IN THE FEDERAL COURT OF AUSTRALIA JUDGMENT No. 638. (81. NoT FOR GENERAL DISTRIBUTION NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION CORAM PLACE: DATE: BETWEEN: AND: AND: BEAUMONT J SYDNEY 6 NOVEMBER 1987 No. WAG 49 of 1985 wee ewe FALOM PTY. LTD. Applicant ELDER SMITH GOLDSBOROUGH MORT LIMITED First Respondent GEOFFREY ROBERT MICKEL' ALBERT STANLEY MICKEL MIRRIAM JOSEPHINE MICKEL KINGSLEY ALBERT MICKEL Second Respondent ELDER SMITH GOLDSBOROUGH MORT LIMITED Cross Claimant GEOFFREY ROBERT MICKEL ALBERT STANLEY MICKEL MIRRIAM JOSEPHINE MICKEL KINGSLEY ALBERT MICKEL Cross~Respondents MINUTES OF ORDER THE COURT ORDERS: Note: Application dismissed. Applicant to pay the respondents' costs. Cross-claims dismissed; the cross -claims. Settlement and entry of 36 of the Federal Court no order as to the costs of orders is dealt with in Order Rules. ae Sas iN IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY No. WAG 49 of 1985 GENERAL DIVISION BETWEEN: FALOM PTY. LTD. Applicant AND: ELDER SMITH GOLDSBOROUGH MORT LIMITED First Respondent GEOFFREY ROBERT MICKEL ALBERT STANLEY MICKEL MIRRIAM JOSEPHINE MICKEL KINGSLEY ALBERT MICKEL Second Respondent AND: ELDER SMITH GOLDSBOROUGH MORT LIMITED Cross Claimant GEOFFREY ROBERT MICKEL ALBERT STANLEY MICKEL MIRRIAM JOSEPHINE MICKEL KINGSLEY ALBERT MICKEL Cross~Respondents CORAM: BEAUMONT J-- PLACE: SYDNEY DATE: 6 NOVEMBER 1987 REASONS FOR JUDGMENT This is a claim for damages arising out of the sale of a farming and grazing property near Esperance. The purchaser, Falom Pty. Ltd. ("Falom") acquired the property for the price of $520,000 ($100,000 of which was payable over ra TH corr on ~ eight years with interest at 10%) under a contract of sale made in August 1983 and completed in April 1984. Falom, a company controlled by Mr. E.J. Reck and his family, says that it was induced to enter into the transaction by misrepresentations made by Elder Smith Goldsborough Mort Limited ("Elders"), the agent for the vendors, and members of the Mickel family. Falom claims damages in the sum of $70,000. The respondents deny liability and, if the question arises, dispute that Falom suffered any damage in any event. Mr. Reck was Falom's principal witness. He is a German citizen and a farmer and a merchant banker in that country. He speaks a little English but it was necessary for him to give his evidence through an interpreter. He first visited Western Australia in May 1983; the object of his visit was to gather information about the investment situation in that State, and to buy a farm. He contacted Mr. H.J. Wegmann, another German citizen who had migrated to Australia and had purchased a farming property near Esperance. Mr. Wegmann suggested that Mr. Reck retain the services of Mr. J.D. von Altenstadt,*-another German citizen who had migrated to Australia and carried on business in Perth as an investment adviser. Mr. Reck said that in May 1983, he inspected 15 or 20 farms 1n the Esperance region; he was accompanied by Mr. P.C. Donkin, a representative of Altenstadt Investments Australia Pty. Ltd. together with a German tax consultant, Mr. L. Bulander. Mr. Reck inspected the Mickel's farm which was then ar en for sale. At the time it was known as "The Mail Run". Mr. Reck said that the inspection which took about half an hour, was conducted by Mr. R. Verco, a representative of Elders. Since the property had an area of 1,035 ha. (2,558 acres), it was not fully traversed; however, Mr. Reck did see some of the paddocks and some of its dams. Mr. Reck next inspected "The Mail Run" in August 1983; he was accompanied by Mr. Verco, Mr. Wegmann'as a representative of Mr. von Altenstadt and Mrs. Reck. Mr. Verco then handed Mr. Reck a document entitled "Description of Property for Sale". It described "The Mail Run" as 47 kms. distant from Esperance with an area of 1,035 ha. under freehold title. Under the sub-heading "Land", the following appears: FULLY CLEARED 980 PART CLEARED DOZED UNCLEARED 55 POISON SALTLAND TOTAL 1035 Under the heading "Water" appeared: EQUIPPED NOT EQUIPPED WELLS BORES 1 DAMS 3 5 SOAKS Under the heading "Livestock" appeared: SHEEP CATTLE OTHER PRESENT 4500 WHOLEMILK QUOTA NOW CARRY (Litres) POTENTIAL SO ae ET ae yr on i ed ? pote Under the heading "Price" appeared: "Cash $575,000.00 W.1I.W.O/Bare Terms $575,000.00 Deposit $325,000 Balance 10 years Interest 10%" According to Mr. Reck, on this visit, he inspected five of the dams on the property (they are known as dams No's. 1, 2, 6, 7 and 8). He said that Mr. Verco told him that "all dams contained plenty of fresh water". Mr. Reck noticed that dam No. 1 contained some, but not much, water; dam No's. 2, 6 and 7 had little water; dam No. 8 contained "relatively-much water". Again, Mr. Reck did not traverse every paddock; there are 18 paddocks in all. A major issue in the proceedings is the degree to which "The Mail Run" was affected by salinity. Mr. Reck said that, on this inspection, he noticed some indications of salt. His evidence in chief was as follows: "MR. WHITTINGHAM: «..Now Mr. Reck, were you aware of any salt on the land at the time of your inspection? THE INTERPRETER: I was aware that there is salinity 1n the area but because none of this was mentioned I assumed that in this particular farm there would be no salt or only very, very minor. MR. WHITTINGHAM: Did you ask any questions about salt? THE INTERPRETER: I did not ask any questions because I only presumed there would be small amount because no salt was mentioned in the description. MR. WHITTINGHAM: Could you see any indication of salt in the land that you inspected? THE INTERPRETER: We saw the strip where the creek runs through and on paddock number 10 we also saw a small area of salt. ner ne tine v7 oct rr er ee er wn wo Scanner ean weer oe we ee Pa, peers oe recehane eke tee ana MR. WHITTINGHAM: I will just go back to the water for the moment. Did you taste any water? THE INTERPRETER: In none of the dams. T trusted in the declaration of Mr. Verco." According to Mr. Reck, Mr. Verco was asked to give an estimate of the value of the land. Mr. Verco mentioned $520,000 and crossed out the figure of $575,000 appearing on the "Description of Property". Mr. Reck was not sure whether this happened on his first or his second inspection." Mr. Reck's evidence in chief then continued: , "MR. WHITTINGHAM: Let us go back a few stages then, Mr. Reck. After you inspected the farm on the second occasion, did you make any request of Elders in regard to the price of the property? THE INTERPRETER: Richard verco said we could get the farm for $520,000 if we so wished. MR. WHITTINGHAM: I do not think that is an answer to the question. Did you make any request of Eiders? THE INTERPRETER: I did ask Mr Altenstadt to ask Elders to supply me with a totally new description of the farm, which then was the basis for the deal. THE INTERPRETER: I would not have bought the farm if I did not have received this description again... THE INTERPRETER: If I had not received this description, I would not have bought the farm." The document is on Elders letterhead, is signed by Mr. Verco and dated 8 August. It is addressed to Altenstadt Investments. So far as material, 1t is as follows: —* "Dear John In response to instructions given to me on Friday 5th August 1983, I have inspected the property known as "BEL VUE DOWNS" [the former name of "The Mail Run"] Esperance and hereby submit my market appraisal. LOCATION The land is situated some 46 kms from Esperance township on the main bitumen Perth - Esperance highway, and is serviced by S EC and S T D telephone. The property is located in a safe 530mm rainfall area. SOIL TYPES AND PASTURES Soil types consist mainly of Esperance loam over gravel and clay. The property has about 30 hectares of sand. Fertiliser history is adequate by the condition of the pastures and planted crops. Water supply is adequate from 1 bore and 8 dams. Pastures are mixed sub clover types :- Esperance, Daliak, Woggy and Clare. COMMENTS The property is considered to be an attractive parcel of land in that it is well managed and established in a popular area, soil types are productive giving potential for reliable and versatile farming enterprise. The Coobidgee Creek runs through the property. MARKET APPRAISAL Taking the above factors into account, I consider the property to have a value of $520,000 cash. CONCLUSION In conclusion I advise that this report is prepared for the party to whom it is addressed and no liabilities or responsibilities is recognised to any other party what so ever." On 10 August 1983, Falom executed an "offer and a acceptance" document for the purchase of "The Mail Run" for $520,000, the price to be paid as to $400,000 on 1 March 1984 (settlement date) and the balance of $100,000 to be paid by five equal annual payments commencing on 1 March 1985 with interest at 10% p.a. on the balance outstanding. The agreement was expressed to be subject to the approval, on or before 10 December 1983, of the Foreign Investment Review Board and the Reserve Bank. With reference to this document, Mr. Reck gave this evidence: "MR. WHITTINGHAM: When you signed the document, offer and acceptance, with regard to the purchase of this property, Mr. Reck, what did you believe the position to be with regard to the dams and the land? - that is, so far as salt land was concerned? THE INTERPRETER: I believed that I had an excellent farm with an excellent water supply with no salt problems. MR. WHITTINGHAM: What did you believe with regard to the stocking of sheep on the farm? THE INTERPRETER: I have believed that, as it was documented in the description, I could keep 4500 sheep at any time. MR. WHITTINGHAM: Again, so far as the dams were concerned? THE INTERPRETER: I believed I would have 8 good dams." Falom took possession of the property on completion of the contract on 1 April 1984. On completion, Falom paid the vendors the sum of $400,000 ($20,000 deposit having been paid in August 1983) and the balance of $100,000 was secured by a mortgage back to the vendors. The principal sum was to be repaid (together with interest at 10% p.a., calculated with annual rests) by eight equal annual instalments of $12,500 — commencing on 1 April 1985. Soon after moving into possession, Falom lost 25 sheep in paddock No. 9 where dam No. 5 is. There was an adequate volume of water in the dam. The death of the stock was discussed between Mr. Reck's daughter, Miss S.F.H. Reck and Mr. G.R. Mickel. It was suspected that the sheep died because of salt poisoning. Mr. Mickel acknowledged responsibility and agreed to pay, and did pay, Falom $350 by way of compensation. Falom then sought advice from the State Department of Agriculture. Samples of water were taken from each dam. It was found that the water in three of the dams (Nos. 3, 5 and 8) contained excessive amounts of salt. In April or May 1984, the Reck family also discovered that parts of the land itself were affected by salinity. It will suffice to say now that Falom's expert, Mr. P.G. Muller, is of the view that there is and has been 98 ha. of primary saline land and 66 ha. of secondary saline land on the property. It is now conceded by the Mickel family that there were "about 40 or 50 hectares of uncleared and/or salted land." Most of the salt-affected area is in the top north-east corner of the property. According to Mr. Reck's evidence, he was not shown that area on either inspection; the closest he came to it was in paddock 12, which he said was about 500 m. away; in any event, his view of the salted region was, he said, obscured by trees. In his evidence in chief, Mr. Reck explained that, apart from the salt problems, some of the dams did not provide an acceptable supply of water. He said that dam 2 leaked; that the catchment for dam 6 was poorly constructed; he — claimed (and Mr. G.R. Mickel substantially agreed with his evidence) that, in April or May 1984, Mr. Mickel told him that the builder of that dam "should be shot", Before going to Mr. Reck's cross-examination and the evidence of the other witnesses, I should refer to the case pleaded by Falom in its amended statement of claim. Falom alleges contraventions of ss.52 and 53A of the Trade Practices Act and negligence and fraud at common law. It relies on the statements in the "Description of Property" document and in Mr. Verco's letter dated 8 August 1983. Falom says that these statements were false in that: "(i) the farm did comprise salt land (1i) the water supply is not adequate from the bore and 8 dams for stocking the farm with 4,500 sheep (iii) the water supply from the bore and the 8 dams was not all of good quality for sheep (iv) the water supply on the farm is not of good quality suitable and adequate for the reasonable and proper stocking with sheep (v) by reason of (i), (i1), (iii) and (iv) hereof the farm is not an attractive parcel of land for a price of $520,000 cash in that - (a) 16% of the farm is affected by water course or surface salinity of a permanent nature with smaller areas of adjacent pasture showing indications of increasing soil salinity; (b) one dam leaks and will not retain water and is substantially useless; (c) 4 dams are useless due to excessive salinity and lack of adequate catchment; 10. (d) the three other dams have poor or inadequate catchment and deficient storage capacity resulting in a carrying capacity of only 1150 dry sheep equivalents; (e) the bore is of limited supply = and facilities resulting in a _- carrying capacity of only 700 dry sheep equivalents; (f£) the Coobidgee Creek running through the property is of no use for stock due to high saline content; (g) the water supply from the bore and 8 dams was deficient by 4,150 dry sheep equivalents; (h) in reality there were not 8 useable dams on the farm." From Mr. Reck's cross-examination, the following emerged: (1) Altenstadt Investments were retained by Falom to advise and for this service were to be paid a fee of $26,000; however, when Falom ran into problems, Altenstadt agreed to forego half of its fee (i.e. $13,000). (2) Although it suggested that Mr. Verco's letter was needed in order to obtain the approval of the Foreign Investment Review Board, Mr. Reck said that he made his offer to buy subject to Elders' providing an appropriate letter. (Mr. Altenstadt later said that what the Board required was evidence that the property had been offered to prospective Australian purchasers.) (3) On the first inspection, Mr. Donkin told him that, as a farm, "The Mail Run" was "in order"; and Mr. Reck took this advice into consideration when deciding, in August, to purchase. (4) In August 1983, he inspected the property on two occasions, although the second visit was only short. (5) He had never before seen land affected by salt. (6) On none of the r4 no — 11. inspections did he see dams 3, 4 or 5 -— "(on the second visit) we were under time pressure, and after we saw all this land and Mr. Verco confirmed that it was good land and that the water was good, we did not inspect those...(Mr. Verco) said it was a very attractive piece of land and the water was good and there was plenty of fresh water." (7) Mr. Verco had told him that dam 6 was "no good". (8) He saw Mr. Verco put the figure $520,000 above the amount $575,000 on the "Description of Property" document. Mr. Donkin's evidence was that in May 1983 he accompanied Mr. Reck on an inspection of a number of farming properties and that Mr. Reck then became aware of salt land. Mr. Verco was also present on the inspection of "The Ma21l Run". The visit took less than an hour; they saw some, but not all, of the dams. In examination in chief, Mr. Donkin said: "Do you have any recollection as to the water levels in the dams that you passed?---My recollection is that the dams were reasonably satisfactory with the exception of two, as I recall. One, I believe, had either a poor holding or poor catchment, and the second one probably had the same problem. Is that what you were told by anyone, or 1s that an assumption by you?---No. We saw that. You saw that?---That is right. Was anything mentioned to Mr Reck about the saline content or quality of the water in the dams?---Not to my recollection, no. Do you recall Mr Reck raising with Mr Verco anything about the water in the dams?---I think the conversation was limited to volume and perhaps the catching capacity of the dams and their holding ability, and that is the extent of the conversation I recall. an ye err en te tire ee ee wee Seer Sapte aia anam cia "4 12. Did Mr Reck make any reference to the saline content of the dams?---I do not recall such a comment. Was any of the water tasted?---Yes. We tasted the bore, which is the central part of the farm, and which was pumping well and our sampling seemed to indicate that the water was satisfactory. At whose request or suggestion was the tasting done of the water?---I can only recollect that three or four of us climbed up on to the dam and had a taste. Who initiated the tasting I have no idea. Did Mr Reck taste the water?---I believe so. There is a creek that runs through the middle of this property, at the beginning of the. southern end of the property. Was anything mentioned about salt affected land to Mr Reck on this first occasion?---Yes. We stopped and examined the creek in one portion. The Creek is surrounded by some uncleared land and there is some obvious evidence of salt water in the middle of the creek. That 1s obviously very clear. You say it is very clear. What I am asking you is whether that was pointed out to Mr Reck?---Yes, it was. Who pointed that out?---I did. Was any other area of salt pointed out to Mr Reck?~--Yes. I believe we showed a small area of salt affected land which could be best described as being in the western half of the farm on the southern portion. When you say, small area, what - - -?---I imagine two hectares. The uncleared land is in the top north-east corner of the farm. Is that right?---I believe so. Was any reference by Verco made to Mr Reck of that being salt affected?---I do not recall any conversation along those lines, no. Was that area of land sighted by Mr Reck?---It was seen to be uncleared land, but we only viewed it from a distance. What kind of distance?~--I imagine a quarter of a mile." , =e 13. Mr. Donkin said that he was aware of salinity problems in the Esperance district: "And it is common, is it not, in the Esperance area for some of the land to be salt affected?---Yes, that is correct. In fact it is quite a serious problem in that area, is it not?---It is. It is also, salinity, a problem on occasions in water catchment areas -— dams and bores and so on?---That is correct. And you were well aware of that, of course, in ~- 1983?---Of course." ? Mr. Donkin managed his own farm in the district. [It did not have any salt problem. He explained: "...it is incorrect to say that all farms (in the area) have a serious salt problem. There is probably a degree of salinity on most farms." Mr. Donkin said that on his inspection, he tasted water from the bore. He said: ",...all bore water tastes a little salty down there. The degree is very hard to judge, but we felt that the water was acceptable...for stock." ~ Mr. Donkin was also cross-examined about dams: "Would you think it is quite possible then that ' leaky dams would be a fairly typical feature of a farm?---Yes, correct. That is right." Mr. Donkin was also questioned about carrying capacity (it will be recalled that the "Description of Property" mentioned 4,500 dry sheep equivalent): "How many sheep to the acre do you think you can run on a farm in the area of the Mickels a en ee re A Yoe ee ' " oe rere: ee womens wee a 14. farm?---My experience would indicate something of the order of perhaps one and three-quarter, maybe up to two and a quarter. . So an average two sheep to the acre is quite a reasonable rule of thumb?---I believe so. Were you satisfied with that average as far as the Mickels farm was concerned?---Yes, I think that would be fair. Are you still of that view,---Yes, I think so; taking into account, of course, seasonal variations which can alter that dramatically. I beg your pardon?---Taking into account seasonal variations can alter that quite dramatically. Would you have a look at exhibit B, please? Just look down to the livestock section. As I understand your evidence, you told his Honour that you understood from this document that the property had a carrying capacity of 4500 sheep. Is that right?---yes. I believed the property could carry up to that, yes. Your understanding from the document was not necessarily that there were 4500 sheep on the property at the time of inspection?---No. My belief would be that there were not 4500 at the time of inspection. Did = you communicate to Mr Reck your understanding that the property was one that could carry 4500 sheep?---I do not remember any specific conversation related to exactly 4500, but I would have to believe the property is capable of doing it. HIS HONOUR: You would have to believe, did you say, Or you would believe?---My experience would lead me to believe that I understand the property could carry that. Again, we must - There is no property in the Esperance area which flatly carries its carrying capacity for all 12 months of each year." mcr Mr. von Altenstadt gave evidence of the negotiations in August 1983. Falom was incorporated at that time and, for a short period after its incorporation, Mr. von Altenstadt was 15. a director of Falom. As has been said, his company also acted as Falom's consultant. Although Falom was incorporated only a short time before it executed the "Offer and Acceptance" document, nothing turns on this: if any actionable misrepresentations were made, it continued up to the point of Falom's entry into the contract; there is no suggestion that any misrepresentation was later withdrawn; rather, the making of any misrepresentation is denied by the respondents. It appears that a number of offers were put to the Mickel family on behalf of Mr. Reck which were rejected. It ws suggested to Mr. von Altenstadt that Mr. Reck had committed himself to a price of $520,000 before Mr. Verco wrote his letter dated 8 August 1983. Although Mr von Altenstadt's recollection of these events was not very good, he strongly resisted the suggestion. I think it is likely that he did require an appropriate "market appraisal" from Mr. Verco before permitting Mr. Reck and Falom to commit themselves to a contract to purchase. On the other hand, 1t is clear from Mr. von Altenstadt's evidence that both he and Mr. Reck also relied on Mr. Donkin's opinion that "The Mail Run" was "a good property" and that both he and Mr. Reck were aware that there were contents of salt known to be on the farm along the creek and the creek bed. Mr. Wegmann gave evidence of his inspection of the property in August 1983 in Mr. Verco's car. He believed it took about one and one-half hours. Only one dam was looked at but, according to his evidence, Mr. Verco then said that six ~ of the eight dams had "plenty of fresh water"; of the other two dams, Mr. Verco explained that one leaked and the other was silted up. Mr. Wegmann had purchased his farm nearby in December 1982. His property did not have a salt problem but he was aware of salinity in the Esperance region. Mr. Verco was called. His version of what happened on the inspections did not seriously challenge what Mr. Reck', Mr. Donkin or Mr. Wegmann said on that point. As has been seen, Falom's case on liability is essentially a documentary one. In the first instance, Falom relies on the "Description of Property" document. Falom points to the omission of any reference to an area of salt land. Although it is common ground that some parts of the property are affected by salinity, there is disagreement as to the extent of its injurious affectation. Falom called as an expert Mr. P.G. Muller. In his opinion, there were 98.34 ha. of primary saline land and 66.26 ha. affected by secondary salinity, a total of 164.60 ha. Mr. Muller defined his terminology as follows: "Primary salinity - salinity that was present under natural conditions. Secondary salinity - where soluble salts have accumulated in the soil as a consequence of irrigation, agricultural practices, or the clearing of the Native vegetation. Slightly saline land - where the soluble salts cause only a slight decrease in yield or a lack in vigour of the more sensitive pasture plants such as subterranean clover. Moderately saline land - where pasture and crop species are replaced by — ome 17. salt tolerant plants such as barley grass. Strongly saline land - where all plant cover is destroyed and the soil surface is bare." Mr. Muller produced a salt land map and a survey, both annexed to these reasons, to indicate the sites affected. Mr. Muller said that on the sites on "The Mail Run" affected by salt, some plants would not be able to grow. He mentioned wheat, barley, subterranean clover and perennial rye grass. On these sites, he observed that barley grass was the Main salt tolerant plant species growing. There were no clover or rye grass residues present. Elders called expert evidence on this issue from Mr. S.M. West. He estimated that only 91 ha. was actually affected by salt at this time. He also thought that the salinity had spread since 1983 and that an estimate of 55 ha. as the area then affected "may have been realistic". The respective approaches of the two experts was different. Mr. Muller proceeded by way of ai sampling procedure, using soil tests. On the other hand, Mr. West relied on visual observation of the vegetation and was prepared to treat as not affected by salinity an area which Supported vegetation. Mr. West indicated areas supporting vegetation on a copy of Mr. Muller's map which is also annexed to these reasons. To a large extent, the point of departure between eo a wn eo ot ey aaa iors them 18. occurred in their use of terminology. Mr. explained: ",...the basic difference is in interpretation of what is actually saline and what is primary saline, and what is secondary saline...we do not dispute - we do not have any disagreement with definition...We agree with the definitions. An area supporting native vegetation that has no salt accumulation on the actual surface - we raise the question: can that be termed as saline? If you take for instance the other soils throughout the state, here you can take - a lot of the salts are stored within the top 5 or 6 metres of the soil profile. Now the thing is that once you clear that land, that can become saline fairly quickly too, and the fact that you have rising groundwater assistance - now the situation, if you have salts which are stored in the top half metre and the top 10 centimetres, if it is fairly sandy sort of top soils, do not have these salts - now once that vegetation is removed and with free capillary rise, those salts are brought to the surface, it becomes quickiy saline. That seems to be the definition of primary saline land. I say, seems to be, whereas realistically I would class moral soils in the eastern wheatbelt areas as primary saline land because they have natural - even in the top few centimetres of soils, they have naturally saline soils, very high levels in the order of point - what you refer to as point 4 per cent. HIS HONOUR: Yes; but there is a real problem of definition, is there not? When you say of something being naturally in the soil, it depends on what your timespan is. If you are talking in terms of thousands of years - - -?---No; we are looking at Western Australia, you know, within 19 or 20 years of development, of agriculture development. That is not a long timespan in geological time. That is a very rapid increase in saline problems. Whether you are looking at two or three years, or whether you are looking at 20 years, it is still - both are very rapid..." West In my Opinion, it is possible to reconcile these expert views. I accept Mr. Muller's assessment, as a matter of soil content, of an area of 164 ha. as salt-affected to S aeand tea ianeenatiae 19. some degree. On the other hand, I accept Mr. West's assessment that about 91 ha. appeared to be sterile and was not supporting vegetation in 1987. These opinions were the result of field work carried out in 1987 and it is not possible to fit with any precision what would have been the position in August 1983. All that can be said is that the position can be expected to have deteriorated since that date. I find then that "The Mail Run" was salt affected in August 1983 and that the extent of affectation cannot be fixed precisely but was upwards of 55 ha. On the other hand, on inspecting the property, Mr. Reck saw a strip of land affected by salt. It follows that Mr. Reck, and by imputation, Falom, was aware that there was some land affected by salinity. It is not, and could not be, suggested that Mr. Reck was aware of the full extent to which the property was salt-~affected. Accepting for the purposes of the argument that the failure to mention an-area of salt land in the "Description of Property" document constitutes a misrepresentation of the true position, the next question is whether the making of such a misrepresentation induced Falom to enter into the contract to purchase. It 1s well established that a misrepresentation is no ground for relief unless it induces the representee to enter into the contract. The applicable principles were re-stated by Wilson J. in Gould v. Vaggelas (1984) 56 A.L.R. 31 at p.46: 20. "(i) Notwithstanding that a representation is ~poth false and fraudulent, if the representee does not rely upon it he has no case. (ii) If a material representation is made which is calculated to induce' the representee to enter into a contract and that person in fact enters into the contract there arises a fair inference of fact that he was induced to do so by the representation. (iii) The inference may be rebutted, for example, by showing that the representee, before he entered unto the contract, , either was possessed of actual knowledge of the true facts and knew them to be true or alternatively made it plain that / whether he knew the true facts or not he did not rely on the representation. (iv) The representation need not be the sole inducement. It is sufficient so long as it plays some part even if only a minor part in contributing to the formation of the contract." Wilson J. was there speaking of the general law tort of deceit but the reasoning is also applicable to a claim for damages under the Trade Practices Act (see Roy Williams, Proof of Inducement in Actions for Deceit and Contravention of Section 52 of the Trade Practices Act (1987) 3 Aust. Bar Rev. 170). -- In my opinion, Falom has failed to establish that it relied on any misrepresentation arising from the failure to mention salt land in the "Description of Property" document. When that document is viewed in context, 1t is seen as the provision of preliminary information only. It was not a document which could be expected to influence an experienced businessman such as Mr. Reck in the ultimate formation of the Caan _ = ot San = ang eran ee : ' ae er 21. commercial judgment whether to negotiate to acquire the property at all, and, if so, at what price. It is hardly necessary to say that the procedures usually adopted by prospective purchasers in negotiating for the acquisition of a substantial farming and grazing property are significantly different from those used by consumers shopping in a supermarket. For one thing, the prices are in a very different scale and there is usually scope' for negotiation on many aspects of the transaction. For another, the product for sale in the former case is a complex thing in its own right. To take one aspect, it is quite unrealistic to assume, as Falom's case seems to do, that the whole of rural land may be presumed to be capable of supporting vegetation. This could never be presumed. Rural land ius often mountainous; it is sometimes affected by soil erosion. Because of the complexities inherent in any proposal to acquire a rural property in the Esperance district, Falom took the obvious precautions, first, of surrounding itself with advisers - Messrs von Altenstadt, Wegmann and Donkin; secondly, of inspecting the property on several occasions; and thirdly, of negotiating on price. All these steps, orthodox as they were, indicated where the real processes of decision-making lay in this case. The decision by Falom to buy at $520,000 arose out of the taking of advice from Falom's consultants rather than the earlier, largely formal, "Description of Property" document. No doubt, that document provided some useful preliminary information in the early Seaton aera ~ ~~ tn eee. 22. period of the negotiations. But it was superseded by subsequent events. In particular, the inspections, the consultants' advice and the reduction of the price were the operative factors which influenced Falom''s decision to buy: the "Description of Property" document was, by then, of historical significance only. In my view, it did not induce the sale or contribute to the formation of the decision to buy in any material way. The next matter relied on in this connection is the statement in the "Description of Property" document with respect to "Water". Here, Falom faces the additional difficulty of establishing a misrepresentation in the first place. It will be recalled that the document stated that "not there was one equipped bore, three dams and five dams equipped". It is suggested by Falom that there should be implied in these statements a representation that each of the dams provided a good quality water supply adequate for the "reasonable and proper stocking with sheep". There are obvious difficulties in making such an implication. It would not be open to a court to imply those words as a matter of business efficacy because the instrument purports only to be a "description" of the property. The description was accurate so far as it went and there is no warrant for importing into 1t an additional provision that the water supply had a particular quality. The difficulty in attempting to formulate the terms of such an implied provision indicates why it would not be proper to make any such implication. In addition, the comments I have made above with respect to the salt land ees eee sens 23. applied equally here. That is to say, the information provided in the "Description of Property" document was overtaken by subsequent events and played no real part in the subsequent decision to buy. In my opinion, Falom was not induced to purchase by any of the statements made in the "Description of Property" document. The other matter relied upon is Mr. Verco's letter. In the first place, Falom says that the statement by Mr. Verco that "water supply is adequate from one bore and eight dams" was false. The "adequacy" of the water supply was a contentious issue at the trial. Obviously, it is ultimately a question for the judgment of a suitably qualified person to make an assessment of the position as a whole. It is true that one dam leaked and some others were salt affected. But that is not the present question. Again, the "adequacy" of a water supply cannot be considered in the abstract. It must be viewed in its context which includes, inter alia, seasonal conditions, actual and anticipated rainfall, types of stock and rates or level of stocking. It became common ground during the trial that the property had the capacity to carry 4,500 D.S.E. This is cor pe or 24. perhaps the best, objective, evidence that the water supplies were adequate. Falom called expert evidence from Mr. S.C.F. Bull on the point. He prepared two reports, one in June 1984, the other in December 1986. At the latter date, he estimated that the property could water 4,700 DSE, but domestic requirements had also to be met out of this. This supported, to some extent, Mr. Donkin's assessment that the farm had a DSE of 4,500. Of course, it also supported Mr. Verco's appraisal in his letter. Although Mr. Bull criticised the effectiveness of a number of the dams, the assumptions in his calculation of 4,700 were understandably challenged by the respondents: "Your DSE calculations are on the basis that this property would not have had any rain for 22 months?---The assessment is based on the fact that the dams are full at the beginning of one summer and assuming no runoff, at the end of 22 months assuming no runoff - - - Have you ever known that to happen in your 11l years experience in the Esperance area?---It has come awful close at times. On the sand plain, where the rainfall is - I am talking about the sand plain, not the mallee country - the sand plain where this property was situated. Have you ever known that to go without water for 22 months?-~-Without rain? Yes, without rain, sorry?---I cannot say that I--- It has not, has it?--~No. In fact was not the 1983-84 season the worst season that Esperance sand plain had ever experienced in 50 years?---I would not know. In the 11 years that you were there it was an extremely dry period, was it not?---It was. And there was still rain during that cmecaet ona wore o. seyret ee oo 25. period?--~Yes. And is not one of the beauties of the Esperance area that it does have, on the sand plain, a guaranteed rainfall? It is a very safe area as far as rainfall is concerned?---Well, I do not know if I am qualified to answer that question." At worst, in my view, Mr. Verco's statement that the water supply was "adequate" was a puff or an exaggeration At best, it was an accurate statement of a reasonably held opinion. It was not an actionable misrepresentation or misleading or deceptive conduct for the purposes of the Trade Practices Act. Then it is said by Falom that the references in Mr. Verco's letter to "soil types" is misleading because of its failure to refer to the salt-affected areas. Again, the suggestion must be one for importation or implication of a representation that there was no salt land. Here also, there is a difficulty in making such an implication. Mr. Verco was not an agricultural scientist. His letter did not purport to be a scientific analysis of the soil content of the whole property. Rather, the letter purported to give the reader an assessment of market value and, in that context, a general description of the soil types and pastures over the property as a whole. As such, it was reasonably accurate. When dealing with a_= relatively substantial tract of rural land, a "by and large" description 1S appropriate and this is what Mr. Verco did. He did not attempt, and could not reasonably have been expected to repr ee erry Prgms: ay . > haa rs eee nen Heme ern 26. attempt, a detailed description of the topography. In my view, there was no misrepresentation or misleading conduct in this respect. Further, Falom encounters the additional difficulty of establishing any inducement to act on this account. By 8 August 1983, Falom was well seized of the picture. Mr. Reck had inspected the property with his advisers on several occasions. He was aware that there was some salt-affected land. He could hardly have needed Mr. Verco's letter to describe the property for him. The purpose of requiring the letter was to assure Falom that it was not paying too much. In this, it would seem that Mr. Verco's assessment of the market was reasonably accurate. Falom called expert evidence from a valuer, Mr. R.J. Reed. Mr. Reed's analysis in 1987 of comparable sales showed a median or average figure of $405 per hectare on a net arable basis. He therefore offered the following valuation as at August 1983: "960 Ha. at $420/Ha. $403,200 75 Ha. at $100/Ha. $ 7,500 House $ 25,000 Garage -~ $ 500 Sheds $ 7,000 Shearing Shed & Yards $ 15,000 Silos $ 2,000 $460,200 Deduction/Adjustment to improve water supply say $ 10,200 Nett Valuation (ex terms) as $450,000 Cash Terms $100,000 8 yrs. 10% Assume Ruling Investment Rate is 15%, Differential is 5% Allowance for Terms is estimated te ee nee pee mie ee ge ee 27. as $23,000. Valuation Opinion Esperance Loc. 1434 as at August, 1983 is therefore given as $473,000 (maximum) ." As has been seen, the valuation exercise is complicated by the circumstances that the vendors allowed terms with respect to the balance of $100,000. Falom also called expert evidence on this question from Mr. D. Clapin who calculated that, assuming certain bank investment rates, the vendors would have received the same value for a term sale of $100,000 or a cash sale of $92,002. Elders called valuation evidence from Mr. I.G. Jelly. In his opinion, the property's value as at August 1983, based on comparable sales, was in the range of $480,000 (cash) to $530,000 (cash). He said that he believed the value was "in the vicinity of" $500,000 (cash). It is not necessary that I attempt to fix the value of the property with any degree of precision. Suffice it to say that it was within the range of Mr. Verco's estimate. It will have been noted -that Mr. Verco was not purporting to give a valuation. It was a "market appraisal", required, as the letter said, as a matter of urgency and thus without the time needed to analyse comparable sales. In my view there was no misrepresentation in Mr. Verco's observations under his sub-heading "Comments". It follows, in my view, that the respondents did not contravene the Trade Practices Act; and that no cause of alee aad 28. action in negligence or in fraud has been established. In my opinion, Falom's claims fail. Elders have cross-claimed against the Mickel family seeking an indemnity in the event of Falom's' claims succeeding. The Mickel family have also cross-claimed against Elders for, inter alia, breach of statutory duty and at common law for breach of contract and negligence. Again, this cross-claim was intended to deal with the contingency that Falom's claim might succeed. In the result, the application will be dismissed, with costs. The cross-claims will also be dismissed. I propose to make an order as to the costs of the cross-claims. I certify this and the rerenily - Aanor/ preceding pages to be a true copy of the Reasons for Judgment of his Honour Mr Justice Beaumont. 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