Federal Court of Australia|1990-08-13|Before: Burchett J

Re Benlist Pty Limited v Olivetti Australia Pty Limited; Chesterton International (Nsw) Pty Limited; Olivetti Australia Pty Limited and Benlist Pty Limited [1990] FCA 289 (13 August 1990)

And: OLIVETTI AUSTRALIA PTY LIMITED; CHESTERTON INTERNATIONAL (NSW)

PTY LIMITED; OLIVETTI AUSTRALIA PTY LIMITED and BENLIST PTY LIMITED

Counsel for the Applicant: Mr M.H. Tobias QC with Mr R. Kaye

Solicitors for the Applicant: Messrs Swaab and Associates

Counsel for the First Respondents: Mr R.B.S. MacFarlan QC

with Mr R.F. Margo

Solicitors for the First Respondent: Messrs Sly and Weigall

Counsel for the Second Respondent: Mr M. Holmes

Solicitors for the Second Respondent: Messrs Moore and Bevins

The matter be listed for further directions on a date to be fixed.

On the date fixed for further directions, the applicant bring in short minutes of declarations in accordance with these reasons.

The costs of the hearing on 5, 6, 7, 8 and 9 February be reserved.

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

In October 1988 Chesterton International (NSW) Pty Limited ("Chesterton"), as agent for Olivetti Australia Pty Limited ("Olivetti"), issued a brochure promoting the sale by auction, on 7 December 1988, of a substantial city building known as "Olivetti House" situate at 140 William Street, Sydney. Framed by attractive aerial photographs showing the building in its setting against a background of Sydney harbour and the opera house, the brochure contained a summary of the building's features including the statement:

"Owner occupiers and investors will immediately

appreciate what a sound investment 140 William Street

represents. Equally it will reward the developer who

wishes to refurbish and strata the property."

2. After the summary, the brochure enclosed a detailed analysis of Olivetti House headed "Auction Investment Report for the sale of 140 William Street, Sydney". The introduction to the report made it clear that the "premises (were) offered with approximately 60% vacant possession in June, 1989 and provide(d) tremendous scope for both owner/occupiers, investors and developers." Particulars of the building, its services, existing tenants, outgoings, a financial analysis and a statement of potential income followed. There was then a section headed "Summary". In this section, there appeared the statement:

"With 4286.1 square metres of office accommodation

becoming available in June 1989, due to Olivetti's

relocation, a great opportunity exists to upgrade the

building for a new tenant, owner/occupier or a

developer who will strata the building."

The final portion of the report consisted of a disclaimer clause and appendices which included a survey report from Wallis and Moore Pty Limited dated 28 December 1979, showing that the building stood "partly within the boundaries of the land" and that "(a)long the western boundary the western face to the subject building stands from 10mm to 40mm on the adjoining land at Street level and from 20mm clear of the boundary to 20mm over the adjoining land at roof level."

3. There was in existence, but this was not mentioned in the brochure or in the investment report, a letter from Wallis and Moore Pty Limited which had originally accompanied the survey report and bore the same date. That letter commenced as follows:

"We forward herewith a survey report in respect of the

above premises.

We have inspected the building in so far as conversion

to a strata scheme is concerned and comment as

follows:-

a) It will be necessary under current legislation to

effect a subdivision with the property adjoining to the

west (Bank of N.S.W.) to overcome encroachments by the

subject building beyond its title boundaries.

Subject to the concurrence of this action with the

adjoining owner, it could be reasonably assumed that

the Sydney City Council would not object to such a

subdivision nor place any unreasonable condition upon

such a subdivision.

. . ."

4. Although the existence of a problem confronting any strata development was thus pointed out in 1979, this appears to have been overlooked or brushed aside when the brochure was prepared advertising "a great opportunity ... to upgrade the building for ... a developer who will strata the building." Not only was that claimed opportunity featured in the brochure, it was also singled out for mention in letters written by Chesterton, shortly before the auction, to two prospective buyers, an organization known as Grose Property Holdings and The Hudson Conway Group. It was plainly regarded by the auctioneers as a selling point.

5. Olivetti House failed to reach the reserve price at the auction, but was sold to the applicant Benlist Pty Limited ("Benlist"), as a result of negotiations following the auction, for a price of $18 million, a deposit of $500,000 being paid on contract and the balance being payable on completion, which was to take place a year later, on 7 December 1989.

6. The agreement contained a term by which the purchaser acknowledged the encroachments referred to in the survey report of Wallis and Moore Pty Limited, and that "the Encroachments are the subject matter of a deed dated 27 June 1974". The deed was in fact dated 27 June 1984. It was made between Olivetti Australia Pty Limited and S.M.A. Motors Pty Limited ("S.M.A."), the purchaser of land adjoining Olivetti House. There was a recital in the deed that the Olivetti House building encroached on the adjoining land, and also that the adjoining building encroached on the land on which Olivetti House stood. It was further recited that:

"Olivetti and S.M.A. have agreed that all existing

encroachments by both buildings are minor and that

rectification of the encroachments by either building

would be costly and difficult while both buildings

stand in their present form."

"1. For as long as both the Olivetti Building and

the S.M.A. Building remain standing in their present

form:

(a) S.M.A. shall not require Olivetti to rectify

existing encroachments by the Olivetti Building on the

S.M.A. land nor shall S.M.A. make any claim or demand

for or seek to recover damages or compensation from

Olivetti (either under the Encroachment of Buildings

Act or otherwise) in respect thereof;

(b) Olivetti shall not require S.M.A. to rectify

existing encroachments by the S.M.A. Building on the

Olivetti land nor shall Olivetti make any claim or

demand for or seek to recover damages or compensation

from S.M.A. (either under the Encroachment of Buildings

Act or otherwise) in respect thereof."

The agreement between Olivetti and Benlist required the purchaser to enter into a similar deed as a condition of completion. Time was not made of the essence in respect of completion, but there was a provision, in case of default by either party, entitling the other to serve a notice to complete specifying at least 14 days from the date of service of the notice for completion.

7. Provision was made in the contract for access to be given, at all reasonable times, to the architect of the purchaser and other persons nominated by the architect, and the vendor was required to sign applications and other documents to enable the purchaser to obtain approvals which it might require. Although the survey report previously mentioned was annexed to the contract, the letter which had accompanied it was again omitted.

8. The director responsible for the conduct of the affairs of Benlist was and is Dr S.M. Larkin, a veterinary surgeon who had retired from the practice of that profession to concentrate on his very considerable investment activities. He has been involved, through various corporate entities, in over 70 schemes for the utilization of commercial and residential properties, including four strata subdivisions. Since 1986, his main areas of investment have been hotels, commercial buildings, golf courses and residential properties. He is the managing director of a group of companies, known as the Larkin Group, which controls between $100 million and $200 million worth of properties in and around Sydney. Amongst those properties is the Crest Hotel at Kings Cross.

9. In September 1988, Dr Larkin revived a previous interest in Olivetti House. He inspected it at that time with a Mr Stokes, a director of Chesterton, and again in October with Mr Stokes and also a Mr Taylor of the same company. Sometime in November, according to his affidavit, he looked at the investment report. I think by that expression he meant to include the brochure, since he made specific reference to a statement which was in the brochure. There is no doubt that Dr Larkin was, at this stage, primarily interested in the building by reason of its potentiality for conversion to an hotel. However, his evidence is that he was also attracted to it because it appeared to offer the alternative, should an hotel conversion prove not to be feasible, of conversion to strata title. Dr Larkin asserted that the agreement would not have been entered into if he had known

"that it was not possible to strata subdivide the

Olivetti building. ... The Olivetti building's value

had to be enhanced as a hotel or by strata subdivision

conversion. I did not consider it feasible to renovate

the building and then sell it on to an owner/occupier."

10. Confirmation, up to a point, of Dr Larkin's evidence in this respect is provided by the evidence of the then chief building surveyor of the Sydney City Council with whom Dr Larkin checked, prior to the auction, to ensure there would not be any particular difficulties to be overcome, so far as the Council was concerned, if either conversion were carried out. Dr Larkin also had some very preliminary figures estimated for the cost of a strata subdivision of the building (the amount being $5,451,000). It is not clear whether this latter step was in any way related to the investment report, which Dr Larkin may not have read till after the figures were requested, or whether it was his own spontaneous reaction to the possibilities inherent in the availability for purchase of Olivetti House.

11. Almost immediately after Benlist entered into the contract of purchase, Dr Larkin made arrangements for the lodgment of the appropriate application to the Sydney City Council to enable the proposed hotel conversion to be approved. There was need of haste, because Olivetti House was in an area designated to be taken over by South Sydney Council as from 1 January 1989, and it was anticipated the change of responsible authority would result in delays for applications lodged from that date. But the priority given, in this situation, to the proposed hotel development emphasizes that Dr Larkin's principal concern, when the contract was executed, was to obtain a building for conversion to an hotel. The development application was in fact lodged on 20 December 1988. It was, in due course, approved on 16 August 1989. Having regard to the conditions of approval, it was estimated that the cost of carrying out this conversion would be about $11.7 million.

12. During the months when the development application in respect of the hotel conversion was under consideration, conditions in the Australian hotel industry, and in the Australian tourist industry generally, underwent some change. The climate became less favourable for an hotel development. By May 1989, Dr Larkin decided to look further into the possibility of a strata title development. He obtained from Chesterton a report which referred to the then "huge demand for commercial stratas within the City." That report was dated 22 May 1989.

13. By about July 1989, the situation in the hotel industry had deteriorated to the point where an adviser of the Larkin Group, in discussion with Dr Larkin, could refer to the industry's "demise". In that month, Dr Larkin told Mr Stokes that he would like Chesterton to act as agent for resale of Olivetti House. The building was advertised, and shown to a number of prospective buyers. In particular, there were negotiations with a company Delfin Property Group Limited ("Delfin"). On 20 September 1989, Chesterton wrote to Dr Larkin indicating that Delfin's maximum offer was $18.2 million. The letter, which was signed by Mr Stokes, concluded with a recommendation (to accept $18.5 million) which was expressed to be made "(i)n the knowledge that it is your preferred option NOT to settle". Dr Larkin did not claim to have written back repudiating this suggestion, which I take to mean that Mr Stokes understood Dr Larkin did not wish to complete the purchase, unless simultaneously with a further sale to a third party such as Delfin. At one stage in his cross-examination, Dr Larkin appeared to concede as much. Of course, if the property could be resold, an even more favourable course would be to arrange for the rescission of the contract and for the conclusion of a separate contract directly between Olivetti and the ultimate purchaser.

14. In the meantime, Dr Larkin had in June 1989 asked his secretary to get in touch with the surveyors for the Larkin Group, Hill and Blume Pty Limited, regarding the possibility of a strata subdivision of the building. The result was that shortly afterwards Dr Larkin was advised, for the first time, of the fact that the encroachments reported by Wallis and Moore Pty Limited presented an obstacle to strata subdivision. Mr Allen of Hill and Blume Pty Limited made that clear. Dr Larkin consulted his solicitor, Mr Swaab of Messrs Swaab and Associates. On 26 July 1989, Mr Swaab was instructed to endeavour to rectify the encroachments by a boundary realignment. He approached S.M.A., which proved co-operative.

15. In pursuance of the negotiations with S.M.A., after some exchange of correspondence, a survey report dated 25 September 1989 was obtained from Hill and Blume Pty Limited. That report indicated that, after all, the surveyor, Mr Allen of Hill and Blume Pty Limited, considered Olivetti House stood "within its intended boundaries". Nevertheless, the report added:

"In our opinion there are no visible encroachments

between the two properties (Olivetti House and the

building to the west), however, it should be noted that

adjacent walls between the two properties are presently

inaccessible due to the nature of the buildings."

The report was accompanied by a plan, which showed no encroachments, but was marked "walls inaccessible". However, S.M.A's solicitors, Messrs Clayton Utz, on 24 October 1989 wrote to Messrs Swaab and Associates stating that the matter had been referred by S.M.A. to its surveyors who had recommended that the deed, previously referred to, be retained. (By that, of course, was meant that a new deed in the existing form should be required to be executed by Benlist, in substitution for Olivetti, upon completion of the purchase of Olivetti House.) That led to discussions directly between the surveyors, because Mr Allen took the view that he was not prepared to sign a certificate to enable a strata subdivision to be registered while the parties were insisting upon the retention of a deed which expressly admitted the existence of encroachments. The surveyors concluded that the deed should be altered to refer to "possible encroachments if any". As a result, on 13 November 1989, Messrs Swaab and Associates sent a facsimile transmission to Messrs Clayton Utz suggesting the following insertion in the recitals of the deed to be executed in replacement of the existing deed:

"The parties believe that there may be minor

encroachments of the (property) and for abundant

caution have agreed to enter into this Deed to resolve

any disputes in respect of such encroachments if any."

On 15 November, Messrs Clayton Utz's prompt response was:

"We suggest that, in order to cover the position,

recitals C and D of that draft Deed be omitted and the

following substituted:

C. The parties believe that there may be minor

encroachments by the S.M.A. Building on the Olivetti

land and by the Olivetti Building on the S.M.A. land.

D. Benlist and S.M.A. agreed that the rectification

of such encroachments (if any) by either building would

be costly and difficult while both buildings stand in

their present form and have agreed to enter into this

Deed.

We suggest that the above adequately covers the position."

16. At this point, Benlist cut short the negotiations with S.M.A. Instead of taking up the suggestion communicated by Messrs Clayton Utz, or else putting forward some further or alternative variation of the terms of the proposed Deed, Messrs Swaab and Associates on 27 November 1989 wrote to Olivetti's solicitors, Messrs Sly and Weigall, a letter which drew attention to the statement, quoted above from the investment report, to the effect that "a great opportunity exist(ed) to upgrade the building for a new tenant, owner/occupier or a developer who will strata the building". The letter proceeded:

"You will be aware that the Land Titles Office has no

power to register a plan for strata title of a property

where an encroachment on to a (sic) adjoining property

exists.

You will also be aware from correspondence between

ourselves and Messrs Clayton Utz, solicitors,

culminating in their letter of 24 October 1989 that the

encroachment referred to in the Contract cannot be

avoided despite the protracted and costly actions taken

by our client to survey and negotiate matters with the

adjoining owner."

17. It will be observed that the reference to the letter of Messrs Clayton Utz of 24 October 1989 was to the letter which advised that S.M.A's surveyors had recommended the retention of the deed. Subsequent correspondence with Messrs Clayton Utz culminating in their letter of 15 November 1989 was not mentioned. The letter of 27 November 1989 went on to allege that the property had been misrepresented in a manner affecting its value, and to refer to s.52 of the Trade Practices Act 1974. After a further exchange of letters, on 5 December 1989, Benlist purported to rescind the contract and demanded a refund of the deposit. Olivetti's response, on 8 December 1989, was to treat the purported rescission as a repudiation which it announced it accepted, so that the contract was at an end.

18. In these circumstances, Benlist now claims, pursuant to ss.52, 53A and 87 of the Trade Practices Act, relief by way of rescission of the contract and consequential orders, including damages. Alternatively, claims are made for damages under ss.52 and 53A. However, it was agreed between the parties that the court would be asked to determine, at this stage, whether the applicant Benlist could establish the liability of the respondent Olivetti to an order for the setting aside of the contract ab initio, or to any other order in relation to the contract, or the liability of Olivetti and Chesterton to pay damages to the applicant, but that any question of assessment of damages, as well as consideration of a cross-claim brought by Olivetti against Benlist, should be deferred.

19. An understanding of the case requires reference to be made to s.8(1)(f)(iv) of the Strata Titles Act, 1973 (NSW), as it stood at all relevant times up to 14 December 1989, that is, until after the rescission of the contract. (Certain amendments made by s.4 of the Strata Titles (Registration of Plans) Amendment Act 1989 (NSW) received the royal assent on 14 December 1989, but did not then come into force; they were on 23 March 1990 proclaimed to commence on 30 March 1990.) Before its amendment, s.8 relevantly provided:

"(1) A plan relating to land shall not be registered

as a strata plan unless -

(a) it consists of -

(i) a location plan; and

(ii) a floor plan,

in respect of that land;

. . .

(f) that location plan is accompanied by a

certificate given by a registered surveyor certifying -

. . .

(iv) that the building erected on that land

and each proposed lot shown on that location plan are

wholly within the perimeter of that land except to the

extent of any encroachment referred to in section

38(1)(b) (a provision concerned only with encroachments

"on to a public place") or, where eves or guttering

encroach on land other than a public place, that an

appropriate easement exists."

The amendments mentioned above made provision, but only from 30 March 1990, for registration of a strata plan where an encroachment on land other than a public place is the subject, or is intended to be the subject, of an appropriate easement.

20. The contention advanced by Benlist is that, at all times prior to the final rescission of the contract, s.8 was a formidable obstacle to any strata conversion of Olivetti House. When the brochure and the investment report were trumpeting to potential buyers "a great opportunity" to "strata the building", the only survey evidence in existence warned that this could not be done without the concurrence of an adjoining owner. It is true, the applicant could concede (though, as to this, a further point was taken which I shall discuss later), that steps might be taken to rectify the situation under the provisions of the Encroachment of Buildings Act 1922 (NSW), but that would involve time and expense, and the outcome would remain uncertain. Given the state of affairs existing in November 1988, in which must be included the only known survey of the building, showing, as it did, encroachments on adjoining private land, the applicant contended it was misleading, or was likely to mislead, to suggest that the building was suitable for a strata title conversion.

21. Several answers were put forward on behalf of the respondents. Counsel submitted the brochure and investment report were really making a prediction about what could be done in the future, not representing a fact. But I think a statement was made implicitly about the suitability of the building for the suggested use, a matter of present fact. Then it was said that any misrepresentation conveyed was, on analysis, purely one of law, and not of fact. I do not think that this is correct. There was implied a representation (on the applicant's case, a mispresentation) that, under the existing circumstances, the building was suitable for strata title conversion. That was a representation of fact, notwithstanding that the error (if error there was) could only have been revealed by taking account of the effect of a statutory provision, and notwithstanding that all facts necessary to reveal the error could have been found in the documents by an alert person with the necessary knowledge of the detailed requirements of the Strata Titles Act. Counsel for the respondents accepted that, on the authorities, a representation of mixed fact and law must be held to be a representation of fact. Furthermore, to the extent that a representation of this kind may involve a question of law, s.53A(1)(b) of the Trade Practices Act embraces it as an actionable representation nevertheless. For that section proscribes a misleading representation "concerning the nature of (an) interest in ... land" and a misleading representation concerning "the use to which the land is capable of being put or may lawfully be put" (emphasis added).

22. Reliance was also placed, for the respondents, on the amendment to s.8 of the New South Wales Act. But this amendment was made too late to save the respondents from infringing the Trade Practices Act, if their conduct otherwise offended against ss.52 and 53A. It is only in the imagination of a poet that, as Thomas Campbell wrote, "Coming events cast their shadows before". Of course, it is possible to envisage a case where an amendment might already be in the process of enactment, or have already been determined upon by a government, but nothing of that sort is suggested to have occurred here at any time prior to the execution of the contract, and I do not have to consider such a case. Even if the amendment were relevant, its impact would depend upon the obtaining of S.M.A's agreement to the granting of an easement, or upon the applicant emerging successful from the ordeal of litigation under the Encroachment of Buildings Act.

23. The availability, in this case, of the Encroachment of Buildings Act was questioned by Benlist. It was argued that the deed to which Benlist and SMA were parties would preclude either of them taking proceedings under that Act. However, I accept the respondents' submission that the terms of the relevant covenants (which I have earlier set out) simply do not extend to a proceeding brought by Benlist for appropriate relief in respect of encroachments by its own building. The covenants are concerned with proceedings against an encroacher, not with proceedings brought by him. But that is not necessarily to deny the deed any effect upon an application under the Encroachment of Buildings Act. A grant of relief under the statute is discretionary, and a court could be asked to refuse it on the basis that the deed, though not expressly barring the remedy in question, evinces a general intention to confine the parties to its own measure of relief. Whether, in the circumstances of a particular application, a court would exercise powers conferred on it by the Encroachment of Buildings Act, not simply to enable encroachments to be retained, but to permit of strata subdivision of the encroaching building, cannot be predicted with certainty. Also, as a practical matter, the holding charges on a building bought for $18 million might well make the law's delays prohibitive.

24. The respondents relied on a disclaimer clause contained in the investment report, and also repeated as a footnote on the back cover of the brochure. This provided:

"Chesterton International (NSW) Pty Limited for

themselves and the vendors of this property whose Agent

they are, give notice: (i) The particulars are set out

as a general outline only for guidance of intending

purchasers and do not constitute an offer or contract;

(ii) All descriptions, dimensions, reference to

conditions and necessary permissions for use and

occupation and other details are given in good faith

and are believed to be correct, but any intending

purchasers should not rely on them as statements or

representations of fact and must satisfy themselves by

inspection or otherwise as to the correctness of each

of them; (iii) No person in the employ of (Chesterton)

has any authority to make or give a presentation or

warrant whatsoever in relation to this property."

It has been held on many occasions that the perpetrator of misleading conduct cannot, by resorting to such a clause, evade the operation of the Trade Practices Act. Of course, if the clause actually has the effect of erasing whatever is misleading in the conduct, the clause will be effective, not by any independent force of its own, but by actually modifying the conduct. However, I should think it would only be in rare cases that a formal disclaimer would have that effect. As was pointed out during the argument, it was at one time fashionable for some counsel to add to their opinions a note disclaiming responsibility in the event that the law should turn out not to be as they opined it was. I do not think those counsel would have suggested that the note had the effect that their clients placed no reliance on the opinions, though some clients may have been somewhat bemused.

25. In the present case, the suggestion of the suitability of the building for strata title conversion might continue to influence the mind of a prospective purchaser notwithstanding his awareness of the existence of a disclaimer clause, which did not single out the particular representation, but purported to apply generally to every detail stated in the investment report. If it were permissible to avoid the operation of the Trade Practices Act by such a clause, it would be all too easy to make representations in the confidence that they would be acted upon, and then withdraw them in the confidence (equally important for the securing of the desired business) that the withdrawal would not be acted upon. (Cf. the comments of Lockhart J. in Henjo Investments Pty Ltd v. Collins Marrickville Pty Ltd [1988] FCA 40; (1988) 79 ALR 83 at 99.) I accept Dr Larkin's evidence to the effect that he regarded the disclaimer clause as a usual clause, to be ignored, but that he did place some reliance, as undoubtedly the respondents expected him to do, upon at least some other portions of the investment report. I shall return to the question of reliance upon the particular portions of the brochure and investment report which are relevant here.

26. There is one aspect of the disclaimer clause which requires further discussion. The third of its numbered provisions denies the authority of any person in the employ of Chesterton to do certain things. Although the terms of the provision are somewhat curiously expressed, it was argued on behalf of Olivetti that it did effectively exclude Chesterton's authority to make any representation which might be implicit in the statements in the brochure and investment report. I do not accept this argument. Whatever the effect of such a provision within its intended sphere of operation, it does not alter the fact that the brochure itself and the investment report were issued on behalf of Olivetti and with its approval. That was amply proved. The very clause relied on is expressed as a notice given on behalf of Olivetti by its agent Chesterton. What the third provision is about is denying the authority of an individual in the employ of Chesterton to bind Olivetti by some further action falling within its language; it is not speaking of the contents of the brochure or the investment report. If there were any ambiguity in that respect, as I think there is not, it would have to be resolved contra proferentes.

27. An important question raised by the evidence is whether, in fact, there were encroachments by Olivetti House. The original survey was explicit, and appears to have been accepted at the time by the two very substantial enterprises then involved, Bank of New South Wales and Olivetti. No argument was urged that Olivetti was estopped by deed (and see Halsbury 4th ed. vol. 16 para. 1585), but plainly the recital in the deed made by it amounted to an admission of the existence of an encroachment. Although the court was told during the hearing that Olivetti was obtaining its own survey, it ultimately put forward no survey evidence. The surveyor responsible for the reports made by Wallis and Moore Pty Limited, Mr Hall, a director of that company, gave evidence that Olivetti House was "a most irregular building", but he was satisfied that he could and did get to the bottom of the walls and the tops of the walls externally, and that the extent of the encroachment indicated by him was determined by his being able to see it. The most that can be said to the contrary of Mr Hall's conclusion is that Mr Allen could not observe, where the wall was visible, any encroachments by it, and expressed the opinion referred to earlier; but parts of the wall were invisible. Mr Allen did not hold to his view sufficiently firmly to be prepared to sign a certificate that there were no encroachments while the deed continued to assert a different state of affairs.

28. I find, on the evidence, that it is impossible to determine with any assurance that no encroachments exist. That is because of the impossibility of seeing portions of the wall. The result must be that a surveyor would be entirely justified in refusing to certify that the building actually is wholly within the perimeter of the land. Mr Allen's equivocal readiness to give a certificate only if the deed could be modified in the way he proposed does not deny this conclusion.

29. It follows from the matters so far discussed that, by the issue of the brochure and investment report, Olivetti and Chesterton engaged in misleading conduct within the meaning of s.52 of the Trade Practices Act, and in conduct that was likely to mislead within the same section, and also that they made a misleading representation concerning a characteristic of the land and concerning the use to which it was capable of being put or might lawfully be put within the meaning of s.53A.

30. The next question is whether the applicant suffered loss or damage by the conduct of the respondents within the meaning of ss.82 and 87 of the Act. In answering that question, it is necessary to consider whether Dr Larkin, who was the directing mind of the applicant, relied on the relevant representation and, if so, what was the effect of that reliance. For the respondents, emphasis was placed on the fact that Chesterton did not have, and Dr Larkin did not think that Chesterton had, particular expertise in relation to the strata development of a city building. (But Chesterton was an agent conducting a practice concerned with city buildings, and might have been expected to have had access to qualified advisers when making serious statements involving conclusions beyond the area of the expertise it did have.) Counsel for the respondents urged that the statements sued upon really involved an assumption which others had made, including Dr Larkin himself, and that these statements should not have been regarded as conveying any further assurance of the fact. Dr Larkin had vast experience of his own, which he could have been expected to exercise rather than take the brochure at face value. He should have seen it, so the respondents contended, as no more than an "opening gambit" or invitation designed to attract interest and provoke ideas, but upon which it would be unreasonable for him to rely. Reference was made to Parkdale Custom Built Furniture Proprietary Limited v. Puxu Proprietary Limited [1982] HCA 44; (1982) 149 CLR 191; The Saints Gallery Pty Ltd v. Plummer [1988] FCA 213; (1988) 80 ALR 525; and Pappas v. Soulac Pty Ltd [1983] FCA 3; (1983) 50 ALR 231.

31. On the other hand, the very nature of a detailed analysis called an investment report invites the reader to treat it as a serious document, upon which some reliance can be placed. So far as the question of strata development is concerned, Mr Stokes admitted in evidence that if the building was regarded as suitable for that kind of development the potential market for it was thereby widened. He conceded that "the targeting of the strata developer section of the market was of significance", and that it was important to attract as wide a market as possible in order "hopefully ... thereby (to) push the price up". It was put to him that there was no doubt "that both at the end of 1988 and the end of 1989 the ability to strata the building added value to it", and answered: "Yes, it could have done." As I have remarked earlier, the singling out of this feature in letters to prospective buyers makes it plain that, at the time, he had no doubt of its importance. At one stage in his evidence Mr Stokes observed, concerning the suggestion in the brochure of a great opportunity for strata developers, "there is an impact on price, of course." He said he believed when the investment report and brochure were prepared "that a developer could strata Olivetti House". He made it clear that the documents were intended to convey that fact. Asked whether he was aware "that there were encroachments ... on the adjoining property", he said: "Yes. Yes, I naturally thought that that could be overcome by negotiation or buying the encroachment as is normally done." Nevertheless, he conceded: "We made no enquiries of the adjoining owner" (ie to establish whether the encroachment could be overcome in that way).

32. If there is a real question whether Dr Larkin was influenced by the relevant representation, that question cannot be answered without regard to the principle stated by Wilson J. in Gould v. Vaggelas 157 CLR 215 at 236:

"If a material representation is made which is

calculated to induce the representee to enter into a

contract and that person in fact enters into the

contract there arises a fair inference of fact that he

was induced to do so by the representation."

Wilson J. also pointed out that the representation need not be the sole inducement:

"It is sufficient so long as it plays some part even if

only a minor part in contributing to the formation of

the contract."

Wilson J.'s statement of the relevant principles was referred to by Lockhart J. in Henjo Investments Pty Ltd v. Collins Marrickville Pty Ltd (supra) at 96, and I applied it in a different context in Jewel Food Stores Pty Ltd v. Hall (1989) 85 ALR 375 at 385. See also Zoneff v. Elcom Credit Union Limited (1990) ATPR 51,142 at 51,151, where Hill J. has collected a number of the authorities, and R. G. Maxwell and Associates Pty Ltd v. Warner (Davies, Spender and Hill JJ., unreported, 4 May 1990).

33. Dr Larkin gave quite specific evidence to the effect that he would not have decided upon the purchase of Olivetti House had he not accepted the representation as correct. He said he wanted the availability of the alternative of strata subdivision as a fall-back position should hotel conversion prove not to be feasible. The respondents countered this evidence with submissions attacking the credit of Dr Larkin. I do not think it is necessary to examine each issue of credit in detail in these reasons. I have, of course, considered them. I have come to the conclusion that even if I reject every attack, I should not accept the full breadth of Dr Larkin's claim. Upon all the evidence, I think it is probable that Dr Larkin's primary intention of utilizing the building for conversion to an hotel was firm enough to have led him to pursue the purchase of the building at an appropriate price, quite apart from the question of its suitability for strata subdivision. There is no doubt that the course of action he followed immediately after entry into the contract was directed to the hotel conversion project.

34. That does not mean that the relevant representation had no influence on events, or that there was no reliance placed upon it. When he decided to purchase Olivetti House at the agreed price, I think Dr Larkin was influenced, as Olivetti and Chesterton intended he should be, by the representation according to which the building had the added potentiality that it was suitable for strata title conversion. The fact is that strata title conversion was then in Dr Larkin's mind, if only secondarily, as his inquiry of the City Council's chief building surveyor makes clear. And it is probable that the asserted potentiality added something to the building's value. The evidence is clear that it widened the field of possible purchasers, and this would be likely to influence both the asking price and Dr Larkin's view of the appropriate price. Furthermore, as represented, the building could be sold at a price involving no deduction for the costs and holding charges (required to be hazarded in overcoming the survey difficulty, if it could be overcome) which a purchaser would be likely to have to bear before embarking on any strata title conversion. Although I think Dr Larkin would, in any case, have decided upon a purchase of the building at some price, I infer that, on the probabilities, the sale was effected at a higher price, that is, at the price actually negotiated, partly because Dr Larkin was influenced by the representation. Adapting, to the situation relating to the conclusion of this contract, the language of Wilson J. quoted above, the representation played some part in contributing to the formation of the contract actually entered into. While the evidence (particularly of Mr Stokes) enables me to infer that the value of a building lacking full suitability for strata title conversion was probably less than the value of the building as it was thought to be, the figures were not explored in the evidence in view of the agreement of the parties to defer any question of damages. The difference may have been quite small, having regard to the building's other potentialities and the possibility of overcoming the problem of strata subdivision; or it may have been substantial.

35. I should add that the respondents urged Dr Larkin's own prior assumption that the building might be suitable for strata title conversion as a reason why I should not accept that the relevant representation had any effect. I do not think this follows. A representation which accords with the recipient's prior impression, and confirms it, is all the more likely to be accepted without question. It may influence his action, at least to the extent contemplated by Wilson J. in the passage I have cited from Gould v. Vaggelas. Cf. Zoneff, ubi cit. supra. I think the representation was also the more likely to reinforce Dr Larkin's prior impression because it related, not to his primary use for the building, - every aspect of which he would have had more reason to check - but to a merely secondary use, which, however, contributed to its price.

36. Having regard to my findings, it will be necessary to consider the question of damages. That question is likely to fall within a fairly narrow compass, and to depend upon expert evidence concerning the extent of the effect upon valuation of the difference between this building, considered as suitable for strata title conversion, and this building, considered as lacking such suitability to the degree to which it did so by reason of the difficulty of compliance with the terms of s.8 of the Strata Titles Act. As at present advised, I do not think any question of setting aside the contract ab initio arises upon the view I have taken of the facts. Even if I had accepted that Benlist would not have been interested at all in the property except on the basis represented, and not merely that the representation affected the price, the applicant's claim to have the contract set aside would nevertheless have been confronted by formidable difficulties.

37. In Creative's Landscape Design Centre Pty Limited v. Platz (1989) 11 ATPR 50,686 at 50,697, the joint judgment of Bowen C.J., Sheppard and von Doussa JJ. accepts the view that s.87 of the Trade Practices Act confers on the court powers which are not fettered by the well known principles controlling the discretion to grant the equitable remedy of rescission, but are discretionary, so as to enable the court, while exercising a wider discretion under s.87, to obtain guidance, as appropriate, from those principles. In Henjo Investments Pty Ltd v. Collins Marrickville Pty Ltd (supra) at 102, Lockhart J. said:

"In granting a remedy under s 87, the court is not

restricted by the limitations under the general law of

a party's right to rescind for breach of contract or

misrepresentation. Nevertheless, in exercising its

discretion under s 87, the court will consider the

conduct of the parties after they had knowledge of the

misleading quality of the conduct ... ."

His honour quoted, from the advice of the Privy Council in Senanayake v. Cheng (1966) AC 63 at 83, a statement of the questions arising at general law as being "whether restitutio in integrum is substantially possible and whether rescission is timely and just and fair." He added:

"On this approach the court must consider all the

circumstances before it in the exercise of its

discretion."

38. In the present case, a delay of some months occurred following the revelation of the obstacle confronting a strata subdivision. It may be that the extent of the difficulty was not fully appreciated all at once. It was certainly reasonable for some time to be taken in exploring the possibility of remedying it. But where an applicant chooses not to attempt to rescind at once, but to seek to overcome such a problem, it must be a serious impediment to an exercise of discretion in his favour if, after the lapse of some months, and at a time when his endeavours to solve the problem appear about to bear the fruit of success, he suddenly aborts the process and seeks at that stage the remedy of rescission. However, it is unnecessary to pursue this question further, and I have reached no final conclusion upon it.

39. It is sufficient for the present that I make declarations, in accordance with these reasons, that the respondents have in trade or commerce engaged in conduct that was misleading or likely to mislead within the meaning of s.52 of the Trade Practices Act, and that they have in trade or commerce in connexion with the sale of an interest in land and in connexion with the promotion of the sale of an interest in land made a misleading representation concerning the characteristics of the land and the use to which the land was capable of being put or might lawfully be put within the meaning of s.53A of the Act. I order that the matter be listed for further directions on a date to be fixed, so that the applicant may bring in short minutes of declarations in accordance with these reasons, and so that directions may be given for its further conduct.

Strata Titles Act 1973(NSW)

Strata Titles (Registration of Plans) Amendment Act 1989(NSW)

Strata Titles Act 1973(NSW)

Strata Titles (Registration of Plans) Amendment Act 1989(NSW)

Strata Titles Act 1973(NSW)

Strata Titles (Registration of Plans) Amendment Act 1989(NSW)

Strata Titles Act 1973(NSW)

Strata Titles (Registration of Plans) Amendment Act 1989(NSW)

Re Benlist Pty Limited v Olivetti Australia Pty Limited; Chesterton International

At a glance

Court

Decision date

Before

Source

Judgment (79 paragraphs)

Re Benlist Pty Limited v Olivetti Australia Pty Limited; Chesterton International (Nsw) Pty Limited; Olivetti Australia Pty Limited and Benlist Pty Limited [1990] FCA 289 (13 August 1990)

Parties

Legislation Cited (16)

Cases Cited (5)