Hammer v Sunman [1999] FCA 966

FEDERAL COURT OF AUSTRALIA

Hammer v Sunman [1999] FCA 966

TRADE PRACTICES – conduct that is misleading or deceptive – representations allegedly made under authority of first mortgagee of property to second mortgagee – express and implied representations – whether representations made – whether made with authority of first mortgagee – whether misleading – reliance – whether representation moved applicant not to take action it would otherwise have taken

Trade Practices Act 1974 (Cth) s 52 Fair Trading Act 1987 (NSW) s 42

Lam v Ausintel Investments Australia Pty Ltd (1990) ATPR 40‑990 cited Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546 cited Yorke v Lucas (1985) 158 CLR 661 cited

ANDREW HAMMER, JOSEPH HAMMER AND JOLAN FULOP v ANTHONY SUNMAN

NG 259 OF 1996 LEHANE J

16 JULY 1999 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 259 OF 1996

BETWEEN: ANDREW HAMMER, JOSEPH HAMMER AND JOLAN FULOP

Applicants

AND: ANTHONY SUNMAN

Respondent

JUDGE: LEHANE J

DATE OF ORDER: 16 JULY 1999

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. The application be dismissed. 2. The applicants pay the respondent's costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 259 OF 1996

BETWEEN: ANDREW HAMMER, JOSEPH HAMMER AND JOLAN FULOP

Applicants

AND: ANTHONY SUNMAN

Respondent

JUDGE: LEHANE J

DATE: 16 JULY 1999

PLACE: SYDNEY

REASONS FOR JUDGMENT

Background 1 This case concerns a block of units in Bondi Road, Bondi, known as the Palage. The Palage comprised 128 residential units, a small number (apparently three) of what were described as "commercial units" and fifty‑five garages and car parking spaces. A strata plan had been registered in respect of the property, so that there was a separate marketable title to each of the units and each car parking space and garage. For some time up to 29 October 1993 the entire property was owned by a partnership comprising the applicants: Mr Andrew Hammer, his brother Mr Joseph Hammer and their sister Mrs Jolan Fulop. The partnership had several substantial investments in real property in the Sydney metropolitan area. In mid‑1993 the applicants decided to make their most substantial investment: on 8 July 1993 they contracted to buy for $14,000,000 the building known as Caltex House in Kent Street, Sydney. They decided to raise a substantial part of that sum by selling the Palage. 2 The partnership had operated the Palage as a motel and serviced apartments. Shortly before 29 October 1993, the applicants had entered into contracts to sell thirteen units. On 29 October 1993 they sold the rest of the property: they sold to Foxprize Pty Limited (Foxprize) one hundred residential units, the three commercial units and the fifty‑five garages and car parking spaces; they sold the remaining fifteen residential units to Destunija Pty Ltd (Destunija), a company associated with Foxprize. The principal of both Foxprize and Destunija was Mr John Hawkins, a real estate agent. 3 The total purchase price payable by Foxprize was $11,657,700. Of that sum, Foxprize borrowed from Permanent Trustee Australia Limited (Permanent) the sum of $7,600,000. It executed in favour of Permanent a first mortgage of the one hundred residential units. $2,557,700 came from the applicants by way of vendor finance: that finance was made available by two separate loans, one secured by a second mortgage of the one hundred residential units and the other by a first mortgage of the commercial units, garages and car parking spaces; but the two mortgages were "cross‑collateralised"; that is, each was also security for the debt secured by the other. The balance of the purchase price came from a company called Maboli Pty Ltd (Maboli). Maboli also lent to Destunija to enable it to buy the fifteen units: both loans were secured by a first mortgage of those fifteen units, a third mortgage of the one hundred residential units purchased by Foxprize and a second mortgage of the three commercial units. 4 Permanent lent to Foxprize, and took its mortgage, as trustee of a trust known as the Howard Mortgage Trust, the manager of which was Howard Funds Management Limited (Howard). During the period with which this case is concerned, the chairman of directors of Howard was Mr Robert Blann. Mr Blann was also substantially interested in, and the moving spirit of, Maboli. The respondent, Mr Sunman, is a solicitor. During the relevant period, he was a sole practitioner, practising at Woollahra. He had acted for several years for what was known as the Howard group. He acted for Permanent and Howard on the transaction with Foxprize; he also acted for Maboli in relation to its mortgages. In addition, though I do not think that anything turns on this, he acted for Foxprize on sales of units which took place over some months after the purchase was completed. He did not, however, otherwise act for Foxprize in connection with its dealings with the three mortgagees. 5 It will be necessary, later in these reasons, to consider in detail some aspects of what happened after the loans were made, the purchase by Foxprize completed and the mortgages taken. For the present it is sufficient to record, without being more specific, that Foxprize defaulted and all the lots in the Palage were ultimately sold; and that, while realisations were sufficient to discharge Foxprize's indebtedness to Permanent, the applicants suffered a loss. They claim that that loss resulted from conduct of Mr Sunman, acting on behalf of Permanent and Howard, which, they say, infringed both the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (NSW) and they claim damages from him accordingly. The applicants made similar claims against Mr Blann, who was joined as second respondent. However, on the fourth day of the trial orders were made giving effect to a settlement between the applicants and Mr Blann. Accordingly, the only issues outstanding are those between the applicants and Mr Sunman.