Re Warren John Myers & Elizabeth Fiona Myers v Transpacific Pastoral Co Pty Ltd [1986] FCA 32 (18 February 1986)

FEDERAL COURT OF AUSTRALIA

Re: WARREN JOHN MYERS & ELIZABETH FIONA MYERS
And: TRANSPACIFIC PASTORAL Co. PTY. LTD.
No. QLD G104 of 1985
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Pincus J.

CATCHWORDS

Trade Practices - misleading statement - proof of loss - whether principles under general law applicable - construction of "by" in s. 82 of Act - damages - whether affirmation a bar - recovery of expenses.

Trade Practices Act, 1974 ss.52; 53A(1) (b) ; s.87(2)

HEARING

BRISBANE
18:2:1986

ORDER

The respondent pay the applicants the sum of $5,360.

The respondent pay the applicants' costs of and incidental to this application to be taxed if not agreed.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

This is an application for relief under s.87 of the Trade Practices Act in respect of alleged breaches of s.52 and 53A(1) (b) of the Trade Practices Act. The applicants say that they were misled by Mr. Geoffrey Bone, an agent of the respondent vendor, that they agreed to buy a block of the respondent's land as a result, and that they thereby suffered loss being mainly the deposit paid. In circumstances which need not be set out, the transaction was never completed and the respondent has possession and title.

2. The statements complained of are six in number and are said to have been made orally and in writing by Mr. Bone in Queensland to the applicants at Gosford, New South Wales. It is necessary to deal with two only of the allegations, namely the first two in the statement of claim, which amount to much the same thing. Under those paragraphs, the applicants led evidence that they were told the land in question was a rich sandy loam suitable for use in growing flowers and vegetables commercially.

3. The applicants proved that the land is totally unsuitable for the purpose mentioned. It is neither friable nor fertile and drains badly. The evidence is that it is suitable for grazing only, at a carrying capacity, in a reasonable season, of about a beast to four hectares; that is, the land (being about 100 hectares) will carry about 25 head of cattle, but because of the poor quality of the soil is unsuitable for commercial cropping.

4. The quality of the land is not in issue and the main factual dispute is as to whether Mr. Bone made the statements attributed to him by the applicants. Mr. Bone says he was not asked for any information about the nature of the land, nor did he volunteer any, although he admits there were a number of conversations about the transaction before the contract was made.

5. Mr. Bone was a witness of good demeanour, but I prefer the applicant's recollection of events. Rather foolishly, they agreed to buy the land without having inspected it, and it seems clear that they hoped to use it commercially. I think it unlikely that they would have refrained entirely (as Mr. Bone says they did) from making any enquiry about its quality. It is true that the statements complained of are not to be found in Mr. Bone's letters to the applicants which have, at least in part, the appearance of being so framed as to help in resisting allegations of the sort which have been made, but the content of the letters and newspaper clippings sent by Mr. Bone to the applicants seems to me more consistent with the applicant's case than that of the respondent. It is unnecessary to explain this point comprehensively, but I will mention two matters. Mr. Bone described the land in a letter as a "good viable size for the area" but explained in his evidence that he meant a good viable size for a hobby farmer whom he described as "one who has independent means of support". In his first letter, however, Mr. Bone appeared to be trying to create the impression that the land is suitable for, among other things, growing vegetables commercially and that with persistence, one might expect to make quite a lot of money out of such activity.

6. The most substantial point against the applicants' case as to the making of the statements alleged is that when, after taking possession, they first spoke to Mr. Bone, they did not make the complaint I have mentioned. I find it difficult to understand their apparently friendly response to him at that time, when they had surely been in possession for long enough to be well aware of the property's deficiencies. However, they made at least a general complaint the next day to Mr. Ross, then solicitor for all parties, and I am not prepared, on the whole, to reject their case on the ground of their curiously mild reaction to having been, as they say, grossly misled.

7. That is, I find that the respondent, by Mr. Bone, orally made such statements as are mentioned in pars. 5 (a) and (b) of the statement of claim and that they were misleading. The statement of claim initially alleged fraud, but that allegation was abandoned and I therefore make no finding on it.

8. The next question is whether the misleading statements caused the applicants loss and an aspect of this is that the statements I have found to have been made were, arguably, not the main reason for the applicants' decision to buy.

9. Mr. Carmody argued on behalf of the respondent that I should not find that any loss ensued but candidly referred me to the reasons in Smolonogov v. O'Brien (1982) ATPR 40 - 312. There reference was made, in considering such a point as this, to Barton v. Armstrong (1976) AC 104 at 118, in support of the proposition that a fraudulent misrepresentation inducing the execution of a deed is a ground of relief even if "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". That statement was related to the proof necessary to set aside the deed, in an equity suit.

10. I would not regard the dictum just quoted as any authority with respect to the availability of relief in consequence of a breach of s. 52 of the Trade Practices Act. It appears that special principles as to proof of loss at common law may have evolved for cases of fraudulent misrepresentation, influenced by the rules applied by courts of equity. But the question in a claim to recover damages under s. 82 is simply that stated in the section, namely whether the claimant has suffered loss and damage "by conduct of another person that was done in contravention of" the relevant provision. I agree with Mr. Carmody's submission that the word "by" means "by reason of" or "as a result of", as was said in the Smolonogov case at p. 43, 848. Once it is accepted, as I think it must be, that the applicants have to show that the misleading statements caused their loss, then it certainly is necessary to have "an examination into the relative importance of contributory causes".

11. Here it is arguable that the applicants were so irrationally enthusiastic about their proposal to re-establish themselves in rural Queensland, that they would have bought whether or not the statements complained of were made. Further, even if the land had had the qualities promised, considering the applicants' parlous financial condition, it is not easy to see how they could have survived financially for long enough to establish themselves in their enterprise. Nevertheless, and not without doubt, I have come to the view that the statements I have found to be misleading brought about the contract to purchase the land and caused loss. Rather unwisely, the applicants (as I find) placed considerable reliance on the statements referred to above, as to the quality of the land.

12. It was further argued on behalf of the respondent that, because they remained in possesion of the land for some time and agreed to a variation as to the times for payment, the applicants would be held under the general law to have affirmed the contract and that the same outcome should fairly be held to ensue under the statute. But affirmation is not, under the general law, a defence to a claim for damages; it only affects the right to rescind. In a claim for damages for deceit, the prima facie rule is that the defrauded party is awarded price paid less value. That right survives an affirmation, as many reported cases illustrate. Where, as here, the transaction has not been completed, the damages for deceit cannot be based on the price paid and must be limited to expenditure made in consequence of the tort: Halsbury Vol. 31 Para. 1092. The contention that the general law, as applicable to claims in the tort of deceit, provides an analogy helpful to the respondent must be rejected. Apart from that, the court may look at the matter more broadly under s. 87 (2) of the Trade Practices Act and is not confined to considering what remedies would have been given in an action for damages for fraudulent misrepresentation.

13. The applicants were in possession of the land, on which there was no habitable dwelling, for some months and gained an advantage from that. On the other hand, it does not appear to me that their occupation was of much value and they built a small dam in the meantime. I hold that they are entitled to damages consisting of a refund of the deposit paid ($4,000) and payment of their legal costs ($1,360) expended in the purchase, making a total of $5,360. I give judgment for that sum and costs.