Dalton v Lawson Hill Estate Pty Ltd [2005] FCAFC 169 (22 August 2005)

TRADE PRACTICES – misleading conduct – sale of vineyard and winery – misrepresentation by vendors of area occupied by vines – whether misrepresentation also made by selling agent – whether selling agent merely passing on information supplied, and known to purchaser to have been supplied, by vendors.

TRADE PRACTICES – misleading conduct – sale of vineyard and winery – misrepresentation by vendors of volume of available bore water as 1800 gallons per hour – in support, vendors handed to purchaser an ‘invoice’ given to them more than two years previously by water drilling contractor referring to ‘1800 GPH’ (1800 gallons per hour) – contractor had in fact orally informed vendors water flow from bore was 400 gallons per hour – 400 gallons per hour is approximately 1800 litres per hour – trial judge accepted that contractor had inadvertently written ‘1800 GPH’ rather than ‘1800 LPH’ and that if vendors had read the invoice at the time, they would have appreciated the error – whether contractor liable to purchaser as a result of vendors having handed over the invoice to them more than two years later – whether chain of causation broken.

Trade Practices Act 1974 (Cth) s 52
Partnership Act 1892 (NSW) ss 6(1), 10(1), 12

Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 cited
Butcher v Lachlan Elder Realty Pty Limited [2004] HCA 60; (2004) 212 ALR 357 applied
John G. Glass Real Estate Pty Ltd v Karawi Constructions Pty Limited [1993] ATPR
41-249 distinguished
Re La Rosa; Ex parte Norgard v Rodpat Nominees Pty Ltd (1991) 31 FCR 83 cited

JOHN MICHAEL DALTON v LAWSON HILL ESTATE PTY LTD
as trustee of the LAWSON HILL ESTATE TRUST
NSD 1928 of 2004

TOVEGOLD PTY LTD as trustee for O’BRIEN McGREGOR TRUST FUND v LAWSON HILL ESTATE PTY LTD as trustee of the LAWSON HILL ESTATE TRUST
NSD 56 of 2005

LAWSON HILL ESTATE PTY LTD as trustee of the LAWSON HILL ESTATE TRUST v JUNE MARGARET GRACE
NSD197 of 2005

LINDGREN, FINN & EMMETT JJ
22 AUGUST 2005
SYDNEY

BETWEEN:	JOHN MICHAEL DALTON APPELLANT
AND:	LAWSON HILL ESTATE PTY LTD As trustee of the LAWSON HILL ESTATE TRUST (ACN 096 523 241) FIRST RESPONDENT JUNE MARGARET GRACE SECOND RESPONDENT JOSE JOHN HAROLD GRACE THIRD RESPONDENT
JUDGES:	LINDGREN FINN & EMMETT JJ
DATE OF ORDER:	22 AUGUST 2005
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The appeal be allowed.

2. The first respondent pay the appellant’s costs of the appeal.

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

BETWEEN:	TOVEGOLD PTY LTD (ACN 003 600 486) t/as O’BRIEN McGREGOR FIRST NATIONAL REAL ESTATE as trustee for O’BRIEN McGREGOR TRUST FUND FIRST APPELLANT TIM O’BRIEN SECOND APPELLANT
AND:	LAWSON HILL ESTATE PTY LTD As trustee of the LAWSON HILL ESTATE TRUST (ACN 096 523 241) FIRST RESPONDENT JOSE JOHN HAROLD GRACE SECOND RESPONDENT JUNE MARGARET GRACE THIRD RESPONDENT
JUDGES:	LINDGREN FINN & EMMETT JJ
DATE OF ORDER:	22 AUGUST 2005
WHERE MADE:	SYDNEY

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

BETWEEN:	LAWSON HILL ESTATE PTY LTD As trustee of the LAWSON HILL ESTATE TRUST (ACN 096 523 241) FIRST APPELLANT PAUL HOULIHAN SECOND APPELLANT MARY HOULIHAN THIRD APPELLANT LESLEY EVANS FOURTH APPELLANT PETER ROCHFORT FIFTH APPELLANT ANTHONY FLEMING SIXTH APPELLANT MARGARET FLEMING SEVENTH APPELLANT PATRICK HOULIHAN EIGHTH APPELLANT MARIE HOULIHAN NINTH APPELLANT NOEL MAGEE TENTH APPELLANT ANNE MAGEE ELEVENTH APPELLANT RUPERT NEWTON TWELFTH APPELLANT BARBARA NEWTON THIRTEENTH APPELLANT CLIVE POOLMAN FOURTEENTH APPELLANT CREMORNE HOLDING PTY LTD FIFTEENTH APPELLANT
AND:	JUNE MARGARET GRACE RESPONDENT
JUDGES:	LINDGREN FINN & EMMETT JJ
DATE OF ORDER:	22 AUGUST 2005
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The appeal be allowed.

2. The respondent pay the first appellant’s costs of the appeal.

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

BETWEEN:	JOHN MICHAEL DALTON APPELLANT
AND:	LAWSON HILL ESTATE PTY LTD As trustee of the LAWSON HILL ESTATE TRUST (ACN 096 523 241) FIRST RESPONDENT JUNE MARGARET GRACE SECOND RESPONDENT JOSE JOHN HAROLD GRACE THIRD RESPONDENT

BETWEEN:	TOVEGOLD PTY LTD (ACN 003 600 486) t/as O’BRIEN McGREGOR FIRST NATIONAL REAL ESTATE as trustee for O’BRIEN McGREGOR TRUST FUND FIRST APPELLANT TIM O’BRIEN SECOND APPELLANT
AND:	LAWSON HILL ESTATE PTY LTD As trustee of the LAWSON HILL ESTATE TRUST (ACN 096 523 241) FIRST RESPONDENT JOSE JOHN HAROLD GRACE SECOND RESPONDENT JUNE MARGARET GRACE THIRD RESPONDENT

BETWEEN:	LAWSON HILL ESTATE PTY LTD As trustee of the LAWSON HILL ESTATE TRUST (ACN 096 523 241) FIRST APPELLANT PAUL HOULIHAN SECOND APPELLANT MARY HOULIHAN THIRD APPELLANT LESLEY EVANS FOURTH APPELLANT PETER ROCHFORT FIFTH APPELLANT ANTHONY FLEMING SIXTH APPELLANT MARGARET FLEMING SEVENTH APPELLANT PATRICK HOULIHAN EIGHTH APPELLANT MARIE HOULIHAN NINTH APPELLANT NOEL MAGEE TENTH APPELLANT ANNE MAGEE ELEVENTH APPELLANT RUPERT NEWTON TWELFTH APPELLANT BARBARA NEWTON THIRTEENTH APPELLANT CLIVE POOLMAN FOURTEENTH APPELLANT CREMORNE HOLDING PTY LTD FIFTEENTH APPELLANT
AND:	JUNE MARGARET GRACE RESPONDENT
JUDGES:	LINDGREN, FINN & EMMETT JJ
DATE:	22 AUGUST 2005
PLACE:	SYDNEY

1 These appeals concern the purchase of a vineyard and winery and associated assets for a total price of $1,125,000. Prior to the purchase, statements were made about the acreage of fruiting vines and the output of a water bore on the property. A judge of the Court ordered judgment for the buyer, in the sum of $705,589, against one of the two vendors, against the vendors’ agent and against the driller of the bore, on the basis that the making of the statements was misleading and deceptive and induced the buyer to enter into the contract to buy the property. The vendors’ agent and the driller of the bore have appealed from the judgment entered against them. On the other hand, the buyer has appealed from the refusal of the primary judge to order judgment against the other vendor.

2 In 1985, Jose John Harold Grace (‘Mr Grace’), became the registered proprietor of a parcel of 51.51 hectares (approximately 127 acres) situated on the eastern side of Henry Lawson Drive, about 5 kilometres north of the town of Mudgee, NSW (‘the Property’). The Property is known as ‘Lawson Hill’. With the assistance of his wife, June Margaret Grace (‘Mrs Grace’), Mr Grace planted what was described as ‘a small dry land vineyard’. Vines were planted in stages in four separate areas of the Property. In 2000 and 2001, the total area planted amounted to 14.37 acres (5.82 hectares), if regard is paid only to the trellised areas of land, or 16.28 acres (6.59 hectares), if access areas, consisting of headlands and side lands, are included in the measurement. As will appear, it is highly significant that, either way, the total area was appreciably less that 20 acres.

3 After acquiring the Property, Mr Grace caused the construction upon it of a four-bedroom main dwelling with attached garage (‘the House’). At later times, he caused the erection of two further buildings, being a sales building with tasting room and attached winery (‘the Winery’) and a two-bedroom cottage (‘the Cottage’). For a number of years Mr and Mrs Grace grew grapes on the Property and sold wine either from the Winery or through a customer mailing list, advertising and local promotion. Mrs Grace used the Cottage to provide bed and breakfast accommodation to tourists.

4 The business of growing grapes, selling wine and providing bed and breakfast accommodation was carried on by Mr and Mrs Grace in partnership under the name ‘Lawson Hill Winery’. Plant and equipment used in connection with the business was owned by them as partners. There were also furnishings in the House and in the Cottage, apart from the plant and equipment in the Winery, which were all owned by the partnership. In addition, there were stocks of bottled wine at any given time that belonged to the partnership.

5 From 1990 to 1995, Mr and Mrs Grace suffered health problems that impeded their ability to carry on the business and in 1995 they attempted to sell the Property and business at public auction, but failed to do so. Accordingly, they continued to carry on the business in partnership.

6 In early 1998, Mr and Mrs Grace contacted a water diviner, who recommended drilling a bore at a particular location in a small gully on the Property. Mr Grace therefore contacted Mr John Michael Dalton (‘Mr Dalton’), a water-drilling contractor. There is a question as to whether Mr Dalton engaged in business in his own right, or was merely a consultant or employee of Dalton Walter Drilling Services Pty Ltd (‘the Dalton Company’), since one answer advanced by Mr Dalton before the primary judge was that any conduct of his was engaged in only as a consultant or employee of the Dalton Company and not in his personal capacity. Mr Dalton said that, in those circumstances, he could have only accessorial liability, if any liability at all.

7 The primary judge concluded that Mr Dalton’s contention was not supported by the evidence. While Mr Dalton was a director of the Dalton Company, there was no contemporaneous evidence referring to the Dalton Company. There was not even oral evidence that the drilling contract with Mr and Mrs Grace was made on behalf of the Dalton Company. The most that could be pointed to by Mr Dalton consisted of references in the pleadings to the Dalton Company and a written statement by an employee, who did not give oral evidence, that he was employed by the Dalton Company.

8 As will appear below, three printed invoices were delivered to Mr and Mrs Grace during 1998. Mr Dalton signed the invoices, each of which is in the same printed form. The name ‘Dalton Water Drilling Services’ is printed on the face of the form. There is no ACN or ABN shown on the form. There is no reference to either Mr Dalton or the Dalton Company on the form of invoice and there is nothing in the form to indicate who was behind the business carried on under the name ‘Dalton Water Drilling Services’. Mr Dalton was the holder of a drilling licence, although, under the relevant legislation, it is at least arguable that a licence must be held by an individual and not a corporation (see Water Act 1912 (NSW) s 118A and Water (Part 5 – Drillers’ Licenses) Regulation 1995 (NSW) regs 4, 5, 6, Schedule 1, Forms 1 and 2). At best, the evidence is equivocal: at worst it is contrary to Mr Dalton’s contention.

9 It would have been possible for Mr Dalton to adduce evidence concerning the business of the Dalton Company to demonstrate that all of the work carried on in 1998 was in fact carried on by the Dalton Company. He did not do so. In any event, whether the Graces made their arrangement with the Dalton Company or with Mr Dalton depended on what passed between them and the background circumstances all objective matters, as distinct from Mr Dalton’s subjective intention. There was no error on the part of the primary judge in concluding that any conduct engaged in by Mr Dalton at the relevant time was conduct of Mr Dalton personally.

10 In about mid-April 1998, Mr Dalton attended at Lawson Hill and drilled at the selected location on the property. No water was found, so Mr Grace asked Mr Dalton to drill at another location some 70 to 80 metres further down the gully. At about 21 to 25 metres below ground, water was encountered. There is a dispute as to what Mr Dalton said to Mr Grace concerning the water flow from that drill hole. Whatever was said, Mr Grace was disappointed. He then instructed Mr Dalton to drill four further holes, all of which proved dry. Mrs Grace sent a sample of the water found in the second hole to a local laboratory and received a certificate of analysis showing that the quality of the water was such that it would be suitable for grape vine irrigation, but would require to be diluted by stored rainwater to avoid concentrations of calcium carbonate that would block the filters on drip irrigation systems.

11 On 22 April 1998, Mr Dalton sent invoice number 0642 for $16,500, addressed to ‘Lawson Hill Winery’ (‘Invoice 0642’). The work charged for by Invoice 0642 was ‘to drill 1,450 feet of test bores’. Invoice 0642 was signed by Mr Dalton. An endorsement on it indicates that it was paid by Mrs Grace on 28 April 1998.

12 There were spaces on the form of Invoice 0642 for certain information as follows:

13 Mrs Grace said that she noticed that Invoice 0642 contained no indication of the water flow rate, so she telephoned Mr Dalton and asked for an invoice giving that information. She said in evidence that she did not want to pay such a large sum without such details.

14 Mr Dalton subsequently gave Mrs Grace invoice number 0650 (‘Invoice 0650’) in the same form as Invoice 0642. Invoice 0650 was dated 29 April 1998 and was also addressed to ‘Lawson Hill Winery’ and signed by Mr Dalton. In the spaces in the printed form of Invoice 0642, figures were inserted in handwriting opposite the printed items as follows:

The figures ‘50’, ‘10’ and ‘30’ were intended as measurements in feet. The phrase ‘1,800 GPH’ is of critical importance. It is common ground that ‘GPH’ stands for ‘gallons per hour’. However, that appears to have been a mistake.

15 At some stage, Mrs Grace requested Mr Dalton to case the second bore hole. While there was some dispute about when that occurred, the primary judge found that the second bore hole was cased on or about 29 April 1998. However, an invoice for that work bears the date 11 September 1998, some four months after the work was done. Invoice number 0679, for $800, is in the same form as the first two and was addressed to ‘Lawson Hill Estate’ (‘Invoice 0679’). The work charged for by Invoice 0679 was ‘TO CASE EXISTING BORE TO 100΄ WITH 6\ STEEL CASING’. It was also signed by Mr Dalton, who endorsed on it ‘Paid with thanks’.

Mrs Grace said that she tried unsuccessfully on many occasions to telephone Mr Dalton to query the discrepancy, but was unable to get on to him for some time. She said that his response, when she finally spoke to him, was that when he completed Invoice 0679 he did not have Invoice 0650 with him and relied on his memory.

17 After the second bore hole was cased, a bucket was placed over it. Mr and Mrs Grace made no attempt to use the bore prior to the sale of the Property, notwithstanding that the Property continued to be adversely affected by drought conditions. Each of them disclaimed the possibility that they themselves might use the bore for irrigation purposes. They asserted that their motive in having it drilled and cased was to add to the Property’s marketability. They viewed a successful bore as a marketing tool.

18 Mr Dalton had no recollection of Invoice 0679, although he accepted that it was in his handwriting and that he had signed it. He could not explain why it was dated three and a half months after he did the work. He could not explain the figures that he had written on it, which appear to bear no relationship to those shown on Invoice 0650. He said that whatever was recorded on Invoice 0650 would be right, as he did not do a second test.

19 Mr Dalton gave evidence that he only roughly measured the water flow rate from the second bore hole, over a half to three quarters of an hour. He said that he estimated that the water flow was 400 gallons per hour and that he conveyed that estimate to Mr Grace.

20 It appears that the primary judge found that, after Mr Dalton cased the second bore hole, he had a conversation with Mr and Mrs Grace along the following lines.

Dalton:	‘The 400 gallons an hour from that bore is equal to approximately 10,000 gallons per day or 70,000 gallons per week which is a hell of a lot of water if held in storage.’
Mrs Grace:	‘How many litres per hour would 400 gallons an hour work out to be?’
Mr Dalton (after making some calculations on a calculator):	‘About 1,800 litres per hour.’
Mrs Grace:	‘Would you mind writing that amount down on the invoice?’
Mr Dalton:	‘I can do that because it means exactly the same thing.’

Mr Dalton said he ‘then’ completed Invoice 0650 and handed it to Mrs Grace or Mr Grace. He said that he erroneously wrote ‘GPH’ against the figure ‘1800’ instead of ‘LPH’, which stands for litres per hour.

21 The primary judge found, therefore, that Mr Dalton gave to Mr and Mrs Grace a document that incorrectly stated the estimated flow of water from the bore. His Honour found that, while Invoice 0650 was incorrect, Mr Dalton did not intend to mislead Mr and Mrs Grace, or any subsequent reader of it. Rather, while he acted honestly, he acted carelessly. The primary judge found that, if at the time of delivery, Mr and Mrs Grace had read the estimated water flow on invoice 0650, each of them would have realised that the figure was incorrect. They could have asked Mr Dalton to correct it and, presumably, he would have done so. They did not and he did not. Invoice 0650 was not produced by Mr and Mrs Grace again, or considered by them, until several years later, in the circumstances to be described shortly.

22 At relevant times, Tovegold Pty Ltd (‘the Agent’) carried on business as a real estate agent in Mudgee under the name ‘O’Brien McGregor First National Real Estate’. Timothy Bruce O’Brien (‘Mr O’Brien’) was associated with the Agent. The proceeding was conducted on the basis that all relevant actions of Mr O’Brien may be imputed to the Agent.

23 During 1999, Mr and Mrs Grace again decided to attempt to sell the Property. They therefore contacted Mr Bruce McGregor (‘Mr McGregor’), who was then associated with the Agent. Mr McGregor, on behalf of the Agent, produced a one page brochure (‘the 1999 Brochure’), which described the Property as follows:

24 Jason Dunne (‘Mr Dunne’) graduated as Bachelor of Horticultural Science from Hawkesbury College in 1994. After graduating, Mr Dunne was employed by Orlando Wines in the Hunter Valley. In late 1996, he went to the Riverland Region of South Australia with Orlando Wines, as a viticulturist. At that time, he also commenced external studies in viticulture through Charles Sturt University at Wagga and graduated as Bachelor of Applied Science (Viticulture) in May 2000. Thus, Mr Dunne was no novice to viticulture.

25 In about August 2000, Mr Dunne, who was then with Orlando Wines in Mudgee, approached Mr O’Brien, enquiring on behalf of a friend about the availability of the Property. Mr O’Brien subsequently told Mr Dunne that the Property was available for sale at a price of $1,350,000. Mr Dunne said that he would pass on that information.

26 Mr Dunne had made his enquiry on behalf of Paul Houlihan (‘Mr Houlihan’). Mr Dunne was a friend of Mr Houlihan’s son and had known Mr Houlihan since 1988. At various times, Mr Houlihan had expressed an interest in wine growing and, at one stage, said to Mr Dunne that, if Mr Dunne ever wanted to do anything about getting into a vineyard, he should let Mr Houlihan know. Upon learning that the Property was for sale, Mr Houlihan asked Mr Dunne to have Mr O’Brien arrange an inspection. An inspection was arranged for 3 September 2000.

27 In the meantime, on 13 August 2000, Mr Dunne sent to the Agent a handwritten note, setting out information that he required concerning the Property (‘the Information Request’). The Information Request listed twelve items as follows:

28 The inspection arranged for 3 September 2000 took place on that day. Mr Houlihan and his wife, Mary Houlihan, together with Mr Dunne, attended the inspection. Mr O’Brien and Mr and Mrs Grace were also present. There was no general discussion about the bore. However, Mr Houlihan said that Mr Grace pointed out to him the location of the bore and Mr Dunne said that Mr Grace told him that it was possible to pump 1,800 gallons an hour from the bore.

Following the narrative was a map of the Mudgee area, showing the location of vineyards.

33 The first part of the Property at Present document was relevantly as follows:

34 Further documents followed, consisting of architectural plans of the House and the Winery, as well as a reprint from a newspaper article describing three ‘Vineyard Cottages’, including ‘Lawsons Hill Vineyard Cottage’. Also enclosed was a plan of the Property showing its boundaries (‘the Plan’). The Plan also showed, in sketch form, the location of the House, the Cottage and the Winery, together with the locations of twelve plantings of different varieties of grapes. In most cases, the number of rows of vines was specified.

35 At or after, but not before, the inspection on 3 September 2000, a typed response to the Information Request was provided. The answers all came from Mr Grace. In answer to item 1, Mr Grace provided an explanation as to why 2000 was a difficult year and then set out a table of grape production for the years 1996 to 2000 inclusive. Figures were given in relation to twelve different grape varieties for 1996 to 1999 inclusive. For the year 2000 there was simply a tonnage for whites and a tonnage for reds. The totals were as follows:

36 In response to item 2, which asked for ‘areas by variety and vineyard map’, Mr Grace said ‘see separate sheet’. The separate sheet was a copy of the Plan. There is no indication of the area of any planting of grapes on the Plan. In Mr Grace’s response, item 3 was deleted but there was a response to each of the other nine questions, including, in some cases, further documents being attached. Nothing appears to turn on the other responses. There is apparently no evidence that any further request was made for information as to the area of the various plantings marked on the Plan.

37 On 28 September 2000, Mr Grace signed a document described as ‘Sales Inspection Report and Selling Agency Agreement’ addressed to the Agent. The agreement referred to the sale of ‘Lawson Hill Vineyard and Winery together with inclusions to be specified in contract for sale... as per contract of sale.’ That document contains a statement of the Agent’s opinion as to the current reasonable selling price, of $1,100,000, and the price at which the Property was to be offered for sale, of $1,550,000. On the same day, an Information Memorandum for the Agent was partially completed. The memorandum had three parts as follows:

Only the first part was completed. Neither the Rural Listing Check List nor the Marketing Strategy was completed.

38 At some stage, Mr and Mrs Grace wrote to Mr O’Brien enclosing ‘Our information booklet’. The document attached consisted of the Rare Opportunity document, the architect’s plan of Lawson House and the ‘Vineyard Cottages’ reprint. Mr O’Brien’s recollection was that he received the letter and its enclosures after the inspection of 3 September 2000. On 11 September 2000, Mr O’Brien wrote to Mr and Mrs Grace, referring to the inspection and saying that ‘the Houlahans [sic] have expressed interest in your property and have gone to do some further investigations.’

39 On 10 October 2000, Ms Leanne Goodear, a sales co-ordinator with the Agent, wrote to Mr Grace. After introducing herself, Ms Goodear wrote:

On 13 October 2000, Mr O’Brien wrote to Mr Grace enclosing ‘a copy of your property as seen on our home page on the internet’.

40 On 17 October 2000, Mr Grace sent a facsimile communication to the Agent. The facsimile consisted of three pages. The first page was marked ‘Attention Tim O’Brien’ and contained a typed description of ‘Lawsons Hill Estate Vineyard, Winery and Residence’. Underneath the typed description, the following note in Mr Grace’s handwriting appeared:

The second page was a copy of the document enclosed with Ms Goodear’s letter of 10 October 2000, with handwritten amendments. Significantly, the statement ‘presently there are 22 acres of vines’ was altered in the handwriting of Mr Grace to read ‘presently there are 20 acres of vines’. The third page was a copy of the document enclosed with Mr O’Brien’s letter of 13 October 2000, with handwritten amendments. The phrase ‘presently there are 22 acres of vines’ was again altered to read ‘presently there are 20 acres of vines’.

41 Following receipt of that facsimile, Mr O’Brien made a handwritten note to Ms Goodear to ‘make appropriate changes as suggested by June Grace’. Subsequently, the Agent’s internet site was amended so that the description of the Property was that contained in the first page of the facsimile communication. Importantly, the statement ‘at present there are 20 acres of vines’ appeared in the internet site consistently with the typing that had been sent by Mr Grace on 17 October 2000.

42 Soon afterwards, the Agent produced a one page brochure (‘the 2000 Brochure’) describing the Property under the heading:

At the foot of the 2000 Brochure, in significantly smaller print, was the following:

It is common ground that, prior to 23 April 2001, Mr O’Brien provided to Mr Houlihan at least one copy of the 2000 Brochure, although it is not entirely clear when he did so.

43 On 13 November 2000, Mr O’Brien wrote to Mr Grace, enclosing ‘a copy of your property as seen on our home page on the internet’. The attachment was the description of the Property sent by Mr and Mrs Grace on 17 October 2000.

44 A further inspection of the Property was arranged for 7 January 2001. Mr and Mrs Houlihan again attended. Mr Dunne may also have attended, although Mr O’Brien was not present. Further discussions took place between Mr Houlihan and Mr and Mrs Grace.

45 In the course of those discussions, Mr Houlihan asked Mr and Mrs Grace about the capacity of the bore. Mr Grace pointed to the location of the bore and said that it produced about 1800 gallons per hour in a dry year. He said that better than that could be expected in a good year. Mr Grace went on to say that it was common practice ‘to shandy the bore water with rain water’, although he said that he did not think it was necessary to do so. When asked about the possibility of irrigating the vines directly from the bore, Mr Grace replied that he would not do that and agreed with Mr Houlihan that a dam would be the preferable way of irrigating the vines. Mr Houlihan also said that Mr Grace confirmed some of the information that he had given at the September inspection, including the extent of the vine area on the Property.

46 Following the inspection on 7 January 2001, Mr Houlihan discussed with various friends the possibility of buying and improving the Property. The primary judge found that the Rare Opportunity document, the Property at Present document and the 2000 Brochure were widely distributed amongst potential members of a proposed consortium that Mr Houlihan intended to organise to buy the Property.

47 One of the potential members of the proposed consortium was Anthony Fleming (‘Mr Fleming’), an accountant. Mr Fleming prepared financial estimates based on the assumption that the Property contained 20 acres of fruiting vines, all of which could be irrigated from a dam constructed around the bore. In February and March 2001, Mr Fleming visited the Property, the first time with his wife, Margaret Fleming, and Mr Dunne, and the second time with Mr Houlihan. During the second visit there was a long meeting involving Mr Fleming, Mr Houlihan and Mr Grace, during which Mr Fleming showed his financial estimates to Mr Grace and asked him whether his assumptions for grape production and wine yield were reasonable. Mr Grace said they were.

48 During that meeting, there was a discussion about irrigating the vines. Mr Houlihan commented to Mr Grace that he had said that the bore supplied 1800 gallons of water per hour. Mr Grace went into another room and returned with Invoice 0650, which he showed to Mr Houlihan and Mr Fleming, saying: ‘This is from the fellow who sunk the bore [sic]’. Mr Grace pointed out the estimated water flow rate of 1800 gallons per hour.

49 On 29 March 2001, a meeting was held at the home of Patrick and Mary Houlihan. The meeting was attended by potential members of the proposed consortium. There was discussion at the meeting concerning a proposal for the establishment of a unit trust, financed by National Australia Bank Limited, in the sum of $1,300,000. Unit holders would give personal guarantees for such finance.

50 On 17 April 2001, Lawson Hill Estate Pty Ltd (‘the Purchaser’) was incorporated. The Purchaser then executed a trust deed for the establishment of the Lawson Hill Estate Trust. Units in that trust were subsequently allocated to the various parties who had indicated an interest in participating in the proposed consortium. There were 14 unit holders in total.

51 On 23 April 2001, the Purchaser entered into a contract with Mr Grace, as the registered proprietor of the Property, whereby Mr Grace agreed to sell and the Purchaser agreed to buy, for the price of $1,125,000, ‘the land and improvements known as Lawsons Hill Winery, Henry Lawson Drive, Mudgee’. Annexure A to the contract specified inclusions in the sale and Annexure B specified items on the Property that were to be excluded from the sale.

Annexure C is a single sheet dated 6 March 2001, listing quantities of bottles of wine totalling 25,000.

53 Also attached to the contract for sale was a taxation depreciation schedule for the period 1 July 1999 to 30 June 2000 for Mr and Mrs Grace’s partnership. While only Mr Grace was named as vendor on the first page of the printed form of contract, Mrs Grace also signed the contract at all places where it was signed by Mr Grace. Clearly enough, the contract was intended to operate as a sale, not only of the fee simple in the Property, but also of the business carried on by Mr and Mrs Grace in partnership under the name Lawsons Hill Winery. That fact will have some significance as will appear below.

54 Relevantly for the claim made by the Purchaser in the proceeding before the primary judge, the following further special conditions were also included:

55 The Purchaser contended that Mr and Mrs Grace and the Agent each represented that the Property contained 20 acres of fruiting vines, whereas, in fact, the Property contained only some 14 to 16 acres of fruiting vines. The Purchaser also claimed that Mr and Mrs Grace represented that the Property contained a bore capable of supplying 1800 gallons of water per hour, whereas the output of the bore was only 400 gallons of water per hour, or less. In addition, the Purchaser claimed that Mr Dalton made misrepresentations concerning the Property, by creating, and not rectifying the mistake on, Invoice 0650. The proceeding was conducted on the basis that both representations were made by Mr and Mrs Grace and that they were false.

56 It is somewhat extraordinary that the Purchaser should be entitled to recover damages of $705,589 in respect of a purchase for a total purchase price of $1,125,000, on the basis of informal statements made in the course of negotiations, which led to a formal written contract, where the Purchaser had been advised by a viticulturist, an accountant and solicitors. One might have expected that, if any reliance at all was to be placed upon such informal statements, some attempt would have been made to formalise them by including them as warranties in the contract. It is, therefore, curious that the Purchaser signed a contract containing special conditions (1) and (4), which refer expressly to the absence of representations and warranties concerning certain aspects of the Property.

57 Specifically, the Purchaser acknowledged in special condition (1) that no representation had been made in respect of the situation, conditions and state of repair of the Property. The Purchaser expressly acknowledged that it had inspected the Property, that is to say, it had seen the extent of the vines. If the particular acreage of the vines was of any significance, it is curious that they did not themselves measure it, or ask for some express confirmation of the representations upon which they were intending to rely in signing the contract. The Purchaser also acknowledged in special condition (4) that no warranties had been given as to the carrying capacity of the Property, its productivity or the uses to which it might be put. It is just as curious that, having signed a contract containing such a provision, the Purchaser did not ask for express warranties concerning matters that it considered were of sufficient significance to induce it to enter into the contract.

58 Nevertheless, the primary judge found that reliance on the statements concerning 20 acres of fruiting vines and the capacity of the bore of 1,800 gallons per hour was proved. That reliance was through various unit holders, in particular, Mr Houlihan, and through Mr Dunne and Mr Fleming. There was no appeal by Mr Grace from the orders made by the primary judge against him. Further, there was no notice of contention filed by Mrs Grace in the appeal by the Purchaser seeking to support the judgment in her favour on the basis that there was no reliance by the Purchaser on any of the statements in question. Nor did Mrs Grace seek to resist the Purchaser’s appeal on the basis that neither she nor Mr Grace was engaged in trade or commerce in negotiating and entering into the contract for the sale of 23 April 2001.

59 The primary judge found that Mr Grace, the Agent and Mr Dalton had engaged in conduct that contravened Part V of the Trade Practices Act or the corresponding provisions of the Fair Trading Act, and that the Purchaser suffered damage by that conduct in the sum of $705,589. However, the primary judge concluded that Mrs Grace had not engaged in any contravening conduct.

60 Ancillary questions arose concerning the entitlement of the various parties held liable to indemnity from other parties. There were cross claims by the Agent against Mr and Mrs Grace, by Mr Dalton against Mr and Mrs Grace and by Mr Grace against Mr Dalton. The primary judge directed that judgment be entered in favour of each cross-claimant other than Mrs Grace against each cross respondent, for the recovery of such amount as would be necessary to ensure that the following ultimate burden of the payment of the judgment in favour of the Purchaser and the Purchaser’s costs:

61 As a consequence of the various notices of appeal that are before the Court, the following questions arise:

62 There was no dispute on the appeal as to whether, in entering into the contract of 23 April 2001, the Purchaser relied on representations that the Property contained 20 acres of fruiting vines and a bore capable of supplying 1800 gallons of water per hour. The questions on appeal were rather whether the Agent, Mr Dalton and Mrs Grace were responsible for representations that contravened either Part V of the Trade Practices Act or the corresponding provisions of the Fair Trading Act.

63 The Purchaser’s claim against Mrs Grace is based on ss 42, 45(1), 61(c) and 68(1) of the Fair Trading Act. Section 42 relevantly provides that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. Section 45(1) relevantly provides that a person must not, in trade or commerce, in connection with the sale of an interest in land, make a false or misleading representation concerning the characteristics of the land or the availability of facilities associated with the land. Section 68(1) relevantly provides that a person who suffers loss or damage by conduct of another person that is in contravention of s 42 or s 45(1) may recover the amount of the loss or damage by action against the other person or against any person involved in the contravention. Section 61(c) relevantly provides that a person who has been in any way directly or indirectly, knowingly concerned in, or party to, a contravention of the Fair Trading Act is a person involved in that contravention.

64 The primary judge concluded that, because Mrs Grace was not named as a vendor of the Property in the contract for sale of 23 April 2001, and because Mrs Grace did not act as an agent for reward of Mr Grace, she should not be regarded as having acted in trade or commerce when she supplied information about the Property. His Honour concluded that any recovery against Mrs Grace must be on the basis of accessorial liability under s 61(c) of the Fair Trading Act. Thus, his Honour concluded that the Fair Trading Act applied to Mrs Grace only if she had knowledge of the essential facts constituting the contravention of the Act by Mr Grace. The essential facts include the facts that render the representation misleading or deceptive (see Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661).

65 His Honour found that Mrs Grace was ‘involved in’ the making of the representations concerning the vine area and the capacity of the bore. If his Honour was intending to use the expression ‘involved in’ in the way contemplated by s 61(c) of the Fair Trading Act, that would be an end of the matter, because his Honour found that the representations constituted a contravention of s 42. However, his Honour went on to say that the claim against Mrs Grace must depend upon whether it was shown that she was aware of the falsity of at least one of the representations. Since his Honour concluded that there was no evidence that suggested Mrs Grace was aware of the inaccuracy of the representation concerning the vine area, the case against her depended, in his Honour’s view, upon the question of whether Mrs Grace knew the bore representation was false.

66 Clearly enough, his Honour appears to have intended, by his use of the expression ‘involved in’ in relation to the making of the representations, to signify no more than Mrs Grace was involved in the making of them. The question of whether she was involved in the contravention, as distinct from being involved in the making of the representations, depended upon whether she had knowledge of the essential facts constituting the contravention, namely, the fact that the representations were misleading or deceptive.

67 The primary judge found that Mr Dalton orally reported his estimate of 400 gallons per hour and Mrs Grace became aware of that figure. His Honour considered that it was inconceivable that Mrs Grace did not enquire about the water flow rate from the second bore hole. However, his Honour considered that any accessorial liability on the part of Mrs Grace was dependent on the existence of present knowledge, at the time when she made the representation, of falsity, as distinct from past and forgotten knowledge. The primary judge found that, notwithstanding Mrs Grace’s earlier knowledge of Mr Dalton’s estimate, she did not realise that the figure of 1,800 gallons per hour was wrong at the time when she made any representation incorporating that figure. The primary judge found that Mrs Grace ‘lacked the necessary intent to mislead’ the Purchaser in relation to the water flow of the bore. His Honour concluded, therefore, that Mrs Grace was not liable because she was not involved in the contravention by Mr Grace, within the meaning of s 61(c).

68 The primary judge’s reference to lacking ‘the necessary intent to mislead’ may indicate a misconception. It is not necessary to establish an intention to mislead, as such, in order to satisfy the requirements of s 61(c). It is sufficient if Mrs Grace knew that the representation was being made, participated in the making of the representation and knew facts that rendered the representation misleading or deceptive. It was not necessary to establish that the true facts were present to her mind at the time of her participation in the making of the representation, that is to say, that she intended to mislead or deceive.

69 It is clear enough that Mr Grace and Mrs Grace were each engaged in trade or commerce, as that concept is now understood, in their negotiations that led up to the contract with the Purchaser. That is to say, each of them was intent upon engaging in a transaction for the sale of the business being carried on by them in partnership. That sale entailed the assets of the business, the business name and, in effect, the goodwill of the business of the Lawsons Hill Vineyard and Winery. Mr and Mrs Grace carried on that business on the Property in partnership. They were the joint owners of the plant, equipment and stock in trade of the business.

70 To the extent that Mr Grace was engaged in trade or commerce in negotiating for the sale of the Property and the business being carried on at the Property, Mrs Grace must also be regarded as having been engaged in trade or commerce in that respect. The negotiations that led up to the contract for sale of 23 April 2001, and the contract itself, necessarily involved Mrs Grace as a co-vendor with Mr Grace. Indeed, she signed the contract, no doubt because it entailed, in addition to the sale of the fee simple in the Property, the sale of the plant, equipment and stock in trade employed in the partnership business.

71 It is not to the point that both the vine area representation and the bore water output representation both related immediately to the land, rather than to the business. They related to the business too, but even if they did not, they nonetheless induced the Purchaser to enter into a composite contract for the purchase of both land and business.

72 There was no suggestion that Mr Grace was not engaged in trade or commerce in the negotiations that led up to, and the making of the contract for sale. To the extent that Mr Grace was so engaged, so was Mrs Grace. It follows that the judgment in favour of the Purchaser should have been against Mrs Grace as well as Mr Grace. The Purchaser is entitled to succeed on its appeal.

73 The Purchaser claimed that, in publishing and distributing various documents, the Agent, through Mr O’Brien, and Mr O’Brien personally, engaged in misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act and s 42 of the Fair Trading Act respectively. While there was some confusion in the evidence as to which documents were seen by particular individuals connected with the Purchaser at particular times, his Honour concluded that the Agent published, and Mr O’Brien distributed, at least two documents in which it was stated that the Property contained 20 acres of vines. His Honour found that the Agent published, and Mr O’Brien distributed, the 2000 Brochure.

74 The primary judge found that the evidence did not satisfactorily establish that the 1999 Brochure was provided by Mr O’Brien to Mr Houlihan or any other person representing the Purchaser. Accordingly, his Honour concluded that the case against the Agent was narrowed to the statement about 20 acres of vines in the 2000 Brochure, which his Honour found was a statement that was communicated to individuals connected with the Purchaser.

75 In the Further Amended Statement of Claim, the Purchaser also alleged that, in or about late August 2000, Mr O’Brien represented to Mr Dunne that the area of vines on the Property was 20 acres. The primary judge referred to Mr Dunne’s evidence that Mr O’Brien had told him, in response to an enquiry in about September 2000, that there was about 20 acres of vines on the Property and Mr O’Brien’s evidence that he did not recall having done so. His Honour found that the issue did not matter because the Purchaser’s pleaded case against the Agent and Mr O’Brien was confined to the statements made in the 1999 Brochure and the 2000 Brochure. However, his Honour appears to have overlooked the fact that an amendment was made at some stage to the Statement of Claim to include the allegation referred to above. The Further Amended Statement of Claim was filed on 1 September 2004, the date of the third day of the hearing.

76 Whether or not the Purchaser pleaded the oral representation by Mr O’Brien, the issue remains the same. While the primary judge found that the statement that there was 20 acres of vines on the Property was incorrect, the Agent and Mr O’Brien say that, in all the circumstances, their statements to that effect, whether in a brochure or orally, were not misleading or deceptive because the individuals relevantly connected with the Purchaser knew that the Agent was not itself making any statement and that Mr and Mrs Grace were the sole source of information about the extent of the vine area.

77 Mr Houlihan agreed, in the course of cross-examination, that Mr Grace repeatedly said that the vine area comprised 20 acres. Mr Houlihan also agreed that he understood that Mr Grace had planted the vines and that he expected that Mr Grace had incurred costs, such as cultivating and spraying, that are ordinarily charged by the acre. Mr Houlihan agreed that, by the time the question of buying the Property came around, he had confirmation from what he regarded as a reliable source, namely, Mr Grace. However, Mr Houlihan claimed that, when the time to exchange contracts arrived, the position of the Agent was ‘one of corroboration... on the basis that [the Agent] told me it was 20 acres’. Mr Houlihan claimed that he looked to the Agent to have independent expertise.

78 The primary judge concluded that there was no doubt that Mr Houlihan was influenced by the representations made to him by Mr and Mrs Grace. His Honour also referred to the insistence by Mr Houlihan that he placed reliance upon the fact that the representation about the vine area was contained in a sales brochure prepared by the Agent and distributed to him and others. His Honour accepted Mr Houlihan’s evidence in relation to that matter.

79 The primary judge concluded that the only real issue in relation to the liability of the Agent was whether the circumstances were such as to make it apparent that the Agent was not the source of the representation about vine area and took no responsibility for it. That is to say, the issue was whether it was apparent that the Agent was merely passing on information about the vine area ‘for what it is worth’.

80 The primary judge found that the Agent was a local agent who claimed local knowledge and who was in the business of selling local properties, including rural properties such as vineyards. His Honour concluded that anybody dealing with Mr O’Brien in 2000 would have reasonably expected him to have a good knowledge of the Property and to appreciate the importance of correctly stating the size of the vine area. His Honour found that a reader of the 2000 Brochure would be entitled to assume that its statement that ‘every care has been taken in respect of the information contained’ would apply to the statement about the vine area. His Honour concluded that a reader would not necessarily assume that the Agent had obtained a formal survey, but would assume that the Agent had made at least an informal check of the position by, for example, requesting to look at plans or driving a vehicle along the lines of trellises and making an arithmetical calculation.

81 Notwithstanding the disclaimer in the 2000 Brochure, his Honour found that the Agent made no disclaimer about its knowledge or belief in the correctness of the statements in the 2000 Brochure. His Honour found that the Agent had not brought home to the Purchaser that it was not in a position to take responsibility for the statement and was acting as a mere messenger. Mr O’Brien did not suggest that he said anything to that effect to Mr Houlihan or Mr Dunne. The primary judge concluded that that was not the effect of the disclaimer in the 2000 Brochure. His Honour concluded that Mr Houlihan’s belief that the Agent was taking responsibility for the statement about the vine area was not unfounded or unreasonable.

82 In considering the liability of an agent for sale for contravention of s 52 of the Trade Practices Act or s 42 of the Fair Trading Act, it is necessary to consider the character of the particular conduct of the particular agent in relation to the particular purchaser, bearing in mind what matters of fact each knew about the other as a result of the nature of their dealings and the conversations between them, of which each may be taken to have known. The mere fact that a person had engaged in the conduct of supplying a document containing information which is in fact misleading does not necessarily mean that that person had engaged in misleading conduct. It is crucial to examine the role of the person in question (see Butcher v Lachlan Elder Realty Pty Limited [2004] HCA 60; (2004) 212 ALR 357 (‘Butcher’ – discussed further below) at [37]). Where a person purports to do no more than pass on information supplied by another, in circumstances that make it apparent that the person is not the source of the information and that the person expressly or impliedly disclaims any belief in its truth or falsity, merely passing it on, for what it is worth, does not involve conduct that is misleading or deceptive (see Yorke v Lucas at 666).

83 The area planted with vines is not a matter discernible without measurement. Indeed, his Honour found that there was a question as to precisely what is to be measured when stating the area that is planted with vines. Thus, there is a question of whether or not access areas should be included.

84 As the communications between Mr and Mrs Grace, on the one hand, and the Agent, on the other, which are summarised above, demonstrate, some care was taken by the Agent to obtain confirmation from Mr and Mrs Grace that the statements in the 2000 Brochure were accurate. To state that ‘every care has been taken in respect of the information’ contained in a brochure does not signify that independent steps have been taken to verify the information. More particularly, such a statement does not signify that an agent has independently measured or calculated an area to check whether the information given by its principal is correct, particularly when the statement goes on to say that ‘no warranty is given as to the accuracy’ of the information.

85 The 2000 Brochure stated explicitly that no warranty was given as to the accuracy of the information contained in the Brochure and that any prospective purchaser should rely on its own enquiries. That is an unequivocal statement that the Agent was not accepting responsibility for the information contained in the 2000 Brochure. The clear intimation is that the prospective vendors had furnished the information to the Agent.

86 While the Agent, and no doubt Mr O’Brien, held themselves out as having local knowledge, that quite clearly would not extend to having specific knowledge of the area of the plantation of vines on particular properties. It might, for example, signify knowledge as to the way in which such an area is usually measured in the district. It might extend to knowledge about particular practices in relation to viticulture in the district. However, it could not rationally be regarded as a statement that the Agent was familiar with the dimensions or area of every property or of particular parts of every property in the district.

87 The Purchaser contended that the area of vine planting was ‘one of hard physical fact’ and that a prospective buyer was entitled to assume that a statement as to a ‘hard physical fact’ had been verified by the agent (see John G. Glass Real Estate Pty Ltd v Karawi Constructions Pty Limited [1993] ATPR 41-249 (‘John G Glass’ discussed further below) at 41, 359). However, if the expression ‘one of hard physical fact’ is intended to signify ‘an uncontroversial matter, admitting of only one answer’, it must be said that the question of how the area of land planted with vines is to be described is not a matter of ‘hard physical fact’. Whether access areas (headlands and sidelands) or only the trellised areas are to be included was debatable. In any event, it would be unreasonable to attribute to an agent responsibility for every representation which can be correctly described as going to a matter of hard physical fact.

88 The purchasers could not reasonably have expected Mr O’Brien to have been the source of the vineyard acreage information nor could they have expected in the circumstances that by virtue of his calling he possessed the expertise necessary to verify that information. The conduct of the agent and Mr O’Brien involve no more than passing on information from the Graces to prospective buyers. They were not additionally vouching for its accuracy. They had in fact taken care as to the accuracy of the information by having it checked by the Graces. They were furnished information that, as events turned out, was incorrect. In all the circumstances, neither the Agent nor Mr O’Brien engaged in conduct that contravened s 52 of the Trade Practices Act or s 42 of the Fair Trading Act. The Agent and Mr O’Brien are entitled to succeed on their appeal from the judgement in favour of the Purchaser.

89 The significance of the Rare Opportunity document and the Property at Present document, being Grace documents which pre-dated the 2000 Brochure, is that they are the first documentary representations made as to vineyard acreage and they are made by the Graces at their first meeting with the prospective purchasers. They provide the context in which the Agent’s/O’Brien’s representations should be seen.

90 From the time of the inspection of 3 September 2000, Mr and Mrs Houlihan and Mr Dunne must have known that the source of the information conveyed by the Agent as to the area under vines, was the Graces. The representations in the Rare Opportunity document were those of the Graces; see the references to ‘we’ and ‘our’ in the document.

91 Mr Houlihan agreed that following the meeting on 3 September 2000, later in 2000 and early in 2001, he attended the Property and met with the Graces numerous times, and that Mr Grace repeatedly referred to the area of vines as 20 acres on such occasions. Mr O’Brien was not present.

92 It is true that, prior to the inspection, Mr Dunne sent the Information Request to O’Brien McGregor, the second inquiry on which read ‘areas by variety + vineyard map’. However, Mr Dunne agreed the inquiries in the Information Request were intended for Mr Grace and that the answers to them were in fact provided by him. It is not suggested that Mr O’Brien handed over the answers to the questions prior to the meeting on 3 September, although Mr O’Brien said it was possible that he handed over to the Houlihans the typed answers at the meeting.

93 Mr Houlihan insisted that he relied on Mr O’Brien, as well as on the Graces, for the ’20 acres’ figure, that he did not distinguish between them, and that he saw the agent’s position as ‘one of corroboration’. But Mr Houlihan’s understanding is not conclusive of the question how the Agent’s conduct is to be understood for present purposes: whether, on the one hand, as itself amounting to the making of a representation, or, on the other hand, as a passing on of information supplied by the Graces.

94 While Mr Houlihan said in cross-examination, that ‘you look to the agent to have local knowledge’ and as having ‘independent expertise’, the attribution of those qualities to him does not of itself give the agent a knowledge of, or expertise relating to, all matters which are the subject of communications made in its name. Nor do they make the agent independently responsible for the information so communicated. There is nothing in the evidence to suggest, in the course of their dealings with O’Brien that the applicants called upon him to display his alleged expertise. This is unsurprising. The applicants, understandably, dealt directly with the Graces. The relevant expertise (ie assessing acreage of vineyards) was not one that reasonably could be attributed to O’Brien on what was known about him, even if he had ‘local knowledge’: cf Butcher at [42]-[44].

95 On the appeal, the Agent relied on the reasoning of the majority judgment in the High Court in Butcher, while the Purchaser sought to distinguish that case and to persuade us that the facts of the present case were closer to those of John G Glass. Butcher concerned what was said to be a representation in a suburban real estate agent’s brochure relating to a Sydney waterfront residential property, to the effect that a metal picket fence ran along the line of the mean high watermark which appeared in a survey diagram that was included in the brochure. It transpired that the mean high watermark was not located where it was shown on the diagram. The High Court held by a 3:2 majority that the agent did not make a representation beyond stating what information the vendor wished to have communicated to a purchaser. Factors which favoured that conclusion were that:

96 John G Glass concerned a representation in the brochure of a real estate agent which held itself out as ‘Consultants to institutional investors and to developers of major properties’ as to the net lettable area of a building which was in the course of construction. Factors which favoured the holding by a Full Court of this Court that the agent was liable were that:

97 In this area, each case depends on its own facts. Considerations which lead us to conclude that the Agent was to be seen as relaying information provided by another are that:

98 In light of the conclusion that the Agent is not liable to the Purchaser, the question of indemnity by Mr and Mrs Grace does not arise. However, if a different conclusion had been reached in relation to the liability of the Agent to the Purchaser, there is no reason to limit the extent of the indemnity of the Agent.

99 The primary judge apportioned responsibility for the vine area representation as to 80 percent to Mr Grace and 20 percent to the Agent. Since he treated the vine area representation and the bore water representation as equal inducements, the result was that overall, the Agent’s responsibility was 10 percent.

100 If the Agent and Mr O’Brien had any liability to the Purchaser, it was because it relied, quite reasonably, on the information furnished to it by Mr and Mrs Grace. The Agent expressly sought confirmation of the accuracy of the statements in the 2000 Brochure. There is no reason why the Agent should have doubted the accuracy of information furnished to it by its principal: Mr Grace was the owner of the Property and the person responsible for planting the vines. To the knowledge of the Graces, the Agent had not independently measured the area planted with vines. There is certainly no reason, as between the Agent and Mr and Mrs Grace, why the Agent should have checked the 20 acre figure furnished to it by its principal and which it received in good faith. The Agent and Mr O’Brien are therefore entitled to succeed in their appeal in so far as it is brought against the order that as between them and Mr Grace, they bear 20 percent of the liability and Mr Grace 80 percent. If we had found the Agent and Mr O’Brien liable at all, they would have been entitled to a full indemnity from Mr and Mrs Grace.

101 By para 16A of its amended cross-claim, the Agent claimed that if, contrary to its contention, it represented to the Purchaser prior to mid-October 2000 the area of vines, then before those representations were made, Mr and Mrs Grace had previously represented to the Agent that the area of vines was 20 acres, and, in so doing, made a misleading and deceptive representation in trade and commerce in contravention of s 42 of the Fair Trading Act 1987 (NSW) (‘FTA’), which was relied upon by the Agent in making its representation to the Purchaser. According to para 19 of the amended cross-claim, if the Agent is liable, it is entitled to recover the amount of that liability from the Graces, being the consequence of their contravention of s 42.

102 Accordingly, there was before the primary judge a claim by the Agent against, relevantly, Mrs Grace based on FTA s 42.

103 Contrary to his Honour’s view, the Agent’s claim for indemnity did not depend on an accessorial liability of Mrs Grace, depending, in turn, on proof of her knowledge of the falsity of the vine area representation. Similarly, the Agent’s claim for indemnity did not rest on the doctrine of equitable contribution. It follows that Re La Rosa; Ex parte Norgard v Rodpat Nominees Pty Ltd (1991) 31 FCR 83 and other authorities to the effect that s 72 of the FTA, the FTA equivalent of TPA s 87, does not authorise an indemnity or contribution order as between co-contraveners or as between an accessory and a contravener, are irrelevant.

104 We think that Mrs Grace is liable (with Mr Grace) to indemnify the Agent. As noted at [40] above, on 10 October 2000, Leanne Goodear of O’Brien McGregor First National wrote to Mr Grace enclosing a draft of the listing details for the property and asked him to ‘check, make any adjustments and return ... in the envelope supplied’. The draft contained a statement ‘presently there are 22 acres of vines ...’. Mrs Grace altered the number ‘22’ to read ‘20’ and returned the document to O’Brien McGregor on 17 October 2000. Mr O’Brien wrote a note to Ms Goodear: ‘Leanne, could you please make appropriate changes suggested by June Grace. Thanks, Tim’ (see [38] and [39] above). As instructed by Mrs Grace, the final version of the 2000 brochure stated ‘at present there are 20 acres of vines ...’.

105 We think that Mrs Grace is as liable as her husband for misleading the Agent into communicating the 20 acres measurement to the Purchaser. If, contrary to our view, that was a representation by the Agent for which the Agent and Mr O’Brien incurred liability to the Purchaser, they are as much entitled to recover the full amount of that liability from Mrs Grace, as they are from Mr Grace.

106 On the hearing of the appeal, the Agent and Mr O’Brien sought leave to file a further amended cross-claim and we indicated that we would rule on their application in our final reasons for judgment. The further amended cross-claim would add, further and in the alternative, new paras 20–22. These paragraphs refer to the partnership which existed between Mr and Mrs Grace. Counsel for Mr and Mrs Grace on the appeal opposed the granting of leave to amend. However, he was not able to point to any prejudice caused to Mr and Mrs Grace by the granting of leave, and leave should be granted.

107 Paragraph 6 of the further amended statement of claim alleged that Mr Grace conducted a winery business known as ‘Lawson Hill Winery’ on the land, but in their respective defences, Mr and Mrs Grace pleaded in answer that the business was conducted by both of them in partnership. Financial records in evidence demonstrated that the business was that of ‘JH and JM Grace’. Mrs Grace co-signed the contract for sale throughout that document. Although it was in the standard form of a contract for the sale of land, it is plain that the parties treated the business as being sold by means of it too, and the document contains references to ‘the Vendors’ (in the plural).

109 Mrs Grace would be liable (with Mr Grace) to indemnify the Agent simply on general agency principles because:

However, this claim was not pleaded. Paragraph 20 of the proposed further amended cross-claim pleads that Mr Grace (not Mrs Grace) is liable to indemnify the Agent (fully) by reason of an implied term of the Sales and Marketing Agreement dated 28 September 2000.

110 Paragraph 21 of the proposed further amended cross-claim relies on s 6 of the Partnership Act, which provided:

The Sales and Marketing Agreement was not ‘executed in the firm-name, or in any other manner, showing an intention to bind the firm’. The ‘Principal’ was shown simply as ‘Jose Grace’ and there was nothing on the face of the document to suggest that he intended to bind the firm trading as ‘Lawson Hill Winery’.

111 Paragraph 22 of the proposed further amended cross-claim relies on ss 10(1) and 12 of the Partnership Act. Subsection 10(1) provided, relevantly:

Section 12 provides that every partner is liable jointly with his or her co-partners and also severally for everything for which the firm, while the partner is a partner in it, becomes liable under, relevantly, s 10(1).

No particulars of this paragraph are given. The Agent’s case is that some loss-causing contravention of s 42 of the FTA made by Mr Grace was authorised by Mrs Grace, with the result that she is jointly and severally liable with him to the Purchaser.

114 We think the appropriate course, in the absence of proper particularisation of the claim or of debate on the appeal of the issues mentioned above, is to grant leave to amend but not to rely on the new claims made in holding Mrs Grace liable with her husband to indemnify the Agent.

115 The Purchaser’s claim against Mr Dalton is that, in contravention of s 42 and s 45(1) of the Fair Trading Act, he engaged in conduct that was misleading or deceptive by creating, and not rectifying the mistake in, Invoice 0650. It is significant that the Purchaser did not claim that Mr Dalton, or the Dalton Company, had made any representation to the Purchaser or any person associated with or connected with the Purchaser. Mr Dalton had no apprehension of the Purchaser or anyone associated or connected with it. Nor did he have any knowledge of the interest in the Property of such persons until after completion of the purchase of the Property by the Purchaser. The primary judge did not find that, when Mr Dalton carried out his work at the Property and delivered Invoice 0650, he knew that Mr and Mrs Grace had in mind an eventual sale of the Property or that they were interested in the bore as a marketing tool.

116 It is clear that Mr Dalton created Invoice 0650 and wrote ‘1800 GPH’ in the space provided for the estimated supply of water. The proceeding was conducted by all parties on the basis that the water flow rate was never more than 400 gallons per hour and that the figure written by Mr Dalton on Invoice 0650 was incorrect. The question is whether Mr Dalton engaged in conduct that was misleading or deceptive qua the Purchaser, in contravention of s 42 of the Fair Trading Act and, if so, whether there was a causal connection between that conduct and the damage that the primary judge held was suffered by the Purchaser by entering into the contract of 23 April 2001.

117 The primary judge found that Mr Dalton gave Mr Grace an oral estimate of 400 gallons per hour and that that was an honest estimate. His Honour found that Mr Dalton converted that into litres at the request of Mr and Mrs Grace and that it was because he had calculated 1,800 litres that, intending to write ‘1800 LPH’, he mistakenly wrote ‘1800 GPH’ on Invoice 0650. His Honour concluded that the action of Mr and Mrs Grace, in quoting 1,800 gallons per hour to Mr Houlihan, Mr Dunne and others should not be regarded as having broken the chain of causation between the written misrepresentation made by Mr Dalton to Mr and Mrs Grace in Invoice 0650 and the damage suffered by the Purchaser. On his Honour’s view of the facts, Mr and Mrs Grace did no more than pass on to others, in good faith and without realising the error, the wrong information contained in Invoice 0650. In passing on the information orally, they were misled by Invoice 0650 into misremembering what Mr Dalton had orally reported to them in April 1998.

118 By showing Invoice 0650 to Mr Houlihan and Mr Fleming, Mr Grace directly passed on Mr Dalton’s erroneous written statement. His Honour found that it was not unreasonable for Mr and Mrs Grace to rely upon Invoice 0650, since it was in the form of a document of record and completed in a manner consistent with that purpose. His Honour found that it was the incorrect statement itself, rather than any supervening act of Mr and Mrs Grace, that caused the damage to the Purchaser. Mr Dalton’s action in giving Mr and Mrs Grace a document of record that misstated his estimate of the water flow generated the very risk of the damage that in fact occurred.

119 The primary judge found that, in April 1998, each of Mr and Mrs Grace understood that Mr Dalton’s estimate of the water flow was 400 gallons per hour or 1800 litres per hour. Neither of them was misled or deceived by Invoice 0650 into believing, in April 1998, that the estimated water flow was 1800 gallons per hour. His Honour found that Mr and Mrs Grace did not read the estimated water flow rate on Invoice 0650 and therefore did not realise, at that time, that the figure was incorrect.

120 Mr and Mrs Grace were cross-examined at length. His Honour formed the impression that each of them was an honest person trying to give correct evidence and he did not believe that either of them would have embarked on any deceitful course of deciding to leave an error uncorrected and to take advantage of the error later. Rather, his Honour concluded that, in the interval of over 2 years before Mr Dunne’s first enquiry of Mr O’Brien, the figure stated orally by Mr Dalton had slipped out of their minds. When they took out Invoice 0650 for use in connection with the sale of the Property, they did not realise that it was incorrect and acted in good faith in quoting the figure of 1,800 gallons per hour and showing it to Mr Houlihan and Mr Fleming.

121 Mr Dalton contended that it was not open to the primary judge to find that Mr and Mrs Grace made an honest mistake. Their case at the trial involved an assertion that Mr Dalton gave an oral estimate of 2,000 gallons per hour in April 1998. His Honour expressly rejected that case.

122 Mr Grace claimed in his evidence that Mr Dalton told him 2000 gallons per hour. Mr Grace denied, in cross-examination, that litres were mentioned by Mr Dalton at any stage. He denied that Mrs Grace asked how many litres per hour 400 gallons per hour would work out to be. In cross-examination, Mrs Grace denied that Mr Dalton mentioned 400 gallons per hour, although she agreed that Mr Grace may have said that the figure mentioned by Mr Dalton was not enough to irrigate grapes. She agreed that the discussion between her husband and Mr Dalton was in gallons and that, as a consequence of the discussion, Mr Dalton went back to the second bore and drilled deeper to try to get a higher yield from the bore if he could.

123 At first, Mrs Grace said that she could not remember that Mr Dalton said that the original yield of the bore was only about 400 gallons an hour. However, later in the course of cross-examination, when it was suggested to her that she was told that there was a flow of 400 gallons per hour and that that was simply insufficient for any agricultural purpose she responded ‘No, absolutely not’. Later still, when asked whether she understood that the water that was generated from the second bore would not be sufficient to irrigate the property, she said: ‘We were told it would be good enough in an emergency, 1,800 gallons an hour’. Mrs Grace also denied asking Mr Dalton about litres and said that she did not think in litres. She denied that Mr Dalton made some calculations in response to an enquiry from her and said that the flow was about 1,800 litres per hour.

124 In the light of the responses that were given by Mr and Mrs Grace, it is difficult to support the conclusion of the primary judge that the figures stated orally by Mr Dalton slipped out of their minds. The conflict in the evidence was not one that involved determining whether or not Mr and Mrs Grace had forgotten but whether or not Mr Dalton told them in April 1998 that the flow was 1,800 gallons per hour, rather than 400 gallons per hour or 1,800 litres per hour. They expressly denied that and his Honour did not accept their evidence on the point.

125 The difference is significant. It bears directly on the question of the causal connection between Mr Dalton’s error, on the one hand, and the damage suffered by the Purchaser on the other. If Mr and Mrs Grace made a conscious decision to make a representation that the flow was 1,800 gallons per hour and to produce Invoice 0650 by way of corroboration, knowing that they had been told in April 1998 that the flow was only 400 gallons per hour, there was a clear novus actus interveniens that would be sufficient to break the causal link between Mr Dalton’s mistake and the Purchaser’s loss.

126 As between Mr Dalton, on the one hand, and Mr and Mrs Grace, on the other, the conduct of Mr Dalton in providing them with Invoice 0650 containing the incorrect statement, was not misleading or deceptive, because he told them the correct figure at the time. Even if they did not notice the mistake, there was nothing said to Mr Dalton that would indicate to him that Invoice 0650 was to be put to some use other than as a record for Mr and Mrs Grace of what he had told them orally. He was not retained to give any advice as to the water flow. He was not retained to give a certificate as to the water flow. Rather, he was retained to drill the bore and subsequently to case the bore. He did that. It is significant that Invoice 0650 has no amount on it. Mr Dalton did not charge any fee for, and was not remunerated for, stating an estimate of the water supply from the bore.

127 It was the act of Mr and Mrs Grace, whether it was dishonest or the result of a mishearing or misremembering (and if the latter, when and how it first occurred), in making a misleading statement to Mr Houlihan and Mr Fleming, and in producing Invoice 0650, that caused the Purchaser’s loss. It was Mr and Mrs Grace who put Invoice 0650 into circulation in circumstances where there was no expectation on the part of Mr Dalton that that might be its fate. There was no conduct in contravention of s 42 of the Fair Trading Act on the part of Mr Dalton by which any loss or damage was suffered by the Purchaser.

128 Mr and Mrs Grace were told by Mr Dalton in April 1998 that the water flow was only 400 gallons per hour and did not intimate to him in any way that they intended to make any use of Invoice 0650 in relation to any other person. They assumed the risk of inaccuracy in the Invoice (which was only part of Mr Dalton’s communications to them on water flow) when using it as they did. There was no contravention of s 42 on the part of Mr Dalton by inadvertently erroneously recording 1,800 GPH, rather than 1,800 LPH, on invoice 0650.

129 If Mr Dalton’s careless conduct of misrecording ‘1,800 GPH’ is considered in isolation, it would be conduct apt to mislead or deceive. But it is not to be considered in isolation. It was supposed to be a written confirmation of Mr Dalton’s oral account to the Graces of what he had seen. It was not a certificate for which he was paid or which he should reasonably have understood might well be communicated to others.

130 For all the reasons given above, Mr Dalton is entitled to succeed in his appeal from the judgment against him in favour of the Purchaser. It also follows that he is entitled to succeed in his appeal in so far as it is brought against the order for contribution in favour of Mr Grace.

131 All three appeals should be upheld. The orders made by the primary judge should be set aside. In lieu of those orders, there should be orders that judgment be entered in favour of the Purchaser against Mr Grace and Mrs Grace. Judgment should be entered in favour of the Agent, Mr O’Brien and Mr Dalton in respect of the claims made against them by the Purchaser. Judgment should be entered in favour of Mr Dalton in respect of the claim made against him by Mr Grace. Since neither the agent nor Mr O’Brien is liable to the Purchaser, no question of indemnity arises on their cross claims, which should be dismissed. The dismissal of the proceeding, so far as concerns the claims by other applicants, should stand, since there was no appeal from those orders.

132 Mr and Mrs Grace should pay the Purchaser’s costs of the proceeding as against them. The Purchaser should pay the costs of the Agent, Mr O’Brien and Mr Dalton. Those costs should include the costs of their cross claims. Mr Grace should pay the costs of his cross-claim against Mr Dalton. The Purchaser should pay the costs of the appeals by the Agent and Mr O’Brien and by Mr Dalton. Mrs Grace should pay the Purchaser’s costs of its appeal. Independent submissions were not made on behalf of the second to fifteenth appellants in the Purchaser’s appeal, and they should be left to bear their own costs of that appeal.

Counsel for the Appellant (Dalton):	R Toner SC and J Gruzman

Solicitor for the Appellant:	Pike & Associates

Counsel for the First Respondent (Lawson Hill Estates Pty Ltd):	M Ashhurst

Solicitor for the First Respondent:	Henderson Taylor Workplace Lawyers

Counsel for the Second Respondent (Mrs Grace) and the Third Respondent (Mr Grace):	D Burwood

Solicitor for the Second and Third Respondents:	Doyle Wilson

Counsel for the First Appellant (Tovegold Pty Ltd) and Second Appellant (Tim O’Brien):	J C Kelly SC and W V McManus

Solicitor for the First and Second Appellants:	Colin Biggers & Paisley

Counsel for the First Respondent (Lawson Hill Estates Pty Ltd):	M Ashhurst

Solicitor for the First Respondent:	Henderson Taylor Workplace Lawyers

Counsel for the Second Respondent (Mr Grace) and the Third Respondent (Mrs Grace):	D Burwood

Solicitor for the Second and Third Respondents:	Doyle Wilson

Counsel for the First Appellant (Lawson Hill Estates Pty Ltd) and the Second to Fifteenth Appellants (Paul Houlihan and Ors):	M Ashhurst

Solicitor for the First Appellant and the Second to Fifteenth Appellants:	Henderson Taylor Workplace Lawyers

Counsel for the Respondent (Mrs Grace):	D Burwood

Solicitor for the Respondent:	Doyle Wilson



Dates of hearing:	2, 3 May 2005

Date of judgment:	22 August 2005

•	WATER CUT
•	THICKNESS
•	STANDING WATER LEVEL
•	ESTIMATED SUPPLY
•	QUALITY

•	Mr Grace said that there were 20 acres under vines and a further 50 acres suitable for vines;
•	Someone (Mr Houlihan said he ‘assume[d] ... the Graces’ [T53]) handed to Mr or Mrs Houlihan a brochure which bore the words, ‘Rare Opportunity’ (‘the Rare Opportunity document’), which Mr Houlihan said he accepted had been ‘prepared by the Graces’ [T53] and which stated ‘we have at present 20 acres of vines’ (it contains several references to ‘we’ and ‘our’; the primary Judge stated at [42] that it was ‘agreed’ that Mr Grace provided it; Mr O’Brien said he did not do so, since he did not receive it until after the meeting); and
•	Mr or Mrs Grace probably gave Mr Houlihan a document which bore the words, ‘Property at Present’ (‘the Property at Present document’), and which stated ‘20 acres of fruiting vines’. (Mr Houlihan said he was given the Property at Present document "at or shortly after" [2AB131] the meeting and thought it was in the folder which contained the Rare Opportunity document, with the consequence that it was probably given to him by Mr Grace and was probably a Grace document. He said this document provided the basis on which he informed other potential investors about the property. Mr O’Brien said he was quite sure that this document was not prepared by O’Brien McGregor. He had no recollection of ever having seen it prior to this proceeding. The actual provenance of this document has not been explained satisfactorily.

1996	1997	1998	1999	2000
Total tonnage for 1996 55.7	46.7	23.55	38.5	19.3

•	they were co-owners of the business;
•	through Mr Grace, they engaged the Agent to find a buyer of the business; and
•	within the scope of its authority from the Graces, the Agent represented that the area of vines was 20 acres.

•	whether a contravention of s 42 of the FTA is a ‘wrongful act or omission’ within s 10(1) of the Partnership Act; and
•	whether s 10(1)’s notion of authorising a wrongful act or omission requires proof that the partner sought to be made liable knew all the essential elements of the contravention, including the falsity of the representation.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1928 of 2004

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 56 of 2005

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 197 of 2005

Federal Court of Australia - Full Court Decisions

Dalton v Lawson Hill Estate Pty Ltd [2005] FCAFC 169 (22 August 2005)