FY Lyte Rta ee JUDGMENT No, Ol 7 BS 'veeenee vey CATCHWORODS TRADE PRACTICES - misleading statements by real estate agent - representation that house made of brick whereas made of concrete blocks - representation pool at rear adjoined a park whereas 1t adjoined private property - purchaser discovered truth between contract and settlement - whether purchasers settling reserving their rights destroyed their cause of action. TORT - negligent misrepresentation - whether vendors' agent owed purchasers of property a duty of care. TORT - vicarious liability - whether vendors liable as principals for negligent acts of real estate agent. Trade Practices Act 1974, 5.52 James Clayton MacCormick & Anor. v. Henry Alfred Nowland & Ors. Qld G92 of 1987 PINCUS J. BRISBANE 9 MARCH 1988 IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD G92 of 1987 GENERAL DIVISION ) BETWEEN: JAMES CLAYTON MACCORMICK AND MARUSIA MACCORMICK Applicants AND: HENRY ALFRED NOWLAND AND MAVIS JEAN NOWLAND First Respondents AND: CORNISH SIMES AND WILLIAMS PTY. LTD. Second Respondent MINUTES OF ORDER JUDGE MAKING ORDER: PINCUS J. DATE OF ORDER: 9 MARCH 1988 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. the respondents pay the applicants the sum of $15,000. 2. the respondents pay the applicants' costs of and incidental to the proceedings, to be taxed. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD G92 of 1987 GENERAL DIVISTON ) BETWEEN: JAMES CLAYTON MACCORMICK AND MARUSTA MACCORMICK Applicants AND: HENRY ALFRED NOWLAND AND MAVIS JEAN NOWLAND First Respondents AND: CORNISH SIMES AND WILLIAMS PTY. LTD. Second Respondent PINCUS J. 9 MARCH 1988 REASONS FOR JUDGMENT This 18 an application for relief under the Trade Practices Act 1974, and under the general law, in respect of misleading statements said to have been made in connection with the purchase of a house. The case allustrates the need for care in advertising properties for sale. The advertisement 1n question here, although very brief, contained two misleading statements which have proved to be expensive for the vendors and their agent. Procedurally, the matter has taken rather an unusual course. There was a short hearing last year at which it was determined that the difference between the price of the property and its value was $15,000, the latter being the lower figure. It was hoped that fixing that sum might produce a settlement of the case. However, it was not settled and the (logically anterior) question as to whether any of the respondents 15 liable was litigated on 2 and 3 February. In essence, the applicants' case is that the house was represented by the vendors' agent to be made of brick, whereas in fact it is made of concrete blocks, and it was represented that a pool at the rear of the property adjoined Ironside Park, whereas 1t does not. There is no dispute that the representations were made - they are in writing - and it appears to me that they were both untrue. As to the representation that the house is made of brick, a suggestion was made that "brick" 1s aword apt to describe not only bricks in the ordinary sense, but the hollow concrete blocks from which the house is in fact constructed. I am of the contrary view. The more substantial defence raised as to this aspect was that, as was submitted, the appiicants should have or actually did determine on inspection that the house was not made of bricks: although 1ts anterior and exterior walls are plastered, one could notice (so the respondents said) certain areas 1n which the concrete blocks were exposed. That point is discussed below. As to the second representation, the precise statement made in the agent's newspaper advertisement was that "An i/g pool at the rear of the property adjoins Ironside park". The vendors' agent's representative, Mrs. Sinnamon, who gave evidence before me, wrongly assumed that an area of land immediately to the rear of the property was part of Ironside Park. In fact, as is common ground, the land immediately adjacent to the rear of the property is private; Ironside Park 1s to the south-east and its north-western corner touches the subject property at its south-eastern corner. It seems clear enough (although the contrary was argued) that the statement about the park was misleading. There was nothing which a prospective purchaser of the property inspecting it could notice, looking from the rear, to suggest that the land adjoining the pool area was not part of the park. Mrs. Sinnamon, by her remarks on the inspection, reinforced the impression created by the advertisement. Mr. Cooper, for the first respondents, argued that what Mrs. Sinnamon said at' the inspection was not pleaded and argued that it was what she said at the inspection which was relied on by the female applicant. That appears to me not likely to be correct, and I find that' the statement that the pool adjoined the park was misleading and was an inducement. As to the latter, the ordinary purchaser would, I think, prefer to have a park adjoining his pool area rather than private property, and I am satisfied that these applicants were, to a significant degree, attracted by the idea that the area in question was parkland. I should add that it was argued for the respondents that it is impossible to read the newspaper advertisement as representing that the parkland extended across the whole of the rear boundary. The submission assumed a burden of proof upon the applicants which they do not in truth bear: all they have to show is that it was misleading to say that the park adjoined the pool at the rear of the house. No one simply reading the advertisement without benefit of inspection would be likely to take that to mean (as is the fact) that the whole of the land adjoining the rear boundary of the house was private, and the representation was likely to become even more misleading to one who inspected the premises. I turn to the more difficult question of the statements that the house was "brick". It was argued, and I find, that the evidence proves that without any very rigorous inspection, a Purchaser could have concluded that the house was not made of brick, but of concrete blocks. Structures close to or abutting on the house itself could be seen to be made of concrete blocks: a retaining wall, a drain, a garage and a laundry; but the blockwork was able to be seen, on a sufficiently close inspection, also within the house proper: in the ceiling, in the hot water system cupboard and perhaps in a storeroom. Mrs. Sinnamon said in evidence that it was obvious on inspection that the house was made of concrete blocks. J am not prepared to find that to be so. It must have been obvious enough that, for example, the garage and the retaining wall were so made, but an inspecting purchaser might well think that the principal structure was brick, unless he happened to take a ladder to the third storey and get into the manhole, or look into the hot-water system cupboard - assuming there was sufficient light. I would, however, not have been prepared to reach a conclusion on this issue in favour of the applicants, were it not for the evidence of Messrs. Woolcock and Butterworth. Woolcock is an engineer, and Butterworth a builder and each was consulted by the applicants before the contract was made with respect to the possibility of performing substantial structural alterations. I accept their evidence that they were told the house was of brick and advised the applicants on that basis. For example, in calculations made at Woolcock's behest by amember of the staff of his firm of consulting engineers, demolition costs were calculated on the basis that the walls were of brick, not concrete blocks. Although either Woolcock or Butterworth might well have noticed, in particular by looking into the ceiling, that the construction was concrete block, neither did. In those circumstances, I am not prepared to find that the applicants must necessarily have had the impression created by the advertisement dispelled. Of course, they discovered later both that the area to the rear of the pool was not parkland, and that the house was built of concrete block. Those discoveries came between contract and settlement, and it was argued on behalf of the respondents that their having, on legal advice, continued with the transaction destroyed their cause of action. Mr. Cooper said that they brought their misfortune on themselves and should have rescinded. In some circumstances, such an argument might perhaps succeed, but I am not prepared to uphold it here. It appears that the basis of the advice given to the applicants was that if they purported to rescind, that might well be challenged by a claim for specific performance. They thought it impractical to be left ina position of uncertainty and, reasonably in my view, informed the vendors by letter of their complaints "reserving their rights", and settled. No authority was cited in favour of the proposition that the applicants did not have such a choice as they claimed to have and, in my opinion, the advice they were given was correct. The general rule is stated in Halsbury 4th Ed. 31 dealing with remedies for misrepresentation: see paras.1082 and 1085. I accept that, as the respondents contended, the applicants having decided to go on with the transaction, gives some support to the respondents' contention that the applicants were not induced to enter into the contract by either of the misrepresentations alleged, but I am satisfied in the end on the whole of the evidence that the misrepresentations were inducing factors. It follows from what I have said that it 1s my opinion that the applicants are entitled to succeed against the second respondent, the company which inserted the misleading advertisement and prepared the misleading auction brochure. A more difficult question 1s whether the applicants have any cause of action against the first respondents, the vendors. Mrs. Sinnamon gave evidence that the house was listed in the agent's records as being "Besser brick". She claimed that the relevant documents had been destroyed. Accepting that the listing was as Mrs. Sinnamon says, it is a reasonable inference that the first respondents told the second respondent of the nature of the construction; of course, it would have been odd to have done otherwise because, as I have explained, a sufficiently rigorous inspection of the house must have revealed that it was built of blocks. Mr. Redmond, for the applicants, made reference to the fact that a long series of advertisements had apparently described the house as being made of brick; one might perhaps infer, in the absence of evidence to the contrary, that the Nowlands must have seen one or more of those advertisements. However, Mr. Redmond did not contend that anything which the Nowlands did personally made them liable. He said the first respondents were liable as the second respondent's principals on one of the pleaded bases - that is, fraud, negligence or breach of the statute. As to fraud, I am not prepared to make a finding in favour of the applicants. There 1s some evidence suggestive of sharp practice. If, as Mrs. Sinnamon says, the house was listed as Besser brick, it seems odd that it was advertised as simply "Drick", the "Besser", which would tend to make people think of concrete blocks, being omitted. Further, there 1s room for argument that there was recklessness on the part of the agent in asserting that the pool area at the rear adjoined the park, without any proper foundation for that statement. On the whole, however, I do not find that anything done by the second respondent constituted deceit under the general law. As to negligence, Mr. Redmond, for the applicants, relied on the decision of the Supreme Court of Queensland in Roots v. Oentory Pty. Ltd. £19837 2 Qd.R. 745. There, Thomas J. held that, in the circumstances of the case before him, a real estate agent owed a purchaser a duty of care with respect to informdtion supplied by the agent about the characteristics of the property being sold. Since the reasons of Thomas J. were delivered, the duty of care found to exist in some of the cases he mentions may have been narrowed. In particular, in Sutherland Shire Council v. Heyman (1985) 60 A.L.R. 1, the High Court refused to follow Anns v. Merton London Borough Council £1978] A.C. 728 and the authority of Anns's case suffered further at the hands of the House of Lords (Curran v. Northern Ireland Co-ownership Housing Association Ltd. C19871 2 W.L.R. 1043) and the Privy Council (Yuen Kun Yeu v. Attorney-General of Hong Kong C1987] 3 W.L.R. 776). In Curran's case, Lord Bridge urged the merits of "the dictates of good sense and the consideration of what is fair and reasonable" as criteria by reference to' which the existence of a duty of care might be judged - p.1052. His Lordship also suggested that 1t would be "contrary to the fitness of things" to hold a duty to exist in the case before him. Taking that broad view of the matter, I must confess to some reservations about the appropriateness of imposing a duty of care on the agent for one party to a prospective contract in favour of the other party - 1n addition to the other potential liabilities arising from statute and under the general law. It is not absolutely clear to me that, if Lord Bridge's test 1s right, good sense and consideration of what is fair and reasonable requires that view. However, it seems right to follow the conclusion arrived at in the Supreme Court, as a matter of judicial comity, and because the authorities referred to by Thomas J. appear to me, with respect, to give substantial support to his conclusion. It must be held that there was negligence on the part of the agent, at least in respect of the information about the location of the park. I do not say that the agent should necessarily have taken positive steps to determine where the park was, but, not really knowing the character of the land adjoining the pool area, I do not think the agent was entitled to state its mere guess as 1f 1t were a fact. It was also negligent, in my opinion, (although less so) in describing the house as being made of brick, when it knew 1t was not. I accept that it is commonly thought that concrete block construction 1s not as well proven as brick, and it should have been evident to the agent that to describe a concrete block house as brick might well mislead purchasers - as it did here. I also take into account the evidence that there was mention of "Besser" in the listing, but not in the advertisement. Mr. Redmond, for the applicants, argued that the vendors as principals of the second respondent were vicariously liable for the acts of their agent under the general law. The leading authority on the point appears still to be the old case of Mullens v. Miller (1882) 22 Ch.D. 194 1n which it was held that an agent engaged to find a purchaser has authority to describe the property in such a way as to bind the vendor. In Overbrooke Estates Ltd v. Glencombe Properties Ltd £19741 3 All E.R. 511, Brightman J., as he then was, distinguished Mullens v. 10. Miller because there a document existed which negated any such authority as was held to exist in the Mullens case. Here, according to the evidence of Mrs Sinnamon, there was a document tending to negative the agent's authority to make such a representation as was made as to the mode of construction of the house: as mentioned above, Mrs Sinnamon said the house was Jisted as "Besser brick". There was, however, nothing brought to the notice of the purchasers to suggest that the agent did not have the ordinary authority to describe the property. It should be added, that there 1s evidence from which one might well infer actual and not merely ostensible authority to make the representations in question, for it appears that the house was advertised a number of times and one might well infer that the first respondents became aware of the terms of the advertisements. Further, as counsel for the applicants has pointed out, neither of the vendors gave any evidence. I do not think it necessary to reach a conclusion on the guestion whether the terms of the advertisements had the specific authority of the first respondents. I am satisfied that the agent had the ordinary authority to describe the property to prospective purchasers, that it did so, and accordingly the vendors are vicariously liable for the agent's negligent misrepresentation. In Summary: 1. The representations relied on were in writing and not disputed. li. 2. They were untrue and the agent made them negligently. 3. The agent (a company) is liable to the applicants under 5.52 of the Trade Practices Act 1974 and also under the general law in negligence. 4. The vendors are liable to the applicants as principals under the general law. It should be added that counsel for the applicants argued that the vendors were liable as principals also under 5.84 of the Trade Practices Act, but it is unnecessary to reach a conclusion on that aspect of the matter. I was not asked to determine any question relating to the liability of the respondents inter se. There will be judgment for the applicants against the respondents in the sum of $15,000 with costs. poges are a irte cozy of the reasons fo judgmeni here of His Honour Mr. Justice Pincus A See Associate Dated 7 Marc 198¢ Counsel for the applicants: Mr. F.W. Redmond Solicitors for the applicants: Michael Robinson Counsel for the lst respondents: Mr. D.R. Cooper Solicitors for the lst respondents: Lees Marshall & Warnick Counsel for the 2nd respondent: Mr. M.D. Hinson Solicitors for the 2nd respondent: Lethbridge & Munro Dates of Hearing: 2 & 3 February 1988