CATCHWORDS Trade Practices - misleading and deceptive conduct - purchase of land - alleged representation by land salesman as to availability of water supply to land - measure of damages. Trade Practices Act 1974, ss.52, 53A, 82 Brown v. The Jam Factory Pty Ltd (1981) 35 A.L.R. 79 Mister Fiagqins Pty Ltd v. Centrepoint Freeholds Pty Ltd (1981) 36 A.L.R. 23 Yorke v. Ross Lucas Pty Ltd (1982) 45 A.L.R. 299 Matter No. G15 of 1985 ANTONIO JOSEPH CERAVOLO and PETER ECONOMOU REAL ESTATE PTY LTD and GERHARD STEPHEN BOTZEK RECEI' ~§ OCT 1985 ; Forster J. FERAL C Adelaide 3 October 1985 wg a ee IN THE FEDERAL COURT OF AUSTRALIA ) ) SOUTH AUSTRALIAN DISTRICT REGISTRY) } No. G15 of 1985 GENERAL DIVISION ) BETWEEN: ANTONIO JOSEPH CERAVOLO Applicant - and - PETER ECONOMOU_ REAL ESTATE PTY LTD and GERHARD STEPHEN BOTZEK Respondents MINUTE OF ORDER FORSTER, J. ADELAIDE 3 OCTOBER 1985 JUDGE MAKING ORDER WHERE MADE DATE OF ORDER THE COURT ORDERS THAT: 1. There be judgment for the applicant against the first respondent in the sum of $14,436 with the first respondent to pay the applicant's costs to be taxed. 2. The applicant be at liberty to discontinue proceedings against the second respondent Gerhard Stephen Botzek with the applicant to pay the second respondent's costs to be taxed. 3. The second respondent be at liberty to discontinue the cross-claim against the first respondent with no order as to costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA } ) SOUTH AUSTRALIAN DISTRICT REGISTRY) ) No. G15 of 1985 GENERAL DIVISION ) BETWEEN: ANTONIO JOSEPH CERAVOGLO Applicant - and - PETER ECONOMOU REAL ESTATE PTY LTD and GERHARD STEPHEN BOTZEK Respondents REASONS FOR JUDGMENT CORAM: Forster J. This case provides a further indication of the desirability of power being given to this Court to remit proceedings to a suitable State Court for resolution. The maximum amount of damages which the applicant, if successful, can reasonably hope to receive is in the vicinity of $15,000 within the jurisdiction of the Local Court of Adelaide and the question of liability is ina short compass and is not difficult of resolution raising no complicated questions of law or fact. The applicant was desirous of purchasing a block of land an the hills out of Adelaide inorder to build thereon a residence for himself and his family. As a result of reading an advertisement in the daily newspaper he got in touch with the respondent which carries on business under the name L.J. Hooker - 2. Unley. By arrangement, the applicant and his wife met one Grothauzen on or near allotment 544 which abuts Mount Osmond Road and Hayward Drive. Grothauzen is a licensed land salesman employed by the first respondent. What Grothauzen said and did during those discussions forms the basis of the applicant's claim. I should mention that the proceedings were discontinued against the second respondent at the beginning of the trial and I will refer to the first respondent as the respondent. Grothauzen's evidence was that on the first visit to the land only the applicant was present and not his wife. He saad that there was a later meeting on the land at which the applicant and his wife and some of their friends were present. The applicant and his wife gave evidence of only one meeting with Grothauzen on the land at which both of them were present but no one else. Grothauzen's account of two meetings, the first with the applicant alone and the second with the applicant and his wife and some of their friends, was not put to the applicant or his wife in cross-examination. In this somewhat unsatisfactory state of affairs I have come to the conclusion that Grothauzen was mistaken. I accept the evidence of the applicant and his wife. There was only one meeting on the land and both were present. The applicant says that at this meeting he enquired of Grothauzen what the position was as to the supply of water, electricity and gas to the land. Grothauzen recalls only a a- gmote.y rity alah BM ee ps eer iN 5 . orcs me mne 3. discussion about the supply of water to the land but does not deny that there may have been discussions about electricity and gas. At all events it is only what the applicant says Grothauzen said about water which 1s the subject of complaint. The applicant says that Grothauzen told him and his wife that a water supply went right past the block and that it would be a Simple inexpensive matter to tap into the supply. It 1s said that Grothauzen gave an estimate of "a couple of hundred dollars" as the cost of tapping into the water supply. The applicant's wife's evidence supports him except that she does not remember anything being said about the cost. The applicant and his wife both say that Grothauzen pointed out to them a metal manhole cover or inspection plate in the roadway adjacent to the land which was only about twenty feet away from it and said that water supply could be obtained by tapping into the pipe at that point. Grothauzen denies this and says that he said merely that the Nearest water supply was to a house some one hundred and fifty yards away where there were three or four steel plates in the road. He concedes that he pointed out the steel plate in the road adjacent to the land and told the applicant that he did not know what that plate was for. The applicant and his wife say that on 8 March 1984 when the contract for the'purchase of the land by the applicant was signed, the applicant asked Grothauzen to confirm that a supply of mains water would he readily available to the block. They say that this discussion occurred after the contract was signed " ne nr meee ge . Made 4. so that anything that Grothauzen then said could not have been an inducement to the applicant to enter into the contract. This may well be so but what the applicant says that Grothauzen said and did provides corroboration of a sort of what he had previously said and done. The applicant and his wife say that the applicant asked Grothauzen to confirm that the water supply would be readily available and to give him a plan of the block to help him with his application to the Engineering and Water Supply Department. They say that Grothauzen confirmed that the water supply would be readily available and that after he drew a plan on a piece of paper which he did not give to the applicant, he handed to the applicant a printed plan (Exhibit B) having made a mark thereon with a ball point pen indicating the position of the plate in the road adjacent to the land. Exhibit B bears such a mark in the appropriate place. Grothauzen says that he did not give the plan to the applicant on the occasion of the signing of the contract but on some other occasion before the signing which he cannot precisely identify. Grothauzen also says that he did not make the mark on the plan to which I have referred. Having seen and heard the applicant and his wife and Grothauzen giving evidence and assisted by Exhibit B, I have reached the conclusion that I should prefer the evidence of the applicant and His wife to that of Grothauzen. I find that on the probabilities Grothauzen told the applicant before he signed the contract that a mains water supply could be readily and inexpensively provided to the land from the identified point adjacent to it. Sar guar ar conaiiiceinteentameer mane? nag a ieee ne 5. The fact is, as was proved by Manoel, a senior engineer in the Engineering and Water Supply Department, that it is unlikely that mains water will ever be available to the land and that the plate in the road adjacent to 1t gives access to a pipe carrying water from a pumping station to a tank higher up the hill. This pipe is not available for supply and is most unlikely ever to be so. The applicant made a formal application to the Engineering and Water Supply Department for a supply of water to the land and this application was refused. Grothauzen's representation that a supply of mains water would be readily and inexpensively available from the plate adjacent to the land was false and amounted to misleading and deceptive conduct. The applicant says that although the land was generally suitable for his requirements he would not have bought it had he known that mains water would not he available. The respondent is a corporation and through its agent in trade or commerce it engaged in conduct that was misleading or deceptive and a breach of s.52 of the Trade Practices Act is thus made out. A breach of s.53A 15 also claimed and, in my view, made out. Damages are claimed pursuant to s.82 of the Trade Practices Act with respect to the contravention of ss.52 and 53A. The starting point for the assessment of damages is no doubt the difference between the value of the land and what the applicant paid for it (see Brown v. The Jam Factory Pty Ltd 6. (1981) 35 A.L.R. 79 and Mister Fiqqins Pty Ltd v. Centrepoint Freeholds Pty Ltd (1981) 36 A.L.R. 23). The only oral evidence as to the value of the land at the time of the purchase viz. 27 April 1984 is that of Mr Goodwin, a licensed valuer of some experience, who valued it at the relevant time at $35,000. There is also however, the fact that the land was sold by the applicant in May 1985 for $50,000. Goodwin was aware of this sale and the price paid but it did not cause him to alter his valuation as at only thirteen months earlier. He was not cross-examined on this point and although I have some misgivings about his valuation as at the relevant time his evidence is uncontradicted and no substantial argument was put to me by the respondent about it. If the appropriate measure of damages is to assess how much worse off the applicant was as a result of the misleading or deceptive conduct of the respondent, as I think it is, there are a number of other matters which should be taken into account. Before he knew that mains water would not be available, the applicant employed an architect to prepare some preliminary Plans for the house which he intended to build. He said in evidence that he paid the architect "approximately $1000 odd". No vouchers or receipts were tendered to support this evidence although the plans were tendered and an opportunity was specifically given to the applicant to produce such vouchers and receipts during the overnight adjournment of the hearing. No por sete ae fy aes pee Pe peony 7. explanation was given for their non production. Ina letter from the applicant's solicitors dated 24 July 1985 the cost of plans was said to be $450. The applicant said that there were other fees paid of which he was unable to give any details. No doubt the plans cost something but I do not feel justified in allowing any more than $450 under this head. The applicant also says that having purchased materials and with the assistance of relatives he erected a fence around the property. He says that this cost $1,000 but once again no invoices or other papers were tendered to support this. There was no evidence as to the cost of the materials nor of the wages paid to the two relatives who assisted with the erection of the fence. I accept that the fence was erected but, in view of the total absence of supporting evidence about the cost, I allow $500 under this head. Expenses to which the applicant was put in connection with the purchase were $272 for the fee of the land broker and $1,034 in stamp duty and registration fees of the transfer. I allow $1,306 under this head. At settlement the applicant paid $49-66 being his proportion of council rates and land tax and he said in evidence that he also paid these rates and taxes for the year 1984/85. There was no evidence as to the amount of these payments and I can only assume that they were the same as the previous year and totalled $233. Settlement of the sale by the applicant took place on 24 May 1985 and no doubt the purchaser A i F _ =. ery oT or ere 8. paid to the applicant his proportion of the rates and taxes. No calculation has been made by the parties of what the applicant paid. I calculate the applicant's proportion of the rates and taxes at approximately $209. His solicitors' letter mentioned above claims $180 for rates and taxes and I allow this latter amount. The cost of procuring a mortgage and of its stamping and registration and the interest paid under it are also claimed in the solicitors' letter but I do not propose to make any allowance with respect to these financing costs associated with the purchase, (see Yorke v. Ross Lucas Pty Ltd (1982) 45 A.L.R. 299). Ido however make an allowance for interest on the purchase price paid by the applicant. I consider that for the purposes of calculation ten percent is the appropriate rate, (see Yorke v. Ross Gucas Pty Ltd (supra)). Ten percent on $43,000 from 13 April 1984 to 24 May 1985 is $4,794-76 and bearing in mind contingencies I allow $4,000 under this head. The applicant is entitled to damages calculated as follows - Difference in value $8,000 Plans 450 Fence 500 Costs of transfer 1,306 Rates and taxes 180 Interest 4,000 14,436 i od An " . powreees = Pe OTT Cp een ome eet, one QT TT There will be judgment for the applicant in the sum of $14,436 and costs of action to be taxed. I certify that this and the S&S preceding pages are a true copy of the Reasons for Judgment of Mr Justice Forster. Associate "~@éu- Leelee Dated: 2 uw Ocriboar 79PS wee are es