CATCHWORODS Trade Practices Act 1974 - relief sought under section 87 for breaches of sections 52 and 53A - counter-claim for damages for failure to complete - whether applicants influenced by misleading conduct. TRADE PRACTICES ACT 1974 sections 52, 53A, 87 FEDERAL COURT ACT 1976 N.S.W. G. 187 of 1982 NANETTE ANNE THEAKSTONE v. MITABI PTY. LIMITED N.S.W. G. 188 of 1982 LEE ROSS JENNINGS v. MITABI PTY. LIMITED St. John, J. Sydney Monday 17 October, 1983 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION G. 187 of 1982 BETWEEN: NANETTE ANNE THEAKSTONE Applicant AND: MITABI PTY. LIMITED Respondent G. 188 of 1982 BETWEEN: LEE ROSS JENNINGS Applicant AND: MITABI PTY. LIMITED Respondent ORDERS JUDGE MAKING ORDERS: ST. JOHN, J. DATE OF ORDERS: MONDAY 17 OCTOBER 1983 WHERE MADE: AT SYDNEY THE COURT ORDERS THAT: 12/2 (1) (2) (3) (4) (5) Both applications are dismissed. On the counter-claim by the respondent against the applicant Theakstone, there will be judgment in the sum of twenty-nine thousand six hundred and three dollars and forty-five cents ($29,603.45). On the counter-claim by the respondent against the applicant Jennings, there will be judgment in the sum of twenty-six thousand eight hundred and seventy-two dollars and twenty cents ($26,872.20). The applicant Theakstone is to pay the respondent's costs of the application and counter-claim up to the date of hearing and half the costs of the hearing, including counsel's fees as for one brief. The applicant Jennings is to pay the respondent's costs of the application and counter-claim up to the date of hearing and half the costs of the hearing, including counsel's fees as for one brief. +2 -/3 (6) Liberty to the respondent to apply for an order for interest on the judgment should 1t remain unpaid within fourteen (14) days of today's date. 17 ' t me g) ob ' - Weng wot ' . "May " - ? nm t ' ' . +~ * ' o ' Ae? A wat Ya hte She % ee .. Baste tae at "ah i Seeks te eg BEA weet IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION G. 187 of 1982 BETWEEN: NANETTE ANNE THEAKSTONE Applicant AND: MITABI PTY. LIMITED Respondent G. 188 of 1982 BETWEEN: LEE ROSS JENNINGS Applicant AND: MITABI PTY. LIMITED Respondent REASONS FOR JUDGMENT ST. JOHN, J. MONDAY 17 OCTOBER 1983 AT SYDNEY 22/2 In these two applications, which were heard together, each applicant sought relief pursuant to §.87 of the Trade Practices Act 1974 ("the Act"). Each applicant had entered into a contract in writing to purchase, when complete, a home unit in a development at Sunshine Beach near Noosa Heads, Queensland. The applicant Theakstone paid a deposit of five thousand two hundred and seventy- five dollars ($5,275.00) towards a total purchase price of one hundred and five thousand five hundred dollars ($105,500.00) on unit No. 5; and the applicant Jennings paid a deposit of five thousand one hundred and fifty dollars ($5,150.00) towards a total purchase price of one hundred and three thousand dollars ($103,000.00) on unit No. l. Each applicant alleges breaches of S.52 and S.53A of the Act to ground his or her application. The misleading conduct relied upon in each case is the alleged oral misrepresentations by the agents for sale and written and pictorial matter contained in a brochure handed by those agents to the applicants. Those alleged misrepresentations concerned the locality of the units in relation to the beach, the views to be seen from such units and the soundness of investment in such units. Because of the conclusions I have reached on the facts, it is not necessary for me to detail all the specific alleged misrepresentations. The contracts bear date 14th December, 1981. At that time, the building project was in a planning stage and the contracts provided that the balance of the purchase monies was payable and settlement should take place within fourteen (14) days of the vendor's solicitor notifying the purchasers' solicitor that the units plan had been registered. Notification of that registration was given in September, 1982. The contracts also contained a provision that, should the purchasers default in paying the balance of the purchase price, the vendor was entitled to forfeit the deposit paid and to sue the purchasers for damages for breach of contract. To both applications, a counter- claim, based on the contractual provision, by the respondent for damages against each applicant is made pursuant to §.32 of the Federal Court Act 1976. Both applicants gave evidence that, at the time of entering into the contracts, they were the joint proprietors of a hotel business in Paddington, New South Wales and the motivation in purchasing each of 02/4 the units was as a holiday unit for each of them, which the applicant Theakstone described as ultimately becoming an investment. The applicant Theakstone had never been in the vicinity of Noosa Heads, but the applicant Jennings had twice been to Noosa Heads but not to Sunshine Beach. Having heard the evidence, I am satisfied that the motive for purchase in both cases was as a speculative investment and I do not accept the evidence of either applicant in that 'respect. The basic 1mprobability of selecting a holiday unit at a price in excess of one hundred thousand dollars ($100,000.00) by the applicant Theakstone at a place she had not visited, and her business partner purchasing a different unit at the same time is re-inforced by the applicants' reaction to the drop in value of the units to which I later advert. It is common ground that home unit sale prices in the Noosa Heads area declined substantially between December 1981 and September 1982. A valuer, called by the respondent testified that, at the time of entering into the contracts, the relevant units were of a value of approximately ninety-five thousand dollars (395,000.00) and, at the time the applicants were called upon to 20/5 complete the contract, the value of each unit had declined to seventy-five thousand dollars ($75,000.00). I have come to the conclusion that the reason why the applicants did not complete the purchase was because of the decline in value, and that their allegations of reliance upon misrepresentations, in an attempt to avo1ld their obligations under the contracts, were manufactured for that purpose. As well as the unconvincing manner in which both applicants gave their evidence, there was the completely independent evidence of Miss Furner, a secretary employed by a firm of solicitors instructed by the applicants to act for both applicants on his or her respective purchases, who gave evidence that, on the 10th September, 1982, the applicant Theakstone telephoned her office and said to her that she, Theakstone, and Jennings had thought about "the whole thing for a while and that they had heard of the drop in prices in Noosa". She said that she would be coming up to Noosa to see one of the partners in that firm and that she did not want to proceed with the contract because of the drop in prices. The conduct of the applicant Theakstone thereafter and, in particular on her visit to the Noosa area, confirms an effort to avoid completion «6/6 of the contract by any possible means. Reverting to the alleged misrepresentations, one such relied upon by the applicants was that an employee of the vendor's agents stated that the purchase of a unit in this particular development was "a very sound investment". That employee gave evidence to the effect that he had produced to the applicants three brochures relating to three different developments in Noosa and that, of the three develop- ments, the one in which they later agreed to purchase units was to be preferred to the remaining two, and that those three developments were the best of such developments in Noosa which he had seen. I prefer the evidence of this employee to that of the applicants. Because the alleged misrepresentations, 1n my view, did not influence the applicants to purchase the units, I dismiss their applications. As to the counter-claims, 1t was submitted that Fencott v. Muller (1983) 46 A.L.R. 41 may not apply to a counter-claim and that I should defer my decision pending the result of an appeal to the High Court which would decide the issue. I am satisfied that the counter-~ claims in these applications fall squarely within the test formulated in Fencott v. Muller (supra) and see no necessity to delay judgment. "7 As at September, 1982, on the applicant's failure to complete, the respondent was left with a property in each case of a value of seventy-five thousand dollars ($75,000.00). The respondent is entitled to a judgment in each case for, inter alia, the difference between that value and the purchase price less the amount of the deposit paid. It was argued on behalf of the respondent that, added to that figure, there should be interest at the rate of which the respondent was obliged to pay pursuant to a mortgage over the whole of the development entered into to finance such development. That there was such a mortgage was evident from a perusal of the contracts of sale, but a further search of the title would be necessary to discover that the interest agreed to be paid under such mortgage was twenty-two percent (22%) reducible to twenty percent (20%) upon prompt payment. Counsel for the respondent was unable to cite to me any authority specifically dealing with the right to compensation for loss of interest as a part of damages in the circumstances of this case. However, I think it consistent with the principles relating to damages for breach of contract that the respondent be compensated for the loss of use of the difference between the purchase price and the valuation less the deposit, whilst such monies remained unpaid. ---/8 In the circumstances, I am prepared to add an amount equivalent to interest at the rate of fifteen percent (15%) for one year to the figure representing the monies which the applicants should have paid at the due date for completion. The solicitor's costs thrown away by the respondent on the sale are recoverable by it. The damages I award against the applicant Theakstone are as follows: Purchase price $105,500.00 less deposit of $5,275.00 added to value of unit at date for settlement $75,000.00 $80,275.00 $25,225.00 add interest for one year at 15% p.a. on $25,225.00 $3,783.75 add solicitor's costs $594.70 Total $29,603.45 The damages I award against the applicant Jennings are as follows: 12/9 Purchase price $103,000.00 less deposit of $5,150.00 added to value of unit at date for settlement $75,000.00 $80,150.00 $22,850.00 add interest for one year at 15% p.a. on $22,850.00 $3,427.50 add solicitor's costs $594.70 Total $26,872.20 There was evidence of rentals received by the respondent for the two relevant units since October 1982. They are rentals of units of a value of seventy-five thousand dollars ($75,000.00) and, in my view, have no bearing on the damages to be awarded. The respondent has chosen to rent rather than sell. If this course caused loss to the respondent, it must bear that loss, likewise the applicants cannot benefit because those rents were received for units valued at seventy-five thousand dollars ($75,000.00) and not the purchase price. On the counter-claims, there will be judgment for the respondent against the applicant Theakstone in the sum of twenty-nine thousand six hundred and three dollars and forty-five cents ($29,603.45); anda judgment against the applicant Jennings in the sum of twenty-six thousand eight hundred and seventy-two dollars and twenty cents ($26,872.20). The formal orders I make, therefore, are:- (1) Both applications are dismissed. (2) On the counter-claim by the respondent against the applicant Theakstone, there will be jyudgment in the sum of twenty-nine thousand six hundred and three dollars and forty-five cents ($29,603.45). (3) On the counter-claim by the respondent against the applicant Jennings, there will be judgment in the sum of twenty-six thousand eight hundred and seventy-two dollars and twenty cents ($26,872.20). (4) The applicant Theakstone is to pay the respondent's costs of the application and counter-claim up to the date of hearing and half the costs of the hearing, including counsel's fees as for one brief. ee e/11 ont il (5) The applicant Jennings is to pay the respondent's costs of the application and counter-claim up to the date of hearing and half the costs of the hearing, including counsel's fees as for one brief. (6) Liberty to the respondent to apply for an order for interest on the judgment should 1t remain unpaid within fourteen (14) days of today's date. i . _ TEA (rey ST SeHN Vor lL tT to €3 Bek