District Court of WA|2008-02-22

TERRANOVA & ANOR -v- AUXIL PTY LTD & ORS [2008] WADC 29 (22 February 2008)

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA

CITATION : TERRANOVA & ANOR -v- AUXIL PTY LTD & ORS [2008] WADC 29

Negligent misstatement and misleading or deceptive conduct - Real estate agent wrongly advising semiliterate vendors that offer to purchase their land contained certain terms, which it did not, and in reliance of which, vendors accepted the offer - Whether plaintiffs entitled to damages and if so, method and timing of assessment of those damages - Third party claim by real estate agent against purchaser's representative seeking contribution and/or indemnity of damages payable to vendors

Judgment for the plaintiffs in the sum of $131,117.36

1 This action involves a claim by the plaintiffs, as vendors of land, against their real estate agent for failing to ensure that the plaintiffs, who had limited ability to speak and read English, signed a contract for the sale of their land containing all relevant terms which would provide for, and protect, their requirements.

2 The real estate agent orally represented to the plaintiffs that the required terms to sell their land were contained in a written offer to purchase that land. The plaintiffs were accordingly induced by their agent to accept the offer, which they did, by signing it. In the event, the offer did not contain all required terms, as a result of which, the plaintiffs allege that they have suffered loss and damage leading to this action against the defendants, being the real estate agent (second defendant) and the company in which he worked (first defendant).

3 The defendants, in turn, issued indemnity/contribution proceedings against the first and second third parties. It was the first third party who, on behalf of the second third party, presented the written offer to purchase the plaintiff's land and it was the first third party who made an oral representation regarding that offer when he presented it to the second defendant. The second defendant relied on that oral representation when he later told the plaintiffs that the written offer contained all required terms. This action concerns those oral representations.

4 The claim has not been pursued against the third and fourth third parties.

5 The plaintiffs, Mr and Mrs Terranova, are both approximately 60 years of age and have both been in Australia for approximately 40 years. Mr Terranova is a grano worker. Mrs Terranova undertakes book work for her husband. Both have a limited ability to read and speak English. In the case of Mr Terranova, this became evident when he attempted to read the oath. During the course of his evidence, he was simply unable to read certain terms of various offers to purchase the land which he owned jointly with his wife, who was better able to read and speak English than Mr Terranova but, her capacity was also noticeably limited.

6 The subject land, comprising 8 acres, had been purchased in about 1992 by Mr and Mrs Terranova at Landsdale for $260,000. In 2001, they determined to sell it. Their daughter-in-law worked in the first defendant's real estate agency as a secretary and she referred them to the second defendant.

7 On 4 November 2001, the plaintiffs instructed the second defendant, Mr Oud, a licensed real estate sales representative employed by the first defendant, Auxil Pty Ltd trading as Merewether Oud, real estate agents in Kalamunda, to sell their land. In so trading, Auxil Pty Ltd was engaged in trade or commerce.

8 Mr Oud is now 69 years of age and retired. He had been a licensed real estate representative since 1975 and as such, he might be expected to "know what properties sell and what properties won't sell", as stated by him. Although his office was in Kalamunda, he said that he had experience to sell property in Landsdale and that he had sufficient experience to represent the plaintiffs on the sale of their property.

9 The first defendant was to receive a commission on the sale of the property in the sum of $20,000 plus GST.

10 Mr Oud had sufficient confidence in his ability to sell the plaintiffs' property that he spent money on advertising, including a "For Sale" sign, newspaper advertisements and marketing. It is not in dispute that any purchaser of the property would subdivide it into residential lots for resale.

11 Mr Oud received numerous enquiries and thought that he would receive an offer on the property. He thought that he would make money by selling the property at a price approaching $1.7 million, although, because that figure was determined by the plaintiffs, he did not, at least in the early stages of this matter, carry out an appraisal on the property.

12 In February 2002, Mr Oud received an offer to purchase the property in the sum of $800,000. This offer was presented by Mr Boyle, the first third party. The purchaser was stated to be Fimmano Consultancy Services Limited and/or an unnamed nominee. Fimmano is the third third party in this action.

13 I should note here, that, at some stage, Mr Boyle told Mr Oud that he was not seeking a conjunctional agency and so Mr Oud would retain all of the commission on the sale of the plaintiffs' property which Mr Oud thought "was bit of a carrot for me to sell his offer to the vendors".

14 Mr and Mrs Terranova counter-offered in the sum of $1,420,000, as to which Fimmano made a further counter-offer of $1,050,000. The plaintiffs counter-offered again at $1,400,000. This was not accepted. This series of transactions can be found in Exhibits 2.1 and 2.2.

15 Subsequently on 30 April 2002, Mr Boyle presented a further offer from Fimmano and/or an unnamed nominee in the sum of $1,125,000. This offer was brought by Mr Boyle to Mr Oud, who in turn, presented it to the plaintiffs. There were no further negotiations for about two weeks. Then the plaintiffs instructed Mr Oud to make a counter-offer in the sum of $1,300,000. Mr Oud accordingly wrote this figure on the offer. However, the plaintiffs then instructed Mr Oud to score through the written figure of $1,300,000 and to substitute it with his suggested figure of $1,275,000 and to provide a further clause 9 providing for the return to the plaintiffs of a block of land after the purchaser Fimmano had completed sub-division of the property. This method of structuring the purchase price to include a cash sum and the transfer of a block to the plaintiffs was Mr Oud's solution to "rekindle the negotiations" (Exhibit 21, par 57).

16 Mr Oud recommended that there be an annexure to the counter-offer containing various terms as to sub-division and settlement. Such terms were contained in a document entitled "Annexure A". This offer and counter-offer are contained in Exhibits 9, 3 and 10. The counter-offer was probably made on 16 May 2002, but it was not accepted by Fimmano.

17 The next offer received from Fimmano and/or unnamed nominee via Mr Boyle is dated 12 June 2002 (Exhibit 4). This provided for a purchase price of $1,275,000 and the return to the plaintiffs of a block of land after sub-division. Clause 9 of this offer from Fimmano reads as follows:

One Block is to Be retained by the Vendors after subdivision and is completed, and the Block is to be 800m² approx and to be on the Eastern Boundary Top end of Mossfield Ret." (sic)

18 The offer further contained a cl 8 as to due diligence and a cl 10 referring to Annexure A requiring certain matters, including settlement, no later than 1 November 2002. The plaintiffs counter-offered that offer with a cl 11 requiring settlement within "90 day's (sic) from 16 May 2002". That counter-offer was never accepted by Fimmano.

19 There then followed a further offer from Fimmano dated 26 August 2002. This offer was again brought to Mr Oud by Mr Boyle. It also provided for a purchase price of $1,275,000 with settlement on or before 1 April 2003, although, that date has been written over another date, the precise detail of which cannot be ascertained by examining the document (Exhibit 16) but, it could well have been 1 November 2002. Of importance is the fact that this offer did not provide for a block to be transferred back to the plaintiffs after sub-division had been completed. Further, this offer, although in the name of Fimmano and/or nominee, nominated Cityzone Holdings Pty Ltd, the second third party, as the nominee.

20 Mr Oud took this offer to the plaintiffs. He began writing an additional clause on the offer providing for a block of land to be transferred to the plaintiffs after sub-division, but, because of the late date for settlement (1 April 2003) , the plaintiffs instructed Mr Oud that they did not want to counter-offer in any event and accordingly, Mr Oud drew a line through the first page of the offer.

21 Subsequently, Mr Oud advised Mr Boyle that the offer was not accepted. He explained to him only that the settlement date was "too far away". He did not refer to the offer failing to provide for the transfer of a block of land to Mr and Mrs Terranova after the sub-division had been completed.

22 On the following day, being 27 August 2002, Mr Boyle provided yet another offer to Mr Oud. This time Cityzone Holdings Pty Ltd was named as the purchaser. Again, this offer was for the sum of $1,275,000 with settlement on or before 20 November 2002. However, this offer did not provide for a block of land to be transferred back to the plaintiffs after sub-division. That is perhaps not surprising, given that Mr Oud did not refer to the lack of such a clause when rejecting the Fimmano offer from the previous day.

23 When Mr Boyle handed the offer dated 27 August 2002 (Exhibit 11.1) to Mr Oud, he also handed to him a plan of proposed sub-division which showed a lot numbered 36 comprising 853 square metres.

Boyle said to me words to the effect 'They (being the vendors) must be happy they are getting 853 sq m'. He was standing alongside of me and the plan was resting on our reception counter.

99. I read the offer and I saw that the purchaser was now Cityzone Holdings Pty Ltd.
100. I said to Boyle words to the effect 'You have another company as the purchaser'.
101. He said words to the effect 'Yes, we are buying under the name of one of our other companies'.
102. Because of the discussion held with Boyle at his home, I understood that Boyle had some control over Cityzone Holdings and that was one of his development companies.
103. Boyle did not say to me that Cityzone was a new purchaser that was unrelated to Fimmano and the earlier negotiations.
104. I focused on the amount of the offer of $1.275 million what Boyle said about the block of 853 sq m and the diagram of proposed sub-division that he gave me, I understood that the vendors would retain a block as part of the offer.
105. I did not check the special conditions on the offer. I accepted what Boyle said."

25 In due course, Mr Oud presented the Cityzone offer to the plaintiffs, together with the plan of proposed sub-division. He told the plaintiffs that the offer met their terms, meaning that they would receive $1,275,000 and a block of land after completion of the sub-division. Mr Oud asked the plaintiffs to accept the offer. They then signed the offer by way of their acceptance thereof, together with Annexure A thereto, being in the same form as it had been previously (Exhibit 11.2). This is admitted in the pleadings. Cityzone's representative executed Annexure A on 28 August 2002 (Exhibit 7.2), although adding in a further clause 2(d) thereto, which is not presently material.

26 A copy of the accepted offer dated 27 August 2002, Annexure A thereto, the plan of proposed sub-division and the Joint Form of General Conditions for the Sale of Land 2000 Revision were marked as Exhibits 8.1 - 8.4 respectively.

27 It should be noted however, that Cityzone's representative had not signed the copy of the plan of proposed sub-division accompanying the offer and that Mr Oud did not request that the plaintiffs sign it.

28 Next, the deposit of $20,000 was paid by the purchaser. Thereafter, on 1 October 2002, Mr Boyle sent an application for rezoning (Exhibit 12.1), together with a further proposed plan of sub-division (Exhibit 12.2), to Mr Oud. The plaintiffs were required to sign the rezoning application.

29 Only at this time did Mr Oud, for the first time, read the terms of the contract for the sale of the plaintiffs' property to Cityzone. When he did so, he noticed that the contract did not record a term that Cityzone was to transfer a block of land to the plaintiffs after the proposed sub-division had been completed. This was then reported to the plaintiffs who required Mr Oud to rectify the problem. He attempted to do so by contacting Mr Boyle by telephone and arranging to meet. In due course, a meeting occurred at which Mr Boyle told the plaintiffs that the matter could be rectified.

30 The rectification was attempted by writing a clause on Annexure A to the contract for the sale of the plaintiffs' land as follows:

One block is to be retained by the vendor after sub-division has been completed and to be 800 853m² approximately on the eastern boundary."

This was then signed on 2 October 2002 by the plaintiffs and Mr Boyle, with Mr Oud signing as witness to all three signatures - see Exhibit 11.2.

31 On the same date, the plaintiffs, Mr Boyle and Mr Oud also signed the plan (Exhibit 12.2) attached to the application for sub-division. The block, which is marked thereon to be transferred to the vendors is Lot 44, comprising 800 square metres. However, according to Mr Oud, Mr Boyle wrote on the plan: "853 agreed on the 2/10/02" alongside Lot 44.

32 Mr Terranova said that Mr Boyle attended him at his workplace for him to sign this document. Mrs Terranova said that Mr Boyle attended at her home for her to sign this document.

33 The plaintiffs then believed that they had an agreement in writing by which they would sell their property for $1,275,000 with a block of land (Lot 44) of approximately 853 square metres being transferred back to them by Cityzone after completion of the sub-division.

34 One Sunday morning in early December 2002, Allan Bruce Caratti, a director of Cityzone, attended upon the plaintiffs at their home. Certain discussions took place, during which Mr Caratti professed no knowledge of the proposed transfer of a block to Mr and Mrs Terranova after sub-division.

35 In response to this development, the plaintiffs that day instructed Mr George Grasa, a solicitor from G G Legal in Fremantle. Mr Caratti, in turn, instructed Messrs Birman & Ride, solicitors in Perth.

36 On 16 December 2002, Mr Grasa wrote to Birman & Ride (Exhibit 20.1) indicating that his clients would seek rectification of the contract so as to ensure that they received the transfer of the block of land after sub-division, which they had believed was a contractual term in their dealing with Cityzone. Nonetheless, given that settlement had been extended by agreement to 16 December 2002, the plaintiffs were prepared to settle on the written terms of the contract, but they sought to reserve their rights to enforce the claim for rectification in due course, including if necessary, an injunction restraining Cityzone from dealing with Lot 44 as identified on the plan of proposed sub-division.

37 In response to this, Mr Birman wrote to Mr Grasa (Exhibit 20.2) claiming that the letter dated 16 December 2002 from Mr Grasa constituted a repudiation of the contract, which Cityzone then accepted. Mr Birman's letter also indicated that Cityzone anticipated that it would suffer:

"... substantial damages by reason of the Terranovas' conduct. We are in the process of ascertaining the quantum of the claim but we expect it to be in the order of $1.5 million."

38 On 23 December 2002, Mr Grasa sent a notice of default (Exhibit 5.2) by facsimile transmission to Mr Birman reserving the rights of the plaintiffs to future action for rectification, but requiring Cityzone to complete settlement by the payment of the balance of the purchase price, together with interest thereon, and the costs of preparing the default notice. The default notice specified a period of 14 days for rectification of the default, failing which:

"The Vendor intends to enforce the Vendor's rights and remedies under the Contract at law or in equity and the Contract may be terminated."

39 It can be seen that the default notice was not self-executing in that it did not purport to terminate the contract in the event of Cityzone not completing the contract within the specified 14 days. Rather, the notice only advised that the "Contract may be terminated".

40 Mr Birman alleged by letter dated 7 January 2003 (Exhibit 20.3) that the default notice was defective because Cityzone had previously accepted the plaintiffs' repudiation of the contract. There were further matters of defect about which Mr Birman also complained but, he sought to negotiate a solution to the problem. Mr Grasa likewise sought a solution.

41 The plaintiffs and Cityzone and their respective solicitors and counsel then attended a conference on or about 23 January 2003. This did not resolve the matter. Further letters passed between the solicitors acting for the plaintiffs and Cityzone including, on 7 February 2003, a letter from Mr Grasa to Mr Birman indicating that:

"Our clients also terminate the contract for the sale of the abovementioned land pursuant to the default notice dated the 23rd December 2002."

42 Notwithstanding this, the parties continued to negotiate and ultimately, on 4 March 2003, settlement of the contract on the terms contained therein was achieved. There had of course been the lingering threat by Cityzone of a claim for damages in the sum of approximately $1,500,000 against the plaintiffs. Further, an unsigned draft of a statutory declaration that Mr Caratti was prepared to sign was provided to the plaintiffs' solicitors by Mr Birman advising that:

(i) it was Mr Boyle who contacted Cityzone requesting that Cityzone make an offer to purchase the plaintiffs' property, which Cityzone did, but without Cityzone retaining Mr Boyle as its agent;

(ii) Mr Caratti only learned of the provision of cl 5 to Annexure A dated 28 August 2002 in about December 2002. That clause purported to vary the terms of the contract and had been signed by Mr Boyle; and

Apart from the matters that I have described above neither I nor Cityzone authorised Mr Boyle to engage in any negotiations, discussions or other matters touching upon the contract between Cityzone and the Terranovas. In particular, neither Cityzone nor I authorised Mr Boyle to meet with the Terranovas on or about 2 October 2002 or to execute the alternative annexure 'A' ie that containing clause 5 thereto."

43 In these circumstances, the plaintiffs seem to have acted reasonably and in the best interests of themselves and Cityzone in settling upon the contract pursuant to its terms. They did have the threat from Cityzone of a claim for damages against them and it is clear, that, the offer accepted by them does not contain a term providing for a block of land to be transferred to them.

44 In passing, I should note also that notwithstanding the views expressed by the parties' solicitors, my view is that the default notice was a valid default notice but, once it was not complied with after the expiration of the 14 days referred to therein, then, in the absence of termination of the contract within a reasonable time thereafter and given the subsequent ongoing negotiations aimed at settlement, it was incumbent upon the plaintiffs to issue a further notice again specifying that time was of the essence of the contract and specifying a date for completion. Only upon the issue of such a further notice, and failure by the purchaser company Cityzone to complete settlement in accordance therewith, would it then have been possible for the plaintiffs to terminate the contract.

45 Accordingly, it seems to me to be a correct view of the factual situation that the contract remained on foot and could be completed, as in fact it was completed, on 4 March 2003. I further reject the suggestion by Mr Birman that the notice of default repudiated the contract. The notice was not inconsistent with the terms of the contract. Rather, the notice called upon Cityzone to complete settlement in accordance with the contract terms, reserving to the vendors the rights which they claimed. In that circumstance, it was not possible for Cityzone to purport to accept repudiation of that contract, which is perhaps implicit in the fact that Cityzone continued to negotiate to seek completion of the contract.

Negligence and/or misleading or deceptive conduct by the second defendant

46 On the pleadings, the negligence and/or misleading and deceptive conduct alleged against the second defendant were both denied. During cross-examination of the second defendant, it was however conceded by his counsel that he had been "careless". In closing submissions, counsel also conceded that liability to the plaintiffs was admitted, save that it was not admitted that the plaintiffs had either suffered, or proved, loss and damage.

47 It is however necessary to give further consideration to relevant facts before proceeding further.

48 The starting point is that given the offer received on 30 April 2002 (Exhibit 9) from the then prospective purchaser, Fimmano, was not acceptable to Mr and Mrs Terranova, Mr Oud:

" thought that I could rekindle the negotiations on the basis that Mr and Mrs Terranova keep a right to a block in the sub-division of the property."

49 It was at this time that Mr Oud wrote cl 9 by way of counter-offer to return a block of land after sub-division to Mr and Mrs Terranova as part of the consideration. The date on which this counter-offer containing cl 9 was put to the prospective purchaser was probably 16 May 2002.

50 Mr Oud said in his evidence that he "took responsibility to get the block for" the plaintiffs. He did not however know whether such a proposal would interest Mr Boyle. Nonetheless, Mr Oud claimed to have sufficient experience to represent the plaintiffs in their sale of their property and, as he explained, he does not suggest offers to his clients "in a vacuum". Rather, he "suggests figures available which may result in the sale of property". In determining that a counter-offer should have been made in the sum of $1,275,000 together with the return of a block of land after sub-division, Mr Oud brought his "experience to bear" in arriving at that solution. He determined that the figure of $1,275,000 was the "best figure" in conjunction with the return of a block after sub-division.

51 This really suggests nothing more than to point to Mr Oud's obligation to act in the best interests of the plaintiffs and bring all skill, care and diligence to the task as required of him as their real estate sales representative. Such would necessarily require him to bring his "experience to bear", as he said, on the property's value before allowing the plaintiffs to commit to a sale thereof. This would ensure that the plaintiffs knew of, and received, fair market value for their property, unless of course it was necessary to quit that property quickly for some reason, such as dire financial circumstances, which was not the case here. There is no evidence of any reason for Mr and Mrs Terranova to sell the property quickly or at anything under market value. Indeed, Mr and Mrs Terranova were in the happy position of not needing to rush to accept any offer.

52 It is important to note that Mr Oud took responsibility for the counter-offer dated 16 May 2002 and the fact that such counter-offer included the transfer back of a block in addition to the $1,275,000 is "why I thought the deal should be signed up". This therefore places some value on the plaintiff's property, at least in Mr Oud's mind, and of course, he said that he was sufficiently experienced to act upon the sale of that property for the plaintiffs. Further, Mr Oud thought that he could sell the property for a price "approaching $1,700,000". He "held that view up to the point of the property being sold".

53 On 16 May 2002, Mr Oud prepared Annexure A as part of the counter-offer because he believed that the plaintiffs and Fimmano were "getting pretty close" to a concluded contract. This further reflects a belief by Mr Oud that a figure of $1,275,000, plus the return of a block, was a reasonable consideration to be accepted by Mr and Mrs Terranova.

54 Mr Oud accepted that in the ordinary course of events, he is expected to read any offer given to him by a prospective purchaser before discussing that offer with his vendor/client. Mr Oud's evidence was that a careful sales representative would "do that to ensure that it contained all the terms required" by his vendor/client.

55 Further, Mr Oud knew that Mr and Mrs Terranova's written and spoken English was not very good. He said in evidence that "they relied on me to convey terms of the offer - but not completely. Some of the children were always present. I knew Mr and Mrs Terranova's English was poor and that they required assistance".

56 Accordingly, upon receipt of the offer dated 26 August 2002 (Exhibit 16), Mr Oud read that offer and saw that it did not contain a block transfer clause and so he began to write in such clause himself before Mr Terranova indicated that because of the proposed late settlement date, he and his wife did not wish to accept that offer, even with a block transfer clause.

57 Notwithstanding the lack of a block transfer clause in the Fimmano offer dated 26 August 2002, Mr Oud "understood" from what Mr Boyle then said to him that there was a block transfer clause in the Cityzone offer dated 27 August 2002 (Exhibit 11.1). In his statement, Mr Oud says:

Boyle said to me words to the effect 'they (being the vendors) must be happy they are getting 853 sq ms' ..."

... I understood that the vendors would retain a block as part of the offer."andI did not check the special conditions on the offer. I accepted what Boyle said."

58 Mr Oud said in evidence that he looked only at the offer to see that Cityzone was then the purchasing company and that settlement was scheduled for 20 November 2002. He looked at the proposed plan of sub-division to see the lot which was proposed to be transferred back to the plaintiffs after sub-division. He "focused on those three things only" and asked the plaintiffs to sign the offer, which they duly did at his request and in reliance of his advice to them, thereby accepting that offer. The accepted offer was then delivered to Mr Boyle on behalf of Cityzone.

59 Accordingly, apart from the standard requirement accepted by Mr Oud for a sales representative to read any offer in any event before discussing that offer with his vendor/client, there was the added complication with the plaintiffs' accepted difficulty with written and spoken English, and given that the Fimmano offer dated 26 August 2002 did not contain a block transfer clause, there was then a special need for Mr Oud to ensure that the Cityzone offer dated 27 August 2002 contained such a block transfer before he allowed the plaintiffs to accept it and he could not simply accept what Mr Boyle had said and assume that the Cityzone offer contained such a clause. To this can be added the further fact that this was the first offer from Cityzone, although Cityzone was named as Fimmano's nominee in the offer dated 26 August 2002.

60 I also again observe that the copy plan of proposed sub-division which accompanied the Cityzone offer was not signed. Yet Mr Oud "focused on the ... diagram of proposed subdivision" (Exhibit 21 par 104). If he was so "focused" then, he should have noted that the plan had not been signed on behalf of Cityzone.

61 In these circumstances, it was inevitable that counsel for the second defendant should properly concede that the second defendant was "careless".

62 Accordingly, I make findings of fact that the second defendant was both negligent in failing to read the Cityzone offer and in his advice to the plaintiffs in that he told them that the offer met their terms, such that he asked them to accept the Cityzone offer. Further, by so advising the plaintiffs, the second defendant was guilty of misleading and deceptive conduct against the plaintiffs. He has therefore contravened s 52 of the Trade Practices Act 1974 (Cth), thus activating a claim for damages under that Act pursuant to s 75B and s 82 thereof and I will assess loss and damages pursuant to this Act.

63 The first defendant is vicariously liable for the acts of the second defendant - Brockway & Anor v Pando & Anor [2000] WASCA 192; (2000) 22 WAR 405.

64 I also find that had Mr Oud informed the plaintiffs that the offer dated 27 August 2002 from Cityzone did not contain a block transfer clause, then, they would not have accepted that offer. Their minimum price prior to this had been $1,400,000, alternatively they would only accept a lower price plus the return to them of a block after sub-division. That had been their position for some three months prior to Mr Oud's admitted "careless" act. Further, Mr Oud was aware of this on 26 August 2002 when the plaintiffs rejected Fimmano's then offer, even though the reason for rejection of that offer, without counter-offering for a block transfer clause, was the proposed late date for settlement.

65 In these circumstances, the plaintiffs claim to have lost a commercial advantage or an opportunity to sell their property for either $1,400,000 or more, or a combination of $1,275,000 or more, plus the return of a block, requiring a remedy sounding in damages requiring assessment thereof. Alternatively, they seek the value of the block as damages, given that they have already received the sum of $1,275,000.

66 As was stated in Gates v City Mutual Life Assurance Society Ltd (1985-1986) 160 CLR 1 at 11, the Trade Practices Act does not prescribe the measure of damages recoverable by a plaintiff for contravention of the provisions of Parts IV and V thereof. Accordingly, it is for the court to determine what is the appropriate measure of damages recoverable by a plaintiff who suffers loss or damage by conduct done in contravention of the relevant provisions. From Gates' case:

"... it is a question of determining how much worse off the plaintiff is as a result of entering into the transaction which the representation induced him to enter than he would have been had the transaction not taken place. This entitles the plaintiff to all the consequential loss directly flowing from his reliance on the representation ..., at least if the loss is foreseeable." (12)

and

"... the object of damages in tort is to place the plaintiff in the position in which he would have been but for the commission of the tort. This, on the authorities, is the appropriate measure of damages in relation to misleading and deceptive conduct. Had the plaintiff not suffered the defendant's negligence and contravening conduct, then, he could and would have entered into a different contract and that it would have yielded the benefit claimed." (13)

See also Esso Petroleum Co Ltd v Mardon [1976] EWCA Civ 4; [1976] QB 801 at 820 - 821.

67 In Marks v GIO Australia Holdings Limited [1998] HCA 69; (1998) 196 CLR 494 at [10] - [20], Gaudron J commented on the method of calculating damages. After referring to reliance and expectation losses in contract, her Honour referred to damages in tort being "awarded with the object of placing the plaintiff in the position in which he would have been had the tort not been committed (similar to reliance loss)", quoting from the decision in Gates at 11 - 12.

68 As to the measure of loss and damage McHugh, Hayne and Callinan JJ in Marks' case referred at [41] to damages for deceit "very often" coinciding with "the amount of the loss or damage caused by a contravention of s 52". Damages are awarded in deceit "because the plaintiff altered its position in reliance on the defendant's misrepresentation". That indeed is what Mr and Mrs Terranova did.

69 The High Court in Gates and Marks preferred the view that in cases involving misleading or deceptive conduct, that, the measure of damages in tort is appropriate in most, if not all, cases. In this case, the tortious measure seems appropriate, but, the court is not necessarily so confined. See, for example Gaudron J in Marks at [11] - [17] inclusive.

70 However, in Marks, McHugh, Hayne and Callinan JJ further explain in [48] that:

"a party that is misled suffers no prejudice or disadvantage unless it is shown that that party could have acted in some other way (or refrained from acting in some way) which would have been of greater benefit or less detriment to it from the course in fact adopted. Thus, the party that is misled will have suffered loss if a chose in action which was acquired was worth less than the amount paid for it. There may well be other ways in which it might suffer loss or damage."

71 Counsel for the defendants, however, places reliance upon Gates' case in which damage was not proved because the appellant in that case was not able to establish that, but for his reliance on the agent's representation, he could and would have entered into policies of insurance containing a disability clause of the kind represented by the agent, given that such policies were not available on the market.

72 Gates' case however is a different scenario to this case. Gates sought to buy a policy of insurance which was not available on the market. Here, the plaintiffs were selling their land and simply awaiting a purchaser with whom to deal on their required terms. They could have refrained from accepting the offer from Cityzone.

73 I have already noted that Mr Oud thought he could sell the property "for a figure approaching $1,700,000" and that he "held that view up to the point of the property being sold", together with the fact that he brought his "experience (of over 25 years) to bear", to explain why he recommended a sale price of $1,275,000 plus the transfer of a block back to the plaintiffs.

74 This is, of course, to be appreciated against the background of Mr Oud as a licensed real estate agent representative acting in the best interests of his principals, exercising the skill, care and diligence required of such a representative and being aware of his duty to advise the plaintiffs of the current market value of their Landsdale property and to ensure that they received that value.

75 I have therefore relied upon Mr Oud's evidence regarding his duties to his vendor clients, his experience which he brought "to bear" on the matter and his assessment of the property as being "prime" and even "hot" for sub-division in respect of which he had numerous enquiries, notwithstanding that the only offers were those received from Fimmano and Cityzone. I have further relied on Mr Oud's evidence that it was his suggestion of the formula regarding a cash sum of $1,275,000 and the return of a block after sub-division as being a solution by which he thought he could "rekindle" the negotiations and why "the deal should be signed up".

76 Further, it can be seen from Exhibit 4 that Fimmano indeed made an offer to the plaintiffs on 12 June 2002 providing for the purchase price of $1,275,000 and the transfer of a block back to the plaintiffs after sub-division, together with a settlement date scheduled for 1 November 2002. The only reason that offer was not accepted is because the plaintiffs wanted a settlement within 90 days from 16 May 2002.

77 Again, during subsequent negotiations in February 2003 between the plaintiffs' solicitors and Cityzone's solicitors, Mr Birman, by letter dated 7 February 2003 (Exhibit 20.13), offered on behalf of Cityzone, to settle the then dispute as follows:

2. [The plaintiffs] receive $200,000 in advance of settlement.
3. Settlement be for a sum of $1.275 million.
4. [The plaintiffs] retain a property with an area of 853m²."

78 The only differences therefore between the offer made by Fimmano on 12 June 2002 and the offer made by Cityzone in February 2003 are the extended settlement date and the early payment of $200,000. The real difference between these offers is one in respect of the reduced interest to be earned because of the later settlement date on the difference between $1.275 million less $200,000 which could have been received on the sale proceeds by the plaintiffs, less of course income tax payable on that interest, and/or, the opportunity for reinvestment by the plaintiffs in other real estate or other investments at an earlier opportunity. In this regard, I should say that, as discussed with counsel during submissions during the trial, I have disavowed any suggestion that I take judicial notice of the fact that real estate prices in Perth were, at all material times, on the increase.

79 In the circumstances, one can therefore confidently infer that a sale price of $1,400,000, or $1,275,000 plus the return of a block after sub-division, were reasonable expectations of the benefit the plaintiffs would receive on the sale of their property. The plaintiffs have not received all of that benefit and they have therefore suffered loss and damage, which was not of negligible value.

80 From the plaintiffs' evidence, it is clear that, had Mr Oud not been guilty of conduct contravening s 52, then, the plaintiffs would not have sold their property for a mere $1,275,000 and that they would have continued to market it to seek either the $1,400,000 specified by them or another sum in combination with the transfer back to them of a block after the completion of sub-division, which, when aggregated, would return $1,400,000, or more.

81 Given that this was "prime" or "hot" vacant land awaiting sub-division and that the plaintiffs were desirous of selling their property, it is not difficult on the evidence to accept that the vendors would have continued to market their property with the high probability that they would have found a buyer prepared to pay in accordance with the property's worth. Mrs Terranova gave evidence that she sought the transfer back of a block either for investment purposes or for the purpose of building a retirement home thereon.

82 The consequence of Mr Oud's contravention requires a "comparison between the position in fact of the party which alleges loss and the position that would have obtained had there been no contravention" (Marks at [53]). As noted above, had Mr Oud not been guilty of contravening conduct, then the plaintiffs would have refrained from accepting the Cityzone offer and they would have waited for a purchaser willing to offer their required terms.

83 It is important to recall that, on 26 August 2002, the plaintiffs instructed Mr Oud that they did not want to counter-offer the offer received on that date from Fimmano. That offer did not provide for a transfer of a block to the plaintiffs after sub-division and it also provided for a late settlement. In so instructing Mr Oud, the plaintiffs demonstrated their intention to await an offer of $1,400,000 cash, or its equivalent in cash and land, with a reasonably close settlement date.

84 In these circumstances, damages "should be ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued" - Sellars v Adelaide Petroleum NL [1994] HCA 4; (1993-1994) 179 CLR 332 at 355. The value of the plaintiffs' loss or damage is "ascertained by reference to the degree of probabilities or possibilities" as to which see Sellars' case, at 355 and Malec v J C Hutton Pty Ltd [1990] HCA 20; (1990) 169 CLR 638 at 643 as quoted in Sellars' case at 350 to the effect that:

"... the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability."

85 See also Murphy v Overton Investments Pty Ltd [2004] HCA 3; (2004) 216 CLR 388 at [46] and [68].

86 Given my findings, the plaintiffs are to be compensated by being placed in the position in which they would have been had the contravening conduct not occurred. The plaintiffs have therefore really lost the opportunity to sell their property for $1,400,000 or more or for $1,275,000 or more plus the return of a block of land after sub-division. On the evidence, there is a high degree of probability that they would, in due course, have found a purchaser willing to meet their requirements for the sale of their property, such that there does not seem to be any valid reason to adjust an award of damages to reflect the degree of probability, as set out in Malec's case.

87 However, the plaintiffs have transferred their property to Cityzone and they have been paid $1,275,000. The plaintiffs have therefore really lost the value of the lot which was to be transferred to them upon completion of the sub-division.

88 Counsel for the defendants next submitted that the plaintiffs have neither produced any evidence of the value of their property, nor of a block to be transferred to them. I have already referred to Mr Oud's evidence as to the value of the plaintiffs' 8 acre property.

89 Mr Don Eftos gave evidence at the trial that the block which the plaintiffs believed from the plan of proposed sub-division provided by Cityzone (Exhibit 8.3) would be transferred to them was advertised for sale after sub-division at $128,000. There was a vendor rebate of $2,500 for owner/builders to build a property on the block within a certain time, thereby reducing the property value to $125,500. In fact, according to the Department of Land Administration records, the property was transferred from Cityzone to the purchasers thereof for the sum of $123,000. Mr Eftos therefore valued the property at $125,000, but, accepted a value of $123,000.

90 Apart from the fact of sale at $123,000, counsel for the defendants objected to all other evidence relating to the block as being of a hearsay nature. Counsel also objected to the valuation on the basis that Mr Eftos did not know what the terms and conditions of sale were. Such conditions can of course relate to what is paid. However, the fact of the matter is that the land transfer specified a consideration in the sum of $123,000 and it had been registered. Title had passed to the purchasers whose names are shown in that transfer document. Ad valorem conveyance duty was paid by these purchasers on the market price of the property in a sub-division of the whole of what had previously been the plaintiffs' 8 acre property. It seems to me therefore, that, I can at least find the value of the block to be as stated in the actual stamped and registered transfer. Accordingly, I find that the value of the block which the plaintiffs had hoped would be transferred to them was the sum was $123,000.

91 Before leaving this topic, I should point out that the defendants' counsel also objected to any reliance as to the value of the plaintiffs' land being placed on either the offer dated 12 June 2002 from Fimmano (Exhibit 4) or the offer to settle from Mr Birman recorded in correspondence from Mr Grasa dated 7 February 2003 (Exhibit 20.13) by which Fimmano and Cityzone each respectively offered to purchase the property for $1.275 million plus the transfer back of a block to the plaintiffs. Counsel quoted Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370 at 378 for the proposition that the court should not pay regard to offers which had not been accepted when seeking to value land. In Pownall's case, the offers were of a hearsay nature. The Full Court, in that case, followed Gregory v Federal Commissioner of Taxation [1971] HCA 2; (1971) 123 CLR 547 at 562 which in turn relied on McDonald v Deputy Federal Commissioner of Land Tax [1915] HCA 54; (1915) 20 CLR 231 in which the High Court said at p 238 that the rules of evidence "have been adopted for the better furtherance of justice" to exclude

"the act or opinion of a third person, manifested on some former occasion, respecting the value of other land, not on oath, not in the presence of the parties, the opinion not capable of being tested by cross-examination, such that the opinion was not admissible at all to affect adversely one of the parties to the litigation."

92 However, the reasons for exclusion given by the High Court are not applicable in this case. The offers from Fimmano and Cityzone are contemporaneous with relevant events, they concern the subject property, not "other land", they have been made by third parties to this action and such offers were made to the plaintiffs.

93 In Goold v Commonwealth of Australia & Anor [1993] FCA 157; (1993) 114 ALR 135 Wilcox J of the Federal Court accepted evidence of an arm's length offer to purchase land once satisfied about the genuineness of the offer. This was followed in Henderson v Amadio (1996) 160 ALR 391, quoting Phillipou v Housing Commission of Victoria (1969) 18 LGRA 254 concluding that "it would be anomalous and unjust for the court to adopt a blanket rule excluding offer evidence" as proof of value. In these different circumstances, I propose to follow the view of Wilcox J. That does not contradict the Full Court in Pownall's case, but is based on different circumstances.

94 On this basis, the appropriate measure of the plaintiffs' loss or damage is the shortfall up to $1,400,000 or the loss of the value of the block after sub-division. Loss or damage should be determined as at the date of settlement ie, 4 March 2003 when the plaintiffs transferred their property to Cityzone for less than proper consideration (Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351). Although the sub-divided block was not transferred to the purchasers until 4 May 2004 (see Exhibit 17), the transfer was stamped at a consideration of $123,000.

95 The stamp duty imprint on the transfer appears to be dated 28 February 2003, which is somewhat surprising. The stamp duty imprint shows the gross value of the land on the transfer to be $128,000, but the consideration was $123,000 and that is the figure I intend to allow without any discount, given the offers received from Fimmano and Cityzone and the evidence of Mr Oud to which I have already referred. From this, the sum of $20,000 plus GST is to be deducted as the uncontested amount due to the first defendant on the counterclaim for commission on the sale of the plaintiffs' property. I will allow interest at the rate of 6 per cent per annum on $101,000 from 4 March 2003 to the present, resulting in a final judgment in favour of the plaintiffs in the sum of $131,117.36 calculated as follows:

4 years interest: 3 March 2003 - 4 March 2007 $ 24,240.00

96 The defendants issued a third party notice against Mr Boyle and obtained default judgment against him on 4 November 2003. By order of the Principal Registrar in Chambers made on 26 November 2007, I am now to assess damages pursuant to that judgment as part of this trial.

97 The defendants also issued a third party notice against Cityzone. That defended action has, of course, proceeded to trial.

98 The statement of claim alleges that Mr Boyle was Cityzone's "agent" and that he was negligent, reckless and guilty of misleading and deceptive conduct in advising Mr Oud that Cityzone was prepared to purchase the plaintiffs' property for $1,275,000 and to also transfer a block of 853 square metres to the plaintiffs after subdivision of the plaintiffs' property. The claim in tort alleges that Mr Boyle was a joint tortfeasor and calls in aid of it the Law Reform (Contributory Negligence and Tortfeasors') Contribution Act 1947. The claim based on misleading or deceptive conduct relies upon s 52 of the Trade Practices Act.

99 However, I am not able to identify any duty of care which a purchaser such as Cityzone or its agent would owe to Mr Oud and/or the plaintiffs accepting here, for the sake of the argument, that Mr Boyle was Cityzone's agent. In any event, I have proceeded against the defendants pursuant to s 52 of the Trade Practices Act and so I will now proceed on the defendants' claim against the third parties pursuant to that Act. This raises an issue of the status of such a claim against Mr Boyle as an individual in the event that he was not the agent of Cityzone, for there is no alternative claim against him pursuant to the provisions of the Fair Trading Act 1987. However, my findings as to misleading or deceptive conduct would equally apply to the Fair Trading Act.

100 First, it is necessary to examine the notion of misleading and deceptive conduct in more detail than was necessary in the plaintiffs' claim against the defendants.

101 In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191 at 199, Gibbs CJ said that:

Section 52 does not expressly state what person or class of persons should be considered as the possible victims for the purpose of deciding whether conduct is misleading or deceptive or likely to mislead or deceive. It seems clear enough that consideration must be given to the class of consumers likely to be affected by the conduct. Although it is true, as has often been said, that ordinarily a class of consumers may include the inexperienced as well as the experienced, and the gullible as well as the astute, the section must in my opinion be regarded as contemplating the effect of the conduct on reasonable members of the class. The heavy burdens which the section creates cannot have been intended to be imposed for the benefit of persons who fail to take reasonable care of their own interests. What is reasonable will of course depend on all the circumstances. The persons likely to be affected in the present case, the potential purchasers of a suite of furniture costing about $1,500, would, if acting reasonably, look for a label, brand or mark if they were concerned to buy a suite of particular manufacture.

The conduct of a defendant must be viewed as a whole. It would be wrong to select some words or act, which, alone, would be likely to mislead if those words or acts, when viewed in their context, were not capable of misleading. It is obvious that where the conduct complained of consists of words it would not be right to select some words only and to ignore others which provided the context which gave meaning to the particular words."

102 This was followed in HW Thomson Building Pty Ltd v Allen Property Services Pty Ltd [1983] FCA 166; (1983) 48 ALR 667 in a case concerning a speculator who contracted to purchase two home units in a tower building complex following representations by the vendor that it intended to build two further towers of home units. The purchaser was not told that there was no intention to proceed with the second tower until sufficient pre-sales off-plan had been achieved. The vendor was not contractually bound to proceed with the other two towers.

103 The vendor's conduct was held to not be misleading by reason of the purchaser's experience as a speculator in home units, the fact that the parties contemplated that a solicitor would advise the purchaser, the subject matter of the contracts and the price to be paid for the two units (see 674).

104 Further, as noted in Millers "Annotated Trade Practices Act" 25th ed par 1.52.5 referring to Equity Access Pty Ltd v Westpac Banking Corporation [1989] FCA 506; (1990) ATPR 40-994 at 50,950, Hill J in the Federal Court observed that:

Conduct will be likely to mislead or deceive if there is a 'real or not remote chance or possibility' of misleading or deception regardless of whether it is less or more than 50 per cent ... . The question of whether conduct is misleading or deceptive or likely to mislead or deceive is an objective question which the court must determine for itself.

Hence evidence that persons in the relevant class have been misled will, although admissible, not be determinative. In some cases however such evidence will be very persuasive ... .

4. ...the court must consider whether a reasonably significant number of potential purchasers would be likely to be misled or deceived."

105 It may also be relevant in an appropriate case to consider the protocols that should be followed by a particular class of persons to whom representations have been made so as to determine whether or not conduct has been misleading or deceptive or likely to mislead or deceive - Metcalfe v NZI Securities Australia Ltd [1995] FCA 1271; (1995) ATPR 41-418 at 40,671.

106 In the general sense, when a representation is relied upon as constituting misleading or deceptive conduct, proper regard should be made of an assessment of the reactions or likely reactions of the ordinary or reasonable members of the class - Campomar Sociedad Limitada & Anor v Nike International Ltd [2000] HCA 12; (2000) 202 CLR 45 at 85 - 87.

107 In Butcher & Anor v Lachlan Elder Realty Limited [2004] HCA 60; (2004) 218 CLR 592 at [37], Gleeson CJ, Hayne and Heydon JJ referred to the situation:

"... where ... a plaintiff alleges that a particular misrepresentation was made to identified persons, of whom the plaintiff was one. The plaintiff must establish a causal link between the impugned conduct and the loss that is claimed. That depends on analysing the conduct of the defendant in relation to that plaintiff alone."

108 In Havyn Pty Ltd v Webster [2005] NSWCA 182, reference was made at [86] to Butcher's case which:

"emphasises that one cannot look at a representation forming part of a course of conduct in isolation from the character of the transaction and the overall conduct here of the agent."

It was the "agent's conduct viewed as a whole" that is important - [88].

109 Whether conduct is misleading and deceptive is a question of fact to be determined in the context of the evidence as to the alleged conduct and as to the relevant surrounding facts and circumstances - Lego Australia Pty Ltd v Paul's (Merchants) Pty Ltd [1982] FCA 135; (1982) ATPR 40-308 at 43,804.

110 These cases show the approaches to cases of misleading or deceptive conduct in cases involving both the general public at large and identified individuals.

111 It is however, for the court to determine if conduct is misleading or deceptive or likely to mislead or deceive - FAI General Insurance Co Ltd v RAIA Insurance Brokers Ltd (1992) ATPR 41-176 at 40,409.

112 Further, actual evidence that a person has been misled or deceived does not conclusively establish that conduct is misleading or deceptive or likely to mislead or deceive - Taco Co of Australia Inc v Taco Bell Pty Ltd [1982] FCA 136; (1982) ATPR 40-303.

113 The representation alleged by Mr Oud to have been made by Mr Boyle that Cityzone was prepared to purchase the plaintiffs' property $1,275,000 and to also transfer a block to them was clearly wrong and therefore misleading and deceptive. The defendants accordingly rely upon what French J said in ConAgra Inc v McCain Foods (Aust) Pty Ltd [1992] FCA 159; (1992) 106 ALR 465 at 542 that:

"where some express representation is made and that representation is demonstrably false, it is not usually necessary go beyond that finding in order to conclude that it is misleading or deceptive."

and submit that I should therefore find conduct contravening s 52 against the first and third third parties and not further examine the facts.

"The case of an obvious puff might be taken as an exception. Where conduct depends upon context or surrounding circumstances to convey a particular meaning, then those factors must be taken into account but only as a way of characterising the conduct."

115 The "course of conduct ... the character of the transaction and the overall conduct here of the agent" (Havyn) and the "context and surrounding circumstances" (ConAgra) are therefore relevant.

116 In addition to this, Steytler J (as he then was) in Gardner Corporation Pty Ltd v Zed Bears Pty Ltd & Ors [2003] WASC 13 noted that conduct contravening s 52 of the Trade Practices Act:

" ...will seldom, if ever, be the sole cause of a person suffering loss and the [Trade Practices] Act directs attention to the question whether that conduct was a cause and 'does not require, or permit, the attribution of some qualification such as "solely" or "principally" to the word "by" ' " [in s 82] quoting McHugh J in Henville v Walker [2001] HCA 52; (2001) 206 CLR 459 at [163] - see [51].

"If a defendant's breach has 'materially contributed' to the loss suffered, it will be regarded as a cause of that loss even if other factors played a more significant role in producing it. McHugh J, in Henville, [106], said, in this respect, that:

'As long as the breach materially contributed to the damage, a causal connection will ordinarily exist even though the breach without more would not have brought about the damage. In exceptional cases, where an abnormal event intervenes between the breach and damage, it may be right as a matter of common sense to hold that the breach was not a cause of damage. But such cases are exceptional.' " [53]

118 When making a s 52 claim, a claimant's negligence is not usually a bar to a plaintiff succeeding when that plaintiff has proved misleading or deceptive conduct or conduct likely to mislead or deceive and a causal link is established between such contravening conduct and the claimed loss. As McHugh J said in Butcher v Lachlan at [111]:

"A corporation does not avoid liability for breach of s 52 because a person who has been the subject of misleading or deceptive conduct could have discovered the misleading or deceptive conduct by proper inquiries."

119 In support of this proposition, McHugh J referred to Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd (1987) 72 ALR 601 which was affirmed on appeal in Henjo Investments Pty Ltd & Ors v Collins Marrickville Pty Ltd [1989] FCA 246; (1989) 89 ALR 539 and Sutton v AJ Thompson Pty Ltd (in liq) (1987) 73 ALR 233 at 240 - 241. It is however instructive to consider the facts of these cases which involved failure by the person misled to make "proper inquiries".

120 Henjo's case concerned the purchase of a restaurant business. Representations were made by the vendor as to the seating of patrons in the restaurant and bar. The purchaser instructed its solicitors to investigate and confirm compliance with local government and licensing authorities' requirements as to seating in both the restaurant's bar and dining room. The solicitor failed to do so. Contrary to the authorities' restrictions, the vendor had increased seating beyond prescribed limits, but this was not ascertained by the purchaser until after completion of the purchase. Judgment was entered for the purchaser notwithstanding that verification of the representations referred to above was not sought or was inadequate.

121 Sutton's case also concerned the sale of a business in which the vendor was guilty of contravening conduct by misrepresenting the cost of materials, labour and packaging, the sale price of the product sold and the average number of units of product sold each month. The Full Federal Court upheld the principle that the purchaser was not deprived of his remedy because of a failure to check the accuracy of the vendor's representations. Sutton's case involved a pre-existing relationship with "an atmosphere of mutual trust" (239).

122 In Henjo, the Full Federal Court approved the decision of Pincus J in Neilsen v Hempston Holdings Pty Ltd (1986) 65 ALR 302 at 313 in which, on the sale of a motel, representations were made by a vendor as to occupancy rates of that motel. The purchaser failed to take reasonable care of his own interests by undertaking a proper investigation of the figures represented to him. Notwithstanding the purchaser's failure to verify the occupancy figures as represented and so discover their falsity, the purchaser succeeded with his claim by reason of reliance on the misleading and deceptive conduct, even though the contravening conduct was not the only factor in his decision to purchase the motel.

123 Another example can be found in Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 94 ALR 719, in which a solicitor, whose expertise was in trade practices, and his wife purchased a property relying on a real estate agent's brochure and advertisement and a defective certificate detailing a development control plan. The trial Judge was critical of the solicitor for not having one of his partners who was experienced in conveyancing advising and acting for him. Nonetheless, although the trial Judge found that the solicitor gave "scant attention" to the certificate, that did not mean that he understood the meaning of the zoning requirements and the misrepresentations made in the brochure and the advertisement as to zoning. Accordingly, the solicitor and his wife succeeded in their claim. A requirement for such success was actual reliance on the misleading or deceptive conduct (744). However, the trial Judge said at 744:

"A case may perhaps be imagined where an applicant is so negligent in protecting his own interests that there will be a finding of fact that the representation complained of was not in the circumstances a real inducement to his entering into a contract. In such a case the element of causation between misrepresentation and damage will have been severed by the intervention of the negligence of the applicant."

124 Counsel for the defendants referred me to Thorpe Nominees Pty Ltd v Henderson & Lahey (1988) 2 Qd R 216, in which the Full Court of Queensland dealt with the defence of novus actus interveniens in a claim for negligent advice concerning the lending of money. Counsel relies on Thorpe's case and submits that:

"Oud's response to Boyle's misrepresentations was the very thing likely to happen as a result of Boyle's misleading and deceptive conduct and as such Boyle's conduct remained operative."

125 Accepting here that Mr Boyle's misrepresentation has "materially contributed" (Gardner Corporation) to Mr Oud misleading and deceiving the plaintiffs such that the causal connection would ordinarily exist, the question is then whether, this is "a case [in which Mr Oud was] so negligent ... in protecting his own [and the plaintiffs'] interests ... [that] the element of causation between the misrepresentation and damage will have been severed by the intervention of the negligence of" Mr Oud? (Argy) or, whether Mr Oud's negligence was the "abnormal event" which has "intervene(d) between the breach and damage ... such that it may be right as a matter of common sense to hold that the breach (by Mr Boyle) was not a cause of damage" (Henville). This is to be considered against "the course of conduct ... the character of the transaction and overall conduct of the agent" (Havyn) and the "context and surrounding circumstances" (ConAgra).

126 Turning then to that issue, Derrington J in Thorpe's case at 225 referred to:

"[T]he breaking of the chain of causation and the necessity to be able to draw such a line of demarcation clearly before the later conduct will be regarded as a novus actus interveniens."

He said that this was "very much a matter of fact and degree". After reciting the trial judge's findings of fact, Derrington J went on to say that:

"His Honour was aware of the expression used in other cases to describe the degree of negligence by the second tortfeasor that would amount to a break in the chain of causation. Terms were discussed such as 'inexcusably bad': Martin v. Isbard [1946] WALawRp 8; (1946) 48 W.A.L.R. 52, 56; 'completely outside the bounds of what any reputable (solicitor) might engage in': Lawrie v. Meggitt (1974) 11 S.A.S.R. 5, 8 or 'so obviously... improper that it is in the nature of a gratuitous aggravation of the injury': South Australian Stevedoring Co. Ltd v. Holbertson [1939] SAStRp 37; [1939] S.A.S.R. 257, 264; or 'unreasonable': McKew v. Holland & Hannen & Cubitts (Scotland) Ltd [1969] UKHL 12; [1969] 3 All E.R. 1621."

127 In March v E & M H Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506, Mason CJ referred to the McKew decision, saying that the plaintiffs "unreasonable" action severed the chain of causation: He said that:

"The decision may be explained by reference to a value judgment that it would be unjust to hold the defendant legally responsible for an injury which, though it could be traced back to the defendant's wrongful conduct, was the immediate result of unreasonable action on the part of the plaintiff. But in truth the decision proceeded from a conclusion that the plaintiff's injury was the consequence of his independent and unreasonable action." (517)

(i) Mr Oud was, at all material times, a licensed real estate sales representative with over 25 years experience. He was first licensed in 1975 and had been a partner with Mr Merewether since 1984.

(ii) The person to whom Mr Boyle made his oral representation was a specific person, namely Mr Oud.

(iii) The oral representation was that "they (the vendors) must be happy they are getting 853 sq m". Mr Boyle also had a plan of proposed sub-division which he showed to Mr Oud.

(iv) Mr Oud says that Mr Boyle did not tell him what price was offered by Cityzone for the plaintiffs' property. Accordingly, Mr Oud "read the offer and [he] saw that the purchaser was now Cityzone Holdings Pty Ltd". Mr Oud "focused on the [written] amount of the offer of $1,275,000" He had to read the offer to ascertain this information, but he also focused on "what Boyle said about the block of 853 sq m and the diagram of proposed sub-division that he gave me ..." - see Mr Oud's statement above at pars 98 - 105.

(v) The oral representation must therefore be viewed in the context of the contemporaneous presentation of a written offer and Mr Oud's need to read the written offer so as to ascertain at least two important matters, being those relating to the identity of the purchaser and the purchase price.

(vi) Mr Oud also looked at the plan of proposed sub-division, but did not check the written offer to see if it was referred to therein. Again, the oral representation must be considered in light of this.

(vii) The Cityzone written offer did not refer to the return of a block measuring 853 square metres upon completion of the sub-division, or to any block, at all. The plan of proposed sub-division was not signed on behalf of Cityzone.

(viii) Mr Oud accepts that it was expected of him that he would read the offer. He said that a careful representative would do that to ensure it contained all of the terms required by his vendor. It is a protocol which he accepted that he should have followed.

(ix) Mr Oud's duty to read the offer to ensure that it contained all required terms was more critical in the facts of this case because of the difficulty Mr and Mrs Terranova had in reading English. He knew, and he accepted in his evidence, that they relied upon him "to convey" the terms of the offer to them, including terms to protect their interests, such as the block transfer claim. Accordingly, he should have read the offer to check for such a clause.

(x) Mr Oud should have read the offer to ensure that it contained a block transfer clause as represented to him by Mr Boyle. Rather, he simply "understood" that the offer contained the block transfer clause because of what Mr Boyle had misrepresented to him. He was under extreme pressure and he focused only on the facts he gleaned from the written offer that Cityzone was then the offeror, the purchase price and that the settlement date had been brought forward. He had also been provided with an unsigned plan of the proposed sub-division which he did not check against the offer to ensure that it matched the block transfer clause in the offer. He did not check that the plan was signed on behalf of Cityzone.

(xi) It was in these circumstances that Mr Oud asked the plaintiffs to sign the offer by way of their acceptance thereof, after informing them that the Cityzone offer met their required terms.

(xii) The offer was an offer to purchase land, which necessarily requires a written instrument, with all relevant terms contained therein.

129 In the circumstances, the conduct of Mr Boyle, when viewed as a whole, includes not only the oral representation, but also the contemporaneous provision of the written offer and the plan of proposed sub-division and is to be regarded in the context of a contract for the sale of land.

130 For Mr Oud to concentrate only on the oral representation of Mr Boyle and to not read the written offer beyond the three matters referred to in par (iv) above and to not look for the land transfer clause really understates the totality of what was represented to Mr Oud. To ignore the written offer was not merely a failure to make "proper inquiries" in the sense referred to by McHugh J in Butcher's case at [11].

131 It is and would have been patently obvious to a reasonable real estate sales representative and to Mr Oud upon reading Cityzone's written offer, that, although accompanied by an unsigned plan of proposed sub-division, the offer made no reference to the transfer of a block to the plaintiffs after sub-division and that as such, the oral representation and the written offer were inconsistent with each other.

132 In these circumstances, not only was further inquiry of Mr Boyle by Mr Oud required (in case Cityzone hopefully perhaps, had simply overlooked writing in the block transfer clause), but Mr and Mrs Terranova should most definitely have been told of the inconsistency, rather than being told that, to the contrary, the offer met their requirements. Further, Mr Oud should have observed that the proposed plan of sub-division had not been signed by anyone on behalf of Cityzone.

133 In Butcher's case at [41] Gleeson CJ, Hayne and Heydon JJ considered "the nature of the parties" ie, who and what they were. On the one side in that case there was a company director and his de facto wife who conducted a carpet cleaning business from their home. They were proposing a major investment in expensive real estate for family purposes. On the other side, the relevant party was a suburban real estate agent. Their Honours said:

" - that real estate agents, while they carry out tasks on behalf of their principals, are not agents in the sense of creating legal relationships between their principals and others. Here, the agent was obviously an agent for the vendor, but only in a limited sense. The legal relationship to be created by any contract of purchase was to be created by the purchasers directly - by bidding at the auction and then signing a contract."

134 Their Honours then referred "complex" questions of title to land being "quite outside what suburban real estate agents hold themselves out as doing and are likely to be able to do".

135 However, the completion of an offer to purchase real estate in Western Australia is not a "complex" task by reason of the facts that Western Australia utilises the Torrens system of land title and has adopted a commonly used standard form of contract for the sale of land approved by the Law Society of Western Australia Inc and the Real Estate Institute of WA. Licensed real estate sales agents and representatives frequently "write up" those standard forms, even drafting and providing written conditions on those standard forms. Such a form was used in this matter. And so it was that Mr Oud sought to add a written term into earlier offers referred to above providing for the transfer of a block of land to the plaintiffs after completion of sub-division of the property by the purchaser. If he was able to do that earlier, then, it cannot later be said that to read and check that the offer from Cityzone contained such a clause was a "complex" task beyond Mr Oud's capability. Rather, it was merely a routine task.

136 The oral representation to Mr Oud must also be viewed in light of his 25 plus years' experience in real estate and also in light of who, or perhaps more correctly, what Mr Boyle was, or purported to be.

137 Mr Boyle told Mr Oud words "to the effect I am a real estate agent". Strangely perhaps, he was not seeking a conjunctional agent's commission. Mr Boyle further said that he was "a director of several companies" and that he had "a company that is interested in purchasing the land". Subsequently, he said that he had "another company as the purchaser". Mr Oud did not know, at any material time, whether or not Mr Boyle was a director or other office bearer of either Fimmano or Cityzone. Mr Oud had not then asked and he had not been told anything about those matters. Mr Boyle's true capacity was never really ascertained at any material time. Mr Oud only asked a direct question in this regard in October 2002.

138 Mr Oud should also have well known that the terms of an offer to purchase land must be contained in a written offer. He accepts that, as the vendors' agent, he should have read the offer rather than simply rely upon what a purchaser, or a purchaser's representative or agent, might have said were the terms contained in that written offer.

139 Mr Oud was alive to the plaintiffs' requirements of him yet he failed to check the offer as I have described and he so failed notwithstanding that on the previous day, he had received an offer from Mr Boyle, on behalf of Fimmano, nominating Cityzone as purchaser, which likewise did not contain a clause providing for the transfer of a block to the plaintiffs. In fact, Mr Oud was aware of this and he began to write such a clause on that offer by way of counter-offer. He did not complete writing that clause because Mr and Mrs Terranova decided not to counter-offer in any event given the lengthy settlement period required by Fimmano.

140 It is also pertinent to note that when Mr Oud orally advised Mr Boyle of the rejection of the offer from Fimmano, he only informed Mr Boyle that the reason for such rejection was the lengthy settlement period and in this circumstance, it is perhaps little wonder that the offer from Cityzone only brought forward the settlement period and did not include a block transfer clause. Mr Oud had not raised it with respect to the offer made 26 August 2002, so why should Cityzone include such a clause?

141 Given these matters, it is then necessary to draw the "line of demarcation" (per Derrington J in Thorpe) to determine whether Mr Oud's acknowledged and accepted "careless" act in not reading Cityzone's written offer was "so negligent" (per Hill J in Argy) that Mr Boyle's misrepresentation to Mr Oud was not the real inducement to Mr Oud being guilty of misleading and deceptive conduct towards the plaintiffs. If it was not the real inducement, then it amounts to a break in the chain of causation. In other words, it is necessary to decide if Mr Oud's careless act was an "abnormal event" (per McHugh J in Henville) which has intervened between Mr Boyle's misrepresentation and the damage to be suffered by the defendants, given that I have now found in favour of the plaintiffs against them. In determining this issue, I have drawn on each of the examples referred to by Derrington J in Thorpe's case.

TERRANOVA & ANOR -v- AUXIL PTY LTD & ORS [2008] WADC 29 (22 February 2008)

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TERRANOVA & ANOR -v- AUXIL PTY LTD & ORS [2008] WADC 29 (22 February 2008)

Legislation Cited (4)

Cases Cited (26)