SULLIVAN v DAN SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL MASON P, MEAGHER JA and SHELLER JA 19 February, 22 April 1998 [1998] NSWCA 292 FACTS The appellants purchased land at auction and then engaged the respondents to settle the conveyance for them. The respondents failed to ascertain that the land was subject to outstanding conditions pertinent to the Development Approval with the consequence that the owner of the land was liable to certain criminal sanctions and civil liabilities. The appellants sued for breach of contract arsing from their retainer and in tort for damages arising from breach of duty of care in relation to settlement of the contract. The vendors of the land never informed the appellants or the respondents of the outstanding matters in relation to the Development Approval, neither in the contract for sale itself nor in their answer to the respondents requisitions on title. The vendors also informed the Council during the course of the conveyance itself that they were attending to the demands of the Council in relation to the outstanding works to be carried out to meet the Development Approval. This they did not do. They then assured the respondents that there were no matters outstanding with the Council. In the Court below, his Honour followed Carpenter v McGrath (1996) NSW Conv R 56,052. He found the existence of the unfulfilled conditions did not amount to a defect in title. The appellants put a new case on appeal under the Trade Practices Act. The issue on appeal is whether the appellant should be allowed to prosecute this new case. HELD (1) Meagher JA, Mason P agreeing: the case the appellant seeks to put forward on appeal is an entirely new cause of action, claiming different remedies, opening possibilities not open to the trial judge and if commenced now under the Trade Practices Act, statute barred. (2) By Sheller JA, Mason P agreeing: the appellants' failure to take such proceedings tells strongly against any likelihood that they would have succeeded. Mason P. I have had the benefit of reading the judgment of Meagher JA and Sheller JA. I agree that, for the reasons given by them, the appeal should be dismissed. Citing Rohini v Kriziac (1991) 105 ALR 593, counsel for the appellants submitted that the new case which he sought to advance on appeal was one based on facts pleaded and established. Unfortunately for the appellant, that decision is distinguishable. Here the failure to assert the case now relied upon meant that the respondents refrained from leading evidence which could have been given and which might have been critical to the outcome of the proceedings. In those circumstances, justice requires the appellants to be refused the opportunity to rely upon this alternative case. Meagher JA. The appellants are the purchasers of certain land in the Newcastle area. They sued the respondents, who were the solicitors acting for them on the settlement of the purchase. They allege that the respondents are 2 UNREPORTED JUDGMENTS liable in both contract and tort for not having ascertained, before settlement, that the conditions of a Development Application granted to one of their predecessors in title affecting the land had not been complied with. The case was heard by Bryson J, who found against them. They appeal. The land was situated at 158 Macquarie Road, Cardiff, New South Wales. The vendor was a company called Neville Bell's GolfClinic Pty Limited. A golf driving range was conducted as a business on the property. It is lot 2 of Deposited Plan 788892 and contained 5.25 hectares (about 13 acres). There are on the property an amenities building, a shop and a garage for vehicles, together with equipment for conducting the business — all these things were included in the sale. The appellants purchased the land by auction on 30 July 1992. The purchase price was $500,000, the deposit paid by the appellants $50,000. Some time afterwards they gave the contract to the respondents and asked them to settle the conveyance for them. The land in April 1989 was in the ownership of a club called the Cardiff Soccer Football Club. It was this Club which sold the land to Neville Bell's Golf Clinic Pty Limited, the vendor to the appellants. In April 1989 the Club wrote to the Lake Macquarie City Council seeking Development Approval to the use of the land as 'Golf Driving Range, Car Parking and Amenities, and Landscaping Extension to existing Soccer Club Sporting Facilities." The Development Approval was granted on 21 April 1989, subject to conditions. Two of those conditions were as follows: 3. Car Parking being provided on site in accordance with the following: — (i) 21 spaces in accordance with Council's adopted car parking code. (iii) (sic) Each space individually marked on the pavement. (iv) Separate off-street loading/unloading facility clear of the car parking area and driveways. (v) Clear pedestrian entry/exit area so designed to allow safe entry/exit pedestrian movement from the building. 4. All Driveways and access corridors for full length from the kerb and gutter or existing edge of seal and carparking(sic) areas being constructed, paved, graded and drained to the satisfaction of the City Engineer. By late 1989 the Club had transferred the land to Neville Bell's Golf Club Pty Limited, the vendors to the appellants. That company sought and obtained a Building Approval to erect buildings in accordance with the Development Approval. A condition, of that Building Approval was that the conditions of the Development Approval be satisfied. The two conditions were never complied with, and the golf business seems to have been conducted on the land from April 1989 to date. At all times whoever was owner of the land would have been liable to a variety of criminal sanctions and civil liabilities. At no stage did the appellant seem to have any conversations, or any correspondence with, the vendors. The contract which they signed at the Auction did not, directly or indirectly, refer to any unsatisfied Development Application conditions. The vendors knew of them (as his Honour found) but neither the appellants nor therespondents did. The respondents made requisitions on the title by letter dated 3 August 1992. These included the following: 6. Has the Vendor notice or is he aware of: c) 'Any requirements of or work performed or being performed or proposed by any Local Government, Water & Sewerage, Public Health URJ SULLIVAN v DAN (Meagher JA) 3 Pastures Protection Board or other competent authority which would involve the performance of work or the expenditure of money on or in connection with the land sold ... *" The answer from the vendor's solicitors on 13 August 1992 was 'No'. This answer was obviously wrong, entirely wrong to the vendor's knowledge and probably wrong to their solicitor's knowledge. On 21 August 1992 the Council wrote to the vendors and pointed out, under the heading 'WORKS TO BE CARRIED OUT" "Off-street car park, drainage and landscape shall be completed in accordance with the plans approved by Council.' The vendor replied on 4 September 1992, saying relevantly: Item 5. Off-Street Car Park, Drainage and Landscape is being relocated. The plans and specifications are being drawn by Colin C. Murray and Associates and will be submitted to Council for your approval as soon as they are finished. As his Honour said, that letter was obviously 'deceptive nonsense."Settlement took place on 18 September 1992. Shortly before that date the vendor's solicitors had assured the respondents (who passed the information on to the appellants) that 'there are no matters outstanding with the Council.' One of the plaintiffs Mr Brian John Sullivan, said in a witness statement: Had Mr Dan advised me that the property was subject to outstanding council requirements which costs $100,000.00 or more to comply with I would not have proceeded with the purchase. I would have instructed Mr Dan to rescind the contract and do what he could to obtain a refund of the deposit. His Honour believed Mr Sullivan on this and everything else. This, in an abbreviated form, is the background to the action which the appellants brought against the respondents. In their Statement of Claim they alleged that (a) the respondents owed them both in contract and in tort a duty of care, pursuant to which they should have ascertained that the conditions of the Development Approval had not been complied with and acquainted the appellants with that fact, (b) they had committed a breach of that duty, whereby c) the appellant would have to do whatever work was necessary to comply with the conditions, and (d) the costs of doing that, amounting to some $200,000, were recoverable by the appellants as damages. However, at some stage, despite thepleadings, the question of rescission crept in; presumably because if rescission were available to the plaintiffs but unexercised by them their case for damages would crumble, whereas if that remedy were nonexistent or lost, their case for damages would be strengthened. The learned trial judge ruled that he would deal with all issues except damages first, and hear damages later. This ruling was unfortunate. Possibly this ruling accounts for the fact that the cost of complying with the Development Approval's conditions was never ascertained. The plaintiffs alleged the cost would be almost $200,000; the respondents alleged, in the Court of Appeal but not at first instance, that no more than $11,000 would be required. Bryson J said: There is no evidence establishing what it would cost, but it is obvious that the cost of design and construction of the works required would be substantial, some tens of thousands of dollars if not more. It is not, I think, unfair to say that Bryson J concentrated his energies on the question of whether the existence of the unfulfilled conditions constituted a defect in title. He held that, in conformity with this Court's decision in Carpenter v McGrath (1996) NSW Conv R 56,052, it did not. From that finding everything 4 UNREPORTED JUDGMENTS else flowed: if there were no defect in title, there never was a right to rescind, whether the respondents were in breach of duty or not (and his Honour was inclinedto think they were not). As to the existence of the duty, his Honour seemed inclined to accept the evidence of Mr Neville Moses, the distinguished conveyancing expert, that a prudent solicitor would have ascertained whether unfulfilled conditions existed or not, but declined to pass upon whether there was a duty to do so or not, holding that it was in any event irrelevant. The finding of irrelevance was, I think, irresistible, once his Honour had made his critical finding on the question of defect of title. Hence, initially, the appellants lost before his Honour. In this appeal, the appellant's case changed wondrously. The case put below was scarcely mentioned, his Honour's conclusions barely challenged. A new case was put, based on the Trade Practices Act. The vendor had been guilty of deceptive and misleading conduct. Even on his Honour's findings, this is indeed true. The vendor misled the appellants into thinking there was no impediment to their conducting the business of a golf driving range on the land. There is no doubt that was their state of mind at settlement. Under the Trade Practices Act this meant they could have sought a wide range of remedies: rescission, reduction in the purchase price, damages or other remedies. They, according to their learned counsel Mr Motbey, have, because of the behaviour of the respondents, been deprived of the chance of obtaining any of those remedies. If, on a Trade Practices Act application, they hadbeen granted damages, those damages would have been, prima facie, the difference between the contract price ($500,000) of the land and the actual value of the land at the date of the contract (i.e that which could have been obtained if all facts had been known). What the appellant now claim is the loss of the chance of pursuing that sum. The appellant's case on this basis seems strong. The question arises as to whether the appellant should be allowed to prosecute this case, an entirely different one from that hitherto pursued. It is really an entirely new cause of action, claiming different remedies. It opens possibilities which never occurred to the Judge, or to either counsel at the trial. If an action were commenced now seeking relief under the Trade Practices Act it would be statute barred. Notwithstanding the fact that no facts seem to be in dispute (apart from the vital fact of the cost of compliance with the conditions of the Development Application), I feel, although with great hesitation, that it would be unfair to inflict on the respondents another and different hearing. In my reluctant view, therefore, I would favour dismissing the appeal with costs. Sheller JA. The unsuccessful plaintiffs appeal from the decision of Bryson J. The facts are summarised in the judgment of Meagher JA, which I have had the benefit of reading. By an amended statement of claim the appellants alleged that the respondent solicitors were in breach of the terms of their retainer or, in the alternative, of a duty of care owed to the appellants in relation to the settlement of a contract, which the appellants had entered into at an auction held on 30 July 1992, to purchase a property at 158 Macquarie Road, Cardiff, New South Wales, from Neville Bell's Golf Clinic Pty Limited for $500,000. The particulars of damagein the amended statement of claim alleged that the appellants were required to comply with the conditions attaching to a development consent issued by the Lake Macquarie City Council on 24 April 1989 which involved building on the land a paved parking area suitable for twenty-one vehicles, paving an access URJ SULLIVAN v DAN (Sheller JA) 5 road, effecting landscaping works and constructing stormwater drainage. The appellants remained ignorant of these conditions until after settlement. Bryson J dealt with liability and deferred the assessment of damages. His Honour found that while there was no statutory time bar for the enforcement of the conditions of the development consent, actual enforcement of the condition by mandatory order was unlikely and that while it was possible that a prosecution might be instituted under the Environmental Planning and Assessment Act 1979, it was not probable that such a prosecution would succeed. His Honour said that conduct of the Council in relation to the condition made it improbable that it would ever take any action to compel compliance with the condition. By this, as his Honour said, he meant improbable as at the date of judgment, 18 November 1996, and improbable as at September 1992 when the contract was completed. These findings disposed of the appellants" claim to damages as particularised. The appellants were not required to comply with the conditions. However, Bryson J went on to consider what steps the appellants could have taken if the respondents had found out and informed them before they settled their purchase that there were development consent conditions which had not been complied with. This led to a consideration of whether there was a defect in title such as to entitle the appellants to rescind the contract and to defend any specific performance suit. His Honour held that they would have been entitled to resist completion of the contract only if the failure to comply with the conditions of the development consent was rightly regarded as a defect in the vendor's title but that, applying what was said by this Court in Carpenter v McGrath (1996) 40 NSWLR 339, there was no defect in title and no right to rescind. His Honour said that the appellants would have been obliged to complete their purchase even if they had known of the circumstances relating to the development consent. It followed from this view that even if it was the correct conclusion that the solicitors were in breach of their duty, the appellants would not have had a right to resist completion if the true facts had been known but would have had a contractual obligation to complete their bargain. There were grounds for a discretionary defence to specific performance, but the outcome could not be regarded as certain; compare Summers v Cocks (1927) 40 CLR 321. Turning to the question of the risk of forfeiting the deposit by refusing to complete, his Honour said that the prospects appeared to favour relief againstforfeiture but the outcome would be uncertain and it could not be said that a solicitor was in breach of duty for not advising a client to take such a risk; nor was that the appellants" case. His Honour concluded by saying: It should not in my opinion be found that, if the facts had come out before settlement, there was any action which the defendants should have taken which would have improved the plaintiffs" position. The substance of the appellants" complaint, which they have raised on this appeal, was that the appellants were entitled to damages for the loss of the opportunity to rescind or to refuse to complete because of the respondents" failure to investigate and advise them before settlement that the conditions of the development consent had not been fulfilled. One of the appellants, Mr Brian Sullivan, gave evidence that the cost of effecting the work necessary to satisfy the conditions would be in excess of $175,000. He said that if the respondents had advised him that the property was subject to outstanding Council requirements which would cost $100,000 or more to comply with, he would not have proceeded with the purchase. He would have 6 UNREPORTED JUDGMENTS instructed the respondents to rescind the contract and do what he could to obtain a refund of the deposit. This evidence, admitted without objection, supports the argument that the respondents" breach of duty led to the loss of an opportunity to avoid completion which might otherwise have been taken. However, Bryson J found that that opportunity was valueless for the reasons to which I have referred. His Honour was satisfied that the risk offorfeiture and possibly of paying damages for failing to complete meant that even if the respondents had informed the appellants of the conditions before settlement, the appellants, properly advised, would have completed the contract. Mr Sullivan was not cross-examined about rescinding the contract because, as I understand counsel for the respondents, the appellants" case at trial was not put on the basis that the value of the lost opportunity to rescind should be measured other than by the cost of works that the appellants alleged they were required to incur as a result of not having avoided completion. As the cross-examination demonstrated, the respondents ran a case that the Council would never require the work to be carried out. That case succeeded. On the appeal the appellants, however, sought to put their case in a way which was not put at trial, namely, that they lost the opportunity to take proceedings against the vendor for misleading or deceptive conduct; s 52 of the Trade Practices Act 1974. One immediate answer to this was that such proceedings, although within time, were not taken when the appellants did learn of the vendor's conduct, which Meagher JA has summarised. From the bar table counsel for the appellants said that the vendor was a 'shell' company. However, if the vendor was unable to meet any order to pay damages and presumably the costs of litigation, no opportunity was lost. The onlyopportunity then became the opportunity to apply to a Court to make a wider order, perhaps avoiding the contract of sale and requiring the vendor to repay the price paid albeit that the contract had been completed, pursuant to the powers conferred by s 87 (1) and (2) of the Trade Practices Act. In such a case it was argued that the value of that lost opportunity recoverable as damages from the respondents would be the difference between the price the appellants paid for the land and its value subject to the need to comply with the conditions of the development consent. The respondents strenuously opposed such a ground of appeal being raised for the first time on appeal. The appellants conceded that no such case was run at first instance. I accept the statement by counsel for the respondents that, had such a case been raised below, evidence could have been given which might have prevented the point from succeeding, namely, bearing in mind the amount of damages likely to have been recovered, that the risk of taking such proceedings was such that the appellants would not have taken them; compare Coulton v Holcombe (1986) 162 CLR 1 at 7-8. Accepting this, I do not think the appellants should be permitted to raise this point. In any event the appellants" failure to take such proceedings tells strongly against any likelihood that they would have succeeded. Accordingly, I agree that the appeal should be dismissed with costs. Appeal dismissed with costs. Counsel for the appellant: S MOTBEY Solicitors for the appellant: JENKINS and ASSOC Counsel for the respondent: AM COLEFAX URJ SULLIVAN v DAN (Sheller JA) Solicitors for the respondent: MALLESONS STEPHEN JAQUES