Rozene Pty Limited v Raine & Horne Commercial (NSW) Pty Limited [2005] NSWSC 792

New South Wales Supreme Court

CITATION : Rozene Pty Limited v Raine & Horne Commercial (NSW) Pty Limited [2005] NSWSC 792

HEARING DATE(S) : 23 May 2005 - 27 May 2005, 2 June 2005

JUDGMENT DATE : 5 August 2005

JUDGMENT OF : Barr J at 1

DECISION : Verdict for the defendant. Plaintiff to pay the defendant's costs.

PARTIES : Rozene Pty Limited, Raine & Horne Commercial (NSW) Pty Limited

FILE NUMBER(S) : SC 012765/89

Plaintiff: P Biscoe QC/J Kirk COUNSEL : Defendant: D Fagan SC/P Bolster

Plaintiff: Summit Law SOLICITORS : Defendant: Colin Biggers & Paisley

LOWER COURT JURISDICTION :

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

GRAHAM BARR J

5 AUGUST 2005

012765/89 ROZENE PTY LIMITED v RAINE & HORNE COMMERCIAL (NSW) PTY LIMITED

JUDGMENT 1 HIS HONOUR: The plaintiff, Rozene Pty Limited (Rozene) sues the defendant, Raine & Horne Commercial (NSW) Pty Limited (Raine & Horne) for damages arising out of the sale by Rozene of a building. The building was situate 116-122 Miller Street North Sydney (116 Miller Street) and comprised commercial and office space. Mr Nicholas Andrews was Managing Director of Rozene and at all material times controlled it and spoke for it. Raine & Horne was the letting agent for 116 Miller Street and Mr Guy Walter, a Director of Raine & Horne, managed its business arrangements with Rozene. 2 116 Miller Street was not far from the intersection of Miller Street and Pacific Highway. The building adjoining it on the northern side was 112 Miller Street. The Australia and New Zealand Bank (ANZ) or interests which it controlled owned 112 Miller Street and carried out retail banking there. It also housed its data processing department in the building. 3 ANZ was in the business of buying and owning real property. So were certain entities under its control, namely subsidiary companies respectively called ANZ Investments and Securities Limited, which was the bank's superannuation arm and which I shall call the Pension Fund, Australian Fixed Property Trust (AFT), Delfin Property Group Limited (Delfin) and Dalgety Investments Limited (Dalgety). AFT and Delfin were wholly owned by ANZ and Dalgety part-owned. Although those companies had their independent management and strategies, neither could without the authority of and funding from ANZ enter into a venture like the purchase of 116 Miller Street. 4 Rozene banked with ANZ. Mr Andrews also owned a meat exporting business with an annual turnover of $30 million, and that business, too, banked with ANZ. As an important client of the bank, Mr Andrews knew a number of its managers, including the manager for the time being of the branch at King and George Streets, Sydney, where he did his banking business. The branch manager at one time was Mr Hardy and later Mr Penn. 5 ANZ had a Property Group, the head of which was an Assistant General Manager, Mr Scott. Mr Scott's office was in Melbourne. The principal officer of the Group in Sydney was Mr Peter Genery. His job was to provide premises for the several organs of the bank in New South Wales. This he did by planning and putting forward written proposals and submissions for consideration by Mr Scott and, if appropriate, the Board of Directors of ANZ. A step like the purchase of 116 Miller Street would have to be approved by the Board. A minute for the approval of the Board would have to have Mr Scott's support. 6 Mr Andrews gave Mr Walter and Mr Genery, among others, to understand that Rozene would sell 116 Miller Street if a suitable price could be attracted. It was a three-storey building set among taller buildings and the site might have been thought suitable for redevelopment. The interest of ANZ in property generally, together with the possibility of jointly redeveloping the adjoining sites at 112 and 116 Miller Street, particularly as 112 Miller Street had the vehicular access to Pacific Highway that 116 lacked, might make the building especially attractive to ANZ. 7 There was not enough space at 112 Miller Street properly to accommodate the ANZ branch and the data processing department. Mr Genery foresaw a long term solution to the problem by the joint redevelopment of 112 and 116 Miller Street. He was therefore keen to interest the bank or any of its entities in purchasing 116 Miller Street. 8 At some stage Rozene appointed Raine & Horne selling agent. Mr Andrews and Mr Walter spoke about selling by tender. Then, having spoken to Mr Walter, Mr Andrews decided to sell by auction. Mr Walter made arrangements for auction on 7 June 1988 and continued speaking to developers likely to be interested in offering to buy. Offers were made by a number of interested companies but none was ever made by ANZ. In May 1988 Mr Andrew Clubb, a developer, indicated to Mr Walter that his company was interested in purchasing 116 Miller Street at $8.25 million on terms as to deposit and the time allowed for settlement. By 18 May Mr Andrews was prepared to sell to Mr Clubb's interests. On 20 May contracts were exchanged with Mr Clubb's company, Wedna Bulk Pty Limited (Wedna) for sale for $8.25 million. Settlement was to be after six months. The auction was cancelled. 9 Wedna entered into negotiations with ANZ and on 28 November 1988 exchanged contracts with it for the sale to the bank of 116 Miller Street for $12.816 million. Both contracts settled on 12 December 1988. 10 By para 8 of its Further Amended Statement of Claim Rozene asserts this - 8. On or about 7 April 1988, and on 13 May 1988, and again on or about 16 May 1988, and again on or about 17 May 1988, and again on or about 18 and 19 May 1988, Raine & Horne by its employee Mr Walter advised Mr Andrews on behalf of Rozene in regard to the Wedna Offer. PARTICULARS (aa) That the property should be sold by auction and not by tender. (a) That the Wedna Offer was the best price that could be obtained for the property. (b) That Raine & Horne had referred the Wedna Offer to all prospective purchasers. (c) That no prospective purchasers had been prepared to offer a sum higher than the Wedna Offer. (d) That Rozene could not reasonably expect to obtain a higher sum than the Wedna Offer if the property were to be offered for sale by auction. (e) That he had spoken to the ANZ and they were not interested in acquiring the property. (f) That Peter Genery of the ANZ (or in the alternative the ANZ) would be, and then had been, informed that contracts would be exchanged on the Wedna Offer on 19 or 20 May 1988. ("the Wedna Advice") 11 Raine & Horne accepts that it offered advice like that asserted in para (aa). It accepts the assertion in para (e) that it advised that ANZ was not interested in acquiring the property but says that the advice was true in that it meant that ANZ would not make an offer to purchase. Otherwise Raine & Horne disputes the terms of the advice Rozene says it offered. 12 Rozene asserts that the contract was entered into in reliance on the Wedna advice. It asserts that in giving the Wedna advice Raine & Horne breached the terms of its agreement with Rozene, was negligent and engaged in conduct and representations within the meaning of s51A Trade Practices Act 1974 which were misleading or deceptive. By para 12 the claim is particularised thus - 12. In giving the Wedna Advice Raine & Horne breached the terms of the Agreement. PARTICULARS (a) Raine & Horne failed to make any or proper enquiries of the ANZ Bank, Delfin and Dalgety in order to ascertain their interest in purchasing the property prior to advising Rozene to sell the property before auction. (b) Raine & Horne failed to do all things that were necessary or appropriate as the agent of Rozene to sell the property at the best price which could be obtained. (c) Raine & Horne failed to advertise (sic: advise that) the property should be offered for sale by tender and not by auction. (d) Alternatively, Raine & Horne failed to conduct an auction and failed to advise the Wedna Offer should not be accepted. (e) Raine & Horne remained silent when there was an obligation to speak in regard to (a) and (b) above. (f) There were no reasonable grounds for saying that the Wedna Offer was the best price that could be obtained for the property. (g) It was not the case that Raine & Horne had referred the Wedna Offer to all prospective purchasers. (h) There were no reasonable grounds for saying that no prospective purchasers had been prepared to offer a sum higher than the Wedna Offer. (i) There were no reasonable grounds for saying that Rozene could not reasonably expect to obtain a higher sum than the Wedna Offer if the property were to be offered for sale by auction. (j) The Wedna Advice implied that satisfactory enquiries had been made and that such enquiries had revealed no better offer was available to Rozene, when this was not the case. (k) Raine & Horne did not warn Rozene of alternative options available to Rozene in conducting the sale of the property on Rozene's behalf including withdrawing the property from auction or setting a very high reserve in a strong market in circumstances where Raine & Horne knew or had reason to believe there were other parties who were prepared to pay an amount in excess of the Wedna Offer, and where such warning should have been given. (l) Raine & Horne had not spoken to the ANZ as claimed. (m) The ANZ itself or through its subsidiaries Delfin and Dalgety was interested in acquiring the property. (n) Raine & Horne had not informed Peter Genery or anyone of the ANZ that contracts would be exchanged on the Wedna Offer on 19 or 20 May 1988. 13 Raine & Horne denies that any advice tendered constituted less than reasonable care, for the purposes of the action in contract and tort, or misleading or deceptive conduct.