Pascali v Carr

Judgment

1. BATHURST CJ: I agree with the orders proposed by Macfarlan JA and with his Honour's reasons.
2. BELL P: I agree with Macfarlan JA.
3. MACFARLAN JA: On 7 June 2012 the appellant, Mr Joseph Pascali, entered into a contract to sell his recently redeveloped waterfront home at Seaforth to the remaining respondent to the appeal, Mrs Marcelle Carr. Mrs Carr paid a deposit of five per cent of the purchase price of $8,550,000 on the exchange of contracts. A further five per cent was stipulated to be payable upon satisfaction of a special condition of the contract, Special Condition 16, concerned with the provision of evidence satisfactory to the purchaser of the existence of home warranty insurance ("HWI") and of compliance with council requirements in relation to the building works.
4. The sale was settled after Mr Pascali, through his agent Mr Jason Nowytarger, submitted evidence referable to Special Condition 16.
5. In proceedings commenced by Mrs Carr in the Commercial List in 2014, Mrs Carr alleged inter alia that Mr Nowytarger had made fraudulent implied misrepresentations to her in relation to the fulfilment of Special Condition 16 and that Mr Pascali was vicariously responsible for Mr Nowytarger's conduct. After an eight day hearing, McDougall J found for Mrs Carr and entered judgment in her favour ([2018] NSWSC 1424 and orders entered on 17 October 2018). Following the discontinuance of an appeal by other defendants in the Court below and of a cross appeal, Mr Pascali is the sole appellant and Mrs Carr is the sole respondent.
6. The issues on appeal are confined to the following: 1. whether it is to be inferred from the documentary evidence that the alleged implied Insurance and Development Representations (see [31]-[34]) were made; 2. if they were made, whether it is to be inferred that Mr Nowytarger understood that he was making the Development Representation as found; and 3. whether it is to be inferred that Mrs Carr relied upon those Representations.
7. For the reasons given below, I consider that Mr Pascali's appeal should be dismissed with costs.

The Contract for Sale

1. Mr Gerald Kesby of Anglo Lawyers acted for Mr Pascali on the sale. Mr Brian Thomas of MacKenzie Thomas Lawyers, assisted by Ms Angela George, acted for Mrs Carr. Dealings on behalf of Mrs Carr in relation to the contract were largely undertaken by her husband, Mr Ian Carr.
2. In the years prior to the sale, Mr Pascali had arranged with Mr Nowytarger, who was his son-in-law and had building experience, for Mr Nowytarger to have the Seaforth home redeveloped. Mr Nowytarger was to engage, supervise and pay the builders and tradesman who worked on the property. The work was financed by Mr Pascali, with the proceeds of sale, after reimbursement of Mr Pascali's expenses, to be paid to his daughter, Ms Simone Pascali-Nowytarger.
3. Special Condition 15 of the Contract provided for Mr Pascali to complete prior to settlement some 48 items of outstanding building work listed in an attached schedule.
4. Special Condition 16 was in the following terms: "16 Completion of this contract is subject to and conditional on the vendor delivering to the purchaser evidence satisfactory to the purchaser acting reasonably that all building works undertaken on the property in the 6 years preceding exchange of the contract (building works): (a) have been completed in accordance with the requirements of Manly Council (this may be by a final occupation certificate or similar certificate); and (b) are covered by a current home warranty insurance policy in respect of the whole of the building works. The vendor must use their best endeavours to complete the building works and obtain the home warranty insurance in manner sufficient to comply with those conditions as soon as possible and in any event no later than the due date for completion. If such evidence is not provided by that date, the purchaser may, by written notice to the vendor, rescind this contract provided that the purchaser may not give a notice of rescission if the vendor provides such evidence to the purchaser before the purchaser gives the vendor a notice of rescission. Despite any other provision of this contract, until such evidence is provided, the purchaser need only pay a 5% deposit with the balance of the deposit payable within 2 business days of the provision of such evidence."
5. Special Conditions 15 and 16 became part of the Contract on or about 14 June 2012 as a result of further negotiations between the parties during the "cooling off" period following the exchange of contracts on 7 June 2012.

Communications prior to settlement concerning compliance with Special Condition 16

1. On about 15 August 2012 Mr Nowytarger provided to Mr and Mrs Carr a document entitled "Final Occupation Certificate 100273 (residential)" dated 15 August 2012, attaching a bundle of certificates from contractors. On 4 September 2012, he sent to Mrs Carr an email attaching an HWI Certificate of 28 March 2011 in the amount of $170,000. Mrs Carr did not examine the terms of the certificates.
2. On 10 September 2012, Mr Carr sent to Ms George of MacKenzie Thomas an email attaching a copy of the Final Occupation Certificate dated 15 August 2012 and saying "[w]e are expecting the Home Owners Warranty Certificate tomorrow". He asked whether it would be possible to settle on a specified day. He appears to have been unaware that Mrs Carr received an HWI Certificate on 4 September 2012.
3. On 11 September 2012, Mr Kesby sent Mr Thomas an email in the following terms: "Please find enclosed as follows; (a) Building Occupation Certificate dated 14 August 2012 in compliance with Special Condition 16(a) and (b) Home Warranty Insurance Certificate dated 12 April 2011 in compliance with Special Condition 16(b) Per Special Condition 16, we would now be obliged if the Purchaser would arrange to increase the Deposit held by the Agent (Ray White) from $427,500.00 to $855,000.00 within two (2) business days. Please also forward a Transfer for our client's execution. We thank you in anticipation."
4. The "Building Occupation" Certificate attached to the email was in fact a "Final Inspection" Certificate given by a private certifier. The Certificate of Insurance was, as with that provided to Mrs Carr on 4 September 2012, dated 28 March 2011 and for the amount $170,000. It related to "Structural Alterations/Additions" carried out for Mr Nowytarger by Mr Daniel Miller trading as "Dan Miller Construction".
5. Mr Thomas replied to Mr Kesby later on the same day as follows: "We refer to your letter sent by facsimile today. We note the following in relation to the documents attached to your letter: 1. The document entitled "Mandatory and Critical Stage Inspection Report - Final Inspection Domestic" is not the Final Occupation Certificate; 2. Both the Inspection Report and the Home Warranty Insurance Certificate are issued with "Jason Nowytarger" listed as owner of the property, not Mr Pascali. We received a copy of the Final Occupation Certificate from our client yesterday, and it too was issued with Mr Nowytarger listed as owner. In addition, it was issued in respect of the wrong deposited plan number. We have spoken to Private Certifiers Australia, and they have told us that the incorrect deposited plan number was simply a mistake, and is easily fixed. However, they said that [they] were under the impression that Mr Nowytarger was the owner of the property. It also became apparent that they have issued the Final Occupation Certificate on the basis of a different Home Warranty Insurance Certificate than the one you sent us. That certificate, also incorrectly issued to Mr Nowytarger, was for work done by a different builder and for a different amount. These inconsistencies will need to be rectified by your client. Our clients will not provide further deposit monies until both the Home Warranty Insurance Certificate and Final Occupation Certificate (for all building work referred to in Special Condition 16) are produced noting the correct owner. Until such time as these documents are produced, the precondition for the payment of further deposit monies contained in Special Condition 16 will not have been met."
6. On 17 September 2012 Mr Carr sent to Mr Thomas and Ms George two HWI Certificates that he and Mrs Carr had received from Mr Nowytarger. Mr Carr asked whether they were "ok" and whether settlement could occur that week. The certificates were dated 14 September 2012, related to work carried out by Mr Miller and were in the amounts of $170,000 and $450,000. On each certificate, the work was said to have been carried out "for" Mr Nowytarger.
7. On the same day Mr Carr sent an email to Mr Nowytarger stating that Mr Thomas "says we really need the HWI certificates in Joe's name as well as he is the owner of the property".
8. On 18 September 2012, Mr Thomas replied to Mr Kesby in the following terms: "We refer to our correspondence last week regarding the Final Occupation Certificate and Home Warranty Insurance Certificates for 4 Laura St, Seaforth. We have received the enclosed Home Warranty Insurance Certificates from our client. These certificates suffer from the same defect notified to you in respect of the certificate received last week - they are issued for the benefit of 'Jason Nowytarger', not Mr Pascali. A Home Warranty Insurance Certificate does not provide insurance cover to our client, as a future owner of the property, unless it is issued for the benefit of the property owner as at the time of issue, or the property owner becomes a successor in title to the policy by some other means. On the documents and information provided to date, our client will not be able to obtain the benefit of the insurance, as a successor in title, if it remains in Mr Nowytarger's name. We also note that we have not received an amended Final Occupation Certificate. As stated last week, our client will not be obliged to provide further deposit monies until both the Home Warranty Insurance Certificates and Final Occupation Certificate (for all building work referred to in Special Condition 16) are produced noting the correct owner. If you consider that we have overlooked some mechanism by which our client obtains the benefit of Home Warranty Insurance, please let us know. Our client is anxious to complete the purchase and is willing to take a practical view provided her interests are properly protected. We would appreciate if you would keep us updated on your client's progress in rectifying the above issues."
9. Mr Kesby replied on the same day in the following terms: "With reference to your letter of 11 September 2012, we understand that you have received a copy of the Final Occupation Certificate from your client. We should be obliged if you would make a copy available to us. We have been seeking a copy from our client, but have not to date met with any success in this regard. Our client advises that he has through his son-in-law, Jason Nowytarger, made application for a Certificate in his own name and is awaiting its issue."
10. Mr Kesby responded further on 18 September 2012 as follows: "Further to your letter of today's date regarding Home Warrantee [sic] Insurance, we are advised that Mr Jason Nowytarger's role, was as the engaging party to the building contractor. Notwithstanding that the Vendor was not party to the building contract, Section 92C of the Home Building Act (NSW) 1989, entitles him to the benefit of the Policy. This is reinforced by the Terms of the Policy in which the insured is defined as ''YOU' and is explicitly defined on Page 4 as "including any owner of the Land ... and any successor in title to that person". Accordingly, we invite you to conclude that it is not necessary that the Certificate of Insurance should be considered deficient in not being expressed to be "for" the Vendor property owner. Similarly, we would suggest that a Final Occupation Certificate issued to a name other than the registered proprietor does not waive the effect of the Certificate that the work has been certified."
11. On 19 September 2012, Mr Kesby sent a Final Occupation Certificate dated 18 September 2012 to Mr Thomas. This certificate described the person having the benefit of the identified development consent as "Jason Nowytarger/Joseph Pascali". The private certifier who issued it noted that there was a current development consent and construction certificate in respect of the property and stated that "[t]he building is suitable for occupation or use in accordance with its Classification under the Building Code of Australia".
12. Mr Thomas responded on the same day indicating that the certificate was satisfactory but stating that the issue concerning the two HWI Certificates that had been supplied was still unresolved as those certificates stated that Mr Nowytarger was "the only person named as owner" in them. He said that he would accept certificates which named both Mr Nowytarger and Mr Pascali as owners as he said that the Final Occupation Certificate did.
13. As a result of communications by Mr Thomas with the home warranty insurer, and with the co-operation of Mr Pascali, the insurer issued a letter stating that the HWI Certificate dated 14 September 2012 would inure to the benefit of successors in title to the current owner, Mr Pascali.
14. On 25 September 2012, Ms George wrote to Mr Kesby setting out a checklist of 9 items that Mr Kesby would have to provide at the settlement scheduled for the following day. These included as numbers six and seven the "Original Home Owners Warranty Certificates" and "Original Final Occupation Certificate". Mr Kesby's firm responded by saying that they were instructed that Mr Nowytarger had already provided these items to Mr Carr. Later that day, Mr Carr confirmed to Ms George that that had happened.
15. Settlement of the sale took place on 26 September 2012, at which time the further five per cent of the deposit, as well as the balance of purchase monies, was paid to Mr Pascali.

The Further Amended Statement of Claim

1. In the Commercial List proceedings, Mr Miller was the first defendant, Mr Nowytarger was the second, and Mr Pascali was the third. It is sufficient for the purposes of this appeal to focus on the allegations made in the deceit cases against Mr Pascali.
2. By [20] of the Further Amended Statement of Claim ("FASOC"), Mrs Carr alleged that on or just prior to 19 September 2012 Mr Pascali, through his solicitor, provided to her two HWI Certificates (for $450,000 and $170,000) and a Final Occupation Certificate dated 18 September 2012.
3. In [22] Mrs Carr alleged that, subsequent to the carrying out of the renovation work, Mr Miller and Mr Nowytarger signed and backdated two building contracts, and provided them to the home warranty insurer with a letter stating that Mr Miller had carried out all the work at the property. Mrs Carr alleged that this conduct was calculated to, and did mislead, the insurer into issuing the HWI Certificates naming Mr Miller as the builder. This was significant because Mr Miller was a licenced builder whereas the persons who in fact did the work were not.
4. Mrs Carr alleged that Mr Pascali made two sets of representations to her. These were described in the FASOC as the Insurance and Development Representations.
5. In [29], the Insurance Representations alleged by Mrs Carr are described as follows: "In providing the Home Warranty Certificates [to the plaintiff], Pascali represented to the plaintiff that: i All of the work undertaken within the last six (6) years in respect of residential building for the construction of the Home had been undertaken by Miller; ii All of the residential building work was the subject of Home Warranty insurance; iii That the Home Warranty insurance had been obtained without deception and would not give rise to any entitlement to avoid the policy; and iii That the residential building work had been undertaken by a licensed builder. iv. That by provision of the Home Warranty Certificates, Pascali had complied with special condition 16 of the contract. (the Insurance [R]epresentations) Particulars The representations are implied from the provision of the Home Warranty Certificates."
6. In [30], Mrs Carr alleged that the Insurance Representations were false because the certificates did not cover all of the work that was done and Mr Miller had not undertaken all the work. (Presumably, certificates for greater amounts would have cost more to obtain).
7. In [37], the Development Representations alleged by Mrs Carr were described as follows: "By the tender of the Occupation certificate to the plaintiff, Pascali expressly and impliedly represented that i The house was complete and had been constructed in a proper and workmanlike manner, by a licenced builder, except for the incomplete or defective work, identified in the Contract for the sale of land, and, the 20 September 2012 email. ii Had been constructed in accordance with the Manly Council DA and the CC. (the Development [R]epresentations)
8. In [39] and [40], Mrs Carr alleged that the work had not been done in accordance with the development application and the construction certificate issued by the local council, nor was the work substantially undertaken by a licenced builder. Mrs Carr further alleged that the Insurance and Development Representations were made with knowledge of their falsity and with the intent that they be relied upon. She further alleged that she did rely upon those representations in completing the purchase of the property.

The Judgment at First Instance

1. The primary judge found that Mrs Carr's deceit claims based both on the Insurance and Development Representations to have been established. His Honour noted that there was no suggestion that Mr Pascali was involved in, or had any knowledge of, the fraud perpetrated by Mr Nowytarger but that Mr Pascali was nevertheless vicariously responsible for Mr Nowytarger's conduct.

The deceit claim based on the Insurance Representations

1. His Honour found that most of the development work was done by a Mr Taylor, and that Mr Miller was not therefore properly described as the builder in respect of the work. He also found that Mr Nowytarger and Mr Miller prepared backdated building contracts for submission to the home warranty insurer, and signed and submitted a letter to that insurer containing false statements about who had undertaken the building work. As a result, the HWI Certificates were procured by representations that Mr Nowytarger knew to be false.
2. His Honour further found that Mr Nowytarger provided the first HWI Certificate (dated 4 September 2012) to Mr Kesby, as a result of which Mr Kesby sent it to Mr Thomas under cover of his letter of 11 September 2012. Subsequently two further HWI Certificates, dated 14 September 2012, were provided to Mrs Carr and, after a letter was obtained from the home warranty insurer, Mrs Carr, through her solicitor, accepted the certificates and agreed to settle her purchase.
3. His Honour continued: "150 When the letter of 11 September 2012 is read in conjunction with special condition 16(b), the point is clear. Expressed in terms of that special condition, the letter represented that the HWI certificate was capable of satisfying Mrs Carr, acting reasonably, that all building works undertaken on the property in the 6 years preceding exchange of contract were covered by a current HWI policy in respect of the whole of those works. 151 Although the representation in the letter of 11 September 2012 was not expressly repeated when further documents were provided to Mr Thomas, it is obvious that those further documents were provided on the basis that they would have the same effect. In other words, when the further HWI certificates were provided, there was at the very least an implied representation that they complied with special condition 16(b); that they were "evidence" that, considered reasonably, could satisfy Mrs Carr that the whole of the building works in question were covered by a current HWI policy. 152 Equally plainly, those representations were made to Mrs Carr with the purpose of inducing her not to rescind the contract but, rather, to pay the balance of the deposit and thereafter to complete the contract. 153 In my view, the representations, both express and implied, were false. Further, in my view, Mr Nowytarger knew that they were false. The representations were false because, at the very least, the certificates did not relate to the whole of the building work carried out on the property over the six years preceding exchange of contracts. … 157 Of course, the deceit does not stop there. Mr Nowytarger must have known that the purported contracts for residential building work that were signed to procure the issue of the HWI certificates were shams. However, that is a additional reason for, and not a necessary element of, the finding of deceit against Mr Nowytarger."
4. As to Mrs Carr's reliance, his Honour found: "159 As I have said, I accept Mrs Carr's evidence that if she had been advised to rescind the contract for non-compliance with special condition 16, she would have accepted that advice … Likewise, I accept Mr Thomas' [evidence] that if the special condition were not complied with, he would have advised Mrs Carr to rescind … The provision of the HWI certificates was clearly intended to induce Mr Thomas to conclude that the special condition 16(b) had been satisfied, and to advise Mrs Carr accordingly. In other words, it was clearly intended to induce Mrs Carr not to rescind, but to proceed to completion. 160 It is but a short step to conclude that Mrs Carr did rely upon the HWI certificates, provided in the way, and with the express or implied representations, to which I have referred, in deciding not to rescind, but rather to complete, the contract."

The deceit claim based on the relevant Development Representation

1. The primary judge noted the terms of the pleading of the Development Representations (see [34] above) but stated that he was only concerned with the second representation, that is, that the building renovation work had been constructed "in accordance with the development approval and the construction certificate" (at [167]).
2. His Honour first noted that, consistent with the terms of ss 109C and 109H of the Environmental Planning and Assessment Act 1979 (NSW), the Final Occupation Certificate did not state that the building work had been completed in accordance with the requirements of the council.
3. Nevertheless, his Honour noted that the building work was not in fact completed in accordance with the council's requirements and found that Mr Nowytarger knew that to be the case. He also found that three certificates given by Mr Miller and attached to the Final Occupation Certificate (see [13] above) were false, to Mr Nowytarger's knowledge.
4. His Honour continued (at [181]-[182]): "Mr Nowytarger provided the final occupation certificate either directly or through Mr Kesby to Mrs Carr (perhaps through Mr Thomas). He did so in circumstances that represented impliedly that the certificate was capable of demonstrating that all works had been carried out in accordance with the Council's requirements. He must have known that it was false to represent that the works had been so completed. For reasons essentially the same as those I gave in relation to the HWI certificates, I would find, were it necessary, that: (1) Mrs Carr relied upon the final occupation certificate in deciding to complete the contract rather than rescind it: and (2) Mr Pascali is liable for the consequences of Mr Nowytarger's deceit in relation to the provision of the final occupation certificate."

Were the Insurance Representations made?

1. Special Condition 16 contained both conditional and promissory elements as follows: 1. the parties' obligations to complete the contract were subject to and conditional on, Mrs Carr being satisfied in the manner specified in Special Condition 16; 2. Mrs Carr's satisfaction was to relate to evidence delivered to her by Mr Pascali; 3. to give efficacy to these provisions, promises must be implied that Mr Pascali would deliver "evidence" of the nature described to enable it to be considered by Mrs Carr, and that Mrs Carr, upon receipt of such evidence, would decide whether she was satisfied with it; and 4. Mr Pascali was, expressly, required to use his best endeavours to complete the building works and obtain the relevant home warranty insurance. He was required to do this "in a manner sufficient to comply with the conditions stated in the clause" (that is, that there be evidence of compliance with the council requirements and of home warranty insurance).
2. There can be no doubt that in causing the Final Occupation and HWI Certificates to be submitted to Mrs Carr, or her solicitor, that Mr Nowtarger was intending to provide the "evidence" that Special Condition 16 required be considered by Mrs Carr. As the evidence and primary judge's findings make clear, Mr Nowytarger was seeking to bring about the satisfaction of Special Condition 16 and thereby bring about completion of the sale.
3. His conduct in submitting the certificates thus involved, as the primary judge held, an implied representation that the certificates were capable of satisfying Mrs Carr, as contemplated by Special Condition 16, on the assumption that she was acting reasonably. His conduct bore some analogy to that of a person depositing cheques with a bank for collection to the person's account. In those circumstances, the person impliedly represents to the bank that he or she is "entitled to do so - in other words, his conduct implies that he [or she] either is the owner of the cheques or is acting with the authority of the owner" (National Commercial Banking Corporation of Australia Ltd v Batty (1986) 160 CLR 251 at 258; [1986] HCA 21 (Gibbs CJ)). Equally here, Mr Nowytarger's conduct implied that he was acting consistently with Special Condition 16 and providing authentic evidence of the matters there described (as to representations implied from conduct, see generally K R Handley, Spencer Bower & Handley: Actionable Misrepresentation, (5th ed, 2014, LexisNexis Butterworths) at 3.05).
4. The certificates were not in fact capable of satisfying Mrs Carr, acting reasonably, because they did not, as Special Condition 16 required, relate to "all building works undertaken" in the previous six years (see [153]). As well, the HWI Certificates had been procured by fraudulent misrepresentations made to the insurer (see [157]). Whilst the primary judge found that the words used to describe the representation (see [32] above) do not appear in the relevant paragraph of the FASOC, the substance of the representation he found was pleaded in paragraph (iv): "That by provision of the Home Warranty Certificates, Pascali had complied with special condition 16 of the Contract". As I have noted above, one of Mr Pascali's obligations under Special Condition 16 was to submit "evidence" on the specified subject matter for Mrs Carr's consideration. His submission of the certificates to her implied that he was doing so in fulfilment of this obligation.
5. Mr Pascali submitted on appeal that he was only obliged to use his best endeavours to obtain home warranty insurance and that Special Condition 16 did not contain any promise that he would provide evidence of insurance for all the building works. However, as I have indicated, Special Condition 16 did require him to submit such evidence of insurance and it is clear from the express words of the condition that this insurance had to relate to "all building works undertaken on the property in the 6 years preceding exchange of the contract".
6. Mr Pascali further submitted that his provision of the evidence did not carry with it any representation that the evidence was satisfactory. This is true, but the primary judge did not find that Mr Pascali represented that. Instead, his Honour found that the implied representation was that the HWI Certificates were "capable of satisfying Mrs Carr" (at [150]). This accords with the conclusions that I have expressed above as to the implied representation that he made.
7. Mr Pascali further submitted that in this context the primary judge wrongly took into account Mr Nowytarger's subjective purpose in providing the HWI Certificates. His Honour referred to Mr Nowytarger's purpose in [152] of the judgment, but there is nothing in the judgment to indicate that his Honour did so impermissibly. It was open to his Honour to take into account Mr Nowytarger's purpose in providing the certificates, objectively ascertained by reference to the communications between the parties, for the purpose of determining what representation was made. Further, his Honour was entitled to, and indeed bound to, consider Mr Nowytarger's subjective purpose when determining whether Mr Nowytarger's representations were made with fraudulent intent.
8. Finally, Mr Pascali submitted that a representation that the HWI Certificates were capable of satisfying Mrs Carr could not have been made because there were a number of circumstances that would have made it clear to Mrs Carr that they could not do that. Mr Pascali submitted (i) that Mrs Carr knew that more than $620,000 worth of building had been done (that being the total of amounts shown in the two operative HWI Certificates), (ii) that the Final Occupation Certificate referred to other tradesman who the HWI Certificates were unlikely to cover, (iii) that Mr Miller was listed as the builder on the HWI Certificates when Mrs Carr had been told that Mr Nowytarger was the builder, (iv) that Mr Thomas was aware of another HWI Certificate that was issued in respect of the property, and (v) that the 2012 HWI Certificate superseded the 2011 Certificate with the result that any representation relating to the 2011 Certificate could not have remained operative.
9. Mr Pascali did not however in fact establish that Mrs Carr knew that more than $620,000 worth of building work had been done. When asked about this topic in cross-examination, Mrs Carr said that she thought that HWI "had a cap on it" (meaning that, notwithstanding that the amounts stated in the certificates totally $620,000, the building work might have been for a greater value) and that she in any event relied upon her solicitor, Mr Thomas, to advise her whether the certificates were satisfactory. Moreover it is clear from Mr Thomas' cross-examination that he had "no idea of the value of the building works".
10. In the absence of any finding of actual knowledge on Mrs Carr's part that the HWI Certificates did not cover the whole of the building work, the most that could be said in favour of Mr Pascali's submission is that there was information available to Mrs Carr and her advisers from which they might have been able to deduce that the certificates did not in fact cover all of that work. That is however an irrelevant circumstance because, as Mr Pascali conceded on appeal, contributory negligence is not a defence to a claim in deceit.
11. In these circumstances, I conclude that there was no error in his Honour's finding that the Insurance Representation to which he referred was made.

Did Mrs Carr rely on the Insurance Representation that was found?

1. Mr Pascali's principal submission on this topic was that it was not established that Mrs Carr relied on the Insurance Representation as found by the primary judge, as distinct from simply relying on the certificates that Mr Nowytarger provided.
2. Mrs Carr did not give any express evidence of reliance but in my view the primary judge did not err in finding that she relied upon the representation as found. The decision in Batty to which I have referred above again provides an analogy. In that case, Gibbs CJ found that it "was a fair inference of fact … that the Bank collected the proceeds of the cheques because it was induced to believe that Davis was entitled to deposit them. If it had known that Davis had no authority to deposit the cheques it is inconceivable that it would have collected the proceeds" (at 258). His Honour referred to R v Lambie [1982] AC 449 where the defendant used her credit card for purchases knowing that the transactions would result in her credit limit being exceeded. Lord Roskill, who delivered the principal judgment, said (at 460): "… the only remaining question is whether Ms Rounding was induced by that representation to complete the transaction and allow the respondent to take away the goods. My Lords, if she had been asked whether, had she known the respondent was acting dishonestly and, in truth, had no authority whatever from the bank to use the credit card in this way, she (Ms Rounding) would have completed the transaction, only one answer is possible - no".
3. Likewise, in the present case, if Mrs Carr, or her solicitor Mr Thomas, had been told that the HWI Certificates did not, as Special Condition 16 required, cover all of the building work or that the certificates had been obtained by fraudulent misrepresentations, it is clear that Mr Thomas would have advised Mrs Carr to object and not proceed to settlement without further evidence. Moreover, her evidence made it clear that she would have acted in accordance with such advice as Mr Thomas gave her. Contrary to Mr Pascali's submission, the representation was therefore material and relied upon by Mrs Carr.
4. Also, contrary to Mr Pascali's submissions, Mrs Carr's reliance on the judgment of her solicitor Mr Thomas does not preclude an inference of her reliance on the representation. Indeed, it is clear that Mr Thomas relied upon it and Mrs Carr is entitled to take advantage of that.
5. Mr Pascali referred on this topic to Holmes v Jones (1907) 4 CLR 1692; [1907] HCA 35 in which the vendors of a pastoral property made false statements when offering it for sale. The purchaser however refused the offer and, having been informed of the inaccuracy of the statements, negotiated a sale upon a totally different basis, relying upon his own inquiries and not the false statements made by the vendors. It was in this context that Griffith CJ said (at 1702): "It appears to me to be common sense as well as law that, when a purchaser chooses to rely upon his own judgment or upon that of his agent, he cannot afterwards say that he relied upon a previous representation made by the vendor".
6. The present case is different because neither Mrs Carr nor her solicitor became aware of the falsity of the Insurance Representations and their reliance on them did not, as it did in Holmes v Jones, cease at any relevant point of time. It was sufficient to conclude that there was reliance by Mrs Carr to establish that she relied upon her solicitor (Demetrios v Gikas Dry Cleaning Industries Pty Ltd (1991) 22 NSWLR 561 at 575) and that the solicitor relied at least in part on the relevant representation (ibid at 570). It did not matter that the representation was not the only matter that Mr Thomas took into account.
7. I reject Mr Pascali's submission that Mrs Carr's position is prejudiced by the fact that the 2012 HWI Certificates were not provided under cover of a letter, like the letter of 11 September 2012 submitting the 2011 Certificate, that expressly related the provision of the certificates to Special Condition 16. As the primary judge held, the circumstances of the later provision of the certificates made it plain that they were submitted for the same purpose as the 2011 Certificate was submitted.
8. Finally, again contrary to Mr Pascali's submissions, I do not consider that the primary judge gave insufficient reasons for his reliance finding. The fact that he reasoned along the lines that I have stated above is apparent when the whole of that part of his judgment concerned with the deceit claim based on the Insurance Representations is considered.

Was the relevant Development Representation made?

1. Mr Pascali submitted that because the Final Occupation Certificate did not expressly state that the building works had been carried out in compliance with council requirements (and the statutory provisions did not require it to do so), no representation that the council's requirements had been fulfilled was made. The Final Occupation Certificate was however referred to in Special Condition 16 simply as a method by which the matter stated in sub-condition (a) might be established. The reference to it does not mean that the remainder of the condition to which it related can be ignored. Relevantly, the condition was that evidence be provided of compliance with council requirements. It is arguable that provision of the Final Occupation Certificate carried with it an implied representation that those requirements had been complied with, even though the Final Occupation Certificate did not state that to be the case. I do not however consider that to be sufficiently clear to hold that that representation was implied for the purposes of an action in deceit, in which, given the seriousness of the allegation, liability must be established with considerable assurance (see s 140 Evidence Act 1995 (NSW) and Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 67 ALJR 170 at 170-1). It is at least equally arguable that the provision of the certificates carried with it an implied representation only that the certificate was a genuine certificate of the description appearing in the special condition.

Whether Mr Nowytarger knew he was making the relevant Development Representation?

1. Consistently with Mr Pascali's submissions, I am also not persuaded that the evidence established that Mr Nowytarger intended to make the Development Representation. An inference open on the evidence is that Mr Nowytarger provided the Final Occupation Certificate because Special Condition 16 referred to its provision as a means of satisfying Special Condition 16(a). The inference that that was his state of mind is at least as persuasive as the alternative proposition that, although he recognised that Special Condition 16 referred specifically to the Final Occupation Certificate, he appreciated that its provision would (if the view I have expressed in the previous paragraph is incorrect) imply the broader proposition that council's requirements had been met.
2. As a finding that Mr Nowytarger knowingly made a false representation is an essential element of the deceit claim against him based the Development Representations, and as it has not be established, that claim should also be rejected for that reason.

Did Mrs Carr rely upon the relevant Development Representation?

1. Similar reasoning leads to the conclusion that it was not established that Mrs Carr relied on the relevant Development Representation rather than the Final Occupation Certificate. To find otherwise, it would be necessary to conclude that she, or her solicitor, Mr Thomas, thought beyond the terms of the Final Occupation Certificate itself to the terms of Special Condition 16 and reasonably believed that provision by Mr Nowytarger of the Final Occupation Certificate was impliedly representing more than what was in the certificate and was representing that the council's requirements had been satisfied. There was no express evidence to this effect and in my view the primary judge erred in implicitly finding that this occurred.

Conclusions

1. I have accepted Mrs Carr's case on the deceit claim based on the Insurance Representations but rejected her contentions concerning the deceit claim based on the Development Representation. As Mrs Carr's success on only one of these two claims is sufficient to sustain the judgment and orders made in her favour at first instance, Mr Pascali's appeal should be dismissed with costs.

Amendments 20 June 2019 - Typographical error in [68]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 June 2019