Re Paul Smolonogov and Adrian Lapardin v Raymond Lawrence O'Brien and Barbara Annette O'Brien [1982] FCA 189; (1982) 67 FLR 311 (1 October 1982)

FEDERAL COURT OF AUSTRALIA

Re: PAUL SMOLONOGOV and ADRIAN LAPARDIN
And: RAYMOND LAWRENCE O'BRIEN and BARBARA ANNETTE O'BRIEN [1982] FCA 189; (1982) 67 FLR 311
No. G167 of 1981
Trade Practices - Evidence

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Ellicott J.(1)

CATCHWORDS

Trade Practices - Consumer Protection - Alleged false or misleading statements concerning land - Action against individuals - Alleged statements made in course of telephone conversation following advertisement - Subsequent conversation at respondents' home followed by contract - Whether statements false or misleading - Whether made "in trade or commerce" - Damages - Whether entry into contract caused by representations in telephone conversation

Trade Practices Act, ss.6(3), 53A(1) (b)

Evidence - Similar facts - Similar false representations made by respondent to another intending purchaser shortly prior to alleged misrepresentations relating to similar adjoining land - Whether admissible.

Trade Practices - Consumer protection - False or misleading statements re sale of land - Statements made in telephone conversation by individual - Whether made "in trade or commerce" - Whether causation of loss or damage - Measure of damages - Similar fact evidence - Trade Practices Act 1974 (Cth), ss 6(3), 53A(1)(b), 82, 87. Following discussions and negotiations between the applicants and one of the respondents, including a telephone conversation during which the respondent was alleged to have made false and misleading statements in relation to certain land which had been advertised for sale by him, the applicants entered into a contract to purchase the land and paid a deposit. The applicants, both individuals, claimed damages under s. 82 of the Trade Practices Act 1974 (Cth), and a declaration that the contract was void, and relied on s. 53A(1)(b) as extended by s. 6(3) because the false and misleading statements were made in the course of a telephone conversation.

Held: (1) Where the interest of the public at large is invited in the proposed sale of land, as was done here by the placing of advertisements in the newspaper, followed by negotiations and discussions with persons responding to the advertisements, the conduct is appropriately described as being in trade or commerce. It would be difficult, however, to describe the sale of land by private contract, without more, as occuring "in trade or commerce".

Re Ku-ring-gai Co-operative Building Society (No. 12) Ltd [1978] FCA 50; (1978) 36 FLR 134 , referred to.

(2) The conversation between the applicants and the respondent, in the circumstances of this case, took place "in trade or commerce" within the meaning of s. 53A. Because that conversation involved the use of telephonic services, s. 6(3) operated to extend s. 53A(1)(b) to the conduct of the respondents, notwithstanding that they are individuals.

(3) In the phrase "a person who suffers loss or damage by conduct" in s. 82, the word "by" clearly means "by reason of" or "as a result of". However, it is not necessary that the conduct be the only contributing cause to the loss or damage; it is sufficient if the conduct (in this case, the telephone conversation) can be seen , in a material sense, to be part of the cause.

(4) The proper measure of damages in an action under s. 82 is the tortious measure appropriate to an action for deceit, e.g. fraudulent misrepresentation, not that appropriate to breach of contract.

Brown v. Jam Factory Pty Ltd (1982) 53 ALR 340; Mister Figgins Pty Ltd v. Centrepoint Freeholds (1981) 36 ALR 23, referred to.

(5) Evidence that the respondent had made similar statements, also false and misleading, to another person concerning other land should be admitted on the basis of the principles applicable to similar fact evidence.

Martin v. Osborne [1936] HCA 23; (1936) 55 CLR 367; Mister Figgins Pty Ltd v. Centrepoint Freeholds Pty Ltd (1981) 36 ALR 23, referred to.

HEARING

1982, May 31; June 1, 2, 3, 6; July 19; October 1. 1:10:1982
APPLICATION.

Proceedings brought by applicants alleging the respondents made false or misleading statements concerning certain land contrary to s. 53A(1)(b) of the Trade Practices Act 1974 (Cth) and seeking to recover damages pursuant to s. 82 of the Act and a declaration that the contract between the parties for the sale of the land was void.

N.A. Cotman, for the applicants.

J.A. Farmer and S. Clapham, for the respondents.

Cur. adv. vult.

Solicitors for the applicants: Xuexreb & Krikunov.

Solicitors for the respondents: Paul L. Henke & Co.
F.P.C.

ORDER

1. Declares that the contract of sale made between the applicants and the respondents and dated 10 August 1982 is and has been void since 2 October 1981.

2. Orders that the respondents refund to the applicants a sum of $5,000 representing the deposit moneys paid by the applicants to the respondents pursuant to the said contract of sale.

3. Orders that the respondents are liable to pay to the applicants by way of damages the legal and other costs reasonably incurred by the applicants in connection with the contract and the purported rescission thereof on 2 October 1981.

4. Orders that the respondents pay the applicants' costs of this application including any reserved costs.

5. Orders that any party is to have liberty to apply on seven days notice to the others. Without limiting the generality of this order, any party is to have liberty to apply for an inquiry as to damages in the event of the parties being unable to agree as to the amount of damages payable pursuant to order 3 above.

DECISION

Paul Smolonogov and Adrian Lapardin ("the applicants") have brought proceedings against Raymond Lawrence O'Brien and Barbara Annette O'Brien ("the respondents") claiming that the respondents made false or misleading statements concerning certain land near Jindabyne contrary to the provisions of s.53A(1)(b) of the Trade Practices Act ("the Act") and seeking to recover the loss or damage which they have suffered by that conduct pursuant to s.82 of the Act.

The proceedings have certain novel features. The respondents are individuals and s.53A cannot apply of its own force because it is restricted to the actions of corporations. The applicants however say that the offending conduct took place in the course of a telephone conversation and that they are therefore entitled to rely on s.53A as extended by s.6(3) of the Act to found an action against the respondents as individuals.

Sections 53A(1)(b) and 6(3) provide:-

"53A.(1) A corporation shall not, in trade or commerce, in connexion with the sale or grant, or the possible sale or grant, of an interest in land or in connexion with the promotion by any means of the sale or grant of an interest in land -
. . . . . . . .
(b) make a false or misleading statement concerning the nature of the interest in the land, the price payable for the land, the location of the land, the characteristics of the land, the use to which the land is capable of being put or may lawfully be put or the existence or availability of facilities associated with the land; or
. . . . . . . .
6(3) In addition to the effect that this Act, other than Part X, has as provided by sub-section (2), Division 1 of Part V has, by force of this sub-section, the effect it would have if

(a) that Division (other than section 55), were, by express provision, confined in its operation to engaging in conduct to the extent to which the conduct involves the use of postal, telegraphic or telephonic services or takes place in a radio or television broadcast;

(b) in section 60 the words 'cause or permit a servant or agent of the corporation to' were omitted; and

(c) subject to paragraph (b), a reference in that Division to a corporation included a reference to a person not being a corporation."

The telephone conversation in question related to land owned by the respondents which they had advertised for sale and the alleged false or misleading statements concerned the location and characteristics of the land and the use to which it was capable of being put or might lawfully be put.

FACTS

The respondents acquired 5 adjoining portions of land known as portions 81, 101, 106, 112 and 122 in the Parish of Wilson, Snowy River Shire, in August 1980 for the sum of $24,000. This case concerns portions 81 and 101 and the following description relates to that land, in particular, but in most respects would apply to all the land acquired by the respondents.

The land is located near Jindabyne and one means of getting to it is to drive along the Dalgety road from Jindabyne until coming to the Paupong Road. One then drives a short distance down the Paupong Road (a graded gravel road) and turns off to the right along a track which traverses a number of paddocks and passes through six gates. Having arrived near the land it is necessary to leave your car and walk approximately five to six hundred yards over a rise and down a slope through the bush to arrive at its eastern boundary. By this route it is approximately 13 miles from Jindabyne to the turn off on the Paupong Road and approximately 16 miles from Jindabyne to the boundary. There is thus no cleared road right to the land by this route. The Dalgety and Paupong Roads are all-weather roads. The track through the paddocks is normally traversible by two wheel drive vehicles. However, in wet weather it becomes slippery, a creek it crosses rises and as a result the track can become impassable except to four wheel drive vehicles. According to one of the respondents' neighbours, Mr Cogan, it would be fair to say that you habitually use a four wheel drive vehicle in that sort of country.

The track passes through paddocks in which the land is largely cleared and reasonably good pastoral land. However, the land acquired by the respondents, apart from small areas, is uncleared. It is hilly. There are distant views from various points on the land. The land is described as moderately timbered. It is not a forest but it is mainly covered with manor gums, tall white eucalypt gums 10" to 12" in the girth at the base, 4" to 5" at the head and 20' to 30' high. It has never been ploughed or seeded. In some parts of it there is very little grass, in others the grass is very good. It is natural grass and includes a natural clover. It is assessed by Mr Cogan as one sheep to the acre country all year round and was grazed up until 1967 or 1968. He has only seen cattle or sheep on that country in the last few years when stock strayed on to it. It has not been used as a farm, has no buildings or facilities on it and is not completely fenced. To have regular vehicular access to it, it would be necessary to construct a road along that section where, in August 1981, one walked after leaving a vehicle. It would be possible to drive a four wheel drive vehicle to it and over portions of it and with care and experience this might be possible in a two wheel drive.

The land was conditional leasehold under the Crown Lands Consolidation Act. In order to apply for permission to build on it, it would, on the evidence, have first been necessary to convert it to freehold by paying the appropriate fees and obtaining consent and then amalgamating both portions into one. It was likely that the Shire Council would then grant permission to build on it. No building permit existed in relation to it.

The total area of land in the portions acquired by the respondents was approximately 875 acres. They decided that they would like to build on portion 106 (287 acres) and for the purposes of financing the building, to sell other parts of their holding. Early in August they advertised portion 122 and as a result entered into a contract to sell that portion and an adjoining portion 112 to Mr Houghton, a barrister. The contract was dated 6 August 1981.

On 9 August 1981 they advertised lots 81 and 101 in the "Sunday Telegraph". The advertisement was inserted under the classification "Farms, Stock, Stations" and read as follows:-

"JINDABYNE 282 acres, building permit O.K, magnificent views $45,000 542-1845 (SX)."

It was seen by Mr Smolonogov who brought it to the attention of Mr Lapardin and asked him to telephone the number advertised. Mr Lapardin did so and spoke to Mr O'Brien.

Mr Lapardin says that in the course of this conversation, Mr O'Brien told him that the land was 13 miles from the centre of Jindabyne, that it was practically on the main road - only one or two gates from it - and that there was no problem with access at all. After referring to the size of the area, Mr Lapardin says Mr O'Brien told him it was very good land, it had fantastic views like Switzerland, there was nothing on it but he had a building permit to build on it. He says Mr O'Brien said to him - "I intend to build a house there myself. There are no worries. There is no problem to build a house on it and no problem to bring in materials."

In answer to Mr Lapardin's enquiry as to whether there was any water on the land, Mr O'Brien told him there was a permanent creek running through the property. He says that the telephone conversation concluded with Mr O'Brien telling him that if he was interested he should hurry because of the response to the advertisement. According to him he said "I sold the adjoining block to a solicitor or barrister and there were nine solicitors waiting at my door the day after the advertisement appeared waiting to exchange contracts."

Following this conversation, the applicants decided to visit Mr O'Brien at his home. Mr O'Brien admits there was a telephone conversation but denies making most of the statements alleged by Mr Lapardin.

If the statements were made they were clearly false or misleading. As I have said the land is about 16 miles from Jindabyne. It is necessary to go through six gates in order to get to its eastern boundary. It is not "practically on the main road" and it would be wrong to suggest that there was no problem with access, particularly as it is not possible to drive, even along a track, to its eastern boundary. To get to the land with building materials would be difficult enough let alone driving with them to a selected building site on the land. Furthermore, it could hardly be described as "good" land. It is not good grazing land. It is hilly, moderately timbered with only small areas clear of timber and would be difficult to traverse except with a four wheel drive vehicle. Mr O'Brien concedes that he said it had a permanent creek on it but Mr Cogan, the neighbour, says that the creek on it is not a permanent creek. Both his and the documentary evidence establish that it isn't. No building permit existed in relation to it and although a permit to build might well have been forthcoming much had to be done before it could be obtained.

As I have indicated, it is on the telephone conversation the applicants rely in order to invoke the jurisdiction of this court. A finding in their favour as to what was said in that conversation clearly depends on whether I am satisfied on the balance of probabilities, but having regard to the gravity of the matters in issue, namely, a breach of s.53A, that Mr Lapardin's version of that conversation is correct. (See Peter Williamson Pty. Limited v. Capitol Motors Limited a judgment of Franki J. as yet unreported and cases there cited).

Before expressing a view on this matter, it is necessary to refer to some subsequent events particularly the conversation between the applicants and Mr O'Brien at his home. Mrs O'Brien, although in the home, was not present at this conversation. The applicants and Mr O'Brien each gave evidence about it. Mr Lapardin says that Mr O'Brien told them that the property was 13 miles from Jindabyne. They asked him about the road leading to the land and he said there was no problem with access, it was a good road. Mr O'Brien, according to Mr Lapardin, said he was intending to build a brick veneer house on it "as soon as I finish with all the deals, and you can judge by that there are no worries with bringing any materials". He also intended to build an inground swimming pool. He said this included bringing a full load of bricks or anything like that. He also said that there was a permanent creek running through the property with another creek running through it but it ran only with heavy rain "or something like that."

Mr Lapardin said they asked Mr O'Brien why he wanted to sell the land so urgently. He said it was because there was a new law coming in which would prevent him from selling it as a separate parcel and that this law would come into effect in a week's time. Mr Lapardin said Mr O'Brien told them that the land was mostly cleared with some part of it covered with bush and that they could drive through the land. Mr Lapardin says he asked - "Can I drive through this land in my car which is a Datsun 200B". Mr O'Brien replied - "No problem, you can drive to any point of the farm in your car". He said there was no problem bringing a caravan. It could be put next to the creek. When asked about the road leading to the land he said "It is graded once or twice a year. It is a gravel road". When asked about how far the actual farm was from the road he said it was only one or two gates.

Mr Lapardin says Mr O'Brien told them he had a few buyers interested in the land, particularly one who had just recently rung him from Cooma, and was coming from Cooma, who had inspected it and was wanting to buy it. Mr O'Brien said to them "If you want to buy this land you will have to make up your mind now." They told him they would like to go and have a look at the land but he repeated his story that there was no time because the end of the week was the deadline for dealing with the land because of a new rule in the area. Mr Lapardin says he then discussed the matter with Mr Smolonogov and they decided to offer Mr O'Brien $50,000 for the land. He told them they wouldn't be sorry because it was good farm land and had beautiful Switzerland views. Mr Lapardin says that Mr O'Brien told them that they could run sheep on the land or rent the property to a farmer in the meantime so he could put his sheep on the property for grazing purposes.

In his affidavit, Mr Lapardin said that at this conversation a map, probably a Lands Department map and an aerial photograph were produced by Mr O'Brien. He also said that he repeated the representations made in the telephone conversation including the ability to build on the land.

In the course of oral evidence a black and white aerial photograph was produced and admitted (exhibit "D"). Both Mr Lapardin and Mr Smolonogov said that the one they saw was coloured and Mr Lapardin says that when it was produced Mr O'Brien told them not to take much notice of it because it was not taken professionally and you couldn't really see anything on it.

In cross examination he gave the following answers to questions as to why they bought without inspection:-

"In the normal course, if you were going to spend a lot of money on a property, you would make sure you went and had an inspection first, would you not, before you signed any contract?---Yes. That was very foolish of us in not doing it but, as I said previously, Mr O'Brien said to us he had only one week in which he must sell this land otherwise the council would not permit him; and we accepted his explanation for that.

If you had really wanted to make absolutely sure about the land being to your satisfaction, you could have gone down the next day to inspect the property, or any time within the next week?--- Not the next week. As I understand it correctly, we had only 48 hours to do so. Secondly, we just believed this man when he told us about it."

Mr Smolonogov's command of English is probably not as good as that of Mr Lapardin. Although the transcript of his evidence is not always clear, I think it is possible to state, with sufficient certainty, the effect of his evidence as to the conversation at Mr O'Brien's home.

In summary, he corroborated Mr Lapardin's version. Mr O'Brien, he says, stated that he land was good land, had beautiful views, had a permanent creek and was not far from Jindabyne - 13 miles. He showed them photos, including an aerial photograph. One photo showed trees and Mr Smolonogov said they asked him about it. It looked dark. Mr O'Brien said that is the land, it is mostly clear. He told them they could drive an ordinary car to any point on the land. He also told them that there was a good gravel road right to their land which was graded once or twice a year, that there were only one or two gates to open to get to the land. Mr Smolonogov told Mr O'Brien he had a caravan and asked if he could move it to the land and stay there. Mr O'Brien said there were no problems. He also said that there was no problem to build a house. He had a permit already. He asked him about electricity and Mr O'Brien told him that the power was not far from the property and with three of them - Mr O'Brien, themselves and the barrister - it wouldn't cost so much to bring it to the land. He said he was selling the land because of a new law and that he had already sold portion to a barrister. When he had advertised in the newspaper the next morning nine solicitors were at his front door with contracts. He said that he had one person who was an Italian who had called in from Cooma and wanted to buy the land. When asked why he did not sell it, Mr O'Brien said he had spoken to his wife and she had recommended to him that they put it to auction. Mr Smolonogov says that he and Mr Lapardin then conversed in Russian and they told Mr O'Brien they would give him an extra $5,000 and Mr O'Brien said "It is a deal".

Mr Smolonogov said that the aerial photograph was coloured. In cross examination he was asked whether the photograph that he looked at had marked on it an outline of where the land was and he said "yes". He remembered there being a mark, a small blue pencil mark. The aerial photograph in evidence (Exhibit "D") in fact has such a mark on it. He gave the following evidence in cross examination:-

"When you looked at the land that you were interested in in the aerial photograph, did it appear that that land had a lot of bush or trees on it?---Very dark; this is reason why I asked Mr O'Brien at the start, it is too dark, I do not see anything. He said, do not look at that, it is good farm land, mostly cleared, is what he said. After, I did not look at these photographs any more, I believed what Mr O'Brien said, you know."

Mr O'Brien, in substance, denies the applicants' versions of both conversations. In an affidavit he swore that on the telephone or at his home he told them that the property was about 12.8 miles to the front gate on the Paupong Road, that there were about 6 gates and that at a later date he was going to put in cattle grids. On the question of access he told them he was putting in a brand new road to the block to service a new subdivision he was putting in. He denied saying there were no problems in relation to access and he denied that he said he had a building permit. He says he told them "You will have to convert both leases to freehold and then you will have over 250 acres which is the minimum requirement to obtain building permission. After conversion to freehold and when the new road is in you will have no problems".

In relation to the question of vegetation he denied that he said that the land was mostly cleared or that you could drive all over the property by ordinary car. He says at the meeting he showed them an aerial photograph illustrating the density of the timber and also said to them "my next door neighbour has put in a timber treatment plant to impregnate saplings and there may be a market for logs as his land has new trees as you can see from the photograph. He also said to them that the property was properly fenced and you could run stock on it.

In his oral evidence he agreed that he had said there was a permanent creek running through the property. He said there had been a drought period for a long while and there was not a lot of water there but there is water along the length of the creek so far as it traverses portions 81 and 101 consisting of dams and water holes fed in part from natural springs. He denied saying that the operation of the new law was his reason for selling and he denied making a statement about a person coming from Cooma. He said he told them he had had numerous telephone calls from interested persons. Whilst they were there the phone was constantly ringing. His attitude was that he refused to take deposits from them or anyone else. He said:-

"I told them if they wanted to purchase the land they would have to get in touch with their solicitor and their solicitor would get in touch with my own solicitor and they would arrange deposits and contracts and everything. I did not touch anyone's money, nor would I."

He told them most of the trees were sapling type trees, that his neighbour, Mr Cogan, had recently installed a timber treatment plant and cut down those saplings and impregnated them with a chemical and that there may be a market for their trees with him. He denied what they alleged in relation to the road leading to the land. He said he gave them instructions how to get from Jindabyne along the Dalgety Road and Paupong Road, a distance of approximately 13 miles. He said he told them that when they came to a set of stockyards on the Paupong Road they should proceed as follows:-

"Go through half a dozen gates until you come to the white fibro house. Continue on - you will have to turn right at the white fibro house, go to the next gate and through that gate, turn hard left and park your car there. Now the roadway will run up the top of that rise there and down into the land on the other side."

He could not recall anything being said about a caravan. He says he showed them the aerial photograph which is in evidence (exhibit "D"). He denied showing them any photograph that was coloured.

The next day, 10 August, at 9:00 a.m. the applicants and Mr O'Brien went to the office of Mr O'Brien's solicitor, Mr Henke. A contract was prepared for signature. Mr Henke, who gave evidence, says he asked them whether they had seen the aerial photograph and one of them said "Yes". Mr Henke also said he was concerned that they were not represented, at that stage, and he prepared a letter to them pointing out there was a requirement for a minimum area of 250 acres to build and that the land would have to be converted to freehold first and consolidated. They then went with Mr O'Brien to the Courthouse at Glebe where the Clerk of Petty Sessions, Mr Hodgson, explained the effect of the contract to them and they executed it in his presence. He then signed a certificate under s.1C(5)(c) of the Land Sales Act 1964 which is an annexure to the contract of sale. The contract provided for a purchase price of $50,000 and a deposit of $5,000 which was paid by the applicants. Completion was to take place within 8 weeks of the date and in that respect time was made of the essence.

Several weeks after this the applicants decided to inspect the land. Before doing so, Mr Lapardin says he had a conversation with Mr O'Brien seeking directions. Mr O'Brien however denies this conversation. Apparently it was damp when they went to the property and they took the road from Jindabyne until they got to the Paupong Road and identified the point where they were to turn off along a dirt track. They had been told to drive until they came to a fibro house. Mr O'Brien said he told them of this in their initial conversations at his home but they say it was not mentioned until they sought directions from him. Instead of going through two gates they had to go through six gates. They located the fibro house and drove through another gate and 100 to 150 metres further they parked their car. They then walked over what they thought was the land they had bought and they say that because they were dissatisfied with it they rang him on their return and expressed their dissatisfaction. Mr O'Brien denies this and says that Mr Smolonogov rang him and told him they were happy with it.

Eventually, after seeking legal advice, a notice was sent by the applicants to the respondents dated 2 October 1981 purporting to rescind the contract and demanding a return of the deposit with interest and costs. The grounds state that representations were made which induced them to enter into the contract, that the representations were material and false and were made either carelessly, negligently or fraudulently. The particulars given were as follows:-

"We were told that the land was substantially cleared; that it was possible to build on the land; that the land was close to the main road; that there was a good access to the land; that there was a creek running through the property; that there was a good water supply on the property and that the land was good grazing land."

The respondents subsequently decided to treat this notice of rescission as a repudiation of the contract and to regard it as at an end. Subsequently, they sold the land to another purchaser for $45,000.

In an affidavit in these proceedings, Mr Lapardin identified a number of photographs, some of which showed the road and the gates along which they drove from the Paupong Road in order to reach the point where they parked their car. Twelve of the photographs were said to be of portions of the subject land. I am satisfied from evidence given by Mr Cogan, the neighbour, that the photos were actually taken of his land and not the subject land. However, I do not think this was a deliberate deception. I think Mr Lapardin genuinely believed they were views of the subject land. They were photographs taken in January 1982 on a subsequent visit. The error only serves to indicate the difficulty which the applicants had to identify the land in question. When they visited the area shortly after the contract was signed it is probable they did not traverse the land at all but other land. Indeed, until the hearing of this case had progressed a distance it seemed that there would be difficulty in identifying the precise boundaries of the land. However, it was agreed that a large aerial photograph (exhibit 2) correctly identified those boundaries. On that exhibit it is also possible to identify the dirt track, the fibro house and approximately the point where it was necessary to park a car in order to get to the land by the route intended. It is not surprising that the applicants were not able to identify the subject land with certainty and confused it with land which, unbeknown to them, belonged to Mr Cogan. This larger aerial photograph, which, of course, was not shown to the applicants in August 1981, reveals that the subject land is covered in trees and confirms the evidence which Mr Cogan gave about the nature of the area. There are other photographs in evidence which were identified as representing the subject land and they confirm the general nature of it.

I have not found it necessary to summarise the whole of the evidence that was given. Much of it related to photographs of the property and the surrounding portions.

The fundamental issue is whether the statements alleged by Mr Lapardin were made by Mr O'Brien during the telephone conversation on 9 August 1981 and, if so, whether they were false or misleading.

Having considered the evidence, I am satisfied that they were made and were in a number of respects, which I will indicate, false or misleading.

Mr O'Brien admits stating that there was a permanent creek running through the property. Although Mr O'Brien disagreed, I am satisfied that according to ordinary parlance the creek or water course through the land was not a permanent creek. It was therefore a false or misleading statement. Mr Cogan has had a long acquaintance with the area and says the creek does not become permanent until after it leaves the subject land and reaches a point on his land. I accept his independent evidence in this respect. It is corroborated by a topographic survey map of the area. The fact that there might always be water holes along it or water beneath it in parts does not make it a permanent creek.

Mr Lapardin says that Mr O'Brien told him he had permission to build on the land. I think the probabilities clearly are that he did. The advertisement stated - "Building permit O.K". I think this would indicate to a reader that a building permit was available. I think it probable he conveyed a similar impression on the telephone and repeated it at his home.

Mr O'Brien denies this and says he explained that the title would have to be converted to freehold and that the local Shire or Municipality would probably then give consent to build. If, as appears to be the fact, this is what had to happen in order to obtain a permit it was clearly misleading, in my opinion, to state in the advertisement "Building permit O.K." or that he had permission to build on the land.

In the light of the advertisement, one can understand Mr Henke, Mr O'Brien's solicitor, writing the letter of 10 August 1981, making it clear what had to be done and, in effect, protecting his client from the effect of any representation.

I am therefore quite satisfied that Mr O'Brien made a statement to the effect that he had a permit to build on the land and that this statement was at least misleading.

The other statements allegedly made in the telephone conversation related to the access to the land, its location and distance from Jindabyne, the character of the land and the capacity to drive over it. On the evidence, these statements, if made, were false.

The real question I have had to determine is whether they were made and, on the balance of probabilities, I am satisfied that they were.

Two matters in particular, in my view, support the probability that they were made.

First, I think it most unlikely that the applicants would have agreed to buy the property, sight unseen, if Mr O'Brien had accurately described it to them. If they had been told that the land could not be reached by car, was hilly and covered with timber, had no permanent creek, its eastern boundary was reached by travelling along a dirt track for three miles through half a dozen gates and then walking through the bush for 500 to 600 yards, I seriously doubt that the motivation to enter into a contract to purchase the land, without seeing it, would have been there.

Secondly, what seems equally telling is their decision to offer him another $5,000. Mr O'Brien's explanation, by itself, of why they did this, that is to say, that they did so in order to have him enter into a contract the following day, does not satisfy me. He obviously wanted to sell the land. He was prepared to take $45,000 and it would hardly have needed an additional $5,000 to get him to have his solicitor prepare a contract for the sale of it the following day. A more likely explanation, on the evidence, is that, as a result of the conversations they had, they were so attracted to the land that they did not want to miss the opportunity to buy it and were concerned that somebody else might take it first if they did not seal the deal by offering an additional $5,000. As I have said, I do not believe the land would have been attractive enough to them to buy it sight unseen had it been accurately described. The only feasible explanation for this unusual offer was first that the need for haste in the face of competition was stressed and secondly, that they were prepared to rely on what they were told about the land which made it sufficiently attractive to buy without inspection.

In coming to this view I have also had in mind the demeanour of the witnesses. Neither of the applicants was shaken in cross examination. There is a real chance that they may have discussed their evidence but because of the matters I have just adverted to, I have formed the view that I should accept the substance of their evidence as an independent recollection of what occurred. The respondent, Mr O'Brien, admitted that he had seen a lot of people relating to the sale of this and the other portions and had had discussions with them of varying length relating to the land. I think it is clear, on his own evidence, that he made false or misleading statements regarding the creek and the advertisement is certainly misleading as to the existence of a building permit. I am not satisfied that he deliberately told untruths, but, on the other hand, I am not convinced he had an independent recollection of what took place in his conversations with the applicants.

There are some respects in which the evidence of the applicants may not be accurate. Each agrees that an aerial photograph was produced at the time the discussions took place at Mr O'Brien's home. He identifies it as the aerial photograph in evidence (exhibit "D"). They state that the photograph they saw was coloured. When they went to Mr Henke's office the next day he asked them whether they had seen the aerial photograph and one said they had. I can only assume he asked this in order to satisfy himself, they being unrepresented, whether they had some idea of what they were purchasing. On the evidence I incline to the view that they were shown the aerial photograph, exhibit "D", which had some markings on it to show the location of the land. However, I accept their evidence that when it was shown Mr O'Brien indicated that it did not give an accurate impression of the land. Other photographs may have been shown at the time which were coloured and this has probably led to their confusion as to the aerial photograph being coloured.

In the circumstances therefore, I am satisfied that in the course of the telephone conversation between the applicant, Mr Lapardin and the respondent, Mr O'Brien, the latter made a number of false or misleading statements including the following:-

. That the subject land was 13 miles from Jindabyne, was practically on the main road and only one or two gates from it;

. That there was no problem to get onto the land;

. That it is very good land;

. That he had a building permit to build on it and that there was no problem to build a house on it and to bring in materials;

. That there was a permanent creek running through the property.

The statements were made on behalf of himself and his wife as owners of the land.

I am also satisfied that during this conversation Mr O'Brien said words to the effect that if Mr Lapardin was interested he should hurry because a potential buyer from Cooma was coming to Sydney and wanted to buy it, that there had been a tremendous response to the advertisement and that he had sold the adjoining block to a solicitor or barrister.

I am also satisfied that, within the meaning of s.53A(1)(b) of the Act, these false or misleading statements were made in connection with the possible sale of an interest in land that they concerned either the location of the land, the characteristics of the land or the use to which the land was capable of being put or might lawfully be put.

Evidence was adduced by the applicants, as similar fact evidence, from Colin William Houghton, a barrister of the Supreme Court of New South Wales. It related to false representations allegedly made to him by Mr O'Brien on 2 August 1981 and was tendered on the basis that if those representations were made it made it more probable that the false representations alleged in this application were made to the applicants. (See Martin v. Osborne [1936] HCA 23; (1936) 55 C.L.R. 367 at pp. 375-6; Mister Figgins Pty. Ltd. v. Centrepoint Freeholds Pty. Ltd. (1981) 36 A.L.R. 23 at p.28.) Mr Houghton's evidence was that, on 2 August 1981, he saw an advertisement in the "Sydney Morning Herald" under "Stations and Farms" which read:-

"JINDABYNE farm 150 acres, $15,000, urgent sale, 542.1845".

On the same day he rang the number given and spoke to the respondent, Mr O'Brien. He says that Mr O'Brien confirmed that the property was for sale at the figure mentioned and that he, Mr Houghton, then asked Mr O'Brien a number of questions about the land. In summary he says he was told that it was good farm land, that there was no house on it, that you could run any stock on it but there was none there at present, that it was situated just at the side of the Paupong Road and that it was all farm land around it. He says Mr O'Brien also told him he could build a beautiful house there, there would be no restriction on him doing so but that it was conditional title. He was also told, he says, that there was a creek at the bottom of the property by the road and electricity ran right along the road. He asked him where it was precisely. Mr O'Brien directed him to take the Dalgety Road from Jindabyne for approximately 10.8 miles until reaching the Paupong Road. He should proceed down the Paupong Road for a distance of 1 1/2 to 2 miles until reaching a set of stockyards on the right and then continue along the road past the stockyards for about 2 miles past four or five fences and that the land on the right at that point was the area. Mr Houghton says he took a note of what Mr O'Brien said to him at the time and that note is in evidence.

Mr Houghton says that he then went to Jindabyne and travelled down the Paupong Road as directed and after counting four or five fences as directed on the right came to an area where there was a permanent creek as described by Mr O'Brien. Further to the right of that was what Mr Houghton described as beautiful grazing land. He proceeded a mile further down the road and the land, he says, was equally beautiful.

On his return to Jindabyne he spoke to Mr O'Brien on the telephone and told him where he had been and that on the right hand side of the Paupong Road he had seen a creek and to the immediate right of that some beautiful farm land. He asked Mr O'Brien "Is that the land". Mr O'Brien told him he should have gone just a few hundred yards further and he would have seen the property immediately on the right hand side. Mr Houghton says he then said to him he had driven a bit further and the land was equally beautiful. Mr O'Brien then told him if he wanted the property he should exchange contracts now because there were 13 contracts out on it. Mr Houghton told him that because the land was so beautiful he would exchange contracts.

On 6 August 1981 contracts were exchanged between Mr Houghton's solicitor and Mr O'Brien's solicitor. The land advertised was, apparently, portion 122 of the respondent's land. In fact two blocks were purchased, namely, portions 122 and 112 for $36,000. This happened because Mr Houghton found that he could not build a house on 150 acres and needed at least 250 acres. Subsequently Mr Houghton was shown the aerial photograph (Exhibit "D") by Mr O'Brien. This indicated, of course, that the land was not farm land but hilly and timbered. He visited the land and verified this and subsequently rescinded the contract for fraudulent misrepresentation. The respondents treated the rescission as a repudiation and have since sold the portions for $36,000.

If the statements alleged by Mr Houghton to have been made by Mr O'Brien to him on the phone on 2 August were made some of them were clearly false, e.g. that the land was good farm land, that it was just at the side of the Paupong Road and that one could see it by travelling approximately two miles past the stockyards along that road. Mr O'Brien did not recall speaking to Mr Houghton on the phone. He says he spoke to Mrs Houghton, that he spoke to Mr Houghton at a later time after he had been to look at the property and that he gave directions to Mrs Houghton as to how to get to the land. He denies giving the instructions of which Mr Houghton gave evidence and says he told them to go through a gate at the stockyards until they came to the white fibro house. He then gave explicit instructions as to how to reach the land following fences and the like through the bush. Apart from giving directions to Mrs Houghton he says that he told her the price should be $18,000, not $15,000, that they talked about the land and that he said there was no house but there was water on it.

I am satisfied that Mr O'Brien made statements to Mr Houghton which were in substance of the nature deposed to by Mr Houghton and that these statements were made in a telephone conversation on 2 August 1981. I am also satisfied that the statements were, in the material respects I have already mentioned, false or misleading.

In the exercise of my discretion I think I should admit the evidence of Mr Houghton on the basis of the principles applicable to similar fact evidence. I think it increases the probability that representations were made to the applicants which were also false or misleading in material respects. However, I should point out that my conclusion that I should accept the evidence of the applicants is in no way dependent on the admission of Mr Houghton's evidence. In other words, I would have arrived at the same conclusion, without it, for the reasons I have already given.

Section 53A(1)(b) provides that a corporation shall not "in trade or commerce" make a false or misleading statement of the nature described. Section 6(3) provides (inter alia) that Division 1 of Part V (which includes s.53A) has the effect it would have if it were by express provision confined in its operation to engaging in conduct to the extent to which the conduct involves the use of (inter alia) telephonic services. Two questions which were argued at the hearing arise from this. First, whether s.53A(1)(b), as extended by s.6(3), applies, whether or not a false or misleading statement is made "in trade or commerce" and secondly, if so, whether what was said here was said "in trade or commerce" within the meaning of the section.

At the hearing I indicated my tentative view that what was said was "in trade or commerce". Further consideration has confirmed this view and I therefore have no need to express a view on the first question.

The words "in trade or commerce" in my opinion, do not require that what is done must be in the course of carrying on a business. The words are of wide import and should not be given a narrow meaning. In Re Ku-ring-gai Co-operative Building Society No. 12 Ltd. [1978] FCA 50; (1978) 22 A.L.R. 621, Bowen C.J. at pp.624-5 said:-

"The terms 'trade' and 'commerce' are ordinary terms which describe all the mutual communings, the negotiations verbal and by correspondence, the bargain, the transport and the delivery which comprise commercial arrangements: W. & A. McArthur Ltd. v. State of Queensland [1920] HCA 77; (1920) 28 C.L.R. 530 at 547. The word 'trade' is used with its accepted English meaning: traffic by way of sale of exchange or commercial dealing: Commissioner of Taxation v. Kirk (1900) A.C. 588 at 592 per Lord Davey; W. & A. McArthur Ltd. v. State of Queensland, supra at 548. The commercial character of trade was mentioned more recently by Lord Reid in Ransom v. Higgs (1974) 3 ALL E.R. 949 at 955. His Lordship there said:'As an ordinary word in the English language 'trade' has or has had a variety of meanings or shades of meaning. Leaving aside obsolute or rare usage it is sometimes used to denote any mercantile operation but is commonly used to denote operations of a commercial character by which the trader provides to customers for reward some kind of goods or services.' Moreover, the word covers intangibles, such as banking transactions, as well as the movement of goods and person for historically its use has been founded upon the elements of use, regularity and course of conduct: Bank of New South Wales v. Commonwealth (1948) 76 C.L.R. at 381."

Deane J. (at pp. 648-9) said:-

"The terms 'trade' and 'commerce' are not terms of art. They are expressions of fact and terms of common knowledge. While the particular instances that may fall within them will depend upon the varying phases of development of trade, commerce and commercial communication, the terms are clearly of the widest import: see generally, W. & A. McArthur Ltd. v. State of Queensland [1920] HCA 77; (1920) 28 C.L.R. 530 at 546ff; Bank of New South Wales v. Commonwealth [1948] HCA 7; (1948) 76 C.L.R. 1 at 284ff and 381ff. They are not restricted to dealings or communications which can properly be described as being at arms length in the sense that they are within open markets or between strangers or have a dominant objective of profit-making. They are apt to include commercial or business dealings in finance between a company and its members which are not within the mainstream of ordinary commercial activities and which, while being commercial in character, are marked by a degree of altruism which is not compatible with a dominant objective of profit-making."

Here the respondents advertised on at least two occasions the sale of portions of theirland in a widely distributed newspaper. Thereby they indicated to the public their willingness to treat and invited interested members of the public to communicate with them by telephone to discuss the matter. In those circumstances I consider that what they did by advertising and conducting negotiations over the telephone with interested members of the public was done "in trade or commerce". They are utilising the ordinary means of trade or commerce for the purpose of selling their land and what they did was in my view done "in trade or commerce". Where land is sold by private contract, without more, it would, I think, be difficult to describe what happens as occurring "in trade or commerce". But where the interest of the public at large is invited in the sale and discussions and negotiations ensue, the conduct is, in my opinion, appropriately described as being engaged in in trade or commerce. Dealing with the public at large and utilising the ordinary means of disseminating information about property which is for sale when engaged in for the purposes of sale are of the very essence of trade or commerce.

In my opinion, therefore, the conversation between the applicants and the respondent, Mr O'Brien, in the circumstances of this case, took place "in trade or commerce" within the meaning of s.53A. Because that conversation involved the use of telephonic services, s.6(3) operated to extend s.53A(1)(b) to the conduct of the respondents notwithstanding that they are individuals. The conduct therefore was engaged in in contravention of s.53A as extended by s.6(3) of the Act.

DAMAGES

These proceedings are brought pursuant to s.82 of the Act which provides that a person who suffers loss or damage by conduct of another person done in contravention of Part V, may recover the amount of the loss or damage by action. Relief is sought pursuant to s.87(1A) and (2) of the Act in terms of a declaration that the contract is void ab initio and an order that the respondents refund to the applicants the deposit of $5,000. An order is also sought seeking the recovery of the costs incurred by the applicants in relation to the contract of sale.

In relation to damages, a question arises as to whether the applicants have suffered loss or damage by the wrongful conduct of the respondents relied upon, that is, the false or misleading statements made about the land in the course of the telephone conversation. It was argued on behalf of the respondents that the loss or damage alleged, i.e. the payment of the deposit and entry into the contract was not the result of the telephone conversation but of a decision made by the applicants at the respondent's home.

In the phrase "a person who suffers loss or damage by conduct" in s.82, the word "by" in my view clearly means"by reason of"or"as a result of." When ss.82 and 87 are read together the court's power to compensate for such loss or damage is clearly not restricted to an order for pecuniary damages. Section 87(1A) and (2) make it clear that it can include an order declaring the contract void and directing a refund of the deposit in addition to or in lieu of pecuniary damages. However, the power to make such orders is dependent on it being shown that the loss or damage was caused by or resulted from the contravening conduct.

It is clear from the evidence that the applicants did not decide to offer to purchase the land until they had their conversation with Mr O'Brien at his home. They made that decision because he instilled in them a sense of urgency and because they believed that what he told them was true. What he told them at his home was largely a repetition of what he told Mr Lapardin on the telephone and it was false or misleading. When they visited the area, subsequent to signing a contract, they formed the view that it was incorrect and immediately objected.

The question which arises is whether in these circumstances the telephone conversation can be said to have induced or caused the applicants to enter into the contract. In my opinion, on the facts of this case, the telephone conversation was part of a course of conduct embarked on by the respondents to dispose of their land at Jindabyne. That conduct included placing the advertisement in the "Sunday Telegraph" inviting people to ring, holding the consequent telephone conversation and personal conversation at the respondent's home and attending the respondent's solicitor's office at the same time as the applicants the next morning to have the contract prepared and signed and the deposit paid.

In such circumstances it may not be possible to say of any particular aspect of the conduct that it alone induced the contract. Because the telephone conversation was, in the events which happened, an integral part of what took place, I think it is proper to conclude that the contract was induced by the respondents' false or misleading statements during the telephone conversation, albeit in conjunction with the advertisement and the conversations at the respondent's home.

In dealing with a matter of causation such as this I do not think it is necessary that the conduct be the only contributing cause to the loss or damage. If it can be seen, in a material sense, to be part of the cause that is sufficient for an applicant to claim loss or damage suffered by conduct contravening Part V.

The precise question has not arisen previously, so far as I am aware, in relation to the application of s.82. However, there have been decisions which support the view that the proper measure of damages in an action under s.82 is the tortious measure appropriate to an action for deceit, e.g. fraudulent misrepresentation, not that appropriate to breach of contract. (See Brown v. Jam Factory Pty. Ltd. (1981) 35 A.L.R. 79; Mister Figgins Pty. Limited v. Centrepoint Freeholds Pty. Ltd. (supra).

In cases involving fraudulent misrepresentation leading to a contract, where the misrepresentation is only part of the cause, it has been held that provided it is established that the misrepresentation was in part an inducement to the contract, this fact entitles the person affected to damages or rescission as the case may be.

In Australian Steel and Mining Corporation Pty. Limited v. Corben (1974) 2 N.S.W.L.R. 202 at p.207 Hutley J.A. said:-

"The party relying on misrepresentation to avoid a contract has to prove that the false statement did influence him . . . . but it is not correct to say that the representation must be the very ground upon which the transaction has taken place. Once there is acceptable evidence that the representation was one among the factors which induced the contract, that is sufficient."

This proposition was founded on the opinion of the Privy Council in Barton v. Armstrong(1973) 2 N.S.W.L.R. 598 at p.631 where their Lordships said:-

"If . . . . Barton relied on the misrepresentation, Armstrong could not have defeated his claim to relief by showing that there were other more weighty causes which contributed to his decision to execute the deed, for in this field the court does not allow an examination into the relative importance of contributory causes. 'Once make out that there has been anything like deception and no contract resting in any degree on that foundation can stand' (per Lord Cranworth L.J. in Rynell v. Sprye)." (1852) 1 DEG.M & G. 660 at p.708

It would not be wise, of course, to apply those statements directly to the interpretation of s.82. However, the situation here is at least analogous because the telephone conversation was an integral part of the events which led up to the signing of the contract. The statements made in that conversation were, as I have held, false or misleading and the acceptance at the time of the truth of those statements by the applicants was one of the factors inducing them to sign the contract. It can be argued that the repetition of them in the subsequent conversation at the respondent's home and the making of other statements preceded the actual decision and were important, even critical, factors in inducing the applicants to enter into the contract. But even so, once having been made in the telephone conversation, I am satisfied the effect they had, resulting from that conversation, persisted until the contract was signed and that they were a material inducement to the contract.

It is true that the effect of the misleading statement regarding permission to build was subsequently removed by Mr Henke's letter. However, the other false or misleading statements were clearly material and, in my view, at least in part, induced the contract.

It follows that, in my opinion, their entry into the contract was at least in part a result of the false or misleading statements made by Mr O'Brien during the telephone conversation and that therefore the applicants are entitled to recover from the respondents the loss or damage suffered by them as a result of entering into it. The compensation for loss or damage, as s.87A(1A) and (2) make clear, is not confined to pecuniary damages. In the circumstances of this case it is permissible and appropriate in order to compensate the applicants to declare the contract void and order the respondents to refund the deposit of $5,000 and I propose to do so.

The applicants are also entitled, in my opinion, to damages representing the costs incurred by them in relation to the contract. This would include legal costs incurred in connection with the contract and the notice of rescission of 2 October 1981. It would also include any other costs incurred by the applicants such as the expenditure on travelling to the property prior to rescinding the contract. The respondent should pay the applicants costs of these proceedings.

I make the following declarations and orders:-

1. Declare that the contract of sale made between the applicants and the respondents and dated 10 August 1982 is and has been void since 2 October 1981.

2. Order that the respondents refund to the applicants a sum of $5,000 representing the deposit moneys paid by the applicants to the respondents pursuant to the said contract of sale.

3. Order that the respondents are liable to pay to the applicants by way of damages the legal and other costs reasonably incurred by the applicants in connection with the contract and the purported rescission thereof on 2 October 1981.

4. Order that the respondents pay the applicants' costs of this application including any reserved costs.

5. Order that any party is to have liberty to apply on seven days notice to the other. Without limiting the generality of this order, any party is to have liberty to apply for an inquiry as to damages in the event of the parties being unable to agree as to the amount of damages payable pursuant to order 3 above.