Moffa & Anor v Newmark Commercial Pty Ltd & Ors No. DCCIV-99-1861 [2003] SADC 44 (20 March 2003)

05/11/2002 to 29/11/2002, 09/12/2002 to 11/12/2002, 16/12/2002.

PRINCIPAL AND AGENT - FIDUCIARY DUTY - DAMAGES In November 1998, the plaintiffs sold an investment property at Norwood for $340,000 - the defendants acted in the transaction as agents for the plaintiffs - before the execution of the contract, the defendants encouraged the plaintiffs to sell - both before and after the execution of the contract, the defendants gave advice to the purchaser about the feasibility of a residential development of the property - the advice was not given with the knowledge and consent of the plaintiffs, nor was it subsequently disclosed to the plaintiffs - held that the defendants were in breach as agents and fiduciaries of the plaintiffs of a duty of disclosure in several respects - held that, but for the breaches, the plaintiffs would have held the property for the purpose of investigating how they might optimise their investment, either by selling or developing, at some later time - held that damages should be based upon the difference between the sale price of the property in November 1998 and the market value of the property at the time of trial - damages assessed at $160,000 - counter-claim for commission dismissed - held that the plaintiffs should be permitted to make an election between damages and an account of profits between the publication of these reasons and the entry of judgment.

• Bowstead and Reynolds on Agency (16th edition);
• Equity, Fiduciaries and Trusts (1989) edited by TG Youdan;
• Chesire and Fifoot's Law of Contract (8th Australian edition);
• Finn, Fiduciary Obligations ;
• Keppel v Wheeler (1927) 1 KB 577;
• Georgieff v Athans (1981) 26 SASR 412;
• NZ Netherlands Society v Kuys (1973) 2 NZLR 163;
• Daly v The Sydney Stock Exhange Limited [1986] HCA 25; (1986) 160 CLR 371;
• James v ANZ Group [1986] FCA 41; (1986) 64 ALR 347;
• Commonwealth Bank of Australia v Smith [1991] FCA 375; (1991) 102 ALR 453;
• Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41;
• Roadshow Entertainment Pty Ltd v CEL Home Video Pty Ltd ; ;

Counsel: MR H ABBOTT - Solicitors: GRIFFINS LAWYERS

Defendants: NEWMARK COMMERCIAL PTY LTD, PAUL HORNER AND RANNIERO D'ALESSANDRO

Counsel: MR P HEYWOOD-SMITH AND MR D ROSTRON - Solicitors: FOUNTAIN & BONIG

Judgment No. [2003] SADC 44

Moffa & Anor v Newmark Commercial Pty Ltd & Ors

[2003] SADC 44

In November 1998, the plaintiffs sold a property at 10-12 Sydenham Road, Norwood. The price was $340,000. The purchaser was Dean Parletta. Settlement eventually took place in July 1999.

At the core of the plaintiffs' case is the contention that the defendants acted as agents for the plaintiffs on one side of the transaction and as advisers to Parletta on the other. The plaintiffs claim damages for breach of contract, false and misleading conduct, misrepresentation, negligence and breach of fiduciary duty. The defendants deny liability, and the first defendant counter-claims commission.

The first plaintiff is the son of the second plaintiff. His occupation is barrister, but for some years he has also had a keen interest in property investment. His father, the second plaintiff, worked at the relevant time as a bricklayer and building contractor. The second plaintiff played a very minor role in relevant events, and so, when I use the name Moffa in these reasons, I mean to refer to the first plaintiff only.

Since 1986, the plaintiffs have bought and sold a number of residential and commercial properties, with Moffa providing most of the capital and initiating most of the decisions and his father doing renovation work. The transactions have been mainly in the joint names of the plaintiffs, or in the name of Democratic Chambers Pty Ltd (Democratic Chambers), of which Moffa and his father are respectively three quarter and one quarter shareholders. With respect to other transactions, Moffa was involved with other persons in the name of one or other of two entities, namely ADASA Unit Trust and Fresash Pty Ltd.

The first defendant (Newmark Commercial) carries on business as a registered land agent and licensed valuer. The second defendant (Horner) is a registered land agent and licensed valuer, and was employed by Newmark Commercial at the relevant time as a commercial sales person. Following a successful no case to answer application at the close of the plaintiffs' case, Newmark (Real Estate) Pty Ltd (Newmark Real Estate) is no longer a party. Newmark Real Estate is a registered land agent, but its business is confined to property management. Newmark Commercial and Newmark Real Estate are related companies. The fourth defendant (D'Alessandro) is a registered land agent and licensed valuer, and a director of Newmark Commercial.

Moffa and Horner first met in about 1991. Moffa was experiencing difficulty in finding a suitable tenant for an investment property at 21 Market Street in the city, and had to move to live with his father so that he could rent out his family home. Horner was working for Raine and Horne at the time. Horner secured Migrant Health Services of the South Australian Housing Commission as a tenant, and Moffa was very grateful. The parties then began to meet frequently, usually over coffee in a café, to share their common interest in real estate.

Over the ensuing years, Horner successively worked for or with or as Raine and Horne (to 1992/1993), Horner Lindblom Real Estate (for about 18 months), Paul Horner and Associates, and Newmark Commercial (from April 1996 to September 2000). Although Moffa and Horner occasionally met socially at night and on weekends, during all of their contacts real estate was usually the dominant topic of conversation. Sometimes they would talk about a particular property and the feasibility of buying or selling or renting. Properties in the city that were discussed in this way included 32 Whitmore Square, 34-36 Whitmore Square, 416-420 King William Road, 14 Grenfell Street, 94-96 Gouger Street, 285 Flinders Street, 162-164 Gouger Street and 64 Hurtle Square.

Later in the association, the topic of discussions extended beyond property investment to property development. Properties would be discussed with a view to determining the feasibility of subdivision and/or development for commercial or residential purposes. Properties that were discussed in this way included 42 Nelson Street, Stepney, 66 Ashwin Parade, Torrensville, 12 Hazelwood Avenue, Hazelwood Park, 42-60 Gilbert Street, Adelaide, 21 Highgate Street, Highgate, and the Yellow Cab site at Gilles Street in the city.

With respect to these and other properties, sometimes Horner would bid at auction on Moffa's behalf. Sometimes Newmark Commercial would be the vendor's agent. Sometimes Horner would negotiate with another agent to share commission. Sometimes Newmark Real Estate would be appointed to manage a property that Moffa had purchased. In the case of the Highgate property, a joint venture was discussed at the Newmark office with the use of a white board.

Horner did not charge a fee for the time that he gave to his site attendances and discussions with Moffa. His and D'Alessandro's hope was that goodwill from the association would lead to future income for them and the Newmark companies, in the form of either commissions on sales and resales, or fees for management of rental properties.

The association which Moffa had with Horner can be distinguished from legal relationships which arose or may have arisen from time to time with respect to particular properties and particular transactions. During the course of the association, it suited the parties to discuss property matters informally as friends. Horner did not take formal instructions, did not proffer formal advice, and, as I have said, did not receive any fee. And, as I have also said, each had a hope, if not an expectation, that financial benefits would follow.

Parletta's previous association with D'Alessandro

Parletta and D'Alessandro were friends at the same primary school about 40 years ago, and have maintained a close friendship ever since. Parletta was and is a builder, in the name of Parletta Constructions Pty Ltd, and property developer, in the name of Winter Mornings Pty Ltd. In 1992 and 1993, Parletta and D'Alessandro were partners in a development at Torrens Park. On occasions, D'Alessandro sold properties for Parletta. At relevant times in 1998, Parletta was visiting D'Alessandro at the Newmark office about once a week or fortnight. Parletta said that, although he was looking for properties to develop, the visits were mainly social. At one of these visits, however, he first heard that the Sydenham Road property was for sale.

The property at 10-12 Sydenham Road, Norwood

The property was purchased by the plaintiffs at auction in November 1997 for $311,000, with Horner doing the bidding for no fee. Sydenham Road runs north and south. Stephen Street is a narrow one way street off Sydenham Road to the east, and is one street to the south of Magill Road. The property is on the south eastern corner of the junction of Stephen Street and Sydenham Road. At the time of purchase, the improvements comprised a former butcher shop on the corner, living quarters with frontage to Sydenham Road, two attached workers cottages with frontages to Stephen Street, and two industrial sheds in open space. The rear or eastern end of the property was in use as a wood yard by a tenant, Neil McConnon. The rent was $100 per week. The lease expired on 30 September 1998.

The property was situated within the "Mixed Use A Zone" of the City of Norwood, Payneham and St Peters ("the Council"). The Council's development plan allows "a range of uses including small scale offices, warehouses and retail showrooms and residential use" in this zone. The plan provides a list of the kinds of development which are non-complying, and the list includes a builders yard. The plan also provides that one of the principles of development control is that the average site area per dwelling for residential development in the zone should be not less than 120 square metres.

On the northern side of Stephen Street is a hotel car park and the Caroma factory. The factory runs three shifts over 24 hours a day. Semi-trailer access to the factory is from Sydenham Road via Stephen Street. Immediately to the north of the car park is the Alma Hotel on Magill Road.

By the time of the sale of the property in November 1998, Moffa had made a definite decision to subdivide the property and to retain the wood yard so that his father could store his builders materials. The contract with Parletta was subject to finance, and to other special conditions as well. The subdivision was approved in May 1999. The date of settlement was 23 July 1999. Parletta's nominee for the purpose of the transfer was Winter Mornings Pty Ltd. The lot which passed to Winter Mornings Pty Ltd was 1500 square metres, and the lot which was retained by the plaintiffs was 298 square metres. I will henceforth describe the property which was purchased by the plaintiffs in November 1997 as "the original property", the lot which later passed to Winter Mornings Pty Ltd as "the property", and the lot which was later retained by the plaintiffs as "the builders yard".

The contract was in the form approved by the Real Estate Institute of South Australia. I quote the provisions which govern the rights of a vendor upon default by a purchaser in compliance with a special condition. I quote also the various special conditions in the schedule.

The party required to comply with a Special Condition must make every reasonable endeavour to do so. If the Special Condition is not complied with before the date specified in the Special Condition (or if no date is specified, within twenty one (21) days of the date of this Agreement) then,

6.1 if the failure to comply with the Special Condition is not due to the neglect or default of the Vendor or the Purchaser, the Vendor or, unless the Purchaser has waived such condition and communicated such waiver in writing to the Vendor or the Agent, the Purchaser, upon giving seven days' written notice to the other party, may terminate this Agreement and upon its termination (unless the condition is complied with in the meantime) all monies paid under this Agreement must be, re-paid to the Purchaser and all rights and liabilities under this Agreement, will cease; or

6.2 if the failure to comply with the condition is due to the neglect or default of the Vendor or the Purchaser, the party not in default may terminate this Agreement. If the Vendor is in default, the Purchaser may, upon giving seven days' written notice to the Vendor, terminate the Agreement and all monies paid by or on behalf of the Purchaser must be repaid to the Purchaser upon the termination or otherwise clause 7.2 will apply. If the Purchaser is in default, clause 7.1 will apply.

7.1.2 If the Purchaser fails to pay the Deposit in accordance with this agreement, or otherwise breaches a term of this Agreement prior to the Settlement Date, the Vendor may, without prejudice to any other legal rights or remedies the Vendor may have, give to the Purchaser notice in writing requiring such default to be remedied within a period of three business days from the service of the notice and stating that, unless the default is remedied within that period, this Agreement will automatically terminate at the expiration of that period unless, in the meantime, the Vendor withdraws the notice by written notice to the Purchaser.

7.1.3.1 the Purchaser breaches this Agreement prior to or on the Settlement Date; and

7.1.3.2 any such default continues unremedied for a period of not less than three (3) business days the Vendor may at any time after those three (3) business days give notice to complete to the Purchaser. The notice must:-

7.1.3.3 appoint a time for Settlement (between 10.00 am and 3.00 pm on a business day); and

7.1.3.4 require the Purchaser to settle at the time appointed in the notice.

If the Purchaser fails to comply with the terms of the notice, the Vendor may, without prejudice to any other legal rights or remedies the Vendor may have, terminate this Agreement by notice in writing to the Purchaser.

A notice of completion may be given more than once.

R. Special Conditions [Clause 6]

This Agreement is subject to:-

The Lender agreeing on or before the 29th day of January 1999 to advance not less than $1,700,000.00 to the Purchaser, and the Purchaser obtaining that advance on or before the Settlement Date. The advance to be for a term of 2 years at an interest rate not exceeding 9.0% % (sic) per annum, repayable Monthly and otherwise on such terms and conditions as the lender requires.

1. The issue of a Certificate of Title as per Appendix "B" for Allotments 51 and 52. Allotment 51 being the subject of this contract contract (sic). The cost in regard to the issue of separate Titles to be at the Vendors expense in all things.

2. The Vendor agrees to allow the purchaser right of access over the subject property for the purpose of preliminary works in regard to achieving Planning approval. Such works not to include any demolition and or site preparations. The Vendor further agrees that upon the contract becoming unconditional, in all things, the Purchaser is allowed to enter the site for the purpose of commencing construction, which may include demolition and any preparation or construction works the Purchaser requires.

3. The City of Norwood, Payneham, St. Peters giving Planning Approval for the construction of Fourteen (14) Strata / Community Titled Home Units. Such plans are to be submitted to the City of Norwood, Payneham, St. Peters no later than the 29th January 1999. Approval for the desired development to be granted on or before the 30th March 1999.

4. Settlement occurring under the following conditions;

- within 14 days of the City Norwood, Payneham, St. Peters giving Planning Approval for the desired development, as per S Other Conditions (2)

- within 14 days of the issue of the subject Certificate of Title

- 30th April 1999

whichever is the later.

5. To the confirmation that the site has no land contamination. To this end the Purchaser shall instruct a competent soil Engineer to undertake a contamination survey. If such a survey conveys contamination the cost of such will be borne by the Vendor, in all things. If the survey shows no contamination then the cost will be shared equally between the Vendor and the Purchaser."

Since some at least of the conduct upon which the claim is based took the form of oral communications, I will need in due course to canvass the oral evidence in some detail. But, for now, I will list the documents that were tendered in evidence, or at least those that describe relevant background events.

Moffa signs letter authorising Horner to purchase the original property on his behalf.

Democratic Chambers purchases original property at auction for $311,000.

Settlement occurs, and transfer is taken in name of Plaintiffs.

Horner writes to Phillip Brunning of the Council attaching plan and seeking Council's opinion on proposal to subdivide original property into allotments of 1500m² and 298m².

Council writes to Horner advising that original property is located within Mixed Use A Zone of Kensington and Norwood Development Plan and forwarding copy of relevant provisions.

Horner faxes to his brother Michael Horner (land broker) copies of certificate of title and abovementioned letters of 18/8/98 and 27/8/98 with instructions to subdivide.

Michael Horner faxes to John Bested and Associates (surveyors) copies of correspondence from Newmark Real Estate to Council and back.

Bested writes to Horner enclosing copy of preliminary plan of division and account for fees of $481.40.

D'Alessandro hands to Parletta copy of "Comparable Sales Report" of October 1998 for each of Norwood and Stepney.

D'Alessandro and Parletta prepare feasibility study at Newmark's office based on 13 units (the reference to ten units on the front page seems to be a mistake).

Parletta prepares feasibility studies at home based on 13 units.

Horner writes to and Moffa signs cheque in favour of Bested for $481.40. (Cheque dated 2/10/98 in error).

Moffa signs cheque in favour of Greenway for $120 for "architectural services in developing an indicative dwelling layout".

Horner writes to Bested enclosing possible dwelling plan for the builders yard and cheque signed by Moffa for $481.40.

Bested lodges application for land division with Council.

Bested writes to Council enclosing possible dwelling plan for the builders yard.

Bested faxes to Horner correspondence from Council with respect to division of the original property.

Council writes to Mark Butcher (architect) seeking advice with respect to proposed division.

Parletta and Moffa's father sign contract with respect to the property.

Council writes to Bested with respect to the proposed division indicating the matter has been referred to their Heritage Architect and requesting a dwelling design.

SA Water writes to Bested requiring payment of $5,959 before approval of SA Water can be forwarded to Development Assessment Commission.

Bested forwards copy of letter from SA Water to Horner.

Parletta pays contract deposit of $5,000, and Horner prepares internal sales report showing that total fee payable to Newmark Commercial is $6,000.

Parletta prepares feasibility study based on shop and ten units.

D'Alessandro has appointment with 'Dean Parletta re Norwood ideas'.

Council approves application for land division subject to requirements of SA Water Corporation being met and to payment of $1,355 into Planning and Development Fund.

Bested writes to Horner advising application for land division has received Development Plan Consent, enclosing a copy of approval with Council's Statement of Requirements, and requesting payment of $1,355.

Michael Horner writes to Moffa enclosing application to Registrar-General for execution and account for fees of $1,096.

Newmark Real Estate renders to plaintiffs account for $6,000.

Parletta prepares two feasibility studies, each based on shop and ten units.

Parletta faxes "discussions and ideas" to his architect, John Diekman.

Parletta faxes to D'Alessandro "Some ideas I've sent John Diekman".

Horner writes Byass' telephone numbers in his diary.

Parletta, in name of Winter Mornings Pty Ltd, applies to Council for approval of development plan consisting of restoration of shop as office and construction of ten units.

Parletta prepares feasibility study based on shop and ten units.

D'Alessandro values Parletta's property at Seventh Avenue, Joslin at $350,000.

Bested writes to Horner advising that two payments need to be made to obtain certificate of approval to land division, namely

D'Alessandro prepares marketing report for Parletta based on shop and ten units.

Horner values Parletta's property at Glynburn Road, Glynde, at $175,000.

Tony Fimeri of Fimeri Financial Services writes to Parletta advising position with respect to approaches to various banks for finance.

Horner faxes to Parletta 'History of Sydenham Road plus copy of titles'.

Plaintiffs and Parletta sign letter to Newmark Commercial making contract unconditional and nominating 29/5/99 as date of settlement.

Diekman provides to Council new drawings of shop and ten units in relation to application for planning consent.

Planning committee of Council meets and defers application for approval.

Horner forwards Moffa's cheque for $5,959 to SA Water.

Horner forwards Moffa's cheque for $1,355 to Development Assessment Commission.

Horner bids for at auction and purchases house at Malvern on behalf of plaintiffs. Settlement occurred on 23 July 1999.

Parletta prepares feasibility study based on ten units.

Bested writes to Michael Horner enclosing plan of land division approved by Development Assessment Commission and account for fees.

Parletta prepares feasibility study based on ten units.

Fimeri writes to Parletta advising position with respect to loan application to Commonwealth Bank.

Moffa writes cheque for $1,096 in favour of Houtermans and Horner.

Moffa writes cheque for $1,433 in favour of John Bested and Associates.

Parletta writes letter to Horner saying that, with approval imminent, "I thought it was time to start getting a few things organised". The fourth and fifth paragraphs read: "Lastly, we would require approval from the vendor that he accepts us commencing work before settlement. The work that may be commenced will probably be Demolition and clearing of the site, and preparation of the sub base ready for the concrete.

I think that would be the most we could hope to have done before settlement. That is if settlement is in early July?"

Council gives divisional development plan consent to restoration of shop and construction of nine units.

Michael Horner writes to Moffa advising that plan of division lodged at Lands Titles Office.

Lands Titles Office notifies Michael Horner of approval of plan of division.

Horner faxes to Michael Horner direction that funds from subject property be distributed:

Parletta prepares feasibility study based on sale of shop for $93,000 and nine units.

Horner values the builders yard at $140,000 for Westpac Banking Corporation.

Parletta prepares feasibility study based on shop and nine units.

Lands Titles Office notifies Michael Horner of deposit of plan of division.

Parletta prepares feasibility study based on ten unit sites.

Executive Manager of Commonwealth Bank faxes to Fimeri: "... I think there are the makings of a deal ..."

Michael Horner faxes to Moffa copy of notice of default received from vendor's solicitors with respect to house at Malvern.

Michael Horner writes to plaintiffs enclosing memorandum of transfer of property for execution.

Michael Horner faxes to Moffa copy of settlement statement dated 7/7/99 showing adjustments to 9/7/99.

Michael Horner faxes to Moffa copy of settlement statement of same date.

Fimeri faxes to Michael Horner copy of first page of "Offer of Facility" received from Bank SA.

D'Alessandro faxes to Michael Horner request that $1,000 ($6,000 professional fee less $5,000 deposit held in trust) be forwarded to Newmark after settlement.

Michael Horner faxes to Moffa copy of settlement statement dated 19/7/99 showing adjustments to 9/7/99.

So much for the documents. I turn now to the oral evidence. It will be convenient to discuss the oral evidence under separate headings. The main factual dispute concerns the discussions which led to the contract. For the most part, events outside those discussions, both before and after the contract, are not seriously in dispute.

When Moffa purchased the original property in November 1997, for some time he had been looking for a property for use by his father as a builders yard. Within a day of the auction, a person approached Horner and offered to buy Moffa's interest in the contract for $30,000. Moffa rejected the offer. The tenant McConnon remained in occupation, and Newmark Real Estate managed the property for Moffa, until the lease expired on 30 September 1998.

As the expiry of the lease grew near, Moffa considered the possibility of developing the original property or part thereof as a showroom/warehouse. He met Horner and an architect, Carlo Panozzo, at the site, but decided not to proceed. Two other proposals were considered and rejected by Moffa. Someone wanted to lease the cottages, and Bunnings wanted to store wine barrels in one of the sheds.

Moffa and Horner also discussed a division of the original property so that the rear portion could be retained as a builders yard and the balance could be sold. Horner made approaches to the Council about a division, and to two developers, John Jarvis and Luke Koumi, about a sale.

When Jarvis and Koumi said they were not interested, Horner asked D'Alessandro whether Parletta would be interested. D'Alessandro suggested to Horner that he approach Parletta. Some time later, Horner asked Parletta in the kitchen of the Newmark office whether he would be interested in buying the property for $340,000. Parletta said yes, and he and Horner met at the site.

A week or two later, at Parletta's request, D'Alessandro met Parletta and Parletta's architect, John Diekman, at a café in Norwood. At this meeting, which was probably held in about mid-October, D'Alessandro encouraged them to consider developing the site, and Diekman was keen to do so.

Within a week or so of the meeting, Parletta contacted D'Alessandro about a feasibility study. Newmark had developed a computer program for that purpose. They met at Newmark's office on 26 October 1998 D'Alessandro handed to Parletta a copy of a "Comparable Sales Report" which Harmer had printed out. The report detailed recent sales of units in the Norwood and Stepney areas. They sat in front of a screen, and D'Alessandro discussed with Parletta the variables that had to be keyed in. The number of units was 13 and unit prices ranged between $150,000 and $190,000. The printout that resulted can be summarised as follows:

For some reason unexplained, the total in the right hand column is incorrect. The actual total is $338,845.

After considering the offer, Parletta told Horner he would pay $320,000 for a contract with special conditions. Horner noted the special conditions that Parletta wanted, including conditions making the contract subject to finance and subject to planning approval for the construction of units. Horner told Parletta that Moffa would not settle for less than $340,000. Parletta's response was to agree to pay $340,000 with his special conditions.

On 11 November 1998, Horner produced and Moffa signed a contract for $340,000 in the names of Democratic Chambers as vendor and Parletta and/or nominee as purchaser. Horner took the contract away, and the next day left it with Parletta. Parletta signed the contract at Horner's office on 18 November 1998. In the evening of that day, Moffa's father signed the contract at Moffa's house, but said at the time that he was unhappy about the small size of the block that was to be retained for him. At some stage the names of the plaintiffs were substituted as the vendors. Each party initialled each of the special conditions. The due date for the deposit was 27 November 1998, but the actual payment was made on 9 December 1998. There was no written sales agency agreement between the plaintiffs and Newmark Commercial in relation to the sale.

Moffa said it was Horner's idea to sell the larger portion of the original property for $340,000, and that the idea was first put to him in mid to late October 1998. Moffa said Horner persuaded him to sell by saying it was a great deal, a great price, and Moffa would get the builders yard for his father for free. Moffa said that, when he queried whether the special conditions were unduly favourable to the purchaser, Horner responded that Moffa had to agree to the conditions to get a great deal, and they had to move as quickly as possible. Moffa said that Horner told him Parletta had miscalculated the price because he would not get approval for 14 units. Moffa said that Horner told him the builders yard was worth between $140,000 and $150,000. Moffa said that his father was unhappy about the sale because the builders yard was too small. Moffa denied that an offer of $320,000 was passed on to him by Horner.

On the topic of commission, Moffa said he agreed to Horner's request that $6,000 be paid to Newmark Commercial and $3,000 be paid to Horner. Moffa's subsequent handwritten settlement statement (exh D10) includes $3,000 for "PH fees".

Horner printed a comparable sales report for October 1998 for Parletta at Parletta's request. He became aware of the feasibility study of 26 October 1998 within a day or so of it being done. D'Alessandro brought it to his attention.

Horner said that Moffa asked him to find a buyer amongst his clients for $340,000, and that is why he offered the property at that price to John Jarvis, Luke Koumi and Dean Parletta. Jarvis and Koumi were not interested, and Parletta said he would pay $320,000 subject to his own special conditions. Horner reported this to Moffa, and Moffa said he wanted no less than $340,000. Horner told Moffa that his only hope of achieving $340,000 was to accept Parletta's conditions, and Moffa agreed. Horner then prepared the contract. The deposit of $5,000 was the deposit that Parletta was prepared to pay. He drafted special condition R1 in standard form, but the particulars were provided by Parletta. He drafted special conditions S1 to S5 in accordance with Parletta's request. The number of units and the dates in S3 were provided by Parletta.

Horner said he did not tell Moffa at that time that it was a great deal, you get what you want, you get a builders block for free for your father. Moffa did not say that the conditions seemed pretty favourable to the purchaser. Horner did not tell Moffa that Parletta had miscalculated the number of units. Horner did, however, speak to Parletta's architect. The architect said he had 14 new style warehouse apartments in mind. Horner did not tell Moffa that he had spoken to Parletta's architect.

Horner went to Moffa with the contract, and Moffa went through it. He did not discuss any of the special conditions except for S(5) regarding contamination. Moffa signed the contract, and initialled each of the special conditions. The topic of commission was discussed, and Moffa agreed to pay $6,000.

Horner took the contract away, and the next day left it with Parletta, saying take it or leave it, there would be no negotiation. Parletta signed the contract at Horner's office on 18 November 1998.

On the topic of commission, Horner said Moffa agreed to pay $6,000, and that the $3,000 mentioned by Moffa was offered much later as a "goodwill gesture".

Parletta was at the Newmark office in about September 1998 when Horner told him that the property was for sale for $340,000. Business was quiet, and he wanted to hold on to his subcontractors by finding a property to develop. He drove past the property, and spoke to his architect, John Diekman. Horner gave him a copy of Bested's plan (exh D52), and he gave it to Diekman. [Bested's plan must have been prepared between 14 September 1998 (Horner's fax to him) and 29 September 1998 (his letter to Horner).]

Parletta spoke to D'Alessandro, and they had coffee with Diekman in a Norwood café. Diekman had prepared sketches of a floor plan and of developments including the butcher shop of nine, twelve and 14 units (exh P37).

Parletta then sought further advice from D'Alessandro, as appears from the following passage from his cross-examination when he was asked about the feasibility study of 26 October 1998:

How did it come about that you and Mr D'Alessandro got to work on this document.

Through discussion I remember asking him what he thought of the property because he'd been reasonably distant or neutral in prior conversations, not negative, not positive but pretty much, you know, I could tell that he wasn't really wanting to be overly involved. You know, it was Paul's sale, it was his vendor so I asked him what he thought. It was probably the first time when he said, 'Let's run some numbers through'. It was his first real positive input.

I asked him exactly that, 'What do you think of Sydenham Road as a residential development?'.

He said, 'Let's have a look'. He said, 'It's a site close to the city. Let's run some numbers and see what it comes up like'."

Parletta said that, at the time of the feasibility study on 26 October 1998, the figure of $340,000 was already known to him. The sale amount for each of the 13 units was the result of discussion with D'Alessandro. Parletta said that D'Alessandro was "fairly neutral" and "not very upbeat" about the property, and he took a copy of the study away thinking he would have to make a decision on his own. Late at night the same day, he did his own feasibility studies on his computer at home.

After Parletta looked at unit sales in the area and decided that the contract was worth pursuing, he made an offer to Horner of $320,000. Horner said that Moffa would not entertain anything less than $340,000. In examination-in-chief, Parletta said that the rejection of his offer was pretty well instantaneous and that Horner did not take instructions, whereas in cross-examination he said that Horner informed him of the rejection on a later occasion.

Parletta said that he then agreed to pay $340,000. On the topic of conditions, I quote from his evidence-in-chief:

At that stage was there any discussion as to conditions.

Yes, for me to proceed I wanted certain conditions to safeguard my position should there be a problem with council, problem with contamination, problem with finance, so those conditions were discussed verbally; I never put them in writing but they were put in writing by Paul Horner.

Do you have a recollection now as to the conditions that you required.

Those that I've mentioned in a broad sense, to do with finance, to do with approval and settlement after approval, to do with land contamination; that's about as much as I can remember off the top of my head.

Do you recall the type of access prior to the settlement.

Do I understand from an answer that you gave a moment ago you, yourself, didn't reduce these conditions to writing.

What was the next that you heard in respect of the matter.

With respect to special condition R1, Parletta said he mentioned the amount but left the term and the rate to Horner. With respect to special condition S(3), Parletta said he discussed with Horner how long it would take to submit plans and obtain approval, but he left the dates to Horner.

Horner told him in August 1998 of Moffa's intention to sell. Later Horner asked him whether Parletta would be interested, and a price of $340,000 was mentioned. D'Alessandro suggested to Horner that he approach Parletta direct, and Horner did so in his presence in the kitchen at the Newmark office. Later still, probably in October 1998, Parletta asked D'Alessandro to meet with him and his architect, John Diekman, and he did so at a café in Norwood. He encouraged Parletta and Diekman to look at the property. A week or so later, Parletta contacted him about a feasibility study. He did not think that providing comparable sales and participating in a feasibility study involved him in a conflict of interest. The feasibility study was not meant to be accurate; merely a guide as to how to go about it. The offer was known and not discussed, and he thought he was assisting Parletta to make a decision in Moffa's favour.

On an occasion before Christmas 1998, Parletta and Diekman called at the Council. After consideration of sketches, plot ratios and open space provisions, it seemed to them unlikely that 14 units would be approved. They decided that ten units plus the butcher shop would both appease the Council and give them a good area and planning design. Parletta did not, however, have plans to submit to the Council by the contract deadline of 29 January 1999.

As appears from the chronology of documents, on 13 January 1999 Parletta prepared a feasibility study based on the shop and ten units, and on the following day had an appointment with D'Alessandro to discuss 'Norwood ideas'.

In about early February 1999, a person named Leon Byass rang Moffa at his home. Byass said he was employed by the State Government, that he was representing a charitable institution for young delinquent children, and that the property was ideally located for that purpose. Byass said he was interested in buying the whole of the property, and mentioned figures in the high four hundred thousands to the low five hundred thousands. Moffa referred Byass to Horner. Some time later, on Moffa's version, Horner rang, said he had spoken to Byass, and Byass was offering no more than Moffa already had, namely $340,000 plus a block worth $140,000 to $150,000. On Horner's version, although he cannot now recall he may have said: "What Byass is offering you is no better than what you've got from Parletta". As for the value of the builders yard, Horner's evidence was that, by the end of January or early February, he thought it was worth $120,000 to $130,000. He said he would have discussed the value of the yard with Moffa at this time. He agreed that his view of the value of the yard indicated a substantial rise in land values by late January or early February.

Moffa obtained a copy of the contract from Horner. He initially asserted that he did not receive a copy at any earlier time, but he was mistaken about that. He saw that special condition S(3) requiring submission of plans to Council by 29 January 1999 had not been met by Parletta. Moffa asked Horner whether he could get out of the contract. On Moffa's version, Horner said no. On Horner's version, he said: "You're the lawyer, you tell me". Byass rang Moffa often, and on each occasion Moffa referred him to Horner. On the basis of Horner's note in his diary of 11 February 1999, it is likely that his first contact with Byass was on or after that date.

Horner's evidence was that Byass offered to buy Parletta's interest in the contract for $20,000, that Parletta's response to Horner was that the contract had already cost him $37,000, and that at a later meeting Byass declined Horner's suggestion that he make an offer "subject to contract" over the whole property.

I refer again at this point to the chronology of documents. On 10 February 1999, Parletta faxed some development ideas to D'Alessandro. On 26 February 1999, D'Alessandro valued Parletta's house at Joslin for the purposes of Parletta's application for finance. On 24 March 1999, he prepared with Horner's assistance a marketing report for Parletta. A page from a telephone message pad shows that Moffa received a telephone call from Byass as late as 30 March 1999.

During his examination-in-chief, Parletta said this about his involvement with D'Alessandro between 26 October 1998 and 10 February 1999:

"We had, on many occasions going to his office and discussing it. I mean, the whole complex had been discussed on a casual basis as to how we were going, how many bedrooms were going to be provided for each townhouse. So there was an ongoing discussion as to how the whole project was developing and what was being included in it."

During the period February to early April 1999, Horner suggested to Moffa that Moffa and his father buy the butcher shop. Horner may have suggested that he be a purchaser as well. He said that the price was $93,000. In the end, Moffa decided against the suggestion.

Parletta's decision to make the contract unconditional by letter dated 30 March 1999 was made notwithstanding that he had yet to obtain Council approval and finance. Through Horner, Moffa was putting pressure on Parletta to settle. Parletta felt he was at risk of losing the contract. Both Horner and D'Alessandro assured him that the contract was safe. The letter stipulates a new settlement date, namely 29 May 1999. Horner thinks that he inserted that date on Parletta's advice that approval for finance would be through by then.

The position that Horner took to the 30 March 1999 deadline appears from the following passage from his cross-examination:

And at no stage after that did you tell him that the failure by Parletta to comply with the 30 March deadline would give him a right to take action to terminate the contract. Do you agree you didn't tell him that.

I can't recall. Mr Moffa didn't want to terminate the contract.

By the end of March, it must have been patent to you that the market had risen.

There was - I think it was becoming quite buoyant, sort of moving up.

Why didn't you tell the Moffas to take advantage of this failure by Parletta and to terminate the contract.

Mr Moffa didn't want to terminate the contract. He wanted the contract unconditional."

The date that the Development Assessment Commission approved the plan of division is not known, but it must have been between 21 April 1999, when Horner forwarded Moffa's cheque to SA Water, and 3 May 1999, when Bested wrote to Michael Horner forwarding the Commission's certificate of approval. The Council's consent to the divisional development plan followed soon after, that is, on 14 May 1999.

Horner told D'Alessandro that Moffa was interested in buying the shop back in its un-renovated state for $93,000. Parletta relayed that information to his finance broker. When Moffa eventually said he was not interested, the Commonwealth Bank withdrew from discussions. The shop was sold to someone else for $87,500 on 21 June 1999. The contract shows that Newmark Commercial was Parletta's agent (P61).

By late April 1999, Moffa had committed himself and his father to the purchase of the Malvern property. He and Horner had come to an agreement about that property. Horner was bankrupt, and Moffa wanted to help him. Horner would live in the house for twelve to 18 months whilst it was being renovated by Moffa's father. Then the house would be sold and the proceeds shared equally between Moffa, his father and Horner. Each paid $5,000 towards the deposit.

The settlement date of 29 May 1999 mentioned in the letter of 30 March 1999 passed by, notwithstanding that the plans had been approved by the Council on 14 May 1999. Doubtless the primary reason was that Parletta had not obtained finance. It may also be that, either then or sometime in June, Moffa had said that he wanted to defer settlement so that his liability for capital gains tax on the builders yard would fall into the 1999/2000 tax year.

On 3 July 1999, Moffa and Horner met for coffee at Café Bongiorno. Moffa said he needed $260,000 to settle on the Malvern contract. Horner said that Parletta would settle on the Sydenham Road contract because he had been offered $340,000 for the shop and four units. On 5 July 1999, Moffa received the vendor's notice of default with respect to the Malvern property. He met Horner again at Café Bongiorno. On Moffa's version, he put three bags of sugar on the table to represent Parletta, Horner and himself, and said, amongst other things, "Where did all the cream go?" Horner does not remember that particular conversation. On Horner's version, Moffa said he had been 'shafted'. Both agree that the meeting was terminated by Moffa walking out and saying that he would take all of his business away.

As appears from the chronology, the Lands Titles Office notification of the deposit of the plan of division was on 24 June 1999. Michael Horner's evidence was that certificates of title would have issued about two weeks after that notification. According to the last in time of the options specified in special condition S(4) of the contract, settlement was due "within 14 days of the issue of the subject Certificate of Title". As also appears from the chronology, settlement occurred in fact on 23 July 1999.

A number of events after the meeting on 5 July 1999 can be mentioned to show the antagonism that developed between the parties at that time. Newmark Real Estate collected rent from Moffa's tenant at 285 Flinders Street, and Moffa alleged that it failed to account. Moffa and Horner became embroiled in a dispute with respect to the property at 162 Gouger Street owned by ADASA Unit Trust. There was correspondence between solicitors over Newmark's alleged refusal to hand over files with respect to properties that had been managed on Moffa's behalf. And Moffa allegedly approached an employee of Newmark with the suggestion that he photocopy files for a fee.

The nine units approved by the Council were constructed and made available for sale from about July 2000. Newmark Commercial sold, in addition to the butcher shop, six of the nine units. Four of those units were sold off the plans with contracts for Parletta to build the units. The total commission paid to Newmark Commercial was in the order of $27,000 to $28,000, excluding GST. D'Alessandro played an active role in the presales, and shared the commission with Horner. The standard arrangement with Horner was that he would receive 55% of commission paid to Newmark Commercial on sales conducted by him.

According to Parletta, the profit that Winter Mornings made on the development of the property was $250,000 to $260,000, and the profit that Parletta Constructions made on the construction of the units was $80,000 to $90,000. Parletta said that these figures had been anticipated by the original feasibility study of 26 October 1998.

As already mentioned, Moffa's evidence was that Horner told him before the sale of the property in November 1998 that the value of the builders yard was between $140,000 and $150,000.

Horner's evidence was that he told Moffa in June 1999 that the builders yard was worth $120,000 to $130,000, but in "a moment of weakness" valued the yard for Westpac Banking Corporation at $140,000 (see his letter dated 17/6/99, exh P34 - 394). He said Moffa wanted the figure to be $150,000. Horner also gave evidence that, at about the time of the sale in November 1998, he valued the builders yard on the spot for capital gains purposes at Moffa's request. His recollection was that he put $85,000 on it. He said he did the valuation on his computer, but he has been unable to find in on his hard drive. Moffa said he had no recollection of that particular valuation.

At the time of relevant events in 1998 and early 1999, Moffa and Horner were friends, and were meeting and chatting or telephoning and chatting on an almost daily basis. Although the property at Sydenham Road must have been a constant topic of conversation, and doubtless all of the options of sell, subdivide and develop were touched upon from time to time, there was no particular reason for either party to recall what had been said and done until after the meeting at Café Bongiorno in early July 1999. Moffa's state of mind after that meeting was dismay at finding out about the extent of the defendants' involvement with Parletta and anger at missing out on an opportunity either to sell the property to the SA Government or to develop the property himself. Horner's state of mind after that meeting was that both parties had received a good deal. The parties did not come together again except in an adversarial and hostile environment. Some of the evidence of each, in my assessment, was reflective of that environment and reconstructed to fit opposing perceptions of relevant events.

Moreover, on one occasion at least, in my assessment, the evidence of each was less than entirely frank.

During the opening of Moffa's case and his examination-in-chief, emphasis was given to the extent to which he placed reliance and trust upon Horner's advice. It was therefore important for me to know that for some years Moffa had lectured students at TAFE on basic property law. Yet the information only came to light when Moffa was asked about it in cross-examination. His explanation for not disclosing the information earlier was unconvincing.

In his evidence-in-chief, Horner denied telling Moffa until about May 1999 that a sale of the property for $340,000 was a good deal. Under cross-examination, however, he agreed that that was his state of mind before the contract was signed. It is inconceivable in my opinion that he did not disclose his state of mind to Moffa during their many discussions about the property before the contract was signed. It is also worth observing that paragraph 9.4.2 of the Defence reads: ".... following execution of the contract by Parletta, Horner stated to the first plaintiff words to the effect that in his opinion it was a "great deal" and a "great price" and that "you've got the small block of land for nothing".

For all these reasons, I will approach the evidence of Moffa and Horner with caution, and base my conclusions where possible on the objective facts, and on my sense of what is likely to have happened in light of the evidence as a whole. I will also keep in mind that it is the plaintiffs who bear the ultimate onus of proof.

As for D'Alessandro, it is his interpretation of objective facts, rather than his account of the facts themselves, which is in dispute.

Moffa's visit to the original property with Panozzo and Horner about a month before the expiry of the lease on 30 September 1998 was significant. It demonstrates that, as the date of the expiry approached, Moffa was thinking seriously about how he might deal with the original property in the future. Although he wanted to retain a portion for his father, he also wanted to optimise his investment. His consultation with his architect at the site was the first positive step that he took in that regard, and demonstrates that he was willing to consider developing, as opposed to selling.

It is likely that Moffa's decision not to develop the original property as a showroom/warehouse, and Horner's approaches to the Council and his brother Michael, occurred within a month or so. It is likely that Moffa knew about Horner's approaches in the first instance, because he was in possession of the accounts of Bested and Greenway, and it seems that he signed cheques in payment of those accounts on 2 November 1998 without demur. Moreover, given that the approaches were in tune with Moffa's desire to retain the wood yard for his father and otherwise to optimise his investment, it is also likely that they were within the scope of his ongoing discussions with Horner. I quote a relevant passage from Moffa's examination-in-chief:

As at 2 November '98, had Mr Horner discussed with you the division of the property into a small block and a large block.

It had been discussed - the concept - for months, specifically from mid to late October, yes, 'Wouldn't it be a good idea that we could cut off a portion and keep a portion for free?'. It started out general and then got more specific.

At any stage prior to the signing of the contract, did you instruct Horner to instruct anyone to do such a plan.

Did you assume that such a plan would have to be done.

I didn't turn my mind to it. It was something that I would have left for Paul to do. That was his job, if it was to be done. The detail with respect to things like that, I considered to be Paul's job.

If it was going to cost money, would you have authorised him to do that without a specific authorisation from you.

I don't think it would have been unusual, given the state of the relationship. If we are talking of a few hundred dollars, yes, he would have that discretion, I think.

Would you expect him to tell you if he was doing that.

You mentioned the time Mr Horner came to you with a proposal to divide the land into two in mid to late October.

At any time before that date was there any instruction given by you or anything said by you to Horner which would have authorised him to go off and prepare a plan of division.

Nothing specific, apart from the fact that that was always a prime option in my mind, and had been since late '97, but he knew that my main concern was to look after my father."

It is likely that a price of $340,000 was mentioned during the course of Moffa's discussions with Horner, irrespective of who came up with the figure first. As it happened, a sale at that price would leave Moffa with a builders yard at no cost to him, and it is likely that Horner said words of encouragement to that effect to Moffa on a number of occasions. As it also happened, and as Parletta later came to discover from the feasibility study on 26 October 1998, a purchase at that price would enable Parletta to achieve, albeit on the basis of a number of assumptions, and in addition to a profit on unit construction of 8%, a profit on unit sales of 20%.

It is likely that the value of the builders yard was also a topic of Moffa's discussions with Horner, but I am unpersuaded that Horner told Moffa at that time that the yard was worth between $140,000 and $150,000.

It is likely that Moffa asked Horner to find a buyer, or agreed with Horner that Horner should find a buyer, that he did so well before the feasibility study on 26 October 1998, and that Horner's approaches to Jarvis, Koumi and Parletta were made in accordance with that request or agreement. I hold that a contract of agency with respect to the sale of the property between the plaintiffs and Newmark Commercial came into existence at that time, that is, in about September 1998. The contract was not in the form of the "Sales Agency Agreement" approved by the Real Estate Institute of South Australia (exh D11), nor otherwise was it in writing.

It is likely that Parletta's initial response was to offer $320,000, and that he later agreed to pay $340,000 in exchange for special conditions to be drafted by Horner regarding finance, access, approval and contamination. Nevertheless, Horner's drafting reflects in my judgment an attempt by him to serve the interests of Parletta in three respects at least:

1. The deposit of $5,000 was just under 1.5% of the purchase price, and so was very low. The witness John Hogarth said that, given the uncertainties created by the special conditions, one would ordinarily expect the vendor's agent to insist upon a deposit of 10%.

2. Notwithstanding the terms of special condition S(2) regarding access to the site, there is no evidence that Parletta wanted a right of access so far reaching that it would permit him to commence construction before settlement. Parletta's evidence was:

In terms of the condition about access to the site, what did you tell Mr Horner.

We wanted to - there's certain planning things, engineers need to do bore logs and also with the possibility of demolishing the existing cottages on the site would have been an advantage in order to get underway with the building process as quickly as possible after settlement. So we wanted to try and make sure we had access to the site.

Did you actually say to him you wanted the right to commence construction or did you just use a phrase 'access to the site'.

Those things may have been discussed but I don't recall clearly exactly what.

Do you recall in May 1999 - remember you were shown a letter dated 11 May. It's in volume B, it's P34, p.362. Look at the fourth paragraph of that letter beginning 'lastly'. Just read that to yourself.

When you wrote that letter you were under the impression that you'd need the vendor's approval to go ahead and commence work in demolition, didn't you.

I thought it would be easy to formally gain that approval, yes.

3. Special condition S(3) making the contract subject to approval by Council for the construction of 14 units necessarily contemplates an average site area of 107 square metres (1500 square metres divided by 14), which is significantly less than the minimum site area of 120 square metres provided by the Council's development plan. In his evidence, D'Alessandro acknowledged that there was 'a low likelihood' of the Council approving 14 units.

The steps which D'Alessandro took with respect to the property were also significant. Some time in about mid-October 1998, he discussed the property with Parletta and his architect at a café in Norwood. Then, on 26 October 1998, he participated with Parletta in the preparation of a feasibility study, and provided Parletta with a report on comparable sales. Horner's evidence was that he had knowledge of that feasibility study shortly after it was done. None of these steps was advised to the plaintiffs at the time. Indeed, the plaintiffs only became aware of the feasibility study after obtaining third party discovery from Parletta. These steps demonstrate that, during the time that Horner was discussing with Moffa the feasibility of subdividing and selling, D'Alessandro was advising Parletta about the feasibility of buying and constructing units for sale.

Indeed, Parletta said that unit design and unit prices were a recurring topic of conversation from November 1998. D'Alessandro's diary (exh P65 and T1041 - 1043) shows that he had appointments on 14 January 1999 ("Dean Parletta re Norwood ideas"), 28 January 1999 ("proposal for Norwood"), 17 February 1999 ("Paul Horner re Norwood") and 3 March 1999 ("Parletta's office Glynburn Road"). Parletta said that he does not remember giving a copy of the feasibility study of 13 January 1999 to D'Alessandro, but 'it was certainly something that we viewed'. Parletta said he also discussed with D'Alessandro the way the market was moving.

Parletta's discussions and appointments with D'Alessandro, Moffa's discussions with Horner after 29 January 1999 about Byass, and D'Alessandro's receipt from Parletta on 10 February 1999 of "Some ideas I've sent John Diekman", together with D'Alessandro's notations thereon, were also significant. They show that, during the time that Horner was discussing with Moffa his rights with respect to Parletta's breach of special condition S(3), D'Alessandro was advising Parletta about Pareletta's plans for development of the property.

Irrespective of what was said and by whom in relation to Moffa's prospects of avoiding the contract, clauses 6 and 7 of the contract gave to Moffa the right to serve a notice of default and to terminate the contract if within three days Parletta failed to remedy the default. And, as is admitted in paragraph 20.2.2 of the Defence, Horner knew at this time (that is, in "late January or early February") that property values had begun to rise. D'Alessandro's evidence was that, in January 1999, he had a feeling that the market was moving.

The letter of 30 March 1999 making the contract unconditional was prepared by Horner in response to Moffa's concerns about continuing delays. Parletta was in further breach of special condition S(3), because the Council had not approved the plans by that date. Parletta was, as Horner put it to him at the time, "out of contract". Byass was still wanting to speak to Moffa. Yet when Moffa signed the letter of 30 March 1999, he effectively waived any right to terminate the contract for Parletta's breach. On 24 March 1999, D'Alessandro had presented a marketing report to Parletta. D'Alessandro had prepared this report with Horner's assistance to support Parletta's attempts to obtain finance. The report demonstrates that, six days before the deadline in the contract for Council approval of the plans, Horner and D'Alessandro were assisting Parletta to obtain finance for his proposed development of the property. The report was not disclosed or discovered to the plaintiffs.

Clause 6 of the marketing report sets forth anticipated selling prices for each of ten town houses and the butcher shop. The introductory paragraph states:

"As previously supplied, the sale prices have been ascertained by careful and thorough analysis of recent sales of comparable properties in the locale of the subject property."

It is likely, as Parletta acknowledged in his evidence, that "the sale prices" referred to in the report were based upon identical sale prices in the feasibility study of 13 January 1999. It is also likely, as D'Alessandro acknowledged in his evidence, that the sale prices in that feasibility study were the result of his discussions with Parletta to that time.

It is important to understand that Newmark Commercial's dealings with Parletta took place against a background of increasing prices in the Norwood area. As is admitted in paragraph 20.2.2 of the Defence and as Horner said in evidence, he knew in late January or early February 1999 that the market had begun to rise. Horner also said in evidence that, by the end of March 1999, the market was becoming "quite buoyant". D'Alessandro said that "the market was showing signs of increase" at the time of the feasibility study on 13 January 1999, that "I had a feeling the market was moving" as of 29 January 1999, and that "the market was progressively going up through 1999". These views are reflected in a comparison of the feasibility studies of 26 October 1998 and 13 January 1999. In the former, predicted gross sales were $2,255,000 for 13 units at prices ranging between $150,000 and $190,000, whereas, in the latter, predicted gross sales were $2,246,000 for 10 units at prices ranging between $192,000 and $228,000.

I hold that Newmark Commercial entered into a contract of agency with Parletta for the pre-sale and sale of the units by no later than late May or early June 1999. The contract was not in writing. D'Alessandro said "it sort of evolved". Parletta said he gave instructions to sell the units after Council had approved the plans. We know from the chronology that the date of that approval was 14 May 1999. Parletta also said that the "for sale" signs went up in early June 1999, about a week after Newmark Commercial had been engaged.

Irrespective of when the contract of agency with Parletta commenced, I am satisfied that, from the time of the feasibility study on 26 October 1998 at the latest, Horner and D'Alessandro had an interest in seeing that a sale of the property to Parletta did not founder, and were actively assisting Parletta to that end, because they knew, or at least expected, that they would be appointed as agents for pre-sales and sales of the units.

"From the moment Parletta and you discussed his purchasing Sydenham Road, you expected or hoped that Newmark would get the selling agency from Parletta in relation to these units, didn't you.

No, that's true, there's no guarantee, but you expected to get it, didn't you.

Was anything said at that time about Newmark Commercial acting for Parletta in the purchase of the property.

On 26 October 1998, did you have any hopes in that regard.

It was probably very early in the piece to call that but I would have thought if we were lucky enough to buy it and things worked out, we'd have a chance of getting a resale in the future, probably."

If you hoped to receive an appointment as his selling agent, I suggest your interest in receiving that appointment and earning commissions from him would conflict with your interest, with the vendor's interest.

I would have put the earnings issue as secondary to the first issue.

You couldn't possibly suggest that the earnings issue wasn't there, though, could you.

I always felt that I'd have a reasonable chance to sell them. That's point blank. The type of fees that - we will earn the fees anyway, so if you're appointed as an agent, it's not a free gift. You've got to earn the sales. So to actually put them paramount in your mind at the start of the exercise wouldn't have been in my mind. So that would have been secondary.

Would you agree that you nonetheless had to try and balance those two interests: your own and the vendor's.

I probably would have made sure that the contractual side had reached a logical conclusion first because if you actually put your sales hat on first, there would be a conflict, and you may actually not be in a good position from that point of view, so I would always try to be aware - my disposition would be a general awareness of the vendor's position.

Were you trying to keep your sales hat off your head and in the cupboard for as long as you could.

Do you recall when it was that you asked him to prepare the report.

It was to assist us with our finance application and would help us with our financiers.

At this point in time had you engaged Newmark Commercial to act for you down the track in respect of any subsequent sales.

Not formally but we had had discussions about the unit and I think there was probably an unwritten sort of expectation that they might be selling them.

Is this an expectation on your part or Mr D'Alessandro's.

I think there was an expectation on Mr D'Alessandro's side and probably there was on my side as well."

Can I suggest to you that virtually right from the beginning of your deciding that you were interested in the project around about 26 October `98, you contemplated that you would engage Newmark to sell your development.

Yes, it was probably something that I thought would happen, yes."

A further point arises from the marketing report of 24 March 1999. The fifth paragraph of clause 3 states:

"The Community Title Scheme also provides an excellent vehicle for pre-sales allowing the possibility of lot sale and building contract combinations thereby effectively reducing the developers risk and accordingly should be exploited and promoted in a pre-sale marketing program."

The importance of pre-sales to the viability of the development is reflected in Fimeri's correspondence with various lending institutions. As Parletta put it "Pre-sales take the risk out of the project". The importance of pre-sales is reflected also in part of special condition S(2) of the contract, namely: "The Vendor further agrees that upon the contract becoming unconditional, in all things, the Purchaser is allowed to enter the site for the purpose of commencing construction, which may include demolition and any preparation or construction works the Purchaser requires." As I have pointed out, there is no evidence that Parletta wanted a right of access so far reaching that it would permit him to commence construction before settlement.

In his evidence, D'Alessandro acknowledged that the holding costs of $100,138 in the feasibility study of 26 October 1998 at the Newmark office would be less if there were pre-sales. Incidentally, when Parletta got home that same day and did a study on his own computer, he increased holding costs to $140,248.75.

The drafting by Horner of special condition S(2), and the preparation by D'Alessandro of the marketing report, lend support to the conclusion that D'Alessandro and Horner were promoting Parletta's interests at relevant times.

It is true that Moffa was unaware before the contract that the SA Government would emerge as a possible buyer in January 1999, and that there would be an upswing in the property market in Norwood during the course of that year. But for some time he had been a keen and experienced property investor, and more recently had become interested in property development. Had he known that D'Alessandro was in detailed discussion with Parletta about the development potential of the property and that a feasibility study was showing a 20% profit on a purchase price of $340,000, it is unlikely that he would have sold the property at that stage. Rather, he would have wanted to hold the property for the purpose of investigating how he might optimise his investment, either by selling or developing, at some later time.

It is also true that, as a lawyer with experience of real estate and knowledge of real property law, Moffa was capable of assessing for himself the legal significance of Parletta's failure to meet the 29 January 1999 deadline. But had Moffa known that D'Alessandro had been in detailed discussion with Parletta about the development potential of the property, and had Horner and D'Alessandro disclosed to Moffa the knowledge that they had gained by that time that property values had begun to move, it is likely that Moffa would have exercised his rights under clauses 6 and 7 of the contract to give notice of default to Parletta, albeit that termination of the contract would not have been the inevitable outcome.

The delay in settlement was occasioned, at least in part, by Moffa's failure to write cheques to SA Water and the Development Assessment Commission until 21 April 1999. Another reason, according to Horner, was Moffa's wish to defer his liability for capital gains tax on the builders yard until the 1999/2000 tax year. On the other hand, both Horner and Moffa said that Moffa wanted to apply the proceeds to the settlement of the Malvern property.

But had Moffa known of D'Alessandro's detailed discussions with Parletta about the development potential of the property, and had Horner and D'Alessandro disclosed to Moffa the knowledge that they had gained by that time that property values had begun to move, it is unlikely that he would have signed the letter of 30 March 1999 thereby waiving his rights under clauses 6 and 7 of the contract to give notice of default to Parletta.

What legal consequences should flow from these findings and conclusions of fact?

I have held that Newmark Commercial, through Horner, acted as agent for the plaintiffs with respect to the property between the commencement of negotiations in about September 1998 and the settlement of the contract on 23 July 1999. Obviously enough, Newmark Commercial owed a contractual duty to the plaintiffs during that period. The duty included a duty of disclosure, as appears from the following paragraphs from Bowstead and Reynolds on Agency (16th Edition):

"An agent may not enter into a transaction in which his personal interest, or his duty to another principal, may conflict with his duty to his principal, unless his principal, with full knowledge of all the material circumstances and of the nature and extent of the agent's interest, consents." (Footnote omitted)

"Disclosure. The duty does not actually prohibit the adoption of a position or the entering into of transactions in which such a conflict might occur; it rather prohibits doing so without disclosure of all material facts to the principal so as to obtain his consent. In this sense the rule may, as suggested in the Comment to the previous Article, differ in application from the less flexible rules relevant to express trustees. Consent of the principal is not uncommon. But it must be positively shown. The burden of proving full disclosure lies on the agent and it is not sufficient for him merely to disclose that he has an interest or to make such statements as would put the principal on inquiry." (Footnotes omitted)

"Where an agent enters into any contract or transaction with his principal, or with his principal's representative in interest, he must act with perfect good faith, and make full disclosure of all the material circumstances, and of everything known to him respecting the subject matter of the contract or transaction which would be likely to influence the conduct of the principal or his representative." (Footnotes omitted)

An agent employed to sell land is generally employed to obtain the best possible purchase price reasonably available: Keppel v Wheeler (1927) 1 KB 577. His duties, including his duty to convey to his principal any material, information or advice which the principal should know in order to guide him in transacting the business in progress, carry through to the time of settlement: Georgieff v Athans (1981) 26 SASR 412 at 414-415.

The duty of an agent to his principal may also be fiduciary in nature. Whether it is or is not will depend upon the nature of the relationship. In NZ Netherlands Society v Kuys (1973) 2 NZLR 163, the relationship in question was between a society and its secretary. The Privy Council said (at page 166):

"Their Lordships are in agreement with these contentions in so far as they stress the necessity to give consideration to the nature of the relationship between Kuys and the society and to the question whether that relationship imposed upon him, in relation to the particular transaction under investigation, duties of a fiduciary character. The obligation not to profit from a position of trust, or, as it is sometimes relevant to put it, not to allow a conflict to arise between duty and interest, is one of strictness. The strength, and indeed the severity, of the rule has recently been emphasised by the House of Lords (Boardman v Phipps [1966] UKHL 2; [1967] 2 AC 46; [1966] 3 All ER 721). It retains its vigour in all jurisdictions where the principles of equity are applied. Naturally it has different applications in different contexts. It applies, in principle, whether the case is one of a trust, express or implied, of partnership, of directorship of a limited company, of principal and agent, or master and servant, but the precise scope of it must be moulded according to the nature of the relationship. As Lord Upjohn said in Boardman v Phipps (supra):

"Rules of equity have to be applied to such a great diversity of circumstances that they can be stated only in the most general terms and applied with particular attention to the exact circumstances of each case" (ibid, 123; 756)."

In Daly v The Sydney Stock Exchange Limited [1986] HCA 25; (1986) 160 CLR 371, the High Court was concerned with an action by an investor against his stockbroker for failing to disclose relevant information. Gibbs CJ said (at page 377):

"Normally, the relation between a stockbroker and his client will be one of a fiduciary nature and such as to place on the broker an obligation to make to the client a full and accurate disclosure of the broker's own interest in the transaction. The duty arises when, and because, a relationship of confidence exists between the parties." (Footnotes omitted)

In Equity, Fiduciaries and Trusts (1989) edited by T G Youdan, the following passage appears (at page 50):

"One can identify clearly enough relationships in which the advisory function unmistakably is not fiduciary or is fiduciary. As to the former, there should be nothing fiduciary where in the circumstances the adviser is reasonably entitled to expect that (1) the other party, because of his position, knowledge, etc., will make his own evaluation of the matter including the advice or information given and will in consequence exercise an independent judgment in his own interests in the subject of decision; or (2) the other party is assuming the responsibility for how his own interests are to be served in the matter, howsoever incompetent in this he may in fact be. The first of these is often invoked, particularly in United States decisions, when dismissing the suggestion of fiduciary responsibilities arising from information exchanges between business persons. The latter provides the apparent rationale in the United States for denying a broker's fiduciary responsibility to an investor operating a non-discretionary account, and in England, for a like denial where a bank manager simply provides explanatory information about the nature and effect of a transaction.

The lawyer and the stockbroker illustrate the functionary regarded as clearly fiduciary at least when acting in an advisory, and not merely in a ministerial, capacity. Predictably it is these the courts have in mind when they describe the adviser as a fiduciary. And what these suggest is that fiduciary responsibilities will be exacted where the function the adviser represents himself as performing, and for which he is consulted, is that of counselling an advised party as to how his interests will or might best be served in a matter considered to be of importance to his personal or financial well-being, and in which the adviser would be expected both to be disinterested, save for his remuneration, and to be free of adverse responsibilities unless the contrary is disclosed at the outset."

In James v ANZ Group [1986] FCA 41; (1986) 64 ALR 347, the Federal Court was concerned with an action by farmers against a bank which they had approached for finance for the purchase of a property. Toohey J said (at page 368):

"The year 1981 was a time of rising farm values, a rise which continued until mid 1982 and then fell away. Counsel pointed to the reference to "a hopeless businessman" and "he relies heavily on others" as evidence of the trust placed by James in the bank and his necessary reliance upon any advice given by it. However it is important to keep in mind the distinction between advice of a financial nature and advice in regard to farming operations. As to the first, there is no doubt that the bank did advise the applicants from time to time and in the circumstances it had an obligation to do so. As to the second, I do not think Parker gave, or the applicants accepted, any such advice. There can be a real distinction between the giving of advice on the one hand and the imparting of information or the exchange of ideas on the other."

In Commonwealth Bank of Australia v Smith [1991] FCA 375; (1991) 102 ALR 453 at 477, a full bench of the Federal Court said:

"Not only must the fiduciary avoid, without informed consent, placing himself in a position of conflict between duty and personal interest, but he must eschew conflicting engagements. The reason is that, by reason of the multiple engagements, the fiduciary may be unable to discharge adequately the one without conflicting with his obligation in the other. Thus, it has been said, after ample citation of authority, that where an adviser in a sale is also the undisclosed adviser of the purchaser, an actual conflict of duties arises: Finn, "Fiduciary Obligations", pp 253-4."

In Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 at 97, Mason J said:

"That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction."

There was, as I find, much more to the contract between the plaintiffs and Newmark Commercial than an instruction to find a buyer for $340,000 or, as counsel for the defendants put it, 'I want you to subdivide, I want to keep a smaller part, and I want you to sell the larger part and I want you to get me $340,000 for it'. I have found that it is likely that Moffa asked Horner to find a buyer or agreed with Horner that Horner should find a buyer, and that a price of $340,000 was mentioned during discussions. But I do not thereby conclude that Moffa gave to Horner a specific and firm instruction to sell the property for that figure come what may. Although, as will emerge, $340,000 was the market value of the property at the time, the defendants were still required by the contract to act in the plaintiff's best interests with respect to the price.

Moreover, there was, as I find, much more to the relationship between Moffa and Horner than the mere imparting of information or ideas by the latter to the former. I refer to the association and the relationships which I have described earlier in these reasons under the heading "Moffa's previous association with Horner". I refer to the events which I have described under the heading "Events before the contract". And I refer to my findings and conclusions of fact. That association, those relationships and events, and those findings and conclusions of fact, combine to satisfy me that a fiduciary relationship between Newmark Commercial and the plaintiffs co-existed with the contract of agency between those parties. I consider that Newmark Commercial, through Horner, was acting for the plaintiffs with respect to the sale of the property in, to adopt words from the extract which I have quoted from Youdan, "an advisory, and not merely in a ministerial, capacity".

I do not accept, on the other hand, that Horner should have advised Moffa to develop the property himself. As will also emerge, the view that the property was ready for residential development in November 1998 is based largely upon the buoyant state of the market in 1999.

I hold that Newmark Commercial committed breaches of duty to the plaintiffs in its capacity as agent and fiduciary in the following respects:

1. Through Horner and D'Alessandro, it should not have provided a comparable sales report to Parletta on 26 October 1998 without the plaintiffs' knowledge and consent.

2. Having done so, it should have disclosed the report to the plaintiffs.

3. Through D'Alessandro, it should not have assisted Parletta with respect to the feasibility study on 26 October 1998 without the plaintiffs' knowledge and consent.

4. Having done so, it should have disclosed the study to the plaintiffs.

5. Through Horner, it should not have encouraged the plaintiffs to sell the property for $340,000 without disclosing its dealings with Parletta to that point, especially in relation to the comparable sales report and the feasibility study of 26 October 1998.

6. Through Horner, it acted in Parletta's interests and contrary to the plaintiffs' interests with respect to the amount of the deposit and in drafting special conditions S(2) and S(3) of the contract.

7. Through D'Alessandro, it should not have assisted Parletta with his plans to develop the property by providing advice from time to time on unit design and prices likely to be achieved on pre-sales and sales.

8. Having done so, it should have disclosed the advice to the plaintiffs.

9. Through Horner and D'Alessandro, it failed to advise the plaintiffs that, given the rise in the property market in early 1999, and given its knowledge of Parletta's plans to develop the property, the plaintiffs should consider serving notice on Parletta with respect to his failure to lodge plans with the Council by 29 January 1999.

10. Through Horner, it should not have offered advice to the plaintiffs about the Byass proposal without disclosing its dealings with Parletta and its expectation that it would be acting as Parletta's agent on the pre-sales and sales of the units.

11. Through D'Alessandro, it prepared a marketing report for Parletta without the plaintiffs' knowledge and consent.

12. Having done so, it failed to disclose the report to the plaintiffs.

13. Through Horner and D'Alessandro, it failed to advise the plaintiffs that, given the continuing rise in the property market in 1999, and given its knowledge of Parletta's plans to develop the property, the plaintiffs should have considered serving notice on Parletta with respect to his failure to obtain approval for the development from the Council by 30 March 1999.

14. Through Horner and D'Alessandro, it sought to profit from its position of trust. Its dealings with Parletta were designed to maximise its chances of eventually receiving instructions to act as Parletta's agent on the pre-sale and sale of the units. Its duty as fiduciary was either to refrain from such dealings or to make a full disclosure thereof to the plaintiffs and of its expectation that it would be acting as Parletta's agent on the pre-sales and sales of the units.

Counsel for the defendants contended that Moffa could not have given notice to terminate with respect to Parletta's failure to meet the 29 January 1999 and 30 March 1999 deadlines because on those dates he was not in a position to give title to the property in terms of special condition S(1). Citing Cheshire and Fifoot's Law of Contract (8th Australian edition) at para 21.23, counsel relied upon the proposition that a party who is unwilling or unable to perform a contract is not entitled to terminate the contract for breach by the other party.

I consider that the answer to the contention is provided by a later passage in para 21.23, namely:

"A party need only be ready and willing to perform the contract in substance. A party who is in breach may nevertheless have the right to terminate, so long as the breach is not repudiatory or of an essential term or such as to deprive the other party of the substantial benefit of the contract."

The authority cited by the authors for that proposition is Roadshow Entertainment Pty Ltd v CEL Home Video Pty Ltd [1997] NSWSC 473; (1997) 42 NSWLR 462 at 479 - 80.

Notwithstanding Moffa's tardiness in paying the fees, at no time was his willingness and ability to provide a title a question of concern. Had he been aware of the advantage to him of termination, doubtless he could have made prompt payment of the fees and otherwise done everything to obtain a title without unnecessary delay.

I begin with two tables. The first summarises the values which the valuers put upon the property as at various dates.

Value 1 represents the market value of the property unsubdivided. Value 2 represents the market value of the property as a parcel of land capable of being subdivided into nine unit sites and one butcher shop. With respect to his valuation as at 11 November 1998, Fudali said that, given the special conditions in the contract favourable to the purchaser, a situation of no risk to the purchaser is as good as an approved development. This is why I have placed his figure of $450,000 in the column headed 'Value 2'. Fudali said that planning approval generally adds 10-15% to the value.

Southwick did not put a value on the property as at the date of the contract, but he did express the view "that the property was sold below its market value".

The second table summarises the main so-called "comparable sales" or "sales of influence" referred to by the valuers.

The following properties seemed to attract most of the attention of the valuers.

This site was part of a larger 4,476 square metre block of land formerly used as a truck depot on the western side of the street. The block had been substantially cleared and a significant sum had been spent on soil remediation. It was generally a level site in a street of commercial buildings, including a warehouse opposite. On the northern side of the warehouse, however, were a row of cottages of heritage significance.

The witness, Richard Wood, purchased this block in October 1997, and immediately put a 2,108 square metre portion, lot 5, back on the market. Horner was engaged as his agent. Spiro Morris was a buyer for $320,000, then $385,000, but his offers were not accepted. Eventually, lot 5 was purchased for $400,000 by Salvatore (known as Sav) Ali of SA Constructions Pty Ltd. The settlement date of the contract was 9 March 1998. By this time, the lot was subject to planning approval for twelve units, which gave each unit site a price of $33,000. Sav Ali eventually constructed ten units, which means that each unit site had a price of $40,000 (exh P54). Some of the sites were sold subject to a builders contract with Sav Ali. Other sites were sold after units had been constructed. As Fudali said, it is generally accepted that planning approval adds 10 to 15% to the value.

It is also generally accepted that this development eventually proved to be very successful. Nevertheless, the price per square metre of $227 agreed by Parletta in November 1998 represents a 19% increase on the price per square metre of $190 agreed by Sav Ali in March 1998. In the absence of an adjacent factory, hotel and hotel car park, this property was superior to the subject property.

This site was part of the original 4,476 square metre block purchased by Richard Wood. Sav Ali bought it off market from Wood in late November 1998 for $250,000. Settlement occurred on 29 January 1999. Planning approval had already been granted for five units. At some point Horner attempted to sell the blocks as commercial sites. Four units were eventually constructed, which means that the price per unit site was $62,500. The units were set back from the road to minimise the impact of noise. The Fullarton Road property was inferior to the subject property, being on a busier main road. The agreed price of $346 per square metre would not have been generally known at the time of the subject contract.

This site was formerly used as a factory in a street of buildings which were mainly commercial and industrial in character. The site was sold, with settlement in September 1998, for $750,000 or $261 per square metre. Assuming 19 unit sites, the price per unit site was $39,474. The site was resold on 28 September 1999 to Sav Ali for $1,140,000. At one stage, Horner was the vendor's agent, but not at the time of either of the sales. Nineteen units were eventually constructed, which means that the price per unit site was $60,000. Access to the units was and is from both King William Street and Little Rundle Street. In the absence of an adjacent factory, hotel and hotel car park, this site was superior to the subject property.

This site was formerly occupied by the Council works depot. It is in a good residential location to the south of the Parade, and within a short walk of quality shops and cafes. The auction in April 1998 was well attended. Southwick expected that it would sell for about $750,000, but the ultimate price was $940,000. D'Alessandro was there on behalf of a client, but was unable to put in a bid. Southwick said there was obviously a pent-up level of demand from all the bidders that were there. Given its amenity and location, this property was substantially superior to the subject property.

The opinion of Robert Brooke is to the effect that the property was sold at market value in November 1998. I prefer that opinion for the following reasons:

1. He seemed to me to be the only witness who confined his valuation entirely to information known at the time of the contract in November 1998. The others, to a greater or lesser extent, seemed to allow hindsight, that is, the state of the market in 1999, to intrude. The area was in transition from industrial/commercial to commercial/residential in 1998 and 1999. But it is the price of land purchased before November 1998, whether for unit development or otherwise, not the price fortuitously paid for units in 1999, which is the relevant guide. Sales which had settled before the subject sale included 29 Edmund Street in March 1998 at $190 per acre (with approval for twelve units), and 106 -108 King William Street in September 1998 at $261 per acre.

2. The original property was purchased by the plaintiffs at auction. Although the vendor was a receiver manager, according to Horner there were five genuine bidders, including a developer. The price paid for 1798 square metres in November 1997 was $173 per square metre. The price received for 1500 square metres in November 1998 was $227 per square metre. This represents an increase in just over twelve months of 31%. An increase of that magnitude cannot be explained solely by the conditional nature of the second contract.

3. Brooke's opinion that the property had an inferior residential potential, given the industrial/commercial nature of the locality, the proximity of the 24 hour Caroma factory, the coming and going of semi-trailers to and from that factory, and the proximity of the hotel and the car park of the hotel, is confirmed by the impression that I formed at the view. The other valuers, to a greater or lesser extent, disagreed with his opinion or attached less weight to these matters.

4. His opinion that 88 Coke Street, when compared with the subject property, had a substantially superior residential potential is confirmed by the impression that I formed at the view. Fudali and Southwick took, wrongly in my opinion, the Coke Street sale into account.

5. His opinion that 29 Edmund Street had a superior residential potential is confirmed by the impression that I formed at the view.

6. Even allowing for the limited value of statistics, the following figures in the SA Government Valuation Services Report (exhibit D30) paint a picture of moderate rises in the Norwood area in 1997 and 1998, and a fairly dramatic rise in 1999:

The plaintiffs seek an award of damages upon the basis of one at least of the following approaches:

1. The difference between the sale price of the property in November 1998 and the market value of the property in November 1998.

2. The difference between the sale price of the property in November 1998 and the market value of the property at trial.

3. An account of the defendants' profit from commissions earned on the pre-sale and sale of the units.

4. The profit that the plaintiffs would have made had they chosen to develop the property themselves.

5. The value of the opportunity lost at the end of January 1999 to terminate the contract.

As I have said, I am not persuaded that the sale price of $340,000 in November 1998 was less than the market value at the time. Nor, as I now add, am I persuaded that it is likely that the plaintiffs would have developed the property themselves. It is true that Moffa was becoming increasingly interested in subdivision and development. It is also true that Parletta sought to borrow 100% of the project, or $1.8 million, and that Moffa may have had the capacity to borrow less. But even had he been in possession of all information relevant to the development potential of the property, I am unable to conclude that it is likely that Moffa would have been prepared to borrow sufficient funds and to proceed upon the basis of a risk and profit of 20%. Parletta opted to do so but, as a developer and a builder, he stood to gain 8% on building contracts as well.

In light of my findings and conclusions, it seems to me that approaches 2, 3 and 5 are the only approaches that remain open, and that approach 2 can be treated as subsuming approach 5. As for approach 3, counsel for the plaintiffs concedes that his clients should elect between damages and an account of profits. Given the figure that I consider would be appropriate under approach 2, doubtless the plaintiffs will elect to take that figure in lieu of any figure under approach 3. I consider that, in the particular circumstances of this case, the plaintiffs should be permitted to make that election between the publication of these reasons and the entry of judgment: United Australia Ltd v Barclays Bank Ltd (1941) AC 1 at 19 and 30. Approach 2 is consistent with my conclusion that proper disclosure to Moffa prior to the contract would have resulted in his opting to hold the property for the purpose of investigating how he might optimise his investment, either by selling or developing, at some later time.

Since there is, as I have found, a direct connection between the defendants' breaches of duty and Moffa's lost opportunity to hold the property for the purpose of investigating how he might optimise his investment at some later time, I need do no more than note the principle applied in various cases but first stated in Brickenden v London Loan and Savings Co (1934) 3 DCR 465 at 469, namely:

"When a party, holding a fiduciary relationship, commits a breach of his duty by nondisclosure of material facts, which his constituent is entitled to know in connection with the transaction, he cannot be heard to maintain that disclosure would not have altered the decision to proceed with the transaction... Once the court has determined that the non-disclosed facts were material, speculation as to what course the constituent, on disclosure, would have taken is not relevant."

I refer to the chapter written by Mr Justice Gummow, then a judge of the Federal Court, on "Compensation for Breach of Fiduciary Duty" in the text edited by Youdan. His Honour discusses a number of Australian and overseas authorities, including Re Dawson (1966) 2 NSWLR 211. I quote a relevant passage from the judgment of Street J in that case:

"The form of relief is couched in terms appropriate to require the defaulting trustee to restore to the estate the assets of which he deprived it. Increases in market values between the date of breach and the date of recoupment are for the trustees' account; the effect of such increases would, at common law, be excluded from the computation of damages; but in equity a defaulting trustee must make good the loss by restoring to the estate the assets of which he deprived it notwithstanding that market values may have increased in the meantime. The obligation to restore to the estate as to the assets of which he deprived it necessarily connotes that, where a monetary compensation is to be paid in lieu of restoring assets, that compensation is to be assessed by reference to the value of the assets at the date of restoration and not at the date of deprivation. In this sense, the obligation is a continuing one and ordinarily, if the assets are for some reason not restored in specie, it will fall for quantification at the date when recoupment is to be effected, and not before."

I conclude that, in the case of a non-trustee fiduciary (Newmark Commercial) and the intervention of a third party without notice (Parletta), equity requires the fiduciary in material breach (Newmark Commercial) to place the plaintiffs as far as possible in the same position as if they had never entered into the disputed transaction (the sale of the property to Parletta).

I conclude that the plaintiffs' damages should be based upon the difference between $340,000 and the value of the property, had it not been subdivided for development, at the time of trial. Although the plaintiffs have had the use of the proceeds of sale since 23 July 1999, an off-setting factor is the opportunity that they would have had to earn rental income from the property had they retained it after November 1998. In relation to the market value of the property in November 1998, I have preferred the opinion of Brooke. His valuation as at 23 July 1999 of $445,000 is the lowest of the valuations applicable to that time. There is no valuation applicable to any later time except that of Brooke. He valued the property as at January 2001 at $485,000 and $500,000, with the latter figure reflecting its then development potential. I do not know whether, if for no other reason than to enhance its value, the plaintiffs would have sought development approval for the property at any time between November 1998 and the trial. I do not know whether and to what extent the property would have appreciated in value after January 2001. Unlike common law damages, however, equity does not require exactitude in the determination of equitable compensation: Catt v Marac Australia Ltd (1986) 9 NSWLR 639 per Rogers J at 661. In the final analysis, I consider that the sum of $160,000 would represent fair compensation to the plaintiffs for their loss.

Counsel for the defendants submitted that any damages should be reduced to reflect the fact that Moffa used the proceeds of settlement to fund his purchase of the property at Malvern, given that the property at Malvern was eventually sold for a substantial profit. I do not agree. There is no basis for supposing that the purchase of the property at Malvern was necessarily dependent upon funds from the sale of the property at Sydenham Road as opposed to funds from any other source.

Given my conclusion that Newmark Commercial acted on both sides of the transaction, it is not entitled to recover commission from the plaintiffs: Finn, Fiduciary Obligations, para 592. So the counter-claim will have to be dismissed.

It will be apparent that my reasons to this point have been confined to two only of the causes of action relied upon by the plaintiffs, namely breach of the contract of agency and breach of fiduciary duty. I now need to hear from counsel whether formal judgment should be entered against one or more of the defendants, or whether I should proceed to deal with one or more of the causes of action relied upon by the plaintiffs under the Misrepresentation, Fair Trading and Trade Practices Acts. Questions of interest and an election by the plaintiffs to take damages in lieu of an account of profits also remain for consideration.