Supreme Court New South Wales Medium Neutral Citation: Eddie Michael Awad & anor v Twin Creek Properties Pty Ltd [2011] NSWSC 923 Hearing dates: 27, 28, 29, and 30 June 2011 Decision date: 30 June 2011 Jurisdiction: Equity Division Before: Brereton J Decision: Defendant to pay plaintiffs $75,000. Defendant to pay 50 percent of plaintiffs' costs. Catchwords: TRADE PRACTICES - Misleading and deceptive conduct - representations made in relation to future matters - effect of (CTH) Trade Practices Act s 51A - where corporation makes representation in relation to future matters and does not have reasonable grounds to make representation, representation presumed to be misleading - evidential onus on defendant to establish it had reasonable grounds - once defendant adduces such evidence onus falls on plaintiff to establish on balance of probabilities that grounds were not reasonable - reasonable grounds in relation to future matters involve an intention on part of representor to perform the representation and an ability to perform the representation - defendant had intention but did not have ability at time made representation to construct hotel and have certain hotel chain operate hotel - representation misleading and deceptive. TRADE PRACTICES - Misleading and deceptive conduct - reliance on representation by plaintiffs to purchase property - first plaintiff asserts would not have purchased property but for representation - post facto subjective statements inherently unreliable - need to examine objective indicia as to whether plaintiff would have purchased property but for representation - representation influenced decision to purchase property but not decisive factor. TRADE PRACTICES - Relief for misleading and deceptive conduct - plaintiff seeks order to rescind contract - where representation not decisive in plaintiff entering into contract, not appropriate to order rescission - representation affected purchase price - damages awarded commensurate to impact of representations on purchase price. CIVIL LIABILITY - Defences - proportionate liability - plaintiffs' solicitor said not to have acted with due competence and skill in advising plaintiffs about purchase - claim an apportionable claim under (NSW) Civil Liability Act - solicitor a concurrent wrongdoer - liability of solicitor assessed at one-third. Legislation Cited: (NSW) Civil Liability Act 2002, s 34, s 35 (NSW) Civil Procedure Rules 2005, r 42.34 (CTH) Trade Practices Act 1974, s 51A, s 52, s 53A, s 82, s 84 s 87 Cases Cited: Adelaide Petroleum NL v Poseidon Ltd (1988) ATPR 40-901 Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 55 ALR 25 Gould v Vaggelas (1984-1985) 157 CLR 215 Kayteal Pty Ltd v John Joseph Dignan & ors [2011] NSWSC 197 Sykes v Reserve Bank of Australia (1998) 88 FCR 511 Category: Principal judgment Parties: Eddie Michael Awad (first plaintiff) Karen Elizabeth Awad (second plaintiff) Twin Creeks Properties Pty Ltd (defendant) Representation: Counsel: CJ Birch SC and DS Wienberger (plaintiffs) J Robson SC and D Healey (defendants) Solicitors: Thurlow Fisher Solicitors (plaintiff) Surry Partners Lawyers Pty Ltd (defendant) File Number(s): 2009/291401 Judgment (ex tempore) 1Pursuant to an amended statement of claim filed on 19 November 2010, the plaintiffs Mr and Mrs Awad seek an order declaring void ab initio a contract for the sale of land between them as purchasers and the defendant Twin Creeks Properties Pty Ltd as vendor of land, situate at and known as lot XX at XXX to XXX Luddenham Rd Luddenham ( "the subject land" ). In about October 2003, the defendant engaged an agent, Mr David Jones, to sell the lots located within an 800 acre residential subdivision known as 'Twin Creeks', within which the subject land is situated. In about September 2004, and later in about December of that year, Mr and Mrs Awad met with Mr Jones in order to inspect and inquire about Twin Creeks generally and, in due course, the subject land. Following their initial meeting, Mr Awad had several further meetings with Mr Jones. In the course of their meetings, Mr Jones provided to the Awads copies of a brochure entitled "Twin Creeks Acreage Gold Living" ( "the brochure" ); an A3 sized booklet entitled "Pattern Book A Guide for the Creation of Twin Creeks" ("the pattern book" ); additional marketing material, including "Twin Creeks Golden Country Club - Why Just Be A Gold Club Member When You Could Be An Owner?", and "Twin Creeks - Golf & Country Club"; a newsletter entitled "Twin Creeks Update - Autumn 2004", and a newspaper article that had been published in the Sun- Herald dated 28 November 2004. 2Mr and Mrs Awad say that in reliance upon various representations contained in that material, reinforced by oral representations made to them by Mr Jones, they decided to purchase the subject property with the intention of building their dream home on it; consequently, on 18 February 2005, they exchanged contracts for purchase of the land and instructed architects to design the home they intended to build on it; and, in due course, after some negotiated extensions, they completed the contract on 27 February 2006. 3Since completion of the contract, the Awads have made observations, concerning the subject property, that various of the expectations generated by the representations contained in the marketing materials and as made by Mr Jones, have not been fulfilled in a number of respects. Essentially, these representations fall into four main categories. The first is that, whereas they had expected that Twin Creeks would comprise 177 residential lots only, each of at least 1 acre in size, the defendant currently intends to develop it into 285 lots, of which 231 will be not less than 1 acre and 54 will be less than 1 acre but not less than 1,500 square metres in size. Secondly, whereas they had expected that a resort hotel managed by Peppers Retreats, Resorts and Hotels ( "Peppers" ) would open at Twin Creeks by 2007 and that Peppers would manage the various recreation and restaurant facilities at Twin Creeks, in fact there is no such resort hotel operated by Peppers or anyone else, and the recreation facilities and restaurant, although at one stage managed by Peppers, are now managed by Troon Golf, as they have been since about mid 2006. Thirdly, whereas they had expected that the houses built at Twin Creeks would be built in accordance with the design stipulations in the pattern book, houses smaller than those that they had anticipated, on parcels of land smaller than had been expected, have now been built on the 1,500 metre lots. Finally, whereas they had expected that the verges would be landscaped and maintained, that has not happened to date, and the verges, at least in that stage of the development (Stage 2) of which the subject property forms part, remain un-constructed and un-landscaped. 4The Awads say that, as a result, the subject property is considerably less desirable to them than they had been led to expect. Additionally, they contend that its value is significantly less than it would have been had the representations been fulfilled, and that they would not have purchased the land, but for the representations which they say have since been falsified. 5In their amended statement of claim, they relied on (CTH) Trade Practices Act 1974 s 52, s 53A and collateral contract. As the case has been conducted, the focus has been almost entirely on Trade Practices Act s 52. In my view, that has been a correct judgment, and I shall deal in due course with why the other pleaded bases were not applicable. 6At the heart of the plaintiffs' case is the contention that by combination of the meetings with Mr Jones and the marketing materials, including the brochure supplied, the defendant made a number of representations to them. These are set out in paragraph 2 and in paragraph 2A of the amended statement of claim. As pleaded, paragraph 2 contains the express statements said to have been made on behalf of the defendant, and paragraph 2A contains representations said to be conveyed by or implicit in those express representations. For convenience, in the following summary I combine them so as to express the plaintiffs' complaints, as I understand them. 7The representations the plaintiffs contend were made to them are first, that Twin Creeks would be subdivided into a master-planned community comprising 177 residential lots only, and would never and could never be subdivided into more than 177 lots only; secondly, that no more than 177 homes would be built within Twin Creeks, and Twin Creeks would never and could never have more than 177 homes built therein; thirdly, that the size of each of the residential lots would be no smaller than 1 acre, and would never and could never have lots smaller than 1 acre; fourthly, that the defendant would procure the registration of a community plan of subdivision which would regulate the design and development of Twin Creeks in accordance with the representations so far identified; fifthly, that Twin Creeks would be developed as set out in the Twin Creeks master plan - although there was some debate about precisely which master plan that referred to, it seems to me that it must have been that contained in the brochure; sixthly, that the houses built and constructed at Twin Creeks must be designed in accordance with the Twin Creeks pattern book and must be approved by the Twin Creeks design review panel, which would ensure that all design was in accordance with the pattern book; seventhly, that the landscape, streetscape and verges would be constructed in accordance with the pattern book and in accordance with the streetscape and verges constructed at stage 1 of the development; eighthly, that a resort would be constructed within Twin Creeks which would be open in early 2007 and be managed by Peppers, and residents of Twin Creeks would be able to enjoy the benefits of that resort, and that the defendant had no reason to believe that a resort would not be constructed within Twin Creeks, which would open in early 2007 and be managed by Peppers; ninthly, that Peppers would manage the recreation facilities and restaurant at the country club within Twin Creeks, and that the defendant had no reason to believe that Peppers would not manage those recreation facilities and restaurant; and, tenthly, that Peppers had entered into contractual undertakings to construct a resort within Twin Creeks and/or manage the country club, and all necessary council and statutory consents for that had been obtained. 8Evidence of the conversations that took place between Mr Jones and the Awads is contained in Mr Awad's affidavit. He was not challenged seriously, if at all, about his conversations with Mr Jones, and Mr Jones was not called by the defendant to contradict him. I accept that the conversations took place as described by Mr Awad. 9Twin Creeks accepts that Mr Jones was engaged and acted as its agent in respect of the subject land. Accordingly, under Trade Practices Act, s 84 (which provides that where an agent of a corporation engaged in conduct within their actual or apparent authority, the corporation is taken to have engaged in such conduct), if not otherwise, conduct engaged in by Mr Jones is deemed to have been conduct engaged in by Twin Creeks. 10Of the representations to which I have referred, based on acceptance of Mr Awad's evidence of the conversations and the contents of the various marketing materials, I find that the defendant made representations as follows. First, that Twin Creeks would be subdivided into a master planned community comprising 177 residential lots and possibly 80 resort villas. I do not accept that the defendant represented that Twin Creeks would and could never be subdivided into more than 177 lots. Such a representation would be an extraordinary one, not easily reached by a process of implication as distinct from express statement. That planning regimes can vary, and that planning restrictions can be amended by local or by state government, is notorious. The idea that a development, even one such as Twin Creeks, could be frozen forever into 177 acre lots without prospect of change, is far removed from reality. Thus, I do not accept that the representation extended to one that Twin Creeks could never be subdivided into more than 177 lots. 11Secondly, that no more than 177 homes, and possibly 80 resort villas would be built within Twin Creeks. Again, for substantially the same reasons, I do not accept that it was represented that Twin Creeks would never and could never have more than 177 homes built on it. I refer to the 80 resort villas, because reference was made in the promotional material to the incorporation of resort villas "subject to approval", which had not yet been - and ultimately was not - obtained. 12Thirdly, that each of the residential lots, other than the resort villas, would be no smaller than 1 acre in size. However, I do not accept that Twin Creeks represented that the development would never and could never have lots smaller than 1 acre in size, for the reasons expressed above. I also do not accept that there was any representation that the spaces on which the resort villas were to stand, would be no smaller than 1 acre. 13Fourthly, that Twin Creeks would procure the registration of a community plan of subdivision to regulate the design and development of Twin Creeks in accordance with the foregoing representations. This representation, however, did not subsequently play a significant role in the proceedings. 14Fifthly, that Twin Creeks would be developed as set out in the master plan in the brochure. That adds little to the first three representations. Insofar as it might be suggested that it conveyed any representation of immutability, I would not accept that. 15Sixthly, that the houses built and constructed at Twin Creeks must comply with the pattern book and be approved by the design review panel which would ensure that they complied with the pattern book. 16Seventhly, that landscape, streetscape and verges would be constructed in accordance with the pattern book, commensurate with those constructed in stage 1 of the development. 17Eighthly, that a resort would be constructed within Twin Creeks which would open in 2005 (as distinct from 2007, which was alleged in the pleading) and be managed by Peppers, the use of which Twin Creeks residents would be able to enjoy. I do not accept that it was implicit in that representation that Twin Creeks had no reason for doubting that that would happen as pleaded. The true effect of a representation with respect to a future matter is an issue to which I shall come in due course. 18Ninthly, that Peppers would manage the recreation facilities and restaurants at the country club. Again, I would not accept that there was an additional representation over and above that, and that the defendant had no reason to believe that Peppers would not do so. 19Finally, I do not accept that there was any representation that Peppers had entered into contractual undertakings to construct a resort, or that all necessary council and statutory consents had been obtained. So much does not appear to me to be implicit in the express statements that were made. 20Trade Practices Act, s 52(1) provides: A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. 21Each of the representations, which I have found above, related to a future matter. They were in the nature of assertions made to Mr and Mrs Awad about a state of affairs that did not exist in the present but would exist in the future with respect to Twin Creeks. 22Absent Trade Practices Act, s 51A, to which I shall come, the position so far as representations with respect to future matters are concerned is that, if the representation is not fulfilled when the time for fulfilment comes, that does not automatically mean that the representation, when made, was misleading or deceptive, or even raise a prima facie case to that effect. In Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 55 ALR 25 the Full Court of the Federal Court (Bowen CJ, Lockhart and Fitzgerald JJ) said, at pages 30-31: If a corporation is alleged to have contravened s 52(1) by making a statement of past or present fact, the corporation's state of mind is immaterial unless the statement involved the state of the corporation's mind. Whether or not s 52(1) is contravened does not depend upon the corporation's intention or its belief concerning the accuracy of such statement, but whether the statement in fact contains or conveys a meaning which is false; that is to say, whether the statement contains or conveys a misrepresentation. Most commonly, such a statement will contain or convey a false meaning if what is stated concerning the past or present fact is not accurate; but a statement which is literally true may contain or convey a meaning which is false. Many statements, for example, promises, predictions and opinions, do involve the state of mind of the maker of the statement at the time when the statement is made. Precisely the same principles control the operation of s 52(1) with respect to the making of such statements. A statement which involves the state of mind of the maker ordinarily conveys the meaning (expressly or by implication) that the maker of the statement had a particular state of mind when the statement was made and, commonly at least, that there was a basis for that state of mind. If the meaning contained in or conveyed by the statement is false in that or in any other respect, the making of the statement will have contravened s 52(1) of the Act ... The non-fulfilment of a promise when the time for performance arrives does not of itself establish that the promisor did not intend to perform it when it was made or that the promisor's intention lacked any, or any adequate, foundation. Similarly, that a prediction proves inaccurate does not of itself establish that the maker of the prediction did not believe that it would eventuate or that the belief lacked any, or any adequate, foundation. 23Accordingly, in order to establish that a representation with respect to a future matter was false, in the absence of s 51A of the Act, the plaintiff would have to establish that the defendant when making the representation did not intend to perform it, or lacked any or any adequate foundation for such intention. 24That position has been to some extent modified by s 51A(1), which relevantly provides: ... where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading. 25On its own, this provision would mean that in order to establish that the representations were misleading, the plaintiff would have to establish an absence of reasonable grounds on the part of the defendant for making them. But the position is further affected by section 51A(2), which provides: For the purposes of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation. 26Although there has been some controversy in the case law as to the precise effect of s 51A(2) in terms of onus, seems to me that the position is that (1) it does not cast a legal burden on the defendant to prove that it had reasonable grounds; (2) rather, it casts on the defendant a burden of adducing evidence that it had reasonable grounds; so that (3) once it adduces such evidence, the court must then resolve on the balance of probabilities, the plaintiff bearing the onus, whether the defendant did not have reasonable grounds. In other words, for the defendant to avoid the deeming effect of s 51A(2), it must adduce evidence which, if accepted, would establish reasonable grounds for making the representation. Once it adduces such evidence, the deeming provision is defeated, but in the absence of evidence which, if accepted, would establish reasonable grounds, the deeming provision takes effect. 27The defendant has conceded that it was for all relevant purposes acting in trade or commerce within the meaning of the Trade Practices Act s 52. The central issue for determination is therefore whether the defendant did not have reasonable grounds for the representations that it made. 28In Sykes v Reserve Bank of Australia (1998) 88 FCR 511, Heerey J (at page 513), took the view that the respondent bank in that case had not properly pleaded its defence to a s 51A claim as it had not alleged, let alone shown, some facts or circumstances existing at the time of the representation on which the representor in fact relied, which were objectively reasonable, and which supported the representation made. 29With all due respect, it seems to me that the position can in most cases be simplified - at least where the future matter relates to the conduct of the representor - in that reasonable grounds involve that there be on the part of the representor first, an intention to perform the representation, and secondly, an ability to perform it. The best of intentions do not provide reasonable grounds if there is no ability to perform. Similarly, ability to perform does not establish reasonable grounds in the absence of an intention to perform. 30For reasons which are not unimportant in the context of the present case, there has been some debate about the pleading of reasonable grounds under s 51A. In Adelaide Petroleum NL v Poseidon Ltd (1988) ATPR 40-901, French J, as his Honour the Chief Justice of Australia then was, said (at 49,700): It was submitted by the respondents that the applicants should be obliged to plead as material facts the reasonable grounds said to be lacking. In my opinion that is not a requirement of a viable plea in reliance upon sec. 51A. It may be however, that to avoid the abuse of the section by persons making the bald assertion that promises or predictions lack reasonable grounds, particulars may be ordered. 31On the other hand, in Western Australia v Bond Corp Holdings Ltd (1991) 99 ALR 125, the following view was expressed by French J (at 129): ... a party involving [ sic ] the application of s 51A to a representation as to a future matter should make clear that it is doing so. In that way the respondent will know that, if the representation was made, it has the burden of showing, and must plead, that it had reasonable grounds for making it. The duty of the applicant to make clear that it invokes s 51A is discharged if it pleads that the respondent did not have reasonable grounds for making the representation and that it was thereby misleading and deceptive. 32Hence French J adopted the position, that a party proposing to rely on s 51A should make it clear in the statement of claim that it is doing so, so as to allow the respondent to know that it has the burden of pleading that it had reasonable grounds for making the relevant representation. This was the foundation for the view taken by Heerey J in Sykes v Reserve Bank , to which I have referred. Thus the position on the authorities is, first, that it is not incumbent on a plaintiff to plead as material facts the reasonable grounds said to be lacking. There is, however, an obligation on a defendant to plead that it had reasonable grounds, and what those grounds were. It was for that reason that, at the pre-trial directions hearing, I initially expressed concern that while the case was clearly being conducted on the basis that it was a s 51A 'future matters' case, there did not appear, in the defendant's pleading, an allegation that it had reasonable grounds for making the representations, let alone as to what those reasonable grounds were. That defect was ultimately addressed by amendment to the defendant's pleadings early in the hearing. 33In this case, the defendant sought to establish that it had reasonable grounds for the relevant representations through the evidence of one of its directors, Mr Wiesener. Mr Wiesener, the evidence showed, was not the sole director of the defendant, but was the director who had the carriage of the Twin Creeks development. His evidence made clear enough that he had close involvement in the defendant's decisions, so far as the Twin Creeks development was concerned. No doubt other directors were also involved in some of those decisions. But, in my view, for a corporation to adduce evidence that it had reasonable grounds does not necessitate that the corporation call every one of its directors to assert what their intentions were, nor produce corporate documents and minutes to prove board resolutions - which are typically less than expansive on intentions from time to time. 34In this case, Mr Wiesener's evidence, coupled with the documentary material to which he referred, demonstrated such grounds as existed on which the relevant opinions could be held. I do not accept that the absence of other directors from the witness box in that respect was significant, anymore than I accept that the absence of Mrs Awad from the witness box on the plaintiffs' side was significant. Appropriately and economically, the case was limited to calling the main players on each side, rather than those who were not so intimately involved in the events and whose evidence would add little. That is a matter for which the parties and their representatives are to be commended, rather than criticised. 35As with Mr Awad, so with Mr Wiesener, with, if anything, the most minor exceptions, I found nothing overtly unbelievable about his evidence, or his demeanour. Generally speaking, I accept his evidence as I do that of Mr Awad, although, as will become apparent, there are minor respects - largely relating to matters of retrospective perception - about which I have some reservations. 36As to the 177 acreage lot representations - the first category of representations to which I referred above - the evidence establishes that, at least until 2007, all plans for the Twin Creeks development limited the development to 177 lots of at least 1 acre (plus potentially 80 resort villas until they were not approved in about late 2004, although some contention about them remained thereafter). More importantly perhaps, there were in place a series of environmental planning instruments, which had the legal and practical effect of precluding development of Twin Creeks into more than 177 lots, or into lots of less than 1 acre. Mr Wiesener's avowed intention was that the development proceed accordingly. All that changed when in 2007, in a meeting with the then Minister for Planning, The Honourable Mr Frank Sartor, at which Twin Creeks was seeking to procure approval for the 80 villa sites which had been described as subject to approval in the promotional material), the Minister proposed that the environmental planning instruments be varied, so as to permit some 54 1,000 square metre lots. 37Mr Wiesener's evidence, together with the documentary material, satisfies me very comfortably that, at all times up to 2007, the defendant had the intention of fulfilling the representations in respect of 177 lots of not less than 1 acre and no more than 177 homes (other than potentially the villas), and not only had the ability to comply with that representation, but were legally constrained by the then environmental planning instruments to do so. I am, therefore, satisfied that the defendant had reasonable grounds for the representations it made in respect of the 177 acreage lots. 38The pattern book representations, although pursued in the litigation, ultimately played a relatively small part in it. Mr Wiesener was taken in cross-examination to photographs of a number of houses now erected at Twin Creeks. It was suggested to him that in various respects they did not comply with the pattern book, the chief complaint being that it was said that their garages dominated the frontage. While views may differ in this respect, Mr Wiesener denied that was so, and my observation of the relevant photographs accords with his denial. That there were garages on the frontage is clear; but that they dominated the frontage (in the way he described various houses in some suburbs as doing so), was not only far from clear; in my view, the opposite in fact was established. In each case, they clearly occupied less than 50 percent, and in most cases significantly less than 50 percent, of the frontage. Furthermore, no evidence of an architectural or other nature was called by the plaintiff to establish that they contravened the pattern books in any way. Mr Wiesener also gave evidence that the representation was fulfilled, in the sense that all houses at Twin Creeks were still required to comply with the pattern books (albeit that an additional pattern book had been introduced for the smaller lots), and were subject to the supervision of the design committee. In my view, the defendant had reasonable grounds for making the pattern book representations when it made them. 39So far as the landscaping or verge representations are concerned, Mr Wiesener's evidence establishes that landscaping and verges were installed for stage 1; that difficulties arose because, during the construction of later buildings, the construction works destroyed the verges and they required reinstallation at expense; that Twin Creeks still intended to install the verges in compliance with the representation to the other stages as and when those stages came to completion; and that for the stage in which Lot 86 is located he expected that that would be in the next 12 months. Mr Wiesener's evidence therefore clearly establishes that, at the relevant time when the representations were made in 2004 and 2005, the defendant intended to fulfil the landscaping and verges representations. My view has been less clear as to whether ability to perform those representations at the relevant time has been established. However, the fact that they were performed and then reinstated in respect of an earlier stage of the development is evidence of ability to perform sufficient in my mind to conclude at least that evidence has been adduced of reasonable grounds for those representations. 40I turn finally to the Peppers representations. Essentially, the evidence of reasonable grounds in that respect is that there was an intention to build a resort hotel and have Peppers operate it; there were negotiations with Peppers to that end; there was a contract entered into with Peppers for Peppers to operate the restaurant, bar and resort facilities, including the hotel if it was built; and - although of dubious relevance, because it was subsequent to the relevant date - that for some time from 2005 to 2006 Peppers did, in fact, operate the resort facilities. The fact is that a hotel was not built and, years after the event, still has not been built. 41The construction of a significant building such as a hotel is a rather more significant undertaking from a financial perspective than the installation of landscaping and verges. An essential part of constructing such a building is finance. Unless the defendant had the funds, or had grounds for believing that it could get the funds, to build the hotel, it could not have had reasonable grounds for believing that it would be able to do so. 42In its evidence-in-chief, Twin Creeks adduced no evidence as to its financial capacity to build the hotel. However, in cross-examination Mr Wiesener, in the course of being taxed with the proposition that by late 2004 the economic viability of the development as a whole was in jeopardy, was asked (at T121, lines 1-9): Q. Do you say that it was quite possible that you could have successfully developed the whole proposal just with 177 rural residential lots and the other matters that were already approved when the development was purchased? A. Absolutely. The bank finance and all of the valuations at the time put no value on the resort site. Q. Do you say there was no economic necessity at all for you to obtain the 80 resort villas? A. None. 43He was asked (at T133, 34-40): Q. The purpose, let me suggest to you, of the villas which would be equally well served by the Minister's proposal was increasing density and providing an appropriate economic return; isn't that correct? A. The economic return was not something that this project turned on in terms of the villas. They were never funded. They were never considered in any valuation or any feasibility by the bank. To the extent that they provided an economic return, they provided an economic return, yes. 44Further (at T137, 34-48), he said: Q. So you say that the hotel development was quite unaffected by the fact that the 80 resort villas would not be constructed? A. It had no implications on the hotel. Q. The hotel's commercial viability would depend upon its own restaurant and bar facilities, wouldn't it? A. It depends on the same restaurant and bar facilities, yes. Q. So how could the viability of the restaurant and bar facilities be in jeopardy generally and yet the resort facility not be affected? Surely that doesn't make sense, Mr Wiesener? A. The resort facility - the fact that they were a shared facility, the viability was significantly improved by having additional density on the site. I don't know if that means that without additional density the hotel wouldn't open the restaurant. It may be that the hotel - I don't think it means that. 45Finally (at T138, 40-45): Q. Do you say the development was ever at risk as a result of the failure to get approval for the 80 resort villas? A. The development at all times until 2010 in terms of its bank finance and in terms of the valuations that were being done for the bank never put any value on the resort site, zero value, and the bank freely lent money because the financial returns were appropriate. 46I have given the closest consideration to whether the first passage to which I referred (at T121, 01-09) amount to some evidence of ability to perform. I have come to the conclusion that it does not. It is a bare assertion that it was possible to have successfully developed the proposal just with 177 rural residential lots. It does not reveal the grounds on which it was considered possible to do so. In my view, even taken with the evidence of intent - and I fully accept that there was intent on the part of Twin Creeks to fulfil the Peppers representation - there is no evidence of reasonable grounds, because there is no evidence of ability to perform. I have not overlooked the provisions of the contract, in particular conditions 33, 34 and 37. Clause 33.1 provides that the vendor discloses that the completed development may contain a number of residential lots or possibly a number of residential lots (including strata lots) to be developed in stages. Clause 34 relevantly provides that the vendor proposes - but, importantly, is not obliged - to carry out certain 'development activities', which include, amongst others, procuring all necessary consents and certificates for the development and subdivision of the relevant land and parcels. Clause 37 specifies that the vendor discloses and the purchaser acknowledges that certain matters and procedures - including those mentioned in clauses 33 and 34, amongst others - are not final and may change, and that the manner in which the land comprising the development will be developed, subdivided and used, is not final and is to be undertaken at the vendor's discretion. Clause 37.3, significantly, begins "If there is a Resort". The salience of those provisions is that they make clear that what was being represented was a plan, that might or might not ultimately be implemented fully in accordance with its terms, and that there was no contractual obligation to implement them. Those provisions, however, do not have the effect that a representor is at liberty to make representations with respect to future matters without having reasonable grounds for making them. 47As the defendant has not adduced evidence which it accepted would establish reasonable grounds for the Peppers representation, it follows that that representation is deemed to be misleading, and the plaintiffs have established in respect of the Peppers representation, but only in respect of the Peppers representation, that Twin Creeks engaged in misleading and deceptive conduct in contravention of Trade Practices Act s 52. 48So far as concerns the claim under Trade Practices Act, s 53A, which is concerned with representations pertaining to the sale or grant of interests in land, it adds nothing - and it has not been suggested by counsel that it adds anything - to the case under s 52. 49So far as the collateral contract claim is concerned, the "entire contract" clause in the contract is a complete answer to that proposition. 50In circumstances where I have concluded that the only misrepresentation established is that relating to Peppers, it is necessary to address questions of reliance. 51I accept that it is clear that the Peppers representations, along with the others, were propounded by the defendant as significant selling points for the property. They were intended to influence purchasers, to form certain views about the property, and they were intended to be relied on. In those circumstances, Gould v Vaggelas (1984-1985) 157 CLR 215 authorises a robust approach to drawing inferences of reliance. 52I am satisfied that the plaintiffs relied on the Peppers representation as one of a number of matters which contributed to their decision to purchase the subject property at the price which they paid for it, namely $1,150,000. However, whether the Peppers representation was decisive, in the sense that but for it they would not have purchased the subject property, is a more difficult question. 53In his affidavit, Mr Awad described the circumstances in which he and his wife first approached Mr Jones. He said that he was looking for an acreage style property, which also had surrounding acreage properties. He wanted to find an exclusive area that had large blocks of land and contained architecturally designed homes. He and his wife were contemplating building a large architecturally designed home. He had seen some advertisements for Twin Creeks. When he arrived there, he told Mr Jones: We've got a property in Denham Court, but we wanted to buy a new block of land and build a designer home. We're looking for a block at least 1 acre in size and we want similar kinds of blocks and houses in the surrounding areas. We want to build a nice architectural home and don't want to be surrounded by project homes on smaller blocks as I don't want to have a nice big house on a big block and be surrounded by smaller houses and project homes, so we are looking for a nice exclusive estate. 54In the course of the conversation, Mr Jones mentioned that Peppers were going to build a resort. The brochure did not contain any reference to Peppers, though it did contains references to a resort hotel. The location of the proposed Peppers Resort was pointed out to the Awads on a model. 55In paragraph 43 of his affidavit, Mr Awad said: Had I been told that there was a possibility that Twin Creeks would be subdivided with more than 177 lots, or had I been told that some lots may be less than one acre in size or that Peppers may not construct a resort I would not have made an offer for the Land, let alone purchased the Land. 56Mr Weinberger, for the plaintiffs, forcefully points out that that evidence of Mr Awad was not attacked, at least directly, in cross-examination, although there was some cross-examination about reliance in a more general sense. He rightly submits, and points to authority, that a judge should not readily reject evidence that has not been challenged. 57Evidence of this type, on the other hand, is in my view inherently unreliable. It is well known, for example, in medical negligence cases, that a plaintiff patient's views or evidence as to what he or she would have done, had he or she been warned of a minor risk of the operation, may be given with all due honesty after the event, but is very much coloured by what has happened in the meantime. Conscious as I am of the risks of rejecting unchallenged evidence, it seems to me that when it comes to reliance in the context of a Trade Practices claim of this type, a court is much better assisted by examining objectively the indicia as to what a party would or would not have done, rather than relying on the party's subjective assertion. I do not doubt that Mr Awad's affidavit contains what he now believes would have been the position. But, looked at objectively, considering his reasons for visiting Twin Creeks in the first place, and examining his description of what it was he was looking for, a neighbouring resort hotel simply does not feature in the picture, and I am unpersuaded that, but for the Peppers representation, he would not have purchased the land. 58That conclusion is very important when it comes to relief. As I have said, the plaintiffs seek an order under Trade Practices Act, s 87, avoiding the contract. Alternatively, they seek damages under s 82. It would not be appropriate to avoid the contract if the impact of the representation would not have been that the purchase was not undertaken, but only that any purchase would have proceeded at a lower price. In my view, this is a case in which it cannot be concluded that the purchase would not have proceeded, but I can conclude that the Peppers factor added something to the price at which the Awad's were prepared to purchase. 59That then brings me to the next question, which is how much the Peppers factor did contribute. Evidence was given by a qualified valuer, Mr Foley-Jennings. He said that the value of the property, as represented, was $1,150,000. That corresponds with the contract price. He said that in his opinion, had the Peppers representation not been true (as I have found) then it would have been worth 10 percent less than that; and that had the 177 acreage lot representation not been true it would have been worth another 10 percent less. But it is not necessary to address the 177 acreage lot issue, as I have found that Twin Creeks had reasonable grounds for making those representations. 60Mr Foley-Jennings was subjected to firm and effective cross-examination and his opinion was roundly criticised. Much of that criticism was very soundly made. The fact remains, however that there was no evidence to the contrary. The essential point is his opinion that the Peppers assumption contributed about 10 percent to the purchase price. As I sought to explain, when indicating why I would not reject his report out of hand under the Makita principles, some aspects of valuation involve little more than professional judgment based on professional experience. In this case, there were no comparable sales to which the valuer had resort. He thought that the Peppers brand and hotel and availability would add something to value and selected, fairly arbitrarily - indeed, he used the word nominally - a figure of 10 percent. He said, as I recall it, "it is not as if it is 20 or 30 percent" and "we don't work in much less than 10 percents". When he was asked whether he could say that 5 percent was wrong, he said that it would be "not wrong", although he thought it was on the low side. 61A judge assessing damages in a case like this has to do the best one can with the available evidence. There is some evidence, albeit not particularly satisfactory evidence, as to the impact of the Peppers assumption on the value, and there is no evidence to the contrary. Bearing in mind that on damages the plaintiff bears the onus, I am unpersuaded that the evidence establishes that the Peppers factor contributed more than 5 percent of the purchase price. Accordingly, the starting point for the award of damages would be 5 percent of the purchase price of $1,150,000. 62The plaintiffs borrowed the whole of the purchase price and have paid interest on it. The parties have agreed that the total interest bill incurred by the plaintiffs amounts to some $445,912.35. It seems to me that the plaintiffs would have borrowed 5 percent less but for the Peppers representation, and on parity of reasoning and their damages should include 5 percent of that total interest bill. 63They have also paid land tax and council rates totalling $21,644. While land tax at least is not necessarily proportionate but applies in increments, in the scope of things, it would not be unjust to allow also 5 percent of that sum of $21,644. 64There is one further issue to be addressed, namely that the defendants have pleaded a defence of proportionate liability under (NSW) Civil Liability Act 2002 , s 35, alleging that the solicitor who acted for the plaintiffs on the purchase is a concurrent wrongdoer. That solicitor, Mr Olliffe, is not a party to the proceedings. At the pre-trial directions hearing, I expressed concern that the court might be asked to make a finding of professional negligence against a person not a party to proceedings and not necessarily on notice of them. To some extent at least, that has been resolved as the court has been informed that Mr Olliffe is a member of the firm of solicitors who act for the plaintiffs in these proceedings and may therefore be taken to be aware of the allegations made. Nonetheless, it needs to be clearly understood that such findings as I am about to make do not bind Mr Olliffe, and are made in the absence of hearing his version of events, in circumstances where the court is bound to consider a defence of proportionate liability. 65The defendant, as I have said, took some measures to draw to the purchaser's attention that the promotional material was not contractual in nature. There were disclaimers in some of the promotional material. More significantly, the special conditions of the contract, which I have mentioned, made clear that there was no contractual obligation on the defendant to implement the development in accordance with the representations. A solicitor using due competence and prudence, advising a purchaser, ought to have advised the purchasers that there was no legal obligation on Twin Creeks to implement the development in accordance with the representations, and that their legal rights were those contained in the contract and no more. Had the solicitor done so then, if one were to accept Mr Awad's evidence, he would never have entered into the contract. 66It seems to me that, although this part of the case has been conducted in relatively small scope and on the documents - being the tender of Mr Olliffe's file - Mr Olliffe has fallen short of the standard expected of a solicitor acting for and advising a purchaser in these circumstances. Mr Awad's evidence, for example, is that he was given no advice about the relevant special conditions, and that notwithstanding that he did in fact tell his solicitor something about why he was purchasing the land. 67Accordingly, I conclude that Mr Olliffe was a concurrent wrongdoer for the purposes of the proportionate liability provisions [ Civil Liability Act, s 34(2)]. 68The question then becomes: how is liability or responsibility to be apportioned between the defendant and Mr Olliffe? I reviewed the authorities on this topic in Kayteal Pty Ltd v John Joseph Dignan & ors [2011] NSWSC 197, [64]-[75]. One significant difference in this case is that, whereas in most of the cases where a solicitor's proportionate liability has tended to be in the order of 10 percent, the other wrongdoer has been guilty of fraudulent misrepresentation, in this case there is no allegation, let alone finding, of fraud. On the principles reflected in the cases to which I referred in Kayteal, that imports that the misrepresentor's share of the responsibility would be less, and therefore the solicitor's greater, than in the case where the misrepresentor was guilty of fraud. 69The second relevant distinction is that in this case the defendant took steps to endeavour to protect itself and point out the position, although ultimately unsuccessfully so. In particular, it sought through the special conditions in the contract, which it might reasonably have expected a purchaser's solicitor to explain to a purchaser, that the representations about the development were not contractually binding obligations. That, I think, is something that again increases the responsibility of the solicitor as against that of the defendant. 70That said, the problem only arose in the first place because of the misrepresentations, so I think the defendant's responsibility still exceeds that of the solicitor. Any apportionment of responsibility in this type of situation is necessarily a broad-brush one, but bearing in mind the considerations to which I have referred, I think in this case an appropriate apportionment is two-thirds to the defendant and one-third to the solicitor. 71The figures to which I have referred total $80,877.81, which I round to $81,000. Two-thirds of that is $54,000. I allow interest of $21,000. I give judgment that the defendant pay the plaintiffs $75,000 (inclusive of interest). 72On the question of costs, first, the plaintiff has succeeded. Prima facie that means that the defendant should pay the plaintiffs' costs. Secondly, however, the plaintiff has succeeded for an amount well within the jurisdiction of the District Court and, as provided by (NSW) Uniform Civil Procedure Rules 2005, r 42.34, a costs order will not ordinarily be made in such circumstances, unless the Supreme Court is satisfied that the commencement and continuation of the proceedings in the Supreme Court rather than the District Court was warranted. Thirdly, the plaintiff has succeeded on one of several representations pleaded, the defendant having succeeded on the others. Fourthly, the plaintiff has not obtained the principal remedy it sought, although it has succeeded on an alternative remedy. 73As with apportionments of liability, apportionments of costs are also necessarily a broad-brush issue. I do not think it was unreasonable to bring the proceedings in this Court. However, it is difficult to see why the defendant should have to pay the whole of the plaintiffs' costs, when the defendant has succeeded on a significant number of issues. 74I order that the defendants pay 50 percent of the plaintiffs' costs of the proceedings. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 August 2011