CATCHWORDS Trade Practices ~ Consumer protection - Alleged false or misleading statements concerning land - Action against individuals - Alleged statements made in course of telephone conversation following advertisement - Subsequent conversation at. appellants' home - Whether statements made "in trade or commerce" — Consideration of what constitutes conduct "in trade or commerce" for purposes of s.53A - Use of newspaper advertisements and use of telephone for conducting negotiations not of itself something done in trade or commerce. me ow t Te Ree Trade Practices Act, ss.6(3), 53A(1)(b) _ RAYMOND LAWRENCE O'BRIEN and BARBARA ANNETTE O'BRIEN v. PAUL SMOLONOGOV and ADRIAN LAPARDIN No. G186 of 1982 ~~ Fox, Sheppard and Beaumont JJ. 17 November, 1983 Sydney. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION BETWEEN: AND: Judges making order: Date of order: Where made: THE COURT ORDERS THAT: No. G186 of 1982 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA RAYMOND LAWRENCE O'BRIEN and BARBARA ANNETTE O'BRIEN Appellants PAUL SMOLONOGOV and ADRIAN, LAPARDIN \ Respondents ORDER Fox, Sheppard and Beaumont, JJ.' 17 Navember, 1983. Sydney 1. The appeal be allowed. 2. The orders of the Court made on 1 October, 1982 be set aside and in lieu thereof it be ordered that the application dated 13 November, 1981 be dismissed with costs. 3. The respondents pay to the appellants their costs of the appeal. \! nN ' ' IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES. DISTRICT REGISTRY ' ' GENERAL DIVISION 'No. G186 of 1992 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA ' BETWEEN: RAYMOND LAWRENCE O'BRIEN and BARBARA ANNETTE O'BRIEN _ Appellants , AND: PAUL SMOLONOGOV and' 7s meen ~ ** * RDRIANTHAPARDIN , Respondents t CORAM: Fox, Sheppard and Beaumont, JJ. DATED: 17 November, 1983. ' f I wih 4 ' REASONS 'FOR JUDGMENT ' : = eae THE COURT: This is an appeal from a sangle Judge of the Court in proceedings brought by the respondents against the appellants claiming that the appellants made false or misleading statements concerning certain land near Jindabyne contrary ta the provisions of para. 53A(1)(b) of the Trade Practices Act, 1974 ("the Act") and seeking (inter alia) to recover the loss or damage which they might have suffered by that conduct pursuant to s.82 of the Act. ~ ae ' I | ' Paragraph 53A(1)(b) provides: "(1) A corporation shall not, in trade ,or commerce, in.connexion with the sale or grant, or the possible sale or grant, of an interest in land or in connexion with the promotion by any means of the sale or grant of an 'interest in land - (b) make a false: or misleading statement concerning the'nature l of the interest in the' land, the price payable for the 'gid, , the location of the lana .f the characteristics' of the jand|, ; the use to which'the laiia i's _capable ,of being put or may ' ow lawfully: be... put or the ' existence or availability of facilities associated with the ' land." Since the appellants are individuals, s.53A cannot ! apply here unless the extended operation of Division I of Part V of the Act provided by sub-s.6(3) is applicable. It is common ground that the extended operation provided for by para.6(3)(a), in its reference to the use of telephonic services, is available here since the respondents say that the offending conduct took place in the course of a telephone conversation (see The Queen v. Australian Industrial Court; Ex parte C.L.M. Holdings Pty. Limited (1977) 136 C.L-R. 235). The telephone conversation in question related to land owned by the appellants which they had advertised for sale and the alleged false or misleading statements concerned the location and characteristics of the land and the use to which it was capable of being put or might lawfully be put. my ' \ 3. 1 ' 1 There is no challenge to the primary findings of I ' fact made by the Judge and they may be summarised as follows. The appellants acquired five adjoining portions of land of a total area of approximately 875 acres known as ' ' portions 81, 101, 106, 112 and 122 in the Parish of Wilson, I Snowy; River Shire, in August, 1980. The land was conditional leasehold under the Crown' Lands Consolidation iad ? Act, 1913 (N.S.W.). -This case concerns portions 81 and 101 ' ' ' . only. In order to'apply for permission to build on that Land ut 'would have been necessary to convert it to freehald by paying the appropriate fees and obtaihing cohsent and ot then amalgamating both portions" into one. It was likely that the Shire Council would then grant permission to build on it. No building. permit existed in relation to it. After acquiring the land, the appellants decided Fat they would like to build on portion 106 (287 acres) it} I ' 1 and, for the! purposes of financing the building, to sell other parts of their holding. Early in August, 1981, they . ' advertised portion' 122 and as a result entered into a 1 , ' contract dated 6 August, 1981 to sell that portion and an 1 4 'adjoining portion 112 to another party. On 9 August, 1981 thely advertised portions §1 and 101 in the "Sunday Telegraph". The advertisement was inserted under the classification "Farms, Stock, Stations" ' and. read as follows: ; mea ' "JINDABYNE 282 acres, building permit O.K. magnificent views $45,CO0O 542-1845 (Sx) ." It was seen by the first respondent who brought it to the attention of the second respondent and asked him to telephone the number advertised. The second respondent did so and spoke to the first appellant. In the course of this telephone conversation, the first appellant made' a' numberof statements about the property which the respondents claimed and the learned Judge found, were false or misleading and which he summarised as follows ((1982)'44 A.L.R. 347 at p.358): I 1 . That , the subject land was 13 miles ' from |Jindabyne, was practically on 2 1 the main road and only one or two gates from it; ' . That there was no problem to get onto the land; . That it is very good land; . That he had a building permit to build on it and that there was no problem to build a hoyse on it and to bring in materials; . That there was a permanent creek running through the property." 5. His Honour was also satisfied that during this conversation the first appellant said words to the effect that if the second respondent was interested he should hurry because a potential buyer from Cooma was coming to Sydney and wanted to buy it, that there had been a tremendous response to the advertisement and that he had sold the adjoining block to a solicitor or barrister. "4 Following 'this conversation, the respondents visited the first appellant at his home. Further discussion between them 'occurred, in the course of which the _——= a te ror Rs respondents offered and the first appellant accepted, a | further sum of $5,000 for the property. The parties, on 10 August, 1981, entered into a written contract for sale. The contract was prepared by Mr. Henke, the solicitor acting for the appellants. Prior to their execution of the contract, the respondents received a letter from Mr. Henke saying, in part: \ "Our client believes that the planning instrument to which the land is subject prohibits the erection of a dwelling house on any parcel of land having an "area of less than 100 hectares. Accordingly, it would seem that before a dwelling house- may be erected on the subject land, the title must first be converted from leasehold to freehold and portions 101 and 81 amalgamated into one lot." ' . 6. Before the respondents executed the contract, Mr. Hodgson, the Clerk of Petty Sessions at the Courthouse at Glebe explained the effect of the contract to them and they executed it in his presence. He then signed a certificate under $.1C(5)(¢) of the Land Sales Act, (N.S-W.) 1964 which is an annexure to the contract of sale. The contract provided for a purchase price of $50,000 and a deposit of $5,000 which. was paid by the applicants. Completion was to take place within eight weeks of the date and in that respect time was made of the essence. The contract contained' the following special conditions: ' C <4 wee we ro or RTs "1. The purchaser hereby acknowledges that this contract represents the entire agreement between the parties and they do not rely upon any representations either written or oral made in respect of the sale of the within property by any person other than as set out herein. Ne wee ' 4. The purchasers acknowledge that the vendors make no representation that it will be lawful to erect a dwelling upon the- land and the purchaser expressly agrees to make no objection requisition or claim for compensation should it be established that a dwelling cannot lawfully be erected upon the property." By notice dated 2 October, 1981, the respondents purported to rescind the contract and demanded a return of the deposit with interest and costs on the grounds that they were induced to enter into the contract by a number of false representations. 1 7. The Learned Judge held that he was satisfied, within the meaning of para.53A(1)(b) of the Act, that the false or misleading statements found, by him, supra, were made in connectiom with the possible sale of an interest in land and that they concerned either the location of the Iand, the characteristics 'of the land or the use to which . | the: Land was capable of being put or might lawfully be put. His: 'Honour declared that the contract of sale was and had been void since 2 October, 1981; ordered the refund of the deposit and ordered that the appellants were liable 'to pay to the respondénts 'by way" of damages the legal and ether costs reasonably incurred by the respondents in connection with the contract and the purported rescission thereof. It ts, submatyed on behalf of the appellants that no contravention of s.53A occurred because the conduct impugned was not something done in trade or commerce. The statements relied on, the argument runs, were private in character and lacked. the trade or commercial context required by the terms of s.53A.- In. Re Ku-Ring-Gai Co-Operative Building Society No. 12 Ltd. (1978) 36 F.L.R. 134, a question arose as to whether certain conduct was "in trade or commerce" for the purposes of s.47 of the Act. Bowen, C.J. said (at p.139): &. "The terms 'trade' and 'commerce' are ordinary terms which describe all the mutual communings, the negotiations verbal and by correspondence, the bargain, the transport and the delivery which comprise commercial arrangements (W. & A. McArthur Ltd. v. State of Queensland). The word 'trade' 1s used with its accepted English meaning: traffic by way of sale or exchange or commercial dealing (Conmissioners of paxatton v. Kirk per Lord Davey; W. & Ae KR NcArthur Ltd. 'Vet State of Queensland). The commercial character of trade was mentioned more recently by , Loyd Reid in Ransom v., Higgs-' His Lordship there said: 'As an ordinary word in the English language "trade" has or: -~has had-a:varzety of meanings or shades of meaning. Leaving aside obsolete ar rare usage it 1 is sometimes used to denote any mercantile operation but is commonly used to denote operations of a commercial \ character by which the trader provides to customers for reward some! kind of goods ' or services.'" | II Deane, J- said (at p.167): t] "The terms 'trade' and 'commerce' are not terms of art. They are expressions of fact and terms of common knowledge. While the particular instances that may fall within them will depend upon the varying phrases of development of trade, commerce and commercial communication, the terms are clearly of 'the' widest 'import (see, generally, W. & A. McArthur Ltd. v. Statefof Queensland and Bank of New South Wales v. The Commonwealth). They are not restricted to dealings or communications which can properly be described as being at arm's length in the sense that they are within open markets or between strangers or have a dominant objective of profit-making." i ae ! ' 9. ' 1 .The learned Judge accepted that the sale of land by private contract, without more, may not be in trade or commerce but his Honour pointed to the fact that the conduct here complained of involved an 'invitation' by the appellants to the public at large to treat with them. This was done by public advertisements inviting the conduct of negotiations over' the telephone. In this: way, the Learned Judge held, ' , . the ordinary means of trade,or commerce were utilised for i] the purpose of selling their land and it follows that the | i ednduct of the appellants was something done in trade or ] commerce for the purposes of the act (cf. Bank. of New South Wales v. Commonwealth (1978) 76 C.L.R.'1 at §.381). Although the explanatory memorandum explaining the ' I operation of the Trade Practices Bill, 1974 describes Part V ij of the Bill as prohibiting "a number of commercial practices ' 4 7 that are unfair, to consumers," (emphasis, added), there does hye ' ' Va not appear to bE any Australian authority squarely in point \ : for present purposes. (c£. Videon v. Barry Burroughs Pty. td. (1981) 53 F,L-R. 425 at p.447; Glorie v. W.A. Chip '& Pulp Co. Pty. Ltd. (1981) 39 A.L.R. 67 at pp.73-5). However, some guidance is given by the approach to this question taken in the United States. In a series of decisions under consumer protection legislation,' the view has been consistently taken that a private sale of property by an individual 1s not conduct in trade or commerce for the purposes of, that legislation except if done in the course of a business activity or otherwise arising in a "business context". ' 10.. Thus, in Young v. Joyce 351 A.2d. 657 (1975), the purchaser of a house brought action against the vendor charging statutory fraud arising out of certain ' misrepresentations. McNeilly, J. said (at p.860): \ . "Pinally, we hold that defendant, Ellen R. Joyce, is not covered by the Consumer ' Fraud Act, cannot be held liahle under 6 Del.C $.2513, and that judgment as to ' her must be reversed.',. Although s.2513 applies to 'any'person', which includes s an 'individual' under s.2511, that statute must be read in light of the stated purpose of the Consumer Fraud ' Act: '... to' protect consumers and ' legitimate business enterprases from unfair or deceptive'' merchandising practices in the conduct of any trade or commerce ...'. vhile the underscored terms are not statutorily defined, we do not believe that the isolated sale of real estate by its owner, in this case, constitutes the conduct of trade or commerce. +Plaintiff essentially concedes this point by admitting that 'Joyce was not engaged in a 'business, vocation or occupation' (for purposes of relieving her from treble damage liability under 6 Del.c. s§.2531 et , seq)." ' ' In Lantner v. Carson 373 N.E.2d 973 (1978), purchasers of a residence brought an action against their private vendors under the Consumer Protection Act of Massachusetts. 'The statute proscribed "unfair or deceptive t : ' acts or practices in the conduct of any trade or commerce". It was held that the Act was not available where the transaction "is. strictly private and is no way undertaken in the ordinary course of a trade or business" (at p.975). ll. Thus, the statutory proscription was read to apply to those acts or practices "which are perpetrated in a business context" (at p.977). Hennessey, C.J. explained the underlying policy considerations (at p.977): , ' "Finally, we note that our conclusions ' with respect to the scope.of G.L. c. 93A are mot inconsistent with the statute's broadly protective legislative purpose. _In Dodd v- Commercial Union Ins. Co., -= Mass. -— 365 N.E.2d 802 1977), we stated that the basic policy of G.L. c. ' 93A was 'to regulate business activities with'the view to providing ... a more ' equitable, balance in the relationship of eqngumers to,persons conducting business activities.' ... An individual homeowner who decides 'to sell his residence stands in no better bargaining position than the individual consumer. Both parties have rights and liabilities established under common law principles of contract, 'tert, and property law- Thus, arming the 'consumer' in this circumstance does not serve to equalize the positions of | buyer and seller. Rather, it serves to ' give supdrior.rights to only one of the parties,' even though as nonprofessionals both stand on an equal footing." In Rosenthal v. Perkins 257 S.E.2d 63 (1979), purchasers brought an action under the Unfair Trade Practices Act against the vendors of a house and the vendors' agent. The Act (G.S.75-1.1.) made it unlawful to engage im "... unfair or deceptive acts or practices in the conduct of any trade or commerce ..." Clark, J. said (at p.67): 12. "The defendants Goldberg were not engaged. in trade or commerce. They did not by the sale of their residence on this one eccasion become realtors. It is clear from the cases involving violation of the' Unfair Trade Practices Act that the alleged violators must be engaged in a business, a commercial or industrial establishment or enterprise. ... The defendant Finley, Inc. and its agent Perkins were engaged in the business of buying. and selling real estate and acting as a real estate broker or agent. Clearly, it was engaged in 'trade or commerce' within the meaning of G.S. 75-1.1." On the other hand, in Begelfer v. Najarian 409 + ee _ rr RTT N.E.2d 167 (1980), it was held that a 'Statute providing a remedy for persons suffering loss as a result of use by < another person, who engages in any trade or commerce, of an unfair or deceptive act or practice, does not require that a commercial transaction must have taken place only in the ordinary course of a person's business or occupatidn before 1 1 its participants may. be subject to liability. After referring to the "business context" test employed in Lantner, supra, Abrams, J. said (at p.176): - "The question of whether a private individual's participation in an isolated transaction takes place in a 'business context' must be determined from the circumstances of each case. To establish a private person's liability under s.ll we assess the nature of the transaction, the character of the parties involved, and the activities engaged in by the parties. See Lantner 13. v. Carson, supra. Other relevant factors are whether similar transactions have been undertaken in the past, whether the transaction is motivated by business or personal reasons (as in the sale of a home), and whether' the participant played an active part in the transaction. We do not read s.ll as requiring that a commercial transaction must take place only in the ordinary course of a person's business or occupation before its participants may be subject to liability under G.L. c. 93A, s.11." + Finally, in. Lynn v. Nashawaty 423 N.E.2d 1052 (1981), the Appeals Court of Massachusetts refused to set, aside a finding of fact that the sale of a stationery store, mero Fr Ane ' and, in particular, representations ds to the worth of stock-in-trade, took place in a business context so as to bring into play a statutory proscription against unfair or deceptive acts or practices in trade or commerce. Having analysed the reasoning in Lantner and Begelfer, supra, Armstrong, J. said (at p.1054): "The sale of a business or business ' assets, by a businessman is not the same as the sale of a home by an individual homeowner (as in Lantner), and =: the defendants in the present case were fully involved in every aspect of the transaction (unlike the defendants in Begelfer), including the false representation which is the core of the alleged c. 93A violation. {It is arguable that they fit well within another of the indicia, having participated, as a family, in two prior sales of stationery stores, although not as sellers, but as buyers.) In view of 14. the position taken in the Begelfer case that an isolated transaction, one that, does not take place in the ordinary course of business, may constitute a violation of s.1l, so long as it takes place in a business context, it is dzrfficult to avoid the conclusion reached by the finder of fact that the transaction at bar violated that section. We cannot say that the judge was required as matter of law to reach the conclusion that the sale of.the stationery store did not take place 'in a 'business context.' The question ina close case is doubtless largely one of fact, and the judge's finding here was '" not clearly erroneous'." In the present case, it cannot be suggested that | the lands acquired by the: appebkbants became trading stock (see Federal commissioner of ,Taxation v. St. Hubert's Island Pty. Limited (In Liquidation)' (1978) 138 C.L.R. 211). Nor is it a case where the taxpayer's activities amounted td more than the mere realisation of a capital asset and constituted the carrying on of land developmehht (see Federal I Commissioner of Taxation v. Whitfords Beach Pty. Ltd. (1982) 1 i 39 A.L.R. 521). The land utself was not used for any business activity: it was. not used for farming or grazing. It follows, in our opinion, that the only possible feature of the case which could conceivably be relied upon to suggest that the impugned conduct occurred in trade or commerce was the resort by the appellants to a newspaper as a medium of public advertisement of the land and the use made by the parties of the telephone for the purpose of ~A. conducting negotiations.! It 1s true, as the learned Judge observed, that the use of such facilities is common practice an the conduct of trade or commerce. It is also true, as Mason, J. observed in Whitfords Eeach, supra, (at p.537) that there is ambiguity in the adjectives "business", "commercial" and "trading" which "have about them a chameleon-like hue, readily adapting themselves to 'their surroundings™. As hzxrs Honour said, in some contexts, i phrases such as "business deal" and 'operation of#business" ae ' ' wf may signify a transaction entered into by a pé json! in the 1 "a 1 | course of carrying on a business; in other contexts they ' ' ' oe ow ty oF Ru I ' : : . . "denote a transaction which is business or commercial in | ' . character" (at p.537). The same may be said of "commercial" or "trading". But, in our view, the mere use, by a person not acting in the course'of carrying on a business, of ta tas | ' : : . facilities commonly employed in. commercial transactions, cannot. transform a dealing which lacks any 'business , character into something done in trade or commerce. of course, the facilties mentioned have applications which are not commercial in any sense: advertisements in newspapers and. the telephone: are used by persons for purposes which are not commercial at all. With all respect to the learned Judge, we are not persuaded that resort to them can create the business context required by the reference to! "trade or commerce" in s.53A. The conduct complained of: was not something done by the appellants in the course of carrying on a business and it lacked trading or commercial character as a transaction. It thus fell outside the scope of s.53A. ul eel 1 | 116. \ An alternative submission was put on behalf of the appellants that no contravention of s.53A occurred because the statements made were not false or misleading or, alternatively, were not relied on by the respondents, having regard to the context in which they were made; the class of t persons to whom they were addressed; the requirement -that such persons should take reasonable care of their own interest; the terms of the contract concluded between the ' parties; and the circumstances of the éxecution of the contract. 'Particular reliance was placed upon the decision . of St. John, J. in Westham Dredging Co. Pty. Ltd. v. Woodside Petrodleym Development Pty. Ltd. (1983) 46 A.L-R. |, . t 287 (cf. the observations made by Northrop, J. in Jet Corporation of Australia Pty. Ltd. v. Petres Pty. Ltd. - unreported 4 October, 1983 at pp.15-16).. In the light of the conclusion we have reached on the other submission put t on behalf of the appellants, it is not necessary to deal with 'this submission: \ ; The appeal' should be allowed with costs. The. ' 1 y orders of the learned Judge should be set aside and, in lieu t 1 thereof, 1t should be ordered that the application be dismissed with costs. ; - ' I certify that this an2 of phean (1S) preceding pages arg a tian eco oF the Neos P PUdENeLY her eat ol ule ions o oh Sustuse ox pan Hemorw fi Fecarea Ae ppowed ant "An Hemenu MMV Geahoe. Bacuiment Piet . , Associate