White Property Developments Ltd v Richmond Growth Pty Ltd & Ors [1998] FCA 1422

EX TEMPORE REASONS FOR JUDGMENT THE COURT: We have had the benefit of comprehensive submissions from counsel concerning the issues raised by the appeal and four cross-appeals. These issues have been discussed with counsel over the course of more than two days. None involves any question of legal principle. Having regard to the lengthy history of the case, we think it desirable to dispose of the matter immediately. The appeal by White Property Developments Limited ("White") raises three issues: (i) the adequacy of the sum allowed by the trial judge in relation to project management fees; (ii) the adequacy of the damages assessed in respect of the breach by Richmond Growth Pty Ltd ("Richmond Growth"), the first respondent, of its contract to give White a right of first refusal in relation to the property at Richmond; and (iii) the claim under s 52 of the Trade Practices Act 1974 by White against Richmond Growth and (by virtue of s 75B of that Act), its directors, John Bernard O'Brien and Graham Allen Paull, the second and third respondents, and its agent, Ken Bennett, the fourth respondent. The cross-appeals also raise the second issue and challenge the trial judge's decision to deny the second, third and fourth respondents (to whom we refer collectively as the individual respondents) their costs of the hearing at first instance.

The section 52 claim Over the course of the litigation, there has been some variation in White's identification of the allegedly misleading or deceptive conduct on the part of Richmond Growth and the individual respondents. At one stage, it was suggested that the misleading conduct commenced before the making of the agreement for a right of first refusal on 22 November 1994; the proposition at that stage was that Richmond Growth never intended to accord to White the benefit of the right of first refusal but (through the individual respondents) led White to believe it did; and it was on the strength of that misrepresentation that White entered into the contract for a right of first refusal and agreed to act as project manager. However, during the course of argument, counsel for White, Mr Burbidge QC, expressly abandoned that proposition. He confined his s 52 case to a contention that, in about early February 1995, Richmond Growth, through the individual respondents, changed its position regarding honouring the obligation to give a right of first refusal, but concealed that change of mind from White. Mr Burbidge submitted that the individual respondents, having determined that they would cause Richmond Growth to breach its obligations under the agreement, granting White a right of first refusal, allowed White to proceed on the false assumption that Richmond Grove intended to honour its contractual commitment. This formulation of the s 52 case has the advantage of consistency with the trial judge's finding that, "initially, everyone acting on behalf of Richmond Growth understood that the granting of the first right of refusal would require some greater obligation on Richmond Growth's behalf" than merely giving White an opportunity to make an offer along with other interested parties. However, like his Honour, we think the claim untenable. The trial Judge specifically found that Richmond Growth made clear its change of position relating to the first refusal agreement immediately its position in fact changed. The communication occurred on 27 February 1995, in a conversation between Messrs Bennett and O'Brien (from Richmond Growth) and Mr Jamieson (of White). Mr Burbidge argued that his Honour's finding of fact was wrong. It should be inferred that the change of mind pre-dated 27 February 1995. In support of this proposition, Mr Burbidge placed emphasis on the fact that, during January and early February, Richmond Growth engaged in negotiations with other prospective purchasers, notably Woolworths, the eventual purchaser. There is no doubt this happened. Richmond Growth's representatives made a considerable effort to persuade other companies to become attracted to the project and keen to become the successful purchaser. However, this course of action does not show an intention to deny White its right of first refusal. It was no more than a commonsense business strategy for Richmond Growth to develop competition for the site. It was in the interests of Richmond Growth to be able to show the highest possible price on the offer it presented to White, at the time of affording that company its right of first refusal. Unless Richmond Growth obtained an offer from somebody else, it would have little option but to accept whatever offer White chose to make. In short, careful examination of those dealings shows that they were not inconsistent with Richmond Growth and the individual respondents intending to adhere to the obligations imposed on the company by the agreement. Mr Burbidge further relied on the absence of the individual respondents from the witness box. He said the inference should be drawn, even if the objective material did not assist White's case, that the respondents changed their mind well before 27 February 1995. In our view, however, his Honour was not bound to come to the conclusion urged by Mr Burbidge. The evidence was consistent with the individual respondents communicating their change of mind immediately it occurred and his Honour was entitled to come to that view. The fact (as his Honour found) that the fourth respondent misled Mr Morcom on another matter on 10 March 1995 does not compel any contrary conclusion. There are further difficulties with the appellant's case. It is by no means clear that representations as to future conduct as distinct from contractual promises were made prior to 27 February 1995. Assuming they were made and assuming (contrary to the conclusions we have already reached) that they were false, there is no evidence that Richmond Growth changed its position in relation to the effect of the right of first refusal before 27 February 1995. Mr Burbidge relied on certain brief evidence given by Mr Morcom, but this was directed to another issue. On 27 February 1995 Mr O'Brien and Mr Bennett met Mark Jamieson, then Financial Controller of White. They showed him an offer of $8.8m from Consolidated Properties (Coles). The offer was conditional on 30 days due diligence, as Mr Jamieson pointed out. Mr Bennett agreed and told Mr Jamieson he should put in an offer by 2 March 1995. This statement can be regarded as inconsistent with an obligation to give White a right of first refusal, although curiously Mr Jamieson did not take that point. He said he could not speak for the directors but "may be able to give you an indication of the price we could proceed with". Three days later, on 2 March, Mr Jamieson gave Mr Bennett what he called "an indicative offer" totalling $8.5m with a "success fee" of $100,000. Later that same day, Mr O'Brien told Mr Jamieson that $8.6m was the minimum price Richmond Growth would accept. On 3 March Mr O'Brien rejected Mr Jamieson's offer of $8.5m and told him White's "final offer" was required by 5pm that day. He faxed a letter to that effect. This letter sparked Mr Jamieson's recollection of White's right of first refusal; he responded that he did not believe the previous day's discussion "constituted our first right of refusal". Mr O'Brien replied the same day with a letter in which he asserted that the rejected offer constituted White's "first right of refusal". It is not necessary to detail the contacts that occurred over the ensuing week. It is enough to say that, by 3 March at the latest, White was aware Richmond Growth took a position in relation to the right of first refusal different to that of White; White's position was correct, in the view of the trial judge. As Mr Burbidge conceded, any misconception by White of Richmond Growth's attitude to the right of first refusal ended by 3 March, at the latest. If we are right in thinking there is no evidence of a changed position by Richmond Growth before 27 February, it is apparent any finding of misleading conduct must be limited to the period of one week from 27 February to 3 March. But there is no evidence that any step was taken during that week that caused White to suffer damage. Mr Burbidge argued that, if White had known earlier about Richmond Growth's position on the right of first refusal, it would have competed actively for the property by putting forward an offer. However, as we have seen, that is exactly what the company did during that week, through Mr Jamieson; apparently at a time when the full strength of his company's position was not in the forefront of his mind. But the offer was not sufficient to attract Richmond Growth. That is not surprising. Richmond Growth had refused an offer of $8.2m from Woolworths and been told on 2 March by that company's agents "we are prepared to negotiate, on behalf of our client, a substantially better purchase offer than the one you currently have from Consolidated Properties"; that is, substantially better than $8.8m. Woolworths offered $9.1m on 4 March. On 7 March this was increased to $9.55m. On 8 March Richmond Growth informed White of that figure and invited it to submit its own final offer by 4pm the following day. White did not do this, taking the view it was entitled to see the full terms of the Woolworths offer and have an opportunity to match it. Ultimately, after obtaining legal advice on the point, Richmond Growth gave White a copy of Woolworths letter and provided it with an opportunity to match the offer. White did not do so; it matched Woolworths price but stipulated this was in respect of a site that included a medical surgery Woolworths was prepared to omit. There were other more minor variations. In March Richmond Growth in substance accorded White the opportunity it was contractually obliged to give. If the story had stopped at that point, there would have been no question of damages for breach of the contract to give a right of first refusal or a fortiori misleading conduct in relation to that right. The story did not stop there. The contract ultimately made between Richmond Growth and Woolworths was on terms more favourable to Woolworths than those in the letter shown to White. White was not told about this variation or given an opportunity to accept those more favourable terms. It was for that reason that the trial judge held that Richmond Growth had breached its contract to give a right of first refusal and there is no challenge to that conclusion. However, it is not suggested there was any misleading conduct (as distinct from breach of contract) at that later stage. In our opinion the trial judge was correct in dismissing the s52 claim.