Henville v Walker [2001] HCA 52

HIGH COURT OF AUSTRALIA

GLEESON CJ,

GAUDRON, McHUGH, GUMMOW, AND HAYNE JJ

BRYAN SAMPSON HENVILLE & ANOR APPELLANTS

AND

GRAHAM GEOFFREY WALKER & ANOR RESPONDENTS

Henville v Walker

[2001] HCA 52

6 September 2001

P55/2000

ORDER

1. Appeal allowed. 2. Set aside the Orders of the Full Court of the Supreme Court of Western Australia made on 24 August 1999 and in place thereof order that the appeal to that Court be dismissed. 3. The respondents to pay the costs of the appeal to this Court and of the appeal to the Full Court of the Supreme Court of Western Australia.

On appeal from the Supreme Court of Western Australia

Representation:

P Mendelow with P J Hannan for the appellants (instructed by Bowen Buchbinder Vilensky)

C L Zelestis QC with C B Edmonds for the respondents (instructed by Phillips Fox)

Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Henville v Walker

Trade Practices – Misleading or deceptive conduct – Real estate transaction – Home unit development – Misleading representation by land agent to developer as to price which could be obtained for residential home units – Incorrect estimate of likely costs of development made by developer – Quantification of damages where misleading or deceptive conduct is but one of a combination of circumstances bringing about the loss ultimately suffered.

Damages – Statutory – Trade Practices Act – Measure of damages – Relevance of common law analogies when quantifying damages – Identification of loss or damage required – Causation of loss or damage – Quantification of damage caused "by conduct of" person in breach of s 52.

Words and phrases − "by conduct of".

Trade Practices Act 1974 (Cth), ss 52, 82(1).

1. GLEESON CJ. This appeal raises a question concerning the extent of liability under s 82 of the Trade Practices Act 1974 (Cth) ("the Act") for a contravention of s 52. The misleading or deceptive conduct involved the giving of advice and information by a real estate agent, which induced a purchaser to buy land for the purpose of a development project and to undertake the project. 2. The appellants were contemplating the purchase of land in a residential area for the purpose of development by the construction of a small block of home units. In considering whether to buy the land for that purpose, they made a feasibility study which calculated the likely return from the project. The feasibility study was based upon estimates of construction and other costs, and anticipated selling prices of the units. The appellants relied upon their own expertise for the cost estimates. (The first appellant is an architect). They relied upon advice of the vendor's agent (the first respondent) as to selling prices and marketability for the purpose of estimating gross revenue. The costs were substantially under-estimated. The selling prices were substantially over-estimated. The state of the market for home units was misrepresented. The land was acquired and the project was undertaken. In addition to the faulty estimation of costs and returns, the project suffered reverses for other reasons. The respondents were held to have contravened s 52 of the Act (read together with s 51A). What is the extent of their liability under s 82? Is it the whole of the loss suffered on the development project; or some, and if so, what, part of that loss? Or is it to be determined on a different basis? 3. The appellants sued the respondents in the Supreme Court of Western Australia. In addition to the claim under the Act there was also a claim under the Fair Trading Act 1987 (WA) and a claim in tort for negligent misrepresentation. Because the claim under the Act succeeded, it was unnecessary for the trial judge, Anderson J, to deal with the other claims. Anderson J held that the respondents were liable, under s 82 of the Act, for part of the loss on the project. He excluded losses "which are really down to" matters he regarded as not attributable to the respondents' erroneous estimates of likely selling prices. Such matters included the lack of proper costing by the first appellant, lack of financial resources, and the failure to get the project finished in a reasonable time. He assessed the damages for which the respondents were liable by notionally capping the appellants' expenditure on the project at a certain level. It will be necessary to return in due course to the method of assessment adopted. 4. The Full Court of the Supreme Court of Western Australia did not find it necessary to decide the questions formulated above. That Court held that the necessary causal connection between the conduct of the respondents and the loss suffered by the appellants had not been established[1]. Rather, it concluded that the first appellant "was the author of his own misfortune and his conduct in preparing and relying on the erroneous feasibility study is to be regarded as the sole cause of his decision to proceed with the development"[2]. That finding on causation also disposed of the alternative claims. For reasons that will appear, I consider that the appellants have made good a challenge to that finding. The appellants seek a restoration of the judgment of Anderson J. They did not cross-appeal to the Full Court, although they filed a notice of contention asserting that the damages to which they were entitled were "at least" those assessed by Anderson J. If this Court overrules the decision of the Full Court that the conduct which contravened s 52 was not a cause of the appellants' loss, it will be required to consider the principles relevant to assessment of damages.