Patey-Dennis v MUT Constructions

R D Marshall / D M Bampton (Plaintiffs) A G Martin (Defendant) Solicitors:

Patey & Murphy Solicitors (Plaintiffs) Kamy Saeedi Lawyers (Defendant) File Number(s): 2010/405658

Judgment 1The plaintiffs, Andrew and Joanna Patey-Dennis, appeal the judgment of the Local Court of 8 November 2010 (hereinafter "the Judgment") dismissing their claim against MUT Constructions (NSW) Pty Limited, the defendant. The claim sought damages for misleading or deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) (hereinafter "the Act"). 2The defendant's conduct, about which the plaintiffs complain, is an omission, namely, the failure of the defendant to advise the plaintiffs of building restrictions imposed because of subsidence from mining that became known to the defendant after exchange of Contract, but before settlement. The facts are in relatively short compass.

Facts on liability 3In 2005, the defendant bought land in Adamstown to subdivide and re-sell and/or develop. The land was located within a Mine Subsidence District under the Mine Subsidence Compensation Act 1961, which required approval of the Mine Subsidence Board (hereinafter "MSB") for all subdivision and building. The defendant offered the Lots for sale, prior to approval being granted, with a right to rescind if approval or registration were delayed. 4The plaintiffs were interested to purchase land and enquired about Lot 80 of the subdivision (hereinafter "the Property"). On 14 August 2006, the plaintiffs made enquiries to the MSB, requesting details of the restrictions in place. 5On 16 August 2006, the MSB responded to the plaintiffs (Exhibit A, p 38) to the effect that improvements were limited to 30 metres in length and could be single or two storey timber or steel framed improvements or single or two storey brick veneer. These limitations are not relevant limitations, given the intentions of the plaintiffs. 6On 15 September 2006, the plaintiffs and defendant entered into a Contract (hereinafter "the Contract") for the purchase and sale of the Property, which formed part of the subdivision at Adamstown to which reference has earlier been made.

Facts found by the learned magistrate 7I will later deal with the role of the Court on appeal, but, for present purposes, it is sufficient to recite the facts as found by the learned magistrate. The learned magistrate found that at the time that the Contract was exchanged, the defendant did not know that the Property was affected by relevant subsidence issues and that the defendant first become aware of the change in status regarding such issues in or around late October 2006: the Judgment at page 6, paragraph 2 and page 2, paragraph 3 respectively. The learned magistrate also found that the mining subsidence status of the Property altered because of knowledge gained during the course of works to prepare the land for registration and became known to the defendant about 15 months prior to completion of the Contract: Judgment at page 7, paragraph 2. 8The defendant, through its solicitors, corresponded with the plaintiffs (and others) by way of an update as to the progress of the development. Updates were issued on 15 December 2006, 29 May 2007, 11 July 2007, 30 November 2007, and 13 December 2007. Those updates contained general information relating to delays including bad weather, notifying the progress of registration of the subdivision and, in the case of the updates of 11 July 2007 and 30 November 2007, extending the "sunset date" in the Contract on account of the delays already occasioned. 9The parties accepted that notice had been given that the last dates upon which the plaintiffs could rescind the Contract, pursuant to the extensions granted on 11 July 2007 and 30 November 2007, was 29 February 2008. At no stage, during any of these updates, was any mention made of the change in status that occurred as a consequence of the shallow unrecorded mine workings to which the MSB referred in its letter of 31 October 2006, with which I will deal shortly. 10On 11 January 2008, the parties settled the Contract and on 21 December 2007, the plaintiffs entered into a tenancy arrangement for rental of other premises, pending the building of their home. The rental property was occupied at or about the same time as the plaintiffs sold their previous home. 11On 30 January 2008, Montgomery Homes, which had been contracted to build the plaintiffs' originally intended two storey brick home on a concrete slab and which had, in accordance with the requirements, lodged the plans with the MSB, were notified by the MSB that the plans were rejected. Upon the rejection of the originally intended plans, the plaintiffs made enquiries of the MSB and the MSB replied by letter dated 1 February 2008. There was correspondence between the parties and with the MSB, the last relevant letter being that from the MSB to the plaintiffs dated 12 February 2008. In that letter, the MSB asserted that the change in building permitted on the land was occasioned by the discovery of unrecorded shallow mine workings by a contractor working for the defendant on or about 27 October 2006. The further requirements of the MSB will hereinafter be referred to as "the MSB restrictions". 12Information on the need to eliminate the risk of mine subsidence from shallow mine workings was sent by the MSB to the defendant on 31 October 2006 and a number of steps would have been needed, being discovery of the depth of the coal seam, location of the mine workings and their extent, the adoption of a methodology to eliminate the risk of subsidence and certification of the foregoing, before the additional restrictions imposed by the MSB would have been overcome. 13The plaintiffs did not sue or claim damage for the loss of the ability to build a house that was originally desired, but seek, by way of damages, the additional cost associated with building in accordance with the additional MSB restrictions. 14As earlier stated, the plaintiffs claim that the defendant's failure to advise them of the change in status of the land that the plaintiffs were purchasing was misleading or deceptive. 15Two other issues of fact need to be recounted. First, an "Information" sheet was distributed, by the real estate agent acting for the defendant, to the plaintiffs after exchange of Contract and before settlement (and before the date upon which rescission of the Contract could have occurred). That Information sheet represented that the Property (other than two irrelevant Lots) was "Mines Subsidence Approved - slab, single and two storey brick". It represented that registration would occur in or about October 2007. It did not otherwise deal with the change in the Mines Subsidence Approval notified to the defendant no later than 31 October 2006. 16Given the date of registration to which the Information sheet referred, and given the state of knowledge, as to the settlement dates, of the defendant, it is more probable than not that the Information sheet was compiled (and therefore distributed) between June and October 2007, namely, after the date upon which the defendant was aware of its incorrectness, after exchange of contracts, and before the date upon which the plaintiffs could have rescinded the Contract. 17Secondly, the defendant, having been notified of the change in requirements by the MSB, obtained legal advice (Transcript, 14 October 2010, p 43.20) and made the deliberate decision not to inform the plaintiffs (and others) of that situation (Transcript, 14 October 2010, p 42.30). This was as a result of having "checked as to whether they needed to be advised with our lawyers and we were told that, no, they weren't, we weren't required to inform them." (Transcript, 14 October 2010, p 42.38.)

The Contract 18There are some aspects of the Contract that require summary and comment. First, the attachments to the Contract include a statement that the land is within a Mine Subsidence District and that MSB approval is required for all subdivision and building, except for certain minor structures. It also advises "strongly" that prospective purchasers consult with the MSB regarding mine subsidence and any surface development guidelines. 19Secondly, Clause 33.1 of the Contract relates to the condition and state of repair of the Property and provides that "the property is sold in its condition and state of repair (including structural repair) at the Contract date and the purchaser accepts with all faults and latent and patent defects, and all infestations and dilapidations; and the purchaser cannot make a requisition or a claim, or attempt to delay completion or attempt to rescind or attempt to terminate because ... of the condition or state of repair of the property ". 20Thirdly, Clause 39, entitled "Entire Agreement" provides for no warranty by the vendor in the following terms: "Without limiting Clause 39.1, the vendor does not warrant or represent that any information or statements contained or referred to in any brochure, advertisement or other document made available by or on behalf of the vendor in connection with this sale or this contract is accurate or complete." Clause 39.1, to which the foregoing refers, relevantly provides that the Contract embodies the entire understanding of the parties and constitutes the entire terms upon which they have agreed. 21Further, Clause 39.3 provides for a warranty by the purchaser that they represent and warrant that they have not relied on any brochure, advertisement or other document referred to in Clause 39.2 [that to which the exclusion of the warranty by the vendor relates]; nor rely on any representation, letter, document or arrangement (whether oral or in writing) or other conduct as adding to or amending this Contract; and are satisfied as to all information relevant to the risks, contingencies and other circumstances affecting the purchase of the Property. 22While a contract must be read as a whole, and, therefore, the entire contract is relevant, the last condition to which specific reference will be made is the effect of Clauses 34.3 and 35 of the Contract. Clause 34.3 gives each party the capacity to rescind the Contract by serving a notice if the Council has not consented to the plan [being the subdivision plan] within nine months after the Contract date, or the plan has not been registered within a further three months thereafter; or that the Council had consented to the plan on conditions that the vendor reasonably finds unacceptable. 23The completion date, for which Clause 35 provides, states that the Contract will be completed on the later of the date 42 days after the date of the Contract and the date 21 days after the vendor (namely the defendant) provides written notice to the purchaser that the plan of subdivision has been registered. The latter of those two dates was 11 January 2008, on which date the Contract was settled. 24The last date on which rescission could have occurred, on the basis of the foregoing, as earlier stated and notified by the defendant through its solicitors, was 29 February 2008. The rescission provision, which has previously been mentioned, is part of a clause dealing with the unregistered plan and providing that completion was subject to and conditional on the consent of Council to the subdivision and the plan being registered at the Department of Lands New South Wales (now known as the Land and Property Management Authority). It gave, as previously mentioned, power to rescind if that consent had not been granted within nine months after the Contract date or registered within a further three months thereafter. 25The parties accept, as earlier stated, that the "sunset date" referred to in the correspondence from solicitors for the defendant of 11 July 2007 and 30 November 2007 is the date from which rescission could occur. The reference to the sunset date in the correspondence is to Clause 34(e) of the contract for sale dated 31 December 2007. There is no Clause 34(e) in the Contract. There are some difficulties with that date being the date upon which rescission could occur. First, it is a date after the satisfaction of the conditions in Clause 34.1. Secondly, it is a date after the last date upon which settlement could occur. Thirdly, it is a date after the plaintiffs became aware of the MSB restrictions. 26Assuming, without deciding, that the reference in the Updates to Clause 34(e) is a reference to Clause 34.3, and assuming, somehow, again without deciding, that the "sunset date" was referable to the date upon which rescission might otherwise occur, two issues necessarily arise. First, is it a commercially sensible provision and, therefore, able to be a construction readily derived? The second issue is whether the right to rescind survives the registration of the plan. In my view both issues should be answered in the affirmative, but the right to rescind does not survive the happening of both registration of the plan and completion of the Contract. 27I accept that it is commercially sensible to have had a provision that allowed the parties to rescind, even after completion or settlement of the Contract, if the subdivision had not been approved and/or registered. I do not consider that settlement of the Contract was necessarily inconsistent with the exercise of a right to rescind. 28Further, Clause 34.3 of the Contract must be read in the context of the whole Contract and in particular the other terms of Clause 34. The plain intention of Clause 34.3 is to allow rescission of the Contract where there has been a delay in approval of the subdivision and its registration. Once that approval had been granted and the registration effected, there may have continued to exist a right to rescind, but the combination of the registration and approval of the subdivision with a later completion of the Contract is inconsistent with the continued right to rescind under Clause 34. The right of rescission in Clause 34.3 is a right of rescission arising from failure to satisfy the conditions precedent in Clause 34.1, upon which completion depended. As a consequence of the foregoing, if it be the case that the sunset date referred to the date upon which rescission could occur, a party could not rescind the Contract after the date on which the Contract was completed, assuming that date occurred after the approval and registration of the plan of subdivision. 29It is also necessary to deal with the effect of Clause 39 of the Contract. There can be little doubt that, by express statement, the Contract embodied the whole of the agreement between the parties. The plaintiffs, however, do not sue for breach of Contract. The plaintiffs sue for damages arising from contravention of s 52 of the Act. There is no issue in these proceedings that the defendant, in buying, subdividing and reselling the properties in question was engaged in trade or commerce. The warranties, to which reference has already been made, expressed in Clause 39.2 and Clause 39.3 relate to warranties or representations that have induced the plaintiffs to enter the Contract. The expressions used in both subclauses relate to past events, namely, events that had occurred prior to the entry into and exchange of the Contract. The provisions of Clause 39 do not relate to conduct in contravention of s 52 of the Act, at least to the extent that such conduct occurred after the exchange of contracts.

Court's function on appeal 30The plaintiffs seek to proceed under s 39(1) of the Local Court Act 2007. That provision allows a dissatisfied party to appeal to the Court, "but only on a question of law". The plaintiffs also, to the extent necessary, seek leave to appeal under s 40(1) of the Local Court Act , which allows, by leave of the Court, an appeal "on a ground that involves a question of mixed law and fact". The defendant "consents" to the leave. 31First, leave is not a question for the parties. While consent may be appropriate and relevant to the function of the Court, it is for the Court to determine whether leave should or should not be granted. One of the issues to which the Court will have regard is the nature of the alleged error. Another issue is the capacity of the Court to correct any alleged error, given its powers on appeal. It is to be noted that neither s 39 nor s 40 of the Local Court Act grant a right of appeal on a ground that involves only a question of fact. 32In dealing with an appeal, the provisions of s 75A of the Supreme Court Act 1970 apply. The appeal is by way of rehearing, which is not a retrial. The role and function of the Court is still confined to the correction of error. There may be ancillary powers thereafter, but it is necessary for an appellant to show error in reasons or in procedure in order to engage the jurisdiction of the Court to make any orders: Allesch v Maunz [2000] HCA 40; (2000) 203 CLR 172; Fox v Percy [2003] HCA 22; (2003) 214 CLR 118. The High Court, in Fox v Percy , supra, said: "[22] The nature of the 'rehearing' provided in these and like provisions has been described in many cases. To some extent, its character is indicated by the provisions of the sub-sections quoted. The 'rehearing' does not involve a completely fresh hearing by the appellate court of all the evidence. That court proceeds on the basis of the record and any fresh evidence that, exceptionally, it admits. No such fresh evidence was admitted in the present appeal. ... [25] Within the constraints marked out by the nature of the appellate process, the appellate court is obliged to conduct a real review of the trial and, in cases where the trial was conducted before a judge sitting alone, of that judge's reasons. Appellate courts are not excused from the task of 'weighing conflicting evidence and drawing [their] own inferences and conclusions, though [they] should always bear in mind that [they have] neither seen nor heard the witnesses, and should make due allowance in this respect'. In Warren v Coombes, the majority of this Court reiterated the rule that: '[I]n general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge but, once having reached its own conclusion, will not shrink from giving effect to it.' As this Court there said, that approach was 'not only sound in law, but beneficial in ... operation'. ... [27] ... If, making proper allowance for the advantages of the trial judge, they conclude that an error has been shown, they are authorised, and obliged, to discharge their appellate duties in accordance with the statute. [28] ... In particular cases incontrovertible facts or uncontested testimony will demonstrate that the trial judge's conclusions are erroneous, even when they appear to be, or are stated to be, based on credibility findings. [29] That this is so is demonstrated in several recent decisions of this Court. In some, quite rare, cases, although the facts fall short of being 'incontrovertible', an appellate conclusion may be reached that the decision at trial is 'glaringly improbable' or 'contrary to compelling inferences' in the case. In such circumstances, the appellate court is not relieved of its statutory functions by the fact that the trial judge has, expressly or implicitly, reached a conclusion influenced by an opinion concerning the credibility of witnesses. In such a case, making all due allowances for the advantages available to the trial judge, the appellate court must 'not shrink from giving effect to' its own conclusion. Finality in litigation is highly desirable. Litigation beyond a trial is costly and usually upsetting. But in every appeal by way of rehearing, a judgment of the appellate court is required both on the facts and the law. It is not forbidden (nor in the face of the statutory requirement could it be) by ritual incantation about witness credibility, nor by judicial reference to the desirability of finality in litigation or reminders of the general advantages of the trial over the appellate process. ... [31] Further, in recent years, judges have become more aware of scientific research that has cast doubt on the ability of judges (or anyone else) to tell truth from falsehood accurately on the basis of such appearances. Considerations such as these have encouraged judges, both at trial and on appeal, to limit their reliance on the appearances of witnesses and to reason to their conclusions, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events. This does not eliminate the established principles about witness credibility; but it tends to reduce the occasions where those principles are seen as critical." (Per Gleeson CJ, Gummow and Kirby JJ.) 33Neither party directed any, or any substantial, attention to the nature of the appeal and the issues raised by the limited function of the Court on appeal as a result of the Local Court Act and Supreme Court Act provisions to which reference has now been made. Nevertheless, these are the principles upon which the Court must act. 34As a consequence of the appeal being a rehearing, the law at the time of the appeal, as distinct from the law at the time of the proceedings at first instance, is applicable. On 1 January 2011, the Australian Consumer Law took effect. However, as a result of the transitional provisions, proceedings commenced prior to 1 January 2011 continue to be decided under the Act. Each of the Local Court proceedings and the appeal to this Court were commenced before 1 January 2011 and, therefore, the Act continues to be the applicable law.

The disingenuousness of rescission 35The first ground upon which the plaintiffs rely relates to the finding by the learned magistrate that it was disingenuous to suggest that the plaintiffs would have rescinded, within the terms of Clause 34.3, utilising delay, on the basis of the MSB restrictions, if they were to have known of them. In other words, the learned magistrate determined that the plaintiffs would not, on account of delay, have rescinded the Contract, because they did not. In effect, the learned magistrate took the view that the only basis upon which rescission could occur under Clause 34 was delay, and a rescission because of the MSB restrictions would not be permitted under Clause 34. 36With great respect to the learned magistrate, this finding discloses an error of law on the construction of the Contract. Clause 34 of the Contract grants the parties a right to rescind the Contract if certain conditions have not been satisfied within a specified timeframe. The satisfaction of the conditions is, was and remains an issue of fact. The Contract provides that if the plan for subdivision had not been approved and/or registered, with the specified time, the plaintiffs could have rescinded. The plan was not approved and registered within that timeframe and the plaintiffs continued to have the right to rescind, as a consequence, at least until the plan was approved and registered and, probably, until such time as the plaintiffs had completed the Contract at a time later than the plan's registration. The difference in that timing is not significant. 37The learned magistrate has conflated the existence of the facts which gave rise to a right to rescind with the motivation of the plaintiffs to rescind. There may be a number of reasons that a party may wish to rescind a contract. One of them, for example, may have been a significant fall in the price of land. Such a motivation does not give rise to a right to rescind, but it may be a reason that a right to rescind, which a party may otherwise have, would be exercised. In this case, the plaintiffs argued, in this Court and below, that the failure to inform them of the changed circumstances, being the MSB restrictions, caused them not to exercise their right to rescind that was otherwise available as a result of the delay in the registration of the plan. 38The determination of the learned magistrate that the delay was the only motivation that could inform, or would have informed, the decision of the plaintiffs to rescind, was an error in the construction of the Contract and an error of law in the Judgment. It remains to be dealt with, later, whether that error of law was determinative of the proceedings.

Misleading conduct 39The parties have categorised the misleading conduct in this case as a question as to whether there was misleading conduct by silence or omission. Concentration on an issue, described in that way as a matter of shorthand expression, can distract the parties, and the Court, from the fundamental nature of the issues to be determined. The question is, and must remain, whether (assuming trade or commerce) conduct, has been engaged in by the defendant, that is misleading or deceptive, or is likely to mislead or to deceive: Fraser v NRMA Holdings Limited (1995) 55 FCR 452 at 483; Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited [2010] HCA 31; (2010) 84 ALJR 644 at [14], per French CJ and Kiefel J. As their Honours French CJ and Kiefel J made clear in Miller , supra, the question is whether the conduct is or is likely to be misleading or deceptive and, in that regard, conduct must be understood to include a reference to refusing to do any act, which, in turn, includes a reference to refraining otherwise than inadvertently from doing that Act: Miller , supra, at [14]. 40I reiterate that, in the current proceedings, the determination not to inform the plaintiffs (and others) of the alteration in status of the land and the MSB restrictions was a deliberate act of the defendant. As a consequence, the only inference available is that the defendant refused or refrained (otherwise than inadvertently) from informing the plaintiffs of the change in status and the MSB restrictions at a time when the plaintiffs had available to them the capacity to rescind the Contract, or at all. 41In Fraser , supra, the Full Court of the Federal Court (Black CJ, von Doussa and Cooper JJ) were required to deal with an allegation that the directors of a company failed to provide information relevant to a decision to be made by shareholders. The Federal Court held that, in circumstances where information was provided that excluded the alleged information, a contravention of s 52 of the Act. The Full Court of the Federal Court said: "Although s 52 gives rise to no duty to provide information, when information is in fact given in purported discharge of the fiduciary duty, s 52 requires that the information given is not misleading or deceptive or likely to mislead or deceive. Additionally, the section requires that the conduct of the directors in withholding certain information is not itself conduct which is misleading or deceptive or likely to mislead or deceive. It is in the area of the proper discharge of the fiduciary duty to provide relevant information that there is an overlap between discharge of the duty and the operation of s 52: a failure properly to discharge the duty may itself constitute a contravention of s 52 as well as a contravention of s 995 of the Corporations Law." (Fraser, supra, at 466.E.) 42In the present situation, there is no common law duty imposed upon the defendant to disclose all information in its possession relevant, possibly relevant, or reasonably expected to be relevant, to the motivation of the plaintiffs to elect to rescind the Contract. Further, the defendant points to the determination by the learned magistrate that the bargaining position of the plaintiffs and the defendant was relevantly equal or substantially equal. In this respect, the learned magistrate took account of the statements of the High Court in Miller , supra. The High Court said: "[22] However, as a general proposition, s 52 does not require a party to commercial negotiations to volunteer information which will be of assistance to the decision-making of the other party. A fortiori it does not impose on a party an obligation to volunteer information in order to avoid the consequences of the careless disregard, for its own interests, of another party of equal bargaining power and competence. Yet that appears to have been, in practical effect, the character of the obligation said to have rested upon Miller in this case." (Miller, supra, per French CJ and Kiefel J.) And in the plurality judgment, the High Court said: "[90] Putting to one side the primary judge's finding that Mr Reynolds and Mr Jones understood that the policy in the bundle was the policy underlying the HIH certificate, the differences between the two documents were capable of causing BMW not to appreciate that it was in possession of the policy to be funded. This would, as Ashley JA observed, leave BMW with the HIH certificate as the only document relating to the insurance. [91] Was Miller's conduct in failing to inform BMW, in terms, that the policy to be funded was not cancellable, or that the policy in the bundle was the policy to be funded, misleading? That question requires close analysis of all of the circumstances of the transaction. The parties were commercially sophisticated. They were experienced in their respective fields. The transaction involved the assessment by BMW of an application to lend Miller's client $3.975 million. The only document that Miller supplied in support of the application which appeared to relate to the policy to be funded did not disclose the nature of the risks insured. But it did put BMW on notice that the underlying policy may be an unusual one. BMW made no further inquiry. BMW's failure to make reasonable inquiries would not automatically defeat its statutory claim for damages for misleading conduct. However, given the history of this transaction, it is a circumstance that is relevant to whether Miller's conduct in failing to disclose its knowledge of the policy is correctly characterised as misleading. ... [96] The requirement of the provision of 'full policy information', contained in BMW's quotation dated 8 December 2000, did not make Miller's failure to advise BMW that the policy was not a cancellable property policy misleading. Miller had supplied BMW with a copy of the policy. BMW was an experienced premium lender. The policy was not a lengthy document. It was apparent that it did not insure the holders against loss or damage to property. It did not contain a cancellation clause. Miller's failure to draw to BMW's attention a circumstance that the document itself disclosed was not misleading or deceptive." (Miller, supra, per Heydon, Crennan and Bell JJ.) 43Thus, the learned magistrate first looked at the question as to whether or not the parties were in an equal bargaining position. The learned magistrate found that they were. The plaintiffs, on appeal, challenge that finding. They challenge it on the basis that the incontrovertible evidence gives rise to an inference that there was an inequality in bargaining position based upon the proposition that the plaintiffs were consumers with no relevant business experience in the purchase of property and the defendant was a business engaged in that undertaking. The reliance placed by the defendant on solicitors' advice, and on which the learned magistrate in part depended for his assessment of lack of sophistication, is not, according to the plaintiffs, a proper basis for the magistrate's finding. I tend to agree with the plaintiffs. But the issue is one of fact. There is evidence upon which the learned magistrate could have determined that there was relevantly no inequality in bargaining position and the learned magistrate so found. This ground does not raise a question of law; nor does it raise a question of mixed law and fact. Whether I agree or disagree with the learned magistrate is irrelevant. The finding was a question of fact, open to the learned magistrate, and ought not, and cannot, be the subject of interference on appeal, because, under the Local Court Act, no appeal may be taken on such a ground. 44The next issue to which attention is required is the status of the leaflet. Her Honour, below, determined that the leaflet was "a marketing flyer only". Her Honour decided that the plaintiffs could not properly rely on the document because, in essence, it was mere "puffery". 45The term "puffery" is a term drawn from the common law. It has no express reference in the provisions of the Act. Nevertheless, a degree of exaggeration or "puffing" is accepted as part of ordinary business relations and, particularly, as part of advertising. Generally, it refers to statements made to induce interest that is later subsumed within the formal documents of contract or proper and appropriate information: see General Newspapers Pty Ltd v Telstra Corporation (1993) 40 FCR 98; Pappas v Soulac Pty Ltd (1983) 50 ALR 231. It is likely, so the courts have determined, to reflect the enthusiasm of the advertiser to place products in a favourable light: Stuart Alexander & Co (Interstate) Pty Ltd v Blenders Pty Ltd (1981) 53 FLR 307, per Lockhart J, who referred to the appropriate approach being a "robust" one. His Honour said: "The public is accustomed to the puffing of products in advertising. Although the class of persons likely to see this commercial is wide, it is inappropriate to make distinctions that are too fine and precise." 46Similar comments were made by Gyles J in Australian Competition and Consumer Commission v Telstra Corporation Limited [2004] FCA 987; (2004) 208 ALR 459. In this Court, Hunt J dealt with the issues in Farquhar v Bottom [1980] 2 NSWLR 380, in the context of defamation proceedings, in which his Honour said: "In deciding whether the matter complained of is capable of conveying to the ordinary reasonable reader the imputations relied upon by the plaintiff, I must be guided and directed by the test of reasonableness. I must reject any strained, or forced, or utterly unreasonable interpretation. I must proceed upon the basis that the ordinary reasonable reader is a person of fair, average intelligence, who is neither perverse, nor morbid or suspicious of mind, nor avid for scandal. This ordinary reasonable reader does not, we are told, live in an ivory tower. He can, and does, read between the lines, in the light of his general knowledge and experience of worldy affairs. It is important to bear in mind that the ordinary reasonable reader is a layman, not a lawyer, and that his capacity for implication is much greater than that of the lawyer." (Citations omitted.) ( Farquhar , supra, at 385-386, per Hunt J.) 47Reference should also be made to the comments of the Industrial Commission in Court Session in CRW Pty Ltd v Sneddon [1972] A.R. (NSW) 17 at 28 (per Sheldon and Sheppard JJ), in dealing with a contravention of s 32 of the Consumer Protection Act 1969. These cases have been referred to and relied upon in many subsequent judgments. 48In this case, the leaflet is not relied upon as misleading or deceptive conduct. Plainly, as held by her Honour below, the statement in the leaflet relating to the attitude of the MSB is wrong. It was wrong at the time that it was distributed to the plaintiffs. It was distributed by the real estate agent of the defendant, named in the contract for sale. 49It is unnecessary for the defendant to be knowingly misleading or deceptive. The learned magistrate relied upon the terms of the leaflet as disclosing an intention to induce persons to be interested in purchase. Plainly, and incontrovertibly, at the time that this leaflet was distributed to the plaintiffs, that cannot have been its purpose in relation to the plaintiffs. The plaintiffs had already entered into the Contract. Moreover, the plaintiffs do not rely upon the statements in the leaflet as misleading or deceptive. They rely upon the total context of the relationship between the plaintiffs and the defendant, including the publication and distribution to the plaintiffs of this leaflet, and the publication and distribution to the plaintiffs of the Updates, to found an allegation of misleading and/or deceptive conduct in not informing the plaintiffs of the change in status of the land. 50It would seem to me that the leaflet, even if it were analysed without any surrounding circumstances, would not be mere puffery. The leaflet contains, in its relevantly misleading aspect, a statement of fact, which, at the time, was known by the defendant to be wrong. When taken with the other aspects, and the context of the whole relationship between the plaintiffs and the defendant, the deliberate refusal to publish the information, known only to the MSB and the defendant, to the plaintiffs takes on a fundamentally different character. 51Accepting, as I must (see previous discussion), that the plaintiffs, on the one hand, and the defendant, on the other hand, were in a substantially equal bargaining position, this is not a case where the defendant has done nothing. Nor is it a case where the plaintiffs have not made appropriate searches, prior to entering into the Contract. This is a situation where the defendant was aware that the plaintiffs were capable of rescinding the Contract. The defendant became aware, as a result of its conduct, that additional restrictions were placed on the capacity to build on the properties that were being and had been sold. The defendant, through its agent, published a leaflet which asserted a continuation of the previously identified condition and not the MSB restrictions. Further, the defendant, through its solicitors, published updates of the progress of the subdivision and development. Those updates deliberately did not include the knowledge gained by the defendant that new conditions were in place, namely, the MSB restrictions. 52The plaintiffs had made proper enquiries prior to entering into the contract and were informed by the leaflet that the conditions on building remained the same and were otherwise informed of matters affecting the development of the site, but not the change in conditions and/or the imposition of the MSB restrictions. In my view, the failure, in those circumstances, to advise of the MSB restrictions or the change in status, when publishing a leaflet asserting a different status and different conditions, and when publishing updates, was conduct that was misleading or deceptive. 53The foregoing does not deal with the fundamental question as to whether the finding of her Honour below to the opposite effect was an error of law or an error of mixed law and fact. Her Honour relied upon the High Court in Miller, supra. It is not apparent that her Honour misunderstood the principles adumbrated by the High Court in that judgment. The parties have concentrated on the existence of a duty in the defendant to disclose. As earlier stated, that is a misunderstanding of the issue. The issue is and remains whether there has been misleading or deceptive conduct. It is a difficult issue to discern whether the conclusion of the learned magistrate is vitiated by an error on a ground that involves a mixed question of law and fact. 54The ultimate question of fact, namely, whether the conduct was misleading or deceptive, involved the application of law as to what is involved in misleading or deceptive conduct and her Honour's conclusion manifests a misunderstanding of that principle or a misapplication of that principle: Kostas v HIA Insurance Services Pty Limited t/as Home Owners Warranty [2010] HCA 32; (2010) 84 ALJR 663.

Reliance 55It is a fundamental feature of a claim for damages under s 52 of the Act that the person who alleges damage must prove that the damage was suffered "by" conduct in contravention of the provision. While a court is capable of determining the effect a representation had on the conduct of a plaintiff, it is essential that there is some evidence upon which the court can infer that the misrepresentation (whether by act or omission) caused the damage claimed: Gould v Vaggelas [1985] HCA 75; (1985) 157 CLR 215; Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1998) 39 FCR 546. 56Causation is a question of fact determined by reference to common sense and experience: March v Stramare (E&MH) Pty Ltd [1991] HCA 12; (1991) 171 CLR 506. 57In the proceedings before the learned magistrate, there was no evidence that, if the plaintiffs were to have known of the MSB restrictions prior to settlement and before the date upon which they were able to rescind the contract, they would have rescinded it. The evidence in chief in the proceedings was adduced by affidavit. All evidence is to be weighed according to the proof which it was in the power of one side to have produced and in the power of the other to have contradicted: Blatch v Archer (1774) 1 Cowp 63; 98 ER 769; Jones v Dunkel [1959] HCA 9; (1959) 101 CLR 298. It is fair to say that, if the plaintiffs were to have adduced evidence to that effect, such evidence would need to be treated cautiously, but the absence of such evidence is telling. 58The learned magistrate came to the view that the plaintiffs did not rely upon the omission to provide them the information and could not rely on it, because the information came to the attention of the defendant (and therefore could only come to the attention of the plaintiffs) after the exchange of contracts. The fundamental error in that determination, discussed earlier in these reasons, is that it is based upon the proposition that the MSB restrictions could not be a motivation for the rescission of the contract because of delay. 59However, the error in the determination of the learned magistrate does not resolve the evidentiary problem for the plaintiffs. The error of the learned magistrate was an error of law in that the wrong test (and/or an irrelevant consideration) was used to determine the capacity to rescind and the causation of the damage. Absent that error, it is still for the plaintiffs to prove that the alleged damage was caused by the act or omission. 60There is little doubt, on the necessary inferences available from the evidence that has been adduced, that the plaintiffs would have seriously considered rescinding the contract. At the time that the MSB restrictions became known, Lots of the subdivision, other than the Property, were still for sale and were unaffected by the MSB restrictions or restrictions to the same or similar effect. Moreover, it seems, the Lot immediately adjacent to the Property was in that category. Common sense would suggest that, given the opportunity, the plaintiffs would have rescinded the current contract and purchased Lot 81, the adjacent property. However, there is no evidence to that effect. 61The defendant's omission caused the plaintiffs to miss the opportunity of considering that course. It may be that the election would not have been exercised, either because of a worse outlook from the adjacent property or other reasons. I infer, from the evidence that is available, that, as a matter of common sense, it was more probable than not that the plaintiffs would have rescinded and purchased the property adjacent. But I am unaware of the cost of the adjacent property and whether it was more or less expensive. Ultimately, even though I consider it more probable that the plaintiffs would have rescinded, there is no direct evidence to that effect, and the plaintiffs are in a position that they could have, had they so chosen, adduced such evidence. 62On one view, an omission (or failure to provide information), in circumstances where a plaintiff continues to act in a manner consistent with previous conduct, will only ever result in a loss of opportunity to act otherwise, but where it is certain that the plaintiff, if given the information, would have acted differently, the percentage may be very close to or at 100%. I consider that rescission of the Contract as a result of being provided with the information available to the defendant at the relevant time is an uncertainty for which damages should be assessed on the principles in Malec v JC Hutton Pty Ltd [1990] HCA 20; (1990) 169 CLR 638 and Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332. I assess the likelihood at 75%. 63As a consequence of the foregoing, I assess damage on the basis of the recompense for the additional cost of building, less half the amount for the hire of the concrete pump. I accept, as I must, the finding of the learned magistrate that delay alone would not, and did not, occasion a need to rescind the contract and the rent payable would have been a cost regardless of the misrepresentation or action occasioned by it. The additional cost of $34,795 is, as a consequence of the foregoing, reduced by $2,600 and damages are awarded as to 75% of that figure. 64As a matter of abundant caution, I make it clear that the cost of re-drafting the plan is a cost occasioned by the MSB restrictions and is included in the foregoing, as is the re-drafting fee. I consider that such costs, in some form or another, would have been occasioned by the MSB restrictions. I do not consider that there is any possibility that no subdivision Lot would have been purchased by the plaintiffs. 65The Court makes the following orders: (i) Leave to appeal granted; (ii) Appeal allowed; (iii) The judgment of the Local Court of 8 November 2010 in this matter be set aside; (iv) The defendant pay damages to the plaintiffs in the sum of $24,146.25; (v) Interest on the sum awarded from the date of the filing of the statement of claim in the Local Court, being 27 January 2009, to the date of judgment, being 30 May 2011, in the sum of $5,024.08; (vi) Pursuant to the provisions of s 101 of the Civil Procedure Act 2005, interest runs on the amounts as varied from 30 May 2011; (vii) The defendant pay the plaintiffs' costs of and incidental to the appeal and the proceedings in the Local Court, as agreed or assessed; (viii) Otherwise the proceedings are dismissed.

Amendments 17 June 2011 - Consequential orders. Amended paragraphs: [65]; Coversheet 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: 17 June 2011