Snowden v Australian Mortgage Assist Pty Ltd

Supreme Court of NSW|2019-11-27|Before: Ball J

[2001] NSWCA 94 Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 7) [2008] FCA 1364 Colonial Mutual Life Assurance Society Ltd v Producers & Citizens Co-operative Assurance Company of Australia Ltd (1931) 46 CLR 41 Cummings v Lewis (1993) 41 FCR 599 Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296 Hollis v Vabu Pty Ltd (2001) 207 CLR 21; [2001] HCA 44 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; [2004] HCA 54 Mutual Life & Citizens' Assurance Co Ltd v Evatt (1968) 122 CLR 556 Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165 Potts v Miller (1940) 64 CLR 282 Sliteris v Ljubic [2014] NSWSC 1632 South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 1541 Stevens v Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16 Sykes v Reserve Bank of Australia (1998) 88 FCR 511 Tonto Home Loans Australia Pty Ltd v Tavares; FirstMac Ltd v Di Benedetto; FirstMac Ltd v O'Donnell [2011] NSWCA 389 Watson v Foxman (1995) 49 NSWLR 315 Willett v Thomas [2012] NSWCA 97 Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515; [2004] HCA 16 Wyse & Young International Pty Limited v Sanna [2019] NSWSC 683 Category: Principal judgment Parties: Anthony Snowden (First Plaintiff) Janet Snowden (Second Plaintiff) Australian Mortgage Assist Pty Ltd (First Defendant) Kimberly Linder (Second Defendant) Representation: Counsel: D Moujalli (Plaintiffs) SE Gray (First Defendant) DA Lloyd (Second Defendant)

Solicitors: Adams Lawyers (Plaintiffs) Norton Rose Fulbright (First Defendant) Argyle Lawyers (Second Defendant) File Number(s): 2018/133092

Introduction

On 30 April 2012 and 6 December 2012, the second plaintiff, Mrs Janet Snowden, entered into contracts to acquire three investment properties in regional Queensland. Each investment involved a contract to acquire residential land and a contract for the construction of a dwelling on that land. The contracts entered into on 30 April 2012 related to two properties in Miles, Queensland. It will be convenient to refer to them as "100 Miles" and "104 Miles". The contracts entered into on 6 December 2012 related to a property in Hope Phillips Crescent, Gladstone, Queensland (the Gladstone Property). In order to finance the acquisition of the land and the building of the dwellings, Mrs Snowden and her husband, Mr Anthony Snowden, the first plaintiff, obtained mortgage finance which was arranged by the second defendant, Mrs Kimberly Linder, who is alleged by the plaintiffs to be an employee or agent of the first defendant, Australian Mortgage Assist Pty Ltd (AMA).
The investments have not been a success. Property values and rents have decreased substantially in both Miles and Gladstone. In these proceedings, the plaintiffs seek to recover the losses they say they have suffered as a consequence of the declines in market value and rents from Mrs Linder and AMA.
The claim is put in various ways. At its heart is an allegation that Mrs Linder made a number of representations which are said to be partly oral and partly in writing concerning the rent that would be achieved for the properties and the value for which they could be sold, which induced Mrs Snowden to make the investments and the plaintiffs to borrow the money they did. Those representations are said to be misleading or deceptive in contravention of s 18 of the Australian Consumer Law (ACL).
An alternative case is pleaded in negligence. It will be necessary to say more about the precise way in which that claim is pleaded, but in essence it depends on the same conduct as the claim based on a breach of s 18 of the ACL. A similar case is also pleaded on the basis that Mrs Linder owed a fiduciary duty "to act in the best interests of the plaintiffs" and breached that fiduciary duty by making the representations and giving the advice she did, and by failing to give advice she ought to have given. In each case, it is said that AMA, as Mrs Linder's employer or principal, is liable for that conduct.

Background

On 23 April 2007, following completion of a certificate IV in finance from the National Finance Institute, Mrs Linder commenced work as a contractor mortgage broker with AMA through a partnership carried on by her and her husband. The terms on which the partnership was engaged by AMA are set out in a contract dated 23 April 2007. The contract contained the following provisions: 1. By your acceptance of this agreement, you expressly acknowledge that the relationship between Australian Mortgage Assist and you is one of principal and contractor and not that of employer and employee. Accordingly, you will not be entitled to be paid any employee benefits. 2. This engagement will not prevent you carrying out another business which does not conflict with the interests of Australian Mortgage Assist clients. However you must not at any time whether during or after the term of this engagement hold out or represent to any person that Australian Mortgage Assist has any connection whatsoever with any other business of yours or any other person. You must make it clear to all persons with whom you deal that you are not the agent of or in any way connected with Australian Mortgage Assist in respect of any business other than that established under this engagement. 3. All commission will be collected by Australian Mortgage Assist. Your remuneration is stated in Schedule 1 and may be adjusted by Australian Mortgage Assist from time to time. … 8. At all times, you must act ethically, responsibly and diligently in representing AMA taking care not to misrepresent AMA, any lender or any products, in any way. Also, you must take all care to ensure that you do not mislead clients and that you act within the requirements of all applicable laws. … 11. By your acceptance of this engagement you agree to indemnify AMA and keep AMA indemnified from and against all claims, losses, costs or expenses which may be sustained or incurred as a consequence of any breach of these terms or arising out of or in connection with your performance of or failure to perform your rights, functions and duties as an agent of AMA or in any other respect whatsoever.
Under cl 5, Mr and Mrs Linder were required to comply with AMA's code of conduct, which was set out in a schedule to the agreement. Under cl 13, AMA agreed to maintain suitable professional indemnity insurance that would extend to cover Mr and Mrs Linder.
Schedule 1 of the contract provided for the payment of 90 percent of the upfront commission and 100 percent of the trailing commission to the partnership of "Self Generated Leads". In the case of leads supplied by AMA, the partnership was to be paid 40 percent of the upfront commission and 30 percent of the trail commission.
Under the terms of the arrangement that was put in place, applications for loans were lodged through a mortgage aggregator referred to in the documents as "Connective Aggregation". The lender paid commission payable on the loan to Connective Aggregation, which then paid the whole of the commission less its charges to AMA. AMA in turn paid the partnership after deducting the amount due to it under the contract.
The contract came to an end on 29 November 2012, when the partnership entered into a Connective Assignment Agreement with AMA by which the partnership purchased a trail book from AMA. Since then, Mrs Linder has carried on business (in partnership with her husband) as a mortgage broker trading under the name "Tailored Home Loans".
Mrs Linder and Mrs Snowden were introduced by a mutual friend. The circumstances in which that occurred are disputed and are not important. Mrs Snowden says in evidence supported by her husband that she met Mrs Linder in late 2011 or early 2012, but it seems clear that the meeting occurred in early April 2012. At that time, Mrs Snowden was looking to buy a house in Penrith which she could rent to her daughter.
Shortly after the introduction, Mrs Linder met with Mr and Mrs Snowden at their home at Blaxland, New South Wales. Mr and Mrs Snowden say that the meeting occurred in early February 2012, but it is apparent from a diary entry made by Mrs Linder that it occurred on 13 April 2012.
There is a substantial dispute about what was said during the course of the meeting.
Each of Mrs Linder and Mr and Mrs Snowden agree that Mrs Linder handed Mr and Mrs Snowden a copy of her business card, which describes Mrs Linder as an "accredited Mortgage Consultant" from AMA. According to Mrs Linder, after an introductory conversation about Mr and Mrs Snowden's home and a question about Mrs Linder's own property investments, Mrs Linder asked about the proposal to buy a property in Penrith for Mrs Snowden's daughter. There was then some discussion about how a suitable property might be located and financed. During that discussion, Mrs Linder asked if Mrs Snowden had only one child. Mrs Snowden replied that she did, but that Mr Snowden had a son by a previous marriage. Mr Snowden then asked whether Mrs Linder knew anything about the Gladstone property market which was where his son lived. Mrs Linder replied that she was actually looking to buy in Gladstone or around the Surat Basin in Miles. Mr Snowden said that his son kept telling them about how rents were going up and that there was a shortage of places to rent. Mr Snowden referred to the mining boom in that area and asked whether Mrs Linder would be able to assist his son to obtain finance to purchase a property in the area. Mrs Linder said that she didn't know without seeing "your documentation". The conversation ended with Mrs Linder asking Mr and Mrs Snowden whether they wanted her to pass on their details to Mr Kevin Smith, an agent that she had been speaking with at Surat Basin Homes. Mrs Snowden replied that she did.
Mrs Snowden gives a similar account of the early part of the conversation. Following a tour of Mr and Mrs Snowden's home, she says they sat down and Mrs Linder told Mrs Snowden that she had around 14 investment properties, that Mr and Mrs Snowden could do something similar, that she had been working for about a year on investment properties in Miles, and that she was currently looking at buying one for herself for a price of about $475,000.
During that conversation, Mrs Snowden says that Mrs Linder took out a folder of documents which included graphs and bar charts setting out information about mining towns in Queensland and the number of families moving to those towns. According to Mrs Snowden, Mrs Linder said words to the following effect: These are in the mines region in Queensland and the rent will go through the roof. I have these properties in Miles, in Queensland. I am buying one of these as an investment in Miles. The Builder is ready to build. On average these properties will be around $475,000.00 each and they are of good quality. You buy vacant land and then build a house on it. If you rent it out, the returns would be between $1,000.00 to $1,200.00 per week.
While showing Mr and Mrs Snowden the material she had, Mrs Linder is also alleged to have said words to the effect of: … If you buy two properties here, the rental return you will get for each will more than cover your mortgage repayments for each one. The selling price for these houses would go up substantially. You'll [sic] can own the houses in 5 years' time, as by then they will be worth more than the loans to buy the land and build the houses. You can sell one of the houses at the end of five (5) years and have a surplus, which will fund your retirement. Then you can sell the second house after another five (5) years or so whenever you need the money and use that surplus.
Mrs Snowden replied that she and her husband would speak about it and get back to Mrs Linder.
Mr Snowden's evidence largely corroborates the evidence given by Mrs Snowden, although he says that he stopped paying attention part-way through the conversation because most of the talking was done by Mrs Linder and his wife.
Mrs Linder took notes during the course of the meeting and at the end of the meeting she completed a document in the nature of a checklist described as a "Fact Find" which records, against a number of printed questions, information about the proposed client and what the client was seeking to achieve. Mr and Mrs Snowden kept no notes of the meeting.
The Fact Find indicated that Mr and Mrs Snowden wanted to borrow money to refinance their existing mortgage at a better interest rate and to obtain pre-approval to purchase an investment property. It indicates that Mrs Snowden was asked a number of questions about her and her husband's financial position and whether they expected it to change over the next 6 to 12 months. Mrs Linder's notes record "Gladstone - Tony's son surveying in area - market booming". The reference to "surveying" was a reference to the fact that Mr Snowden told Mrs Linder that his son was a surveyor. Mrs Linder's notes also record: Note send Kevin Smith details to Jan [Mrs Snowden]
According to Mr and Mrs Snowden, they talked about the possibility of investing in Miles that night and decided to invest in two properties. Mrs Snowden says, in evidence corroborated by her husband, that she telephoned Mrs Linder the following day and said words to the effect of "Kimberly we will go ahead and buy two (2) houses in Queensland as you said". That conversation is denied by Mrs Linder. However, Mrs Linder accepts that shortly after the meeting on 13 April 2012, Mrs Snowden telephoned her and said that she and her husband had decided to invest in two properties in Miles. In response, Mrs Linder asked if Mrs Snowden wanted her to see what she could do about finance, to which Mrs Snowden replied that she did. Mrs Linder then asked Mrs Snowden a number of questions to generate a second "Fact Find" in relation to the proposed acquisitions. In response to a question concerning the purpose of the credit, Mrs Linder wrote ""Purchase land and construct a dwelling for investment purposes".
The Fact Find contained the following question: 1.3 How Long do you expect to remain in the credit contract? (for example - do you expect to sell the property in a certain time frame?)

In response to that question, Mrs Linder recorded Mrs Snowden's answer as "10 yrs +". Like the previous Fact Find, it also indicated that Mrs Linder asked Mrs Snowden a number of questions about her financial position and whether she expected that to change over the next 6 to 12 months, to which Mrs Snowden replied "No". It also asked a question about whether Mrs Snowden was concerned about rising interest rates against which Mrs Linder recorded the answer "Not really". Lastly, against a question concerning insurance, Mrs Linder recorded "Broker advised to check and review - customer talking to fin [financial] adviser + life broker".

It is not entirely clear what happened next. Mrs Linder says, and I accept, that it was her normal practice to prepare two documents to be sent to clients. One was described as a "Needs Analysis/Credit Proposal/Disclosure", which contained information in relation to the proposed loan and the commission that would be payable in respect of the loan. The other was a Credit Proposal/Assessment, which contained information in relation to the loan and the clients' ability to service it. Mrs Linder says, and I accept, that she prepared those documents in relation to the refinancing of Mr and Mrs Snowden's existing loan and the investment property in Penrith, although they are not in evidence. At the same time, Mrs Snowden gathered material together to be included in the applications for the new loans. Mr and Mrs Snowden did refinance their existing loan and Mrs Snowden did ultimately buy an investment property where her daughter could live. No complaints are made in relation to those transactions and nothing more needs to be said about them.
The impression given by Mrs Snowden's affidavit evidence is that, having told Mrs Linder that she proposed to buy two properties in Miles, she left it to Mrs Linder to make all the necessary arrangements. However, that cannot be right. On 23 April 2012, Mr Smith sent Mrs Snowden two purchase orders for 100 Miles and 104 Miles, although only the purchase order for 100 Miles is in evidence. It is apparent from that purchase order that Mrs Snowden spoke to Mr Smith concerning the purchase of the two properties. The day after receiving the purchase orders, Mrs Snowden sent Mr Smith a cheque for $2,000, which was a deposit on both properties. It also appears from the purchase order that Mr Smith had suggested and Mrs Snowden had agreed to use Ms Kathryn Thompson of Redbox Conveyancing to act as her conveyancer on the purchases. That is consistent with evidence given by Ms Thompson, who denies that she was introduced to Mrs Snowden by Mrs Linder.
It appears that Mrs Snowden had a number of discussions with the builder and during one of those she was told that the Queensland Government had announced an extension to 30 April 2012 of a scheme by which it granted a reduction in stamp duty and gave a grant of $10,000 to new home builders. For that reason, there was some urgency in signing the contracts for the purchase of land and the building contracts by 30 April 2012. It also appears that Mrs Snowden discussed with the builder the options available in terms of dwellings that could be built on the land that she was acquiring. At some stage, although it is not clear when, the builder provided Mrs Snowden with a copy of a lengthy email that provided information about the area and the options for houses together with a number of documents extolling the advantages of investing in the Surat Basin. The email also gave information in relation to expected rental returns. It stated that one option was a dwelling with four bedrooms and two bathrooms. In relation to that option, it said: These packages are currently selling from $376,800 up to $446,700 depending on style and size. The current rents on these homes are between $540pw & $600pw however this will increase as these homes are completed. Mrs Snowden agreed in cross-examination that she read through the material provided by the builder and relied on it.
On 30 April 2012, Mrs Snowden entered into contracts for the purchase of land at 100 Miles and 104 Miles for $169,900 for each parcel from Westdan Pty Ltd. On the same day, she entered into building contracts with Surat Basin Builders Pty Ltd for the construction of a four bedroom and two bathroom residential dwelling on each block of land for $314,900 and $320,900 respectively. All four contracts were conditional on obtaining finance. It is not entirely clear when Mrs Snowden signed those documents. However, Mrs Snowden did sign a disclosure statement attached to the contracts for the sale on 28 April 2012, which suggests that that is when she signed the contracts. In her affidavit evidence, Mrs Snowden says that she signed the documents in the presence of Mrs Linder. However, Mrs Snowden's signature was witnessed by her daughter and Mrs Snowden accepted in cross-examination that she was mistaken in her affidavit evidence.
Shortly before signing the contracts, Mrs Snowden, although she had no recollection of it, signed in respect of each property a "Buyer's Acknowledgement For Contract of Sale of Residential Property in Queensland" dated 28 April 2012. In that document, Mrs Snowden acknowledges receipt of all relevant documents including the PAMD [Property, Agents and Motor Dealers Act 2000 (Qld)] Form 30c Warning Statement. That statement contained a clear warning that the purchaser should obtain independent legal advice and an independent valuation.
At some stage, Mr and Mrs Snowden visited Miles. Mrs Snowden says in her affidavit evidence that the trip to Miles occurred after Mrs Linder visited their home to sign the contracts to purchase 100 Miles and 104 Miles. The likelihood, however, is that the trip took place at about the same time as Mrs Snowden signed the contracts. Mrs Snowden says that she and her husband spoke to a few people at the local pub about the town, but that they did not learn much. In cross-examination, she conceded that by about this stage Ms Pamela Moloney, who was a licensed real estate agent at Surat Basin Real Estate, had told her that the properties could be rented out for something in the order of $700 per week and that the builder had told them that if she chose the option of constructing a four bedroom two bathroom house, the likely rents were about $750 per week. Mrs Snowden also conceded that during their visit they spoke to a local real estate agent (not Ms Moloney), although she could not remember what was discussed.
On 16 May 2012, Ms Moloney prepared two documents entitled "Current Rental Opinion" for 100 Miles and 104 Miles. They were obtained in connection with the application for finance. The opinion for 100 Miles is in the following terms: The following statement is a current rental opinion for the property situated at: [100 Miles] Based on the market facts stated below, it is estimated that the weekly amount which may be achieved for the above mentioned property is: $680.00 to $700.00 weekly In accordance with section 21 of the Property Agents and Motor Dealers (Real Estate Agency Practice Code of Conduct) Regulation 2001, the property manager has based the rental appraisal amount on the following material facts: It is our opinion that upon completion and in current market conditions this property would rent in the above mentioned range. This information is based on comparable 4 bedroom, 2 bathroom, 2 garage homes that have recently rented.
The opinion in respect of 104 Miles was in similar terms except that it stated that the rent was $700 to $720 weekly.
Ms Moloney says that she cannot recall who requested the opinions or to whom she gave them. However, she does say that she had many telephone discussions with Mrs Snowden. She does not say that she had any discussions with Mrs Linder in relation to the two properties. Her affidavit was obtained by Mrs Linder. She was not cross-examined. Mrs Linder suggests in her evidence that the documents were given to her by Mrs Snowden. In my opinion, the likelihood is that the opinions were obtained by Mrs Snowden.
In respect of each of the two loans, Mrs Linder prepared a number of documents including: 1. a Needs Analysis/Credit Proposal/Disclosure Document (Disclosure Document); 2. a "St George Credit Proposal/Assessment"' (Credit Assessment); and 3. a credit application which was lodged electronically with supporting documents.
The first two documents were prepared for Mr and Mrs Snowden. Mrs Linder says that she is unable to find copies of those documents in relation to the loan in respect of 104 Miles. However, there is no reason to doubt that those documents were prepared and given to Mr and Mrs Snowden.
The Disclosure Document gives some information in relation to the proposed loan including the loan term (30 years), loan amount ($484,800), and loan structure (variable interest rate, interest only, 3 years). It also gives information on the commission payable by the lender in respect of the loans. The document was signed by each of Mr and Mrs Snowden and Mrs Linder on 18 May 2012.
The Credit Assessment contained the following information: Assessment New Loan amount once fully drawn $484,800 Repayments once fully drawn per month - $2440 Affordability Assessment Net Mthly Wages $10,032 Propossed [sic] Rent $3033 Total Net $13065 Commitments $2440 Basic Living $1500 Credit Card $300 Total Comitments [sic] $4240 Total Net Mthly Surplus $3389
It is plain that the amount for "proposed rent" is taken from the rental assessment provided by Ms Moloney. At the end of the document is the following "Confirmation of Documented Information": I confirm that information contained in this document is a true reflection of my personal financial position. I declare that there is nothing to declare that could have an adverse bearing on my credit application. I understand that any withholding of relevant information may create problems in the future.
Mr and Mrs Snowden's and Mrs Linder's signatures appear under that declaration.
According to Mrs Snowden, approximately six weeks after their first meeting (that is, towards the end of March 2012 on her account) she and her husband "started getting a bit nervous about the investment" so she rang Mrs Linder and asked her to come and explain "how everything is going to work". She says the following day Mrs Linder came to their house and met with both her and Mr Snowden. During that meeting, Mrs Snowden says that Mrs Linder said words to the following effect: I have been looking at these investments for over twelve months. I believe that these are good investments. This a [sic] good decision. You will get good rent returns of about $1,000 - $1,200 per week and make a difference to your lifestyle and retirement. The rental returns will cover your mortgage repayments and in 5 years time the houses will be worth more than the borrowings to acquire them.
A week later, Mrs Snowden says that Mrs Linder rang her and asked whether she and her husband had made a decision yet. Mrs Snowden replied that they had decided to proceed.
Mrs Snowden says that a few days later Mrs Linder came to their house with two sets of St George Bank Loan Application forms to be signed by Mr and Mrs Snowden. Mrs Snowden says that she explained that at that time she wanted the houses to be in her name only. Mrs Linder replied that that was fine, but that Mr Snowden would also need to sign as they were relying on his business earnings. That was agreed. At that meeting, Mrs Snowden says that Mrs Linder suggested using Ms Thompson as the conveyancer.
That account of events is denied by Mrs Linder and is not consistent with some of the objective facts, although Mrs Linder accepts that she went to Mr and Mrs Snowden's home on 18 May 2012 at which time they signed the Disclosure Document, Credit Assessment and Credit Application in respect of 100 Miles. In particular, as I have said, it seems clear that Ms Thompson was introduced to Mrs Snowden by Mr Smith in one of their early conversations leading to the purchase orders. Moreover, it is difficult to know how the sequence of events described by Mrs Snowden (and corroborated by her husband) fits in with what actually occurred.
On the same day that Mrs Linder met with Mr and Mrs Snowden, Mr Smith sent her an email drawing her attention to the fact that Surat Basin Homes would feature on a real estate program on Sky News. Mrs Linder forwarded that email to Mrs Snowden and several other clients. In her covering email she said: please see email below RE a report on Surat Basin and all that is happening, planned to happen etc. Seven new house and land packages were releases [sic] (being the final 7 in stage one) of the Pines Estate. The land has jumped 20k in price since we signed contracts 3 weeks ago … IMAGINE WHEN STAGE 2 HITS!!! Please call me for any additional info you may need on the development, the planned projects…ETC I belive [sic] that these Surat Basin investments that we are making and some of you have made coulfd [sic] potentially be amongst our best in property investment choice. …
On 20 May 2012, Mrs Linder lodged the Credit Application for 100 Miles with St George electronically.
On 7 June 2012, following a number of queries from St George, which were answered by Mrs Linder, Mrs Linder received from St George a Finance Application and Residential Loan Agreement Offer for an amount of $484,800. Subsequently, on 18 June 2012, Mrs Linder went to Mr and Mrs Snowden's home, at which time Mr and Mrs Snowden signed the Loan Agreement in respect of 100 Miles.
There was a delay in lodging a credit application with St George in respect of 104 Miles. Eventually, Mrs Linder received from St George a Residential Loan Agreement Offer for $490,800 in respect of 104 Miles, which Mr and Mrs Snowden accepted.
According to Mrs Snowden, in about September or October 2012, Mrs Linder met with Mrs Snowden and her husband at their home. Mrs Snowden says that during the meeting Mrs Linder told them that she was buying a house in Gladstone and that they should do the same. She is alleged to have said words to the effect of "The two Miles houses rental returns will more than cover your current mortgages, so you won't have to worry about them. Then you can add Gladstone to that. Your Gladstone rental returns will be enough to cover all of the mortgage repayments for Gladstone". Mrs Snowden says that she expressed some reservations, but Mrs Linder stressed the benefits of the purchase and said that she could organise the loan and building work as she was doing with the Miles properties. She is also alleged to have said words to the effect of "The value of each of the Queensland houses will go up, so if you get stuck with repayments, just sell one of the properties. You will be able to sell any of these properties in Queensland for more than you are purchasing it for", and later, "The Gladstone one will rent out for $1000 per week. Plus the value of the property will go up, so when you're ready to sell, you'll make surplus money as the value will substantially increase." Mrs Snowden said that she would think about it.
Mrs Snowden's evidence of the meeting is corroborated by evidence given by her husband. According to him, during the course of the conversation, Mrs Linder showed them some graphs, although he says that he did not pay much attention to them and in cross-examination he says that they might actually have been maps.
The evidence given by Mr and Mrs Snowden is denied by Mrs Linder. However, on 18 October 2012, Mrs Linder sent Mr and Mrs Snowden an email in which she said: I have attached some new info RE the Gladstone property market. Worth aread [sic]
According to Mrs Snowden, on the same day Mrs Linder dropped off a Contract Order Form from Glenlyon Road Development Pty Ltd relating to the purchase of the Gladstone Property and told Mrs Snowden that she (Mrs Linder) was buying lot 3 in the same development. The Order Form provided for the payment of a Reservation Fee of $5,000. Mrs Snowden says that she signed it in front of Mrs Linder. Mrs Linder denies that she did. However, the likelihood is that she did so. Mrs Linder accepts that she faxed a signed copy of the Order Form to Mrs Snowden at 5.17 pm on 19 October. The likelihood is that Mrs Snowden signed the document and gave the original to Mrs Linder who then faxed a copy to Mrs Snowden for her records.
On 5 December 2012, Mrs Snowden signed a contract with Silkwood Homes Pty Ltd for the construction of a dwelling on the Gladstone Property for $229,000. The following day she signed a contract with Glenlyon Road Developments Pty Ltd to acquire the land for $270,000. Mrs Snowden says that Mrs Linder brought the contracts to her home and that she signed them in Mrs Linder's presence. That is denied by Mrs Linder and Mrs Snowden's account seems unlikely, given that her signature on both contracts was witnessed by persons other than Mrs Linder.
On 12 December 2012, Silkwood Homes sent Mrs Snowden a letter setting out some information in relation to the building of the dwelling. Shortly after that letter was sent, Mrs Snowden says that Mrs Linder came to her home and said to her and Mr Snowden that they had a large block and should consider also building a "granny flat" (described in one appraisal as a "teenager's retreat") on it. Mrs Linder is alleged to have said "That will add to your rental income and you could get $300 per week. That'll make $1300 per week". Mr Snowden gives evidence to the same effect. Mrs Linder says that she cannot recall the conversation, although she denies that she ever discussed the amount of rent Mrs Snowden would receive other than by reference to rental appraisals that were provided in respect of the properties. She also says that there is no record in her diary of meeting Mr and Mrs Snowden at about that time.
At about the same time, CBS Property Group provided a rental appraisal addressed "To whom it may concern" stating that it was their forecast that properties consisting of "Four Bedroom, Two Bathroom, Two Car Garage + Fully Self Contained Teenagers Retreat" in Glen Eden (where the Gladstone Property is) should rent for $790 to $800 per week. It is not clear from the evidence who obtained that appraisal. It was ultimately included in the loan application submitted to the National Australia Bank (NAB).
According to Mrs Snowden, a couple of days later Mrs Linder provided her with some information in relation to the cost of building a granny flat. Although Mrs Snowden decided to proceed with the addition, there are no documents in evidence relating to it.
On 7 January 2013, John Logan & Associates provided a valuation for the Gladstone Property valuing it at $574,000 (including the second dwelling) and estimating the rental value unfurnished at $750.00 per week. It appears that the valuation was obtained by the NAB in connection with the loan application that was ultimately made to it.
On 7 February 2013, Ms Moloney provided a letter addressed "To Whom it May Concern" which said: Please accept this letter as confirmation that the anticipated weekly rent for the un-furnished property at [100 Miles] is $750.00 to $800.00.
Work on 100 Miles was completed on 23 April 2013.
On 20 May 2013, Ms Moloney sent an email to Mrs Snowden which relevantly said: Unfortunately, the enquiry for rentals in Miles has not been very strong over the last month. Of the 11 homes we have rented so far in The Pines Estate, 9 of them have been furnished. One unfurnished home was rented for $750 and the other for $800 per week. About 3 weeks ago we had strong interest from Origin Energy. In fact they advised us they were looking to rent 4 properties. A couple of weeks after that meeting they advised us they only needed 1 house at this stage. We are working with two other companies who have asked us to provide them with a list of rental properties that will be available for rent in the next 2 weeks. Your two homes are on the list that we have submitted, but at this stage no commitment has been made by either company. Mrs Snowden forwarded a copy of that email to Mrs Linder.
On 19 June 2013, Surat Basin Real Estate provided Mrs Snowden with a market appraisal for 100 Miles and 104 Miles of $450,000-$460,000 each. Mrs Snowden forwarded that appraisal to Mrs Linder on the same day.
On 3 July 2013, 104 Miles was completed.
On 29 July 2013 Mrs Snowden entered into a six month lease of 104 Miles for $650 per week. On 10 August 2013, she entered into a six month lease of 100 Miles for the same amount.
In August 2013, Mrs Linder prepared a Disclosure Document and Credit Assessment in respect of the application for a loan in relation to the Gladstone Property. Neither of those documents is in evidence. At the same time, Mrs Linder prepared a loan application to the NAB on behalf of Mr and Mrs Snowden. In connection with the loan application, CBS Property Group prepared a rental appraisal for the Gladstone Property in the following terms: It is our forecast that properties of this description in Glen Eden should rent for approximately $790.00-$800.00 per week. These properties are new and complimented with modern design aspects. Please note that this appraisal is an estimate of the current market at the time.
The loan was approved on 10 September 2013 in the amount of $531,361.89.
In late January 2014, Mrs Snowden received a call from Ray White Rural, the real estate agent then looking after 100 Miles and 104 Miles. The agent told Mrs Snowden that she would need to drop the rent for both properties to $300 per week otherwise the tenants would leave. Mrs Snowden agreed. The tenant of 104 Miles remained. However, 100 Miles was untenanted between January and March 2014.
The construction of the Gladstone Property was completed in late 2015. It was rented out in early 2016 for $325 per week. That rent decreased to $275 per week in December 2018.
The evidence is that the current market value of 100 Miles and 104 Miles is $190,000. The current market value of the Gladstone Property is $310,000.

The representations relied on

Mr and Mrs Snowden plead in paras 8 and 17 of the Commercial List Statement that Mrs Linder made the following representations in respect of both 100 and 104 Miles: 1. The rental income from the property would be sufficient to cover the interest payments on the loan of moneys to the plaintiffs for the purpose of financing the purchase of the property and building a dwelling on it; 2. The value of the property will exceed the cost of purchasing and building a dwelling on the property within a period of 5 years from the date of purchase; 3. The plaintiffs would be able to sell the property within 5 years from the date of purchase and the sale proceeds would be sufficient to repay the loan advanced to the plaintiffs for the purpose of purchasing and building on the property and also to allow for a surplus to fund the plaintiffs' retirement.
The representations are largely said to have been made orally, particularly at the meeting on 13 April 2012. However, they are also said to be contained in the Credit Assessment in respect of each loan.
Mr and Mrs Snowden plead in para 26 of the Commercial List Statement that Mrs Linder made substantially the same representations in relation to the Gladstone Property together with the following two additional ones: 1. they would profit from the demand for housing in the Gladstone area because of the mining boom; 2. … 3. the rental income from the property would be increased if the plaintiffs built a second residential dwelling on the property in the form of a granny flat;
Again, the representations are largely said to have been made orally, particularly at the meeting that occurred on or about 18 October 2012 (on the findings I have made). They are also said to have been made in the Credit Assessment for the loan in respect of the Gladstone Property, although that document is not in evidence.

Were the representations made?

Before addressing this question directly, it is necessary to make some preliminary observations.
First, Mr and Mrs Snowden must prove to the reasonable satisfaction of the Court that Mrs Linder made the representations she is alleged to have made and, in particular, that she said what she is alleged to have said.
Second, in considering whether the Court is satisfied that Mrs Linder engaged in misleading or deceptive conduct, it is important to bear in mind the frequently quoted words of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318-9, where his Honour said: In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
Those comments are particularly apposite in this case. Mr and Mrs Snowden's case depends largely on conversations that occurred more than six years before any attempt was made to record them in writing. That record was made in the context of court proceedings resulting from the fact that Mr and Mrs Snowden find themselves in serious financial difficulties as a consequence of the investments that they made. As will become apparent, some of the representations relied on by Mr and Mrs Snowden depend on subtle nuances of language and the precise context in which the words were spoken.
Third, in this case Mrs Snowden's evidence is corroborated by the evidence given by her husband. But that gives rise to a further difficulty. Mr Snowden frankly conceded that he had discussed the events giving rise to these proceedings with his wife. That concession was denied by Mrs Snowden, but I do not accept her evidence on that point. Mr and Mrs Snowden did not come across as unintelligent or ignorant about every day commercial life. But nor were they so sophisticated that they would have understood the desirability of preserving their independent recollections. They are husband and wife who find themselves in very serious financial difficulties as a consequence of what has happened. It is only natural that they would discuss the circumstances giving rise to those difficulties. It is plain from a comparison of their affidavits that the account they give of what happened is one that has been arrived at through discussion and agreement rather than recollection. That is evident from the similarity in what they say happened and what they said was said. But it is most evident from the errors that both made. So, for example, both say that the initial meeting occurred with Mrs Linder in early 2012, whereas the objective evidence suggests that it occurred on 13 April 2012. Both give evidence that Mrs Linder told them that her husband was a builder. In fact, he is a landscaper. Mrs Linder would not have misdescribed her husband's occupation.
Fourth, Mr and Mrs Snowden's evidence is contradicted by evidence given by Mrs Linder that is consistent with contemporaneous documents or other evidence. For example, on Mrs Linder's account, Mr Snowden first raised the topic of the property market in regional Queensland when he mentioned his son. That evidence is inconsistent with the evidence given by Mr and Mrs Snowden, but, as I have explained, it is supported by Mrs Linder's file note. Similarly, the effect of the evidence given by Mrs Snowden is that she was introduced to Ms Thompson by Ms Linder, whereas the Purchase Order signed by Mrs Snowden and the evidence given by Ms Thompson suggest that the introduction came from Mr Smith. Mr and Mrs Snowden both say that Mrs Linder told them that they would be able to get between $1,000 and $1,200 rent for 100 Miles and 104 Miles. But that evidence is difficult to reconcile with the appraisals provided by Ms Moloney approximately one month later and the apparent failure of Mr and Mrs Snowden to raise the discrepancy with Mrs Linder or Ms Moloney.
Taking these matters into account, I have concluded that I should not accept Mr and Mrs Snowden's evidence except to the extent that it is corroborated by documents or objective facts, involves admissions or is inherently probable.
Adopting that approach, I am not satisfied that any of the representations were made by Mrs Linder, or at least not in the form for which Mr and Mrs Snowden ultimately contended.
The difficulty with the first representation (concerning rental income covering interest payments) is that, as pleaded, it is unclear as to time. The representation might be understood simply as a representation that the expected rent would cover the expected interest payments at the time the properties were completed. On one view, that is a representation concerning the results of an arithmetic exercise. On another, it is a representation about the likely interest rates and likely rent on completion. But that is not how it is alleged the representation is to be interpreted. Rather, as finally put, Mr and Mrs Snowden contended that the representation was to be understood as a representation that, over the term of the loan (30 years), the rent would exceed the interest payments. Even on Mr and Mrs Snowden's account of the conversations with Mrs Linder, that is not what Mrs Linder said. Rather, it is contended that, in the absence of any qualification by Mrs Linder, the representation must be understood as a representation about the relationship between the rent and the interest over the term of the loan.
I am prepared to accept that at the meetings on 13 April 2012 and on or about 18 October 2012, Mrs Linder spoke enthusiastically about investing in real estate in Miles and Gladstone respectively. That conclusion is consistent with her own decision to buy properties in both towns and explains why Mrs Snowden took steps herself to invest in properties in those towns shortly after speaking to Mrs Linder. And it is quite possible that Mrs Linder said something about the fact the rent was likely to be more than necessary to cover interest payments. That is something Mrs Linder is likely to have investigated as part of her own investments and is something that reflected the position at the time.
However, I am not satisfied that anything Mrs Linder said was to be understood as a prediction about the amount of rent that Mrs Snowden would receive for the next 30 years or some indefinite period of time. As I have said, even on Mr and Mrs Snowden's account of what happened, that is not what Mrs Linder said. On Mr and Mrs Snowden's account, anything Mrs Linder said was in a context where Mrs Linder was presenting Mr and Mrs Snowden with information she had obtained from her own researches into the property market in Miles and Gladstone. Without knowing that information, it is difficult to reach a conclusion on precisely what was conveyed by what Mrs Linder actually said. Mrs Linder asked Mrs Snowden about her own views about future interest rates at the time she completed each Fact Find. As a result, anything Mrs Linder impliedly said could not have been understood as a statement about what would happen to interest rates in the future. That was a matter about which Mrs Snowden was to form her own views. And if Mrs Linder could not have been understood as saying anything about interest rates in the future, how could she have been understood as impliedly saying anything about the likelihood of rent exceeding interest costs in the future? Moreover, Mr and Mrs Snowden's evidence is that Mrs Linder stated the actual rents that Mrs Snowden would receive for the properties in Miles and the Gladstone Property. Assuming Mrs Linder made representations to that effect, those representations must have been understood as representations concerning the rent that Mrs Snowden was likely to obtain on completion. They could not have been understood as estimates of the amount of rent Mrs Snowden would receive over the next 30 years. It would be natural to interpret more generalised statements concerning rent exceeding interest as being limited in the same way.
Lastly, to Mrs Snowden's knowledge, Mrs Linder was a mortgage broker based in Western Sydney. She could not be expected to have any specialist knowledge about likely future rents in Miles or Gladstone. It is common knowledge that markets fluctuate. Consequently, there is no reason to think that any statement made by Mrs Linder about rent were anything more than statements about existing rents or expected rents at the time of completion based on enquiries she had made in connection with her own investments.
Mr and Mrs Snowden submit that unless Mrs Linder gave them a specific warning that anything she said about rent was to be understood as a statement about the likely position at the time of completion, they must be understood as statements about the next 30 years or the indefinite future. I do not accept that submission. Whether anything said by Mrs Linder required some qualification depended precisely on what Mrs Linder said. I am not satisfied that Mrs Linder said anything which required a qualification of the type for which Mr and Mrs Snowden contend. As I have explained, the context itself suggests that the qualification was implicit in anything Mrs Linder said.
I am not satisfied that either the second or third representations were made. Both representations amount to a representation that the value of the properties would exceed their purchase price within five years, although the third representation carries with it a representation that a sale after five years would produce a surplus to fund the plaintiffs' retirement. The reference in this context to "a surplus to fund the plaintiffs' retirement" must be understood as meaning nothing more than a surplus that Mr and Mrs Snowden could put towards their savings for retirement. It was not seriously suggested that Mrs Linder gave Mr and Mrs Snowden advice on the adequacy of the investments to fund their retirements. Plainly she had no expertise and no information that could provide a foundation for advice of that type.
Both representations raise similar issues to the first representation. Mr and Mrs Snowden's case appears to be that because the representations were unqualified they are to be understood as statements about what was bound to happen within five years. Put in those terms, there are three problems with the representations. First, I am not satisfied that Mrs Linder spoke in terms of a five year time frame or any particular time frame. There is no objective evidence to suggest that she did. The objective evidence - the Fact Finds that are in evidence - suggest that the timeframe Mr and Mrs Snowden were looking at was "10+ years". Why, in those circumstances, Mrs Linder would have spoken of or Mr and Mrs Snowden would have been interested in a five year timeframe is not apparent.
Second, I am not satisfied that that anything Mrs Linder said on the subject was unqualified in the way that Mr and Mrs Snowden says it was. As I have said, I accept that Mrs Linder was enthusiastic about investing in both towns. It is apparent that her enthusiasm was based on the information she had obtained, some of which it appears she passed on to Mr and Mrs Snowden. It may well be that in that context she said words to the effect that the investments were good ones; and a statement in those terms carried with it the idea that the value of the investments would increase. But none of that means that Mrs Linder made unqualified statements to the effect of those alleged. Mrs Linder struck me as someone who was careful and quite precise about what she did say; and she did not strike me as someone who would make unqualified statements to the effect of those alleged. Any statements she did make would have to be understood in the context of what else Mrs Linder said on the subject.
Third, even if Mrs Linder did make unqualified statements to the effect of those alleged, in my opinion, they were still to be interpreted as a statement about what was likely if then current market conditions continued. It was not necessary for Mrs Linder specifically to state that qualification in order for it to be understood. As I have said, Mr and Mrs Snowden knew that Mrs Linder had no particular expertise in the Queensland property market or on the question whether the mining boom in the Surat Basin would continue. As I have also said, it is common knowledge that markets can fluctuate. Any unqualified statement by Mrs Linder would have to be understood in that context.
Mr and Mrs Snowden rely on the Credit Assessment in relation to 100 Miles as supporting the oral representations made in connection with the purchase of that property and 104 Miles. But that document does not provide any support for the first representation. It contains information about rents based on the appraisal given by Mrs Moloney. It is concerned with the expected rent and interest rates at the time of completion. On its face, it records representations made by Mr and Mrs Snowden based on the information they gave Mrs Linder. The document says nothing about the likely value of 100 Miles in five years. As to the same representations in relation to the Gladstone Property, it is difficult to see how the representations could be found in a document which is not in evidence.
Two other representations are alleged to have been made in relation to the Gladstone Property. The first is a broad statement that Mr and Mrs Snowden would profit from the mining boom. That representation raises similar issues to the others. I am not satisfied that Mrs Linder made an unqualified statement in those terms; and even if she did, I do not accept that properly understood, it was a prediction that Mr and Mrs Snowden were bound to profit from the mining boom. It may well be that Mrs Linder expressed the opinion that the investment in a property in Gladstone was a good one because of the mining boom. In making a statement to that affect, it was apparent that she was simply repeating a view that was apparently widely held at the time. However, I am not satisfied that anything Mrs Linder said carried with it something in the nature of a promise that Mr and Mrs Snowden were bound to profit from an investment in property in Gladstone, which appears to be the gravamen of the representation. Again, such a representation does not seem inherently probable. Nor is it corroborated by any objective evidence.
The final representation concerns the granny flat. I accept that it is likely that someone suggested to Mrs Snowden that she include a second dwelling on the Gladstone Property; and the obvious explanation for doing so was that it was likely that that would increase the rent that she would be able to charge. However, the evidence in support of the representation is more specific than that. According to Mrs Snowden, Mrs Linder gave her precise figures on the additional rent she would be able to charge. Again, that evidence is uncorroborated. At about the same time as Mrs Linder is alleged to have told Mrs Snowden that she would get $1,000 per week rent for the main dwelling and $300 per week for the granny flat, CBS Property Group provided a rental appraisal suggesting that the total rent would be $790 to $800 per week. Shortly afterwards, John Logan & Associates provided a valuation for the Gladstone Property (including the second dwelling) estimating the rental value unfurnished at $750.00 per week. The likelihood is that Mrs Snowden would have seen both those valuations. It is improbable that at about the same time Mrs Linder would have given her completely different figures. The likelihood is that had Mrs Linder done so, Mrs Snowden would have raised the matter with Mrs Linder. However, there is no evidence that she did. Conscious of these difficulties, Mr and Mrs Snowden have sought to plead a more generalised representation. However, there is no evidence to support a representation in the pleaded terms.
Moreover, I am not satisfied that it was Mrs Linder who made the representation to Mrs Snowden. It could equally have been the builder and Mrs Snowden could now be mistaken about who raised the issue with her.
It follows from these conclusions that the case based on a contravention of s 18 of the ACL must fail. However, in the event that I am wrong, I should deal with the question whether the representations, if made, were misleading and whether Mr and Mrs Snowden relied on them.

Were the representations misleading or deceptive?

Each of the representations pleaded by Mr and Mrs Snowden concern the future. Under s 4(1) of the ACL, if a person makes a representation with respect to any future matter and the person does not have reasonable grounds for making the representation, the representation is taken to be misleading. Under s 4(2), a person is taken not to have reasonable grounds unless evidence is adduced to the contrary. There is authority in relation to the predecessors to s 4 of the ACL (s 41 of the Fair Trading Act 1987 (NSW) and s 51A of the Trade Practices Act 1974 (Cth), to the effect that in order to engage those sections, the representor has to adduce evidence to show:

some facts or circumstances;
existing at the time of the representation;
on which the representor in fact relied;
which are objectively reasonable; and
which support the representation made. See Sykes v Reserve Bank of Australia (1998) 88 FCR 511 at 513 per Heerey J; City of Botany Bay Council v Jazabas Pty Limited (ACN 060 105 053) [2001] NSWCA 94 at [84]; Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 7) [2008] FCA 1364 at [418]; Willett v Thomas [2012] NSWCA 97 at [41]. Cf Cummings v Lewis (1993) 41 FCR 599 at 565-6 per Sheppard and Neaves JJ.

Whether the third of these requirements survives the replacement of those provisions by s 4 of the ACL may be open to some doubt. However, it is not necessary to resolve the issue in this case. Whether or not Mrs Linder made the representations, it seems apparent that she had opinions on the property markets in Miles and Gladstone that were based on information she had obtained. Consequently, it can be said that she in fact held those opinions.
Mrs Linder accepts that if the first representation was a representation concerning rent over the next 30 years and if it was made, she did not have reasonable grounds for making it and that therefore it was misleading. On the other hand, if the representation was simply a representation that the expected rent was likely to exceed the interest payments, then I accept that Mrs Linder has adduced evidence that there were reasonable grounds for making the representation both in relation to the properties in Miles and the Gladstone Property; and Mr and Mrs Snowden have not proved the contrary.
There is no suggestion that the figures used by Mrs Linder as the interest payable in respect of the relevant loans were not based on reasonable grounds. As to the rent, in the case of each property, there was objective evidence in the form of appraisals from real estate agents that the rent would be more than the interest payments. Although those appraisals were obtained after the representations were allegedly made, they were obtained sufficiently soon after the representations to provide objective evidence of what the expected rent was at the time the representations were made. Moreover, Mrs Linder had undertaken her own investigations of the property markets in Miles and Gladstone. The results of those investigations are not in evidence. However, it is reasonable to infer that they were consistent with the appraisals of Mrs Snowden's properties. That is sufficient to discharge the evidential onus imposed by s 4(2) of the ACL.
There is also a question of how the second and third representations are to be interpreted. If they are to be interpreted as representations to the effect that the properties were bound to increase in value over a five year period, there were no reasonable grounds for making the representations. There could be no certainty that the resources boom that underpinned the increases in prices would continue for a five year period. Similarly, if the third representation is to be interpreted as a representation concerning Mr and Mrs Snowden's needs in retirement and the ability of the investments to meet those needs, then plainly Mrs Linder did not have reasonable grounds for making the representation. Apart from anything else, she had no information concerning Mr and Mrs Snowden's retirement needs.
However, if the representations were representations that the properties could be expected to increase in value over the five year period, with the result that they could be sold for a profit, then in my opinion there was evidence that Mrs Linder had reasonable grounds for making the representations; and Mr and Mrs Snowden have not proved the absence of reasonable grounds. At the time the representations were allegedly made, there was objective evidence that there was high demand for residential property in Miles and Gladstone as a result of the resources boom in those areas. In particular, the material provided to Mrs Snowden by the builder in Miles supported that conclusion. That is consistent with what Mr Snowden's son had told Mr Snowden. Although it is not clear what material, if any, Mrs Linder showed Mr and Mrs Snowden, it is reasonable to infer that any material she did show them included similar information. Again, that is sufficient to discharge the evidential onus imposed by s 4(2) of the ACL.
In my opinion, the fourth representation (that Mr and Mrs Snowden would profit from the mining boom) is of such a generalised nature that it is in the nature of puffery and cannot be misleading. In any event, it cannot convey more than the second or third representations and consequently does not raise any issue in addition to those raised by those representations.
The difficulty in considering whether the fifth representation was misleading is that, as I have explained, the form of the pleaded representation is quite different from the evidence that supports it. In my opinion, the pleaded representation was not misleading. The result of adding the granny flat was to increase the number of bedrooms from four to five and the number of bathrooms from two to three. It seems obvious that an increase in the number of bedrooms and bathrooms provided an evidentiary basis for saying that Mrs Snowden would be able to charge additional rent. It follows that the representation was not misleading.

Reliance

In order to establish loss, Mr and Mrs Snowden must prove that they relied on the representations.
I am not satisfied that Mr and Mrs Snowden relied on any of the representations made by Mrs Linder. Mr and Mrs Snowden may have regarded Mrs Linder as an astute real property investor and they may have taken comfort from the fact that she had bought or was planning herself to buy investment properties in Miles and Gladstone at about the same time as Mr and Mrs Snowden. But it does not follow from that that Mr and Mrs Snowden relied on the representations.
Mr and Mrs Snowden knew that Mrs Linder was a mortgage broker based in Western Sydney. They must have appreciated that she had no particular knowledge of the property markets in Miles and Gladstone and that she was basing her own decisions on information she had obtained. Mr Snowden was told by his son that the market in Gladstone was booming. Mr and Mrs Snowden made their own enquiries concerning the property market in Miles and were provided with information by the builder on which Mrs Snowden accepted she relied. In my opinion, the reality was that they were caught up in the general enthusiasm for the property market in the Surat Basin and surrounding areas and that is what they relied on rather than any particular representations made by Mrs Linder.
The evidence given by Mr and Mrs Snowden of Mrs Linder's representations in relation to rent were representations which included representations concerning the actual rent that Mrs Snowden could expect to obtain. Within a short period of time after each representation concerning rent is alleged to have been made, Mrs Snowden knew from rental appraisals she obtained that the representations were not true. Nonetheless, she proceeded with the investments and, in particular, she and her husband proceeded with the relevant loan applications. In doing so, they must have relied on the independent appraisals and valuations they obtained from experts at the time, not on what Mrs Linder is alleged to have said.
Mrs Snowden's evidence that she relied on Mrs Linder in deciding to include the granny flat in the Gladstone Property is also implausible. At some time after paying a deposit for the Miles properties, the question arose whether Mrs Snowden should obtain a "furniture pack" from the builder as well. It appears from a file note made by Mrs Linder that Mrs Snowden discussed the issue with the builder and concluded that the additional rent that she would obtain did not justify the expense. The likelihood is that Mrs Snowden would have made similar enquiries in relation to including an additional dwelling on the Gladstone Property. Although Mrs Snowden's evidence is that Mrs Linder told her about the additional rent she could obtain by including the additional dwelling on the property and the additional costs of building the second dwelling, there is no evidence of what those costs were or of any calculation done by Mrs Snowden which explains how she arrived at the conclusion she did. Without more, I am not satisfied that Mrs Snowden relied on anything Mrs Linder said in deciding to proceed with the second dwelling.

Loss

Mr and Mrs Snowden claim: 1. The difference between the amount of the loan in respect of each property and the current value of the property (referred to as Acquisition Costs); 2. The interest they have paid in respect of each loan less the benefits they have received in respect of each property (in the form of rent and tax deductions) (referred to as Direct Losses)
It is common ground that the Acquisition Costs in respect of 100 Miles are $291,922.74 ($481,922.74 less $190,000) and the Direct Losses are $31,260.15. The figures for 104 Miles are $306,776.12 ($496,776.12 less $190,000) and $41,648.42 respectively and for the Gladstone Property $217,109.03 ($527,109.03 less $310,000) and $36,501.53 respectively.
Whether that is an appropriate method of assessing Mr and Mrs Snowden's loss depends on whether the circumstances that have brought about the loss can be regarded as arising from the wrongful conduct or whether the loss is extrinsic to that conduct. As Dixon J explained in Potts v Miller (1940) 64 CLR 282 at 298 in a passage quoted with approval by the High Court in HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; [2004] HCA 54 at [40]: If the cause is inherent in the thing itself, then its existence should be taken into account in arriving at the real value of the shares or other things at the time of the purchase. If the cause be 'independent', 'extrinsic', 'supervening' or 'accidental', then the additional loss is not the consequence of the inducement.
In the present case, it seems clear that what brought about the decline in value of the properties and the rent was the fact that, contrary to expectations, the resources boom did not continue and the demand for housing in Miles and Gladstone decreased substantially as a result. Normally, that event would be regarded as one independent of the representations, with the result that the appropriate measure of loss is to compare value and price at the time the properties were acquired: see Potts v Miller (1940) 64 CLR 282. Mr and Mrs Snowden have led no evidence concerning the true value of the properties at the time that Mrs Snowden acquired them. There is no evidence to suggest that she could not have sold them on completion or beforehand. On that basis, it is doubtful that Mr and Mrs Snowden suffered any loss as a consequence of any misleading conduct on the part of Mrs Linder. The only qualification to that conclusion is that if the representations were found to be unqualified representations concerning the future, then it might be appropriate to assess the loss in the way contended for by Mr and Mrs Snowden. That would involve conclusions contrary to the ones I have reached; and before it was possible to know whether damages should be assessed on that basis for that reason, it would be necessary to know precisely what representations were found to be made.
One other point should be made about the claim for damages. On any view, Mr and Mrs Snowden would not be entitled to damages calculated in the way they claim in relation to the Gladstone Property if it was found that Mrs Linder made a misrepresentation in relation to the second dwelling. The case in relation to that representation appears to be that Mrs Snowden would not have agreed to the construction of the second dwelling if the representation had not been made. In order to assess damages arising from that representation, it would be necessary to know the difference in value between the Gladstone Property with and without the additional dwelling and the difference in rent with and without it. No evidence has been led on those matters. Consequently, any claim for damages arising from that representation would fail for that reason.

Negligence

The claim in negligence is that Mrs Linder advised Mr and Mrs Snowden to invest in residential properties in Queensland by purchasing vacant land and building residential dwellings on the land and that if they did so: (a) the rental income from any such property would be sufficient to cover the interest payments on the loan of moneys advanced to the plaintiffs for the purpose of financing the purchase of the property and the building works; (b) the value of any such property would exceed the cost of purchasing and building on the property within a period of 5 years from the date of purchase; (c) the plaintiffs would be able to sell any such property within 5 years from the date of purchase and the sale proceeds would be sufficient to repay the loan advanced to the plaintiffs for the purpose of purchasing and building on the property and also to allow for a surplus to fund the plaintiffs' retirement, (the Investment and Financial Advice)
Mrs Linder is alleged to have owed a duty of care in giving that advice and is said to have breached that duty by failing to advise them that the value of the properties or the rent that Mrs Snowden might receive for them could decline in the future, and by failing to advise them to obtain independent financial advice.
In my opinion, that claim must fail for similar reasons to the claim based on s 18 of the ACL. In particular, the claim depends on findings that Mrs Linder made statements in relation to rent and the value of the properties which I am not satisfied she did make. Similarly, I am not satisfied that Mr and Mrs Snowden relied on any advice Mrs Linder did give.
In addition, I do not accept that Mrs Linder owed Mr and Mrs Snowden a duty of care in the terms alleged for two reasons.
First, in my opinion, the relationship between Mrs Linder and Mr and Mrs Snowden was not one which gave rise to a duty to take reasonable care to give investment advice. In determining whether a duty of care exists in the context of a relationship that falls outside the established categories in which a duty exists, the task of the Court is to undertake a close analysis of the facts and circumstances of the parties' relationship having regard to "salient features" which determine the appropriateness of imposing a duty to take reasonable care to avoid harm and injury: Caltex Refineries (QLD) Pty Ltd v Stavar [2009] NSWCA 258 at [102]-[103] per Allsop P. Those "salient features" include, but are not limited to, the nature and foreseeability of the harm alleged, the control that may be exercised to avoid harm, the respective positions and capacities of the parties, vulnerability, reliance, and any assumption of responsibility.
In particular, vulnerability is to be understood as encompassing the likelihood that a plaintiff could suffer damage if reasonable care was not taken, as well as the plaintiffs' inability to protect themselves from the consequences of the defendant's lack of reasonable care: Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515; [2004] HCA 16 at [23] per Gleeson CJ, Gummow, Hayne and Heydon JJ. The requirement of reasonable reliance requires that the circumstances must be such that it is reasonable for someone to seek, accept and rely on what is said. The nature of the subject matter, the occasion of the interchange, and the identity and respective positions, knowledge and capacities of the parties are factors that will determine the reasonableness of the reliance: Mutual Life & Citizens' Assurance Co Ltd v Evatt (1968) 122 CLR 556 at 571 per Barwick CJ.
In the present case, as I have said, Mrs Linder was, to the knowledge of Mr and Mrs Snowden, a mortgage broker with no particular knowledge of the Queensland real estate market. It must have been apparent that any information Mrs Linder conveyed to Mr and Mrs Snowden was based on the opinions and projections of others. It was open to Mr and Mrs Snowden to make enquiries of people with expertise and knowledge of the relevant markets and, to some extent at least, they did so. Consequently, Mr and Mrs Snowden were not vulnerable to Mrs Linder's conduct and it was not reasonable of them to rely on her advice, when they must have known that she had no particular expertise to give it, that she herself was relying on the advice of others and when they were in a position to seek advice from others with expertise.
Second, s 5H(1) of the Civil Liability Act 2002 (NSW) provides that: A person (the defendant) does not owe a duty of care to another person (the plaintiff) to warn of an obvious risk to the plaintiff.
"Obvious risk" is defined in s 5F in the following terms: 5F Meaning of "obvious risk" (1) For the purposes of this Division, an obvious risk to a person who suffers harm is a risk that, in the circumstances, would have been obvious to a reasonable person in the position of that person. (2) Obvious risks include risks that are patent or a matter of common knowledge. (3) A risk of something occurring can be an obvious risk even though it has a low probability of occurring. (4) A risk can be an obvious risk even if the risk (or a condition or circumstance that gives rise to the risk) is not prominent, conspicuous or physically observable.
The substance of Mr and Mrs Snowden's complaint is that Mrs Linder failed to warn them that the rent for or value of the properties could go down and failed to warn them to obtain independent financial advice. In my opinion, the risks that the property market or rents might go down were obvious risks within the meaning of s 5H. Consequently, there was no duty to warn of those risks. Mrs Linder was told that Mr and Mrs Snowden were seeking financial advice. Consequently, she could not have owed them a duty to advise them to do so.

Breach of fiduciary duties

The requirements for a fiduciary relationship are well established. The essential feature of all such relationships is that there must be an undertaking or agreement by the fiduciary to act for, on behalf of, or in the interests of, another person in the exercise of a power or discretion that will affect the interests of that other person in a legal or practical sense. It is a relationship that provides the fiduciary with an opportunity to exercise that power or discretion to the detriment of the other person who is, as a consequence, vulnerable to abuse by the fiduciary of their office: Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 96-7 per Mason J; Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165 at 196; per McHugh, Gummow, Hayne and Callinan JJ.
The categories of relationship that may be characterised as fiduciary are not closed: Hospital Products at 68 per Gibbs CJ. The nature and extent of any fiduciary duties owed will depend on that relationship and the circumstances in which it arises: Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296 at [179]; Sliteris v Ljubic [2014] NSWSC 1632 at [42] per Black J. Courts have recognised that professional advisers such as stockbrokers and accountants may owe fiduciary obligations: see, for example, Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 at 385 per Brennan J; Wyse & Young International Pty Limited v Sanna [2019] NSWSC 683 at [203] per Brereton J and the cases cited there.
I am prepared to accept that Mrs Linder as a mortgage broker owed Mr and Mrs Snowden fiduciary duties in connection with arranging mortgage finance for them. However, it is well established that fiduciary duties are proscriptive and not prescriptive: Breen v Williams (1995) 186 CLR 71 at 113 per Gaudron and McHugh JJ; Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165 at 197-198 per McHugh, Gummow, Hayne and Callinan JJ. Contrary to Mr and Mrs Snowden's contentions, there is no fiduciary duty to act in Mr and Mrs Snowden's best interests. For that reason alone, the claim must fail.

Was AMA liable for Mrs Linder's conduct?

Having regard to the conclusions I have reached, this question does not arise. I should, however, say something about it in the event that I am wrong.
AMA is said to be liable for Mrs Linder's conduct on the basis that she was an employee or agent. I do not accept that she was an employee. However, I accept that she was AMA's agent.
The question whether an employer-employee relationship exists is a question of fact to be determined objectively. All the circumstances and features of the relationship must be considered: Hollis v Vabu Pty Ltd (2001) 207 CLR 21; [2001] HCA 44 at [24] per Gleeson CJ, McHugh, Gummow, Kirby and Hayne JJ; Stevens v Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16 at 29 per Mason J. The indicia of a relationship of employment are not closed or limited.
What must be considered is the degree of control exercised by the putative employer over the putative employee. What must also be considered, although the relevance of a factor will depend on the particular circumstances, are the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work, the provision for holiday leave, the deduction of income tax, and any delegation of work by the putative employee: Stevens v Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16 at 24 per Mason J. In all cases, parties cannot, through giving a label to a relationship, confer a particular legal character on that relationship that it does not actually possess: South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 1541 at [134] per Finn J.
I do not accept that there was an employer-employee relationship between AMA and Mrs Linder. The relationship between them arose from the contract dated 23 April 2007. That contract was a contract between AMA and the partnership carried on by Mr and Mrs Linder. The evidence is that the commission payable under the contract was paid into an account in the name of the partnership and Mrs Linder received a share of the profits of the partnership. Although not conclusive, the contract states that it does not create a relationship of employer and employee. Under the terms of the contract, the partnership, and Mrs Linder in particular, is entitled to carry on other businesses. Mrs Linder was not paid employee benefits such as wages, superannuation, holiday pay or sick pay. She was not required to attend a place of employment or work any particular hours. Under the terms of the agreement, Mrs Linder was required to supply certain facilities and equipment, such as a reliable vehicle and mobile telephone, a suitably equipped office and a computer. AMA did not reimburse her for costs associated with engaging in the activities of a mortgage broker, other than arranging for professional indemnity insurance. Those matters are sufficient to establish that she was not an employee.
An agent is a person who acts by agreement (which may be express or implied) on behalf of another and is subject to the control of that other person in relation to the activities the subject of the agency relationship: South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 1541 at [136] per Finn J which was cited with approval by the Court of Appeal in Tonto Home Loans Australia Pty Ltd v Tavares; FirstMac Ltd v Di Benedetto; FirstMac Ltd v O'Donnell [2011] NSWCA 389 at [175] per Allsop P (with Bathurst CJ and Campbell JA agreeing).
In my opinion, Mrs Linder (or, more accurately, the partnership through Mrs Linder) was acting as the agent of AMA in arranging mortgage finance for clients. Mrs Linder was equipped with business cards identifying her as a representative of AMA. The agreement described Mrs Linder as an agent of or as representing AMA and sought to control the manner in which she did so. So, for example, cl 2 of the agreement permitted Mrs Linder to engage in other businesses but stated that "You must make it clear to all persons with whom you deal that you are not the agent of or in any way connected with Australian Mortgage Assist in respect of any business other than that established under this engagement". The words "other than" imply that the parties intended that Mrs Linder was an agent of AMA in connection with the business it carried on. Clause 8 of the agreement described Mrs Linder as "representing AMA" and sought to impose obligations on Mrs Linder in connection with that representation. Clause 5 of the agreement required Mrs Linder to comply with AMA's code of conduct. Schedule 3 to the agreement set out what were described as "Agents Equipment and expenses". The agreement contemplated that Mrs Linder would arrange mortgages for clients introduced by AMA. The fees earned by Mrs Linder were paid to AMA and it paid a commission to the partnership, the amount of which depended on whether the client was introduced by AMA or found by Mrs Linder.
The question remains whether Mrs Linder was acting within the scope of her authority as an agent in engaging in the conduct about which Mr and Mrs Snowden complain. Had it been necessary to do so, I would have concluded that she was. Mrs Linder was originally retained by Mr and Mrs Snowden to obtain mortgage finance for them. Mrs Linder was not conducting some separate business and, if she made the representations on which she and AMA are sued, the likelihood is that they were made in order to attract further business, which would benefit both her (or the partnership) and AMA. There was no other relationship between Mrs Linder and Mr and Mrs Snowden and there was no other benefit that Mrs Linder would receive from encouraging Mrs Snowden to buy additional investment properties apart from the relationship and the benefits arising from the fact that Mrs Linder was a mortgage broker and Mr and Mrs Snowden needed mortgage financing to make the investments.
If Mrs Linder engaged in the conduct she is alleged to have engaged in, it is not to the point to say that that conduct amounted to financial advice, which was outside the scope of the usual activities of a mortgage broker. The conduct was still engaged in to further Mrs Linder's business as a mortgage broker; and that was the business she carried on as agent for AMA. That is sufficient to make AMA liable for Mrs Linder's conduct: see, for example, Colonial Mutual Life Assurance Society Ltd v Producers & Citizens Co-operative Assurance Company of Australia Ltd (1931) 46 CLR 41 at 46-47 per Gavan Duffy CJ and Starke J.
AMA submitted that, in any event, it was not liable for Mrs Linder's conduct in relation to the Gladstone Property because that conduct occurred after termination of the contract dated 23 April 2007. However, on the findings I have made, the critical conduct, if it occurred, occurred in October 2012. The contract was not terminated until 29 November 2012. Consequently, AMA was liable for that conduct.

Contributory negligence and apportionment

Mrs Linder and AMA raise defences of contributory negligence under s 137B of the Competition and Consumer Act 2010 (Cth) to the claim for damages for a contravention of s 18 of the ACL and to the claim for damages for negligence.
AMA also raises the question whether the claim against it is an apportionable claim under s 87CD of the Competition and Consumer Act 2010 (Cth) or s 35 of the Civil Liability Act 2002 (NSW).
Having regard to the conclusions I have reached, it is unnecessary to consider these questions; and any consideration of them would depend on the precise nature of any liability that might be found to exist. For that reason, I have not considered those issues.

Conclusion and orders

It follows from what I have said that the proceedings must be dismissed. I did not hear submissions on costs. However, in the normal course of events, Mr and Mrs Snowden would have to pay AMA' s and Mrs Linder's costs. In those circumstances, it would be appropriate to make that order but give the parties an opportunity to submit that some other costs order should be made if that is what they contend.
The orders of the Court are: 1. The proceedings be dismissed; 2. The plaintiffs pay the defendants' costs of the proceedings; 3. Leave to any party to make an application to vary order (2) on or before 7 February 2020.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 December 2019

Australian Consumer Law Civil Liability Act 2002(NSW)

Trade Practices Act 1974(Cth)

Agents and Motor Dealers Act 2000(Qld)

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