CATCHWORDS Trade Practices - misleading conduct - purchase of home unit - representation as to view from unit - unit building not constructed at date of contract - subsequent erection of obstruction to view - plans available for inspection - not inspected by purchaser - whether purchaser entitled to rely upon misrepresentation Trade Practices Act 1977, s.52 DAINFORD LIMITED v. SANROD PTY. LIMITED, HENRY JOHN JAGO and BEATRICE ELEANOR JAGO No. 670 of 1984 CORAM: NORTHROP, MORLING and SPENDER, Jd. 12 Octcber 1984 BRISBANE. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY No. G70 of 1984 GENERAL DIVISION JUDGES MAKING ORDER DATE OF ORDER BETWEEN: DAINFORD LIMITED Appellant AND: SANROD PTY. LIMITED Pirst Respondent AND: HENRY JOHN JAGO and BEATRICE ELEANOR JAGO Second Respondents ORDER Northrop, Morling and Spender JJ. 12 October 1984 WHERE MADE Brisbane THE COURT ORDERS AS FOLLOWS: Ll. Appeal dismissed. 2. Appellant to pay the respondents' costs. IN THE FEDERAL COURT OF AUSTRALIA ) ) QUEENSLAND DISTRICT REGISTRY ) No. G70 of 1984 ) GENERAL DIVISTON ) BETWEEN : DAINF'ORD LIMITED Appellant AND: SANROD PTY. LIMITED First Respondent AND: HENRY JOHN JAGO and BEATRICE ELEANOR JAGO Second Respondents CORAM: Northrop, Morling and Spender JJ. 12 October 1984 REASONS FOR JUDGMENT NORTHROP J: I would ask Mr Justice Morling to express his opinion first. MORLING J: This is an appeal from a decision of a judge of the Court in proceedings in which the appellant was found liable to pay damages to the first respondent arising out of misleading conduct which the learned judge found the respondent had engaged in contrary to the provisions of s.52 of the Trade Practices Act. 2. The proceedings arose out of the purchase by the first respondent 'from the appellant of a home unit in a proposed building to be known as "Imperial Surf" which was to he constructed by the respondent. The second respondents, who are husband and wife, guaranteed the performance of the first respondent's obligations under the contract of purchase. The second respondents were directors of the first respondent. The orders made by the iearned trial judge included declarations that the contract of purchase and the guarantees given by the second respondents were void. No serious challenge was made to the findings of fact made by his Honour and the following account of the facts is taken from his Honour's judgment. The contract in respect of Unit 2B in "Imperial Surf" was dated 24 August 1981. On the same day the first respondent, to which I shall refer hereafter as "Sanrod", also agreed to purchase Unit 1Bin a building known as "Peninsula", another building to be constructed by the appellant, to which I shall refer hereafter as "Dainford". The negotiations in respect of each purchase had occurred on 11 and 12 August 1981. These negotiations took place between the second respondents, Mr and Mrs Jago, and Mr David Heaney, an employee of P.R.D. Realty Pty. Limited. That company carried on the business of areal estate agent at Surfers Paradise and was engaged by Dainford to sell units in "Imperial Surf". Mr Heaney was a real estate salesman 3. employed by P.R.D. Realty Pty. Limited and was authorised by his employer and Dainford to make representations in relation to the sale of units in "Imperial Surf". The market for new units on the Gold Coast was buoyant in August 1981 and there was a heavy demand for units in "Imperial Surf" and "Peninsula". "Imperial Surf" isa large building of about 40 storeys. The land on which it is constructed has a frontage to the Esplanade, which abuts the beach front at Surfers Paradise. Units in "Imperial Surf" went on sale at the end of July 1981 before the construction of the building was commenced. On 11 August 1981 Unit 2B was the only unsold two bedroom unit which was to be constructed at the front of the proposed building facing the Esplanade. Unit 2B 1s on the first floor above ground level and immediately above the main entrance to "Imperial Surf". As was always intended by Dainford, a large canopy or porte-cochere has been constructed over the driveway at the main entrance to the "Imperial Surf" building. Although there are still extensive water views from Unit 2B, the porte-cochere is a sianificant obstruction to the view and it also has other disadvantages for the owner of Unit 2B. 4. Sanrod and Mr and Mrs Jago allege that they were induced to- enter into the contract and the guarantee by misrepresentations made for that purpose. The misrepresent- ations were alleged to have been fraudulently made. I should say at once that there was no finding of fraud made by his Honour, and it was not pressed on this court that any such finding should be made. In substance, the misrepresentation alleged was that there would be uninterrupted water views from Unit 2B in "Imperial Surf". It was alleged that Dainford had no intention at any material time of so constructing "Imperial Surf" that Unit 2B would have uninterrupted water views. It was alleged that "Imperial Surf" had in fact been constructed with a porte-cochere which substantially restricted views of the water from Unit 2B. The respondents' primary case at the trial was that Dainford's conduct constituted a contravention of s.52(1) of the Trade Practices Act. It was further alleged that, in any event, and irrespective of whether the alleged misrepresent- ations were fraudulent or innocent, the respondents were entitled to rescind the contract. After Auaust 1981, and in 1982, there was a sharp down-turn in the market for new units on the Gold Coast anda sharp decline in the value of units, including those in the 5. "Imperial Surf" and "Peninsula" buildings. Both buildings were then still in the process of constuction. In the events that happened, Sanrod did not complete the purchase of Unit 28. It is unnecessry to refer in any detail to the events that transpired between August 1981 and 1 February 1983 when the solicitors for Dainford, pursuant to a notice given in December 1982, required settlement on 1 February 1983. It is sufficient to say that on 11 January 1983 Sanrod's solicitors wrote to Dainford's solicitors expressing concern at the porte-cochere, and requesting advice whether Dainford intended to offer compensation in respect of it. Dainford's solicitors replied on 25 January 1983 denying that the porte-cochere would affect the value or quality of-unit 2B, asserting that the porte-cochere had always been within the contemplation of Dainford, and that it did not intend to offer any compensation to Sanrod. There was no attendance at settlement by or on behalf of Sanrod on 1 February 1983. Instead its solicitors informed Dainford's solicitors of their clients' unwillingness to complete the contract and requested a return of the deposit paid under the contract. It seems to have been common ground at the trial that Dainford elected to accept the repudiation of the contract by Sanrod. Dainford subsequently resold Unit 2B for $165,000, which was some $55,000 less than the purchase price that Sanrod had agreed to pay. 6. The contract for the purchase of Unit 2B contained a recital in these terms: "(b) The Vendor intends to construct a multi-storey building to be called 'Imperial Surf' on the land in accordance with plans and specifications to be prepared by Vendor's architect". However, there was no plans annexed to the contract showing in detail the exact nature and extent of the buiiding to be erected or giving any indication of the proposed porte-cochere at the front of the building. There was considerable conflict at the trial as to what was said in the discussions between Mr and Mrs Jago and Mr Heaney which preceded the signing of the contract to purchase the unit. It is plain from the judgment under appeal that the learned trial judge did not accept any of these witnesses as wholly reliable. He described Mr Heaney as a "most unconvincing witness". He also said that he did not unreservedly accept the evidence of either Mr or Mrs Jago. The trial judge found that prior to the signing of the contract to purchase Unit 2B Mr and Mrs Jago had produced to them a brochure on the "Imperial Surf" building. One sheet of the brochure was a photograph taken from the sea looking towards the land upon which "Imperial Surf" was to be constructed. Superimposed on the photograph was an artist's impression of the proposed building. The building was shown as 7. being about 40 storeys high with an entrance to the ground floor of the building on the Esplanade side of the site. A structure of some sort is shown above the entrance but it is not possible to tell its exact nature from the artist's impression. In particular, it is not possible to deduce from the artist's impression what is the height above ground level of the structure or what is the extent to which it protrudes from the facade of the building. Another sheet of the brochure was described as "Site Plan and Floor Plan levels P, E, and 1". This sheet indicated a "canopy" over the entrance to the buiiding on the facade facing the Esplanade. The plan makes it clear that there was to be a canopy of one kind or another constructed over the driveway 1n front of the building. The part of the ground floor which is immediately adjacent to the canopy is described on this plan as "entry foyer" as to part and, as to another part, "reception". Although there is a paucity of any detail of the canopy, it is reasonably clear to me from the plan that the canopy extends over the whole of the entry drive in front of the main entrance to the building. However, there is no information on the plan from which it is possible to calculate the height of the canopy. 8. The learned trial judge did not accept evidence given by Mr and Mrs Jago that the copy of the brochure given to them on 11 August 1981 did not include a copy of the "Site Plan and Floor Plan levels P, E and 1". However, he found that they did not advert to the reference to the canopy in the plan and that their attention was not drawn to it. He further found that the canopy referred to on the plan was not the same structure as the porte-cochere that was in fact constructed. His Honour was satisfied that as at 11 August 1981 Dainford did intend to construct a porte-cochere similar to, although not identical with, the one that was constructed. He said that it was clear that Mr Heaney and Mr and Mrs Jago did not have any discussions which might have indicated to the Jagos that the view from Unit 2B would or might be obstructed by another" structure on the site. In the course of his judgment his Honour said: "The pre-contractual negotiations related to the purchase of a unit to be constructed one floor above ground level at the front of a building facing towards the Esplanade and the beach. The obvious expectation of an intending purchaser in the absence of information to the contrary would be of views from that unit unimpeded by some structure erected on that site between the unit and the Esplanade. Further, in the course of the negotiations between the second applicants and Mr Heaney, there was discussion of the views which would be enjoyed from Unit 2B. The tenor of those discussions was to confirm the ordinary expectation of Mr and Mrs Jago of unobstructed views consistent with the height of the unit. No attempt was made to disclose to them that the respondent then intended to erect any structure which would or might impede such views. 9. There was no mention of a 'canopy' nor were they referred to the relevant part of the material plan in thé "Imperial Surf" brochure and, even if they had been, it would not have adequately disclosed the nature and extent of what was intended, aithough it would have alerted them and provided an opportunity for further inquiry." His Honour found that what was said and done in the course of the negotiations leading up to the signing of the contract to purchase Unit 2B conveyed a false impression when viewed in the context of the subject matter of the negotiations and constituted misleading conduct within the meaning of 8.52(1) of the Act. He further found that the respondents were influenced to sign the contract and the quarantee by Dainford's misleading conduct, and granted the respondents the relief to which I have already referred. Counsel for Dainford submitted on the hearing of the appeal that the learned trial judge's decision was erroneous in two respects. First, it was submitted that the evidence did not support the finding that Dainford's conduct was misleading within the meaning of s.52 of the Act. Secondly, it was submitted that there was insufficient evidence to show that the respondents were induced to enter into the contract to purchase Unit 2B by the alleged misleading conduct. Whilst I am of the opinion that there is much force in the appellants' first submission I do not think that it should succeed. Had the case for the respondents depended only upon 10. the evidence that they were shown, and relied upon, the brochure, that they expected to enjoy uninterrupted water views from Unit 2B, and that the porte-cochere as constructed partially obstructed such views, I would not have thought that a case of misleading conduct was established. In my view, the brochure made plain to intending purchasers that there was to be a substantial canopy erected over the entrance to the building. The brochure aiso made it clear that the canopy would be of considerable width and would protrude above ground level at that part of the building at which Unit 2B was located. There was no information in the brochure to indicate the height of the canopy or the extent to which it might impede views from' Unit 2B. In the absence of any discussions between Mr Heaney and Mr and Mrs Jago, I do not think the latter could reasonably have interpreted the brochure as conveying to them that there would be uninterrupted views of the water from Unit 2B. It was simply not possible to tell from the brochure that that would be the case or not. However, the trial judge found that the tenor of the discussions prior tc the signing of the contract "was to confirm the ordinary expectations of Mr and Mrs Jago of unobstructed views consistent with the height of the unit". Mr and Mrs Jago gave evidence that Mr Heaney told them in ll. positive terms that "you will have an unobstructed view". Mr Heaney denied making any such statement, and no specific finding in respect of it was made in the learned trial judge's reasons. I think that counsel for Dainford was correct in his submission that the trial judge did not find that this statement was made by Mr Heaney. But that is not the end of the matter. There was much other evidence in the case to the effect that Mr and Mrs Jago believed that there would be uninterrupted water views from Unit 2B, and that they communicated that belief to Mr Heaney. It is unnecessary to refer to that evidence, but some of it may be seen at pages 43, 95 and 126 of the record. It is also clear on the evidence that Mr Heaney did not positively tell Mr and Mrs Jago that the views from Unit 2B would be interrupted to any extent by the canopy. Indeed, Mr Heaney gave evidence that even he did not appreciate the extent of the obstruction which the porte-cochere would cause to the view from Unit 2B. However it is beyond dispute that in August 1981 plans had been prepared which included provision for a porte-cochere which would indeed necessarily obstruct, to an extent, the views of the water from Unit 2B. The plans which were Exhibit 18 in the case include a plan showing a canopy with a solid masonry or concrete surround, some 1,100 mm. in height, around the perimeter of the canopy. This surround would inevitably affect the views from Unit 2B. iz. As I have already said, Mr Heaney did not appreciate the extent of the obstructions of views from the porte-cochere as shown on the plans which were in existence at the time he had his discussions with Mr and Mrs Jago, but Dainford cannot rely upon his ignorance in that respect, since he was its agent for all relevant purposes. Thus the situation was that he knew that Mr and Mrs Jago believed that the views from Unit 2B would be unobstructed and he had discussions with them "the tenor of which was to confirm that belief". That being the case, I think that his Honour was correct in finding, as he did, that what was said and done inthe course of the negotiations leading up to the signing of the contract to purchase Unit 2B was misleading. Mr Heaney omitted to inform Mr and Mrs Jago of the extent to which the views from Unit 2B would be obstructed. Conduct may include not only acts, but omissions, see s. 4(2)(a) and (c) of the Act. Reference may also be made to the numerous cases cited by Spencer-Bower and Turner on Actionable Misrepresentation, 3rd ed. p. 95 et seq. I have earlier referred to the circumstance that the contract referred to plans and specifications to be prepared by the architect, and to the fact that detailed plans showing the porte-cochere were in existence at the time the contract was signed. Counsel for Dainford argued that the failure of Mr and Mrs Jago to look at the plans and specifications disentitled them to rely upon any misleading conduct that otherwise might have occurred. I donot think that this is the case. The 13. contract did not refer to any specific plans but merely to plans "to be prepared by the vendor's architect". It is true that Mr and Mrs Jago might have enquired whether such plans existed but I do not think their failure to do so negatived what was otherwise misleading conduct on the part of Dainford through its agent, Mr Heaney. Counsel for Dainford relied upon Tamplin v James (1880) 15 Ch. D. 215 as authority for the principle thata purchaser who chooses to buy a _ property fully described in plans which he chooses not to look at cannot later complain on the footing that he did not look at the plans. Whatever the application of such a principle to cases arising under s.52 of the Trade Practices Act, the decision in Tamplin v James can have no application in the present case, since the contract for the sale of Unit 2B did not identify any plans in which the unit was fully describe. Tamplin's Case was a case in which the contract itself contained an accurate description of the property sold. Moreover, there was a complete absence of evidence in that case that the vendor did anything that could be construed as misleading. It was a simple case of failure by a purchaser to inspect plans. For the reasons I have given, I think that the learned trial judge was not in error in finding that the respondents had made out a case of misleading conduct on the part of Dainford. 14. The appellant's second arqument can be disposed of more briefly. His Honour referred in some detail to the evidence from which it might have been held, on one view of the facts, that any misrepresentation as to the porte-cochere did not act as an inducement to the respondents to enter into the contract. He referred, for instance, to the market conditions which obtained at the time, to the anxiety of Mr and Mrs Jago to purchase units for the purpose of resale for profit, and other matters. He then said: "However, it is necessary to consider the particular transaction Which was entered into. There were other units for sale on the Gold Coast with other advantages and disadvantages and at other prices, including other units in 'Imperial Surf' although there was no other two bedroom unit on the front of 'Imperial Surf' available. The second applicants wanted such a unit. The applicants' purpose was to acquire further Gold Coast units in the expectation that their value would increase. Their reasons for wanting a two bedroom unit on the front of 'Imperial Surf' were related to that purpose. They selected features which they considered important, according to their perception of what affected present value and potential future increase in value. Their desire for aunit on the front in 'Imperial Surf' was directiy related to the expected views and their significance to value. I am not prepared to reject the second applicants' evidence to the point of concluding that they would have caused the first applicant to contract to purchase the unit at the price even if the respondent had made full disclosure concerning its proposal to erect the porte cochere which has been constructed. On the contrary, I find that the applicants were influenced to sign the contract and guarantee and to make the payments by the respondent's misleading conduct to which reference has already been made." is. I do not think that any valid criticism can be made of this reasoning. Given the finding of misleading conduct, I think it was correct to find on the evidence that Mr and Mrs Jago were influenced to enter into the guarantee and the company was influenced to enter into the contract by that misleading conduct. I would dismiss the appeai with costs. NORTHROP J: I will ask Mr Justice Spender to express his opinion. SPENDER J: I agree with the judgment of Mr Justice Morling. There is one short observation I want to make. While it is not possible to conclude the exact dimensions of the structure depicted on the artist's impression in the brochure, in my view it is quite clear that what is depicted there is not a porte-cochere or anything like one. The picture which is part of the sales brochure used to sell units in "Imperial Surf" conveys a completely different impression from what was in fact built, and what was intended to be built by Dainford at the time of the discussions which preceded the saie of Unit 2B to Mr and Mrs Jago. That impression was an important part of the pre-contractual conduct, the entirety of which has to be 16. considered in determining whether that conduct may properly be characterized as misleading or deceptive. NORTHROP J: I likewise agree with the opinion and reasons given by Mr Justice Morling, and would also adopt the views expressed by Mr Justice Spender. At the trial the learned trial judge, having found for the then applicants on the misleading conduct point, did not find it necessary to consider the other bases upon which the then applicants based their claims. We have stopped counsel for the respondent making submissions on those bases, and accordingly we do not express any opinion on those matters. In the result, the appeal is dismissed with costs to be taxed. — asa the Ave (as) Teer ee mae cory of Uhe ea Be uot herein of his honour Bruen + Ur. ducv-v~ - ee es Associate pated: (Ilals¢