Vickers v Taccone

DECISION : First and second defendants did not validly rescind contract, are not entitled to return of deposit and are liable to plaintiff in damages.

CATCHWORDS : EQUITY [38], [44] - General principles - Fraudulent and innocent misrepresentation - The representation - Generally - Meaning of representation - Whether representation made in absolute terms that land could be developed by erection of four villas - Materiality, inducement and reliance upon representation - Extent of reliance on representation - TRADE AND COMMERCE [94], [136] - Misleading or deceptive conduct - Particular classes of conduct - Real estate transactions - Purchase of land for villa development - Whether representation made in absolute terms that land could be developed by erection of four villas - Enforcement and remedies - Actions for damages - Causation - Causal link between representation and loss - Extent of reliance on representation.

Butcher v Lachlan Elder Realty Pty Ltd (2004) 79 ALJR 308 CASES CITED : Lam v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458

Graeme Arthur Vickers (P & XD) Augusta Taccone (1D & 1XC) PARTIES : Anthony Taccone (2D & 1XC) Geraway Pty Limited (3D & 2XC)

A B S Franklin SC (P & XD) COUNSEL : A T McInnes QC then G Barry Hall QC and H J G Gulpers (1 & 2Ds & 1XCs) S T White SC (3D & 2XC)

Lane & Lane (P & XD) SOLICITORS : J P Lawyers (1 & 2Ds & 1XCs) Minter Ellison (3D & 2XC)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

5866/02 GRAEME ARTHUR VICKERS v AUGUSTA TACCONE & ORS JUDGMENT 1 HIS HONOUR: In this matter the plaintiff was the registered proprietor of a house property at 75 Westminster Road Gladesville ("the land"). He engaged the third defendant, a real estate agent, to sell the land for him. It is alleged that the agent orally and in a brochure represented to the first and second defendants that the land could be developed by the erection on it of four villas. Induced by this representation the first and second defendants on 9 March 2002 bought the land at public auction for $900,000 and signed a contract accordingly ("the contract"). The first and second defendants did not complete the contract and on 6 June 2002 purported to terminate the contract on the ground that the representation was untrue. On 7 June 2002 the plaintiff purported to terminate the contract and forfeit the deposit of $45,000. 2 The first and second defendants are brothers. The first defendant's first name is stipulated in the statement of claim as Augusta. However, both in his affidavit and sworn as a witness, he gave his name as Augusto. 3 The issues between the plaintiff and the first and second defendants are set out in [4] below. There is also a claim by the plaintiff against the third defendant and two consequential cross claims. In the event, these will be determined by the result between the plaintiff and the first and second defendants. They will be detailed below. 4 The issues between the plaintiff and the first and second defendants were agreed between all parties to be as follows: (1) Did the third defendant make to the first and second defendants the representation that the land could be developed by the erection on it of four villas ("the representation")? This raises the following sub issues: (a) Did the third defendant make the oral statements alleged? (b) Did those statements combined with statements in the brochure amount to the making of the representation? (2) Did the plaintiff make the representation to the first and second defendants? This raises issues 1(a) and (b) and also: (c) Was the third defendant authorised by the plaintiff to make the oral statements relied on? (3) Was the representation untrue in that: (a) No development could take place except on the footprint of the existing house? (b) Four villas could not be erected on the land? (4) Did the first and second defendants rely on the representation in entering into the contract? (5) Were the first and second defendants entitled to rescind the contract by notice given on 6 June 2002? (6) Did the first and second defendants by giving that notice rescind the contract? (7) Are the first and second defendants entitled to the return of the deposit? (8) Alternatively are the first and second defendants entitled to an order of the Court rescinding the contract? (9) Was the plaintiff entitled to terminate the contract by notice given on 7 June 2002? (10) Did the plaintiff by giving that notice terminate the contract? (11) Is the plaintiff entitled to damages against the first and second defendants? 5 In their defence the first and second defendants pleaded a number of separate representations, one written and the others oral. However, as early as his opening address, Mr McInnes of Queen's Counsel, who represented the first and second defendants before his unfortunate death during the course of the trial, conceded that the essential substance of the representation relied on was that the land could be developed by the erection of four villas on it. It was confirmed in final address by Mr G B Hall of Queen's Counsel, who succeeded Mr McInnes in the brief, that "the critical question in the case … is really did the agent make a representation that four villas could be erected". 6 The factual background is that the land was in an area where the erection of villas was permitted; it was of a sufficient size to permit the erection of four villas; the frontage, however, was less than that stipulated for a four villa development; and, furthermore, there was a serious water flow problem through the property which created problems for the approval of a four villa development. The water flow problem was noted on the certificate under s 149 of the Environmental Planning and Assessment Act 1979, a copy of which was included in the contract signed by the first and second defendants. But the evidence was that they did not read this certificate before signing the contract. They did not obtain a copy of the s 149 certificate for themselves. The principal witnesses for the first and second defendants were the first defendant, Augusto Taccone, and his father, Domenic Taccone. Although Domenic Taccone was not a party to the contract he attended with the first defendant to entering into the contract and to the enquiries which were made beforehand on the first and second defendants' behalf. The first defendant was a builder and his father had extensive experience as a developer. 7 Not a great deal need be said about the credit of witnesses in this case. There really is not a great deal of controversy about what was said. The contest is about the significance to be placed on it. In general terms, the witnesses for both plaintiff and all defendants appeared to be attempting to give the Court an honest account of what occurred. 8 In view of the fact that it is essentially one representation that is relied on by the first and second defendants, I do not propose to go into the detail of the individual representations alleged in their defence. The substance of the representation made can be seen from two passages in Domenic Taccone's affidavit as follows: "4 On or about the 4th February 2002 at approximately 3.30pm, Damien North from Richardson & Wrench Gladesville, rang me to see if I was interested in a development site. The conversation was along the following lines;

Damian: Hello Domenic. Dom: Hello. Damian: My Name is Damian North from Richardson & Wrench Gladesville, I have gotten your number from our list of developers who are looking for development sites. I have a development site coming up for Auction at Gladesville. Dom: How many villas would fit on the site? Damian: You could easily fit 4 villas, because the property is over 1200sqm in size. Dom: How much would a finished villa be worth on the market. Damian: We have sold a villa in a near by street, for about $520, 000. Dom: What is the width of the property? Damian: The width is approx 18.5m. Dom: The Ryde Council requires a 20m frontage, for villa developments doesn't it? Damian: There are villas in the area that have been built on less than 20m frontages a precedent has been set, so I don't think that there would be a problem. Dom: Could I have a look at the property? Damian: We are having our first open house on Saturday (9th February 2002, between 12.15 & 1 pm), the address is 75 Westminster Road, Gladesville. Come & have a look. Dom: Yes I will.

5 On the day of the first open house (I believe it to be the 9th February 2002) my wife Rita and I went to 75 Westminster Road, Gladesville, to have a look at the site. The first thing I noticed was a large sign out the front of the property that stated in large lettering, ' FOR AUCTION, DEVELOPMENT POTENTIAL' . At the Open House an agent Mr. Fred Jabbour approached us. Fred: Hello Dom & Rita: Hello Fred: Can I have your name & contact number please. Dom: Yes, sure. (As I gave him my details he proceeded to write them on his visitor's sheet. He handed me one of his business cards).

Fred: Feel free to look around. Dom: We did not come to look at the house we are only interested in the land. Dom: An agent called Damian from your agency rang me in regards to this property. He said that it was a development site & was suitable for 4 villas, he gave me the details of the property and said that I should have a look. Fred: Yes that's about right, the land is over 1200sqm and according to the council code you can put 4 villas on the property. Dom: Damian said that it was about 18.5m wide, the council code says that you need a 20m frontage for villas. Fred: We have sold villas in the area that have had less than the 20m frontage required, the council has set a precedent that others can follow." 9 It is of importance that prior to the auction the first defendant and Domenic Taccone had attended at the Planning Department of Ryde Council and made enquiries there concerning the requirements for villa developments. They obtained information at the Council concerning the size and frontage of lots for villa development similar to that conveyed on behalf of the third defendant. This will be dealt with in more detail below in connection with the issue of reliance. 10 Again, as conceded by Mr Hall in final address, the issue between the parties concerning the representation is whether it amounted to a representation that four villas could be built or whether the representation was only that the land was big enough for four villas, leaving it at large as to whether or not the Council would approve such a development. 11 In assessing the meaning and effect of representations one must take into account the context in which they are made and the surrounding circumstances. As was said by the majority of the High Court (Gleeson CJ, Hayne and Heydon JJ) in Butcher v Lachlan Elder Realty Pty Ltd (2004) 79 ALJR 308 at [37]: "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. So here, it is necessary to consider the character of the particular agent in relation to the particular purchasers, bearing in mind what matters of fact each knew about the other as a result of the nature of their dealings and the conversations between them, or which each may be taken to have known."

This principle appears to me to have application in two areas. It is relevant to the meaning to be placed on the representation ("analysing the conduct") and it is also, of course, relevant to the separate question of whether the representation was relied on. 12 In my opinion, in all the circumstances of this case, the correct interpretation is that the representation was that the land was of a sufficient size and had a sufficient frontage (albeit less than the minimum frontage stipulated) to make it possible that the Council would approve a four villa development. It did not amount to a representation that the Council would approve four villas or that four villas could be built. In reaching this conclusion, I take into account the language used by the third defendant's representatives and the context of the conversations, including that the third defendant had the Taccones on a list of developers which it kept. I also take into account the experience of the first defendant as builder and Domenic Taccone as developer. I should add that the auctioneer's statement that there was "nothing to worry about" in the contract is too inchoate to operate as a representation in any way. 13 However, whatever representation was made by the third defendant (and I find that it was not the representation alleged by the first and second defendants), I do not find that it is established that the first and second defendants relied on that representation in entering into the contract. I have already observed that the first defendant and Domenic Taccone attended at the Planning Department of the Council. It is not clear on the evidence whether this was before or after any representation was made to them by the third defendant. Whilst the time of this attendance at Council is stated in an imprecise fashion, it is apparent from paragraph 4 of Domenic Taccone's affidavit set out in [8] above that the Taccones became aware of this property only on 4 February 2002 in the telephone call from Damien North, in which relevant representations were already made. They already knew that the stipulated minimum frontage was 20 metres. It follows from the above that the attendance at Council occurred after the conversation on 4 February 2002. The first defendant's account of that attendance is as follows: "A few weeks prior to the auction of the property, my father Domenic and I went to make enquires [sic] on the property at the Ryde City Council. We spoke to the Duty Planner of Customer Enquires [sic] Lady behind the counter. She checked up on the computer and directed us to the fact that the zoning for Villas was correct, the size of the property was adequate for a 4 villa development, and that there was a 3 metre Easement along the Right side boundary. Her main concern was that the property was only 18 metres wide and the council code usually requires 20metres [sic] as a minimum, although this problem may be overcome by designing the Villas to comply with the Councils' [sic] code. She also said that there have been developments allowed by council in the area with a smaller than 20 meter [sic] frontage. She offered us to purchase a copy of the villa code which we accepted for our designing criteria, and with the information she gave us we were content to proceed as potential purchasers ." (Emphasis added.) 14 There is always a difficulty in the proposition that persons who are developers or who otherwise have commercial experience rely upon representations made to them: see Lam v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458 per Gleeson CJ at 477. This is particularly relevant to reliance by developers upon representations by real estate agents, rather than upon their own experience or their own enquiries in purchasing property: see the passage from Butcher quoted in [11] above. On the evidence one would conclude that the Taccones were aware that there was never certainty in the grant of development applications by councils. However, the evidence goes further than that in this case. In effect, the first defendant concedes in the passage set out above that it was upon information obtained at the Council rather than upon any representation made on behalf of the third defendant that the first and second defendants relied in entering into the contract. The conclusion that I reach is that it is simply not established that there was any relevant reliance by the first and second defendants on any representation by the third defendant. 15 As a result of the foregoing findings of fact, the issues outlined above can be determined as follows: (1) The third defendant did not make to the first and second defendants the representation alleged by them. (2) Neither did the plaintiff make the representation to the first and second defendants. The question as to whether the third defendant was authorised by the plaintiff to make the oral statements relied on does not arise. (3) The question as to whether the representation was untrue does not arise. It may be added that the representation that was actually made was in fact true. (4) The first and second defendants did not rely on any representation made by the third defendant or the plaintiff in entering into the contract. (5) It follows that the first and second defendants were not entitled to rescind the contract by notice given on 6 June 2002. (6) The first and second defendants did not by giving that notice rescind the contract. (7) Bearing in mind the foregoing there is no basis on which the first and second defendants are entitled to the return of the deposit. (8) The first and second defendants are not entitled to an order of the Court rescinding the contract. (9) The plaintiff was entitled to terminate the contract by notice given on 7 June 2002. (10) The plaintiff by giving that notice terminated the contract. (11) The plaintiff is entitled to damages against the first and second defendants for their breach in failing to complete the contract and purporting to rescind it. 16 There was not extensive argument before me as to the items to be included in the damages that should be awarded against the first and second defendants if the plaintiff was entitled to an award of damages. Any outstanding debate as to the quantum of damages may take place when short minutes are brought in to give effect to the orders consequential upon this judgment. 17 Save for one claim in the first cross claim, as to which see [19] below, the above determines the proceedings as between the plaintiff and the first and second defendants. 18 The plaintiff's claim against the third defendant was for damages for breach of warranty of authority, if the third defendant had been found to have made the representation and not to have been authorised to do so. The other claim against the third defendant was for an indemnity in respect of the cross claim by the first and second defendants against the plaintiff (as to which see below). Both these claims fall to the ground and it is not necessary to determine them otherwise than to say that these claims should be dismissed. 19 The first cross claim was by the first and second defendants against the plaintiff and the third defendant, seeking a declaration that the contract was validly terminated by the first and second defendants; for repayment of the deposit; and for damages under the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987. In fact, the issues as to the termination of the contract and the repayment of the deposit were incorporated into the issues as between the plaintiff and the first and second defendants contained in [4] above and have already been determined against the first and second defendants. The claims against the plaintiff and the third defendant must all fail. There should be judgment for the plaintiff and the third defendant against the first and second defendants on the first cross claim. 20 The second cross claim was by the third defendant against the plaintiff for indemnity by the plaintiff against any liability the plaintiff might come under to the first and second defendants. As there is none, this cross claim falls to the ground and must be dismissed. 21 Short minutes should be brought in to give effect to these decisions. As I have already noted, any question of the quantum of damages can be dealt with at that time. Questions of costs may also be raised.

30/06/2005 - Inadvertent omission - Paragraph(s) 19

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