Maisey, G.W. & Anor v. Mudgeeraba Village Estates Pty Ltd & Ors [1985] FCA 191

Federal Court of Australia|1985-05-22|Before: Neaves J

The cross-claims by the first cross~-claimant and the second cross-claimant against the third

The first cross-claimant pay the third ecross-respondent's costs of the proceedings,

The applications by the first cross-claimant and the second cross-claimant for judgment by default against the first cross-respondent and

ZOLENE ELIZABETH PERRY Fourth Respondent and Second Cross Claimant

SURETY INVESTMENTS PTY. LIMITED Second Cross Respondent

JUDGE MAKING ORDER : Neaves J. DATE OF ORDER : 22 May 1985 WHERE MADE : Sydney THE COURT ORDERS THAT:

The cross-claims by the first cross-claimant and the second cross-claimant against the third

The applications by the first cross-claimant and the second cross-claimant for judgment by default against the first cross-respondent and

Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN_THE FEDERAL COURT OF AUSTRALIA UEENS DISTRICT REGISTRY

SURETY INVESTMENTS PTY. LIMITED Second Cross Respondent

The cross~claims by the first cross-claimant and the second cross-claimant against the third

The first cross-claimant pay the third cross-respondent's costs of the proceedings,

The applications by the first cross-claimant and the second cross-claimant for judgment by

Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY

ZOLENE ELIZABETH PERRY Fourth Respondent and Second Cross Claimant

SURETY INVESTMENTS PTY. LIMITED Second Cross Respondent

ZOLENE ELIZABETH PERRY Fourth Respondent and Second Cross Claimant

SURETY INVESTMENTS PTY. LIMITED Second Cross Respondent

To visit Camelot, the legendary capital of King Arthur's Kingdom, was reputed to be a joyful and rewarding

experience and to be conducive, in the lyrics of the well-known musical, to "happily ever-aftering". The association which the applicants in the present proceedings had with Camelot in the guise of Camelot Real Estate at Broadbeach on the Gold Coast of Queensland led to no such experience. On the contrary, that association has for them resulted only in concern, worry and financial loss. Their Mordred was one John Patrick Ord (known as Patrick Ord) and, unfortunately for them, there was no Merlin on whom they

could call to retrieve the situation in which they found

The consequence is that I have before me three proceedings which, by consent, were heard together. In the first proceeding the applicants are Glenn Wayne Maisey and Jacqueline Annette Maisey. The applicant in the second proceeding is Elizabeth Smedley and in the third proceeding Nick James Pty. Limited. In each proceeding the respondents are Mudgeeraba Village Estates Pty. Limited ("Mudgeeraba"), a company carrying on areal estate business under the business name "Camelot Real Estate", and Zolene Elizabeth Perry. When each proceeding was commenced three other

parties were joined as respondents but the applicants in

each case subsequently discontinued the proceeding as

against two of those parties and the Court, in interlocutory proceedings, entered judgment in favour of the other. The remaining respondents, Mudgeeraba and Mrs Perry, have in each proceeding cross claimed against First Coast Pty. Limited ("First Coast"), Surety Investments Pty. Limited

The proceedings arise out of transactions which resulted in the applicants investing moneys by way of capital contribution in a limited partnership styled "First Coast Pty. Ltd. and Others" formed under the Mercantile Act of 1867 of the State of Queensland and entering into contracts for the purchase of residential units in a high rise building to be erected at Broadbeach, Queensland and to

be known as "The Lodge". The applicants allege that they

were induced to enter into those transactions by representations, which were false, made to them by David White, the third cross respondent, then a real estate salesman employed by Mudgeeraba. In the proceeding brought by Mr and Mrs Maisey and that brought by Mrs Smedley damages are sought for breach of section 52 of the Trade Practices Act 1974, for fraudulent misrepresentation and for negligent mis-statement. In the proceeding brought by Nick James Pty. Limited the claim is based on breach of section 52 of the

Trade Practices Act 1974 and fraudulent misrepresentation.

The Limited Partnership The Mercantile Act of 1867 of the State of

Queensland provides for the formation of limited partnerships for the transaction of any business, other than banking or insurance, by any number of persons upon the terms and subject to the conditions and liabilities set out in the statute (section 53). Every such partnership may consist of general partners who are to be jointly and severally responsible as general partners are by law and of persons to be called special partners who are to contribute to the common stock specific sums in money as capital beyond which they are not to be responsible for any debt of the partnership except in the cases provided for in the statute

The general partners only are to transact the business of the partnership (section 56). All the persons forming the partnership are, before commencing business, to sign a certificate containing the style of the firm under which the partnership is to be conducted, the names and Places of residence of all the partners distinguishing the general from the special partners, the amount of capital which each special partner contributes and of the amount contributed by the general partners to the common scock, the general nature of the business to be transacted, the principal place of business and the time when the

Partnership is to commence and when it is to terminate

(section 55). No such partnership is to be deemed formed until the certificate has been acknowledged by each partner before a justice of the peace and registered in the office of the registry of deeds in Brisbane (section 57). No such partnership may be entered into for a longer period than

seven years but a partnership may be renewed provided a

fresh certificate is signed, acknowledged and registered

By deed made 19 June 1981 between First Coast as the general partner and First Coast and Surety Investments as the special partners the parties agreed to forma limited partnership under the Mercantile Act of 1867 to carry on the business of real property development under the name "First Coast Pty. Ltd and Others". The partnership was to begin on the date of registration in the office of the registry of deeds in Brisbane of the certificate required by section 55 of the Act and, subject to the provisions for dissolution contained in the deed, was to continue for 7 years (clause 1.3). The commencing date was, in fact, 19 June 1981. The partnership business was to be carried on from 10 Short Street, Southport, Queensland and at such other place or places as the partners might agree (clause 1.4) and was to be carried on and managed by the general partner alone {clauses 1.6 and 3.1). The general partner was to contribute as its agreed capital to the partnership $5,000

contribute to the partnership as its agreed capital contribution the sum of $5,000 per capital share unit (clause 2.2). The numbers of capital share units to be held by First Coast and Surety Investments were 60 and 945 respectively (clause 2.3 and the Second Schedule). Each Special partner was entitled, subject to the provisions of the deed, to transfer, assign and convey his interest in the partnership in whole or in part (clause 2.5). One of the conditions to which this power was subject was that the assignee agree to be bound by the terms of the deed asa special partner. The general partner was to receive a management fee for its services being a sum calculated at 1.75 per centum of the capital of the partnership per annum payable quarterly in advance and a further sum on termination of the partnership (clause 3.3). Provision was made for bank accounts to be opened and maintained (clause 3.5) and for the partnership to indemnify the general partner (clause 3.6). There was to be a committee of management (clause 4.1) which was for the first six months

to consist of John Patrick Ord solely and thereafter to

comprise 3, 5 or 7 members as might be decided from time to time by a majority vote of the special partners (clause

4.2). Provision was made for the allocation and distribution of profits and losses as between the partners

Special partners were to be entitled to receive an @llocation of profits equal on a cumulative basis to 10.5 per centum per annum on their respective agreed capital contributions subscribed in cash to 'the capital of the partnership. All profits remaining after the payment of the management fee to the general partner and the amounts above mentioned to the special partners were to be divided in proportion to the respective capital contributions subscribed in cash to the capital of the partnership. Losses were to be borne by the general and special partners in proportion to their respective capital contributions

First Coast and Surety Investments were incorporated in Queensland by Mr Ord apparently for the purpose of carrying out the development project which he had in contemplation. The development project required the acquisition of a suitable site and the erection thereon of a high rise building containing residential units. Neither of the companies had substantial assets and, in order to finance the project, the limited partnership to which reference has already been made was formed. Investors were to be invited to join the limited partnership as special partners, contributing for one or more of the capital share units of $5,000. I shall, for convenience, refer to the capital share units as shares in the limited partnership. An investor who contributed for 10 shares, that is to say,

invested $50,000 in the project, was to be entitled to select a residential unit in the high rise building to be constructed and to enter into a contract to purchase that unit at the current list price as published by the partnership, paying a deposit of 2.5 per centum of that price on signing the contract. The balance was payable on settlement following completion of the building which was represented as occurring in approximately 2 years after the

The limited partnership having been formed, First Coast, at the end of July and the beginning of August 1981, entered into contracts to purchase 6 adjoining blocks of land, 4 fronting Victoria Avenue and the remaining 2 fronting Albert Avenue, Broadbeach. The total purchase price was $2,432,750 and deposits totalling $243,275 were paid. The evidence does not identify the source of the moneys used for that purpose. Under each of those contracts the stipulated settlement date was 6 November 1981. It is convenient to mention here, although out of chronological sequence, that First Coast failed to pay the balance of the purchase moneys and the deposits were forfeited. The contracts were re-negotiated, involving the payment of further moneys totalling $50,500 by First Coast to the vendors with settlement to take place in February 1982.

Again, First Coast defaulted and the additional moneys were

behalf of First Coast and Surety Investments extolling the virtues of "The Lodge" project and the advantages of carrying out that project by medium of a limited partnership. According to the brochure that kind of partnership offered "maximum advantage in capital gain

consistent with minimum initial investment". The brochure

"The Directors ef First Coast Pty. Ltd. are confident of returning a minimum of 23 per cent per annum capital gain to owners; after all, that's what some markedly inferior units in other high-rise developments are achieving. However the accompanying booklet shows that early partners could enjoy benefits considerably above that figure. Benefits exclusive to 'The Lodge'."

"First Coast Pty. Ltd. is constructing a 25 storey,

95 Unit, building upon a site of almost one acre directly opposite the Broadbeach International Hotel in Victoria Avenue, Broadbeach, Gold Coast, Queensland.

one-bedroom Units, and 2 Penthouses of 3 bedrooms each ..."

After referring to the limited partnership and the proposal to issue 1,005 shares at $5,000 per share, the booklet continued:

"Shares will attract profits at an expected rate of over 23% per annum. A rate of 10.5% per annum is guaranteed in the Deed of Partnership. However, the profitability of the project is such that a rate in excess of 23% per annum is expected. This statement is hased upon the profitability of comparable projects in this area.

Repayment of principal amounts and accumulated interest will be on settlement of the sales of Units and at the termination of the Partnership. This is expected to be within a period of 24 months from 19th June, 1981, the date of registration of the Partnership.

Investors will be invited to exchange contracts for sale on one Unit for each 10 shares taken up.

Deposit will be 2.5% of Contract Price., Contract Price will be according to the latest dated Sales

The booklet described First Coast as the vendor and Surety Investments as a licensed real estate agent appointed by the

An investor was required to complete an application form for shares in the partnership and, where applicable, a further application form in respect of a residential unit and send the same, with a cheque in favour of Surety Investments for the amount to be invested, to First Coast. A contract of sale in respect of a residential wnit was then to be sent to the investor for signature. The contract was to be returned to First Coast with a cheque for a deposit of 2.5 per cent of the purchase price of the unit, such cheque to be in favour of Surety Investments Pty. Ltd. No.1 Trust Account. The investor would then receive a copy of the contract executed by the

vendor and a transfer note for his partnership shares. Upon

completion and return of the transfer notes the investor was to

be sent numbered investment certificates as evidence of his

ownership of the partnership shares transferred to him.

There are statements in the booklet which are clearly not in accordance with the facts. One example is the statement that First Coast "is constructing" the building. At the time the booklet was prepared the company had not acquired the land let alone commenced to construct the building. Another example is the statement that profit at the rate of 10.5% per annum was guaranteed in the deed of partnership. This mis-stated what was in the deed. A third example is the statement that at registration of the partnership on 19 June 1981 all the available special partner shares were owned by Surety Investments. Two comments may be made. First, the statement is inconsistent with the deed which provided for the shares to be held as to 60 by First Coast and as to 945 by Surety Investments. Secondly, no capital contributions were subscribed in cash by First Coast or Surety Investments in

Camelot's Involvement with "The Lodge" As has already been mentioned Mudgeeraba carried on

the business of a real estate agent under the business name Camelot Real Estate ("Camelot"). The directors of the company were Mrs Perry, her husband John Perry, Donald Totty and his

wife Beatrice Totty. The business was carried on from, amongst

other places, an office at 23 Victoria Avenue, Broadbeach, an

address which was only a very short distance from the land on which "The Lodge" was to be constructed. Mrs Perry was the manageress of the Broadbeach office and had the day to day control of that office and of the staff, including the sales

staff, employed there. She appears to have spent part of her time at other offices of Mudgeeraba in the Gold Coast area. In dune, July and August 1981 the sales staff employed at the Broadbeach office included Mr White, the third cross

Sometime in June 1981 Mr Ord approached Camelot through Mr Sellick with a request for assistance in locating suitable office premises to rent. Mr Ord also asked Mr Sellick to see if an option to purchase certain land in Albert Avenue, Broadbeach could be obtained. It may be mentioned that that land was not the land on which "The Lodge" was to be erected. Mr Ord interested Mr Sellick in "The Lodge" project and he, in

turn, discussed it with Mrs Perry. At Mrs Perry's suggestion

(or, as she would say, insistence) a meeting was held at the Broadbeach office of Camelot on 4 August 1981 for the purpose of discussing the project. Mr Ord and Miss (Maartze Adriana) Adma Bakker (variously described in the documentation as Secretary of First Coast and Surety Investments and as the Marketing Manager of the project) attended the meeting as did

representatives of Camelot including Mrs Perry, Mr Totty, Mr

White and Mr Sellick. There was a general discussion

concerning the project. Mr Ord''s obvious purpose was to have

Camelot list the project and endeavour to attract investors.

For those representing Camelot the purpose of the meeting was

to ascertain as much detail as possible about the project, including an understanding of the limited partnership structure which was a new phenomenon to them, with a view to deciding whether it was a project with which Camelot should be

Arrangements were made to take a tape recording of what was said at the meeting. The whole of the meeting was not recorded and much that is on the tape cannot be transcribed due, at least in part, to more than one person speaking at the same time. A transcript of those parts of the tape that can be transcribed is in evidence. From that transcript and the evidence of those who were present at the meeting I am satisfled that at the meeting Mr Ord, amongst many other things, said that -

The cost of the project would be of the order of $11.5m. of which $S5m. was to be subscribed by

investors and the balance was to be raised by way of

In order to be able to borrow $6.5m. to finance the construction of the building it was essential that the subject land be unencumbered.

. Although contracts for the purchase of the land had

been entered into and deposits paid, it was necessary

that 40 investors each investing $50,000 he found in order that First Coast might complete the purchase of the land and obtain an unencumbered title.

. Settlement in respect of the purchase of the land was to take place on or before 6 November 1981 so that

He had no background in building or in real estate

development, his area being the raising of finance.

At the conclusion of the meeting Mrs Perry informed Mr Ord that she would look further into the project and obtain opinions on it but that she was not prepared to investigate the matter or do business with him unless Camelot was given an

On 7 August 1981 Surety Investments sent to Camelot a

document entitled "Authority to Sell", the operative part of

"We hereby engage and appoint you to act as a Real Estate Agent for the purpose of selling the property

hereinafter described and agree to pay you commission at the rate of 100% (one hundred per

cent) of REIQ Scale if you find a Purchaser/s who enters into a valid and enforceable Contract of Sale

confirmed by us for such property and:- (a) who completes such sale; or

Sale and deposit paid or some part thereof is forfeited; or the Vendor and Purchaser/s mutually agree to rescind the Contract of Sale.

ADDRESS OF VENDOR/S: 10 Short Street, SOUTHPORT 4215 PHONE: 328.333

ADDRESS OF PROPERTY: The Lodge, Victoria Avenue, BROADBEACH

5863 165 Ward Gilston Broadbeach Allotment 20 of Section 5505 246 Ward Gilston Broadbeach Allotment 21 of Section 3952 39 Ward Gilston Broadbeach Allotment 22 of Section 4558 89 Ward Gilston Broadbeach Allotment 19 of Section 6044 242 Ward Gilston Broadbeach Allotment 8 of Section (Deed not Ward Gilston Broadbeach Allotment 7 of Section

FURTHER TO THE AFORESAID one half of such commission shall be paid to you upon payment of a deposit of 2.5% (two and one half per cent) of the Purchase Price and payment also of a sum of s50,000 or more for the purchase of shares in the First Coast Pty Ltd and Others Limited Liability Partnership by the Purchaser. The balance of such commission shall be paid at settlement.

In the event that for any reason whatsoever the aforesaid deposit has to be refunded to thc Purchaser then an amount equal to the commission already paid to the Agent shall be repaid to the Purchaser by the Agent." 232323

The document was signed on behalf of Camelot Real Estate by Mrs Perry and Mr Totty on 7 August 1981 and returned immediately to Surety Investments. On the following day the document was

signed by Mr Ord on behalf of First Coast as vendor.

Shortly thereafter a sign was erected on the land on which "The Lodge" was to be erected advertising the project and containing the names of the real estate agents authorised to

sell units in the proposed building. The names included that

Subsequent to the meeting on 4 August 1981 inquiries were made by Mrs Perry of the solicitor for Camelot, Mr Stephen John Davoren, and its accountant, Mr David Alexander Thompson. Both expressed to her views unfavourable to the project as one involving a high degree of risk for the investor. Mrs Perry also mentioned the matter to local real estate agents (who expressed views favourable to the project) and casually to other business acquaintances who were not identified in evidence but whose views were said to be unfavourable. Certain other inquiries were made by Mr Totty and Mr Sellick. Mr Totty inquired of the Corporate Affairs Commission in Brisbane and of

persons with whom he had business associations but was unable to obtain any information concerning the project or Mr Ord. Mr Sellick made inquiries of the police in New Zealand where, it

was understood, Mr Ord had been associated with a company that

had failed. Those inquiries elicited that Mr Ord had no

persons whom she described as valued customers or clients in

relation to the project. One of those letters is in evidence

"The enclosed brochure and information will be of interest to you.

Mrs Perry, in evidence, agreed that the reference in the letter to the project being of interest to the recipient was badly phrased and misleading. She said that she had intended telephoning the recipients to explain that what she was seeking was their guidance as to the suitability of the project as an investment. She did not do so, however, and received no response to two of the letters. She said she had a discussion with the other recipient in a car travelling from Brisbane to

inspect a site and the view expressed by that recipient was

Notwithstanding that inquiries were being made into the project and Mr Ord, display material advertising "The Lodge" project, which had been prepared by Mrs Perry and Mr Sellick to put before Mr Ord at the meeting on 4 August 1981,

was placed in the window of Camelot's premises at Broadbeach.

There was conflicting evidence as to the period during which this advertising material remained in the window but I am satisfied, and I so find, that it remained there until at least some time in October 1981. I accept the evidence of Mr Maisey that the advertisement for "The Lodge" was in the window of Camelot's Broadbeach office on his first visit (late August or early September 1981) and that of Mr Peter Francis Hill that it remained there for a time after he became an employee of Camelot on 30 September 1981. I reject the evidence to the contrary by Mrs Perry and Mr Totty. "The Lodge" project was

also from time to time advertised ona chalk board on the

Towards the end of August 1981 Camelot received further copies of the brochure and booklet relating to "The Lodge" project to which reference has already been made and

other promotional material. From this material kits were

At about this time a circular letter was prepared as part of the material to be supplied to prospective investors. Copies were made on the letterhead of Camelot. Mr Sellick gave evidence that Mrs Perry and himself were the authors of the document. Mrs Perry denied that she had any part in the preparation of the document. However that may be, I am

satisfied that Mrs Perry was aware of the existence of the

document and that it was being included in the kits for

prospective investors. The circular letter contains statements

which can only be described as untrue and misleading.

At about the same time new business cards were printed for Mr Sellick and Mr White describing them as "Investment consultants". The cards also bore the name and logo of Camelot. Mrs Perry denied that Camelot had arranged for these cards to be printed: she suggested that that had been done by Mr Sellick or by Mr Ord. I am satisfied that the cards were printed on the instructions of Camelot. I am also satisfied that Mrs Perry was aware of the existence of the cards at the time and that the cards described Mr Sellick and Mr White as

Mr White travelled to Sydney on 15 September 1981 and

returned approximately one week later. Before going to Sydney he had a meeting with Mr and Mrs Maisey. While in Sydney he

It will be necessary to return, in greater detail, to

some of the matters already mentioned but before doing so it is

'convenient to refer to the three transactions which are the

Mr Maisey was a farmer and part-time teacher who, with

his wife, moved from Sydney to Blue Knob via Nimbin, New South

Wales in 1977. In August 1981 Mr and Mrs Maisey had funds available to them which they wished to invest. Mr White's

mother was a friend of Mrs Maisey and, during a visit Mr and

Mrs Maisey made to Sydney, Mrs White informed them that her son was working in real estate on the Gold Coast. Mr Maisey, who had known Mr White in Sydney, telephoned Mr White and arranged an appointment to see him at the office of Camelot at

A meeting subsequently took place between Mr and Mrs Maisey and Mr White at the offices of Camelot when they sought advice concerning the investment of their funds. This meeting took place at the end of August or in the early part of September 1981. Mr Maisey saw the display in the window of the Camelot offices advertising "The Lodge". He did not take particular notice of it when he arrived but after the meeting with Me White he spent some time looking at it. Mr White spent most of the meeting, which lasted for some two hours, talking about "The Lodge" explaining "how it wags set up, how it worked". According to Mr Maisey, Mr White said that in his opinion "The Lodge" was the best investment he had for then. Also, according to Mr Maisey, Mr White produced a price list of the units in "The Lodge" on which 30 units had been marked off. Mr White explained that this meant that 30 investors had committed themselves to the project: that the best units had thus been taken and that there were only a couple of the better

units left. Mr White further said that, by virtue of the

"sale" of the 30 units, the purchase price of the land on which the units were to be built was covered and that there was minimal risk because the investors became part owners of that land which, if the project did not proceed, could be re~sold, possibly at an enhanced price, with a return to the investors of the amount they had invested in the project. Mr Maisey also said that Mr White informed his wife and himself that the project and Mr Ord had been investigated fully by Camelot; that inquiries made in New Zealand had disclosed that Mr Ord had no criminal record; that Mr Ord had been engaged in the business of merchant banking; and that he had been successful in

projects similar to "The Lodge". Mr White gave to Mr Maisey a copy of the brochure and the booklet to which reference has

been made together with other material relating to "The Lodge"

After the above conversation Mr White took Mr and Mrs Maisey to inspect other investments that were available. Mr and Mrs Maisey then returned home. There were subsequent telephone conversations between Mr Maisey and Mr White and, about a week or a little more after the meeting at Broadbeach, Mr Maisey informed Mr White that he and his wife proposed to

Mr Maisey and his wife again came to Broadbeach on 23 September 1981, about 2 weeks after the original meeting, and saw Mr White who took them to the office of Mr Stephen English,

solicitor. Mr English had been recommended to them by Mr White as @ legal adviser in relation to the appropriateness of the documents they were asked to sign. At Mr English's office Mr and Mrs Maisey signed an application to be registered as a special partner for 4 shares in the partnership and a form of transfer of shares from Surety Investments to themselves, completed a document nominating unit 18B as the unit to be purchased and signed a form of contract for the purchase of that unit. Mr Maisey handed to Mr English 2 cheques, one for $20,000 and the other for $4,000.

On the same day, 23 September 1981, First Coast executed under its common seal 4 investment certificates each recording that Mr and Mrs Maisey were the registered holders of 1 share in the limited partnership. On the next day First Coast forwarded to Mr English the 4 investment certificates, a trust account receipt (Surety Investments Pty. Limited No.1 Trust Account) for $4,000, a receipt (First Coast) for $20,000 and the transfer of shares form duly executed by Surety

On 23 October 1981 Mr Maisey again went to the Gold Coast and saw Mr English. He gave Mr English signed documents relating to the taking up of a further 6 shares in the partnership and handed to Mr English a cheque for $30,000. On the same day First Coast executed 6 investment certificates in

favour of Mr and Mrs Maisey anda receipt for the sum of

$30,000. Surety Investments also executed the transfer of

shares document which had already been signed by Mr and Mrs

were informed by Mr English that First Coast had failed to complete the purchase of part of the land at Broadbeach on which "The Lodge" was to be built. By letter dated 21 December

1981 Mr English forwarded to Mr and Mrs Maisey a copy of a letter of even date received by him from First Coast confirming that settlement for all the parcels of land had not taken place on 6 November 1981 because the necessary finance was not available. There was subsequent correspondence from Mr English

culminating in a letter dated 5 February 1982 informing them that First Coast had failed to settle under the re-negotiated

Mrs Smedley gave evidence that she was a friend of Mr White's mother. In the course of conversation with her, Mrs

Smedley expressed a desire to return to Queensland to live and as a result Mrs White arranged for her to see her son.

Subsequently a meeting took place between Mrs Smedley and Mr White at Mrs White's home in Sydney. Mrs Smedley expressed interest in purchasing a small cottage or land on which to build but was assured by Mr White that nothing of that kind was on the market for the money she had available. He then

introduced her to "The Lodge" project giving her a folder of documents and pointing out how good an investment it was. Mrs Smedley said that at that meeting Mr White informed her that she "could not lose anything else but the initial deposit; that

was two and a half per cent." He also informed her, according to Mrs Smedley, that the land for the project had been bought

by which she understood him to mean that the purchase price had been paid:

A second meeting took place between Mrs Smedley and Mr White a few days later, apparently on 21 September 1981. Mrs Smedley gave evidence that, in further discussing the project, she asked Mr White whether Mr Ord had been investigated and Mr White replied: "Yes, Camelot have investigated and they have found everything above board." He also said that about 30 units had been sold and that the unit she had selected was not

At the second meeting Mrs Smedley decided to invest. She then signed documents put before her by Mr White and gave Mr White a cheque or cheques for $25,000 and the amount of the deposit on the unit namely $3,925. Mr White handed over the cheque or cheques to Surety Investments on 23 September 1981. Mrs Smedley subsequently signed a form of contract sent to her by Mr English who was, with her concurrence, engaged to act as

A cheque for $25,000 representing the balance of the investment was sent by Mrs Smedley to Mr White care of Camelot. Mr White had by that time left the employ of Mudgeeraba and the letter was opened by Mr Sellick on 15 October 1981. The cheque

was delivered by him to Surety Investments on 16 October 1981.

Mrs Smedley subsequently received correspondence from Mr English, similar to that received by Mr Maisey, concerning the failure of First Coast to complete the purchase of the land.

The James Transaction Mr James gave evidence that he had known Mr White

since their school days and that they had met together from time to time. He was by occupation a roofing contractor, the business being conducted as a family business through a company, Nick James Pty. Limited, of which he and his wife were the only shareholders and directors. At one of his meetings with Mr White he had mentioned that he had some moneys available for investment and he would be interested to consider

Mr James said that he first learned about "The Lodge" project on 18 September 1981 when Mr White came to Sydney to see him about it. He produced a brochure, a booklet, an architect's impression of the proposed building, a price list

and other relevant documents. The meeting lasted some 2 hours

and at its conclusion a decision was made to invest in the

According to Mr James, Mr White referred to the meeting that Mr Ord had had at the offices of Camelot when there was along and detailed discussion of the project and said that after that meeting "we checked it all out ourselves and we checked out Ord ... We've done our homework on this". Mr James said Mr White told him that Mrs Perry, through vears of experience in the real estate business. had her own internal connections for finding out about projects and people, and that

Mr Sellick had made enquiries of the New Zealand police and that, although those enquiries had disclosed a minor

Mr James said that Mr White spent about a third of the time discussing how safe the investment was, a third of the time explaining what a unique and special project it was anda third of the time speaking of the financial rewards to the investor. According to Mr James, Mr White explained that deposits had been paid on the 6 parcels of land from, he believed, Mr Ord's own money and that at least thirty units had been sold including a penthouse for $400,000. Mr James'

"Well, Lt somehow came out that there had to be a lot of money - as at least 30 units had been sold, there had to be a lot of money invested in it which

including my money - was to be used to purchase

the land, and what was left over would be used towards building the building. And Mr White said - he then went back to discuss the safety aspect of it, and he told me, well, if say, for instance now -~ words to the effect, say, Patrick Ord were to be run over by a street car tomorrow, he said this is the only time you could lose anything on this project. He said, 'You would possibly lose $1000 er 91500 for the advertising and marketing expenses and all of the rest of your money would be given back to you and the whole project would stop right then and there and Patrick Ord's deposits would be

forfeited, but not your money'. It was in 2 different aspect of the partnership agreement. So he said - he said there was almost no - he said

there was no chance of Patrick Ord getting run over by a street car and the whole project stopping tomorrow, so if - that was the only risky part about the whole thing. He said once we had acquired the land, he said we had a very valuable parcel of land together with the plans that were

going through the council, or had gone through the council, or were in the throes of - I think - the plans were going through the council or had been passed by the council, and they were special plans because they enabled whoever had the six parcels of land and these plans to put up an extra 10 or 15 units on the site. If Patrick Ord could not raise the finance, David said, the project right then and there - he had to stop the project and he had to sell the whole thing, you had Patrick Ord's valuable plans and these six parcels of land. His plans were unique because David said they had changed the zoning regulations up there and if Someone else wanted to put up a high rise in the same block, they would have to get a new set of plans which would have less twnits in then. So consequently there would be less profit init. So that any developer who had these special plans, plus the valuable six parcels of land, would - well, they would just ~- you would be killed in the rush to take over the whole - that is what happened. They are so valuable that you would have people coming in, wanting to buy the whole parcel. You could sell the thing on, so to speak, toa development."

According to Mr James, Mr White described Mr Ord as "an entrepreneurial-type businessman with merchant banking

experience. The sort of man who could handle money in this

field". In cross-examination he said that Mr White used words to the effect that Camelot was satisfied that Mr Ord was a developer of substance; that he (White) and Camelot had

investigated the project and found it to be sound and involving

At Mr James' suggestion, Mr White telephoned Surety Investments and sought a reduction in the price of the unit to be purchased. That reduction was granted conditionally upon the deposit on the unit and one half of the moneys to be invested in the partnership being paid that day.

The investment was made in the name of Nick James Pty. Limited. A telegraphic transfer of $28,750 ($25,000 for shares in the partnership and a deposit of $3,750 on the unit) was

made by the company to First Coast or Surety Investments.

Mr White also suggested that Mr English be engaged as the company's solicitor in respect of the transaction and this was agreed. Subsequently, on or about 25 September 1981, Mr English sent the necessary documentation to Mr James for execution. The documents bear date 21 September 1981 but they were not executed by the company and returned to Mr English

investment, was forwarded to Mr White by the company on 6

November 1981 and shortly thereafter delivered by him to Surety

Mr James subsequently received correspondence from Mr English similar in content to that received by Mr Maisey and

Mention has already been made of the fact that Mr White ceased to he employed by Mudgeeraba prior to the receipt of the cheques drawn by Mrs Smedley and Nick James Pty. Limited for the second instalments of $25,000 payable by then. Mr White's employment ceased on 8 October 1981 when he was asked to leave following a request by him to Mrs Perry that he be

paid a greater proportion of the commission resulting from

Mr Sellick's employment with Mudgeeraba was terminated by Mr Totty on 17 October 1981.

Early in October 1981 a Mr Helmut Traubner had approached Mr Sellick with a view to investment in "The Lodge", having seen the sign on the subject land which, as I have said, included Camelot's name asa selling agent. Me Traubner consulted Mr Phillip Halliday, solicitor, whose office was only two doors away from that of Camelot. In due course Mr Traubner

decided to invest in the project and there is in evidence

before me a letter dated 27 October 1981 from Mr Halliday to the Manager, Camelot Real Estate enclosing the relevant

documents duly executed by Mr and Mrs Traubner and requesting

that the share transfer form and the contract of sale of the unit be returned to him after execution by First Coast. At the

date of that letter Mr Sellick was no longer employed at

On 6 November 1981 Mrs Perry became aware that First Coast had failed to settle under the contracts for the purchase of the subject land. She telephoned Miss Bakker concerning the

At a glance

Court

Decision date

Before

Source

Judgment (448 paragraphs)

Legislation Cited (1)

Cited By (1)