Federal Court of Australia|1992-11-20|Before: Mr J, Gummow J

Re Demagogue Pty Ltd v Nicholas Ramensky and Gisela Elizabeth Ramensky [1992] FCA 557; (1992) 110 ALR 608 (1992) 39 FCR 31 (20 November 1992)

And: NICHOLAS RAMENSKY and GISELA ELIZABETH RAMENSKY

Trade Practices - contract to purchase home unit "off the plan" - misleading or deceptive conduct - whether relevant factual matrix may include silence - application for relief under sub-s. 87(1A) of Trade Practices Act 1974 - order declaring contract void ab initio - meaning of "loss or damage" in sub-s. 87(1A).

Rhone-Poulenc Agrochimie AG v UIM Chemical Services Pty Ltd (1986) 12 FCR 477

Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd [1988] FCA 40; (1988) 79 ALR 83

Munchies Management Pty Ltd v Belperio [1988] FCA 413; (1988) 84 ALR 700

State of Western Australia v Wardley Australia Limited (High Court, 28 October 1992, unreported), considered.

Counsel and solicitors for the appellants: Mr J. Muir, QC and

Mr S. Lumb instructed by

Virgil Power Bothwell and Co.

Counsel and solicitors for the respondents: Mr P. Morrison, QC and

Mr S. Doyle instructed by

Clayton Utz

BLACK C.J. I agree with Gummow J., for the reasons he gives, that this appeal should be dismissed with costs.

2. No reason has been shown for departing from the findings of the primary judge that the appellant engaged in conduct that was misleading or deceptive, in contravention of s52 of the Trade Practices Act 1974. The failure of the appellant (the vendor) to disclose to the respondents (the purchasers) unusual features relating to access to the land they were buying was but one of the circumstances that led the primary judge to conclude that there had been misleading and deceptive conduct. The primary question was whether there had been conduct that was misleading or deceptive or likely to mislead or deceive. In this case, as in every case in which s52 is relied upon, this was a question of fact that could only be determined - as the judge did determine it - having regard to all the relevant circumstances.

3. Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. To speak of "mere silence" or of a duty of disclosure can divert attention from that primary question. Although "mere silence" is a convenient way of describing some fact situations, there is in truth no such thing as "mere silence" because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed.

4. I add some observations of my own about the requirement in s87(1) and s87(1A) of the Trade Practices Act to show that loss or damage has been suffered or is likely to be suffered and the appellant's contention that "loss or damage" is used in s87 in the same sense as it is in s82.

5. The general law does not impose, as a requirement for effective rescission, that a party who has been induced to enter into a contract by a misrepresentation must have suffered loss and damage in the sense of a loss for which a pecuniary award may be made. In the Trade Practices Act itself, the right of rescission given to consumers by s75A where there has been a breach of a condition implied by a provision of Division 2 of Part V is not conditional upon the existence of loss or damage in that sense. Despite the use of the same words "loss or damage" that appear in s82, it would be surprising if s87, in providing a range of discretionary remedies, contained a limitation that is not imposed by the general law in cases that would fall within the scope of Part V of the Trade Practices Act and that would, in any event, seriously limit the usefulness of the section.

6. Moreover, I consider that s87(1), read in the context of the Act as a whole, contains clear indications that the suggested limitation was not intended. Section 87(1) provides that an order under that sub-section may be made whether or not the court "grants an injunction under section 80 or makes an order under section 80A or 82". That would cover a case where no entitlement to damages under s82 had been shown. By reason of s87(1C), an application may be made under the similar provisions of s87(1A) in relation to a contravention of Part V notwithstanding that a proceeding has not been instituted for damages under s82. That would cover a case where no entitlement to damages under s82 could be shown.

7. In any event, s87(1) is not confined to cases in which damages under s82 are sought; it applies also in proceedings for an injunction and in proceedings for offences against Part V. Section 87(1B) has a similar effect in relation to s87(1A).

8. A further indication of the intention of s87(1) and of s87(1A) is to be found by considering the provisions of the Act concerning unconscionable conduct. Section 52A(1) provides:

"(1) A corporation shall not, in trade or commerce, in

connection with the supply or possible supply of goods or

services to a person, engage in conduct that is, in all the

circumstances, unconscionable."

9. Section 82(1) does not apply in relation to conduct done in contravention of s52A and so no damages can be recovered under the Act in respect of such conduct: see s82(3). Section 80A is also excluded in such cases. Section 80 is not excluded but an injunction under s80 is unlikely to be a useful remedy where unconscionable conduct has occurred. It is thus left to s87(1A), which uses the same language of loss or damage as appears in s87(1), to provide a civil remedy. The applicability of s87(1A) in such cases is expressly recognised by s87(1CA)(a), which imposes a special two year limitation period, and by s87(1D). It could not have been intended that the remedy available to those who have suffered from unconscionable conduct in breach of s52A should be limited by the need to show loss and damage in the s82 sense, especially since recovery under that section is specifically excluded and, in practical terms, s87(1A) can provide the only useful remedy. In these circumstances I consider it to be clear that the loss or damage contemplated by s87(1A) is not limited to loss or damage in the s82 sense but was intended to include the detriment suffered by being bound to a contract unconscionably induced.

10. Sections 87(1) and 87(1A) are part of the same scheme and cover much common ground. They can each be enlivened by a contravention of s52 and the concept of loss and damage in each sub-section must be the same.

11. In my view, the loss or damage for the purposes of both s87(1) and s87(1A) will include the detriment suffered by being bound to a contract induced by misleading or deceptive conduct in contravention of s52. Proof of loss or damage of the sort that would be an "amount of ... loss or damage" for the purpose of s82 is not a prerequisite for the grant of relief under either sub-section.

12. The appellant argued that if the primary judge did have a discretion to grant relief under s87(1) and s87(1A), that discretion miscarried because the remedy was disproportionate to the loss or damage. It was said that the remedy was disproportionate because it had the effect of relieving the purchasers from what turned out to be a bad bargain, the market having fallen. But, as the primary judge found, had the purchasers been aware of the true position with regard to access to the site they would not have entered into the contract at all. The serious consequences for the purchasers if the contract was not set aside are referred to by Gummow J. in his reasons for judgment and I am far from being persuaded that the remedy granted has been shown to be disproportionate, or that the discretion the judge had under s87(1) and s87(1A) otherwise miscarried.

GUMMOW J. This case concerns a written contract dated 14 March 1989 entered into between the Appellant, as vendor, and the Respondents, as purchasers, for the sale of certain land at Noosa Heads in the State of Queensland.

2. The contract recited that the vendor intended constructing upon the land in Certificate of Title Volume 6432 Folio 95 a multi-level residential home unit building to be called "Picture Point Terraces" and that upon completing construction of the building the vendor intended subdividing the land and the building into lots and common property. This was to be achieved by registration of a Building Units Plan pursuant to the Building Units and Group Titles Act 1980 (Q) ("the Building Units Act"). The contract provided for the sale and purchase of an estate in fee simple in part of the building, being Lot No. 5 as outlined on a plan annexed to the contract. A separate freehold title to that Lot was to be conveyed to purchasers. The purchase price was $405,000.

3. The contract stated that the vendor had made application to the Noosa Shire Council for town planning consent to the development. What it did not state or make any reference to was that the only practicable vehicular access to the land would be from Edgar Bennett Avenue, and that since at least October 1987 the vendor had been negotiating with the Land Administration Commission for the grant under the provisions of the Land Act 1962 - 1988 (Q) ("the Land Act") of the right to construct a driveway over public land so as to provide such access for the future home unit owners. Early in March 1989, and before the date of the purchasers' contract, the temporary closure of the appropriate road area had been gazetted and an application had been made for issue of a Road Licence under the Land Act. The Road Licence, No. 21/8247, was issued 16 May 1989, with effect from 2 March 1989. The licensee was shown as Demagogue Pty Ltd.

4. The primary Judge (Spender J) held, and I agree, that the need for a Road Licence under the Land Act for vehicular access to the development was an unusual and unexpected circumstance and, to the respondents, unexpected.

5. The purchasers live in Sydney. They are husband and wife. Mrs Ramensky is a solicitor. In January 1989 they were on holidays at Noosa. On 10 January they visited a local real estate agent, Mr Warren Miller and, after some discussion in his office, he took them to the site of the proposed development of "Picture Point Terraces". To get to the property from the main road they walked through steeply sloping land covered in vegetation and bearing rough 4-wheel drive sand tracks.

6. Whilst on the site, Mr Miller was asked about access to the property. He replied:-

"Well, look, of course there will be access. The developer

will build a driveway up to the road."

7. After the inspection the respondents returned to Mr Miller's office. He produced to them a draft contract. Page 20 thereof showed a plan of the development with a driveway coming from the southern end of the property with the word "ramp" written upon it. The words "security gate across path and driveway" also appear. Closer to the depiction of the units themselves there is a bifurcation, one marked "to level 6 carpark" and the other marked "to level 5 carpark". Nothing was said to the respondents or shown to them to indicate that the driveway was other than within the boundaries of the property or that there was anything differing from the usual situation (believed by the respondents to be the case here) where vehicular access to a road from a block of home units is over a driveway located on the common property of the site of the development. As to the plan, in his evidence Mr Miller agreed that:-

". . . someone looking at that driveway, the gates, the word

driveway and so on, would think it a private driveway, not a

public road."

8. On 13 January the respondents paid a holding deposit of $500. They signed the contract to purchase Lot 5 in late February 1989. It is, as I have indicated, dated 14 March 1989. One half of the deposit of $40,500 was then paid, the other half being paid on 13 September 1989.

"Whether silence constitutes conduct which is misleading or

deceptive of course depends upon the circumstances. Here

the circumstances were special and out of the ordinary.

Moreover, the express representations by Demagogue were such

as to indicate that there was nothing unusual at all about

this aspect of the development. In this case, there was

both a positive misrepresentation, and a misrepresentation

conveyed by a failure to say anything about a road licence.

In the opinion I hold of the circumstances, Demagogue

through Mr Miller and the draft contract created a clear but

erroneous impression that there was nothing unusual

concerning the access to this site and, in particular, there

was no suggestion that a road licence from the Lands

Administration Commission was necessary to provide such

access. The vendor was silent as to conditions which might

affect the continued existence of the licence and as to the

fact that a small but not trivial financial contribution

would be required."

His Honour also found that if, prior to their entry into the contract the respondents had been aware of the circumstances that then obtained concerning the Road Licence and access to the site they would not have entered into the contract, and that it was probable that they would not have entered into the contract at any time. It followed that the respondents had relevantly been induced to enter into the contract.

10. The Land Act does not permit the transfer of the Road Licence to the body corporate but it does permit the transfer to the proprietors of Lots in the Building Units Plan. This would entail a system of covenants between the proprietors of the Lots to ensure, as between themselves and their successors in title, the observance of the conditions of the Licence. In February 1990 a proposed surrender of the Road Licence by the appellant was not accepted and was withdrawn. In March 1990 the appellant proposed to transfer the Road Licence to each proprietor of a Lot in the Building Units Plan. But no such offer of transfer had been made to the respondents before the date for settlement of their contract, namely 16 February 1990.

11. On 12 February 1990 the solicitors for the respondents wrote the solicitors for the appellant that their clients "rescinded" the contract. On 8 February 1990 they had been told that access to the site was subject to a Road Licence in the name of the appellant. Spender J held that the decision to "rescind" was made solely upon their learning of the existence of the Road License and after taking advice on the matter.

12. In the letter of 12 February 1990, the solicitors for the respondents complained that the appellant had contravened s. 52 of the Trade Practices Act 1974 ("the Act") by failing to disclose to the respondents that the access to the property was subject to the Road Licence. The appellant denied that the respondents were entitled to "avoid" the contract and on 19 February 1990 its solicitors told the solicitors for the respondents that they had been instructed to take action against the respondents for specific performance and damages.

13. The proceeding in this Court was instituted by the respondents on 19 March 1990. They sought, inter alia, an order that the contract was void ab initio together with declarations of contravention of ss. 52 and 53A of the Act. Nothing appears to turn upon the addition of s. 53A, the position being that if there had been contravention of s. 52 the same result followed for s. 53A.

14. The particular statutory foundation for the application for an order that the contract was void ab initio does not appear from the pleadings. But the extensive written submissions presented to primary Judge showed that reliance was placed upon sub-s. 87(1A), rather than upon sub-s. 87(1). Section 87 appears in Part VI of the Act. This is headed "Enforcement and Remedies". An application may be made under sub-s. 87(1A) in relation to a contravention of Part V notwithstanding that a proceeding has not been instituted under another provision of Part VI in relation to that contravention. Sub-s. 87(1C) so provides. On the other hand, sub-s. (1) is enlivened only by the institution of a proceeding other than a proceeding for relief under that sub-section: Sent v Jet Corporation of Australia Pty Ltd [1986] HCA 35; (1986) 160 CLR 540 at 543.

15. The orders appealed from are those in which the primary Judge declared that there had been contraventions of ss. 52 and 53A of the TP Act and that the contract dated 14 March 1989 was void ab initio. Spender J also ordered that the appellant pay the deposit of $40,500, together with all accruals, and consequential costs incurred by the applicants in the sum of $6,960.

16. Issues were litigated at first instance as to whether the respondents had been entitled to avoid the contract pursuant to sub-s. 49(5) of the Building Units Act. The primary Judge found against the respondents on this issue. It was not pursued at the hearing of the appeal.

17. The appellant cross-claimed seeking specific performance, and in lieu thereof, damages for breach of contract. The amended defence to the cross-claim was filed, with leave, on 21 December 1990, in the course of final addresses and on the second last day of the trial. The cross-claim still is pressed. An order for specific performance was sought on the appeal. Counsel agreed that if, for any reason, such an order should be refused, the question of damages for breach of contract by the respondents should be referred back to the primary Judge. It appears to be common ground that the relevant market is, and has been for some time, a falling market. In acceding to the joint application of the parties that the inquiry as to damages for breach of contract be deferred pending the outcome of the trial upon the other issues, the primary Judge (Appeal Book 438) indicated that there would be a damages claim "of a significant order", recognising that these are difficult times "particularly for upmarket units on the northern beaches."

18. The respondents say that specific performance should not be decreed by reason of the hardship to them in being forced to an election between accepting a transfer of an interest in the Road Licence in order to have the use and enjoyment of the property they purchased and settling the contract without any legal right to use the only practicable vehicular access, in circumstances where the contract does not require acceptance of an interest in the Road Licence and, before contract, no disclosure was made to them that this would be necessary. The purchasers point to related matters, including the reluctance of the court to order specific performance for a contract of landlocked land (Denne v Light (1857) 8 DeGM and G 774[1857] EngR 350; , 44 ER 588) and the advertent withholding of information concerning vehicular access, as rendering more just the refusal of specific relief (Denny v Hancock (1870) LR 6 Ch App 1 at 11-12, 14; Slee v Warke [1949] HCA 57; (1949) 86 CLR 271 at 277-9, Svanosio v McNamara [1956] HCA 55; (1956) 96 CLR 186 at 196-7.).

19. Two issues of importance arise on the appeal. The first concerns the circumstances in which misleading or deceptive conduct, for the purposes of s. 52 may be constituted by a factual matrix which includes silence as well as overt activity. In particular, the appellant, at least initially, submitted that the parties as prospective vendor and purchaser were "at arms length" and there was no duty to disclose what did not amount to a latent defect in title. The second issue concerns the meaning of the phrase, in sub-ss. 87(1A) and (2)(a)of the Act, "will prevent or reduce the loss or damage suffered, or likely to be suffered . . ." The appellant submitted that it had not been shown that the property as sold was worth less than the contract price and that therefore the respondents could not point to any relevant "loss or damage" to enliven s. 87.

"Without limiting the generality of section 80, the Court

may, on the application of a person who has suffered, or is

likely to suffer, loss or damage by conduct of another

person that was engaged in (whether before or after the

commencement of this sub-section) in contravention of a

provision of Part V . . . make such order or orders as the

Court thinks appropriate against the person who engaged in

the conduct or a person who was involved in the

contravention (including all or any of the orders mentioned

in sub-section (2)) if the Court considers that the order or

orders concerned will compensate the person who made the

application . . . in whole or in part for the loss or

damage, or will prevent or reduce the loss or damage

suffered, or likely to be suffered, by such a person."

Sub-section 87(2)(a) specifies that one order available under

"(a) An order declaring the whole of any part of a contract

made between the person who suffered, or is likely to

suffer, the loss or damage and the person who engaged in the

conduct or a person who was involved in the contravention

constituted by the conduct, or of a collateral arrangement

relating to such a contract, to be void and, if the Court

thinks fit, to have been void ab initio or at all times on

and after such date before the date on which the order is

made as is specified in the order."

20. In dealing with both of these issues it is well to bear in mind that whilst contractual rights subsisted between the parties their relationship is not governed simply by the general law as to vendor and purchaser. The legislation regulates the existence and exercise of what would otherwise be the rights at general law and, in addition, itself creates new rights and remedies.

21. The point was made by Roscoe Pound in his celebrated article "Common Law and Legislation" (1908) 21 Harv L Rev 383 at 406-7:-

"Courts are fond of saying that they apply old principles to

new situations. But at times they must apply new principles

to situations both old and new. The new principles are in

legislation. The old principles are in common law."

As Professor Finn has pointed out, s. 52 of the Act epitomises both the encroachment by statute upon areas previously left to the general law and the challenge which now exists to bring into relative harmony with the body of case-law construing s. 52, general law doctrines whose deficiencies (for example, as to the legal consequences of pre-contractual statements) this case law has exposed: Finn, "Statutes And The Common Law" (1992) 22 UWA L Rev 7 at 11, 25. In the meantime, it should be no inhibition to giving effect to what, on its proper construction, is provided for in the legislation, that the result may be to achieve consequences and administer remedies which differ from those otherwise obtaining under the general law; cf Lamb v Cotogno [1987] HCA 47; (1987) 164 CLR 1 at 11-12.

22. For example, whatever the special rules at general law, no general rule can be laid down which determines the circumstances in which evidence of conversations in pre-contractual negotiations or discussions may be relied upon in a claim alleging contravention of s. 52: Lezam Pty Ltd v Seabridge Australia Pty Ltd [1992] FCA 206; (1992) 107 ALR 291 at 297. Again, it should not be an inhibition upon giving to s. 52 what otherwise would be its effect that the result may be to afford under ss. 52 and 82 a remedy in damages for what the common law would classify as innocent misrepresentation. Restraint upon what otherwise might be the reach of these provisions of the statute is, in any event, provided by the need to show causation.

23. It may also fairly be said that whilst no reliance is placed in them upon s. 52, numerous recent decisions have developed the general law in a fashion consonant with s. 52. I refer to such authorities as The Commercial Bank of Australia Limited v Amadio [1983] HCA 14; (1983) 151 CLR 447, and Waltons Stores (Interstate) Limited v Maher [1988] HCA 7; (1988) 164 CLR 387. But the scope of the remedies provided in Part VI, including those against third parties involved in contraventions of the Act, still provides the means to achieve results beyond those which might be attained at general law. In other cases, the same controversy may generate liability at common law, and in equity, as well as for contravention of s. 52, but the pecuniary remedy in each instance may yield the same quantum. A notable recent example is Commonwealth Bank of Australia v Smith [1991] FCA 375; (1991) 102 ALR 453. There, the bank was held accountable in the same sum to its customers for breach of a duty of care, breach of fiduciary duty and for misleading or deceptive conduct.

24. The counsel for the appellant placed reliance upon certain passages in the judgment of Bowen C.J. in Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 at 489-490. His Honour referred to certain relationships which at general law have been held to give rise to an obligation of disclosure. He said that the nature of relationships giving rise to an obligation to make disclosure might well prove useful in determining some of the cases arising under s. 52 of the TP Act. However, Bowen C.J. also said:-

"Where silence is relied on in order to show a breach of s.

52 it will depend upon the circumstances whether the silence

constitutes conduct which is misleading or deceptive. As in

the case of other sections of the Trade Practices Act 1974

the court may gain assistance from consideration of cases at

common law and in equity dealing with related types of

situations. However, the court is not confined by such

cases because it is concerned with the interpretation and

application of the words of the particular statute."

Referring to the situation under the general law his Honour added (at 490):-

"Vendors and purchasers have not generally regarded as

being, without more, in this type of relationship. There

are occasions when a particular enactment or even the terms

of a particular contract will impose an obligation upon a

vendor which will place the parties in a relationship of

this type involving an obligation to make disclosure."

25. The general law has developed a distinction between the obligations of a vendor of disclosure as regards defects in title and defects as to quality of the property sold. Whilst the vendor's duty of disclosure is confined to latent defects in title, it applies to all such defects, whether known to the vendor or not. On the other hand, when the complaint of the purchaser is one going to the quality of the land sold or to the use to which it may be put, or is that owing to non-disclosed facts within the knowledge of the vendor its value will be less than the purchaser supposed, there is no duty of disclosure: Spencer Bower, "The Law Relating to Actionable Non-Disclosure", 2nd edition, 1990, pp 135-136. The result is that in the absence of any misrepresentation or fraudulent concealment the vendor will incur no liability for failure to make such disclosure: Harpum, "Selling Without Title: A Vendor's Duty of Disclosure?" (1992) 108 LQR 280 at 320. Moreover, as Mr Harpum also demonstrates, where there is a duty of disclosure its juridical basis is obscure.

26. In the related field of insurance contracts, it has been held that the right to avoid the contract in the case of non-disclosure is to be found not in the law of tort or in that as to implied contractual terms. There is a "common law" obligation which arises from the jurisdiction originally exercised by courts of equity to prevent imposition. This provides a defence to an application for specific relief. The appropriate remedy for the aggrieved party is one in rescission rather than in damages in tort or for breach of contract; see Banque Financi re de la Cit SA v Westgate Insurance Co Ltd (1991) 2 AC 249 at 280, where Lord Templeman approved the detailed analysis by the Court by Appeal, (1990) 1 QB 665 at 777-781. This analysis is consistent with what had been said by the High Court in Khoury v Government Insurance Office of New South Wales [1984] HCA 55; (1984) 165 CLR 622 at 635-638; cf J G Fleming "Insurer's Breach of Good Faith - A New Tort?" (1992) 108 LQR 357.

27. On the other hand, there may be cases as between vendor and purchaser which are only to be explained on the footing that the recovery by the purchaser, by reason of the failure of the vendor to disclose latent defects in title, was in damages for breach of contract. Hence the suggestion that the obligation of disclosure, limited as it is, rests in an implied term. In a contract of this class the implication is made by operation of law rather than to give business efficacy to the particular transaction; see Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 345-6, Castlemaine Tooheys Ltd v Carlton and United Breweries Ltd (1987) 10 NSWLR 468 at 484-493, Harpum supra at 332, Harpum, "Exclusion Clauses and Contracts for the Sale of Land" (1992) CLJ 263 at 264, cf Khoury supra at 636-7.

28. In the present case, it is accepted that the title the appellant promised by the contract to convey to the respondents did not include any rights over land outside the relevant parcel. The result was that there was, in the technical sense, no defect in title.

29. However, Professor Butt explains in his work "The Standard Contract for Sale of Land in New South Wales", 1985, that if the vendor has represented that the land possesses certain advantages which an undisclosed latent defect in quality falsifies, the vendor, at general law, will not be allowed to resist rescission by shielding behind the now false representation: Laurence v Lexcourt Holdings Ltd (1978) 2 All ER 810 at 815-817. Further, the learned author points out that in some circumstances silence, in the sense of refraining from comment, may amount to engaging in misleading or deceptive conduct for the purposes of s. 52 of the Act.

30. "Conduct" within the meaning of s. 52 includes refusing to do an act and refusal to do an act includes a reference to "refraining (otherwise than inadvertently) from doing that act": sub-s. 4(2). But in any case where a failure to speak is relied upon the question must be whether in the particular circumstances the silence constitutes or is part of misleading or deceptive conduct. The expanded meaning given by s. 4(2) to "conduct" should not distract attention from the fundamental issue in the case at hand.

31. Spender J indicated in the passage I have set out earlier in these reasons, that the present case concerns both a positive misrepresentation, as to the provision of vehicular access, and misleading conduct from the failure to say anything about the Road Licence, with the whole of the circumstances creating in the respondents the clear but erroneous impression that there was nothing unusual concerning access to the site.

32. In my view, to inquire in such a case whether an independent "duty to disclose" has arisen is to digress from the application of the terms of s. 52. Thus, in Rhone-Poulenc the basic proposition for which the appellants unsuccessfully contended was that a manufacturer who sells a product it knows is bought by consumers for the purpose for which it was made, contravenes s. 52 if the sale and use of the product is unlawful and the product is liable to forfeiture and the manufacturer has not made this known to consumers; see 12 FCR at 505-6, per Lockhart J. Again, in Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd [1988] FCA 40; (1988) 79 ALR 83, the positive statement on behalf of the restaurant vendor that the restaurant seated 128 people was, in the circumstances of the case, misleading when unqualified by words which distinguished the actual capacity from the licensed capacity, that being a matter of vital importance given the nature of the business being sold. In my view it is unhelpful to describe that result, involving as it does a contravention of s. 52, as the product of the breach of any "duty" imposed upon the vendor by that section.

33. The use of the term "duty" is apt to suggest a necessary connection with the general law, which does not exist and is not required by the statute; cf Lam v Ausintel Investments Australia Pty Ltd (1990) ATPR 40-990 at 50,880-1. I agree with what was said by Samuels JA in Commonwealth Bank of Australia v Mehta (1991) 23 NSWLR 84 at 88:

"(S)ilence is not misleading only where there is a duty to

disclose at common law or in equity. It may simply be the

element in all the circumstances of a case which renders the

conduct in question misleading or deceptive."

See also Lee Gleeson Pty Ltd v Sterling Estates Pty Ltd (1991) 23 NSWLR 571 at 582, per Brownie J.

34. It is true, as was pointed out by French J in State Government Insurance Corporation v Government Insurance Office of New South Wales (1991) 101 ALR 259 at 311, that the large number of cases brought under the Act in respect of conduct analogous to passing-off has encouraged the notion that some representation must be demonstrated as an element of conduct in contravention of s. 52. But, consistently with regard to the natural meaning of the terms of s. 52, the question is whether in the light of all relevant circumstances constituted by acts, omissions, statements or silence, there has been conduct which is or is likely to be misleading or deceptive. Conduct answering that description may not always involve misrepresentation; see Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd [1988] FCA 40; (1988) 79 ALR 83 at 93, per Lockhart J, and see Mr Justice French's paper "Trade Practices Act" in Finn ed. Essays on Torts, 1989, pp 186-188. I agree also with the remarks by French J in Kimberley NZI Finance Limited v Torero Pty Ltd (1989) ATPR (Digest) 46-054 at 53,195 where, after referring to various authorities, his Honour said:-

"If in a particular case silence would, as a matter of fact,

constitute misleading or deceptive conduct, sec. 52 by

virtue of its prohibition of such conduct imposes its own

statutory duty to make disclosure.

The cases in which silence may be so characterised are no

doubt many and various and it would dangerous to essay any

principle by which they might be exhaustively defined.

However, unless the circumstances are such as to give rise

to the reasonable expectation that if some relevant fact

exists it would be disclosed, it is difficult to see how

mere silence could support the inference that the fact does

not exist."

As this passage suggests, one may give s. 52 full effect without entirely doing away with what Barton J described as "superior smartness in dealing": W. Scott, Fell and Company Limited v F H Lloyd [1906] HCA 79; (1906) 4 CLR 572 at 580. Nor does the application of s. 52 in the manner suggested necessarily involve the outflanking by statute of developments in the law of contract, tort, fiduciary duty and estoppel of an obligation in certain cases to negotiate in good faith; see Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1, Walford v Miles (1992) 1 All ER 453 (HL), Peel, Note (1992) CLJ 211, Farnsworth "Contract", 1982, 3.26. But, in Australia, discussion of these issues in the general law is plainly defective without close regard to the impact of the Act.

35. Counsel for the appellant referred to what was said by Dixon C.J. and Fullagar J in Svanosio v McNamara [1956] HCA 55; (1956) 96 CLR 186 at 200 (a case of attempted rescission, after conveyance, for misdescription of the land on which stood the subject licensed premises) as to the purchaser dispensing with an identification survey at the purchaser's own risk. But the failure there was in obtaining a survey between contract and completion. Further, what would have been shown here by such a survey if obtained before contract? At best, it would have revealed that the land required for the driveway was then public land, something not inconsistent with the respondents' impression that the driveway would form part of the common property of the development.

36. In my view, the appellant has not shown any reason for departing from the findings of the primary Judge as to the engagement by the appellant in conduct contravening s. 52. I should add that there is no challenge to his Honour's further finding that in entering the contract the respondents placed the necessary reliance upon the misleading conduct of the appellant.

37. There remains the complaint that there was no relevant loss or damage to attract the making of orders under sub-s. 87(1A).

38. Section 82 provides for the recovery in an action of the amount of loss or damage. On the other hand, the powers of the Court under sub-s. 87(1A) are expressed in terms that are permissive rather than mandatory. The appellant submitted that the exercise of discretion by the primary Judge miscarried because his Honour wrongly acted on the footing that the appellant's conduct had been fraudulent. The presence or absence of fraud is a relevant factor in the exercise of powers under this provision: Munchies Management Pty Ltd v Belperio [1988] FCA 413; (1988) 84 ALR 700 at 714. The passage in question in the reasons of the primary Judge is as follows:-

"In all the circumstances, in my opinion, (the respondents)

are entitled to relief pursuant to s. 87 of the Act.

Demagogue deliberately chose to be silent about the question

of the road licence in circumstances where its product was

towards the top end of the range and where prospective

purchasers were entitled to be told what in truth they were

buying." (Emphasis supplied.)

39. No case of common law fraud was pleaded and none found. But the evidence to which I have referred provides ample ground for inferring (i) that both at the time the draft contract was shown to the respondents and at the time of their execution of the contract the appellant was well aware of the need for a Road Licence to enable construction of a driveway to provide a practicable vehicular access to the Picture Point Terraces development and (ii) that the silence in the contract on this matter was not the result of inadvertence to the problem on the part of the appellant. The primary Judge's remarks should be understood in the light of his earlier finding as to contravention, in all the circumstances, of s. 52. In this setting, the use by the primary Judge of the term "deliberately chose to be silent" is not open to objection. It indicates that the disclosure to the respondents which the appellant refrained from making was otherwise than inadvertent, and thus "conduct" within the terms of sub-s. 4(2).

40. Where a contract is entered into as a result of fraudulent misrepresentation by the defendant and the plaintiff affirms the contract, an action in deceit requires proof of the difference in value between what was paid and what was acquired. Subsequent depreciation in value ordinarily should not be taken into account in determining the real value at the time of the purchase: Gould v Vaggelas (1985) 157 CLR 215 at 220-222.

41. However, in the present case, the purchasers did not affirm the contract and seek damages under s. 82, by analogy with damages in deceit. The burden of their case is that they should not be held to the contract because, as the primary Judge found, they would not have entered it but for the conduct of the appellant in contravention of s. 52.

42. Section 4K of the Act states:-

"4K. In this Act:

(a) a reference to loss or damage, other than a reference

to the amount of any loss or damage, includes a

reference to injury; and

(b) a reference to the amount of any loss or damage

includes a reference to damages in respect of an

injury."

43. The phrase "loss or damage" appears in s. 82 and in various sub-sections of s. 87, particularly sub-ss. (1) and (1A). In my view, on this appeal nothing turns upon the circumstance that in a given case sub-s. (1) may be attracted only by reason of the making of an application under s. 82 to recover the amount of the loss or damage suffered by conduct in contravention in a provision of Part IV or V.

44. Section 82 is concerned with the recovery of "the amount of the loss or damage" suffered by conduct in contravention of the Act. Sub-s. 87(1) requires that the Court consider that its order will compensate "in whole or in part" for the loss or damage or will prevent or reduce the loss or damage. Sub-s. 87(1A) requires that the orders concerned will concerned will compensate in whole or in part for the loss or damage suffered "or likely to be suffered", or will "prevent or reduce the loss or damage suffered, or likely to be suffered . . .".

45. Thus, whilst s. 82 is concerned with the recovery of an amount representing the loss or damage, s. 87 is concerned with compensation, whether in whole or in part, for loss or damage and with the reduction of loss or damage, and with the prevention of loss or damage which is likely to be suffered. In the phrase "likely to be suffered", the word "likely" speaks of a "real chance or possibility": State of Western Australia v Wardley Australia Limited [1991] FCA 314; (1990) 30 FCR 245 at 261.

46. One significant distinction between ss. 82 and 87 is the quia timet operation of s. 87. On the appeal to the High Court in Wardley Australia Limited v The State of Western Australia (28 October 1992, unrep) Mason C.J., Dawson, Gaurdron and McHugh JJ. said (p 9 of the Print):-

"The Act draws a clear distinction in Pt VI between loss or

damage which may be recovered under s. 82 and the likelihood

of loss of damage which may be prevented, or, if not

prevented, reduced by one of the remedies under s. 87."

Deane J said (p 27) that the statute in s. 87 expressly distinguishes between the actual suffering of loss or damage and the likelihood (or contingency) that loss or damage will be suffered in the future. This emphasises that the phrase "the loss or damage", at least in s. 87, may be concerned with more than pecuniary recovery as understood in the law of damages in tort; tort law postulates the commission, already accomplished, of a wrong: Leeds Industrial Co-operative Society Limited v Slack (1924) AC 851 at 859, 868-9.

47. Further, unlike the position at general law with the administration of the equitable remedy of rescission of contracts, orders under s. 87 may be made not only against parties to the contract but also against third parties, being persons involved (within the meaning of s. 75B) in the contravention as a result of which the plaintiff entered into the contract: Lezam Pty Ltd v Seabridge Australia Pty Ltd supra at 304, Munchies Management Pty Ltd v Belperio supra at 714.

48. The respondents complain that they entered into a contract as the result of reliance upon conduct which contravened s. 52. Why should they not be described as having suffered loss or damage, within the meaning of s. 87, by that very reliance and entry into legal relations from which they otherwise would have abstained? If that contract be declared void ab initio as provided for in sub-s. 87(2)(a), will that not reduce this loss or damage?

49. It may well be that in a given case the contract is not financially disadvantageous to the complainant. But, at least in Australia, if a contract is rescinded in equity for some vitiating factor in its formation, it is not sufficient for the defendant to show that the transaction to which the complainant was improperly induced to assent, after all, contained terms which, viewed objectively, were not manifestly disadvantageous so that, the complainant should freely have accepted them. The complainant is entitled to say that but for the unconscientious conduct of the defendant he or she would not have entered into any transaction with the defendant; see Cope "Undue Influence and Alleged Manifestly Disadvantageous Transactions" (1986) 60 ALJ 87 at 96 - 97, where the High Court authorities are discussed, and cf Bank of Credit and Commerce International v Aboody (1990) 1 QB 923.

50. It would be an odd result if s. 87 and s. 4K were to be read in a contrary sense by giving too narrow a meaning to the phrase "loss or damage". I agree with what is said on this aspect of the case by Cooper J. I agree also with the discussion by the Chief Justice of the relevant statutory provisions, in particular s. 75A and those subsections of s. 87 dealing with contravention of s. 52A, and with what his Honour says as to their significance in construing the phrase "loss or damage".

51. Further, even if some pecuniary detriment (further propounded as a "real chance" or as presently existing) is required in all s. 87 cases, that requirement is present here.

52. If the respondents' claim to relief under s. 87 fails and the contract remains on foot, they have to answer, on this appeal, the claim against them for specific performance. If an order for specific performance were made against them it would require them to pay the contract price on what is now a fallen market. That would not provide a sufficient answer to the claim for specific performance. Movement in the value of the land since the date of the contract is not, in itself, a material consideration in formulation of a defence of hardship: Fitzgerald v Masters [1956] HCA 53; (1956) 95 CLR 420 at 433.

53. Nevertheless, in my view, the consequences of the administration of an order of specific performance does, within the meaning of s. 87, entail a real chance or possibility of the suffering by the respondents of loss or damage even within the narrower reading of that phrase in s. 87. Further, it would be accurate to say that the likelihood of the respondents suffering that loss or damage is something which is caused by and flows from the contravention of s. 52. Specific performance is sought by the appellant of the contract into which the respondents would not have entered but for the appellant's contravention.

54. As I have indicated, the respondents resist a decree of specific performance on various discretionary grounds. It is not necessary to determine whether such a defence is made out. It is sufficient to say that the defence is substantial and not colourable. Were the defence to succeed, the appellant would be left an inquiry as to damages for breach of contract by the respondents. The exposure of the respondents on such an inquiry would be in a significant order. Again, there is a real chance or possibility of the suffering by the respondents of loss or damage and again, in my view, that likelihood is sufficiently connected with the contravention of the Act by the appellant.

55. I conclude that the relief under s. 87 was properly ordered by the primary Judge. I agree with what is said by the Chief Justice as to the submission that his Honour's discretion miscarried.

56. As I have indicated, the primary Judge acceded to the submission of the parties that the inquiry as to damages should be stood over pending the outcome of the other issues (Appeal Book 438, 448-9). His Honour preferred to act under s. 87 on the footing that the need for the Road Licence, its conditions and annual fee, was a factor which adversely affected the value of a unit at Picture Point Terraces "in a non-trivial way". While the quantification of the loss and damage suffered by the respondents was left uncertain, these circumstances, in a not immaterial way, reduced the attractiveness and value of the units in the development. But, as I have indicated, in my view it is sufficient to support the operation of s. 87 in the present case that whether or not the real value of the property at the time of purchase was diminished in this way, at the trial there was sufficient likelihood of the suffering of loss or damage by the administration of the common law and equitable remedies on the contract sought against the respondents by the appellant.

57. The primary Judge was unimpressed by the evidence of a valuer called by the appellant that the value of each unit in the development would be the same if the land on which the access driveway was constructed was part of the common property instead of being land the subject of the Road Licence. There was debate on the appeal as to whether if he rejected that part of the valuer's evidence his Honour had material before him on which he could reach his conclusion on this point.

58. In the circumstances, it is unnecessary to resolve this dispute. However, it should be observed that the valuer did say that he had been unable to find a similar situation which had occurred on the Gold Coast, the Sunshine Coast and in Brisbane. He accepted that having access by means of Road Licence rather than by the common property owned by the body corporate would materially affect the decision of a purchaser on whether to buy into a block of units on such a development. He also agreed that it was a reasonable assumption that some purchasers, in such a case, might decide not to be involved. That was sufficient footing for his Honour to reach the conclusion that he did.

59. I should refer further to Munchies Management Pty Ltd v Belperio supra, a case to which reference was made in some detail in the course of argument on the appeal.

60. The principal relevance of that decision to the present case is the illustration it gives of the elasticity of the phrase "loss or damage" in s. 87 so as to accommodate a wide range of circumstances. The purchasers in that case complained that they had entered a contract for the acquisition of a business in reliance upon such fraudulent misrepresentations, making of which contravened s. 52. There was no evidence of the true value of the business, so the ground was not laid for an assessment of damages under s. 82 by analogy to the measure of damages in deceit. However, the Full Court held that in the events that had happened the right to rescission had not been lost. It was from a consideration of the position that would obtain from administration of the remedy of rescission (with ancillary orders) that appropriate guidance was to be derived for the granting relief under the Act. The authorities showed that in cases of rescission for fraudulent, rather than innocent, misrepresentation the vendor must indemnify the purchaser for detriments suffered as a direct consequence of the fraud. The reasoning of the Full Court in that regard has since been accepted by the New South Wales Court of Appeal in Demetrios v Gikas Dry Cleaning Industries Pty Ltd (1991) 22 NSWLR 561 at 573.

61. The Full Court said (at 713) that an order for accounting and payment of money made as part of the process of rescission might be seen as recovery literally of the amount of loss or damage in the meaning of s. 82, giving "recover" the sense of regaining through restitution a position lost by the conduct of which complaint is made. The Full Court went on to decide (at 713-4) that, in any event, such orders might properly be considered as reducing the loss or damage within the meaning of s. 87. In particular, the Full Court held (at 716) that the purchasers were, inter alia, entitled to an appropriate indemnity for trading losses incurred before rescission and after rescission, whilst the business was maintained for the benefit of the vendor.

62. Finally, I should refer to cl. 14 of the contract. This provided as follows:-

"14.1 The Purchaser acknowledges and agrees that save

as are expressly set out herein no warranties or

representations have been given or made by the

Vendor or by the Vendor's servants or agents and

any warranties and conditions other than those

expressed in writing herein are hereby negatived

and it is agreed that this sale is subject to no

conditions or representations other than those

expressed herein in writing and the Purchaser

further acknowledges that the Purchaser has

relied solely on the Purchaser's own skill and

judgment in entering into this Contract.

14.2 Without limiting the generality of the

provisions of subclause 14.1 of this Clause it

is agreed and declared that the agreements

provisions terms and conditions contained in

this Contract comprise the whole (of) the

bargain between the parties and no further or

other agreements provisions terms or conditions

exist or apply."

Whatever may have been the effect of this provision upon the rights of the respondents otherwise arising at general law, it could not, of itself, be determinative of the issue of contravention of s. 52: Lezam Pty Ltd v Seabridge Australia Pty Ltd supra at 312-3.

COOPER J. I have had the advantage of reading the reasons of Gummow J. I agree with His Honour's reasons and the orders proposed by him.

2. Having regard to the arguments advanced as to the meaning of the term "loss or damage" in section 87(1) of the Trade Practices Act ("the Act") it is appropriate that I express my opinion on that matter.

3. Section 87(1) so far as is presently relevant provides:-

"...where in a proceeding...the Court finds that

a person who is party to the proceeding has

suffered, or is likely to suffer, loss or damage

by conduct of another person...the Court may

make such order or orders as it thinks

appropriate against the person who was involved

in the contravention...if the Court considers

that the order or orders concerned will

compensate the firstnamed person in whole or in

part for the loss or damage or will prevent or

reduce the loss or damage".

4. The various orders available to the Court are set out in section 87(2).

5. Section 87 provides both the source of the Court's power to provide a remedy and the remedy itself. It is therefore important to distinguish clearly between the need to establish the factual circumstances necessary to enliven the power of the Court to grant relief and the circumstances which are relevant to the nature of the relief which it is appropriate to grant.

6. The circumstance in section 87(1) which empowers the Court to grant relief is a finding that a party "has suffered or is likely to suffer loss or damage by the conduct of another person". That is a question of fact.

7. The words "loss or damage" where they appear in section 87(1) are to be construed by the application of the ordinary canons of statutory construction. This requires giving the words their ordinary meaning in the context in which they appear.

8. The ordinary meaning of loss is "detriment or disadvantage resulting from deprivation or change of conditions" (Shorter Oxford English Dictionary 3rd Ed. (Revised) 1990 at 1241). "Damage" is defined as "1. Loss or detriment caused by hurt or injury affecting estate, condition or circumstances (Arch.) 2. Injury, harm". (Shorter Oxford English Dictionary at 485).

9. There are two matters within the context of section 87(1) which colour the meaning of the phrase in the section. The first is that the loss or damage has been or is likely to be caused by conduct in contravention of the Act. The second is that any order made is to compensate for the loss or damage. However, the compensation is not limited to the payment of a money sum or damages as an examination of section 87(2) discloses. Nor is there anything in section 87(2) which would limit the loss or damage suffered or likely to be suffered to pecuniary loss or damage. In particular, sub-sections 87(2)(a) (declaring a contract or collateral agreement to be void) and 87(2)(ba) (refusing to enforce any or all provisions of a contract) take as their point of focus the denial of the benefit of a contract to a person whose proscribed conduct has caused loss or damage to the other party. Such an order has the consequential effect of releasing the innocent party from the obligations imposed by the contract. In the context of providing compensation it is the obligations imposed by such a contract which is the loss or damage which the order seeks to redress.

10. In my opinion "loss or damage" in section 87(1) means no more than the disadvantage which is suffered by a person as the result of the act or default of another (Halsburys Laws of England (4th Ed.) Vol. 12 para. 1102) in the circumstances provided for in the section.

11. The phrase "loss or damage" in section 87(1) does not involve any concept of quantum or assessment of damages (see Barneys Blu-Crete Pty. Ltd. v. Australian Workers Union [1979] FCA 89; (1979) 43 FLR 463 at 473 where Northrop J. expressed a similar view as to the use of the same phrase in section 45D(1)(a) of the Act). This is to be contrasted with the context of the phrase in section 82 where it is "the amount of the loss or damage" which is recoverable by action. For the purpose of section 82 it is the quantum or assessment of the loss or damage suffered in monetary terms which must be demonstrated. The rules as to the assessment of damages or the measure of damages in an action for deceit are relevant to the question of loss or damage under section 82. However those rules are not relevant to the meaning of the phrase in section 87(1).

12. The distinction between "loss or damage" and "the amount of the loss or damage" is reflected in the terms of section 4K of the Act. The section provides:-

"In this Act-

(a) a reference to loss or damage, other than

a reference to the amount of any loss or

damage, includes a reference to injury; and

(b) a reference to the amount of any loss or

damage includes a reference to damages in

respect of an injury".

13. There are practical reasons why this should be so. The prima facie rule that the measure of damage in deceit is the difference between the value of the property and the price paid is inappropriate where the contract is not completed (Myers v. Transpacific Pastoral Co. Pty. Ltd. (1986) 8 ATPR 40-673 at 47,424). Where the contract remains unrescinded the costs associated with the conveyance of the property are costs arising out of the contract and of performing the obligations imposed thereby. Until the contract is rescinded such costs and expenses do not take on the character of costs and expenses thrown away and as such recoverable loss and damage under the general law. The Court is not restricted in granting a remedy under section 87 by the limitations under the general law of a party's right to rescind for breach of contract or misrepresentation (Henjo Investments Pty. Ltd. v. Collins Marrickville Pty. Ltd. [1988] FCA 40; (1988) 79 ALR 83 at 102,109). Likewise the limitations under the general law as to the assessment of damages and the measure of damage ought not be imported into a definition of "loss or damage" in section 87 to limit the category of actionable loss or damage.

14. To adopt a definition of "loss or damage" for the purpose of section 87(1) which includes the disadvantage of incurring contractual obligations that would not have been incurred but for the conduct complained of does not mean that the granting of a proper discretionary remedy necessarily leads to the setting aside of such a contract or to a refusal to enforce it according to its terms. That result will always depend upon the particular circumstances which exist when the occasion calls for an exercise of the powers under section 87 of the Act. Henjo Investments Pty. Ltd. v. Collins Marrickville Pty. Ltd. is an example of a case where such a result was inappropriate. However, one of the circumstances that will be considered by the Court, amongst others, is the object behind subsections 87(2)(a) and (ba) of the Act. That object mirrors the approach of equity in the case of equitable fraud or unconscionability. The granting of equitable relief in those circumstances is not "to extend sympathetic benevolence to a victim of undeserved misfortune" but "one which denies to those who have acted unconscientiously the fruits of their wrongdoing" (per Kitto J. in Bromley v. Ryan [1956] HCA 81; (1956) 99 CLR 362 at 429; see also Commercial Bank of Australia Ltd. v. Amadio (1982 - [1983] HCA 14; 1983) 151 CLR 447 at 475).

Units and Group Titles Act 1980

Re Demagogue Pty Ltd v Nicholas Ramensky and Gisela Elizabeth Ramensky [1992] FCA 557;

At a glance

Court

Decision date

Before

Source

Judgment (124 paragraphs)

Re Demagogue Pty Ltd v Nicholas Ramensky and Gisela Elizabeth Ramensky [1992] FCA 557; (1992) 110 ALR 608 (1992) 39 FCR 31 (20 November 1992)

Parties

Legislation Cited (3)

Cases Cited (27)