Federal Court of Australia|1992-05-13|Before: Mr J, Beaumont J

Re Lezam Pty Limited and Jlw (Nsw) Pty Limited v Seabridge Australia Pty Limited; Jlw (Nsw) and Lezam [1992] FCA 206; (1992) 14 Atpr 41-171 (1992) 107 ALR 291 (13 May 1992)

And: SEABRIDGE AUSTRALIA PTY. LIMITED; JLW (NSW) and LEZAM

Trade Practices (consumer protection) - lease of city office building - statements made by estate agent on behalf of lessor as to area to be let - statements made in context of rental to be charged per square metre or square foot of space - statements made in letter containing the statement "subject to survey" and a disclaimer clause - lease entered into without reference to the rental having been calculated according to the area to be let - discovery by lessee after rental review that area substantially less than that stated orally and in correspondence - whether lessor and estate agent engaged in misleading or deceptive conduct - significance of the words "subject to survey" and disclaimer clause - whether misleading or deceptive conduct occasioned lessee loss or damage - cross-claims brought by lessor and estate agent against each other - whether agent entitled to indemnity from principal for any amount for which it liable to lessor - whether agent had acted negligently - whether negligence on part of agent would avoid the lessor's liability under an indemnity.

Counsel for the Appellant : Mr D.F. Jackson, QC with

Solicitors for the Appellant : Landerer and Co.

Seabridge Australia Pty. Limited : Mr R.J. Ellicott, QC

with Mr D.M. Yates

Solicitors for the Respondent,

Mr G.C. Lindsay

Solicitors for the Respondent,

Seabridge Australia Pty. Limited : Mr R.J. Ellicott, QC with

The Court orders that:-

1. The appeal be allowed in part.

2. The orders made by Beaumont J. on 12 April 1991 and 6 June 1991 be set

3. There be a new trial:-

(a) (insofar as the appeal concerns the orders made in favour of

the first respondent against the appellant), of the

questions of whether the first respondent suffered loss or

damage as a consequence of the misleading or deceptive

conduct engaged in by the appellant and of the relief (if

any) to which the first respondent is entitled from the

appellant.

(b) of the cross-claim brought by the appellant against the

second respondent.

4. The costs of the proceedings at first instance are to be in the

5. The first respondent pay to the appellant one quarter of the costs of the appeal brought by the appellant against the orders made in favour of the first respondent.

6. There be no order as to the costs of the appeal brought by the appellant in relation to the cross-claim.

The Court orders that:-

1. The appeal be allowed in part.

2. The orders made by Beaumont J. on 12 April 1991 and 6 June 1991 be set

3. There be a new trial:-

(a) (insofar as the appeal concerns the orders made in favour of

the first respondent against the appellant), of the

questions of whether the first respondent suffered loss or

damage as a consequence of the misleading or deceptive

conduct engaged in by the appellant and of the relief (if

any) to which the first respondent is entitled from the

appellant.

(b) of the cross-claim brought by the appellant against the

second respondent.

4. The costs of the proceedings at first instance are to be in the

5. The first respondent pay to the appellant one quarter of the costs of the appeal brought by the appellant against the orders made in favour of the first respondent.

6. There be no order as to the costs of the appeal brought by the appellant in relation to the cross-claim.

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

These appeals (brought by leave because of some uncertainty as to the date of the Court's order) from a judgment of a judge of this Court (Beaumont J.) concern a lease of commercial premises entered into on 16 December 1986. The lessor was Lezam Pty. Limited, the appellant in the first appeal and the second respondent in the second appeal. I shall refer to it hereafter as "Lezam". The lessee was a company, Seabridge Australia Pty. Limited. It is the first respondent in each of the appeals and I shall refer to it hereafter as "Seabridge". The lease was negotiated by an estate agent, JLW (NSW) Pty. Limited (hereafter referred to as "JLW"). It is the second respondent in the first of the appeals and the appellant in the second.

2. The lease was for a term commencing on 1 January 1987 and terminating on 31 December 1992. An option for renewal was provided for but it is not relevant to the matters in dispute between the parties. The premises which were leased were situated at 373-377 Kent Street, Sydney. The lease provided that Lezam leased to Seabridge "the land above described (a reference to the title) and known as 373-377 Kent Street, Sydney." The rental payable was $455,057.86 per year subject to review as provided for in clause 7. There was no reference in the lease to the floor area of the building which was the subject of the lease.

3. In the proceedings below Seabridge was the applicant for relief against both Lezam and JLW. It sued the two companies for damages for breach of s.52 of the Trade Practices Act 1974 ("the Act") because it claimed that it had been misled into thinking that the total floor area which was to be leased to it was greater than was in fact the case. It succeeded before his Honour who gave it relief against both Lezam and JLW under s.87 of the Act. Both Lezam and JLW have appealed from the orders made against them. Additionally, both Lezam and JLW have appealed from an order made by his Honour the effect of which is said to be that each of Lezam and JLW contribute half of the amount ordered to be paid to Seabridge. Each appellant claims a full indemnity from the other for any amount which it is obliged to pay to Seabridge.

4. The facts of the matter were not in substantial dispute at the trial. The account of them which I am about to give comes substantially from the judgment of the primary Judge. The principal evidence given on behalf of Seabridge was that of Mr Kent, its General Manager. He dealt with Mr Glenny who was then an associate director of JLW. In November 1986 Mr Glenny told Mr Kent that the premises were available for lease. On 19 November 1986 the two inspected the premises and discussed details. There is no substantial difference between the evidence of the two about this and other conversations. Mr Kent's version was as follows:-

"Kent: 'What is the available area?'

Mr Glenny then gave me a figure expressed in terms of

square metres.

Kent: 'What is that in terms of square feet?'

Glenny: 'About 24,000 square feet.'

Kent: 'How is that broken down in terms of floor

size?'

Glenny: 'Roughly speaking that breaks down in four

upper floors at 5,000 square feet each and

the ground floor at 4,000 square feet.'

Kent: 'What's the rental rate?'

Mr Glenny then gave me a figure expressed in terms of

dollars per square metre per annum for the ground floor and

for the upper floors.

Kent: 'That's about $24.00 per square foot for

the ground floor and $18.00 per square foot

for the others? That's too much. We would

be looking more in the order of $17.00 to

$17.50 per square foot.'

Glenny: 'Look they won't come down in terms of

rental but they might be prepared to throw

in the naming rights at no cost.'

Kent: 'What is the value of the naming rights.'

Glenny: 'About $20,000 per annum.'

Kent: 'We're not really interested in naming

rights. We would rather have a lower

rental.'

Glenny: 'I'll go and speak to the Pongrasses.'"

The reference to "the Pongrasses" is a reference to Mr and Mrs Pongrass who were described by his Honour as the controllers of Lezam.

5. On 21 November 1986 Mr Kent reported in writing to the directors of Seabridge. He gave some initial details of the proposed lease. Amongst other things he said that the rental rate was $18 per square foot for floors other than the ground floor which was being offered at $24 per square foot. He said that the ground floor area was approximately 3,000 square feet and that each of the remaining floors had an area of 5,000 square feet.

6. On 24 November 1986 some of the directors of Seabridge together with Mr Kent and Mr Glenny inspected the premises. After the inspection Mr Kent wrote to Mr Glenny making a counter offer. The letter mentioned the term of the lease, the rental rates for the ground floor and the upper floors expressed as a figure per square foot per annum and the lease commencement date. The letter also said, "Prior to making a final commitment, we would request that an up to date floor plan be provided for all floors, together with electrical and air conditioning plans."

7. On 27 November Mr Kent and Mr Glenny had a telephone conversation in which Mr Glenny told Mr Kent that the owners would not "budge" on the rental. Mr Glenny then told Mr Kent what the owners were prepared to do. He quoted a rental rate per square foot per annum. A term of six years with two two year options was offered. The lease would commence on 1 January 1987 and there would be a rent free period of 2 1/2 months. There were some other terms to which I need not refer. Mr Glenny said that he wished to impress on Mr Kent the urgency of the situation. He said that the owners were going overseas on 16 December and he wanted to finalise the agreement before then. Mr Kent said that he would get back to him.

8. On 28 November 1986 Mr Kent and Mr Glenny spoke again on the telephone. Mr Kent told Mr Glenny that the Seabridge directors were not happy about the rental rate but thought they would accept it if there were a slight reduction in the rental rate for the ground floor. Mr Glenny said that he would endeavour to get the owners to agree to $255 per square metre for the ground floor. Mr Glenny said that it would assist him if Mr Kent could put in a letter of intent as soon as possible. Mr Kent said that he would organise it straight away but emphasised that the final acceptance of the lease was subject to the landlord producing a survey.

9. There is some difference between Mr Kent's version of this conversation and the version given by Mr Glenny. According to Mr Glenny, Mr Kent said that he had spoken with the directors who were prepared to accept the rental proposed by Mr Kent as well as the other terms about which they had spoken. But Mr Kent added, "However, entering the lease is conditional on being provided with a copy of a survey of the premises specifying the precise areas of the floors." Mr Glenny accepted this and said that he would ask the Pongrasses to have the premises surveyed "so that the deal can go ahead."

10. His Honour thought that nothing turned on the difference between the two versions of the conversation and made no finding about which version was to be preferred. I agree that the difference is immaterial. It should be noted, however, that there is a difference between the evidence of Mr Glenny and that of Mrs Pongrass concerning the terms of a conversation which they had about this matter. Mr Glenny said that he told Mrs Pongrass that the agreement which he reported to her was "subject to a survey of the premises being provided" to Seabridge. Mrs Pongrass said that the substance of what Mr Glenny told her was that the agreement was subject to a survey of the premises. She added that at no time did Mr Glenny say to her that Lezam was to undertake the survey. Be that as it may, on 1 December 1986, Mr Glenny wrote a letter to Mr Pongrass in which he said:-

"Seabridge have requested that the floor areas be surveyed

subject to finally agreeing the rental, and I would be

grateful if this could be arranged as quickly as possible."

11. In the meantime, on 28 November 1986, Mr Kent had written to Mr Glenny a letter which was described as a letter of intent. The letter confirmed the telephone conversation the two had had that day and Seabridge's intention to proceed with the lease. Mr Kent requested that Lezam's solicitors be instructed to prepare a lease on the basis of terms which he set out. They were as follows:-

"(a) Rental rates - Ground floor $23.75 per

sq.ft. per annum

- Floors 1 - 4 $18.00 per

sq.ft. per annum

(b) Lease term - Six years with a further

option of 2 x 2 years

(c) Lease commencement

date - 1st January 1987 with a rent

free period of 2-1/2 months."

12. Mr Glenny replied by letter dated 1 December 1986 which enclosed a document described as "Itemised Lease Schedule". Under the heading, "Description of Premises", it said:-

"Floors and Areas : Ground Floor - 371.0m

(Subject to Survey) Floors 1-4 - 464.5m per floor

Total Area 2,229.0m "

13. The schedule then gave particulars of the lessor and lessee, the date of commencement of the lease, its term and the option to renew. It also specified the rent to be paid. Under the heading "Rental", it said:-

"Rental:$455,057 per annum Ground Floor $255 psmpa

Floors 1-4 $194 psmpa"

The letters "psmpa" stand for "per square metre per annum".

14. After he received the letter, Mr Kent added in his own handwriting the figures $23.70 and $18.03 respectively after the figures $255 psmpa and $194 psmpa. It is common ground that Mr Kent's calculations referred to rent per square foot per annum and were correct.

15. The itemised lease schedule went on to mention that rent reviews were to be made every two years. It dealt with some other matters but it is unnecessary to refer to them. The schedule ran over two pages. Each page was headed with the name under which JLW carries on business, Jones Lang Wootton. At the bottom of each page in print which is quite small, but nevertheless reasonably legible, were the following words:-

"Jones Lang Wootton for themselves and the lessors/vendors

of this property whose agents they are, give notice that:

(i) The particulars are set out as a general

outline only for the guidance of lessees/

purchasers and do not constitute an offer

or contract;

(ii) All descriptions, dimensions, references 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 tenant/purchaser should not rely

on them as statements or representations of

fact but must satisfy themselves by inspection

or otherwise as to the correctness of each of

them;

(iii) No person in the employ of Jones Lang Wootton

has any authority to make or give any

representation or warranty whatsoever in relation

to this property."

16. Mr Kent said that he read the Schedule. He observed that the areas quoted in it were stated to be "subject to survey as I had requested." He added:-

"I understood that the Second Respondent, Lezam Pty.

Limited, or JLW would be checking to ensure that the areas

quoted in the Itemised Lease Schedule were accurate. I had

no reason to think that the figures I had been quoted were

inaccurate and I accepted that the areas which Mr Glenny

had set forth in the Itemised Lease Schedule were accurate."

17. Mr Kent did not say what the basis of his understanding that Lezam or JLW would be checking the areas was. There is no evidence of any communication of this understanding to Mr Glenny. Mr Kent was not cross-examined about the matter nor was Mr Glenny.

18. The lease was executed on 16 December 1986. No survey was produced to Seabridge either before the lease was executed or at the time of its execution. Mr Kent's explanation for not insisting on its production was as follows:-

"At the time the lease was executed by Seabridge I relied

upon the rental referred to in the lease as having being

calculated in accordance with the details appearing in the

Itemised Lease Schedule. As stated I relied upon the floor

areas set forth in the Itemised Lease Schedule as being

accurate. Seabridge had received no information to the

contrary from either JLW or Lezam and because the lease had

to be finalised quickly in view of Seabridge's need to

secure appropriate premises and Mr Pongrass's departure

overseas, I did not press to sight a survey. Seabridge

would not have executed the lease in the form in which it

was executed and providing for the rental therein stated had

I believed the floor areas stated to be other than as stated

in the Itemised Lease Schedule and as understood by me as I

have described. It was on this basis that I accepted the

total rental referred to in the lease as having been

calculated."

Mr Kent was not cross-examined about these various statements.

19. In October 1988, during negotiations for a review of the rent payable under the lease as from 1 January 1989, Mr Kent became aware that the total net lettable area of the premises was less than the area mentioned in the itemised lease schedule. It was discovered that the total lettable area was 1969.42 metres rather than the 2,229 square metres stated in the schedule. The allegations concerning the net lettable area were made in para. 13 of Seabridge's statement of claim. His Honour noted that, during the course of the hearing, Seabridge amended its pleading in respect of the statements of the area of the ground floor. Originally Seabridge alleged that the area of the ground floor was 346.15 square metres and that the area of the third floor was 398.69 square metres. These figures were replaced by figures of 376.95 square metres and 396.69 square metres respectively. Nothing turns on this.

20. Counsel for the appellants submitted that, if the schedule were to be construed as referring to net lettable areas, it would follow that the expression was of uncertain meaning because there was more than one way of arriving at the result. The consequence was that a different result would be achieved depending on which method was selected. I shall come to that submission in due course.

21. The first submission with which I deal concerns the significance to be attached to the words "subject to survey" in the itemised lease schedule. His Honour concluded that the parties intended their oral discussions with respect to the area to be leased to be definitively stated in the letter written by JLW on 1 December 1986 and the schedule attached thereto to the exclusion of what might have passed between them informally earlier. It followed that their discussions could not be relied upon by Seabridge, or presumably Lezam or JLW. His Honour's reasons for putting aside the conversations appear in the following paragraph of his judgment. He said ((1991) [1991] FCA 134; 29 FCR 415 at 421):-

"Turning first to the conversations, I have difficulty in

accepting that oral statements of this kind, in the present

context, can be relied upon to establish a contravention of

s.52. As McLelland J. pointed out in Johnson Matthey Ltd.

v. AC Rochester Overseas Corp. (Supreme Court of New South

Wales, 13 December 1990, unreported), there are reasons of

both principle and policy why the courts should not permit

the stability of commercial relationships and dealings to be

threatened by reliance upon oral statements, said to found

an estoppel, made in the course of negotiating a formal

contract. I agree. In my opinion, notwithstanding that we

are here concerned with a statutory cause of action, this

reasoning may be applied, by analogy in the present case.

The courts should exercise caution in invoking provisions

such as s.52 based upon things said, or not said, in oral

discussion in the course of negotiations which lead to a

formal document or agreement being drawn up. Much will

depend upon the subject matter of the alleged

representation. If the oral statement bears upon a matter

which has been dealt with specifically by the parties in a

formal document or contract, the courts, in my view, should

ordinarily be reluctant to interfere by setting aside or

altering the formal instrument or contract in the absence of

proceedings for rectification of the written instrument

purporting to evidence the real agreement. Where, however,

an oral statement bears upon a subject not dealt with in the

formal contract, the position may be different."

22. With respect, I do not think that one can lay down any general rule which determines the circumstances in which evidence of conversations had by parties in the course of their negotiations for a contract should be admitted or used by the Court. Every case will depend upon its own facts and circumstances. Actions for breach of s.52 of the Act do not involve an applicant for relief in establishing that a person making representations made them knowing that they were false. Innocent misrepresentation is actionable; but, subject to that important distinction, there is a marked similarity between an action under s.52 of the Act and an action for deceit. In actions for deceit the Court has invariably admitted evidence of parties' conversations about the subject matter at issue as well as of letters and other documents passing between them before the contract is signed. If they contain statements which are found to be representations inducing the contract, they will be relevant. Obviously the evidence needs to be looked at as a whole and put in context. There may be cases in which it will be found that later statements, whether written or oral, replace those made earlier or affect or modify them in some way. Very often it will be a letter which is the starting point and a conversation had later which modifies or substantially affects what was said in the letter.

23. I cannot therefore agree with the purport of what his Honour has said in the paragraph which I have quoted from his judgment. Of course, if all that his Honour intended to say was that the weighing up of evidence of representations said to have been made in the course of conversations often presents great difficulty with the consequence that the Court should examine the evidence with a degree of care, I have no problem. That is clearly the case.

24. In the present case it would not be right to put aside the conversations in their entirety. True it is that the schedule sent with the letter of 1 December 1986 was the culmination of the parties' negotiations but I think it has to be read in the light of them and not read to the exclusion of them. I find it difficult to draw the conclusion that the parties intended their oral discussions with respect to the area to be leased to be definitively stated in the schedule to the exclusion of what might have passed between them earlier.

25. It is clear that rental per square metre or square foot was always of importance to Mr Kent. One of the first questions which Mr Kent asked Mr Glenny was what was the available area of the building. Mr Glenny said that it was about 24,000 square feet and then gave an approximate breakdown of the areas of the five floors which were available. Mr Kent said that that meant that the rental was $24 per square foot for the ground floor and $18 per square foot for the others. He said that it was too much and mentioned some lower figures. Thus from the outset Mr Kent was concerned about the rental rate per square foot of space. He was looking at cost and drawing his conclusions upon the basis of how much each square metre or square foot of space would cost Seabridge.

26. There followed the letter of 21 November 1986 in which the figures of $18 and $24 per square foot were maintained and Mr Kent's counter offer made in writing on 24 November 1986 of a rental rate based on lower figures per square foot. On 28 November 1986, as the parties came closer to agreement, Mr Kent and Mr Glenny were still talking about rates of rental per square metre. There then comes the critical conversation about the survey. Mr Kent either said that final acceptance of the lease was subject to the production of a survey or that entering the lease was conditional on Seabridge being provided with a copy of a survey of the premises specifying the precise areas of the floors. Mr Kent's letter of intent sent on 28 November 1986 maintained reference to rental rates for each square foot of space. It did not mention a survey, but the itemised lease schedule sent on 1 December 1986, although it specified the areas of the five floors and rental rates per square metre for them, used the expression "subject to survey". That was obviously to give effect to the discussion between Mr Kent and Mr Glenny on 28 November 1986.

27. The statement of the areas in the schedule was thus a qualified one. The statement, and indeed the schedule itself, must be read as a whole. Furthermore, the statements made in the schedule, particularly the words "subject to survey", must be understood and given meaning in the light of the conversation about the survey on 28 November 1986. That serves to explain why the statement appears in the schedule. As I have said, it was intended to give effect to what Mr Kent had requested, namely, the production of a survey which he could use to check the areas given him by Mr Glenny both orally and in the schedule itself. No survey was in fact produced. The unchallenged evidence of Mr Kent is that he decided not to insist on its production. His reasons were, firstly his understanding (the basis for which was never specified) that Lezam and JLW were checking the areas and, secondly, that he had no reason to think the areas stated were inaccurate. His Honour formed a favourable view of Mr Kent as a witness and one should proceed upon the basis that Mr Kent's evidence in this respect was correct.

28. In my opinion, the critical question to be resolved in the case is the significance of the use of the words "subject to survey" in the schedule. His Honour dealt with the matter thus (29 FCR at 422):-

"... the respondents rely on the circumstance that the areas

were expressed to be stated 'subject to survey'. The

apparent object of this phrase was to qualify the statement

of the area to be leased by reference to the survey which,

it was then contemplated, would be obtained and produced to

Seabridge, presumably before execution of the lease. If,

for instance, the survey had been obtained, showing

dimensions less than those stated in the 'itemised lease

schedule', and the survey had been shown to Seabridge before

it executed the lease, Seabridge could make no complaint in

respect of the deficiency. Since the survey was not so

produced, it is difficult to see how the respondents can now

rely on the rider 'subject to survey'."

29. The contest between the parties is whether the words "subject to survey" in the schedule operate, not only so that they qualify the absolute statement of the areas of the floors of the building, but also displace the absolute character which the statement would otherwise have had; or whether the statement of the areas remains notwithstanding the words of qualification so that it was reasonably acted upon by Seabridge when it entered into the lease believing that the areas were as stated.

30. His Honour's reason for resolving those questions favourably to Seabridge was that, because no survey was produced, Lezam and JLW could not rely on its absence. I do not think that the problem is so simply solved. If one looks only at the itemised lease schedule (which is the way his Honour thought the matter should be approached) one has a qualified statement. The stated areas are subject to survey. If a case had been made based on that document alone, I think it would have failed. The representation sued upon would not have been the representation made. The words "subject to survey" would have enured for the benefit of both parties. If the area were misstated, it would have been open to Lezam to say to Seabridge that it should have insisted on a survey so that the area could be confirmed. Seabridge would have had no case.

31. But, for reasons earlier given, one cannot look at the lease schedule in isolation. The course of dealing between the parties must be taken into account. It was Mr Kent on behalf of Seabridge who insisted on there being a provision requiring the production of a survey. All along he had been concerned about the amount Seabridge would be paying calculated by reference to how much a square foot or a square metre the overall rental would work out to be. As the negotiations came towards a conclusion, Mr Kent decided that he would have the protection which a survey would provide. He thus manifested an unwillingness to rely only on the statements of the area given him by JLW. He may well have been reassured that he could accept the representations by Mr Glenny's willingness to insert the words "subject to survey", but to reach that conclusion would not be to nullify the representations themselves.

32. The conversations concerning the survey occurred, of course, prior to the sending of the lease schedule on 1 December 1986. But already representations had been made by Mr Glenny on behalf of Lezam about the area which was involved. These statements may not have been as precise as those made in the schedule, but in approximate terms they were to the same effect. These considerations lead me to the conclusion that the words used in the lease schedule were not intended to and did not change the situation from one where representations about the area had been made on behalf of Lezam to one under which Seabridge was to rely entirely on the survey which was contemplated and not as well upon the representations. In my opinion Lezam is not entitled to be placed in the situation in which it might have been if the evidence had suggested that all along its representative, although making statements about the area of the building to be leased, was making them in the context that the correctness of the stated area was subject to the checking which a survey would provide.

33. Once one reaches this conclusion, one passes to the remaining questions of reliance and falsity of the representation. I deal firstly with reliance. Did Seabridge through Mr Kent rely on the statements about the area? Plainly it did. So much is established by the two passages quoted from Mr Kent's evidence. No challenge to this evidence was made before his Honour either in cross-examination or otherwise.

34. It was submitted by both appellants that it had not been established that Mr Kent was acting for Seabridge in relying as he did upon the statements about the area. Mr Kent was the General Manager, Company Secretary and Public Officer of Seabridge. He said that he was responsible for the day to day administration of Seabridge's business affairs. He said that his responsibilities included attending to all matters concerning the leasing of premises from which Seabridge conducted its business. He was responsible for carrying out all negotiations on behalf of Seabridge for the leasing of the premises which are the subject of this litigation. In the evidence which I have already quoted he indicated the extent of his reliance. In doing as he did he was plainly acting within his authority as General Manager of the company. In all those circumstances I do not think that there can be a successful challenge to his Honour's conclusions about reliance.

35. One matter that should, however, be dealt with in relation to reliance is the significance which should be accorded to the printed disclaimers at the bottom of the lease schedule which was typed on JLW stationery. I think that, although these were in small type, they were quite legible and ought to be regarded, especially in a commercial transaction such as this, as just as much a part of the document as the words which preceded them. But the document has to be looked at as a whole and against the background of the earlier letters and the oral negotiations which led up to it. The question of area had been the subject of numerous discussions. It was critical to Mr Kent's approach to the matter. I have already said that the areas stated in the lease schedule were similar to those which had been earlier mentioned. The printed disclaimers appeared on the scene for the first time when the schedule was received by Mr Kent. In those circumstances, I do not agree with submissions made by the appellants that the statements made earlier became so qualified by the terms of the schedule that they were no longer able to be relied upon as representations which had been made on behalf of Lezam about the area.

36. There is then the question whether the statement of the areas made in the schedule was incorrect. In the appellants' submissions there was no satisfactory evidence that the areas relied upon by the respondent were incorrect. These areas had been arrived at by a method formulated by BOMA, the Building Owners and Managers Association of Australia Limited. It was the appellants' submission that the BOMA method was only one method whereby the internal areas of a building which was to be leased could be calculated. There were other methods, to which reference was made in evidence, which would have yielded different results. It followed that Seabridge's case, which was based on the BOMA method of measurement, had not been made out.

37. In support of its case Seabridge called Mr S.G. Hill who is a property consultant and valuer. In his affidavit Mr Hill said that in making the measurements referred to in his affidavit he had regard to and applied the standard known as "the BOMA Method for the Measurement of Buildings". Mr Hill said that this standard was the only widely accepted standard for the measurement of office or commercial, industrial and retail properties in Australia. He said that, in the case of commercial office buildings, measurements were made and areas were calculated on the basis of "net rentable areas" or "net lettable areas" determined in accordance with the standard, a copy of which was annexed to his affidavit.

38. Paragraph 11 of Mr Hill's affidavit was as follows:-

"In my experience, when real estate agents, valuers,

architects, surveyors and other persons involved in property

management refer to areas of commercial office buildings in

Australia without qualifying those areas in any way, they

refer to net rentable (or net lettable) areas calculated in

accordance with principles of the BOMA Standard. This has

been my experience since I commenced my employment in

Australia with Legal and General in May 1986. At all times

since then, when I have been involved in negotiations

concerning commercial office premises, whether for rent

review or for assessing the suitability of that

accommodation for clients or in making valuations of such

premises, reference by either party to areas has always been

to net rentable (or net lettable) areas as determined by the

BOMA Standard unless there has been a clear qualification to

the fact that some other area is being referred to. In my

opinion, this practice is widespread throughout the

Australian real estate industry and has been so since at

least May 1986."

39. Mr Hill's evidence was objected to as being irrelevant. His Honour thought that the evidence was admissible as expert evidence which consisted of a generalisation from observed facts within the personal experience of the witness in a field outside ordinary lay experience. His Honour referred to the judgment of McLelland J. in Ritz Hotel Limited v. Charles of the Ritz Limited (No. 7) (1987) 14 NSWLR 104 at p 105 and to Cross on Evidence, Australian Edition, para. 29025. Having referred to the detail of the standard his Honour continued (29 FCR at 426):-

"In my view, it is reasonable to infer, and, in any event,

it is not seriously disputed, that the parties contemplated

a lease of an area to be ascertained by internal

measurements. Given the widespread adoption of the relevant

BOMA standard of measurement, in the absence of any specific

statement to the contrary, it is reasonable to infer that

the parties must have intended that an appropriate BOMA

standard of measurement would apply."

40. The objection to Mr Hill's evidence was maintained before us. I have no hesitation in concluding that his evidence of the use made of the BOMA Standard was admissible. I think the question of the admissibility of para. 11 is more difficult. It is not clear to me that Mr Kent would have had the experience necessary to make him aware of the BOMA Standard. There is little doubt that Mr Glenny had. In his note of instructions and other documentation he used the expression "net lettable area". He is an estate agent of substantial experience. When he used the expression, he used it in the sense in which Mr Hill used it. But there is a question whether Mr Kent understood him to be using it in this way. Having reviewed the whole of the evidence, I have come to the conclusion that he should be taken to have done so. JLW was not retained by Seabridge so that the relationship of principal and agent did not exist between the two. But Mr Kent was all along concerned with area and I think it should be inferred that he would have understood this to mean a reference to net lettable area as ascertained in a way which was usual or customary in the letting of commercial premises. Indeed, so much is implicit in what he did say about his understanding that his reference to rental area would exclude areas occupied by lift wells, common areas, tea rooms, toilets and the like.

41. In their submissions counsel for Lezam said that the fact that Lezam did not use the BOMA method of measuring the net lettable area did not establish a breach of Part V of the Trade Practices Act. It was said that Mr Kent never applied his mind to the method of measurement being used by Lezam and JLW. They submitted that Mr Hill had said that, for the BOMA method to be effectively used, there must be agreement on the parameters, particularly on the method to be used and the measurements which were to be obtained. These could only come from a survey of the premises which was never carried out at any relevant time. Counsel said that the absence of agreement about these matters was responsible for the confusion of the parties about the matter of area. It did not constitute misleading or deceptive conduct but was rather a misunderstanding on the part of Mr Kent and thus Seabridge.

42. I think that the answer to this submission is that it is not realistic to say that from a practical point of view there is more than one method whereby net lettable area can be ascertained. The BOMA method was the usual and accepted method even though its name and the precise details of its application were not shown to have been known to Mr Kent. A representation was made about area. This should be understood as a reference to the net area available to be occupied. The only method whereby this could be calculated was the BOMA method. Once the dispute arose, this was the method used to check the correctness of the measurements. Mr Hill's evidence establishes that they were not correct. It follows that falsity of the representations was established. The submission made by counsel for Lezam ought to be rejected.

43. The next submissions to be dealt with concern the question of relief. His Honour originally made orders on 12 April 1991. There were two declarations, namely, that the two respondents, i.e. the two appellants, were jointly liable to pay to the applicant, i.e. Seabridge, the sum of $89,887.15 and that each of the respondents was liable to pay half of that sum. Five orders were made. These were that the lease be varied "in accordance with the reasons for judgment of Beaumont J. delivered 12th April 1991", the two respondents pay to the appellant the sum of $89,887.15, the applicant have liberty to apply for interest pursuant to s.51A of the Federal Court of Australia Act 1976, that the two respondents pay the applicant's costs except for some costs which were excluded, and that there be no order in respect of the costs of the cross-claims.

44. On 6 June 1991 his Honour made further orders (which were entered on 7 June 1991) as follows:-

1. That the lease described in paragraph 1 of the

amended application be varied by deleting the

amount of the rental specified in Item 2 of

Schedule 2 thereto and substituting the sum of

$405,043 as the rental per annum.

2. Judgment for the applicant against the

respondents jointly for the total sum of

$142,528.55 including interest.

The amount in question had increased because of the inclusion of an award of interest.

45. What is not clear is whether the second order was intended to supersede the first. I think that it must have been; otherwise there would be judgments against the present appellants for an amount exceeding $200,000. If one adopts this view, however, it is not clear what has happened in relation to the declarations, particularly the declaration that each respondent, i.e. each appellant, was liable to pay one half of the sum of $89,887.15.

46. Whether one takes the view that the two sets of orders in some way stand together or that the orders of 6 June 1991 have superseded those made on 12 April 1991, it seems reasonably clear that in giving relief his Honour acted under s.87 of the Trade Practices Act and not under s.82 which provides for the award of damages. Towards the end of his reasons his Honour referred to the fact that Seabridge sought an order varying the amount of the rental payable under the lease together with an order that the respondents (appellants) pay it the sum of $89,887.15, being the difference in the amount of rent payable on a gross area basis and a rental per square metre calculated by reference to net rentable area. His Honour continued (29 FCR at 427):-

"In my opinion, it is appropriate that this relief be

granted pursuant to s.87(1A) of the Act (now a free-standing

provision - see s.87(1C) and s.87(2)(b) (which empowers the

Court, in an appropriate case, to vary a contract or

arrangement)). Seabridge has, in my view, suffered loss or

damage by paying a greater amount than it would have done

had it known the true position."

47. Subsections (1) and (1A) of s.87 are as follows:-

87. (1) Without limiting the generality of section

80, where, in a proceeding instituted under,

or for an offence against, this Part, the

Court finds that a person who is a party to

the proceeding 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 IV or

V, the Court may, whether or not it grants an

injunction under section 80 or makes an order

under section 80A or 82, make such order or

orders as it 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) of this section) if the

Court considers that the order or orders

concerned will compensate the first-mentioned

person in whole or in part for the loss or

damage or will prevent or reduce the loss or

damage.

(1A) 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 or

on the application of the Commission in

accordance with sub-section (1B) on behalf of

such a person or 2 or more such persons, 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, or the person or any of the

persons on whose behalf the application was

made, 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.

48. Paragraph 2(b) of s.87 empowers the Court to make an order varying a contractual arrangement in such manner as is specified in the order. Paragraph (2)(d) empowers the Court to make an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to pay to the person who suffered loss or damage the amount of the loss or damage.

49. It was submitted by counsel for JLW that it was not appropriate to give Seabridge any relief under s.87 against it. The lease was made between Seabridge and Lezam; JLW was not a party to it. The variation of the lease which was ordered pursuant to para.87(2)(b) of the Act was to a contract to which JLW was not a party. It had no rights or obligations under it. But the difficulty I have with the submission is that subsec.87(1A) empowers the Court, where a person has suffered loss or damage by the conduct of another person in contravention of a provision of Part IV, to make such order as the Court thinks appropriate against the person who engaged in the conduct. For the moment I shall assume that JLW was such a person. Paragraph (2)(d) of the section empowers the Court to make an order directing the person who engaged in the conduct to pay to the person who suffered loss or damage the amount of it. Notwithstanding the fact that the variation ordered by his Honour was a variation of an agreement made between parties other than JLW, I do not understand why, upon the assumption that JLW is in breach of s.52, it is not a person against whom an order may be made pursuant to para.(2)(d). The variation will not affect it but, upon the assumption I have made, it is a person who is in breach of the Act and has caused Seabridge damage. If the assumption I have made were correct, it would have been entitled to recover damages against JLW under s.87 just as it would have been entitled to do under s.82. I would reject the submission.

50. In the submission of counsel for Lezam, the basis of Seabridge's case was that, if the alleged misrepresentation had not been made, it would have been better off because it would have paid a lower rental. The test which is usually applied in cases under s.82 of the Act is that propounded by the High Court in Gates v. The City Mutual Life Assurance Society Limited (1985) 160 CLR 1. Subject to what is later said, I see no reason not to apply it as well to a case under s.87. The test, applied to the circumstances of this case is, how much worse off was Seabridge as a consequence of its reliance on the misrepresentation? In counsel's submission, Seabridge could only establish that it was worse off by proving that it would not have taken a lease of the property except at a rental calculated at the rates per square metre of net lettable area shown in the lease schedule. In practical terms that would only have occurred if either Lezam was prepared to agree to a substantial reduction of the rental of $455,000 per annum which it was prepared to accept, or there were other premises available comparable to the subject premises at a rental which was as low as, or lower than, the amount of the rental for the subject premises would have been had the rental for them been reduced in accordance with Seabridge's case.

51. It was said that Mr Kent's evidence was to the contrary of this. Seabridge was desperate to find accommodation. It had given notice of its intention to vacate its existing premises. That notice had been accepted. It was obliged to vacate them by the end of February 1987. It had looked at a number of properties and the evidence tended to establish that it could not find anything cheaper. Furthermore, it had been interested in premises in Sussex Street but on 14 November 1986, it learnt that these were not available to it. It had no other prospect in sight and time was running out. The probabilities were, therefore, that if Mr Kent had learnt of the true areas before the lease was signed, Seabridge would nevertheless have executed the lease as it was because it would have had no other choice. The only premises available were the Kent Street premises. All would have depended on the Pongrasses being willling to accept a substantially lower rental. It followed that Seabridge had not established that it was worse off as a consequence of the appellants' misleading conduct.

52. In the submission of counsel for the appellants, the Pongrasses had shown a marked reluctance to take less than the rental for which they originally asked. It was not they who were concerned about area; it was Mr Kent. They looked at the rental to be paid as an overall figure not related to area. Mr Kent was concerned with area because it was his way of checking the reasonableness of the rental. That was not a matter of much interest to the Pongrasses. It was therefore unlikely that they would have agreed to reduce the rental. Certainly it had not been shown that that would have been the case.

53. All counsel agreed that there was a substantial amount of speculation involved in determining what would probably or what might have happened had the correct area been discovered before the lease was executed and had Mr Kent insisted on a reduction in the rental. Was it likely that Mr Kent would have prevailed or would the Pongrasses have insisted on the rental already agreed? The Pongrasses had problems of their own. They were anxious to leave for overseas soon after the lease was executed. Furthermore, the building had been vacant for a long period. Much of this period was taken up with renovations but these had been completed about the middle of 1986. They had been unsuccessful in letting the building up to the time that Seabridge agreed to take a lease. The ground floor of the premises had been available for occupation since the end of 1985 but attempts to let it separately from the remainder of the building had not been successful. And there is also a question as to how aware the Pongrasses were of Seabridge's problems. The evidence is not clear on this point.

54. The problem does not appear to have been dealt with by his Honour otherwise than in a sentence of his judgment in which he said:-

"Seabridge has, in my view, suffered loss or damage by paying a

greater amount than it would have done had it known the true

position."

55. Counsel for Seabridge conceded in the course of their submissions to us that this conclusion has underlying it matters of speculation and conjecture based though they might be on some of the evidence in the case. Nevertheless counsel submitted that the following matters entitled his Honour to reach the conclusion which he did:-

(a) The rent had been calculated and negotiated on the basis of rates

per square foot or square metre.

(b) It was apparent that it was never part of the Pongrasses'

instructions that they would not let the premises for less than

$455,000 per annum.

(c) Mr Pongrass received a copy of the lease schedule and was asked to

obtain a survey. He must have realised that this could only have

had one purpose and could have led to a lower rental in the event

that the areas were less than those stated in the schedule.

(d) There was no suggestion in the evidence that he objected to

obtaining a survey at the time the matter was raised.

(e) It was arguable that the lease schedule was an offer which could

have been enforced once it was accepted by Seabridge. This may

or may not have been the case but, if a problem had arisen, the

fact that there may have been a concluded bargain constituted by

Seabridge's acceptance of the lease schedule as an offer, when

coupled with the other factors, would probably have persuaded the

Pongrasses to adjust the rent downwards.

I think that each of the matters relied upon in paras. (a), (b), (c) and (d) is of substantial weight. I do not have the same view about the matter relied upon in para. (e). It was not a matter put to his Honour.

56. In further support of their submission, counsel for Lezam said that the evidence showed that it was unlikely that Mr Pongrass would have been prepared to lower the rental even if the survey had shown smaller areas. On 19th November 1986 Mr Glenny spoke to Mr Pongrass. He told him that Mr Kent wanted the rental to come down a little. Mr Pongrass said that he believed the rental was reasonable and that he did not want to reduce it below the level he had determined.

57. On 25th November 1986 Mr Glenny received Mr Kent's letter of 24th November 1986 to which reference has earlier been made. Mr Glenny spoke to Mr Pongrass and read part of it to him. Mr Pongrass said that he would rather not reduce the rental. He added that "any lessee is getting a good rate", meaning apparently that the rent was a very reasonable one. He said that he would accept the proposed terms and give Seabridge a rent free period of two and a half months but he would like to avoid lowering the rental. That evidence provides support for the view that Mr Pongrass would not have been prepared to reduce the rent for which he had asked. Nevertheless, there is the evidence that he and his wife wished to leave for overseas and were anxious to have the transaction completed before they left. In the end Mr Pongrass was not completely satisfied with the rental which was to be paid but, because of his imminent departure, thought that he should accept it.

58. The conclusion of the primary Judge on this matter is expressed so shortly that it occurred to me that the matter may not have been put to him by the appellants with any force. But a reading of the transcript of the argument before his Honour discloses that the matter was very strongly relied upon particularly by counsel for Lezam. All the matters put to us were put by him to his Honour.

59. Counsel for the appellants said that we were in as good a position as was his Honour, ourselves to make appropriate findings and draw appropriate conclusions. The evidence was not in dispute. There had been no significant cross-examination of any of the witnesses about the matter. On the other hand, counsel for Seabridge said that, shortly expressed though his Honour's conclusion may have been, it was a conclusion to which the evidence entitled him to come. No error was disclosed in what his Honour had said.

60. The difficulty is to understand how his Honour approached the matter. The problem to which the competing submissions give rise is certainly not an easy one. The absence of cross-examination on the point is puzzling. It would have been of assistance to the trial Judge to have heard each of the relevant witnesses tested on what might have been his reaction if the truth had been discovered before the lease was executed. But even without that, the submissions made to his Honour required the making of clear findings about the various matters which were involved. He had the benefit, which this Court does not have, of seeing and hearing the witnesses. In a matter of this kind the atmosphere of the trial is all important. The evidence may not be in dispute but it is oral and not documentary, albeit that some of it was given by affidavit. I do not think that in those circumstances an appellate court can be in as good a position as the trial Judge.

61. The absence of detailed findings and reasons on this question makes it impossible, in my opinion, for this Court to determine whether his Honour's conclusion was an erroneous one. We are not able to tell. Regrettably, it is a case where the point relied upon by the appellants has not been dealt with. I see no alternative but to send the matter back for a new trial on the question whether the misleading or deceptive conduct engaged in by the appellants was the cause of any damage to Seabridge in the sense that it was worse off as a result of entering into the lease than it otherwise would have been; see Gates at pp 12-14.

62. Before leaving this aspect of the matter, I need to return to the form of his Honour's orders. The first of the orders made on 6 June 1991 had the effect of varying the terms of the lease by substantially reducing the amount of the rent payable thereunder. That is not an order which could affect JLW. It was not a party to the lease. The second order is in a different category. It is an order whereby judgment is entered against both appellants for the sum of $142,528.55. So far as Lezam is concerned, its liability may have been imposed, not because of any entitlement it had to damages, but as a consequence of the first order.

63. I express no opinion on the question, but it may be that the question of Lezam's liability depends, not upon the principles which were stated by the High Court in Gates, but upon other principles, perhaps akin to those which guide a court in making consequential orders after making an order for the rectification of a deed or contract. On the other hand, the remedy being a statutory one, the Court may take the view that assistance is not to be gained from any reference to or application of general law principles. Each case will require the Court to have regard to the terms of the statute and the facts and circumstances of the case and to exercise its discretion appropriately. None of these matters was the subject of any discussion before us. That is why I express no view.

64. The position of JLW is different. Its liability can only be for damages. The principles enunciated in Gates do apply in relation to the case made against it. It will be according to that criterion that the question of its liability to Seabridge will be determined. That leads conveniently to the next matter which is whether, whatever the liability of Lezam to Seabridge may be, JLW is under any similar liability.

65. The question is whether JLW is a person liable to Seabridge as a person who engaged in misleading or deceptive conduct contrary to s.52 or was a person who was involved in a contravention of that section; see s.75B. Counsel for JLW submitted that JLW was neither guilty itself of a breach of s.52 nor a person involved in a contravention of that section. The relevant principles are discussed by the High Court in Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661. There Mason A.C.J., Wilson, Deane and Dawson JJ. said (p 666):-

"It should be observed at the outset that the facts as found by

the trial judge raise the question whether the Lucas company

itself was guilty of any contravention of s.52. It is, of course,

established that contravention of that section does not require an

intent to mislead or deceive and even though a corporation acts

honestly and reasonably, it may nonetheless engage in conduct that

is misleading or deceptive or is likely to mislead or deceive:

Hornsby Building Information Centre Pty. Ltd. v. Sydney Building

Information Centre Ltd. [1978] HCA 11; (1978) 140 CLR 216, at p 228; Parkdale

Custom Built Furniture Pty. Ltd. v. Puxu Pty. Ltd. (1982) 149 CLR

191, at p 197. That does not, however, mean that a corporation

which purports to do no more than pass on information supplied by

another must nevertheless be engaging in misleading or deceptive

conduct if the information turns out to be false. If the

circumstances are such as to make it apparent that the corporation

is not the source of the information and that it expressly or

impliedly disclaims any belief in its truth or falsity, merely

passing it on for what it is worth, we very much doubt that the

corporation can properly be said to be itself engaging in conduct

that is misleading or deceptive."

The matter has been considered by this Court in some later cases. I refer to The Saints Gallery Pty Ltd v Plummer [1988] FCA 213; (1988) 80 ALR 525 at 529-531 and Wheeler Grace and Pierucci Pty Limited v Wright (1989) 40-940 at 50,255-6 per Lee J.

66. Each case must, of course, depend upon its own facts. None of the authorities to which I have referred provides a comprehensive indication of what needs to be established before a person who is an agent, such as JLW here, will be found to be liable as a principal. But it is in the treatment of the various factual situations which confronted the Courts in those cases that one obtains guidance.

67. In the passage cited from Yorke v Lucas the judges refer to circumstances which make it apparent that, where the corporation is not the source of the information and it expressly or impliedly disclaims any belief in its truth or falsity but has merely passed on the information for what it is worth, it is unlikely to be liable. In considering the matter I have made full allowance for the use of the word "impliedly" in what their Honours have stated. Having done so, I do not think that it could be correct to take the view that Mr Glenny, and thus JLW, adopted such a passive role. Mr Kent did not deal with the Pongrasses. He dealt with Mr Glenny. Mr Glenny was an estate agent of substantial experience who handled the conduct of the negotiations on behalf of the Pongrasses. He made statements in clear terms, qualified though they were by reference to the survey, about the area of the premises and about numerous other matters which were of concern to Mr Kent. In those circumstances I think the correct view is that JLW, through its employee, Mr Glenny, was itself guilty of misleading or deceptive conduct. That conclusion avoids the necessity of considering the question of whether JLW was a person involved in Lezam's contravention and the implications for that expression of the detail of the provisions of s.75B.

68. In relation to the case made by Seabridge against the two appellants it remains to deal with a submission based on laches or delay on the part of Seabridge in suing. Relief under s.87 of the Trade Practices Act is discretionary and, in an appropriate case, excessive delay may be a reason why the Court would not grant relief especially if that relief involved varying a contract with a consequent change in rights and obligations for which it provided, particularly where those rights and obligations had accrued. In my opinion this is not a case where the Court should be dissuaded from granting relief because of any delay on the part of Seabridge. It did not discover the true position until the rent review which took place towards the end of 1988. The proceedings were commenced on 8 November 1989, no more than a year after the discovery of the error about the area. That was close to the end of the limitation period for which the Trade Practices Act provides. I think that, where Parliament has prescribed a specific limitation period, it will never be easy for a party resisting relief to raise delay as a defence, at any rate unless that party has in some way altered its position to its detriment. There is no evidence of that in this case. Accordingly, I would reject the submission made by the appellants in relation to delay.

69. My conclusions up to this point are that the submissions made on behalf of the appellants concerning the question whether Seabridge has proved that the misleading and deceptive conduct engaged in by the appellants caused it damage should be upheld but only to the extent of their establishing the need for a new trial of that issue. All other submissions relied upon by the appellants should fail. That leaves the cross-claims. Although his Honour's orders will need to be set aside, it is still necessary to deal with the cross-claims. The reasons why that is so will emerge from what follows.

70. As mentioned, his Honour thought that each appellant should be liable for one half of the judgment debt. He said that, for that reason, it was not necessary to make any further orders on the cross-claims There was discussion during the argument about the statutory basis for this approach. Section 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) was put aside. Consideration was given to the question whether his Honour was empowered to make the order under s.87 of the Trade Practices Act. In my opinion, that section does not authorise the making of the order. The section confers on the Court wide powers to make orders in favour of an applicant for relief, but it contains no general provision empowering the Court to do justice as between respondents each of whom has been ordered to compensate an applicant for relief, for the full amount of its loss. The position may have been different if each respondent had been ordered to pay half the amount in question to Seabridge, but each was in fact ordered to pay the whole amount.

71. Finally, there was discussion whether the order in question had been made pursuant to the general law, particularly the equitable doctrine of contribution; cf. Equity - Doctrines and Remedies, 2nd ed., Meagher, Gummow and Lehane, paras. 1001 et seq. Eventually no submission was made supporting his Honour's order upon this basis. I have not finally considered the matter and express no opinion on it except to say that it would appear to me to be difficult to justify the order in this way. The great problem is that his Honour has not disclosed his hand. The Court is left to speculate about the matter. There being no support for the course taken by his Honour from any party and there being no apparent basis for it, the matter should be put aside.

72. The contest between the two appellants is not about contribution. It is whether either one is entitled to an indemnity from the other for the entirety of the amount ordered to be paid. In its cross-claim Lezam, subject to a matter to be mentioned in a moment, has sued JLW for damages for negligence and for breach of s.52 of the Trade Practices Act. JLW, on the other hand, has sued Lezam on an indemnity to which it claims to be entitled because of an implied term to that effect in the contract of agency which existed between Lezam and JLW.

73. Lezam's cross-claim is divided into two parts. Paragraphs 4 to 8 plead a claim in negligence. The paragraphs are rounded off by para 9 which says that, in the premises, Lezam says that, if it be liable to Seabridge in damages, then it is entitled to contribution from JLW for such damage. The claim for contribution is expressly based on s.5 of the Law Reform Act and the general law.

74. The second part of the statement of claim pleads a claim for breach of s.52 of the Trade Practices Act. Paragraph 12 alleges that JLW represented to it that it was able competently to negotiate and arrange for the letting of the premises and that it would competently calculate and determine rental "of the net lettable areas in accordance with acceptable standards of measurement". Paragraph 13 pleads reliance. There is no paragraph which pleads falsity of the representations but falsity is suggested in para. 14 which makes the particular allegation of breach of s.52 of the Trade Practices Act. Paragraph 15 pleads a cause of action based on breach of s.42 of the Fair Trading Act 1987 (NSW). That section is in similar terms to s.52 of the Trade Practices Act.

75. One then comes to the claims for relief. The claim for contribution is repeated. There follow claims for declarations that JLW is in breach of the two statutory provisions referred to, a claim for damages and claims for interest and costs. It would seem that the claim for damages is not restricted to the causes of action based on breaches of the two statutes and encompasses also the claim in negligence.

76. JLW's cross-claim simply claims a full indemnity from Lezam for any amount for which it is found liable to Seabridge. It does not indicate how the indemnity is said to arise but it emerged in argument that the indemnity was based upon an implied term of the contract of agency.

77. No defence was filed in relation to either cross-claim, the parties telling his Honour that they were at issue, whatever that may mean.

78. His Honour made no findings and came to no conclusions about any of the causes of action upon which each of the appellants relied in its cross-claim. The result is that we have no findings and no reasons. One might well ask in those circumstances how the matter could possibly be dealt with on appeal. In the submission of counsel for JLW, the position is nevertheless clear. They say that there is authority for the implication of a term in a contract of agency that the principal will indemnify the agent. The term is one of the incidents of the relationship of principal and agent. Counsel also say that the indemnity will not be lost even though the agent be negligent. In their submission, therefore, the matters relied upon by Lezam in its cross-claim are irrelevant. The indemnity would not be affected by a finding that JLW was negligent nor, by analogy, would it be affected by a finding that JLW had engaged in misleading or deceptive conduct qua Lezam. We have been referred to a large number of authorities about these matters. Some of these references are contained in written submissions which were lodged after we reserved our decision. They are numerous and we have not had the benefit of any considered analysis of them.

79. It appears clear that in ordinary circumstances an agent is entitled to look to his principal to indemnify him against loss which he has suffered. Bowstead On Agency (15th ed., p 246) says that every agent has a right against his principal to be reimbursed all expenses and to be indemnified against all losses and liabilities in the execution of his authority but it is pointed out in Article 66 (p 252) that no agent is entitled to reimbursement of expenses or to an indemnity in consequence, inter alia, of his own negligence or breach of duty. Reference should also be made to Article 62 (pp 240-241) which says that an agent is denied remuneration in transactions in relation to which he is in breach of his duties as agent, such breach going to the root of the contract or otherwise justifying the principal's repudiation of the liability to pay. An illustration of this principle in the courts of New South Wales is provided by Greenwood v. Harvey (1965) 66 SR(NSW) 496.

80. Article 62 was the Article relied upon by counsel for JLW, but it seems to me that Article 66, which deals with the circumstances in which an agent may lose his right to an indemnity and does not deal with remuneration, is the more relevant one. Taken at its face value, that would suggest that the right to indemnity may be lost in consequence of the agent's negligence. Support for that view is to be found in some of the cases cited in Bowstead; see pp 254-6.

81. Counsel for JLW placed strong reliance upon the decision of the Privy Council in Kai Yung v. Hong Kong and Shanghai Banking Corporation (1981) AC 787. That decision was referred to with apparent approval by Brennan J. in National Commercial Banking Corporation of Australia Limited v. Batty [1986] HCA 21; (1986) 160 CLR 251 at 273. But Brennan J. did not suggest that Kai Yung had overruled the cases cited by Bowstead, and in any case the principle referred to in Kai Yung cannot be applied sensibly without a full analysis of the facts, which was not made at trial in this case in relation to the cross-claims. In this regard it is to be noted that the agent in Kai Yung was an agent invested with duties which were of a ministerial character.

82. I have not made an exhaustive study of the authorities on the question because I do not think that it is appropriate to do so. In my opinion the only way the problems to which the cross-claims give rise can be solved is by ordering a new trial of them. The two claims are interdependent. Lezam's claim is for negligence and misrepresentation. JLW's claim is for an indemnity. If Lezam is entitled to succeed upon the basis of fault (negligence and/or breach of statutory obligation) it will be entitled to damages. The same matters upon which it relies in its cross-claim are relied upon by it defensively in relation to JLW's cross-claim. Although I would not conclude the matter, because the factual position is yet to be ascertained, I think the likelihood is that a finding of negligence and/or breach of statutory duty against JLW would defeat its claim to an indemnity.

83. In the result the orders which I would propose are that the appeals against the orders made in favour of Seabridge be allowed in part. The orders made at first instance should be set aside and there should be a new trial limited to the questions of whether Seabridge has suffered loss or damage as a consequence of the misleading or deceptive conduct engaged in by the appellants and the relief (if any) to which Seabridge is entitled against each of the appellants. I would order a new trial of the cross-claims. The costs of the proceedings before Beaumont J. should be in the discretion of the judge hearing the new trials. Seabridge should pay one quarter of the costs of each of the appellants of the appeals brought against the orders made in favour of Seabridge. There should be no order as to the costs of the appeals brought in relation to the cross-claims.

I agree that the submissions of the appellants, in respect of the orders made in favour of the respondent Seabridge Australia Pty Limited, should fail upon all issues other than damages. But, in my opinion, they should fail upon that issue as well. At the same time, I agree with the orders proposed in relation to the cross-claims. In the circumstances, I shall confine these reasons to those questions which have seemed to me most significant in the case and to the finding of damages.

2. A misrepresenter does not obliterate the effect of a misrepresentation clearly made, which induces an assent to proposed terms, by adding, as the time of final agreement approaches, a qualification capable of conveying merely that the misrepresentation, the substance of which is not withdrawn, may not be accurate in every detail and may require some, possibly quite minor, qualification. In the present case, moreover, when the sequence of events is appreciated, it is apparent that Mr Kent would have been unlikely to have regarded the bare words "subject to survey" as intended by Mr Glenny to convey any qualification at all; they were no more than a response to his own previous demand, and were unaccompanied by any withdrawal of the statements already made.

3. Nor do I think it a matter of significance that Mr Kent afterwards, being thoroughly persuaded by a representation which was precise to the first decimal place and thus suggested care and accuracy, was prepared to forego his earlier requirement of a survey in circumstances in which both parties were anxious to proceed quickly to finality.

4. In my opinion, the defence based on JLW's disclaimers in small print was rightly rejected by Beaumont J., for the reasons which he gave. Having described the disclaimers as "almost illegible", he stated the fundamental point:

"The present question is not whether the disclaimers were

incorporated in a contract. The question here is whether

the conduct of the respondents, taken as a whole (see

Parkdale Custom Built Furniture Pty. Ltd. v. Puxu Pty. Ltd.

[1982] HCA 44; (1982) 149 CLR 191 at p 199), is misleading or likely to be

so."

When a court comes to apply that principle to a case of a plain misrepresentation, said later to have been disclaimed, it should not allow fine textual analysis, nor the differently orientated rules of contract law, to distract it from seeing the obvious. A disclaimer or qualification will frequently have little or no effect on the impact of a misrepresentation. A man may tell a lie loudly, while murmuring the truth inaudibly, unconvincingly, or so blandly that it is unlikely to receive any hearing. Much the same may be true of a disclaimer which is inconspicuous, or very general, or apparently merely formal. This court has, on a number of occasions rejected defences based on clauses of the present kind in actions for contraventions of s. 52. Once misrepresentation has been shown, the statute prevails over a formal disclaimer. If such a clause is to be effective, it must be by enabling the conduct as a whole (including in it the provision to the complainant of the document containing the clause) to be seen as not misleading. In the present case, the misleading conduct complained of was not rendered blameless by the words in small print at the bottom of a page otherwise reiterating the misrepresentation.

5. It is unnecessary to burden these reasons with reference to all the authorities, which are well known. However, I cite the full court judgment of Sheppard J. (with which Jackson J., and I think also Fox J., agreed) in Clark Equipment Australia Ltd v. Covcat Pty Ltd (1987) 71 ALR 367 at 371-372; and a decision of my own, Benlist Pty Limited v. Olivetti Australia Pty Limited (1990) 12 ATPR 51,583 at 51,590-51,591, may perhaps also be mentioned because it concerned a clause in virtually identical terms (although there are some obvious misprints in the report), and I there endeavoured to state the principle I have now again expressed. Referring to some comments of Lockhart J. in Henjo Investments Pty Ltd v. Collins Marrickville Pty Ltd [1988] FCA 40; (1988) 79 ALR 83 at 99, I concluded:

"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."

6. The central question in respect of damages seems to me to be entirely a matter of fact. The case is plainly distinguishable from Gates v. The City Mutual Life Assurance Society Limited (1986) 160 CLR 1, which concerned a contract of insurance. Insurance companies, when dealing with the general run of customer, notoriously proffer contracts of adhesion; there is little or no prospect of negotiation of terms. A large company, bargaining (or treating, as it would no doubt prefer to say) for a lease of office premises, is in an entirely different position. It is much easier to infer, once an error is found in the basis on which it contracted, that the company would have been able, had the truth been known, to negotiate an appropriate amendment of the contract. In this particular case, Mr Kent and Mr Glenny were experienced businessmen, and the terms of their discussions suggest they both thought the rate negotiated was a fair one; if the correct areas had been made available to them, why would they not have applied what they thought was the right rate to the right areas? Of course, Mr and Mrs Pongrass might have been adamant; but there is nothing in the evidence to require the conclusion that they would have refused to listen to reason. Nor, had they done so, granted that the rate was reasonable, can I see any basis for thinking no other property owner would have accepted JLW's advice about the proper rate and applied it to the correct area of some other property. There is evidence that in November 1986 Mr Glenny had on his books a number of other properties which he considered suitable for Seabridge. Mr Kent swore that the lease actually entered into with Lezam would not have been entered into had he known the truth. In my opinion, it was open to his Honour to infer that Seabridge would have obtained a lease at the rate all parties accepted as reasonable. It should not be forgotten that there is no suggestion of a shortage of premises available for lease; on the contrary, much of Lezam's building had stood vacant and ready for occupation for quite a long time, a fact which must have exerted some pressure on Mr and Mrs Pongrass, who were about to go overseas. Furthermore, Mr and Mrs Pongrass did accept, however provisionally, the addition of the words "subject to survey", the most likely object of which must, I think, have been to provide for the rent to be adjusted in case the areas should turn out to be wrong. If they were actually agreeable to that, it may be thought they would have made the same adjustment in the hypothetical circumstances with which the assessment of damages is concerned.

7. His Honour saw the witnesses, and had an opportunity to assess the firmness of resolve each might have shown; I would not disturb his conclusion. The majority of the court, however, holds we should do so, on the basis that the facts have not been found in sufficient detail to justify the conclusion.

8. Although the appellants argued at the hearing at first instance that Seabridge would, in any event, have accepted the overall rent sought by the lessor, they did not pursue the point in cross-examination of Mr Kent who, as I have said, had pledged his oath directly on the issue. I think his Honour was entitled, in that situation, to treat the argument put as unworthy of extended discussion. He contented himself with saying:

"Seabridge has, in my view, suffered loss or damage by

paying a greater amount than it would have done had it known

the true position."

That passage, brief as it is, accepts Mr Kent's evidence, and accepts that loss was a consequence. Implicit in it, at any rate when it is read in conjunction with the orders actually made, is a finding - fully justified by the considerations I have already outlined - that Mr Kent would have prevailed had there been a dispute about the effect of a correction of the erroneous figures. (Cf. Brittingham v. Williams [1932] VicLawRp 35; (1932) VLR 237 at 239, a decision of the Victorian Full Court delivered by Cussen A.C.J.).

9. A Judge is required to give reasons, but not to spell out every step in the process by which he has arrived at those reasons. So far as concerns the orders made in favour of Seabridge, I would dismiss the appeals with costs.

I have had the privilege of reading the judgment of Sheppard J. and I agree with his Honour's reasons and the orders proposed by him.

Court of Australia Act 1976

Reform (Miscellaneous Provisions) Act 1946

Re Lezam Pty Limited and Jlw (Nsw) Pty Limited v Seabridge Australia Pty Limited; Jlw

At a glance

Court

Decision date

Before

Source

Judgment (142 paragraphs)

Re Lezam Pty Limited and Jlw (Nsw) Pty Limited v Seabridge Australia Pty Limited; Jlw (Nsw) and Lezam [1992] FCA 206; (1992) 14 Atpr 41-171 (1992) 107 ALR 291 (13 May 1992)

Parties

Legislation Cited (4)

Cases Cited (11)