teeneTooncezacoen YUDGMINT No. 227.8... CATCHWORDS TRADE PRACTICES ~- Misleading and deceptive conduct - false or misleading representation about lawful use of property - silence as conduct or representation - creating impression and failing to tell whole story. CONTRACT - breach - waiver - whether time of essence - giving reasonable notice of rescission. PRINCIP AND AGENT - vicarious liability of principal - indemnity for agent acting within scope of authority. Trade Practices Act 1974, ss. SIA, 52, 53A(1)(b), 82, 87(1A) and (2)(a). Federal Court of Australia Act 1976, s. 51A. Transfer of Land Act 1958 (Vic.) Town and Country Planning Act 1961 (Vic.). J v. MEADOWS S$ SERVICE . LTD. and ' (@} s. .- LTD. V.G. No. 105 of 1987 GRAY J. — nN RD MELBOURNE RECEIVED 9TH MAY 1988 1 1MAY 1988 '\ Tee gQuaT OF >. PRINCIPAL REGIS! Con TRY ~~ , IN_THE FEDERAL COURT ) ) OF _AUS' 1987 V.G. No. 105 VICTO I s ) BETWEEN: J. IOQTTA Applicant and WS BUS SERVICE PTY. LTD. and FRATELLI D' 0 S. PTY. LTD. Respondents MINUTES OF ORDER c fs) Ky iT: Judgment be entered for the applicant against both respondents for: (a) damages in the sum of $25,000.00; (b) interest in the sum of $4,529.11; (c) the applicant's costs of the proceeding. The cross-claim of the first respondent, Broadmeadows Bus Service Pty. Ltd., against the applicant is dismissed. Judgment be entered for the second respondent, Fratelli D'Aprano Bros. Pty. Ltd. against the first respondent for: a — (a) such sum or sums as the applicant may recover against the second respondent pursuant to the judgment entered under para.l of this order; (b) the second respondent's costs of the proceeding. The first respondent's cross-claim against the second respondent is dismissed. (NOTE: Settlement and entry of orders is dealt with by 0.36 of the Federal Court Rules.) IN URT OF AU: I 1987 V.G. No. 105 Nd vicTo Ict ISTRY BETWEEN: dg. ALIOTTA Applicant and BROADMEADOWS BUS SERVICE Bry. LED. and FRATELLI APRANO BROS. PTY. _PTY. LTD. Respondents REASONS FOR JUDGMENT JUDGE: Gray J. PLACE Melbourne DATE: 9th May 1988 The first respondent, Broadmeadows Bus Service Pty. Ltd., is a company incorporated in Victoria, which carries on the business of providing bus services. In 1986, it was. the owner of a property at nos. 143 to 147 Lynch Road, Fawkner in Victoria. The property was used by the first respondent as a bus depot, workshop and office. The property was the subject of two separate titles, and the first respondent was the registered proprietor of each under the Transfer of Land Act 1958 (Vic.). . Early in 1986, the first respondent tried to sell the property at auction, but was unsuccessful. It was advised by a firm of real estate agents, Geo. M. Hume Pty. Ltd., that it would be easier to sell the property as an investment property if it could be leased before sale. Using Geo. M. Hume Pty. Ltd. as its agent, the first respondent entered into negotiations to lease the property. In dune 1986, it engaged another firm of real estate agents, the second respondent, Fratelli D'Aprano Bros. Pty. Ltd., as its agent to sell the property. The second respondent is also a company incorporated in Victoria. In the course of giving instructions for the sale of the property, Mr. Loughnan, a director of the first respondent, told Mr. Len D'Aprano of the second respondent that negotiations were under way for a lease of the property, and that the lease was being finalised and drawn up in Sydney. Mr. Loughnan gave to Mr. D'Aprano a photocopy of three pages of a proposed lease. In this document, the first respondent was named as the proposed lessor, and the proposed lessee was described as "Cleanaway Brambles Holdings Pty. Ltd. (Inc in NSW)". After referring to the property as the demised premises, the document contained the following particulars: "USE OF PREMISES: Truck Depot, Workshop and Office COMMENCEMENT DATE: 14th September 1986 TERM: One (1) year FURTHER TERM: Two (2) further terms each of five (5) years RENTAL: $25,000.00 per annum payable by calendar nonthly instalments in advance on the first day of each month." The second respondent advertised the property for sale as an investment property, in various newspapers. The applicant, Mr. John Aliotta, responded to one or more of these advertisements. Thereafter, early in August 1986, negotiations took place between the applicant and Mr. Len D'Aprano about the purchase of the property. Three widely differing accounts of the details of these negotiations, and inspections of the property, have been given by the applicant, his father Mr. Giuseppe Aliotta, and Mr. D''Aprano respectively. It is unnecessary for me to resolve' these differing accounts entirely. Certain facts are clear. In the course of the negotiations, Mr. D''Aprano told the applicant that there was a proposed lease of the property to "Cleanaway Brambles", which was being finalised in Sydney, and either showed him the three pages of the proposed lease which were in Mr. D'Aprano's possession, or told him of their contents. The applicant made an initial offer of $240,000 for the property, but this was rejected. Upon its rejection, the applicant made a further offer of $250,000, stipulating that he required some certainty that the proposed lease would be entered into before settlement. As a result, Mr. D'Aprano drew up two contract notes, one relating to 143 Lynch Road, with a price of $95,000, and one relating to 145-147 Lynch Road, with a price of $155,000. Incorporated into each contract note were certain special conditions, of which the third is important. It was as follows: "THIS SALE IS CONDITIONAL UPON THE VENDORS PROVIDING, THE PURCHASER WITH A_ FULLY EXECUTED LEASE FOR THE PROPERTY HEREIN SOLD, PRIOR TO THE 10th OCTOBER 1986. SUCH LEASE TO PROVIDE THE FOLLOWING: LESSEE: CLEANAWAY BRAMBLES HOLDINGS PTY LID, (INC. IN N.S.W.) OF 8 HAVELOCK ROAD, BAYSWATER. DEMISED PREMISES: 143-147 LYNCH ROAD, FAWKNER AND BEING THE LAND DESCRIBED IN CERTIFICATES OF TITLE VOLUME 6882 FOLIO 274 VOLUME 8466 FOLIO 929 USE OF PREMISES: TRUCK DEPOT, WORKSHOP AND OFFICE COMMENCEMENT DATE: SEPTEMBER 14, 1986 TERM: ONE (1) YEAR FURTHER TERM: TWO (2) FURTHER TERMS EACH OF FIVE (5) YEARS RENTAL : $25,000.00 PER ANNUM PAYABLE BY CALENDAR MONTHLY INSTALMENTS IN ADVANCE RENT INCREASE: ANNUALLY AS PER C.P.I." Contracts were entered into between the applicant as purchaser and the first respondent as vendor in the forms of the two contract notes, containing this special condition. The contracts were entered into on llth August 1986. Pursuant to the terms of the two contracts, the applicant paid deposits totalling 325,000. The first respondent engaged as its solicitor for the purposes of the sale Mr. Geoffrey Fox of Messrs. Geoffrey A. Fox & Associates. Mr. Fox was also acting for the first respondent in relation to the lease of the property. By letter dated 7th August 1986, the accountant for the business known as "Cleanaway" wrote to Mr. Fox regarding the terms of the proposed lease. In this letter, it was stated that the name of the lessee would have to be corrected to read "Brambles Holdings Limited...trading as Cleanaway". The letter also requested that the term of the lease be changed from one year with a further two terms of five years to read one year with a further term of four years and a five year term. By letter dated 20th August 1986, Mr. Fox forwarded to the applicant two formal contracts of sale, one relating to 143 Lynch Road, and the other relating to 145-147 Lynch Road. In each contract, special condition 3 was altered so that the name of the lessee read "Brambles Holdings Limited (Inc. in NSW) of Western Avenue, Tullamarine (trading as Cleanaway)." The further term was amended to read "Two further options, one of four (4) years and the second of five (5) years." The accompanying letter drew attention to these changes. The formal contracts were never executed or exchanged, and the contractual rights of the parties remained to be determined according to the terms of the contract notes. On 14th September 1986, a lease was executed between the first respondent as lessor and Brambles Holdings Limited as lessee. In the schedule to that lease, the lessee is described as "Brambles Holdings Limited (Inc. in NSW) of Western Avenue, Tullamarine trading as Cleanaway." The lease is for a period of one year, and specifies two further terms, the first of four years and the second of five years. By letter dated 16th September 1986, to Mr. Vito Cilauro, who had been engaged by the applicant as his solicitor for the purposes of the purchase, Mr. Fox advised that special condition 3 of the contract note had been satisfied, and promised to forward a copy of the lease. Such a copy was duly forwarded under cover of a letter dated 18th September 1986. By two letters each dated 19th September 1986, Mr. Cilauro advised Mr. Fox that the applicant wished to amend the contract of sale relating to 143 Lynch Road by adding his wife Carmela as co-purchaser with him, and to amend the contract relating to 145-147 Lynch Road by adding as purchasers, together with himself, his parents Giuseppe and Vincenza Aliotta, his sister Salvina Gallenti and his brother Joe Aliotta. Mr. Fox replied by two letters dated 26th September 1986, asking for nomination forms signed by the applicant, nominating the co-purchasers, and for formal contracts of sale amended to show all purchasers, and for transfers of land. None of these documents was ever provided. On 14th September 1986, a lease was executed between the first respondent as lessor and Brambles Holdings Limited as lessee. In the schedule to that lease, the lessee is described as "Brambles Holdings Limited (Inc. in NSW) of Western Avenue, Tullamarine trading as Cleanaway." The lease is for a period of one year, and specifies two further terms, the first of four years and the second of five years. By letter dated 16th September 1986, to Mr. Vito Cilauro, who had been engaged by the applicant as his solicitor for the Purposes of the purchase, Mr. Fox advised that special condition 3 of the contract note had been satisfied, and promised to forward a copy of the lease. Such a copy was duly forwarded under cover of a letter dated 18th September 1986. By two letters each dated 19th September 1986, Mr. Cilauro advised Mr. Fox that the applicant wished to amend the contract of sale relating to 143 Lynch Road by adding his wife Carmela as co-purchaser with him, and to amend the contract relating to 145-147 Lynch Road by adding as purchasers, together with himself, his parents Giuseppe and Vincenza Aliotta, his sister Salvina Gallenti and his brother Joe Aliotta. Mr. Fox replied by two letters dated 26th September 1986, asking for nomination forms signed by the applicant, nominating the co-purchasers, and for formal contracts of sale amended to show all purchasers, and for transfers of land. None of these documents was ever provided. In the meantime, Brambles Holdings Limited went into possession of the property. It was used asa _ truck depot, workshop and office in connection with the business of garbage disposal, carried on under the name "Cleanaway". The trucks which were brought to the premises were garbage disposal trucks, which were very smelly. It was then discovered that the property could not be used as a_ truck depot without a permit from the local municipality, the City of Broadmeadows; the property fell within a light industrial zone under the Melbourne Metropolitan Planning Scheme, made pursuant to the Town a Count Planning Act 1961 (Vic.) and the use proposed fell within column 4 of that planning scheme, as being a use prohibited without a permit. When it discovered that the use of the property as a truck depot was illegal, Brambles Holdings Limited ceased so to use it. Apart from leaving some items of office equipment and a motor car parked on the property, that company went out of occupation. Subsequently, Brambles Holdings Limited and the first respondent joined in an application to the City of Broadmeadows for a permit. A number of occupiers of neighbouring properties objected, mainly because of the smell of the garbage disposal trucks, and the City of Broadmeadows refused a permit. In late September or very early October 1986, the applicant discovered that the property was no longer used as a truck depot, workshop and office. He consulted Mr. Cilauro, who rang Mr. Fox and drew this to his attention. Mr. Cilauro also rang a representative of Cleanaway, who confirmed that the property had heen vacated because there was no permit. Some negotiations took place between Mr. Fox and Mr. Cilauro. Mr. Fox adopted the position that the lease was valid and binding on Brambles Holdings Limited, and that the transaction should proceed. Mr. Cilauro asked whether it would be possible to obtain an acknowledgement from Brambles Holdings Limited that the lease was valid and subsisting. Mr. Fox doubted that the solicitors for Brambles Holdings Limited would advise their client to give such an acknowledgement. On or about 3rd October 1986, Mr. Fox went on holidays for about ten days. He left the matter in the hands of another solicitor, Mr. Anthony Cook of Messrs. Pearn & Cook. During Mr. Fox's absence, the day contemplated for settlement of each of the contracts came and went, namely 10th October. On that day, Mr. Cook wrote to Mr. Cilauro asking for the matters required in Mr. Fox's letter of 26th September, confirming that the first respondent was in a position to settle, and reminding Mr. Cilauro that settlement was due on that date. The letter also contained notice that interest would be sought by the first respondent if settlement did not take place. Mr. Cilauro replied to this letter by letter of 23rd October, stating that the applicant was willing to proceed with the transaction, provided that all the terms and conditions of the contract notes were complied with, and contesting any entitlement to interest. On 13th November 1986, Mr. Fox forwarded to Mr. Cilauro a notice of default in respect of each contract, together with an accompanying letter. Each notice contained a demand for interest on the residue of the purchase price, made time of the essence of the contract and notified that unless the default were remedied within fourteen days the contract would be rescinded, the deposit forfeited, and the land repossessed and resold. In separate letters of the same day, Mr. Fox notified Mr. Cilauro that the first respondent was demanding default interest on the residue of the purchase price from 10th October. By letter dated 19th November, Mr. Cilauro advised Mr. Fox that the first respondent was in breach of the terms and conditions of the contract notes and objected to the release of the deposit by the second respondent. By further letters dated 24th November 1986, Mr. Cilauro wrote to Mr. Fox in the following terms: 10. "Without prejudice to our client's other rights arising from the misrepresentations by the agent, we advise that our client requires your client to provide a fully executed lease for the property as set out in special condition 3 of the sale note by noon on Thursday 27th November 1986 in default of which our client intends to rescind the Sale Note." By letter dated 27th November 1986, Mr. Cilauro advised Mr. Fox that the applicant was rescinding the contract notes and demanded the return of the deposit moneys. He alleged misrepresentations on the part of the first respondent and its agent in holding out that the use described in the lease was the use to which the land could be put. He also alleged a failure to comply with special condition 3. By letters dated 3rd December 1986, with reference to each of the contracts, Mr. Fox advised Mr. Cilauro that "this contract of sale is now at an end". This letter contained a denial of misrepresentations. Negotiations took place between the first respondent and Brambles Holdings Limited, resulting in the execution of a surrender of the lease on 27th March 1987, with rent being paid by Brambles Holdings Limited up to 13th May 1987. As part of the arrangement concluded between the first respondent and Brambles Holdings Limited with respect to the lease, Brambles Holdings Limited wrote a letter dated 17th March 1987, acknowledging that no misrepresentations were made by or on behalf of the first respondent during the lease negotiations. ll. The first respondent sold the property in two separate lots, in accordance with the separate titles. on the sale of 143 Lynch Street, it sustained a loss greater than the amount of the deposit which it had in hand from the applicant. The applicant commenced this proceeding on 6th May 1987. Against both respondents, it claims damages for misleading and deceptive conduct, contrary to 3.52 of the Trade _ Practices Act 1974 and false or misleading representations with respect to the use to which the property was capable of being put or might lawfully have been put, contrary to s.53A(1)(b) of the same Act. In the alternative, the applicant claims against the first respondent for breach of contract, being an alleged failure to comply with special condition 3 of each contract note. In each case, the damages Claimed are limited to $25,000, that being the total of the deposits paid under the contract notes. The first respondent cross-claims against the applicant alleging breach of contract with respect to 143 Lynch Road, and claiming damages quantified at $25,876, being the loss on resale of 143 Lynch Road, together with the expenses of resale, less the amount of the deposit in respect of that part of the property. In addition, the first respondent cross-claims against the second respondent, seeking indemnity on the basis that the second respondent was not authorised to engage in misleading 12. or deceptive conduct or to make any misrepresentation. In turn, the second respondent cross-claims against the first respondent, claiming the indemnity of an agent against its principal whilst acting within the scope of the agency. It is convenient to deal with the various issues which arise under separate headings. MISLEADING AND DECEPTIVE CONDUCT In the applicant's statement of claim, he pleaded that the respondents made a number of representations in the following terms: "(a) the property was able to be used for the purpose described in condition 3 and the proposed lease; (b) that the property was capable of use as a truck depot, workshop and office; (c) that the property might lawfully be put to the use of a truck depot, workshop and office; (d) that such use was able to be carried on forthwith; (e) that Cleanaway was a secure tenant for the property; (£) that Cleanaway was about to commence to use the property for a truck depot, workshop and office; (g) that there were no worries about the lease of the property." ed 13. Both respondents relied on the defence that the evidence did not disclose any express representations in these terms, or to the effect of these terms. It was argued that, in saying that there was a proposed lease to "Cleanaway Brambles", and in disclosing portions of the contents of the draft lease, Mr. D'Aprano had told the applicant nothing other than the truth. Nothing at all had been said on the question whether the property could be used as a truck depot, workshop and office, whether lawfully or in any other sense. The argument was that to tell the truth and nothing more cannot amount to misleading and deceptive conduct. There are, however, two problems with this defence in the circumstances of this case. In the first place, I accept the evidence of the applicant that Mr. D'Aprano did make express representations to the effect that "Cleanaway Brambles" would be a secure tenant, and that there would be no worries about the lease. Mr. D'Aprano denied making such express representations. In my view, however, it is improbable that the conversations in which Mr. D'Aprano was attempting to sell the property to the applicant were as bare as Mr. D'Aprano's evidence would suggest. The likelihood is that Mr. D'Aprano would be concerned to present the property in the best possible light, and in doing so would have attempted to persuade the applicant of the virtues of '""Cleanaway Brambles" as a tenant, and of the desirability of the Proposed lease. Because of this likelihood, I accept the 14. evidence of the applicant that this is what in fact occurred. Of course, statements such as those are puffs, and care must be taken to avoid elevating every puff in the course of a transaction into a contravention of s.52 of the Trade Practices Act 1974. In each case, the question whether a puff amounts to misleading and deceptive conduct depends on its context. In the context of the present case, indications of security and lack of worry helped to convey the impression that the proposed lease would be entered into, and that the property would be occupied by a good tenant, at least in the forseeable future. The second difficulty for the respondents is that silence can constitute misleading and deceptive conduct for the purposes of s.52. In Rhone-Poulenc Agrochimie SA v. UIM Chemical Services Pty. Ltd. (1986) 12 F.C.R. 477, at pp. 489-490, Bowen C.J. said: "Where silence is relied on in order to show a breach of 3 52 it will depend upon the circumstances whether the silence constitutes conduct which is misleading or deceptive. As in the case of other sections of the Trade Practices. Act 1974 the court may gain assistance from consideration of cases at common law and in equity dealing with related types of situations. However, the court is not confined by such cases because it is concerned with the interpretation and application of the words of the particular statute. Dealing with the question of misrepresentation constituted by silence, there are cases which show, for example, that an omission to mention a qualification, in the absence of which some 15. absolute statement made is rendered misleading, is conduct which should be regarded as misleading. 80 too is the omission to mention a subsequent change which has occurred after some statement which is correct at the time has been made where the result of the change is to render the statement incorrect so that thereafter it becomes misleading. This also may be regarded as constituting misleading conduct. However, the general position between contracting parties has been expressed in the following way: "The general rule, both of law and equity, in respect to concealment, is that mere silence with regard to a material fact, which there is no legal obligation to divulge, will not avoid a contract, although it operates as an injury to the party from whom it is concealed." (Smith Hughes (1871) LR 6 QB 597 at 604; and see War dv Hobbs (1878) 4 App Cas 13; W Scott, Fell & Co Ltd v Lloyd (1906) 4 CLR 572; cf Chadwick v Manning £1896] AC 231 at 238.) Under the general law it is important to consider whether there is a legal obligation to divulge. There are particular relationships which have been held to raise an obligation of disclosure. Contracts uberrimae fidei come to mind as examples of this type of relationship. Indeed, there are many particular relationships which raise duties of disclosure. These include trustee and benefictary, solicitor and client, principal and agent and guardian and ward. Where an obligation to disclose arises an omission to inform the person to whom the obligation is owed may, perhaps on the basis that that person is entitled to assume some fact or circumstance which does not exist, constitute or be an ingredient in misleading conduct. The notion of relationships giving rise to an obligation to make disclosure is one which may well prove useful in determining some of the cases which may arise under s 52 of the Trade Practices Act 1974. However, the court will not be restricted to cases where such a relationship has already been held to exist at common law or in equity. The court is likely to be faced with situations under s 52 between 16. particular parties, where it will feel bound to hold that such an obligation to disclose arises from the circumstances. Vendors and purchasers have not generally been regarded as being, without more, in this type of relationship. There are occasions when a particular enactment or even the terms of a particulasr contract will impose an obligation upon a vendor which will place the parties in a relationship of this type involving an obligation to make disclosure." In the same case, Jackson J. dissented as to the result, but not as to the principles applicable. At p. 508, his Honour said: "The ultimate question in each case is whether in the particular circumstances the respondent's conduct whether constituted by act or omission, by communication or by silence, is or is likely to be misleading or deceptive." In the present case, Mr. D'Aprano communicated to the applicant, by telling him or showing him the contents of portion of the proposed lease, and by including the details of that proposed lease in special condition 3, the fact that the proposed lease was for a particular purpose. This was sufficient to convey to an ordinary potential purchaser, and did convey to the applicant, an impression that the property could be used lawfully for that purpose. Once that impression was created, it became the duty or obligation of Mr. D'Aprano to complete the picture by communicating also that the purpose was one for which the land could not be used 17. lawfully, in the absence of a permit from the City of Broadmeadows. Mr. D'Aprano's conduct amounted to a partial truth, which conveyed a representation that the property could properly and lawfully be, and would be, put to the use of a truck depot, workshop and office. The case bears a striking similarity to Given v. Pryor (1979) 39 F.L.R. 437. In that case, allotments of land were advertised as "a wonderful place to live", and by the use of the words "watch it grow". In conjunction with these statements, images were shown of land with houses built on it. In reality, a planning scheme existed which required the permission of the responsible authority for the building of a house on any of the allotments. Franki J. held that there had been a misleading statement concerning the use to which the land may lawfully be put. The defendant in that case was convicted of being knowingly concerned in the making of a misleading statement, for the purposes of s.53A of the Trades Practices Act 1974. That conviction was upheld on appeal. See Pryor Ve Given (1980) 30 A.L.R. 189. The case illustrates the proposition that a person may mislead by creating the impression that land may be used lawfully for a particular purpose, without disclosing the need for a permit to make such a purpose lawful. A similar case, although one which involved active concealment of the conditions of a permit restricting the use of the land concerned, was .A. Nou es - Ltd. v. Barden Motors Pty. Ltd. (1985) A.T.P.R. case no. 40-519. 18. An attempt was made, relying upon evidence from the Town Planning Officer of the City of Broadmeadows, to argue that a permit would have been granted for the use of the property as a truck depot, workshop and office if the trucks which used the property were not to be garbage trucks. Neither the evidence nor the argument is to the point. The fact was that, at the time when each of the contracts was entered into, the purpose for which it was proposed to use the property was unlawful. It never became lawful, because a@ permit was refused. Whether a permit would have been granted in other circumstances is mere speculation. It is impossible to predict with any accuracy the outcome of the process of an application for a permit, when the circumstances of such an application are not known. It must be remembered that a permit is granted or refused by a democratically elected local council, subject to a right of appeal to the Victorian Administrative Appeals Tribunal, and not by a town planning officer. There can be no doubt that Mr. D'Aprano acted innocently. No suggestion was made that he knew of the absence of a permit, or even of the requirement that there be one. It has been established clearly, however, that there is no element of fault necessarily present in a contravention of s.52. As Gibbs C.J. said, in Parkdale Custom Built Furniture Pty. Ltd. v. Puxu Pty. Ltd. (1982) 149 C.L.R. 191, at p. 197: 19. "A corporation which has acted honestly and reasonably may...nevertheless be rendered liable to be restrained by injunction, and to pay damages, if its conduct has in fact misled or deceived or is likely to mislead or deceive. The liability imposed by s.52, in conjunction with ss. 80 and 82, is thus quite unrelated to fault...". It follows from what has been said that Mr. D'Aprano must be taken to have made representations, partly express and partly by implication, in the terms of those alleged in the statement of claim, except perhaps for alleged representations (a) and (b), if those are to be taken as concerning any matter other than the lawfulness of using the property as a truck depot, workshop and office. Mr. D'Aprano was a servant of the second respondent, which in turn was acting as agent for the first respondent. As between a vendor and an intending purchaser, the vendor's agent has authority to bind the vendor by any representation made as to the nature or quality of the property, even if it is false, unless some limitation on the agent's authority is known to the intending purchaser. See Mullens v. Miller (1882) 22 Ch. D. 194, and MacCormick v. Nowland (Federal Court of Australia, Pincus J., 9th March 1988, unreported). A company carrying on business as an estate agent is also liable for the acts of its servant within the scope of his actual or ostensible authority. In the present case, what Mr. D'Aprano did was for the purpose of selling the property, and by way of dealing with its attributes. It fell clearly 20. within the scope of the ostensible authority of the second respondent and of Mr. D'Aprano. Indeed, apart from the express statements about "Cleanaway Brambles" being a secure tenant, and there being no worries about the proposed lease, what Mr. D'Aprano did fell within the actual authority of the second respondent, which authority was imparted by the delivery to the second respondent by Mr. Loughnan of the extract from the proposed lease. For these reasons, the first respondent is vicariously liable for the conduct of the second respondent, which in turn is vicariously liable for the conduct of Mr. D'Aprano. The representations which were made being representations, at least in part, with respect to future matters, s.51A of the Act is applicable. By virtue of this provision, a representation with respect to future matters is to be taken to be misleading unless the corporation making it had reasonable grounds for making it, and the corporation carries the evidential burden as to the reasonableness of the grounds. No attempt was made inthe present case by either respondent to establish that any reasonable ground existed for representing that the property could and would be used lawfully for the purpose of a truck depot, workshop and office, or that the express representations of Mr. D'Aprano were true. hae 21. No issue was taken with the allegation that each of the respondents was and is a trading corporation, or that the conduct alleged was engaged in in trade or commerce. Having regard to the state of the authorities, no such issue could be taken. It follows that a finding must be made that each of the respondents contravened s.52 of the Trade Practices Act 1974 by engaging in conduct that was misleading or deceptive. ' 3. ION 53A(1 Considerations similar to those already dealt with lead to the conclusion that each of the respondents acted in contravention of this provision. Misleading representations were made concerning the use to which the property might lawfully be put. Those representations were made in connection with the possible or actual sale of an interest in land, or with the promotion thereof. Loss G. By s.82 of the Trade Practices Act 1974, if the applicant suffered loss or damage by the conduct of the respondents in contravention of ss. 52 and 53A(1)(b) of the Act, the applicant is entitled to recover the amount of the loss or damage by action against the respondents. i ate 22. The applicant was induced to enter into contracts to purchase the property, and to pay deposits under those contracts, totalling $25,000, by the conduct of the respondents. The applicant wished to buy an investment property, and the impression that the property was to be occupied by a tenant, carrying on lawful activities on it, in accordance with a lease, would contribute readily to the desire to purchase. On the facts, the representations made, expressly or by implication, were a factor which induced the applicant to sign the contracts and pay the deposits. Nor was the effect of such an inducement spent by the inclusion of each of the contracts of special condition 3. The fact that the applicant required such a_ special condition, before increasing his offer, underlines the effect which the representations had on him. The mere fact of inserting the effect of the representations into the contract, as an obligation of the first respondent, is not sufficient to remove the representations as inducing factors. Both respondents relied on the defence that the applicant had suffered no loss because he received what he bargained for. It was said that the lease actually entered into was binding on Brambles Holdings Limited. Even though a lease may state the purpose for which the lessee proposes to use the land the subject of it, the lessee is not compelled 23. to use that land for that purpose without a permit. There is therefore no illegality if no permit exists for the use contemplated by the lease. So much can be gleaned from i ise Koala Pty. Ltd. Vv. ueens Lodge Pty. Ltd. C1977] V.R. 164. In addition, in the present case, there was no attempt to establish misrepresentation by the first respondent to Brambles Holdings Limited, or any other element which would or might have vitiated the lease. The respondents' argument, however, depends on assuming that there is an equation between the existence of a binding lease and the lawful use of the land for the purpose contemplated. In reality, there is a practical difference between having a tenant in occupation and carrying on a lawful activity on land, and the existence of vacant Premises. This difference would be apparent in the event of an attempt to resell. The applicant's father gave evidence to this effect. It is also apparent that inability to use a property for its designated purpose would decrease substantially the likelihood that the tenant would exercise an option for a further tern. There was, therefore, a material difference between what the applicant was led to believe he was purchasing, and what he received. In the circumstances, the applicant would have been entitled to ask the Court to declare the contracts void, pursuant to 3.87(1A) and (2)(a) of the Act, and to order the 24. refund of the deposits, either as specified sums or by way of damages. Since the contracts have on any view of the evidence been rescinded, but the deposits have been retained, the applicant has suffered loss and damage by the misleading and deceptive conduct and the misleading representations of the respondents. He has paid out $25,000 and has not recovered it. It is therefore appropriate to make an order under s.82 for the payment of damages in the sum of $25,000, against both respondents. This award should carry interest pursuant to s.5l1A of the Federal Court of Australia Act 1976. Under that section, the rate of interest is discretionary. It is appropriate to use the rate currently in use in the Supreme Court of Victoria, which is 12.5 per cent. Interest will be calculated from 27th November 1986, the date on which the contracts were rescinded, until the date of judgment. THE CROSS CLAIMS BETWEEN RESPONDENTS As between the two respondents, the first respondent should indemnify the second respondent. As has already been said, the second respondent was armed with authority to speak of the proposed lease, and thereby to mislead the applicant as to the lawful use to which the land might be put. In the circumstances, what was said and done by Mr. D'Aprano was within the scope of the authority of the 25. second respondent. The second respondent therefore has the ordinary right of indemnity of an agent against a principal where the agent has acted within the scope of his, her or its authority. The first respondent's cross claim against the second respondent, which was based on the proposition that the second respondent had acted outside the scope of its authority, should be dismissed. There should be judgment for the second respondent against the first respondent on the second respondent's cross claim, for any amount which may be recovered by the applicant against the second respondent, together with costs. Cc CTUAL RI The alternative claim of the applicant against the first respondent and the cross claim of the first respondent against the applicant depend on the respective contractual rights of the parties. The major issue is whether the first respondent was in breach of special condition 3 in each of the contracts. Three separate breaches were alleged. The first was that the name of the lessee in the actual lease did not correspond with that which the contract required. The second was that, instead of options for further terms of five years each, the lessee was given options of four and five years respectively. The third related to the method of rent increase. 26. There is evidence before the Court that no company has been registered in either New South Wales or Victoria under the name Cleanaway Brambles Holdings Pty. Ltd. The use of that title in the proposed lease, and in special condition 3 of each of the contracts, must therefore be taken to have been a misnomer for Brambles Holdings Limited, which carries on business under the name Cleanaway. As a result, the first respondent has not leased the property to a person other than the person contemplated by the contract, and is therefore not in breach of the contract in that respect. Nor is the discrepancy in the rent review clause of significance. Counsel for the applicant argued that a clause which gave to the lessor the benefit either of an increase measured in accordance with the Consumer Price Index, or an increase measured by way of market value, whichever is the greater, did not accord with special condition 3, which refers only to the Consumer Price Index. It was said that a higher rent according to market value may make the exercise of an option for a further term less likely. In my view, the applicant could not complain legitimately that the lease may result in rental increases greater than those based on the Consumer Price Index. If in fact a market rent caused or contributed to the failure to execise an option for a further term, at least the property could be re-let at such market rent, and a purchaser would not lose. 27. The change in the length of the term of one option for renewal is, however, significant. It is true, as counsel for the first respondent submitted, that an option to renew a lease is an ""if" contract; the option may never be exercised, and the lessor cannot rely upon having the lessee as a tenant beyond the end of the first term fixed by the lease. It is also true that, in the event of exercise of an option, there is a difference between a four year term and a five year term. What may be said with absolute confidence is that, if the tenant does exercise an option fora further term, the length of the further term thereby created is significant. There is a clear difference between a four year term so created, and a five year term so created. In failing to secure the agreement of Brambles Holdings Limited, in the form of a lease, to two further terms of five years, the first respondent was in breach of special condition 3 in each of the contracts. Counsel for the first respondent argued that the applicant had waived his right to performance of special condition 3 in strict accordance with its terms. The waiver was said to arise from the fact that Mr. Fox sent to the applicant the lease as it was actually executed, and formal contracts in which special condition 3 had been altered so as to conform with the terms of the lease, and that no complaint was made on or before the settlement date fixed by the contracts. It would be strange if an offer to vary a 28. contract, to which the other party does not respond, should result in waiver by that other party of rights existing under the contract. Waiver requires the doing of some act indicating forbearance from exercising an existing right. In the present case, not only did the applicant not do such an act, but Mr. Cilauro, on several occasions, called for satisfaction of special condition 3 according to its terms. There was, therefore, no waiver of the right to a lease containing options for renewal for terms of five years. The passing of the settlement date contemplated by the contracts, 10th October, without the provision of such a lease did not mean that the applicant was no longer in a position to call for performance of the contract. At the most, it meant that time ceased to be of the essence for the performance of that obligation of the first respondent, as it also ceased to be of the essence for the performance of the applicant's obligation to pay. Once time ceased to be of the essence, each party had a right again to make it of the essence, by calling upon the other party to perform his or its obligation within a reasonable time. See Thornton v. Bassett C19753 V.R. 407, at p. 423. The first respondent did this by its notices dated 13th November, in relation to payment. The applicant also attempted to doso by Mr. Cilauro's letter of 24th November, with respect to the lease. The question arises whether this notice gave the first respondent a reasonable time in which to perform its 29. obligation with respect to the provision of a lease. In the circumstances, the time allowed by that letter, namely until noon on 27th November, was reasonable. The applicant had continued to insist, by letters of 23rd October and 19th November, on performance of the contracts in accordance with their terms. In circumstances in which it was clear that the first respondent could not and would not fulfil its obligations in this respect, it was unnecessary to allow more time than was allowed. The contracts were therefore rescinded at noon on 27th November, as a result of the failure of the first respondent to fulfil its obligation under special condition 3. The first respondent was not entitled to continue to withhold the deposits, as it would have been if the contracts were rescinded due to the default of the applicant. Further, the first respondent's rights to claim any loss on resale of the property did not arise, as they would have done had the contracts been rescinded by reason of the applicant's default. For these reasons, the first respondent's cross claim against the applicant must be dismissed. It is unnecessary to make any other order with respect to the applicant's claim for the return of the deposit; in effect, he will recover the deposit by way of damages. 30. Appearances Counsel for the applicant: Mr. Watkins Solicitor for the applicant: Mr. Vito Cilauro Counsel for the first respondent: Mr. Wikrama Solicitors for the first respondent: Geoffrey A. Fox & Associates Counsel for the second respondent: Mr. Boaden Solicitors for the second respondent: D'Aprano Stapleton & Co. I certify that this and the preceding twenty-nine (29) Pages are a true copy of the Reasons for Judgment of the Honourable Justice Gray. Dated: ah. Wow, 'AVS. Wiese Associate Qeasn So,