CATCHWORDS TRADE PRACTICES - alleged statement by a salesperson employed by second respondent - depth of fill on land - sales-staff directed to inform purchasers that there might be f211 on the land and that purchasers to make their own enquiries - credibility of witnesses - application dismissed. TRADE PRACTICES - cross-claim by first respondent against second respondent for an indemnity or contribution in respect of any monies the first respondent 1s ordered to pay to applicants - alternatively an order under s.87 Trade Practices Act. Trade Practices Act 1974 (Cwlth), ss. 52, 82 and 87 IVAN VRANCIC and GRETA EMMA VRANCIC (Applicants) v. ELTON CLOSE PTY LIMITED (First Respondent) and LINEHANS ESTATE AGENCY (NEWCASTLE) PTY LIMITED (Second Respondent) and ELTON CLOSE PTY LIMITED (Cross Claimant) and LINEHANS ESTATE.-AGENCY (NEWCASTLE) PTY LIMITED (Cross Respondent) No. G140 of 1982 FITZGERALD J. SYDNEY 4 JULY 1983 IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES REGISTRY ) No. G140 of 1982 GENERAL DIVISION ) BETWEEN: IVAN VRANCIC and GRETA WiIMA VRANCIC Applicants AND. ELTON CLOSE PTY LIMITID First Respondent AND. LINEHANS ESTATE AGENCY (NEWCASTLE) PTY LIMITED Second Respondent AND. ELTON CLOSE PTY LIMITED Cross Claimant AND: LINEHANS ESTATE AGENCY (NEWCASTLI) PTY LIMITED Cross Respondent _O R DE R_ JUDGE MAKING ORDER: FITZGERALD J. DATE OF ORDER 4+ JULY 1983 WHERE MADL: SYDNEY THE COURT ORDERS THAT 1. The applicants' claim against the respondents and the first respondent's claim against the second respondent arc dismissed. ° 2 The applicants must pay the taxed costs ol these proceedings. IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOU'TH WALES REGISTRY ) No. G140 of 1982 GENERAL DIVISION ) BETWEEN: IVAN VRANCIC and GRETA EMMA VRANCIC Applicants AND ELTON CLOSE PTY LIMITED First Respondent AND LINEHANS DSTATE AGENCY (NEWCASTLE ) PTY LIMITED Second Respondent AND ELTON CLOSE PTY LIMITED Cross Claimant AND LINEHANS ESTATE AGENCY (NEWCASTLE ) PTY LIMITED Cross Respondent FITZGERALD J. 1 JULY 1983 REASONS FOR JUDGMENT The Claim The applicants in these proceedings claim against the respondents for damages under s.82 of the Trade Practices Act 1974 ("the Act''). The applicants' claim is founded upon an alleged statement by one Marjorie Walker, a salesperson cmployed by the second respondent, which 1t 1s alleged constituted a contravention of s.52 of the Act. The statement 1s alleged to have heen made in March 1981 The applicants assert that, 1n consequence of what was then said, they entered into a contract dated 27 May 1981 under which they agreed to purchase from the first respondent for $29,975 ts block of land sufficiently described as Lot G9 D.P.261260 The 2. land Lormed part of the Elton Close subdivision which was developed by the first tespondent in Adamstown IIcights, Neweastle The second respondent was the real estate agent engaged by the lirst respondent to negotiate sales of the land. may The case as ultimately presented by the applicants be summarised as follows (a) In March 1981, the applicants were interested in purchasing Lot 69 and erccling thereon a two-storey prick dwelling, and the female applicant on behalf of herself and the male applicant made enquiries olf Marjorie Walker, (b) an reply to the said enquiries, Marjorie Walker represented to the female applicant that the allotment contained fill up lo but not more than a depth ol 1 metre, (c) the depth of filling on the allotment was between 8 meLlres and 11 metres, (d) the respondents knew that the allotment contained f111 to a depth substantially in excess of 1 metre, (Ce) the representation was made in order to induce the applicants to purchase the allotment from the first respondent, and (1) the applicants purchased the allotment in reliance upon the representation. 3. The respondents dispute the applicants' claim, Further, the first respondent cross-claims against the second respondent for an tundemnity or contribution in respect of any monics which the first respondent 15 ordered to pay to the applicants. Shortly stated, the basis of the cross-claim 1s that any statement by Mrs Walker in the form alleged constituted a breach of the terms of the contract bctween the respondents which required the second respondent's servants and agents involved in selling allotments in Flton Close to inform would-be purchasers - (a) that there wus [111 on the allotments, and (b) that they should make thelr own investigations in relation to the f111. Alternatively, the first respondent submitted that, 1f it was ordered to pay damages to the applicants, 11 was a person who has suffered or 1s likely to sufier damage by conduct of the second respondent in contravention of s 52 and that accordingly an order in its favour against the second respondent could and should be made under s.87 of the Act. ; The allotment purchased by the applicants formed part of a large area, formerly known as the Waratah Colliery, which had been acquired by the first respondent late in 1980 for subdivisional development. Coal mining operations on the land had ceased some time prior to its acquisition by the first respondent, and grass and some trees had grown on the land. 1, However, there was a coal heap on the land and a quarry area, and, even where there was vegetation, patches of black coal were visible. It was a matter of local common knwoeldge that the land had been mined. Prior to completing its purchase, the first respondent, at the suggestion of the second respondent, employed a firm of consulting engineers to investigate the natural surface underlying a number of blocks 1n the proposed subdivision including the section containing Lhe allotment purchased by the applicants. Only limited investigations were carried out. One pit was excavated by backhoe on each of the blocks Each pit "was terminated at either natural surlace, full extent of the backhoe, or a retusal''. The engineers delivered a report dated 17 November 1980 in which they stated "The general prolile of the site consisted of * Recent Fill, generally a clayey sandy gravel, pale brown, although some coal waste has been used about the site underlain by, * Old Fill, predominantly gravelly clays and clayey gravels, dark grey to black, varying from moist to wet, underlain by, either * Naturally occurring Gravelly Sandy Clay slopewash, or extremely to highly weathered sandstone and sillstone A topsoil profile ecxisted in most otf the pits. It should be noted that no testing has heen eurricd out in e1ther the Fill or the natural marerials and that the natural surface/b1l] tinter-face soutel not be the founding level for the footinps of any structures placed on the site " 5. They attached to their report a table showing, inter alia, the depth of fill in the respective pits. According to the table attached to the report, the depth of [111 at the selected point on Lot 69 was 2.8 metres. The principal of the Lirst respondent, Wr Turnbull, a Newcastle solicitor, instructed Mr Keegan, a director of the second respondent, that 11s sales-stalff were to anform purchasers that there might be [111 on the land and that they should make their own enquiries in relation to f11l1. Those instructions were duly given. The sales staff were also told that a report had been obtained from the consulting engineer, Coffey and Partners Pty Ltd, but that 1t was not comprehensive. A copy of the report was provided to each of the sales staff, including Mrs Walker, but they were warned not to rely upon tt as a complete and accurate picture in respect ol the f111 on the land, and not to show it to prospective purchasers or to use tt in relutiLon to their sales activities although they eould te 1] purchasers that the report had been obtained. The sales staff were also iuntormed that the Mine Subsidence Board has given an overall approval for the erection of elevated one-storey residences with double garage storage underneath but,if any larger house was to be crected, the Board would have to consider the individual block. At the time at which the Biton Close subdivision was developed, the applicants lived nearby in Merinda Close. When their house at Merinda Close was built, about 1 meLlre of%f111 had been encountered From their experience at Merinda Close, and their knowledge of the Elton Close land 6. and its history, they were aware that 1t might contain some fill despite the presence of grass and trees. By late February or early Varch 1981, they had exchanged contracts tor the sale of their Merinda Close home and Mrs Vrancic, who had previously worked in the second respondent's Property Management Development, approached Mrs Walker to inquire about a possible purchase in the western section of Lhe Elton Close subdivision, which included Lot 69. The applicants' case is founded entirely on a brief conversation between Mrs Vrancic and Mrs Walker which was their sole contact in respect of the satlc. Mrs Vrancic swore in an affidavit that she asked Mrs Walker how much fill had been placed on the land and that Mrs Walker "replied in words to the lollowing effect, 'The land contains up to one metre of f1ll'...". Mrs Walker also swore an allidavil. She said that she was aware that the Elton Close subdivision contained 1111 which varicd from block tO btock and that the fill on Lot 69 was or might be in excess of one metre She denied the statement attributed to her by Mrs Vraneic. Aecording to Mrs Walker. "In accordance with instructions received from the said George Keegan, I said to the female applicant, words to the following offect 'There 1s £111 on the land but you should make your own inquiries beJSore exchanging contracts as to the exlent of the filling and as to the type of! home that can be erected on a site'." Mre-Vrancic in turn denied that any such conversation took place. 7. Mr and Mrs Vrancic gave ovidence that Mrs Vrancic told Mr Vrancic what she had been told by Mrs Walker and that they decided to buy Lot 69 From their experience at Elton Close and what they had then been told, they believed that £111 up to a depth ol one metre was not a problem in the construction of a house and did not add to the expense, at least not signilicantly. A contract was prepared and a copy provided to the applicants for signature and exchange in due course for the counterpart signed by the first respondent. However, contracts were not exchanged, because the sale of the applicants' Meranda Clouse property did not proceed. The applicants' copy of the contract was returned to the second respondent By May 1981, the applicants had obLained a further contract for the sale of their Merinda Close home. Lot 69 was Still available. They contacted the second respondent and, in mid-May, a contract was provided. The contract was Signed, dated 27 May 1981, and exchanged Settlement took place in early July 1981. Wr and Mrs Vrancic each gave evidence Lhat they relicd upon what Mrs Vrancic had earlier been told by Mrs Walker. . I do not accept what they say on that matter and I do not accept that Mrs Walker told Mrs Vrancic that the depth of f111 on the land was not more than one mctre or that Mrs Vrancic told her husband that Mrs Walker had made that statement. Mrs Walker's memory was not particularly good but I think that she was honest. I have not overlooked that another purchaser gave evidence thal, 8. between 24 and 26 May 1981, Nrs Walker inlormed him that there was a "Lew [eet of C111" on Bloch 72. Even if that was said, and 1t was ineorrecl, and the evidence was admissible, I preler the evidence of Mrs Walker to that ot the applicants. Clause 12 of the contract betucen the applicants and the first respondent was in the [ollowing terms "12. (a) The Purchaser is aware that in the development of this subdivision 1t may have been necessary to place fill on some of the lots of the subdivision and the Purchaser shall take no objection or make uny requisition 3f 1t should be found that any part olf the subject land contains f111. (b) The Purchaser 1S aware that in the event of any part of the land being filled land the toundations of any buildings to be crected over such filled land must be taken down to the natural earth and must comply with the requirements of the Mine Subsidence Board." I do not for a moment accept Mrs Vrancic's evidence that she did not read the clause or otherwise become aware of 1t or, had she done so, that she would not have understood 1t. There 1S some conlusion concerning whether she consulted a solicitor on the first occasion in March. However, there 1S no doubt but that she did so in May before the contract was signed and cxchanged ler evidence that she said that she knew what the contract contained but did not, and that the solicitor accordingly did not read the contract to her, or explnuin it, I find totally uiplausible. It 18 also unlikely that, after she had 8. between 24 and 26 May 1981, Vrs Walker informed him that there was a "few feet of f11 1" on Block 72, Even if that was said, and 1t was incorrect, and the evidence was admissible, I prefer the cvidence of Mrs Walker to that of the applicants. Clause 12 of the contract between the applicants and the first respondent was in the [following terms "12 (a) The Purchaser 1s aware that 1n the development o! this subdivision it may have been necessary to place fil] on some of the lots of the subdivision and the Purchaser shall take no objection or make any requisition if 1t should be found that any part of the subject land contains fill. (b) The Purchaser is aware that in the event of any part oJ the land being tilled land the foundations of any buildings to bo erected over such filled land must be taken down to the natural earth and must comply with the requirements of the Mine Subsidence Board " I do not for a moment accept Mrs Vrancic's evidence that she did not read the clause or otherwise become aware o! 1t or, had she done so, that she would not have understood 1t. There 1s some confusion concerning whether she consulted a solicitor on the {first occasion in March. However, there 3s no doubt bui that she did so in May before the contract was signed and exchanged. Her evidence that she said that she knew what the contract contained but did not, and that the solicitor accordingly did nov read the contract to her, or explain it, I [find totally implausible It 1s also unlikely that, after she had 9. gone to a solicitor for the apparent purpose of advice on the contract, he would not read it, or read it but not comment, eSpecially in relation to the special conditions of which clause 12 1s one. 'The solicitor in question sat in court throughout the proceedings but was not called. According to one affidavit by Mrs Vrancic, the purchase was completed on 7 July 1981. Elsewhere she swore that she found out on the same day that extra footings were needed on Lot 69. She said - "On or about 7th July, 1981 I attended upon Mr Hart of H. & G. Planning Service al Cardiff and asked for a quotation for a footings design for the erection of a dwelling on the land. He said, 'You'll need footings and a hali out there' and showed me a copy of a report from Coffey and Partners Pty. Limited, Consulting Engineers dated 17th November, 1980....". Ilaving observed Mrs Vrancic in the witness box, I take leave to doubt whether she would have docilely accepted such news c1ither shortly before or after settlement 11 1t contradicted what she had been told aboul the [111]. Mr Linchan, the principal of the first respondent, gave evidence thut, at about the time of settlement, which the respondents put a little later at 13 July, Mrs Vrancic, who was a lormer employee and known to him, spoke to him und said 'I am allowing $10,000.00 for the cost of {footings on the Elton Closo site because of the f111." 10. Mrs Vrancic denied making such a statement, but it, and other matters, seem to me consistent with a state of knowledge concerning the fill quite different from that asserted by the applicants. It 1S easier to accept the applicant's contention that some time elapsed before they discovered the full depth of the f1l1] and the additional expense which 1t would cause them in the construction of their house. However, neither their initial misapprehension, nor the additional cost, was,in my opinion, caused by any conduct of either respondent. The applicants failed to appreciate how large a problem could be caused by fill and made assumptions as to what the position was likely to be. However, no statement was made by Mrs Walker os the applicants allege, and they cannot now Took tuo the respondents to bail them out of their unfortunate predicament. It 1S regrettable that land with such hidden defects or possible defects may be made avallable tor sale to ordinary people who can 111 aftord to lose money in consequence of an incautious purchase However, that remains the position, although the New South Wales legislature has taken steps to minimize the risk. It 1S impossible to protect people entirely against thelr own imprudence. The Act, including sub-s. 52(1), further extends the law in favour of consumers but sub-s 52(1) has no operation where, as here, there was no conduct which misled or deceived or was likely to mistead or deceive. 11. In the light of my conclusion that the applicants' claim fails, no question arises of the second respondent zundemnifying the first respondent and 1t 1S unnecessary to say much concerning the question of damages. 'The applicants'! put their claim on alternate bases, namely that the land was worth less than they agrced to pay for 1t and that the erection oJ their home cost more bv reason of tho presence oi the greater depth ao! i111. Both the valuer and the enginecr called for the applicants were cross-examined to some effect and thelr respective approaches subjected to criticism, part at least of which possessed merit. The second respondent called an engineer who disagreed with the applicants' engineers on some matters I do not think that it 1s necessary in this case to investigate any of the rival contentions in fine detail. I consider that, in the circumstances, an assessment in the increased costs of construction provides a better approach than a determination of what, 1f any, difference existed in the valuc of the Jand I am generally inelined to accept that, 11 there had only been one metre of [11], the work could have been performed as suggested by the applicants' engineer and that, his costing of the differences in the two situations was broadly acceptable. In my opinion, the cost of their home to the applicants would have been about $8000 less had their land contained 1 metre of f111, not 8 to 11 metres. 12. However, the applicants' claim against the respondents and the first respondent's claim against the second respondent are dismissed and the applicants must pay the taxed costs of these proceedings. I cerlify that this and the 11 preceding pages arc a true copy of the Reasons lor Judgment ol his Honour Mr Justice Fulzgerald ' ' Lone vildecs 4 July 1983 ° Associate