Lonergan v JQZ Eleven Pty Ltd

Background facts

1. I will begin my consideration of the evidence by stating my conclusions concerning the creditworthiness of the evidence given by the witnesses.

Mr Lonergan

1. It was evident from the evidence given by Mr Lonergan that he gave the greater attention to the events that led to the Lonergans entering into the contract than did Ms Lonergan. They both participated in those events and discussed and agreed the course that they would take, but Mr Lonergan appears to have focused more on the detail of the transaction than did his wife.
2. I found Mr Lonergan to be an entirely satisfactory witness, whose evidence on the material issues I have been able to accept with confidence. I will explain below why I reject the submission made by JQZ that Mr Lonergan was an unsatisfactory witness. Mr Lonergan gave direct and immediate answers to all the questions that were asked of him in cross-examination. Wherever he could answer a question in the simple affirmative he did so. Mr Lonergan appeared to me to answer questions without regard to the consequences to his case. In particular, as will be seen, he readily admitted that he had read terms in the draft contract upon which JQZ seeks to rely in its defence. Furthermore, it was my impression that Mr Lonergan's answers were generally appropriate to the questions. I accept Mr Lonergan as a witness of truth. The transaction was a very important one for the Lonergans, and I accept that Mr Lonergan paid attention to detail, at least to the extent that was possible given the relatively incomplete nature of the plans for the Prime Development. I have not hesitated to accept Mr Lonergan's evidence on points of detail, because the subject matter was generally important to the Lonergans and was of a nature likely to be retained in memory.
3. JQZ's first submission as to why Mr Lonergan was not a satisfactory witness rested on his evidence that, in an application for finance for the purchase of the Unit that he made on 30 October 2019, he did not disclose as a liability a debt of $140,000 that he owed to Bendigo and Adelaide Bank. JQZ submitted that Mr Lonergan initially denied the non-disclosure and then attempted to explain that it was disclosed by the repayments being part of the monthly groceries expense, which JQZ said was an incredible explanation. The circumstances in which the $140,000 debt arose were not explored in any detail in the evidence. Mr Lonergan appeared to be surprised by the questions directed at the existence of the debt and did not appear to have time to have fully recalled those circumstances. Mr Lonergan said that the debt arose as a result of a judgment in some unidentified class action suit (T 114.3). He said that an order had been made that the debt be paid by instalments of $1,570 per month (T 113.30). He said that he would not intentionally have misled the lender to whom the credit application was made (T 114.31), and that he believed the monthly repayment of the judgment debt was disclosed in the monthly expenses of $5,735 (T 113.34). There is some force in JQZ's submission that Mr Lonergan's evidence appeared to be questionable on this issue but, given the absence of detail, I am not prepared to accept that this incident demonstrates that Mr Lonergan is a generally untruthful person. If in some way the judgment debt arose out of a class action, it may have concerned some investment made by Mr Lonergan with other persons in the same class. I am not prepared to disbelieve Mr Lonergan's explanation, which I take to be that he treated the liability as a monthly expense.
4. Next, JQZ submitted that Mr Lonergan had falsely stated that he had a loan approval from Pepper Finance to cover the liability to Bendigo and Adelaide Bank as well as to finance the completion of the contract. JQZ made this submission by reference to Exhibit D1, which was a Final Approval dated 2 August 2017 by Pepper Group Ltd trading as Pepper Money for a loan of $363,069.13 secured on a property at Ermington owned by Mr Lonergan. On Mr Lonergan's evidence, that borrowing was made to pay out an earlier mortgage and to obtain funds to pay the balance of the deposit under the contract. Mr Lonergan's evidence was (T 111.26): "… So, when you take out a bank loan, they don't only just give you the deposit, they look after the whole scenario at the end of settlement. So, we had approval from Pepper Money and this was a - this was to try and get a lower value rate - interest rate" (referring to applications for finance that the Lonergans had made to alternative lenders). JQZ also relied upon the following part of the cross-examination of Mr Lonergan (T 116.14-22): Q. By the time of the inspection of 7 November, Mr Lonergan, you had no finance approved, did you? A. We had the original Pepper loan approval, which was based on the whole scenario, so Shore Financial had started discussions with banks to get a lower interest rate. Q. Did the Pepper loan approval cover the repayment of the Bendigo and Adelaide Bank loan? A. Yes.
5. JQZ's submission was technically correct insofar as the Lonergans appeared not to have had a final binding loan approval for the amount necessary to complete the contract. The only loan approval that was in evidence covered the balance of the deposit. However, it appears from Mr Lonergan's evidence that it was his position that he had discussed the matter with Pepper Money and that he had been given to understand that, having made an advance that included funds necessary to pay the deposit under the contract, it had already considered the Lonergans' financial position and it had indicated in some way a preparedness to provide the balance of the finance. Mr Lonergan's position was that all the evidence that was tendered concerned unsuccessful applications for finance that had been made through a mortgage broker to lenders who were likely to require a lower interest rate than would Pepper Money. I am not satisfied that JQZ has adequately demonstrated that Mr Lonergan knowingly gave false evidence to the Court. The evidence did not establish what the true arrangement was between the Lonergans and Pepper Money. There is some plausibility in Mr Lonergan's assertion that Pepper Money would not have advanced the deposit money without satisfying itself that the Lonergans were a good credit risk for a loan for the balance of the price. I reject JQZ's attempt to persuade the Court that an apparently honest witness has given dishonest evidence based upon imprecise inferences asserted by JQZ about the Lonergans' relationship with Pepper Money.
6. Thirdly, JQZ submitted that the Court should find Mr Lonergan was an unsatisfactory witness because (a) he said that he would not have contributed to the purchase if Ms Lonergan had gone through with the contract to purchase the two-bedroom unit (which I will explain below) alone, which JQZ submitted was obviously necessary, and (b) Ms Lonergan gave contrary evidence. Mr Lonergan did say that he was not "going to contribute to the purchase" (T 31.29). Ms Lonergan accepted that Mr Lonergan was going to contribute to the purchase price, although she said that she was not sure that the two-bedroom unit would be an investment for both the Lonergans, even though it was going to be in her name (T 157.11-157.17). So far as the cross-examination of the Lonergans was concerned, the issue was left there. The difficulty the Court has in accepting JQZ's submission is that the issue was not explored in sufficient detail to justify a finding that Mr Lonergan's evidence was untruthful. Ms Lonergan in fact signed the first contract for the purchase of a two-bedroom unit in her own name for a price of $1,190,000, which required the payment of a deposit of $119,000. The two-bedroom unit, if purchased, would have been an investment property, and there is no evidence as to whether the rent from the leasing of the property would have covered the holding costs of the mortgage. Ms Lonergan apparently had some funds to apply towards payment of the deposit, but when the Lonergans decided to buy the Unit, which required payment of a deposit of $158,000, they had to make other arrangements, including obtaining the agreement of JQZ to defer the payment of part of the deposit, and it became necessary for Mr Lonergan to join Ms Lonergan as a purchaser. The evidence is insufficient to enable the Court to determine what the real position was, and whether Mr Lonergan could not honestly say that he understood that he would not be contributing to the price of the two-bedroom unit.
7. JQZ's fourth submission was that Mr Lonergan persisted in giving instructions to Hunt & Hunt to send letters stating that Mr Zhu had said that the Lonergans could have a bath in the Unit, when JQZ had in fact rejected a formal application that a term to that effect be inserted in the contract. It is true that the Lonergans asserted, after the date of their inspection of the completed Unit, that they had been told by Mr Zhu that they could have a bath in the main bathroom. Mr Lonergan explained the error by saying that, when the claim was made on their behalf, they had not revisited the correspondence between the solicitors before the date of the contract. Mr Miller, their solicitor, who wrote the later letters making the complaint, had obviously also forgotten that he had made a request that the inclusion of a bath be inserted in the contract but that the request had been rejected by JQZ. This represents a trivial error in recollection by both Mr Lonergan and Mr Miller and does not bespeak dishonesty on Mr Lonergan's part.
8. JQZ's final submission as to why the Court should find that Mr Lonergan was an unsatisfactory witness was based upon the fact that Mr Lonergan denied in cross-examination that he had decided not to complete the contract by 7 January 2020, when he had in fact written to his mortgage broker to that effect on 3 January 2020. I do not accept that this relatively trivial error in recollection as to dates justifies a finding that Mr Lonergan was not an honest witness.

Ms Lonergan

1. I also found Ms Lonergan to be a creditworthy witness. I am satisfied that Ms Lonergan answered questions put to her in cross-examination truthfully and to the best of her ability. Ms Lonergan did not have quite the same grasp of the detail of events as did her husband, but I am satisfied that was because she left it to Mr Lonergan to attend for both of them to some of the details of the transaction, so that, for example, she did not read the contract, the floor plans provided to her by Mr Zhu, or the draft strata plan annexed to the contract. I have no hesitation in accepting the evidence given by Ms Lonergan.

Mr Zhu

1. I accept that the evidence given by JQZ's agent, Mr Li Zhu, was given conscientiously and to the best of his ability. I accept Mr Zhu as an honest witness. However, the credibility of the evidence given by Mr Zhu must be assessed having regard to the fact that his role was to procure purchasers for the units in the two stages of the Prime Development that were the subject of the retainer of CBRE, his employer. It was Mr Zhu's role to converse with a substantial number of potential purchasers who attended the display suite during the marketing program. This was not a case where the agent dealt with a relatively small number of potential purchasers in respect of a single property over a significant marketing period. There were two open days, and there was evidence that on each day a substantial number of potential purchasers attended, so that queues formed, and potential purchasers had to wait for some time until a representative of CBRE became available to speak to them. Consequently, Mr Zhu must have spoken with a significant number of potential purchasers on each occasion. He would have been required to cover substantially the same subject matter with a significant number of interested parties. There is no reason to think that anything discussed with the Lonergans would have stood out in Mr Zhu's memory. The evidence does not disclose when Mr Zhu was first required to recall his interactions with the Lonergans. However, his affidavit was made on 19 October 2021, about five years after the relevant events occurred. Mr Zhu could not be expected to have actually recalled his interaction with the Lonergans in reliable detail.
2. I am satisfied that, where Mr Zhu has given evidence of the detail of his interactions with the Lonergans, he has been required to reconstruct that recollection, and his evidence has been influenced by his attempt to recall what he would have done in the circumstances based upon his general recollection of his ordinary practices. That does not reflect dishonesty on Mr Zhu's part, but is a reflection of the process he was required to engage in to respond to the evidence given by the Lonergans.
3. Where the evidence of the Lonergans departs from the evidence given by Mr Zhu on the central issues of fact, I have preferred the evidence given by the Lonergans.

The remaining witnesses

1. The remaining witnesses for JQZ, Ms Yi Zhou, who was its development executive, Mr Justin Wu, who was its program manager, and Mr Roger Mattar, its solicitor, gave relatively uncontroversial background evidence.

The Lonergans' circumstances

1. Mr and Ms Lonergan were about 46 and 41 years of age respectively at the date of the contract. They had three children who were then about 15, 11 and 3 years of age.
2. Mr Lonergan completed his Higher School Certificate in 1988. He obtained a Trade Certificate in Fire Systems from NSW TAFE in 1992, a Certificate IV in Fire Technology from the Sydney Institute in 2002, and a Graduate Certificate in Fire Safety Engineering from the University of Western Sydney in 2012. At the time of the contract, Mr Lonergan was employed as a Services Infrastructure Manager by Sydney Airports Corporation. He was made redundant on 30 September 2020 and was self-employed at the time of the hearing.
3. Ms Lonergan completed her Higher School Certificate in Perth in 1992. She obtained a Diploma in Hotel Management from a Community College in Arizona, USA, in 1995.
4. At the time the contract was entered into, the Lonergans were living in a rental apartment in Chatswood with their three children.
5. Mr Lonergan was the owner of a house at Ermington, which he had acquired from his mother for a price of $200,000, which he had borrowed by a mortgage secured on the property. Mr Lonergan's aged mother lived at the Ermington property. Both the Lonergans sometimes stayed at the property to look after Mr Lonergan's mother.
6. The Lonergans had not previously bought a property 'off the plan'. The Lonergans initially planned to acquire an investment unit. By searching on the Internet, the Lonergans discovered the proposal by JQZ to construct the Prime Development. This was an attractive proposition to the Lonergans because it adjoined the Macquarie Centre, which was a large shopping mall with a lot of shops, restaurants and other amenities including a cinema complex. It also had a railway station on the Epping-Chatswood railway line.
7. The Lonergans decided that they would look at the Prime display centre. Ms Lonergan registered their interest in the Prime Development and received an invitation by email for a "VIP" event from CBRE on 4 October 2016. The invitation to the launch of the display centre included a requirement that a "$5,000 Expression of Interest (EOI) amount" be paid to secure an appointment at the launch, which was to be refundable if a decision was made not to make a purchase.

First visit to the display suite

1. The opening of the display centre was held on 23 October 2016, which was a Sunday. When the Lonergans arrived, there was a long queue outside. After some delay they were introduced to Mr Zhu, a CBRE sales consultant, who used the first name Roger.
2. The display suite for the Prime Development included:

• floor plans for each of the floors in the then proposed Stage 1 of the Prime Development, which was to be two buildings, and included Tower A in which the Unit was eventually built;
• a fully built sample bedroom;
• a fully built sample kitchen and dining area;
• a fully built sample bathroom;
• a fully built sample living room; and
• a scale model of the Prime Development, together covering an area about as big as a dining table and about 50 cm high.

1. The Lonergans did not specifically say so in their evidence, but it is an obvious inference from their evidence and the lack of contradiction in the evidence given by JQZ that the fully built sample living room did not have a large structural column in it.
2. Towards the end of the tour of the display suite, the Lonergans discussed the purchase of unit 11505, which had two bedrooms plus a study. They then had a conversation with Mr Zhu, in which he explained that they would have to put down a $5,000 'expression of interest' deposit that day. The Lonergans agreed and Ms Lonergan paid the $5,000 using her credit card.
3. After 23 October 2016, the Lonergans discussed the possibility that the two-bedroom plus study unit might be too small for their purposes. They discussed whether it would be preferable for them to buy a three-bedroom unit. Mr Lonergan's Ermington property required rebuilding and the construction of a granny flat. The Lonergans and their children would be able to live in a three-bedroom unit as their home while the Ermington property was reconstructed. In the longer term, a three-bedroom unit in the Prime Development might be an alternative and preferable home for the Lonergans, particularly after their children left home.

Second visit to the display suite

1. The second meeting with Mr Zhu happened on 30 October 2016, when the Lonergans went back to the display centre at about 10:00 or 11:00 AM to have a look at the floor plan of apartment 11505. They looked through the Stage 1 lot plans on the wall and the unit model again and had a discussion with Mr Zhu about unit sizes. In his first affidavit, Mr Lonergan said in par 18 that Mr Zhu said: "The 3 bedrooms are a fair bit larger than the 2 bedrooms with study. And some of them have the black privacy screens on the balcony at no extra cost."
2. Ms Lonergan said in par 15 of her first affidavit that a conversation to the following effect occurred: David: We are discussing with each other if a 2 bedroom plus study will be big enough. Mr Zhu: Why don't you go for a 3 bedroom? There are still some available. Some of them have the black privacy screens on the balconies. Me: Is there a cost for the black privacy screens? Mr Zhu: No, there is no cost for the black screens.
3. Although some potential purchasers might have been indifferent as to whether the unit that they selected had black privacy screens, it was a feature of particular interest to the Lonergans.
4. In the following and later paragraphs I will set out extracts from the evidence given by witnesses in cross-examination. For the sake of brevity and clarity I will sometimes abbreviate the evidence as set out in the transcript.
5. Ms Lonergan's evidence on the subject in cross-examination was (T 152.21-153.16): Q. In there you say that you suffer from rosacea and need to stay out of the sun as much as possible. Do you see that? A. Correct. Q. When you say you need to stay out of the sun, does that mean the sun in the middle of the day? A. Well, any of the sun in any time. Q. But it's true, isn't it, that the sun during the middle of the day is much stronger. Is that more of a problem than in the afternoon or the morning? A. Not always. Q. Is the problem that's caused by the sun is that it creates a rash? Is that right? A. Hives. Rash and hives as well because I have rosacea and urticaria, which is all hives everywhere and all over my body. Q. It's the place on your body that feels the sun that that there's the problem. Is that right? A. I don't understand. Q. If you get sunlight on your face, that's where the skin problem is. Is that right? A. Which ever part of my body exposed to the sun it will affect. Say for example, if I'm on summer I'm going to the beach with the kids, I come back with all hives everywhere. Q. But wherever the sun hits. Is that right? A. Yes, that's right. Q. So you do go to the beach with the kids, do you. A. Not that often. I would love to, but yeah not that often. Q. Is it right that it's the sun in the middle of the day that's more of a problem than in the evening or the morning? A. Sometimes in the evening can be really sunny as well and depends on the way that - at the moment Sydney where you can't predict. Q. Do you have creams that you can put on your face do you if-- A. Yes. If I come back, for example, if I come back with the rashes all over the body and stuff like that so I straightaway took the medication and then after I put some ointment as well, which is called Rozex for the rosacea and some cream that's prescribed by the doctor and then maybe about seven days it will reduce. And then normally I isolate myself because this look really, really not pretty. Even my little ones say, "You just look ugly Mum." You know, so, like rest everywhere. So, hives.

The Floor Plan

1. The floor plan of the three-bedroom units that Mr Zhu gave to the Lonergans (the Floor Plan) became Exhibit P1. The evidence was that some of the writing on the Floor Plan was made by Mr Zhu on 30 October 2016, and other writing was placed on the document at a later meeting with Mr Zhu on 6 November 2016, that I will come to shortly. The relevant features of the Floor Plan were, in relation to its state as of 30 October 2016:

• There was no structural column depicted in the living room.
• No structural columns were depicted on the balcony.
• Some of the external and internal walls of the unit were depicted by thick black lines suggesting solidity and other walls were depicted by means of lines on a white background.
• The site of the proposed air-conditioning unit was not depicted.
• The writing made by Mr Zhu "*11803: $1.518-1.548M" was shown, as well as other writing that the Lonergans said was made on the Floor Plan by Mr Zhu that does not require a detailed description.
• On the right-hand side of the Floor Plan was a panel that stated: "LEVEL 5 - 21" underneath a small drawing in outline of the four proposed towers, that was apparently intended to show that the Floor Plan had relevance to all of the three-bedroom units that would have the same layout on all of those levels.
• The panel also contained a statement that the internal area would be 97 m², the external area 23 m², and the total area 120 m².
• At the top of the panel under the word "APARTMENT" was a list of 16 unit numbers, which were evidently the numbers of the units on the various floors that would have a three-bedroom apartment with the layout depicted in the Floor Plan. The units identified included the Unit, being 11803.
• Under the list of three-bedroom units were the numbers: "6/9/12/15/18" in Mr Zhu's handwriting.

1. At this stage of the development project, each of the proposed units was identified by a five-digit number, in which the second and third digits identified the proposed level on which the unit would be situated. Accordingly, unit 10603 would be on the sixth level and unit 11803, the Unit, would be on the 18th level.
2. If a reader of the Floor Plan were looking for the information, a close reading of the list of three-bedroom units with the same layout as depicted in the Floor Plan would show that there was apparently no unit with that layout on Level 14. I will return to the significance of this fact below.

The Purchaser Checklist

1. After the meeting on 30 October 2016, Mr Zhu sent a document called "Purchaser Checklist" to Ms Lonergan on 31 October 2016. The Lonergans completed the checklist and emailed it back to Mr Zhu on 1 November 2016. The Purchaser Checklist showed both the Lonergans as the proposed purchasers and ticked the three-bedroom option. The Lonergans indicated six three-bedroom units in order of preference as follows: 10903, 11803, 11203, 11503, 10803 and 11003. The first four of those preferences were on levels that had been stated by Mr Zhu, according to the Lonergans' evidence, as being levels where the three-bedroom unit would have the black privacy screens. The Unit was given as the second reference, although, as explained by the Lonergans in their evidence, they ultimately decided that the unit on Level 9 would be too close to the shopping levels.

The Schedule of Finishes

1. Mr Zhu also gave the Lonergans a document called "Schedule of Finishes". Under the headings "ITEM" and "DESCRIPTION", in respect of the units generally and identified parts of the units, the document specified finishes; for example, for the "Floor covering" in the "Kitchen" it specified "Tiles". JQZ raised in cross-examination with Mr Lonergan the fact that the Schedule of Finishes did not specify black privacy screens on the balcony of the Unit. However, it appears that the document was a generic schedule for all the units, not just those on every third level.
2. One of the items was "Air conditioning system" and the description was "Ducted system air conditioning". I will return to this aspect of the Schedule of Finishes when I consider below whether the Lonergans have established that they were misled or deceived in relation to the location of the air-conditioning unit.
3. The Schedule of Finishes contained four lines of writing at the bottom of the first page in font that was about 1 mm high for lower case letters. The writing was (Schedule of Finishes Disclaimer): The inclusions and finishes above are indicative, subject to final design, provided for marketing purposes only. The vendor may change or remove finishes or inclusions at its discretion. The vendor makes no representation or warranties as to the accuracy, currency or completeness of the inclusions and finishes listed and prospective purchasers must satisfy themselves as to the accuracy, reliability, currency or completeness of the information provided herein and where necessary seek independent advice.
4. It may be unexceptionable for JQZ to have disclaimed the accuracy, currency, or completeness of the information in the Schedule of Finishes, but this begs the question: what was the potential purchaser to make of the requirement that they satisfy themselves and, where necessary, seek independent advice, given that the state of the design of the Prime Development at that time made that exercise impossible?

The sample contract

1. On 2 November 2016, Mr Zhu emailed to Ms Lonergan a sample contract for sale. Ms Lonergan said that she did not read the contract (T 145.38). Mr Lonergan accepted that he read some parts of the sample contract "as a normal person", by which he meant not as "a lawyer" (T 50.21). Mr Lonergan was taken to a number of terms of the contract which he had read in draft. Mr Lonergan said that he did not read every page of the sample contract, but only "the main parts of the contract" (T 52.2).
2. Mr Lonergan accepted (T 53.17) that he read the schedule of finishes as annexed to the sample contract. He satisfied himself that the schedule was the same as the Schedule of Finishes that he had been given by Mr Zhu. Mr Lonergan responded to the suggestion that the schedule of finishes did not say anything about the installation of black privacy screens on the balcony by agreeing (T 53.31) but saying that he could not remember noticing that there was no reference to the black privacy screens. He explained (T 53.37): "… Because it wasn't applicable to every apartment, so why would it be in a schedule of finishes?"
3. Mr Lonergan agreed (T 56.23) that he recalled that there was a clause saying that the vendor would use reasonable endeavours to obtain the development consent. Mr Lonergan said (T 56.42) that he could not remember reading clause 34.3(a)(iii) to the effect that the drawings and plans were not final and were for marketing and illustrative purposes, but said, "it is in my knowledge that that does - sometimes that does occur." Mr Lonergan also accepted (T 57.7) that he understood that there was a clause in the contract that said "that draft documents and concept and drawing plans in connection with the development site are not final and are for marketing and illustrative purposes only."
4. Mr Lonergan accepted (T 57.9-33) that he read clause 35, and in particular 35.1(b) and 35.1(d). He also read additional clause 37.5 (T 57.36). Mr Lonergan said that he did not understand the recission clause in additional clause 40 (T 58.21).
5. Mr Lonergan gave the following evidence of his understanding of the effect of additional clause 43 in the sample contract (T 58.26-59.5 and T 60.15-61.20): Q. Do you recall reading clause 43.1? A. 43.1? Q. Yes. A. Yes. Q. Did you read 43.1(c), when you got this contract around, the draft contract, around 2 November 2016? A. Yes. Q. You understood didn't you, from reading that, that if you signed the contract, you were agreeing that you had not been induced to enter into the contract or relied on anything that Mr [Zhu] had said to you? You understood that, didn't you? A. No, I didn't understand that at the time. Q. Let's be clear about the time. At the time that you read this yourself around 2 November. Is that what you're saying? A. Well, I was told and promised these things by the sales agent, which was part of the reason for my signing this contract. Q. Mr Lonergan, but what I'm suggesting to you that when you read this clause 43.1(c) in the draft contract around 2 November you understood that if you signed the contract, you would be acknowledging that you didn't rely on anything that he said. That's right, isn't it? A. That would be correct. Q. And you understood that at the time you read this on 2 November. Is that right? A. No, I didn't understand that at that time, being a normal person. … Q. I'm sorry, Mr Lonergan, let me just come back to this clause. I was asking you about clause 43.1(c). A. Yes. Q. I just want to ask you first about 43.1(b). Do you recall reading that clause? A. Yes. Q. You understood by reading it, didn't you, is that if you signed the contract you would be acknowledging that you were entering into the contract as a result of your own enquiries. That's right. A. Yes. When I read it, I didn't think it was applicable because it's a standard contract because how - how can you go make your own enquiries with an off the plan and inspections. Q. There are some things that you can make enquiries on off the plan, aren't there. You can find out if there's a development consent. A. Maybe. Q. You can ask for all the floor plans of the building, can't you. A. But that's actually talking about own - own inspections. Inspections of what? Q. I'm not talking about inspections. My question was directed at enquiries. A. Yeah, okay. Q. You could make enquiries for a copy of all of the floor plans of the proposed building, couldn't you. A. Yes, you could. Q. That's something you in fact did. A. Yes. Q. You did understand, didn't you, that it was possible to make enquiries for an off the plan purchase. A. It'd have to be through the sales agent, I would imagine. Q. Mr Lonergan, I just asked you a question about 43.1(c) and you said you didn't understand it to mean that you couldn't rely on what Mr Zhou had told you. Is that your evidence? A. Yes. Well, why - why would you buy a car then if you were having to go to a - a salesperson. So, it's exactly the same. Q. Mr Lonergan, you understood, didn't you, that this contract was to contain the whole of the agreement between the parties if it was signed. A. This was our first off the plan - plan purchase, so we were unsure on how it went. Q. What did you think clause 43.1(c) was referring to? A. Well, that was up to my lawyer to go through and advise me, so like I said, we're just normal person going through - trying to go through a - a large contract. Q. That was something that you would expect your lawyer to advise you about. A. Yes.

The floor plans for each level

1. On 3 November 2016, Mr Zhu sent an email to Ms Lonergan attaching floor plans for every level in Tower A. Mr Lonergan was cross-examined about the significance he attributed to the floor plans. Asked whether he looked through all the floor plans, Mr Lonergan replied (T 62.31): "We just narrowed it down to ones that we were interested in, being two plus study and three bedroom." Mr Lonergan was cross-examined on the subject that none of the floor plans apparently depicted structural columns in the following terms (T 62.34-41, 64.24-25, 64.32-33, and 64.43-47): Q. Do you recall noticing that there were no columns depicted on any of the floorplans? A. They were very open plan. Yes. Q. Are you agree with my suggestion to you that of the floorplans you saw, none of them showed any columns? A. No. They didn't show any columns but some did show services, risers for services. … Q. Mr Lonergan, you knew, didn't you, that these units were going to be in a building that was more than 20 storeys high, didn't you? … A. Well, mine was on level 18, so, yes, you would assume that's going to be more than 20. … Q. You expected, didn't you, in order to build a building that high, that it would be necessary to provide - sorry, to construct structural columns that went through every floor of the building? That's right; isn't it? A. Like I just said to you, I said, you don't actually need structural columns. You can use the walls as the structural support. So that is incorrect.
2. Mr Lonergan was also cross-examined on the issue of whether he learned from an examination of the floor plans that there was apparently no Level 14. Ms Lonergan gave evidence (T 147.33) that she was not aware of the Chinese custom that levels in buildings containing the number 4 were unlucky. Mr Lonergan's evidence on the same subject in cross-examination was (T 71.3-71.44). Q. In your role as a building services engineer, by 2016 had you worked with any Chinese developers? A. Throughout my career I have, yes. Q. You knew, didn't you, that the people behind the developer for the project at Macquarie Park were Chinese people. A. Yes. Q. And the units were being marketed to Chinese people. A. Yes. Q. Were you familiar with the number four being an unlucky number for Chinese people? A. Yes. Q. And you were familiar with that in 2016. A. Yes. Q. Were you also familiar with the practice of Chinese developers of having level numbers which had a four in them? A. Not always. Q. Well you say "not always", but you were familiar, weren't you, with the practice of it? A. I wasn't that au fait with it, no. Q. You'd heard of it, yes? A. I had heard of it. Q. And you understood, didn't you, that when that practice was being implemented it meant that there was no level 4 in the building? A. I would assume so, yes. Q. And no level 14? A. I would assume, yes. Q. And no level 24? A. That I'd be unclear about. I'm not - not sure about that. Q. And had you had any personal experience with this happening in the developments you'd worked on by 2016? A. No.

The preliminary strata plan

1. Mr Lonergan was also cross-examined about the content of the preliminary strata plan that was annexed to the sample contract. The plan for the Unit disclosed that the Unit was on "LEVEL 16". That is, apparently, because it was required that for the strata plan to be registered it would need to have levels that were consecutively numbered without omissions. As JQZ had elected not to give any level the numbers 4 or 14, the numbers of the levels in the strata plan would not match the levels as they would be called in Tower A.
2. Mr Lonergan said (T 73.44) that he was "unsure as to what apartment was going to be on what level". He added (T 74.48) that he "relied on what the agent told [him] to clarify that matter". The cross-examination of Mr Lonergan proceeded as follows (T 72.23-73.2): Q. Now, Mr Lonergan, looking at the floorplan for two bed plus study on page 161 of the Court book, you can see, can't you, that there are unit numbers there for every level between levels 5 and level 21, except level 14; that's right, isn't it? A. Yes, I can see that here. Yes. Q. Did you notice that at the time that you looked at this floorplan back in November 2016? A. I didn't notice; I didn't pay that much attention to those numbers then because the strata plan had the - those levels in it. Had all the levels. Q. I'm sorry, I don't quite understand your response about the strata plan. What did the strata plan have that caused you not to notice the numbers here? A. Well the strata plan was listed one through - so it was listed from basement all the way through to all the levels. Q. So did you understand that because the strata plan had consecutive numbers including four and 14 that you expected there would be levels 4 and 14 in the building. Is that what you're saying? A. We just got confused by the whole numbering of the building. Q. Right. But-- A. And that's-- Q. --you just gave an answer a minute ago about the strata plan and the numbers here. I'm just trying to ask you to explain what you meant by the levels on the strata plan affecting how you read these numbers. A. Well the numbering system didn't line up, so floorplans didn't line up with the strata plan, so we were unsure on how that relationship worked. So we were reliant on the sales agent.
3. The cross-examination concluded (T 73.21-73.48): Q. Now, you can see there that it has an apartment, or it lists an apartment there for every level between levels 5 and 21 except 14. Do you see that? A. Yes, I see that. Q. Did you notice that at the time? A. No, not particularly. Like I said before, we were interested in our numbers that were relevant to us. Q. Did you expect that there would be no level 4 or 14 in this building? A. Again, we were unsure on how that relationship was going to work. Q. So would it be correct then to say that even though the unit that you ended up signing a contract for, 11803, was to your understanding to be on level 18, you were unsure whether it was going to be on level 18. Is that what you're saying? A. No, I'm saying it - it's on level 18, the sales agent marked level 18 had the black screens, so - and he pointed out where it was going to be. So it - we were reliant on that because we were unsure how the relationship of the floors and the layouts worked. Q. So if I can just clarify this, what you say is that the documents that you were provided made you unsure as to what apartment was going to be on what level. Is that right? A. Yes. Q. And so you say that you relied on what the agent told you to clarify that matter, is that what you're saying? A. Yes.

Execution of first contract by Ms Lonergan

1. The Lonergans' evidence was that their initial intention was that Ms Lonergan alone would purchase a two-bedroom and one study unit as an investment. CBRE arranged what was called the "VIP Launch Day" to take place on 5 November 2016, on which parties who had paid the $5,000 deposit and who wished to buy a unit would attend to sign a contract for the purchase of the unit. Ms Lonergan's evidence was that she met with a CBRE representative, Mr Clayton Ross, at the display suite. She had a conversation with him in which she said that the Lonergans were unsure about signing the contract for unit 11505, as they might consider a three-bedroom unit. She said that Mr Ross advised them that, if she signed the contract for unit 11505, she could cancel it in the five-day cooling off period, so the Lonergans could swap to the three-bedroom unit and transfer the $5,000 holding deposit to the new contract. Mr Ross also advised the Lonergans, after saying that he had discussed the issue with the vendor, that if Ms Lonergan signed the contract for unit 11505 that day, CBRE was authorised to give her a 10-week extension for payment of the full deposit.
2. On 5 November 2016, Ms Lonergan alone signed a contract for the purchase of what was described as Lot 107 in an unregistered strata plan at 101 Waterloo Road, Macquarie Park.

Third visit to the display suite

1. On the afternoon of 5 November 2016, Ms Lonergan was advised by Mr Zhu, by telephone, that the Unit was available, and Ms Lonergan organised a time to meet Mr Zhu on 6 November 2016. On the morning of that day, the Lonergans met with Mr Zhu at the display suite at about 10:00 AM. Mr Lonergan gave the following evidence in his first affidavit: 33. All three of us walked through the display suite. Then we stood closer to the model and we put the 3 bedroom plan that Mr Zhu had written on the corner of the model. I pointed to the black screens on the model with Mr Zhu and he counted up the floors again to make sure the level for the apartment had a black screen and the conversation continued: Mr Zhu: 6, 9, 12, 15, 18 -this is the one. You definitely get the black screens on level 18. Victoria: Can you write that in the contract? Mr Zhu: There is no need, that's what you will get. 34. Victoria then wrote the following entry in black under the 11803 pricing range on the three-bedroom plan: Black Screen and said: Just in case so this floorplan will be kept as our proof. 35. Victoria and I then agreed with each other to buy apartment 11803 on level 18 of the Building, with both of us to be purchasers.
2. The Lonergans both signed the contract at about 10:45 AM, according to Mr Lonergan.
3. On 11 November 2016, Ms Lonergan, by her solicitor, Hunt & Hunt, rescinded the first contract by way of a notice to JQZ by its then solicitor, Kemp Strang.
4. Ms Lonergan gave equivalent evidence concerning the Lonergans' discussion with Mr Zhu on 6 November 2016 in pars 31 to 34 of her first affidavit. She said in par 31: "… We then had a conversation in front of the model display, making sure that apartment number 11803 had a black screen by counting the levels with Mr Zhu's laser pointer". She said that Mr Zhu advised the Lonergans that there was no need to include the requirement for black screens in the contract as: "… The black screens are automatically included for apartment 11803, level 18."
5. Ms Lonergan confirmed that she wrote "Black Screen" on the Floor Plan and said that she would keep the Floor Plan "for proof, just in case, since you did not put it in the contract."
6. The words "Black Screen" as apparently written by Ms Lonergan appear on the Floor Plan in black under the price range for the Unit that Mr Zhu wrote on the Floor Plan on 30 October 2016.

Significance of JQZ's marketing campaign

1. The marketing campaign that JQZ adopted through its agent, CBRE, was to advertise widely to encourage potential purchasers to pay a deposit of $5,000 for the opportunity to attend the display suite on a couple of open days to decide whether they wanted to contract to buy a unit. Not only had Tower A not been built, but its design had only reached a relatively preliminary stage. Development consent had not been obtained and the structural design of the building had not started. Many features of the building had not been addressed, and JQZ was not able to give precise information to potential purchasers of the design characteristics of the units. In these circumstances, potential purchasers were particularly dependent on the information provided by JQZ for the purpose of making sound decisions to purchase units, as they were entirely unable to satisfy themselves of the matters that concerned them by making their own inspections and enquiries. In particular, potential purchasers were highly dependent on the information they were given by JQZ's agent.

Mr Zhu's evidence

1. Mr Zhu gave evidence of his recollection of his dealings with the Lonergans in his affidavit made on 19 October 2021. Much of his evidence was consistent with the evidence given by the Lonergans. I will focus on those aspects of Mr Zhu's evidence that are relevant to the issue of whether the privacy screen representation was made.
2. Mr Zhu's evidence was: 25 As we stood at the scale model, Mr Lonergan enquired about the black privacy screens which were on the scale model of Tower A and we had a conversation in words to the following effect: Mr Lonergan: "Is there an extra cost for the black screens on the balcony?" Me: "That is part of the architectural design." Mr Lonergan: "Which floors have the black screens?" 26 I counted up the levels of the scale model and it appeared that the black screen was a feature on levels 6, 9, 12, 15 and 18 of the building model and I said words to the following effect: Me: "They are on every third floor of the building. It looks like they are on floors 6, 9, 12, 15 and 18." 27 As I spoke, I wrote in red ink "6/9/12/15/18" on the copy of the 3 bedroom apartment floorplan. 28 It was very rare for clients to ask about the black privacy screens and I never usually discussed the topic of the black privacy screens unless the client raised it first. This is because some clients are attracted to that feature while other clients dislike the feature. 29 Mr and Mrs Lonergan did not mention the reason why they were attracted to the black privacy screens. They did not mention that Mrs Lonergan suffered from any skin condition and I did not observe any obvious redness on her skin or face. They also did not mention that they wanted to use the black privacy screen to create an additional room on the balcony.
3. Mr Zhu said that he had a very brief meeting with the Lonergans at the display suite on 6 November 2016. Mr Zhu said: 43 During this short meeting, we did not discuss apartment 11803 in detail and I did not do another presentation or another tour of the display suite because, in my mind, they did not need any convincing to purchase the 3 bedroom apartment and they did not ask for another tour.
4. Mr Zhu also said that he did not recall the Lonergans bringing with them the Floor Plan or the Lonergans asking whether they could include the black privacy screens in the terms of the contract. He also did not recall either of the Lonergans writing "Black Screen" on the Floor Plan, or stating that it would be proof that he had guaranteed they would get a black privacy screen. Mr Zhu said in par 45: "… No purchaser or potential purchaser ever said something like this to me." Mr Zhu claimed in par 46 that if a purchaser had said something like that to him, he would have responded that they should confirm it through their solicitor and obtain the developer's approval and request a variation of the contract, as that is the normal practice.

Hunt & Hunt advice

1. On 17 November 2016, Hunt & Hunt wrote a letter of advice to the Lonergans in relation to the contract. The letter included the following statement: 3. The living area for the unit is located on Level 16 and has an area of 121 square metres. This includes the balcony area.
2. Hunt & Hunt had apparently derived this information from the preliminary strata plan that was attached to the contract. Mr Lonergan was cross-examined on the issue (T 92.7-100.17). In essence, Mr Lonergan's position was (T 92.22-92.36): Q. That was inconsistent with your understanding, wasn't it? A. Like I said, confusion was with - there was two plans. Floor plans, strata plan, different levels, different numbers. So, it depends on what plan you use. Q. That wasn't my question, Mr Lonergan. My question was that the suggestion that the unit was going to be on level 16 was inconsistent with your understanding, wasn't it. A. It was inconsistent with the - the floor plan. Q. I'm asking you about your understanding, not the floor plan. A. I was confused, so-- Q. So, you didn't know which unit-- A. --you wouldn't have picked it up. You could - he could have meant either way.
3. And at (T 93.23-93.40): Q. Just to answer my question, it was important to you to know which level the unit was going to be on in the building. Is that right? A. Yes. Q. You say do you that as a result of getting this letter that you were confused about what level of the building the unit was going to be on. A. I wasn't confused. He was technically right as well. I could say level 18. He says level 16. He technically could be right because he's referring to strata plan. I'm referring to a floor plan. Q. Mr Lonergan, come back to this later at paragraph 3. Paragraph 3 doesn't say anything about the strata plan, does it. A. It doesn't say anything about the floor plan either. Q. That's right. I suggest to you that you did not assume that he was talking about the strata plan when he was referring to level 16. Is that right? A. Like I said, he's technically correct as well. You can be level 16 and you can be level 18 depending on what referenced material you use.
4. Mr Lonergan accepted (T 79.27) that he knew that the contract did not mention the black privacy screens and (T 85.9) that he did not tell the Lonergans' solicitor about their expectation that the Unit would have black privacy screens. Mr Lonergan said (T 89.36-89.41): Q. You didn't instruct him to send in a floorplan with black screens, did you? A. No. Q. You didn't instruct him to ask that the contract required that the unit be constructed with black screens, did you? A. No. That was based on a conversation with Mr [Zhu] and the exhibit P1.

Design and siting of structural columns

1. The City of Ryde Council issued a Deferred Commencement Development Consent for the construction of the Prime Development on 7 August 2017. A term of the development consent required structural certification of the proposed Prime Development by a qualified practising structural engineer. Mr Wu, JQZ's project manager, who was appointed as such in August 2017, gave evidence that the structural engineer was engaged on 1 August 2017. The first revision of the structural engineering drawing for Levels 17 and 18 in Tower A was issued on 3 October 2017, and the final design certificate was issued on 20 March 2018. The structural engineering drawing and the design certificate required six structural columns to be installed as part of the construction of the Unit, three of which were the columns the subject of the column representation alleged by the Lonergans. The other three columns were apparently sited at places in the Unit that were less obviously intrusive.
2. There was no evidence on the issue of how obvious it would have been to the relevant employees of JQZ that the structural engineer, who was subsequently retained after the units in Tower A were sold 'off the plan', would require that some structural columns be constructed in the units that were not apparent from the display suite or the floor plans that were given to prospective purchasers. However, from an inspection of the structural engineering drawings and the design certificate, it is probable that the relevant technical employees of JQZ would have expected that JQZ would be required to cause structural columns to be constructed at locations in the units that would diminish their amenity to purchasers.

Events following the completion of the Unit

1. The Lonergans inspected the Unit on 7 November 2019 at the invitation of JQZ and in anticipation of the registration of the Strata Plan and the completion of the contract.
2. The Strata Plan was registered on 11 November 2019.
3. Also on 11 November 2019, Hunt & Hunt sent an email to Thomson Geer, the new solicitors for JQZ, attaching a letter dated 8 November 2019 that referred to the inspection of the Unit that had been carried out by the Lonergans and said that they were "shocked to find that the representations made by your client's agent that black shutters that would be built on the balcony for the property has not been carried out". The letter included: 2. … It was a clear representation of our client that black shutters would be featured for this apartment on Level 18. It was for this reason that our clients actually changed the level in which they purchased the apartment from a lower level as they considered that the black shutters were a feature which they sought to have included in their property. 3. We are instructed that our clients had understood that a bath would be installed in the main bathroom with shower over the bath, rather than as presently constructed with just a shower. As you will note from the plan of the property, the shower space in the main bathroom has been built to enable a bath to be installed. We request your immediate advice in relation to the above matters.
4. One of the enclosures with the letter was the Floor Plan.
5. Thomson Geer advised Hunt & Hunt on 21 November 2019 of the Vendor's Notification in accordance with additional clause 36.2 of the contract that an occupation certificate had been issued for the Unit. The email advised that the Completion Date had been fixed and was to take place in accordance with additional clause 36.1 of the contract.
6. Hunt & Hunt advised Mr Lonergan of the issue of the occupation certificate on 21 November 2019 and stated: "so we are on countdown to completion".
7. Thomson Geer replied to Hunt & Hunt's letter on 3 December 2019, saying: We refer to your letter to us dated 8 November 2019 in relation to the above. We are instructed that our client denies that it promised black shutters on any particular level and if the agent made such representations, they were not authorised by the vendor to make such representations. … The contract clearly provides that marketing material and any representations outside the contract (including those that may be made by agents) are excluded from the contract and the purchaser agreed it has not relied on such matters. Our client maintains that it has completed the building and the subject property as contemplated in the contract. If your client has relied on claims by the agent, we suggest your client take that up with the agent.

Legal principles

1. The focus of the Lonergans' claim is now their allegation that JQZ contravened s 18 of the Australian Consumer Law, subsection (1) of which provides: "A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive."
2. The Lonergans eschewed any reliance on the principle in Flight v Booth (1834) 1 Bing (NC) 370; 131 ER 1160 "to the effect that a purchaser can rescind a contract for the sale of land where there is a material and substantial discrepancy between the subject matter of the sale and that which the vendor can convey" as explained by Darke J in Victorsen v Easy Living Holdings Pty Ltd [2019] NSWSC 1721 at [3]; (2019) 19 BPR 39,893 at 39,897.
3. If the Lonergans establish a contravention of s 18, they put their entitlement to relief on a number of bases. One is that they suffered "loss or damage because of the conduct of "JQZ in contravention of s 18, so that they are entitled under s 236 of the Australian Consumer Law to "recover the amount of the loss or damage by action against" JQZ. They say that the amount of the loss or damage they have suffered is the deposit held by JQZ plus the interest that has accumulated from the investment of the deposit under the contract. They say in addition that, if at general law they are found to be liable to JQZ for breach of the contract, the damage recoverable under s 236 would include the total of the damages they would otherwise be liable to pay to JQZ. Secondly, they rely upon s 237 for an order that JQZ compensate them in order to prevent or reduce the loss or damage that they will suffer. The quantum of this claim is the same as under s 236. Thirdly, the Lonergans seek an order under s 232 that JQZ be restrained from enforcing clause 9.3 of the contract. Finally, they seek an order under s 243 declaring clause 9.3 of the contract void. In substance, the effect of the orders sought would be that JQZ would compensate the Lonergans for the amount of the deposit paid plus interest, and JQZ would be prevented from recovering damages, or any other payment, from the Lonergans for breach of the contract.
4. The proper approach to the interpretation of s 18 of the Australian Consumer Law is as stated by McHugh J in Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 621-2; [2004] HCA 60 at [97]-[98] (Butcher). Although his Honour dissented in the result, as Gummow, Hayne, Heydon and Kiefel JJ said in Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at 341; [2009] HCA 25 at footnote 149 (Backoffice): "McHugh J dissented in the result of the particular case but not as to these questions of principle." Omitting footnotes, McHugh J said of the equivalent provision to s 18 that was found in the Trade Practices Act 1974 (Cth): [97] Section 52 - which is in Pt V of the Act - is capable of flexible application and should be construed accordingly. Such an approach gives effect to the consumer protection objectives that underpin Pt V of the Act generally and s 52 in particular. As Lockhart and Gummow JJ pointed out in Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd: "[T]he evident purpose and policy underlying Pt V, which includes s 52, recommends a broad construction of its constituent provisions, the legislation being of a remedial character so that it should be construed so as to give the fullest relief which the fair meaning of its language will allow." [98] Section 52 must be construed against the background of the general law, for its intended scope cannot be fully perceived without an understanding of that background. But common law principles of liability do not govern the operation of the section. While those principles may often be relevant in determining whether a contravention of s 52 has occurred, they are not determinative and do not always provide a safe guide to the operation of s 52. In Brown v Jam Factory Pty Ltd, Fox J said that the words of the section "should not be qualified or ... expanded, by reference to established common law principles of liability". Courts must give effect to the natural and ordinary meaning of the section, even if to do so "may result in the imposition of liabilities and the administration of remedies which differ from those supplied by the general law". This is because the relevant conduct (including any representation) "falls to be judged under s 52 not, as at common law, by the state of mind or intention of the maker of the statement, but according to its effect or likely effect or impact on the person to whom it is directed".

Significance of the contract being for an 'off the plan' purchase

1. JQZ relied upon the observation of Ward CJ in Eq (as her Honour then was) in Xu v Lindsay Bennelong Developments Pty Limited [2020] NSWSC 1692 at [254] (Xu), where her Honour said in relation to parties entering into 'off the plan' contracts for properties yet to be developed: "[b]oth parties thus shoulder some risk in entering into contracts of this kind prior to the completion of the development."
2. It should be acknowledged that the facts in Xu had something in common with the present, at least to the extent that the subject matter of the contract was a lot in an unregistered plan as indicated on a draft strata plan that was attached to the contract. However, that case differed substantially from the present, as the defendant against whom a misleading or deceptive conduct case was prosecuted by the plaintiff, and who may have engaged in misleading or deceptive conduct comparable to that alleged by the Lonergans in this case, determined not to proceed with the development because it was considered to be unviable, and the plaintiff entered into a deed of novation whereby she agreed to purchase the property from an assignee of the first defendant, who was prepared to complete the development. Her Honour found at [53] that the plaintiff could not in those circumstances have relied upon representations made by the first defendant. Materially, the case against the second defendant was in contract, and her Honour's discussion of the significance of the contract being 'off the plan' and the effect of the contractual terms and disclaimers intended to give the second defendant latitude in what was satisfactory performance took place in that context. Her Honour's comment concerning the risks involved in 'off the plan' contracts was made in the context of considering the effect at general law of those terms and disclaimers.
3. As I have already noted, is not necessary in this case to express any view about the meaning or effectiveness of the contractual terms and disclaimers relied upon by JQZ under the law of contract or equitable principles. The issue here is whether the knowledge of the Lonergans of the existence of the terms and the disclaimers had the effect that JQZ's conduct was not misleading or deceptive or, if it was, that it did not cause the Lonergans to enter into the contract, because the Lonergans understood that they could not rely upon it.

The privacy screens representation

1. The Lonergans' case in relation to what they called the privacy screens representation was that, by his statements to them and the notations that he made on the Floor Plan, Mr Zhu told them by reference to JQZ's model of Tower A in the display suite that the three-bedroom unit that at that time was numbered 11803 was on what would be known as Level 18, and would be constructed with black privacy screens on the balcony. In one sense, that is necessarily a prediction about the state of the Unit after it had been constructed. But it would be unrealistic to characterise the representation as being exclusively a prediction in relation to a future matter. Conduct that conveys information may be composite and involve components that are better analysed in terms of being in part statements as to present facts and in part predictions as to future events.

Proper characterisation of the representation

1. In my view, in the present case, the most realistic way to consider the relevant conduct is to start with a representation by Mr Zhu to the Lonergans, when they were all looking at the model of Tower A, that the three-bedroom unit that the Lonergans were contemplating purchasing, and which they were looking at in model form, was the unit which, in the completed Tower A, would be unit 11803, and would be on the level of the model that represented Level 18 (i.e., the level with unit numbers 118XX). There was also necessarily a separate representation by implication that JQZ would cause Tower A to be constructed in a manner that would match the model. I put aside for the moment the possibility that other conduct of JQZ informed the Lonergans that the completed Tower A might have differences from the model.
2. The point of these observations is that Mr Zhu did not simply predict that JQZ would cause Tower A to be constructed, and that when that occurred it would be found that there was a unit 11803 that had black privacy screens installed on the balcony. That is important because Mr Zhu's error lay in miscounting the levels, and that was an immediate error and did not result from some prediction made by Mr Zhu not coming to pass. In this case, the fact that the Unit was not constructed with black privacy screens installed on the balcony had nothing to do with the future process of constructing Tower A after the date of the contract. The error was one of present fact, in that the unit in the model that Mr Zhu and the Lonergans were looking at that depicted black privacy screens on its balcony was not part of Level 18 of the model, but was part of Level 19.
3. I have found that the Lonergans were careful but relatively unsophisticated potential purchasers of a home unit 'off the plan', and the stage that the design of Tower A had reached meant that the Lonergans were substantially dependent upon Mr Zhu to learn the characteristics of the unit that would become the subject of the contract that they might enter with JQZ. That was the very role for which JQZ, through CBRE, made Mr Zhu its agent. It was a natural result of the marketing plan that JQZ adopted that potential purchasers would be required to make their decisions on the basis of what they were told by the agent, the inquiries that they made of the agent, and what they perceived in the display suite and the documents given to them by JQZ.

Impact of promotional material and disclaimers

1. JQZ correctly submitted that the issue of whether its conduct was misleading or deceptive required an examination of the whole of its conduct insofar as that impinged upon the understanding of the Lonergans, and that the issue should not be limited to the conduct of Mr Zhu engaged in as JQZ's agent. JQZ relied upon the fact that the Floor Plan had no units on Level 14 and included the disclaimer that is extracted at [96] above.
2. I have already explained, in relation to the draft strata plan that was annexed to the contract, that I do not accept that the absence of reference to one or more units on Level 14 on any floor plan was information that would naturally cause persons in the position of the Lonergans to understand that the counting process adopted by Mr Zhu in relation to the model of Table A was erroneous, and hence that JQZ did not intend to install black privacy screens on the balcony to the Unit. In any event, the misleading effect of the advice given by Mr Zhu was not in fact cured by the Lonergans learning the truth as a result of the absence of any units on Level 14 in the Floor Plan.
3. So far as the Floor Plan Disclaimer is concerned, I accept the evidence given by the Lonergans that they did not notice its existence or read it. The existence of the Floor Plan Disclaimer did not in fact dispel the effect of the representations made by Mr Zhu.
4. The Floor Plan was a generic plan for all the apartments listed in the document, so it would not be expected that the black privacy screens would be depicted in the Floor Plan. That is apparently why Mr Zhu wrote "6/9/12/15/18" on the panel in the Floor Plan.
5. Accordingly, even if the issue of whether the privacy screens representation involved misleading or deceptive conduct on JQZ's part should be judged on the basis that the Lonergans ought to have read and understood the Floor Plan Disclaimer, the statement to the effect that JQZ "may make changes to the size and layout without notice to you" would not dispel any misleading understanding had by the Lonergans in respect of a structural feature of the Unit that was not depicted on the Floor Plan in the first place.
6. In any event, as the Lonergans were in fact misled by the privacy screen representation, I would not find that the Floor Plan Disclaimer protected JQZ from the consequences of its misleading or deceptive conduct. I understand that in its submissions JQZ accepted that reasoning (T 286.9), and only relied upon the Floor Plan Disclaimer as part of the information that it generally provided to the Lonergans relevant to the issue of whether they were entitled to believe that any representation made to them concerning the configuration of the Unit before they entered the contract would necessarily be included in the Unit when finally constructed.

Impact of contractual provisions

1. JQZ correctly submitted that the provisions contained in the draft contract were part of its conduct relevant to the question of whether it had engaged in misleading and deceptive conduct. I will deal with JQZ's submissions concerning the significance of the terms of the contract in turn.
2. First, JQZ relied upon the fact that the draft contract disclosed in additional clause 34.3 that it required development consent and in additional clause 34.1 that JQZ was required to use reasonable endeavours to cause the building containing the Unit to be constructed in a proper and workmanlike manner and generally in accordance with the development consent. Additional clause 34.3(c) informed the Lonergans that JQZ would seek to amend the development consent in any way "which it considers necessary or desirable".
3. JQZ in fact obtained a development consent and did not apply to amend the development consent in any way that is material to the effect of the privacy screens representation. Relevantly, the development consent authorised JQZ to build Tower A in a way that was consistent with the Unit being constructed with black privacy screens on its balcony. The positive privacy screens representation did not cease to be misleading or deceptive because the contract authorised JQZ to make amendments that it did not make. Even if it were contractually correct that JQZ could have amended the development consent to remove black privacy screens from Tower A, that possibility did not make the positive representation cease to be misleading or deceptive.
4. Secondly, JQZ disclosed in additional clause 34.3(a)(iii) of the draft contract that the concept drawing and plans in connection with the Development Site were not final, were for marketing and illustrative purposes only, were subject to Authority approval, and could change at any time.
5. This disclosure did not neutralise the misleading or deceptive effect of the privacy screens representation for essentially the same reason as I have given in relation to JQZ's first submission. There were no material changes to the drawings and plans. The possibility that such changes could be made does not alter the fact that Mr Zhu, on JQZ's behalf, misled or deceived the Lonergans into understanding that the subject matter of the contract would have black privacy screens on its balcony.

The columns representation

1. The Lonergans' submission concerning the columns representation was that it was misleading or deceptive for there to be no such columns in the living room display suite or depicted on the Floor Plan, in the absence of any warning conveyed by JQZ that the construction of such structural columns may be required.
2. So far as the column representation is concerned, the representation is in my view similarly best analysed in a composite way. The absence of a structural column in the living room in the display suite, and absence of structural columns being depicted in the Floor Plan in the living room or on the balcony were, in the absence of an explanation to the contrary, representations of a present fact, being that there was no necessity for JQZ to cause the Unit to be constructed with structural columns in the living room or on the balcony. There was also necessarily an implied representation that JQZ would cause the Unit to be constructed in a manner that matched the display suite and the Floor Plan. Again, this implication may be subject to qualification by reason of the information provided by JQZ to the Lonergans before they executed the contract. The point of my observations is that it would be wrong in my view, to characterise the columns representation as being solely a prediction as to the structure of the Unit when it was constructed.
3. In my opinion, substantial structural columns located in the living areas of relatively small home units, in places that significantly intruded into the living space, are design features whose natural significance would be such to ordinary potential purchasers, such as the Lonergans, as to cause those purchasers to assume that no structural columns would be required unless they were included in the display suite, or depicted in the floorplans, or alternatively a clear and prominent warning was given that structural columns would or may be constructed in the living areas in numbers and at places that the developer could not identify by reason of the fact that the structural design of the building had not been completed. It would not be natural for ordinary potential purchasers who have not been warned of the probable need for the construction of structural columns in the living area to realise that the display suite and the floorplans were deficient by reason of the absence of reference to structural columns.

The air-conditioning representation

1. In pars 45 and 46 of their closing written submissions, the Lonergans said that the Floor Plan did not show the location of an air-conditioning unit on the balcony and that this absence amounted to an implied representation that such an air-conditioning unit would not be in the Unit as built. This logic may work in relation to the structural columns, but there is a difficulty when it is applied to the location of the air-conditioning unit. The Lonergans did not lead any evidence concerning the air-conditioning unit, save that they discovered after the completion of the Unit that it was located on the floor of the balcony in a place that would cause the exhaust to blow across the balcony. There was no evidence at all about JQZ's marketing material concerning the air-conditioning of the Unit, or the way that would be achieved. The Lonergans did not give any evidence concerning their expectations concerning the provision of air-conditioning. Nothing was said about whether the model of Tower A incorporated any air-conditioning elements. If the Lonergans expected that the Unit would be air-conditioned, and that that may be achieved by an air-conditioning unit that was located in the Unit, then the device had to be located somewhere. The Lonergans did not say whether they turned their mind to this issue. It may be that the only place where the air-conditioning units could be located without damaging the external appearance of Tower A was on the balconies.
2. As I have recorded above when considering the Schedule of Finishes, one of the items was "Air-conditioning system", which was described as "Ducted system air-conditioning". While there was no reference in any of the documents to the possible need for structural columns, there was reference to the air-conditioning system.
3. The Lonergans may have been entitled to infer from the absence of reference to structural columns that there would be none. The issue with the air-conditioning unit was probably not whether there would be one, but rather as to where it would be situated. Given the dearth of evidence on the issue, I consider that it would not be fair to find that the Lonergans have proved the air-conditioning representation.

Did the Lonergans rely upon the representations to enter the contract?

1. In response to the Lonergans' claim that they would not have entered the contract had they known that there would not be black privacy screens and there would be columns on the balcony and a column in the corner of the living room, JQZ's position was that it disputed that the Lonergans relied upon the representations and, in the alternative, submitted that the Lonergans' reliance was not reasonable.
2. I accept the Lonergans' evidence that they did in fact enter the contract believing that the Unit would be constructed with black privacy screens and that there would be no structural columns in the living areas of the Unit. I also accept that, because of their circumstances, they would not have entered the contract for the purchase of the Unit if they had known the truth. Their decision to upgrade from the two-bedroom unit with study to the three-bedroom Unit was relatively marginal financially, and I have explained why I accept that Ms Lonergan's medical condition was a significant factor in the Lonergans' decision to purchase the Unit. While the reaction of the owner of a home unit to the presence of intrusive structural columns in the living areas may be personal to different owners, I accept that the Lonergans would have reacted to knowledge of the possible construction of the structural columns by considering them to be unacceptable.
3. It is necessary to respond to the submissions made by JQZ in support of its argument that the Lonergans did not rely upon the privacy screens representation or the columns representation when they entered the contract.
4. First, JQZ pointed to the fact that Ms Lonergan initially proposed to buy a two-bedroom unit and her purchaser's checklist sent to Mr Zhu on 1 November 2016 identified as fifth and sixth preferences units 10803 and 11003 that were without black privacy screens. Furthermore, on 5 November 2016, Ms Lonergan signed a contract to purchase unit 11505, which did not have the black privacy screens.
5. It does not follow from the fact that the purchaser's checklist identified two units as preferences 5 and 6 that did not have black privacy screens after Ms Lonergan listed four preferences that did have black privacy screens that the Lonergans did not rely upon the black privacy screen representation when they entered into the contract. On the contrary, they made their preference clear that they wanted a unit with black privacy screens, and they succeeded in obtaining a contract to purchase their preferred unit.

Did unreasonable reliance break the chain of causation?

1. JQZ submitted that it was not reasonable for the Lonergans to rely upon the privacy screen representation such that the chain of causation was broken, relying upon Trilogy Funds Management Ltd v Sullivan (No 2) [2015] FCA 1452; (2015) 331 ALR 185 at [712]-[721] (Wigney J); and Argy v Blunts (1990) 26 FCR 112 at 138 (Hill J). JQZ submitted that it made its position clear to the Lonergans that the building and the property could change and that it was not bound by prior representations in a transaction involving solicitors on both sides. JQZ submitted that, even if the Lonergans established that they had relied upon the privacy screens representation, they had isolated particular conduct from all the rest of JQZ's conduct on a matter that was not objectively significant given the orientation of the balcony, the low cost of it, and the likelihood it could be rectified later as it was unlikely that an owners corporation would prevent an occupant from shading the sun or having privacy. JQZ also submitted that the Lonergans ignored relevant terms of the contract and kept important information from their solicitor.
2. I reject the submission that it was unreasonable for the Lonergans to enter the contract believing that Unit 11803 was on a level that would involve the installation of black privacy screens on the balcony in reliance upon Mr Zhu's explanation. In any event, the matters relied upon by JQZ did not have the effect that it was the Lonergans' unreasonable conduct that was the cause of their entering into the contract such that JQZ's misleading or deceptive conduct was not an operative cause.
3. Furthermore, for reasons given above, I reject the submission that the installation of the black privacy screens was not objectively significant given the orientation of the balcony. As I have just explained, JQZ has not proved that the Lonergans ought to have proceeded on the basis that it was likely that the Owners Corporation would consent to the retrospective installation of black privacy screens in a manner that was inconsistent with the design concept of Tower A.

Reliance by the Lonergans on the columns representation

1. As I understand JQZ's submissions, and in particular its comprehensive written outline of final submissions, JQZ has not made a submission that the Court should find that the Lonergans did not rely upon the columns representation in entering the contract.
2. For the sake of completeness, I record that I am satisfied that the Lonergans did enter the contract on the basis of a belief that there would not be a substantial structural column in the corner of their living room and two substantial structural columns on the balcony. I am satisfied that ordinary prospective purchasers who inspected the display suite living room and who looked at the Floor Plan would be led to believe, in the absence of a clear warning to the contrary, that there would be no substantial structural columns in the living areas, and that other parts of Tower A would provide the structural support necessary for superimposed levels.
3. It is unclear why JQZ has relied upon a thicket of submissions as to why the Court should not accept that the Lonergans entered into the contract in reliance upon the privacy screens representation, when nothing has been said in opposition to a finding that they did so in reliance upon the columns representation.

Loss and relief

1. I have accepted the Lonergans' case that they entered the contract in reliance on the privacy screens representation and the columns representation. I have found that those representations involved conduct on JQZ's part that was misleading or deceptive. I have also accepted that the Lonergans would not have entered into the contract for the purchase of the Unit had they known the truth, given (a) that they were ambivalent as to whether Ms Lonergan should acquire a less expensive two-bedroom unit as an investment, and (b) that they were purchasing the considerably more expensive three-bedroom unit on the basis that there was a real possibility that they would make it their home for some period.
2. The relief that should be granted to the Lonergans should have regard to the circumstances of the case, being that the subject matter of the representations was of real significance to the Lonergans, although they did not involve matters of fundamental importance to the structure and utility of the Unit. That is reflected in the fact that initially the Lonergans responded to their disappointment upon inspecting the completed Unit by asking JQZ to suspend the completion process to allow negotiations to take place to agree an appropriate reduction to the price as compensation for the loss of amenity to the Lonergans that flowed from the effects of JQZ's misleading or deceptive conduct. As has been seen, JQZ rejected the request out of hand on the basis that the alleged conduct did not occur, that JQZ was not responsible for any representations made by its agent, and that the terms of the contract gave JQZ a latitude in the performance required of it that obliged the Lonergans to complete the contract. The Lonergans do not seek an order that the contract be set aside as such relief is not necessary, the parties having agreed that one or other of them effectively terminated the contract. In practical terms, the issue is whether the application of the relevant provisions of the Australian Consumer Law would have required the Lonergans to have completed the contract and then sued JQZ for compensation for the loss caused by its misleading or deceptive conduct.
3. If this issue had arisen in the absence of the Lonergans having made a successful claim that JQZ had engaged in misleading or deceptive conduct, the focus would have been on whether the Lonergans were required to complete the contract and then to sue JQZ for compensation for breach of any relevant duty. That would have required a consideration of whether JQZ had effectively made time of the essence of the contract when it served the second Notice to Complete. The effectiveness of that Notice to Complete would have depended upon whether, at the time it was served, JQZ was itself in breach of the contract. The Lonergans have not alleged in this case that JQZ did breach any term of the contract. Even then, a breach of contract by JQZ would not have precluded the effectiveness of the Notice to Complete unless the consequences of the breach impeded the reasonable ability of the Lonergans to complete the contract: see HG & R Securities Pty Ltd v Sayer [2009] NSWSC 427; (2009) 14 BPR 27,045 at [96]-[104] (Ward J, as her Honour then was). In the present case, even if the making of the misleading or deceptive representations had been a breach of the contract, it seems unlikely that the consequences of the breach prevented the Lonergans from completing the contract. They did not suggest the contrary of that position in their solicitors' letter 8 November 2019 or any subsequent correspondence or their submissions in these proceedings.

Remaining issues in the proceedings

1. The parties contested with considerable vigour numerous issues that only arose if the Lonergans failed in their misleading or deceptive conduct claim for the relief that the Court has decided they are entitled to receive. Those issues are:

• Was the second Notice to Complete ineffective because it was not addressed to both of the Lonergans?
• If the second Notice to Complete would otherwise be ineffective, are the Lonergans estopped by reason of a conventional estoppel from denying that the second Notice to Complete was effective?
• If the second Notice to Complete was effective (either by itself or pursuant to an estoppel) was JQZ's Notice of Termination served on 22 January 2020 effective to terminate the contract?
• Did the Lonergans otherwise repudiate the contract entitling JQZ to terminate by JQZ's Notice of Termination served on 22 January 2020?
• Did JQZ, by serving the second Notice to Complete, make an election to affirm the contract such as to prevent JQZ relying on any alleged repudiatory conduct of the Lonergans occurring before the date of the second Notice to Complete?
• If JQZ's Notice of Termination was not effective to terminate the contract, did JQZ repudiate the contract by serving it, and, if so, should the Lonergans be precluded from relying on JQZ's repudiation of the contract because they would be taking unconscientious advantage of JQZ's mistake or surprise?
• Was the Lonergans' Notice of Termination of 30 January 2020 effective to terminate the contract?
• If the Lonergans' Notice of Termination of 30 January 2020 was not effective to terminate the contract, did the Lonergans on 30 January 2020 or by their subsequent conduct in demanding the return of the deposit evince an intention not to be bound by the contract amounting to a repudiation of it?
• Did JQZ after 30 January 2020 accept any repudiation by the Lonergans and effectively terminate the contract?
• If JQZ did effectively terminate the contract after 30 January 2020, when did that occur as against Ms Lonergan and Mr Lonergan?
• If JQZ's termination of the contract was effective, how should JQZ's damages be calculated?
• Should the Court exercise its discretion under s 55(2A) of the Conveyancing Act 1919 (NSW) to order the return of all or part of the deposit on the basis that it is unjust and inequitable to permit JQZ to retain it in circumstances where the Lonergans became bound to purchase a property that was different in a fundamental respect from what they expected to receive under the contract because of the privacy screens representation or the columns representation?

---

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: 27 October 2022