doing restore them substantially to the status quo. ... The difference between the legal and the equitable rules on the subject simply was that equity, having means which the common law lacked to ascertain and provide for the adjustments necessary to be made between the parties in cases where a simple handing back of property or repayment of money would not put them in as good a position as before they entered into their transaction, was able to see the possibility of restitutio in integrum, and therefore to concede the right of a defrauded party to rescind, in a much wider variety of cases than those which the common law could recognize as admitting of rescission. Of course, a rescission which the common law courts would not accept as valid cannot of its own force revest the legal title to property which had passed, but if a court of equity would treat it as effectual the equitable title to such property revests upon the rescission."
There has been controversy concerning the circumstances in which a purchaser who has been induced to purchase by a vendor's fraudulent misrepresentation and who subsequently spends money improving the land can, as part of the process of rescission in equity, obtain compensation for improvements. There is the general statement of Griffith CJ in Sibley v Grosvenor (1916) 21 CLR 469 at 475; [1916] HCA 14 that the plaintiffs were entitled to restitutio in integrum, which included "rescission of the contract and repayment with interest of the purchase money already paid, together with the amount expended in substantial repairs and lasting improvements effected on the land by them while in possession, from which must be deducted the value of their use and occupation until rescission, with set-off". All members of the Court save for Isaacs J (who favoured a narrower approach to allowances) assented to orders including an account for "all sums expended by plaintiffs in substantial repairs and lasting improvements on the land together with interest": at 476. However, the High Court divided narrowly on this point in Brown v Smitt (1924) 34 CLR 160; [1924] HCA 11, with the majority holding that allowances for improvements which were matters of taste or personal enjoyment, or allowances for improvements made after the party making them knows or has reasonable notice of the defect in title, could not be justified (at 165), while Isaacs and Rich JJ said that no allowance could be made for improvements.
In cases of fraudulent misrepresentation, equity had power not merely to order rescission but also to include an indemnity for loss directly caused by the fraud. Jordan CJ said that "there can be no doubt that complete indemnity could be given by a Court of Equity to the person who had been defrauded, so as to protect him as fully in equity as he could have been protected in law": McAllister v Richmond Brewing Co (NSW) Pty Ltd at 192, quoting Newbigging v Adam (1886) 34 Ch D 582 at 592; see also Nadinic v Drinkwater at [35]-[36]. The "complete indemnity" which could be obtained from a "Court of Equity" in such a case, to accompany rescission, was distinct from the common law remedy of damages. This was explained by Cotton LJ in Newbigging v Adam at 589, when rejecting the submission that such an indemnity amounted to a court of equity granting damages for deceit:
"In my opinion it is not giving damages in consequence of the deceit, it is working out the proper result of setting aside a contract in consequence of misrepresentation. This is a very different thing, because although the damages which would have been obtained in an action of deceit if the misstatement had been made fraudulently, or with such reckless negligence as to bring about the same consequences, might have been the same as what the Plaintiff will get under the indemnity, they might have been much more. The Plaintiff here does not recover damages as in an action of deceit, but gets what is the proper consequence in equity of setting aside the contract into which he has been induced to enter. In my opinion it cannot be said that he is put back into his old position unless he is relieved from the consequences and obligations which are the result of the contract which is set aside."
That passage is a striking illustration of the way in which common law and equity were regarded as distinct a decade after the commencement of the Judicature legislation. It must however be treated with a little care. It pre-dated the recognition of damages for negligent misrepresentation, and is not authoritative for the precise way in which the indemnity is to be determined. Rather, the maximum limit of the indemnity is governed by the sum necessary to restore the injured party "so far as regards the rights and obligations which have been created by the contract into which he has been induced to enter": JAD International Pty Ltd v International Trucks Australia Ltd (1994) 50 FCR 378 at 392. But nothing turns on that point in the present case. Here, the primary judge required, on terms that the consumers undertook to return ownership of the moveable dwellings to Jonval, the appellants to repay the purchase price plus pre-judgment interest, plus an allowance of 85% of the cost of renovations and improvements. That would have been well within the principles governing the exercise of the discretion to order rescission in equity.
Of course, the orders made by the primary judge were pursuant to statute for conduct which was misleading, deceptive and unconscionable, rather than in equity for fraudulent misrepresentation. The primary task is to construe the relevant statutory provisions, rather than to draw an analogy with claims under the general law: Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388; [2004] HCA 3 at [44]. In many respects, statute is broader than equity, although in one respect, as will be seen below, it is narrower. But the broad discretion conferred by s 237 is informed by principles formulated in analogous situations in judge-made law. As McHugh, Gummow, Hayne and Callinan JJ said in Marks v GIO Australia Holdings Ltd at [24] and [116], the principles regulating the administration of the remedy of rescission afford guidance for, but do not dictate, the exercise of the statutory discretion. One of the decisions cited by Gummow J was the decision of the Full Court in Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274 at 288, where it was said that "in the exercise of the discretion in these matters given the court by s 87, the equitable principles concerning rescission give safe, if not necessarily exclusive, guidance".
Often there may be an analogy between misleading or deceptive conduct (which may be wholly innocent) and innocent misrepresentation. Where there is both misleading and deceptive conduct, and unconscionable conduct, then it may be easy to see an analogy with rescission in equity for fraudulent misrepresentation.
If the orders made by the primary judge were identical with or analogous to those which could have been made in equity for fraudulent misrepresentation, then that is powerful evidence that the orders were sustained by statute. In Munchies Management Pty Ltd v Belperio a Full Court of the Federal Court said at 288 that orders such as those in Alati v Kruger may "properly be considered as reducing the loss or damage suffered within the sense of s 87 of the Act". It was not submitted that that decision was clearly wrong, and with respect, it is clearly correct.
True it is that the Commissioner did not make out a case quantifying the actual loss incurred when the consumers obtained something materially different from what they had bargained for. But she did not need to do so. Her claim was not for damages. The fact that the written and oral submissions of junior counsel appearing for the Commissioner at trial referred to damages did not make it so.
True it is that in one respect at least, s 87 and its successors are narrower than equity. There is no need in equity for a loss to be identified before rescission and orders giving effect to restitutio in integrum are made. But I do not accept the appellants' submissions that a loss must be quantified before orders may be made.
First, it is clear that s 237 is available where there is no actual loss, but only likely loss. That tells against the appellants' submission. Indeed, the section authorises orders which will prevent or reduce the loss. Why then the need to quantify a loss which may never occur, in the same way as is necessary under s 236?
Secondly, the result is unlikely. If loss caused by the contravening conduct can be quantified, the plaintiff is entitled to damages in that amount as of right. Orders under s 237 are discretionary and plainly broader than those under s 236. Once again, that tells against the appellants' construction.
Thirdly, there is no textual basis for this supposed precondition. The appellants' reliance on the reference to "the" loss or damage in s 237(2)(a) and (b) is misplaced. That is a reference to the loss or damage in the previous subsection. However, s 237(1) requires only that a person have suffered, or be likely to suffer, loss or damage. It does not require the person to quantify what that loss or damage (or likely loss or damage) is.
Fourthly, Marks v GIO was a very different case. The borrowers entered into loan facilities on the basis that interest would be charged at a base rate plus a margin of 1.25% per annum. Contrary to the lender's representations, the lender was contractually able to vary the margin on 90 days' notice, and it did so. No borrower gave evidence that he or she would have entered into a different facility, or would not have borrowed at all, had they known that the lender had power to vary the margin rate on giving them 90 days' notice. All borrowers were free at any time to repay the facility, without penalty, before the varied margin applied. And the borrowers conceded at trial that "even with the increased margin, the [facility] was more beneficial to [them] than any other available loan facility": see GIO Australia Holdings Ltd v Marks (1996) 70 FCR 559 at 571.
It was in that context that neither damages under s 82 nor other orders under s 87 were made. In circumstances where there was no evidence that a borrower would not have borrowed funds at all, and there was no superior alternative, it was quite plain that there was no loss. The borrowers were misled, but they nonetheless entered into a superior contract than any other available to them, and it was not contended that they would not have borrowed any money at all. The joint judgment acknowledged that this category of case, where there was no demonstrable loss, would be "rare".
But that is far removed from the present case. Here not only were the moveable homes unsuitable for the consumers' intended purpose contrary to what had been represented to them. That by itself may not be enough to establish loss: Marks at [54]. But there was much more. The consumers also entered into occupation agreements and made payments and incurred obligations, and they separately incurred further actual and demonstrated expense in making improvements upon the Marina Villas. They were also in a practical sense "locked in", in the sense that substantial expense was necessarily involved in transporting the dwelling to another site or selling it and relocating to an area not subject to the 28 days condition of development consent. The first category amounts to actual loss or damage, while the second amounts at least to likely loss or damage. That is amply sufficient to satisfy the preconditions to s 237 and s 72(1).
There was evidence of the cost of the improvements. In the case of five of the consumers, the amount was less than $5,000, one had paid some $12,000, two had (jointly) paid some $15,000, two had (jointly) paid some $25,000 and two had (jointly) paid just less than $30,000, although that amount was affected by income received from subletting the villa. (No separate submissions were made concerning the subletting, which may therefore be passed over.)
By way of example, the improvements undertaken by one of the consumers were installing dark shade-cloth blinds costing $1818, installing heavy duty plastic blinds to protect against rain and wind costing $1000, installing CCTV security cameras costing $1200, building a retaining wall costing $500 and installing a clothes line costing $250. The blinds were purchased in February 2011. The retaining wall was built in about December 2013. The evidence does not disclose when the other improvements were built.
Another consumer undertook more substantial improvements, comprising landscaping, deck improvements, kitchen renovations, plumbing improvements, installing a television outlet and installing plantation shutters. The receipts for most of those were in evidence, totalling some $15,000 and all date from October, November or December 2010.
I do not think there is any substance to the complaint that the primary judge referred from time to time to "rent", rather than the occupation fee. That is how the consumers, understandably, described the weekly payments to the landowner, Hacienda. Although the consumers owned the moveable dwellings, they needed to pay the occupation fee in order to reside in them. I see no error in equating the benefit of occupation which the consumers enjoyed with the payments of agreed occupation fees which they made.
If the primary judge had acceded to the Commissioner's submission, and ordered compensation in the amount of the occupation fees paid by the consumers throughout their tenure, it is probable that there would have been appellable error. It will be recalled that Jordan CJ said that, as part of the process of adjustments, "[t]he purchaser must account for ... the value of the use of the property whilst he had it". If the consumers enjoyed occupation of the sites, and had the occupation fees returned to them, it is difficult to see how to that extent the orders would have satisfied the requirement that they compensate for loss, or prevent or reduce loss. There would, to the contrary, be a windfall gain.
No submission was made that the moveable dwellings had not been maintained over that period. The value today may well be roughly comparable to the purchase price. Even if that is not so, in the absence of evidence of a diminution in value, there is no error in making orders which amounted to the reconveyance of title to the moveable dwellings in exchange for the return of the amounts paid plus interest. True it is that if there were evidence of diminished or enhanced value, it would be open for the orders to incorporate an adjustment. But in the absence of such evidence, it cannot be said that the orders made disclose error.
Finally, I turn to the improvements. There was no challenge to the finding by the primary judge at [534] that "in large measure", the improvements were undertaken as a result of the misleading or deceptive conduct or unconscionable conduct and the belief, in the mind of each of the occupiers, that they were able lawfully to live, in retirement, in the Marina Villa and on the Marina Villa site. That is borne out by the timing of most of the improvements. The qualified finding reflected the fact that one of the consumers carried out some of the work after he had become aware of the conditions of his occupation. The primary judge determined to award compensation at 85% of the costs incurred for the following reasons:
"[T]here is some evidence that some of the alterations have been made even though the occupier or occupiers were aware of the legal position in relation to the sites or the risk of it. There is also a natural inference available that the improvements that were made increased the enjoyment of each of the occupiers of the premises.
It seems, given the lapse of time that has occurred since the purchase and these orders, the compensation that should be provided for the improvements that were made to the sites and/or the Villas, should be reduced to take account of the purchaser/occupier enjoyment of the better facility. Of course, if the villas are returned to one or other defendant, the defendants will have the benefit of those improvements in their business and in renting out these holiday sites. The reduction should be minimal and I assess that compensation should be awarded at 85% of the costs incurred."
Thus it may be seen that the primary judge was astute to identify costs incurred by reason of the misleading and deceptive conduct, and also to identify the benefit enjoyed by the consumers. Insofar as the majority of the improvements were caused by the contravening conduct, orders under s 237 authorised compensation for that loss. (Such losses would also have grounded an indemnity available in equity for fraudulent misrepresentation.) I see no error in reducing that cost by 15% to reflect the consumers' enjoyment of the improvements during the period, and while I am conscious that the cost to the consumers is quite distinct from the benefit (likely minimal) to be enjoyed by the appellants upon reconveyance, I think it was open to the primary judge to have regard to that benefit. That is consistent with the broad remedial power conferred by s 237 to craft an appropriate remedy. Sir Donald Nicholls VC, speaking for the Court of Appeal of the position in equity, said of this point that if the plaintiff has improved the property he seeks to return, the plaintiff will not necessarily be entitled to a further payment from the defendant because "it may not be just to require the defendant to pay for improvements he does not want": Cheese v Thomas [1994] 1 WLR 129 at 137G. While there is some controversy concerning the approaches taken in Sibley v Grosvenor and Brown v Smitt, there is no reason to conclude that s 237 precludes regard from being had to such benefit as may be enjoyed by a defendant to whom property which has been improved is restored, and it was open to the primary judge to have regard to that consideration in the facts of this case.
No doubt there were other approaches which could have been adopted, and no doubt there was a measure of informed estimation in selecting 85%. But difficulties in estimating damages do not relieve a court from the responsibility of estimating them as best it can, as Hayne J said by reference to authority in Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; 77 ALJR 768 at [38], and no more stringent approach should be taken to orders under s 237.
For those reasons, orders in the nature of rescission and ancillary orders directed to adjustments to restore the status quo fell comfortably within the requirement of s 237(2).
These grounds are not made out.
I do not accept either way of advancing these grounds. Dealing first with the written submissions, the pleaded case against Mr Willmott was based on what Mr Willmott knew, and what he permitted to occur, especially the sales agreements executed by some of the consumers. Mr Willmott personally signed some sales agreements and most of the occupation agreements. It should be noted that Mr Willmott was not called as a witness (nor did the appellants call any other witness), and so inferences pursuant to Jones v Dunkel were more readily available.
The primary judge found that Mr Willmott was the controlling mind of each of Jonval and Hacienda. He was a director and 50% shareholder, and while the appellants complained that it was not pleaded that Mr Willmott was the sole controlling mind, they did not contend that the inference that he was, which the primary judge drew, was not available on the evidence. Mr Willmott was evidently personally involved in some of the contraventions (insofar as he executed the contracts) and there was a sound basis for the inference that where he was not involved personally, he knew of and endorsed the conduct of his companies' employees. No error has been established in the conclusion drawn by the primary judge that Mr Willmott was personally engaged in conduct which was unconscionable.
Dealing with the way these grounds were developed orally, it is now clear that "moral obloquy" is not a necessary component of a conclusion of statutory unconscionability: PT Ltd v Spuds Surf Chatswood Pty Ltd [2013] NSWCA 446 at [102]-][105]; Ipstar Australia Pty Ltd v APS Satellite Pty Ltd [2018] NSWCA 15; 356 ALR 440 at [195]; Park v Murray Irrigation Ltd [2018] NSWCA 166 at [138]-[139]; Australian Competition and Consumer Commission v Medibank Private Ltd (2018) 267 FCR 544; [2018] FCAFC 235 at [240]-[243] and see Australian Securities and Investments Commission v Kobelt [2019] HCA 18; 93 ALJR 743 at [91]; cf Jams 2 Pty Ltd v Stubbings [2020] VSCA 200 at [91]. But that may be put to one side. I think it was well open to the primary judge to find that conduct in permitting people to purchase moveable dwellings on the basis that they would be their home, often for their retirement, contrary to the written terms of the occupation licence and contrary to the development consent, was unconscionable. The prices were modest, the people were far from youthful, and the conduct involved selling something which was known to be unlawful. The amounts were relatively small, bearing in mind they were for the purchase of a home, but there was evidence indicating that they were the most substantial asset owned by some of the consumers. There is no reason to doubt that the vendor knew that the sales it achieved were brought about by the downplaying of the conditions of the occupation agreements and not advising of the conditions of planning approval. The fact that, as it happens, the consumers have received uninterrupted possession and occupation of the moveable dwellings for around a decade, does not deny the conduct being regarded as unconscionable, especially in light of the unchallenged findings of distress that the consumers' insecurity of tenure caused, and the fact that the consumers have now been involved in litigation for some five years.
The trial judge gave a very long judgment. Even so, as Lord Hoffmann observed in Biogen Inc v Medeva plc [1997] RPC 1 at 45; [1996] UKHL 18, and as Lords Neuberger and Mance reiterated in Chen v Ng (British Virgin Islands) [2017] UKPC 27 at [56], the reasons are an inherently incomplete statement of the impression made upon his Honour by the primary evidence. Especially in a case such as the present, the extent of the distress and uncertainty suffered by the consumers over many years, during which many had hoped to enjoy their retirements, is apt to be only imperfectly captured by the reasons. Not lightly would I interfere with the conclusion that the conduct was unconscionable.
Although it is necessary to identify the actual or likely loss or damage caused by contravening conduct before making orders under s 72 or s 237, it is not necessary to quantify that loss or damage: at [1], [2], [39], [46].
The precondition of identifying actual or likely loss or damage was satisfied. The fact that the consumers purchased homes unsuitable for their intended purpose contrary to what had been represented to them, incurred obligations under the occupation agreements, and incurred expense in making improvements to the villas amounted to actual loss or damage. The fact that they were practically locked in to their purchases due to the substantial expense of selling or transporting the villas amounted at least to likely loss or damage: at [1], [2], [49].
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69 distinguished.
As to issue (ii):
In form and in substance, the Commissioner was seeking orders pursuant to statute in the nature of rescission for return of the amounts paid by the consumers, with adjustments having regard to the outgoings they incurred and the benefits they received: at [1], [2], [26], [50].
The orders made by the primary judge in the nature of rescission and ancillary orders directed to adjustments to restore the status quo fell within s 72 and s 237. There was no error in equating the consumers' benefit of occupation of the sites on which the villas stood with the payments of agreed occupation fees they made. Nor was there error in awarding compensation at 85% of the costs of improvements incurred by the consumers, in circumstances where they had made improvements largely as a result of the contravening conduct, but had enjoyed the improvements during their period of occupation: at [1], [2], [58]-[64].
Cheese v Thomas [1994] 1 WLR 129; Sibley v Grosvenor (1916) 21 CLR 469; [1916] HCA 14; Brown v Smitt (1924) 34 CLR 160; [1924] HCA 11; and Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; 77 ALJR 768 referred to.
Although the primary task is to construe the statute, the discretion conferred by s 72 and s 237 is informed by principles of judge-made law. The orders made by the primary judge would have fallen within the principles governing the exercise of the discretion to order rescission in equity, and this was powerful evidence that the orders were sustained by the statute: at [1], [2], [34]-[37].
Alati v Kruger (1955) 94 CLR 216; [1955] HCA 64; Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388; [2004] HCA 3; Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69; and Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274 referred to.
As to issue (iii):
No error had been established in the primary judge's conclusion that the director was the controlling mind of Jonval and Hacienda. The director had personally executed certain contracts and there was a sound basis for the inference that where he was not involved personally, he knew of and endorsed the conduct of his companies' employees: at [1], [2], [71].
It was open to the primary judge to find that the director's conduct was unconscionable in circumstances where he permitted people to purchase moveable dwellings on the basis that they would be their permanent home, contrary to the written terms of the occupation agreements and the development consent, especially in light of the findings of distress that the consumers' insecurity of tenure caused: at [1], [2], [72]-[73].