Lymquartz Pty Limited v 2 Elizabeth Bay Road Pty Limited [2007] NSWSC 457 | Case summary

Lymquartz Pty Limited v 2 Elizabeth Bay Road Pty Limited [2007] NSWSC 457 | Case summary | Zoe

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12 The third representation is alleged to have been in a colour brochure, which Mr Cirillo gave to the Goltsmans on their first inspection. The brochure stated the units would have " interiors with a sense of space " and be " comfortable and easy and very liveable ". The plaintiff particularly emphasises the words " sense of space ". The plaintiff also alleges that three related representations arise as a naturally corollary of those statements in the brochure: (a) a representation that the existing structure of the Tower Building would enable it to permit the conversion of the building into residential units that would have "interiors with a sense of space" and be "comfortable and easy and very liveable" ; (b) the defendant was not aware of any matters that might have the effect that the residential units would not have "interiors with a sense of space" and be "comfortable and easy and very liveable" ; and (c) the units in the Gazebo development, including apartment T1204, would have no significant undisclosed unusual features which would affect the sense of space. (Collectively, sense of space representations ) 13 The plaintiff pleaded that, contrary to the sense of space representations, the apartment has excessively low ceiling heights that do not meet the minimum height prescribed by F3.1 of the Building Code of Australia. 14 The defendant says in reply to the sense of space representations that: (a) the statements in the brochure are puffery and that nobody would reasonably rely upon them as providing a hard representation about specific ceiling requirements; (b) in any case, the apartment fulfils the descriptions in the brochure, particularly having regard to the fact that the apartment was on the twelfth floor with views over Sydney Harbour and had two balconies; (c) the ceilings comply with the Building Code of Australia's requirement that habitable rooms must have sufficient height that does not unduly interfere with its intended function; and (d) the plaintiff apparently has no concern about apartment C904 yet apartment C904 has roughly comparable ceiling heights. 15 The fourth alleged representation is that apartment T1204 would have a kitchen in a room separate from other rooms ( separate kitchen representation ). As built, the kitchen is a walk-through kitchen leading from the main door to the living room, with the kitchen facilities on each side. The separate kitchen representation was introduced late in the proceedings, in the Goltsmans' affidavits of 30 October 2006, a few weeks before the trial commenced. In Mrs Goltsman's affidavit she said that based on Plans B, C, D and E, " especially " D, she believed that apartment T1204 would have a separate kitchen when causing the plaintiff to contract. Mr Goltsman's affidavit evidence was different. He swore that during the second visit Mr Cirillo told his wife " there will be a separate kitchen " . He said that he believed it would have a separate kitchen because this is what Mr Cirillo said and because of what was shown on Plans E and A. He said that except for this belief he would not have agreed to the plaintiff purchasing apartment T1204.

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16 Mr Cirillo denied making the separate kitchen representation. He testified that he was confident that he discussed the kitchen and that he pointed to where it was on a laminated plan which showed apartment T1204 as built. The defendant also states that (a) in any case the kitchen is separate from the other rooms albeit the entrance way passes through it; (b) two of the plans which the Goltsmans or one of them claim to have received and relied upon prior to contract were not in fact received until after contract; (c) the plans which the Goltsmans say they received prior to contract, and on which they claim to rely, relate to larger apartments; and (d) the Goltsmans saw prior to contract a laminated plan on display at the selling agent's site sales office which accurately showed apartment T1204 as it was later built. 17 The fifth alleged representation is that all the walls in the apartment would be brick ( brick walls representation ). The representation is pleaded as partly oral and partly implied. The defendant denies making the representation. Mrs Goltsman's affidavit evidence was that she inferred from what Mr Cirillo had said about the bedroom wall being brick, that all walls in apartment T1204 would be brick. Mr Goltsman's affidavit evidence was different. He claimed that Mr Cirillo said that all the walls would be brick. The inter-apartment walls are gyprock. PRE-CONTRACT MEETINGS 18 The Goltsmans attended the Gazebo site on three occasions in September and October 2003, prior to executing the contracts. On each occasion they met Mr Cirillo. Mrs Goltsman did most of the talking for her husband and herself. 19 In September 2003, the floor and ceiling concrete slabs and structural concrete columns or walls were in existence in the Tower Building but no internal walls or ceilings had yet been constructed in apartment T1204. 20 The Goltsmans' first meeting with Mr Cirillo was in September 2003. They met him in the agent's site office. He gave them a brochure and a plan. I will call this Plan A. He also gave them a price list either on this occasion or later. Mrs Goltsman asked what one-bedroom apartments were available with harbour views. Mr Cirillo, having ascertained the price range that might interest them, indicated that only apartments in the north-west of the Tower Building on levels 11, 12 and 13 had those views. Either on this occasion or later he indicated that apartment T1204, which had harbour views, was available.

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27 This evidence is contentious. In fact, there was a laminated floor plan for apartment T1204 on display at the Colliers sales office, as explained below. Mrs Goltsman swore in her fourth affidavit of 30 October 2006 that during the third visit Mr Cirillo in her presence handed to her husband a further plan. I will call it Plan E. Mr Goltsman in his affidavit of that date says that it was during the second visit that Mr Cirillo handed him Plan E. 28 The defendant disputes that the Goltsmans received plans D and E prior to contract. 29 There were a number of documents at the selling agent's site office that a prospective purchaser could view. They included floor plans for a " typical " one-bedroom unit in the Tower building or for a "typical" two bedroom unit, a B3 sized laminated booklet entitled " Elizabeth Bay Road Plans " which contained floor plans for each level or each set of identical levels showing the layout of each apartment when complete, and a price list showing apartments sold and not sold and the prices of the remaining apartments. 30 Mr Cirillo's practice, I accept, was to provide copies of the " typical " apartment plans to all prospective purchasers and, when a prospective purchase showed an interest in a particular apartment, to show the purchaser the laminated booklet of floor plans and direct the purchaser's attention to the page on which the apartment they were interested in was located. He testified that he followed this practice with the Goltsmans. He recalled showing Mrs Goltsman the relevant laminated plan entitled " Levels 11 to 13 Tower " which showed apartment T1304 and explaining to her that apartment T1204 is the same as apartment T1304. She denied seeing the laminated plan and denied this conversation. If the Goltsmans saw this laminated plan it is damaging to their case because it shows apartment T1204 as later built, except that it does not directly impact on the sense of space representations, which are based on the brochure. 31 Mr Cirillo indicated that he had been told prior to contract that the Goltsmans were buying for investment purposes. He entered details to that effect in Colliers' business records after the contracts were exchanged. In cross-examination he said that he was told this at the first meeting. Mrs Goltsman, in her fifth affidavit, said that prior to contract Mr Cirillo asked her whether they were buying for investment purposes and that she said no, they were buying for their two sons. REAL ESTATE EXPERIENCE

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32 The extensive real estate investment experience (including contractual experience) of the plaintiff company and its directors, the Goltsmans, should be taken into account. The matters on which it bears include the Goltsmans' understanding of the sale contract for apartment T1204; their ability to read the floor plans shown by the defendant; their understanding of the size and nature of apartment T1204; and whether they relied on a statement in the colour brochure that apartments in the Gazebo development would have a " sense of space " as a representation of fact concerning apartment T1204. 33 At the time of the purchase, Mrs Goltsman, who was the person with principal responsibility for real estate investment transactions undertaken by the plaintiff, was a licensed real estate agent, was working as a licensed real estate agent and property officer at McGrath's Real Estate, and had extensive experience in developing, investing in, buying, selling and leasing real estate. 34 In order to obtain her real estate licence, she completed a three year part-time course which involved instruction in the various aspects of real estate business. She had extensive experience in relation to real estate transactions, which included working as a licensed real estate agent at Vantage Real Estate and working as a licensed real estate agent and property officer for McGrath's Real Estate. That experience included leasing residential units, apartments and houses; negotiating leases on behalf of landlords; inspecting properties with landlords to assess them before they were put on the market; taking prospective tenants and showing them the properties; preparing promotional literature about the properties that were available for lease; and ensuring that leases were properly filled out and had been properly executed. She also handled the paperwork in regard to subdivisional applications undertaken in relation to the plaintiff's investment properties. 35 Since 1985, Mrs Goltsman has been involved via the plaintiff in some eight or nine real estate transactions including buying, selling and developing investment properties. This involved causing significant building work to be done on apartments; engaging and supervising subcontractors to carry out building work including attending to fire safety works involving changing the doors and a couple of ceilings for fire protection; applying to council to subdivide and strata buildings; retaining draftsmen in relation to building works; examining the plans that the draftsman prepared; registering strata plans for buildings; liaising with real estate agents; instructing solicitors; and signing contracts containing " no reliance clauses" which she understood set out all that the plaintiff as vendor was promising to sell to purchasers.

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38 Mr Goltsman bought properties with his wife before the subject purchases in 2003. He supervised the building works on the investment properties which the plaintiff company bought and subdivided. 39 In my view, Mrs Goltsman was well able to assess promotional literature, apartment sizes, floor plans, strata plans and to understand to a significant degree contracts in relation to land. Mr Goltsman had less real estate experience than his wife but sufficient, in my view, to be attributed with the same powers of assessment except that I think he probably would need legal advice to understand most aspects of contracts in relation to land. 40 In Mrs Goltsman's first affidavit she described herself as a real estate agent. But in later affidavits she described herself as a company director and said that she had never practiced as a real estate agent and, although she is a licensed real estate agent it is a formal qualification only. Mr Cirillo became aware that she worked at McGrath's Real Estate. In cross-examination, she denied that she had worked as a real estate agent because she drew a distinction between buying and selling real estate (which she said was acting as a real estate agent), on the one hand, and leasing real estate (which she said was not acting as a real estate agent), on the other hand. I do not think that there is substance in this distinction. It was because she had a real estate licence that she was able to work at McGrath Real Estate. In my view, her later affidavit evidence on this point was not frank and was likely to mislead. UNDERSTANDING OF CONTRACT OF SALE 41 The Goltsmans signed the sale contracts on behalf of the plaintiff. The contract for apartment T1204 attached a draft strata plan which showed that it would have two balconies and that its total floor area would be 55m2. The Goltsmans, in my view, knew when they signed the contract that the total area revealed by the strata plan was 55m2. They now take no issue in relation to the size of the apartment, or the number of balconies in apartment T1204, notwithstanding that was raised in the plaintiff's lawyer's initial letter of complaint in March 2005. 42 The Goltsmans had legal advice before they signed the contracts. The contract for apartment T1204 had attached a section 66W certificate in which a solicitor confirmed that he had explained the effect of the contract to the directors of the plaintiff. The contract contained a covenant by the plaintiff that it had "obtained appropriate independent advice on" and was "satisfied about...the [plaintiff's] obligations and rights under" the contract.

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88 On 30 October 2006, there was a further amended statement of claim, Mrs Goltsman swore her fourth affidavit and Mr Goltsman swore his second affidavit. The further amended statement of claim contained new allegations, namely, the separate kitchen representation and the brick walls representation. Mrs Goltsman's new evidence in this affidavit included the following: (a) she inferred from what Mr Cirillo had said about the bedroom brick wall that all walls in apartment T1204 would be brick. She relied upon this belief in causing the plaintiff to enter into the contracts and there was a fair prospect that she would not have permitted the plaintiff to enter into the sale contracts, if she had known that no walls in the apartment would be brick; (b) Mr Cirillo in her presence handed to her husband Plan E; and (c) when causing the plaintiff to enter into the contract she believed that apartment T1204 would have a kitchen in a separate room, based upon Plans B to D, " especially " Plan D, and Plan E. 89 Mr Goltsman in his second affidavit of 30 October 2006, gave the following new evidence: (a) when Mr Cirillo gave the Goltsmans Plan A, he put his hand on it so that it obscured most of bedroom area shown on the plan and said " that apartment will look something like this "; (b) on their second visit to the site Mr Cirillo handed to him Plan E and said to them " there will be a separate kitchen "; (d) he believed that T1204 would have a kitchen in a separate room because Mr Cirillo said that there will be a separate kitchen, and because of what was shown on Plans E and A. Had he thought it was not going to have a separate kitchen, he would not have agreed to the plaintiff purchasing the unit; and (e) Mr Cirillo had said during the pre-contract inspections that all the walls were going to be brick, if Mr Goltsman had thought that none of the walls would be brick he would not have permitted the plaintiff to purchase T1204. 90 Mr and Mrs Goltsman swore their final affidavits on 10 November 2006, less than one week before the hearing began. Here, Mrs Goltsman said that before signing the contract she told Mr Cirillo that she was not buying for investment purposes but had two sons and was purchasing the units for them; that it was her intention that her son Michael would live in apartment T1204 and David in C904 and that they were respectively 197 cm and 196 cm tall; that the fire sprinklers in the ceilings touched the hair on the top of Michael's head and the bottom of the sprinkler in the kitchen almost touched the hair on top of his head; and that when she inspected the shell of T1204 prior to contract she estimated that the concrete ceiling was about a metre above her head.

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112 Thirdly, reference was made to a number of inconsistencies in Mr Cirillo's evidence in cross-examination including the following: (a) In cross-examination he said that he showed apartment C904 to the Goltsmans. Mrs Goltsman in her affidavit said that they were told by him that apartment C904 could not be inspected. Mr Cirillo did not in his affidavit dispute that evidence of Mrs Goltsman. (b) In his first affidavit Mr Cirillo said that he took the Goltsmans to the shells of certain apartments in addition to T1204. However, in cross-examination he could not recall which apartments he showed them. (c) In his affidavit evidence he denied telling the Goltsmans that there would be a brick wall separating the bedroom area from the living room. He did not in his affidavits say that he told them that there would be a sliding wall. However, in cross-examination he said that he did tell them that there would be a sliding or moveable wall. At other points in his cross-examination he was unclear in his recollection and said that it was " likely " he told them that there would be a moveable wall but that he could not " specifically pinpoint" if he said that. (d) In his second affidavit he said that in his experience " internal walls in modern high-rise apartment developments such as 2 Elizabeth Bay Road are rarely, if ever, constructed using bricks ". In cross-examination, he said that he was unable to give an opinion as to the prevalence of use of brick in internal walls in apartments built in the last ten years. 113 Fourthly, the plaintiff criticised Mr Cirillo's evidence in cross-examination in relation to his affidavit evidence that following the signing of the contracts he completed a " buyer profile ", which was an electronic schedule maintained by Colliers in order to have a profile of the persons buying apartments at the site and their reasons for doing so. Next to the two entries for the plaintiff's name in respect of T1204 and C904 appear the words " INV " and " think the location is worth investing in ". He said that the only source of that information would have been the Goltsmans. He said he inserted the word " INV " because he understood that the Goltsmans through the plaintiff were buying as investors and were not intending to be owners/occupiers (which were denoted by the symbol " O/O " in the schedule). The plaintiff's criticism is that in cross-examination, he claimed for the first time that in his first conversation with Mrs Goltsman she said that she was looking for an investment property. 114 I accept that the above matters suggest that his evidence should be addressed cautiously. Nevertheless, he impressed me as an honest and generally careful witness.

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143 In their 30 October 2006 affidavits, Mrs Goltsman testified that Mr Cirillo handed Plan E to her husband during their third visit to the site; Mr Goltsman testified that Mr Cirillo handed it to him during their second visit. That evidence was inconsistent with their earlier affidavit evidence. In Mrs Goltsman's second affidavit of 8 May 2006, she said, " I had never been provided with a floor plan for apartment 1204 ". I was unpersuaded by Mrs Goltsman's explanation in cross-examination that she was there referring to an architectural plan by which I understood her to be seeking to distinguish Plan E. In Mrs Goltsman's third affidavit, of 27 September 2006, she contended that during the third visit Mr Cirillo handed her Plans B, C and D and said, " We do not have a floor plan for 1204. Unit 1204 won't look exactly like this but it will look something like this ". Mr Goltsman said in his first affidavit, of 27 September 2006, that during the second visit he asked Mr Cirillo whether he had a floor plan for T1204 and Mr Cirillo responded, " Not for that exact unit but the layout will be similar to " Plan A. As their evidence stood until 30 October 2006, they were clearly indicating that they had received no plan of apartment T1204 prior to contract. This suggests that they either did not receive Plan E prior to contract or, if they did, that it had no relevant operative effect on their minds. 144 Mr Goltsman admitted in cross-examination that Plan E showed a sliding door and a bedroom wall that was plainly not brick. He also appeared to admit that he did not know whether he relied on Plan E because he said " Here I got sliding door, so I don't know, believe in that plan or not believe in the plan ". Mrs Goltsman said in cross-examination that Plan E was with her all the time from her early meetings with Mr Cirillo, and that it indicated to her the nature of apartment T1204. Later she said it indicated to her what they were getting " kitchen wise" , and agreed that she understood it was not a typical one-bedroom apartment plan but one that gave a precise size and shape of T1204.

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153 Mr Cirillo represented to the Goltsmans that apartment T1204 would be a one-bedroom apartment. At that time, the defendant intended that the bedroom wall would be built in the way that it eventually was. That is, as a double panel floor to ceiling, sliding wall dividing the bedroom from the living/dining room. The plaintiff submitted that the representation was misleading or deceptive because a one-bedroom apartment must have a fixed wall: therefore, as built, apartment T1204 was a studio or bed-sit. 154 The ability to retract the wall from the balcony opens up the most attractive feature of the apartment, namely, the harbour views from both the bedroom and the living/dining room. From the bedroom, with the panel open, the water view to the eastern part of Sydney Harbour is exposed, whilst the view from the living/dining room expands to capture more of the city skylines. I accept the evidence of Mr Fischer, a director and the principal of the defendant, that that was why the sliding bedroom wall of this and other apartments in the redevelopment were conceived. When closed, the sliding wall completely separated the bedroom from the living/dining room. The construction and incorporation of the sliding panel walls was significantly more expensive than would have been the case if the walls had merely been fixed, with a standard door. 155 I have earlier found that prior to contract the Goltsmans saw a laminated plan of apartment T1204 as it was later built. The Goltsmans claim to have been given Plan E prior to contract, which, if true, seems to me to also indicate that they were aware the apartment was going to have a sliding two-part wall. However, I have held that I am not satisfied that they in fact received Plan E prior to contract. 156 The plaintiff submitted that even if the Goltsmans saw a plan prior to contract which depicted the sliding wall as it was later built, that did not override the express representations that, first, the bedroom wall would be brick and, secondly, that it would be a " one bedroom " apartment. 157 As to the plaintiff's first point, since neither the relevant laminated plan nor Plan E which they claimed to have received prior to contract showed a brick bedroom wall, it seems unlikely that Mr Cirillo would say that it was a brick wall. The allegation of a brick bedroom wall representation was not made until a late stage of the proceedings. Mr Cirillo denied making the representation. Mrs Goltsman in her affidavit evidence said that she " inferred " from the fact that Mr Cirillo (according to her) had said that the bedroom wall would be brick, that all the walls of apartment T1204 would be brick. Yet she said in cross-examination " I was firmly told it was going to be a brick walls all around " and " I did ask a salesman a question what kind of walls, walls in plural, are we having around the apartment and internal. We did ask this question ". This change in her evidence weighs against her reliability. I am not satisfied that the brick bedroom wall representation was made. If it was made, I am not satisfied that the Goltsmans relied on it because the relevant laminated plan and Plan E showed that it was not a brick wall. 158 As to the plaintiff's second point, two questions arise. First, what is a " one bedroom " apartment? Is it, as the plaintiff contends, an apartment which has a fixed wall between the bedroom and living room areas? Secondly, if so, did the Goltsmans understand that is what they would receive?

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159 There was conflicting evidence as to what a " one bedroom " apartment is. The opinion of Mrs Goltsman and that of Mr Peter Van Wyhe, an experienced real estate agent called in the plaintiff's case, was that apartment T1204 was not a one-bedroom apartment because it did not have a fixed wall. The opinion of Mr Cirillo and Mr Woods, real estate agents working for Colliers, was to the opposite effect. 160 The defendant tendered Internet advertisements for one-bedroom apartments in 2006 which indicated they had " sliding doors ", "sliding walls " and " glass partition sleeping area ". The defendant also tendered a survey of Internet advertisements in October 2006 for Elizabeth Bay and other inner city areas, which indicated that apartment T1204 was in the average size range of a one-bedroom apartment. However, the plaintiff in its submissions does not complain about the size of apartment T1204. 161 The plaintiff made the following submissions which I accept, with one qualification in relation to (i): (a) the opinions of Messrs Cirillo and Wood were personal opinions unsubstantiated by evidence and should not be given significant weight; (b) there is no industry practice as to how to describe an apartment which has sliding doors or walls separating the living area from the bedroom area; (c) while Mr Cirillo said that the use of sliding doors or walls to separate a bedroom area from the living area was " innovative " but not a " first ", he could not provide specific examples of where they had been used previously; (d) Mr Van Wyhe had never seen a unit with a sliding wall being marketed and sold as a one-bedroom unit; (e) according to the evidence of Mr Cirillo, some studio apartments have a defined space, for example having a " half wall showing the boundaries of the bedroom area "; and according to the evidence of Mr Van Wyhe, some studio apartments have a partition with screening between the living area and the bedroom area; (f) as a leasing consultant, Mrs Goltsman had not experienced apartments marketed as one-bedroom apartments having a division between the living area and the bedroom area defined by sliding or moveable walls; (g) the defendant's survey of Internet advertisements in 2006 of apartments with sliding doors as one-bedroom apartments does not assist the defendant because they do not demonstrate an industry practice. The advertisements explicitly state that there are sliding doors. Use of sliding doors was said to be " innovative " in 2003, so advertisements in 2006 do not represent common use in 2003. Generally, all one-bedroom apartments with floor plans in the survey have fixed walls; (h) in determining whether a representation of the apartment as a one-bedroom apartment was misleading or deceptive, one has to address the audience for that representation not what the makers of the representation may have thought; and (i) it should be taken into consideration that the apartments were being sold off the plan; at the time of purchase the Goltsmans could not have inspected the apartment as built. I think that the description "off the plan" should be qualified. The existing hotel building was being redeveloped and therefore many of its features were observable prior to contract. However, the bedroom wall was not one of them. 162 The evidence of Mr Peter Van Wyhe, on which the plaintiff largely relies, included the following: (a) in the real estate industry there is a well known and understood distinction between units that are described as " studio apartments " or " bedsitters " and those that are described as " one bedroom units ". The primary distinguishing feature is that one-bedroom apartments have a fixed wall from floor to ceiling that separates the living area from the bedroom area, whereas bed-sitter/studio units do not; (b) whilst bed-sitters/studios often have an internal floor space of less than 50m2 this is not necessarily so. Apartments greater than this size are still described as bed-sitter/studio apartments if there is no fixed wall between the living area and the bedroom area; (c) the distinction between bed-sitter/studio and one-bedroom units has an important effect on market price. In his experience and observation, in the current market a one-bedroom apartment in the high-rise residential areas of Elizabeth Bay and nearby areas typically sell for between $75,000 and $100,000 higher than a studio apartment of the same size; (d) he could recall no instance where an apartment with sliding walls, such as were in apartment T1204, had been marketed and sold as a one-bedroom apartment; and (d) in his opinion the market value of apartment T1204 as at September 2006 was $500,000 to $525,000 and as at November 2003 was $450,000 to $475,000 (if it had been constructed as at that date). 163 I give little weight to the views of Mr Van Wyhe for a number of reasons, substantially as submitted by the defendant. First, it was not disclosed until his cross-examination that he was a former employer as well as a friend and acquaintance of Mrs Goltsman. Where an expert has a pre-existing relationship with a party for whom the expert is giving evidence, a question arises as to whether the pre-existing relationship compromises the expert's objectivity. Non-disclosure of a pre-existing relationship by an expert witness is cause for concern. Secondly, Mr Van Wyhe's affidavit lacked exposure of assumptions or reasoning in coming to his conclusions. His estimate of value was unsupported by reference to any comparable sales, other data or analysis. He was not a valuer nor had he done any study of the methods used by valuers to value land. He disclosed in cross-examination that his affidavit had been dictated to him over the telephone by the plaintiff's solicitor and that the choice of words in the affidavit were not his own. Thirdly, his conduct in cross-examination suggested that he did not understand the role of an expert witness. He refused to answer some questions including questions which sought his opinion based on assumptions put to him. 164 Fourthly, Mr Van Wyhe's view was that the difference in price between a one-bedroom unit and a studio of the same size is between $75,000 and $100,000. In doing so, he propounded a view that if a prospective purchaser inspected an apartment advertised as " one bedroom " and discovered the dividing wall was sliding, they would discount what they would otherwise have been prepared to pay for that apartment by $75,000. This evidence is at odds with the evidence of Mr Fischer, a director of the defendant, that the inclusion of a sliding panel wall was significantly more expensive than would have been the case if the walls had merely been fixed with a standard door. Mr Fischer testified that to replace the sliding dividing wall with a fixed wall and door in apartment T1204 would cost only $2,656. I accept Mr Fischer's evidence. If Mr Van Wyhe's evidence is correct, the defendant or the plaintiff could increase the value of apartment T1204 by between $75,000 and $100,000 merely by replacing the sliding dividing wall with a fixed wall for $2,656 - a net gain of up to approximately $97, 000. In my view, this is implausible. When this logical consequence of his view was put to Mr Van Wyhe in cross-examination he denied, without adequate explanation, that it applied to apartment T1204.

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165 I accept the evidence of Mr Sukkar, the valuer called in the defendant's case, that the sliding walls made no difference to the value of the apartment. Mr Sukkar identified making the most of the views with the benefit of the sliding walls. The evidence of Mr Fischer and Mr Cirillo was that the sliding walls were a superior feature of apartment T1204. The sliding panel nearest the windows permitted expansive views from the living room through the bedroom windows and from the bedroom through the living room windows. Thus, the sliding panel nearest the windows contributed to the sense of space. 166 The question remains: what is a " one bedroom " apartment? One way of testing the matter is to hypothesize a purchase of, say, a " three bedroom " apartment off the plan prior to any construction. I think that description, in the absence of further explanation, would normally be understood to mean that the bedroom walls would be fixed walls with doors, not two-part sliding walls. I do not think that the analysis changes if the hypothesis relates to a " three bedroom " apartment or a " one bedroom " apartment. 167 It may be that a change in market usage of an expression such as " one bedroom " apartment could bring about an understanding in the market, or part of the market, that the bedroom may not have a fixed wall or may have a sliding wall. However, on the evidence before me, I am not satisfied that this was so in November 2003, when the subject contracts were exchanged. There is evidence that in 2003, sliding walls in apartments were a new concept. The 2006 evidence of some apartments being advertised as one-bedroom apartments coupled with a description which indicated that there was no fixed bedroom wall, is insufficient to draw a conclusion of a market understanding that the bare description " one bedroom " apartment, without such a description, would carry the same meaning, particularly in 2003. 168 However, I have found that prior to contract the Goltsmans saw the laminated plan which represented apartment T1204 as it was later built, including the two part sliding wall, and that with their real estate experience they would have been interested in and understood it. In my view, it would have left them in no doubt that the bedroom wall was not a fixed wall but a two part sliding wall. Consequently, I am not satisfied that the representation that it was a one-bedroom apartment was misleading or deceptive in that context, nor that they were mislead or deceived by that representation. 169 The cost of converting the sliding walls to a fixed wall with a door is $2,656. In view of the decision I have made, it is unnecessary to decide whether an award of damages in this sum would be the appropriate measure of relief rather than the relief sought by the plaintiff, which includes a declaration that the sale contracts are void ab initio . Brick bedroom wall representation

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180 I accept that the ceilings in apartment T2104 are unusually low. 181 The plaintiff submitted that there were no reasonable grounds for representing (by silence or impliedly) that there were no unusual significant features affecting spaciousness so far as ceiling heights were concerned. By September 2003, the defendant had already received an Alternative Solution Report by McKenzie Group dated 16 June 2003, which indicated that it was impossible to comply with the minimum height provisions of the BCA in relation to bathroom ceilings. In Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32, Black CJ stated that silence was to be assessed as a circumstance like any other and there was no general duty of disclosure. The question was whether having regard to all the circumstances there had been misleading or deceptive conduct. Black CJ said: Although ' mere silence' is a convenient way of describing some fact situations, there is in truth no such thing as ' mere silence' because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed. 182 It is necessary to consider: (a) whether the statements in the brochure received at the initial visit to the property is mere puffery or whether it is actionable as misleading or deceptive conduct concerning ceiling heights; and (b) if so, whether the plaintiff relied on such conduct. Sense of Space - puffery? 183 The statements concerning a sense of space were made in a colour brochure received by the Goltsmans at their first visit to the Gazebo redevelopment site. The defendant submits that the words in the colour brochure do not convey a representation of fact but are mere puffery. 184 " Puffery " refers to exaggeration in the context of advertising to attract potential purchasers. Puffery often accompanies the sale of real property. Whether pre-contractual representations are actionable or merely in the nature of puffery depends on the particular facts, considered " in the light of the ordinary incidents and character of commercial behaviour ": Australian Competition and Consumer Commission v Kaye [2004] FCA 1363 at [122] per Kenny J. In Overlook Management BV v Foxtel Management Pty Ltd [2002] NSWSC 17 at [118] - [120] , Barrett J set out the general principles regarding when a statement is caught by the prohibition in s 52 of the TPA: (a) latitude is allowed in commercial dealing by way of puffery; (b) "statements alleged to be caught by s 52 must always be assessed in their context" ; (c) " the reality is that a certain amount of hyperbole is permissible and to be expected in business without attracting legal sanctions "; and (d) "Section 52 does not subject commercial enterprises to a regime of enforced modesty in relation to their achievements and skills….That is not the way business works. " 185 In Hanave Pty Ltd v LFOT Pty Ltd (1998) ATPR 41 - 658 at 41,320 , Moore J observed: When looking at the conduct of the alleged infringer of s 52, one must look at the whole of the conduct not the particular matter on which the plaintiff has focused attention in isolation: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191, 199 and Pappas v Soulac Pty Ltd (1983) 50 ALR 231. In that last mentioned case at 234, Fisher, J said, in the context of an agent making statements about the ' commercial' viability of a shopping centre which the agent was selling, ... Many of the statements ... were also essentially the type of introductory comments , in the nature of puffery, made at the start of negotiations, for the purpose of attracting the interest of a possible 'purchaser'. As such they became irrelevant or of little, if any, significance when detailed information is subsequently given a fortiori, to a potential ' purchaser with commercial' experience. To the extent that they are essentially puffery, it is proper to be reluctant to elevate them to the status of potentially misleading conduct. 186 In Mitchell v Valherie (2005) 93 SASR 76 (CA) at [71] - [73], White J summarized the principles governing when a statement by a seller is caught by the prohibition in s 52 of the TPA: (a) "It is clear enough that it is not every statement made in contractual negotiations, or as a prelude to contractual negotiations, which will be regarded as conveying a representation. To constitute a representation, the statement must be a representation of fact." (b) "Statements that are so vague as to be incapable of being given any reasonably precise meaning or because they are exaggerated commendatory opinion rather than a statement of any factual matter do not give rise to an actionable misrepresentation." (c) "There are some introductory comments made at the start of negotiations for the purpose of attracting the interest of possible purchasers which are not reasonably to be understood as conveying a representation of fact. " (d) "The more specific the words used, the less likely it is that they will be regarded as mere puffery." (e) "In each case the statements have to be considered in their own context so as to determine what both the speaker and hearer would have understood them to mean." 187 In considering whether the words complained of in the colour brochure could be considered to convey a representation of fact, the following may be taken into account, substantially as submitted by the defendant. 188 First, the words appear in a conceptual glossy brochure which is pitched at a high level of generality. The brochure contains an express disclaimer that the information it contains is subject to change without notice and any interested party must undertake its own enquiries to confirm the accuracy of the information in the brochure. There are no statements in the brochure about apartment T1204 or about any particular apartment. The brochure contains no statements of hard facts about the property. Mr Goltsman conceded that the brochure contains only general statements about the development that could apply to any apartment in the development. 189 The brochure was, I think, a device to attract the attention of potential purchasers. It contained promotional catchwords. In Eighth SRJ Pty Ltd v Merity (1997) 7 BPR 15,189 at 15,205, Young J said: " It seems to me very difficult to allege that a newspaper advertisement which is designed primarily to tell people that a house is open for inspection should be construed as giving information other than preliminary information upon which a person should rely in order to enter into a contract. If one expects puffery anywhere it would be in such a newspaper advertisement." Similarly , it seems to me that the brochure gave preliminary information, that puffery is to be expected in brochures of this type, and that it is difficult to elevate the words in this brochure to the status of misleading or deceptive conduct or to say that they gave information upon which a person should rely in order to enter into a contract. 190 The second consideration is that the words about the aesthetic quality of apartments in the building - that they will have a " sense of space" and " be comfortable and easy and very liveable" - contain a subjective element. The plaintiff's case is that such words containing a subjective element convey a representation of hard fact. The Full Federal Court in John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR 41 - 249 at 41,359 referred to a representation of " hard physical fact" such as the net lettable area of a building which was an essential factor in determining the likely profitability and, in turn, the value of a building. The Full Court observed that information concerning " the net lettable area of a building, stands on a different footing from the puffery which often accompanies the sale of real property " because the matter of the size of the net lettable area of the building was " one of hard physical fact ". 191 It is difficult to convert statements such as " a sense of space " in a brochure into meaningful representations of fact. What is viewed as having a "sense of space" or being "easy and comfortable" by one person may not be so regarded by another. This is illustrated by the fact that witnesses in these proceedings have given evidence that sliding walls and a kitchen which is not enclosed in a separate room would add to the " sense of space " in the apartment. Mrs Goltsman conceded that sliding doors (as opposed to doors on hinges) save space when the door is open.

[139]

192 The third consideration is that the circumstances in which the brochure was issued suggest that readers would, as in fact occurred, enter the apartment and make their own observations. Before proceeding the Goltsmans saw for themselves the height of the concrete slabs in apartment T1204 during their inspections. The Gazebo project was a redevelopment of an existing hotel, something the Goltsmans knew. The height between the concrete slabs substantially dictated the final ceiling heights. The height between the concrete slabs, which the Goltsmans saw upon their inspection, was between 2.415 and 2.435 metres (that fact may be contrasted with their evidence that the concrete ceilings appeared on their inspection to be over 0.5 metres or about 1 metre above them). The heights between the concrete slabs were already close to the minimum heights under the BCA; that is, before any of the redevelopment work on the apartment had taken place. The final ceiling heights in the "habitable areas" of apartment T1204, which were dictated by the need for plasterboard ceilings to accommodate services in the ceiling and carpet in the living/dining room and bedroom areas, were only approximately 5.5 to 7.5 cm lower than that concrete slab height. That is, the height went from between 2.415 and 2.435 metres to between 2.34 to 2.38 metres. 193 Given the Goltsmans' experience in the redevelopment of existing buildings into apartments for sale, when they saw the concrete slabs, they must have understood, or ought reasonably to have understood, that the ceiling height would be less than the observed height because of the redevelopment work that was yet to take place in the apartment. Mr Goltsman admitted he had experience (gained in relation to the investment properties he had developed) of the need to change ceilings of an existing building for fire protection. 194 The fourth consideration is that statements in a high-level colour brochure become of little significance when detailed information is subsequently given, particularly to a potential purchaser with commercial experience. The plaintiff signed a sale contract, which included a strata plan of the apartment, and was shown the laminated plan showing the sliding door and the ultimate floor plan of the kitchen. 195 Those considerations lead me to the conclusion that the statements that apartments in the redevelopment would have " a sense of space" and be " comfortable and easy and very liveable" are mere puffery and are not actionable as misleading or deceptive conduct. Sense of space - misleading or deceptive, reliance?

[142]

200 Notwithstanding this experience, Mrs Goltsman asserted in relation to the colour brochure that she did not understand the style of language it used as typical advertising words used by real estate people seeking to sell real estate. In my view, that evidence was implausible. 201 A linkage between ceiling heights and the words in the brochure was not alleged until a late stage of the proceedings. Whatever the Goltsmans' assumption may have been about the ultimate ceiling heights, I am unable to attribute it to reliance on the words in the brochure. 202 Accordingly, I reject the sense of space representations claim. Separate Kitchen Representation 203 The plaintiff's pleaded representation is that apartment T1204 would have a kitchen in a room separate from other rooms. The defendant denies making the representation. 204 This alleged representation was first raised on 30 October 2006, about two weeks before the hearing began, about 18 months after Mrs Goltsman first inspected the kitchen in its nearly final form, and about a year after Mr Goltsman first inspected the finished apartment. 205 Mrs Goltsman swore in her fourth affidavit, dated 30 October 2006, that based on plans B, C, D and E, " especially D ", she believed that the apartment would have a separate kitchen. Mr Goltsman's different evidence in his second affidavit, dated 30 October 2006, was that he believed there would be a separate kitchen because during the second meeting Mr Cirillo told his wife and him that " there will be a separate kitchen " and because of what was shown on Plans A and E. 206 A month before this was first alleged as a representation, Mrs Goltsman swore her third affidavit annexing Plans B, C and D, which show kitchens with different floor plans but made no reference to a kitchen representation. In her earlier and second affidavit she exhibited a photograph of the kitchen but made no complaint in relation to the kitchen. In Mr Goltsman's first affidavit sworn on 27 September 2006, he listed the reasons why he would not have permitted the plaintiff to buy the apartment, but they did not include reference to the kitchen. 207 The words attributed by Mr Goltsman to Mr Cirillo are " there will be a separate kitchen ". This is not in the same terms as the pleaded representation that the kitchen would be " in a room separate from others ". Assuming Mr Cirillo uttered these words, the defendant submits that in fact there is a " separate kitchen " albeit not " in a room separate from others ". It is unnecessary to decide that point because the issue can be decided on other grounds. 208 I have earlier found that the Goltsmans did not receive Plan D prior to contract, that I am not satisfied that they received Plan E prior to contract, that they saw the relevant laminated plan and would have understood it, and that they were given a similar A4 architectural plan. The laminated plan showed the apartment as it was built, including the kitchen. Mr Cirillo denied making the alleged oral statement and testified that he is confident that he discussed the kitchen with the Goltsmans and that he pointed to where it was on the laminated plan. I accept his evidence. 209 These findings remove most of the substratum of the Goltsmans' alleged belief. There remain Plans B and C on which Mrs Goltsman (but not Mr Goltsman) said she relied. They showed larger apartments. I do not accept that they contained a representation that apartment T1204 would have a kitchen in a separate room or that the plaintiff relied upon them in that respect. Accordingly, I reject the separate kitchen representation claim. Brick Walls Representation 210 This allegation was first made at a very late stage of the proceedings. The inter-apartment walls are not brick but gyprock. Insofar as the brick walls representation is alleged to be implied from Mr Cirillo's representation that the bedroom wall would be brick, as I have not accepted that that representation was made, the allegation fails. Even if the brick bedroom wall representation had been made, I do not agree that it necessarily implied that all walls would be brick. Insofar as it is alleged by Mr Goltsman that Mr Cirillo made an express oral representation that all the walls would be brick, I am not satisfied that he did. CONCLUSION AND ORDERS 211 I propose to dismiss the plaintiff's claim for the reasons set out above. Consequently, the defendant is entitled to orders for specific performance of the sale contracts and to relief in relation to the guarantees, as sought in the cross-claim. Liberty to apply will be granted which, if necessary, will enable application to be made for the purpose of dealing with any matter involved in or arising in the course of working out the orders for specific performance: Morrow v Tucker [No 2] [2006] NSWSC 1358 at [22]. 212 I make the following orders: 1. The plaintiff's claim is dismissed with costs. 2. Declaration that the cross-claimant is entitled to have the contract dated 6 November 2003 for the sale of apartment T1204, 2 Elizabeth Bay Road, Elizabeth Bay, New South Wales, being part Lot 10 in Deposited Plan 635300 and being Lot 48 in Strata Plan 73943, for the amount of $677,500 (" the T1204 Contract ") specifically performed by the first cross-defendant. 3. Declaration that the cross-claimant is entitled to have the contract dated 6 November 2003 for the sale of apartment C904, 2 Elizabeth Bay Road, Elizabeth Bay, New South Wales, being part Lot 10 in Deposited Plan 635300 and being Lot 153 in Strata Plan 75363, for the amount of $615,000 (' the C904 Contract ") specifically performed by the first cross-defendant. 3. Order that the first cross-defendant specifically perform the T1204 Contract. 4. Order that the first cross-defendant specifically perform the C904 Contract. 5. Declaration that each of the second cross-defendant and the third cross-defendant is liable to the cross-claimant for: (a) payment to the cross-claimant of all monies due to the cross-claimant under the T1204 Contract and the C904 Contract; and (b) the due and punctual performance by the first cross-defendant of all the first cross-defendant's obligations under the T1204 Contract and the C904 Contract. 6. Order (a) that a registrar fix a time and place for completion of the T1204 Contract and the C904 Contract; (b) that a registrar certify the sums which should be paid by the first cross-defendant to the cross-claimant on completion of the T1204 Contract and the C904 Contract; (c) that the cross-claimant and the cross-defendants attend at the time and place fixed for completion of the T1204 Contract and the C904 Contract; (d) that the cross-defendants pay to the cross-claimant the sums certified pursuant to order 6(b) above; and (e) that the cross-claimant and the first cross-defendant execute all such documents and do all such things necessary in order to enable the sales to be completed. 7. Order that the cross-defendants pay the costs of the cross-claim. 8. Grant liberty to apply on three days notice. 9. The exhibits may be returned.

Lymquartz Pty Limited v 2 Elizabeth Bay Road Pty Limited

At a glance

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Judgment (143 paragraphs)

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Legislation Cited (4)

Cases Cited (7)

Cited By (1)