Bullabidgee Pty Ltd v McCleary; McCleary v Bullabidgee Pty Ltd [2010] NSWSC 145 (4 March 2010)

Last Updated: 5 March 2010

NEW SOUTH WALES SUPREME COURT

CITATION:
Bullabidgee Pty Ltd v McCleary; McCleary v Bullabidgee Pty Ltd [2010] NSWSC 145


JURISDICTION:
Equity

FILE NUMBER(S):
2008/277814
2008/278153

HEARING DATE(S):
16, 17, 18 & 23 March 2009

JUDGMENT DATE:
4 March 2010

PARTIES:
2008/277814
Bullabidgee Pty Ltd (P1)
Towool Pty Ltd (P2)
Towool West Pty Ltd (P3)
Towool Water Pty Ltd (P4)
Warrawool Pty Ltd (P5)
Warrawool North Pty Ltd (P6)
Warrawool Water Pty Ltd (P7)
MHD Echuca Pty Ltd (P8)
Ian Tayles (P9)
Brian John McCleary and Peter Joseph Rae (D1)
JP & M Kerr (Billabidgee) Pty Ltd (D2)
Bullatale Pastoral Pty Ltd (D3)
2008/278153
Brian John McCleary (P1)
Peter Joseph Rae (P2)
Bullabidgee Pty Ltd (D1)
Towool Pty Ltd, Towool West Pty Ltd & Towool Water Pty Ltd (D2)
Warrawool Pty Ltd, Warrawool North Pty Ltd & Warrawool Water Pty Ltd (D3)
MHD Echuca Pty Ltd (D4)
Ian Tayles (D5)
Ricegrowers Limited t/as Sunrice (D6)

JUDGMENT OF:
Brereton J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
B W Rayment QC and A D Justice (Purchasers)
B A J Coles QC and S Galitsky (Trustees/Vendors)


SOLICITORS:
Cork Commercial Lawyers (Purchasers)
Francis Kelly & Grant (Trustees/Vendors)



CATCHWORDS:
CONVEYANCING – contract for sale of land – where purchaser claims entry into contracts procured by misrepresentation – where purchaser found not to have relied on contravening conduct - whether contravening conduct productive of loss or damage - where purchaser affirms contract – effect of affirmation on statutory remedies - whether contract should be avoided under Fair Trading Act, s 72 – where purchaser remained in possession following termination by vendor for default – assessment of damages for breach of contract – assessment of damages for trespass - extent to which credit must be given for forfeited deposit – whether deposit should be returned under Conveyancing Act, s 52(2A).
TRADE PRACTICES – contract for sale of land – where purchaser claims entry into contracts procured by misrepresentation – where purchaser found not to have relied on contravening conduct - whether contravening conduct productive of loss or damage - where purchaser affirms contract – effect of affirmation on statutory remedies - whether contract should be avoided under Fair Trading Act, s 72.

LEGISLATION CITED:
(CTH) Trade Practices Act 1974, ss 52, 87
(NSW) Agricultural Tenancies Act 1990
(NSW) Conveyancing Act 1919, s 55(2A)
(NSW) Fair Trading Act 1987, ss 42, 72

CATEGORY:
Principal judgment

CASES CITED:
Alati v Kruger [1955] HCA 64; (1955) 94 CLR 216
Cratchley v Bloom (1984) NSW Conv R 55-203
Crisp v Australia and New Zealand Banking Group (1994) ATPR 41-294
Gould v Vaggelas [1985] HCA 85; (1985) 157 CLR 215
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd [1988] FCA 40; (1988) 39 FCR 546; (1988) 79 ALR 83
Loughridge v Lavery [1969] VicRp 112; [1969] VR 912
McAllister v Richmond Brewing Co (NSW) Pty Ltd (1942) 42 SR (NSW) 187
Morton v Black (1988) 83 ALR 182
Munchies Management Pty Ltd v Belperio [1989] FCA 413; (1988) 58 FCR 274; 84 ALR 700
Myers v Transpacific Pastoral Co Pty Ltd (1986) ATPR 40-673
Romanos v Pentagold Investments Pty Ltd [2003] HCA 58; (2003) 217 CLR 367
Toteff v Antonas [1952] HCA 16; (1952) 87 CLR 647
Yorke v Ross Lucas Pty Ltd (No 2) [1982] FCA 180; (1982) 45 ALR 299
Zieme v Gregory [1963] VicRp 34; [1963] VR 214

TEXTS CITED:


DECISION:
Vendors engaged in misleading and deceptive conduct in contravention of Fair Trading Act, s 42. Purchasers did not rely on contravening conduct. Had they done so, statutory avoidance not available or would have been declined. Vendors effectively terminated for Purchasers’ default. Vendors entitled to damages for breach of contract and for trespass. Decline to order return of deposit, under s 55(2A). Direct that defendants (Vendors) bring in short minutes to give effect to this judgment.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EXPEDITION LIST


Brereton J

Thursday, 4 March 2010

1813/08 Bullabidgee Pty Ltd & Ors v Brian John McCleary & Ors

2244/08 Brian John McCleary & Ors v Bullabidgee Pty Ltd & Ors

JUDGMENT

1 HIS HONOUR: The ninth plaintiff in proceedings 1813/08, Ian Tayles, is the sole director of the eight plaintiff companies, who together are the purchasers – under three contracts for sale of land made on 1 June 2007 – of three aggregations of land called Billabidgee, Towool and Warrawool near Deniliquin, and also – under a separate contract made on the same day – of the chattels located on them, from the first defendants Messrs McLeary and Rae who are trustees for sale of those properties – which were formerly in the ownership of the Kerr family, who are the beneficiaries – pursuant to an order of the Court made in earlier proceedings. The eighth plaintiff, MHD Echuca, as purchaser under the contract in respect of the chattels, paid the purchase price specified in that contract in full on 8 June 2007. On the same day, in accordance with the provisions of the land contracts, upon payment of the deposits, the Purchasers went into occupation and commenced to farm the properties, but they did not pay the balance purchase price on the specified completion date, namely 30 November 2007, nor at all. The Vendors claim declarations that they terminated the land contracts on 12 March 2007 (for failure by the Purchasers to complete on 7 March 2007 in accordance with Notices to Complete given between 14 and 20 February 2007), and that they are entitled to the crops grown and harvested by the Purchasers since then; and judgment for possession, damages for trespass, and damages for breach of contract. The Purchasers originally resisted the Vendors’ claim for possession and sought, pursuant to the (NSW) Fair Trading Act 1987, s 72, an order varying the contract by reducing the purchase price and requiring the Vendors to complete at such reduced price. However, the Purchasers now accept that they cannot establish that they are ready, willing and able to complete, and claim – pursuant to Fair Trading Act, s 72 – an order declaring the contracts void ab initio, and damages; alternatively – pursuant to (NSW) Conveyancing Act 1919, s 55(2A) – discretionary return of the deposit.

Background

2 On 7 May 2007, Mr Tayles saw in The Land an advertisement for the sale of Billabidgee, which was relevantly as follows:

AUCTION

‘BILLABIDGEE’

9154AC – 2303 megalitres water

Coach House Motel – DENILIQUIN NSW

Friday June 1^st at 11.00am

This property has two distinct features – water & location. Situated 30km south east of Deniliquin, 60km from Tocumwal, 90km north of Echuca and approx 300km from Melbourne makes it easily accessible to regional Victoria and southern NSW markets. The water licence attached to the bore has a permanent entitlement of 1029 units & a supplementary allocation of 910 megalitres. There is also an entitlement to 364 megalitres of general security water from the Bullatale Water Trust.

The property lies between the Edward River and the Tuppal Creek with the Bullatale Creek flowing through the middle giving access to fresh water for stock and recreational activities.

The country is level with shade timber – being grey and yellow box, bull oak & Murray pine – in most paddocks and stands of Redgum along with creek systems. Around 7,000AC is available to farm which includes the irrigation layouts. The water is pumped from the Bullatale through the property and is linked to the bore water. There is a lagoon which is used as a storage for reticulation purposes.

The crops generally grown are cereals with irrigated rice and a percentage of the farm has been sown to lucerne for grazing.

The improvements include a 40 square brick homestead (1970), 3 bedroom manager’s house, 5 stand woolshed, machinery sheds, crutching/storage shed, 2 sets of sheep & cattle yards, workshop.

Billabidgee lends itself to large scale farming enterprises with the availability of the bore & creek water & is well suited for breeding & fattening programs.

FOR FURTHER DETAILS OR INSPECTIONS CONTACT SELLING AGENTS:

Ian Macleod Agencies HAY NSW

...

DISCLAIMER: The printed information has been supplied to us by the Vendor. We do not accept responsibility to any person for its accuracy and do no more than pass this information on. Interested parties should make and rely on their own inquiries in order to determine whether or not this information is in fact accurate.

3 On 8 May 2007, Mr Tayles telephoned the agent, Mr Macleod, who provided some information about the property and referred him to a more detailed advertisement, in Stock & Land. Subsequently, Mr Tayles received a telephone call from Mr Rae, one of the Trustees, and he also received by facsimile the draft description and special conditions for the contract for sale, which included:

3 Acceptance of improvements, encroachments and area

...

3.3 The purchaser has entered into this contract following his detailed inspection of the property and acknowledges that there shall be no reduction in price should it be found that the area of the property is less than that area set out in the description of property or in the Crown and other plans attached to this contract.

...

8 Written contract constitutes whole agreement

(a) This contract will supersede any and all prior agreements, understandings, arrangements, promises, representations and warranties of any form or nature whatsoever, whether oral or in writing and whether explicit or implicit, which may have been entered into prior to the execution hereof between the parties, their officers, directors, or employees as to the subject matter hereof.

(b) Neither of the parties hereto has relied upon any oral representation or oral information given to him by any representative of the other party.

(c) No warranties shall be deemed to have been given or implied, as to any matter or thing relating to the subject property, from any map, advertisement brochure or any written or oral statement otherwise than is written herein.

(d) No amendment of this contract shall be valid unless made in writing and duly executed by the parties hereto.

4 On 9 May, Mr Tayles obtained a copy of Stock & Land for 3 May 2007, which contained an advertisement relevantly in the following terms:

“BILLABIDGEE” DENILIQUIN NSW AUCTION 1^st June 2007

Coach House Motel, Deniliquin, 11am

GRAZING FATTENING AGRICULTURE RICE

9,154 ACRES – 3 TITLES – 2,303 MEG. IRRIGATION

This property has two distinct features – water & location. Situated 30km south east of Deniliquin, 60km from Tocumwal, 90km north of Echuca and approx 300km from Melbourne makes it easily accessible to regional Victoria and southern NSW markets. The water licence attached to the bore has a permanent entitlement of 1029 units & a supplementary allocation of 910 megalitres. There is also an entitlement to 364 megalitres of general security water from the Bullatale Water Trust.

The property lies between the Edward River and the Tuppal Creek with the Bullatale Creek flowing through the middle giving access to fresh water for stock and recreational activities.

The country is level with shade timber – being grey and yellow box, bull oak & Murray Pine – in most paddocks and stands of Redgum along the creek systems. Around 7,000AC is available to farm which includes the irrigation layouts. The water is pumped from the Bullatale through the property and is linked to the bore water. There is a lagoon which is used as a storage for reticulation purposes. The crops generally grown are cereals with irrigated rice and a percentage of the farm has been sown to lucerne for grazing.

Billabidgee lends itself to large scale farming enterprises with the availability of the bore & creek water & is well suited for breeding & fattening.

...

PASTURES: Approx 1,200 acres are normally sown to lucerne, the balance are mainly native grasses with herbage abounding in season.

CROPPING: Overall about 7,500 acres can be farmed. Normal annual farming includes 3,000-4,000 for cereal crops plus irrigated rice.

...

DISCLAIMER: The printed information has been supplied to us by the Vendor. We do not accept responsibility to any person for tis accuracy and do no more than pass this information on. Interested parties should make and rely on their own inquiries in order to determine whether or not this information is in fact accurate.

5 On 11 May, Mr Tayles travelled to Deniliquin and inspected the properties, in the company of Mr Macleod and Mr Greg Kerr. In the course of this inspection, he obtained from Greg Kerr further details of the croppable area of each of the paddocks, which he noted on a plan of the property. On 26 May, Mr Tayles inspected the properties a second time, spending the best part of a day doing so, this time unaccompanied.

6 Based on information provided to him by Greg Kerr during the first inspection, and on further information provided to him by the agent, and on inquiries made of another agent as to the selling price of comparable lands, Mr Tayles on 31 May made an assessment of the value of the property. He did so on the basis that there were 1,145 acres of irrigation paddocks, to which he attributed a value of $400/acre; 1,200 acres of eaten out lucerne, to which he attributed $300/acre; 4,500 acres of dry cropping, to which he attributed $300/acre; and 2,271 acres of bush, roads, channels, yards and partly cleared land, to which he attributed $100/acre. These calculations totalled 9,116 acres, of which 6,845 were croppable (close enough to the 7,000 referred to in the advertisements), and a total value of $2,395,100 – to which he added $745,150 for the water rights and $300,000 for the buildings, to derive a total value of $3,440,250. He wrote in his journal “$3.44m” to remind him at the following day’s auction.

7 The auction took place on 1 June 2007. Mr Tayles was the only person bidding. He opened bidding with a bid of $3.44 million. There were no further bids. The Vendors bid $4 million and the properties were passed in to them.

8 Negotiations ensued. Initially, Mr Tayles maintained his position that the property should be sold to him for $3.44 million in the absence of any higher bidder. Mr Macleod maintained that the starting point was the Vendors’ bid of $4.0 million. There was a stalemate, until Mr Macleod said “We have two sworn valuations which give the value of the property as $4.28m”, later explaining that one was at $4.28 million and the other at $4.15 million. Although Mr Tayles emphasised that no one at the auction thought it was worth anything like that, Mr Macleod maintained that the Vendors would not sell for less than $4.28 million. Mr Tayles asked what else could be thrown in on a “walk-in walk-out” basis. The Vendors sought $550,000 for the plant and equipment on the property. After inconclusive negotiations on that topic, an all-in price was discussed. Mr Tayles was eager to reach a resolution, so that he could commence sowing the rest of the crop the following week; otherwise it would be too late to do so. On a walk-in walk-out basis, inclusive of plant and equipment, Mr Tayles raised his bid to $4.3 million and then to $4.4 million; this was influenced by his acceptance that there were sworn valuations at $4.15 million and $4.28 million. Then, the Vendors proposed to apportion only the depreciated value of the plant and equipment to the chattel contract, and the remainder of their value across the land contracts. Eventually, the parties agreed upon a total price of $4.488 million for the land and chattels, of which $120,000 was apportioned to the chattel contract. Mr Macleod and Mr Tayles agreed that certain of the chattels on the properties would be excluded from the sale and Mr Macleod made a list of the excluded chattels.

9 Mr Tayles proposed, and the Trustees agreed, that instead of one contract, there should be a separate contract for each property. Three separate land contracts were exchanged, for $830,000 for Billabidgee, $1,970,000 for Towool, and $1,568,000 for Warrawool. They included special conditions, which were amended at Mr Tayles’ request, but they continued to include the special conditions 3.3 and 8 set out above.

10 A further handwritten document was prepared to provide for the sale of the chattels for $120,000, in the following terms:

MHD Echuca Pty Ltd agrees to purchase the plant on the attached Annexure B for $120,000 plus GST and agrees to pay interest thereon at 12% from 31.8.07 until settlement on 30.11.07.

1/6/07

MHD Echuca Pty Ltd

per Ian Tayles

I Ian Tayles guarantee the above as if the terms of the guarantee were as set out in the contract for purchase of 10/DP251372.

1/6/07

Ian Tayles

11 Annexure B was entitled “Schedule of Plant & Equipment included in the sale of Billabidgee (in Condition as at 1/06/07)” and comprised a list exceeding three A4 pages in length of specified items of farm equipment, concluding “All workshop plant other than personal tools reasonably selected by John, Greg and Wayne Kerr”. The chattel contract did not refer to, or annex, the list of excluded items that Mr Macleod had made.

12 On 1 June, the Purchasers paid $448,000, being the 10% deposits under each of the contracts.

13 Although Mr Tayles apparently instructed Mr Zindilis, solicitor, to act for the Purchasers on 4 June 2007, he appears to have done nothing. There is no evidence that any requisition on title was issued, nor any other of the usual inquiries made. Between 5 June and 6 September, the Vendors’ solicitors wrote to Mr Zindilis on five occasions, but elicited no response.

14 On 5 June, when he again inspected the properties in the presence of Mr Greg Kerr and an agronomist, Mr Tayles formed a belief (he initially said that he had “realised” or “ascertained” it, but later – as the implications of certainty that his language conveyed became apparent to him in the course of cross-examination – modified this to “suspected”) that the properties comprised less than 7,000 farmable acres, although not the extent of any deficiency. He said to Mr Kerr: “Where’s the rest of it?”. That he had formed this belief so early emerged only in a late affidavit sworn and read on the third day of the hearing, in circumstances to which reference shall later be made.

15 On or about 8 June 2007, MHD Echuca paid $120,000 – being the balance purchase moneys and GST under the chattel contract – and the Purchasers entered into occupation of the properties, on which the plant and equipment the subject of the chattel contract was situated, and thereafter proceeded to cultivate the properties, sowing something under 3,000 acres with crops.

16 Subsequently during June 2007, Mr Tayles learned that members of the Kerr family proposed to cause some of the chattels to be removed from the properties and/or sold. There ensued a dispute in respect of the chattels, with Mr Tayles contending that he had purchased all the plant and equipment on the property whether or not it was referred to in annexure B to the chattel contract other than the items specifically agreed to be excluded and listed by Mr Macleod, while the Trustees contended that he had purchased only that which was listed in annexure B. Mr Tayles pressed for the Trustees to take steps to prevent the removal or sale of chattels from the properties; they did not do so (unsurprisingly, since the Purchasers were by then in possession of the properties). On 6 August, there was a meeting between the Trustees, Mr Macleod and Mr Tayles, which, although making some progress, did not resolve this dispute.

17 In about September, Mr Tayles – who was contemplating a re-subdivision of the properties – retained a surveyor, Mr Mitch, to prepare a “desk-top subdivision”. This did not involve any inspection of the properties.

18 During September, Mr Tayles submitted a finance application to the National Australia Bank. He says that he deferred doing so until then, because he wished first to get the chattels issue resolved. He told the bank officer that he believed the properties now to be worth in excess of $5 million, because he had broken it into six rather than just one parcel of land. Not until October did he engage a valuer (Mr Henderson) for that purpose; the valuer’s instructions were never finalised.

19 On 25 September 2007, at the Henty Field Day, Mr Tayles instructed Mr Willis, who was in attendance as a representative of Land and Property Information, to produce a scaled aerial photograph of the properties. He followed up this request on 17 October, requesting a digital format for use with AutoCAD. On 13 November, he received the photographs and a CD-ROM containing the digitised photos. On 16 November he ordered additional copies. According to his affidavit evidence “over the ensuing weeks”, using AutoCAD, he produced a digitised master plan, from which he calculated that the properties had an arable area of 5,325 acres; in re-examination, he suggested that he did not complete this until February 2008.

20 On 18 October 2007, Francis Kelly & Grant for the Vendors wrote to Glowreys for the Purchasers, observing:

In our discussion your Mr Glowrey indicated that Mr Tales may be seeking a mutual rescission of the contracts to substitute different purchasers although you had no firm instructions at this point.

We have raised this matter with the trustees who have indicated that they are not in a position to agree to any such proposal if made. ...

Our clients note that the matter is due for settlement shortly and the time for requisitions on title has passed and the normal stamped transfers have not been submitted for execution. Indeed despite a number of letters to Mr Tales previously nominated solicitor we have not had one single response.

21 On 25 October, Glowreys responded, following a “detailed meeting” with Mr Tayles the preceding day. Having observed that the Trustees had now apparently agreed that the Purchasers were entitled to all the chattels on the properties not specifically listed by Mr Macleod as excluded (with the exception of John Kerr’s utility, which was the subject of a separate agreement), the letter proceeded:

In accordance with the agreement which we are instructed was made at that meeting, the Trustees were to endeavour to get a list of what had been removed with a view to this being quantified and valued so that consideration could be given to an appropriate claim for compensation or, indeed, separate action, for the replacement value of the goods taken.

...

We also reiterate our client’s desire for the rescission of the Contracts dated 1^st June 2007 simultaneously with the execution and exchange of alternate contracts which we will prepare and present for consideration at a meeting between the Trustees, yourself, the Vendor’s agent, Ian Tayles, and the writer, which we propose should occur at 2.00pm on Tuesday 30^th October 207 at the Trustee’s office, if this is convenient for all parties.

Please assure the Trustees that, in putting this proposal, the Purchaser(s) is not seeking, in any way, to adjust the negotiated purchase price, except to reflect the value of goods and chattels to which the Purchaser is entitled, and which are now missing.

22 On 26 October 2007, Mr Tayles sent an email to Mr Rae, proposing an unspecified reduction to the price on account of the chattels that had been removed. Referring to the auction, he commented: “... the property was passed in on one bid of $3.4m. Ian Macleod was only able to get it up to $4.4m by adding in all of the goodies. Some of the goodies have since gone, so an adjustment is surely appropriate”.

23 Meanwhile, Mr Tayles had lodged applications for permission to drill additional bores on the properties, which were advertised on 6 November 2007. On 22 November 2007, Glowreys wrote to Francis Kelly & Grant, relevantly as follows:

Tayles has specifically instructed us to inform you he intends settlement to proceed as soon as practicable after establishing the identity of the items comprising, and the consideration for, the property being purchased, and confirming finance therefore.

24 The letter then discussed the removal of chattels, and proposed that the Kerrs retain the chattels and that the purchase price be reduced by $550,000 (being the notional price of the chattels when the “all-up” price was negotiated; alternatively, the removed items valued on an “indemnity basis”. Deferral of the settlement date to 31 January 2008 was proposed, on the basis that it was unreasonable to expect the Purchasers to finalise their finance while the purchase price remained unascertained. The letter contained no reference to any dispute about the area of farmable land.

25 30 November 2007, the contractual date for completion, arrived and passed. On 6 December 2007, Glowreys again wrote to Francis Kelly & Grant, again proposing reduction of the purchase price by $550,000 in return for the chattels being retained by the Kerrs, and seeking agreement to a deferred settlement date. The letter contained no reference to any dispute about the farmable area.

26 On his own evidence, Mr Tayles’ AutoCAD calculations, showing that there were only 5,325 acres of arable land, were completed in about February 2008.

27 On 12 February, the Vendors served their notices to complete, appointing 7 March 2008 for completion. Up to this point, the Purchasers had not advanced any discrepancy in farmable area as a reason for not completing, or as a matter of dispute. Mr Tayles now says that he was “keeping it to myself”. Nonetheless, the Purchasers did not complete on 7 March. On 10 March they commenced proceedings 1813/08, in which for the first time they complained that there had been a misrepresentation of the area of croppable land, and lodged a caveat (dated 7 March) claiming an “equitable estate in fee simple pursuant to proceedings commenced in the Supreme Court ... and an equitable interest as beneficiaries under a constructive trust arising from the caveators having been in possession of the subject land ... from 7 June 2007 to the present and intending to purchase the subject land ...”.

28 On 12 March, the Vendors served notice of termination, and requested that the Purchasers vacate. On 20 March, the Vendors served notice to quit. The Purchasers did not seek, let alone obtain, any interlocutory relief, but they remained in occupation, and continued to cultivate the land.

29 There was subsequently an interlocutory dispute concerning the proceeds of the 2007/8 crop, which the Purchasers had sown and harvested. The Trustees sought an interlocutory injunction restraining Ricegrowers Limited from distributing any payment for the proceeds for rice delivered to Ricegrowers from the subject properties until the hearing or further order. It was common ground that the Purchasers, who went into occupation under the contract, sowed, cultivated, and harvested the crop, and that it was the Purchasers who entered into the growers' contracts with the Ricegrowers. While I was content to accept that the Vendors had a seriously arguable claim that they were entitled to terminate and had effectively terminated the contracts for sale of the properties, and upon such termination had become entitled to the crops that were growing on them (and subsequently, its proceeds) – noting of course that the validity of the termination remained in dispute in the proceedings – it also seemed that the Purchasers had a seriously arguable case that they were entitled to compensation, under the (NSW) Agricultural Tenancies Act 1990, for the expenditure incurred by them in growing the crop. The Purchasers had adduced evidence, supported by invoices, that they had incurred expenditure in sewing, cultivating and harvesting the rice crop, amounting to some $305,000, whereas the likely proceeds were estimated to not exceed $245,000. Thus, I accepted that the Vendors had a seriously arguable claim that they were beneficially entitled to the proceeds, but that the Purchasers had a seriously arguable claim that they were entitled to compensation in an amount not less than the amount of the anticipated proceeds. Particularly because it seemed that the Purchasers had a strongly arguable claim for compensation which would exhaust the likely proceeds, because of the intervention of the rights of third parties, and because on any view there would be an element of windfall to the Vendors in being able to obtain the benefit of the crop grown by the Purchasers, I concluded that the balance of convenience favoured declining the interlocutory relief sought by the Vendors, but granted more limited relief, to which the Purchasers had offered to submit, namely:

1 Upon the plaintiffs [the Vendors] by their counsel giving to the Court the usual undertaking as to damages, order that the first to fifth defendants [Purchasers] be restrained until further order from by themselves, their servants or agents disbursing or directing, authorising or procuring the disbursement of any of the nett proceeds of the rice crops delivered to the sixth defendant from the properties Bullabidgee, Towool and Warrawool, Deniliquin (after deduction of any amounts the subject of Growers Deduction Authorities, referred to in tab 18 of exhibit IT1 referred to in the affidavit of Ian Tayles, sworn 30 April 2008 in these proceedings), except upon having given seven days written notice to the solicitor for the plaintiffs, any such notice to specify to the parties to, quantum and purpose of the proposed disposition.

30 Since then, the Purchasers have cultivated further crops.

31 Until the commencement of the final hearing in March 2009, the Purchasers’ case was that the court should reduce the purchase price under the contracts and require the vendors to complete at that reduced price. However, at the commencement of the hearing, this position was abandoned, it being conceded that the Purchasers were not able then to complete. They pressed their case as one for avoidance of the contracts, and restitution, compensation and/or damages. At the conclusion of the hearing, on 23 March 2009, the following orders were made:

In proceedings 2244/08 McCleary v Bullabidgee, upon the plaintiffs by their counsel undertaking to the Court that they will not distribute the proceeds of the rice crop growing on the land referred to in the schedule to order 5 of the Summons without first giving the defendants' solicitor 48 hours written notice of their intention so to do; any such notice to specify the quantum of parties to and nature of any proposed distribution:

1. Give judgment that the defendants give the plaintiffs possession of the property referred to in the schedule to order 5 of the Summons.

2. Grant leave to the plaintiffs to issue a writ of possession, such writ not to issue before 6 April 2009.

3. Order that the defendants withdraw caveat AD 813984 by 30 March 2009.

4. Order that the defendants withdraw caveat AD 819804 by 30 March 2009.

Issues

32 In their further amended statement of claim, the Purchasers plead that their entry into the four contracts was procured by three misrepresentations, namely:

The advertisement in Stock & Land, which is said to have misrepresented that the property sold comprised about 7,000 croppable acres, when in fact it comprised only 5,325 croppable acres;

Oral statements by Mr Macleod in the course of the post-auction negotiations on 1 June 1997, that the Vendors had obtained two sworn valuations, at $4.28 million and $4.15 million respectively, which are said to have conveyed that those valuations were soundly based, whereas they assumed, contrary to fact, that the properties comprised 7000 croppable acres; and

Oral statements by Mr Greg Kerr and Mr Macleod during the inspection on 11 May 2007 to the effect that a portion of land near the junction of Cornalla Road and Cornalla West Road which was fenced from the road formed part of the property sold, when in fact it belongs to an adjoining property.

33 The Purchasers contend that the making of those alleged misrepresentations was misleading and deceptive conduct in trade or commerce in contravention of (NSW) Fair Trading Act, s 42 (cf (CTH) Trade Practices Act 1974, s 52), and that the contracts should be declared void ab initio, pursuant to Fair Trading Act, s 72 (cf Trade Practices Act, s 87), with consequential restitutionary and/or compensatory orders, in order to compensate the Purchasers for, or prevent or reduce, loss or damage sustained or likely to be sustained by them by the contravening conduct. The Vendors do not admit the allegations of misleading and deceptive conduct, dispute that they have been or are likely to be productive of loss or damage, and contend that in any event the contracts ought not be avoided by reason of acts of affirmation by the Purchasers. They contend that the contracts have been terminated for default and the deposits under them forfeited, and that the Purchasers are liable to pay damages for trespass in respect of the period since they were given notice to quit. Other than the claim for relief under the Fair Trading Act, the Purchasers do not propound any defence to the Vendors’ claim to have terminated the contracts, although they seek discretionary relief against forfeiture of the deposits under Conveyancing Act, s 55(2A). It is convenient to arrange the issues as follows:

Did the Vendors in trade or commerce engage in misleading and deceptive conduct?

If so, has that conduct been, or is it likely to be, causative of loss or damage to the Purchasers?

If so, should the contract be avoided as a matter of discretion?

Are any and if so what additional or alternative monetary remedies appropriate?

Are the Vendors entitled to damages for breach of contract and/or for trespass?

Should the Purchasers be relieved against forfeiture of the deposit under s 55(2A)?

The chattels dispute

34 Before turning to those issues, however, it is necessary to say something of what is really a “non-issue” in the case – namely the chattels dispute. Although not addressed in submissions – because it was recognised to be at best peripheral – much evidence touched upon it, and it played a large role in the incipient dispute, and colours what followed. Mr Tayles’ apparent misconception about the contractual position with the chattels illuminates his later conduct, and also informs a judgment as to his credit.

35 As a witness, Mr Tayles sought to be precise and accurate. In order to achieve this, he was extremely cautious, frequently asking to see documents before he answered questions. As the below extract shows, his attempt to explain the apportionment of consideration between the land and chattels contracts was artificial in the extreme; he was well-familiar with the concept of apportioning consideration to separate contracts, and in this respect his evidence involved ex post facto invention.

Q. You knew what you had bought from the trustees by way of plant and equipment?

A. I believed everything on the property with some exceptions.

Q. Other people, but not the trustees, had come around and helped themselves, had they?

A. I think you are right.

Q. So you really had no quarrel with the trustees about the plant and equipment?

A. Yes I did.

Q. You were using the issues about the plant and equipment to hold up the sale of the land contract?

A. That’s not true.

Q. Because you knew the land contract was a separate and independent contract from the plant and equipment contract?

A. That’s not true.

Q. And the plant and equipment contract had been paid for but the land contract had not?

A. That’s not the case.

Q. Both those propositions are correct?

A. I disagree.

Q. You had paid all you had to for the plant and equipment and you had not paid anything for the land except the deposit?

A. I disagree. I didn’t include payment of plant and equipment.

Q. I am confused. You say you believed you must have owed more money for the plant and equipment?

A. That’s right.

Q. But you could not work out how much?

A. That’s right.

Q. And until you could work out how much more on top of what you had already paid for the land contract, you could not complete the land contract?

A. I don’t understand how much more.

Q. Is this the proposition: you say, do you, that you could not pay the balance of the purchase price for the contract for the sale of the rural property, the land, until you knew how much more you had to pay for the goods and chattel?

A. I didn’t say that, no.

Q. What is the proposition?

A. The value of the chattel, which includes plant and equipment, was set at $550,000. That was the asking price by the vendors for the chattels, including plant and equipment and other things and the difference between the $550,000 and the $120,000 was tied up in the other contract, they weren’t from the $550 first up to $120, I couldn’t be so lucky.

Q. You know, as an experienced businessman and a person who is content to negotiate this transaction yourself, that there is no skerrick of evidence to support that proposition?

A. I don’t know that.

Q. You do?

A. No.

Q. There is no reference to $550,000?

A. Yes.

Q. And, indeed, you also know that the chattels contract is a separate document?

A. Each is a separate document in one whole purchase.

...

Q. Initially did you inspect the contract?

A. Yes.

Q. Was that one contract for the whole of the property?

A. It was.

Q. Whose idea was it to have three contracts relating to three different parts?

A. My idea.

...

Q. I show you a copy of the document behind tab 11 to PX06, that is to say an exhibit to the affidavit of Mr Rae, that document includes an email from yourself to Mr Rae on 6 June 2007, that is to say six days after your companies and yourself had entered into the contract made on 1 June. You see half way down the page your email to Mr Rae, is that right?

A. I see that, yes.

Q. Amongst other things, the document records the willingness of your company MHD to complete, more accurately to provide on Friday, 8 June a bank cheque for $120,000 to settle the outstanding balance of the plant and equipment. Do you see that?

A. Yes, I do.

Q. Indeed, on Friday morning, 8 June, you did supply a bank cheque for that amount of money for that purpose?

A. That's correct.

Q. Your intention in doing so, I suggest, was that as a result you would then have ownership and responsibility for all the plant and equipment as from that Friday and you would be permitted to operate the property from that date?

A. That's two questions.

Q. I accept that, but can you answer them? Would you like me to break them up?

A. Please.

Q. Your first intention, I suggest this, was that you would be thereby obtaining ownership and responsibility for all of the plant and equipment from Friday, once you paid the cheque?

A. Not for the whole $550,000 worth, no.

...

Q. You are not suggesting you would only get the written down value of the $550,000, are you?

A. That's what I mean, sir.

Q. How could you get only the written down value of the plant or some pieces of equipment, either you got plant and equipment or you didn't get it, surely?

A. I didn't understand at the time and still don't that the $120,000 payment would buy me the $550,000 worth of plant and equipment.

Q. What did you think that was buying you?

A. It was carrying out the obligation under the contract to pay the 120.

Q. What is the obligation of the other side under that contract?

A. By agreement they made it available.

Q. What did you understood to be the obligation of the vendors under that same contract for $120,000?

A. I believe the 120 was part payment for the plant and equipment.

Q. What did you believe the obligation of the other party to the contract to be?

A. To make it available to us to use for plant and equipment – for the harvesting for planting of the crop, sir.

Q. To make available all of the plant and equipment?

A. Yes.

36 In my view, Mr Tayles protestations that $120,000 was anything other than the full purchase price under the chattel contract were thus established to be spurious.

37 I accept that chattels were removed from the properties. Mr Tayles accepts that it was the Kerrs and their agents, not the Trustees, who did so. The Trustees concede that certain plant and equipment was removed from the properties and retained or sold by the Kerrs, but not that what was removed was the subject of the chattel contract. It may well be that the true agreement made at the auction, although not accurately recorded in the handwritten chattel agreement, was that the Purchasers were to acquire all the plant and equipment on the properties, save for that specifically agreed to be excluded and listed by Mr Macleod as such, and thus that the items removed included items to which the Purchasers were entitled under the contract. However, any removal occurred after the Purchasers had paid the balance purchase price under the chattel contract and had taken possession of the properties, and thus of the chattels and equipment on them. Thereafter, the Vendors had no further contractual obligation in respect of the chattels. It was within the right and power of the Purchasers to take steps to prevent their plant and equipment from being removed, or to sue for their return or for damages for conversion. No relevant claim for relief against the Vendors arose from their removal, or was pleaded – save for a paragraph, added to the end of the Further Amended Statement of Claim at commencement of the hearing, which sought rescission of the land contracts and the chattel contract. In circumstances where the total purchase price was apportioned across the four contracts, and the chattel contract had been completed upon payment of the balance purchase price under it with the Purchasers going into occupation of the properties and possession of the chattels on them, the notions (advanced on their behalf at the time, and even in the earlier stages of the litigation) that the Purchasers were (on account of the removal of plant and equipment) entitled to a reduction of the purchase price under the land contracts before completion, or that there was anything more to pay for the chattels, were entirely misconceived.

Misleading and deceptive conduct in trade or commerce?

38 The Stock & Land advertisement, having stated that the total land was 9,154 acres, stated “Around 7,000AC is available to farm which includes the irrigation layouts”, and “CROPPING: Overall about 7,500 acres can be farmed”. In that context, those statements were calculated to be read as referring to croppable areas, and I am satisfied that, viewed objectively, they referred to croppable areas. Accordingly, I accept that the advertisement in Stock & Land conveyed a representation that the properties comprised (at least) 7,000 croppable acres.

39 The only evidence of the actual croppable area is comprised in the AutoCAD survey produced by Mr Tayles, which shows that there were only 5,325 croppable acres. There is no evidence to the contrary. I accept that there were only 5,325 croppable acres in the property, and therefore that the representation was false.

40 It is not in issue that the Vendors had obtained two sworn valuations of the properties at $4.28 million and $4.15 million respectively, as was represented. However, the Purchasers contended that the representation that the Vendors had obtained such valuations implicitly conveyed that those valuations were soundly based. I do not accept this. The representation amounted to no more than that the valuations had been obtained by the Vendors and expressed opinions that the properties were worth $4.28 million and $4.15 million respectively. Mr Macleod was explaining to Mr Tayles that the Vendors would not meet his then offer because they held valuations at those amounts, which were significantly more than he was then offering. The representation that the Vendors had obtained such valuations was not false or misleading, but true and correct; and no further representation that such valuations were soundly based was implicit.

41 Ultimately, it was not suggested that anything really turned on the third alleged misrepresentation, and the evidence did not address it.

42 The contrary not having been argued, I accept that the publication of the advertisement in Stock & Land, and the sale of the farming properties and associated plant and equipment, effectively as a going concern on a walk-in walk-out basis, was “in trade or commerce” for the purposes of the Fair Trading Act [cf Morton v Black (1988) 83 ALR 182, 184-6].

43 Accordingly, in making the representation in the Stock & Land advertisement that the property comprised 7,000 croppable acres, when in fact it comprised only 5,325 croppable acres, the Vendors in trade or commerce engaged in misleading and deceptive conduct in contravention of Fair Trading Act, s 42.

Did the contravening conduct produce loss or damage – reliance?

44 (NSW) Fair Trading Act, s 72(2) (cf Trade Practices Act, s 87(1A)), provides that the Court may, on application of a person who has sustained, or is likely to sustain, loss or damage by conduct of another person that contravened inter alia s 42, make such order as it thinks appropriate against the person who engaged in the contravening conduct if the Court considers that the order will compensate the person who made the application for the loss or damage or will prevent or reduce the loss or damage. Section 72(5)(a) specifies, as one of the orders that can be made under s 72(2), an order declaring the whole or any part of a contract between the applicant and the contravener void ab initio or from some later date. The effect of these provisions is to require two relevant causal connections before such an order can be made: first, that the applicant has suffered (or is likely to suffer) loss or damage by the contravening conduct; and secondly, that the order is calculated to compensate for, prevent or reduce that loss or damage. At this point I am concerned with the first of those questions.

45 Ordinarily, contravening conduct in the form of a misrepresentation will not be productive of loss or damage unless the recipient acts in reliance upon it. The Stock & Land advertisement was no doubt calculated to arouse interest in the properties. The area of croppable land was, objectively, obviously highly material to a potential purchaser. It could have induced an erroneous belief that the property comprised 7,000 croppable acres. However, it also included the disclaimer, set out above, which told readers to make and rely on their own inquiries in order to determine whether or not the information in the advertisement was in fact accurate. Mr Tayles did just that. He checked the areas of the allotments. He checked and validated other matters important to him. During his inspection of the property, he sought and obtained from Mr Kerr information as to the size and croppable area of each of the paddocks, which he recorded on a map. It was on the basis of that information, rather than the advertisement in Stock & Land, that he proceeded to prepare his assessment of value, which informed his bid at the auction, and his starting point for the subsequent negotiations.

46 It needs to be born in mind that the relevant conduct is not any statement calculated to arouse or confirm a belief that the properties comprised 7,000 croppable acres, but the specific statements in Stock & Land – no other statement is pleaded as relevant contravening conduct. The advertisement may have aroused his interest in the property, but while I accept that the price that he bid – and the (higher) price that he eventually agreed to pay – was influenced by a belief that the property comprised a total of 7,000 croppable acres, that belief was ultimately based on the information provided by Mr Kerr rather than on the contents of the advertisement, containing as it did the disclaimer. Because of the disclaimer, this is to be distinguished from a case in which the original representation persisted along with subsequent representations [cf Morton v Black 183-4]; here, the later information superseded that in the advertisement.

47 Moreover, Mr Tayles was aware of the special conditions in the contract, and in particular special conditions 3.3 and 8 referred to above. During the negotiations following the auction, Mr Tayles proposed a number of amendments to the draft special conditions; and he prepared and drafted such amendments himself. In cross-examination, he gave the following evidence:

Q. At no time during the course of the meeting after the auction when the contract was being discussed and agreed upon before its signature did you say anything in particular in connection with the subject matter of the number of acres that were employed or available for farming or cropping activities?

A. The question is too long, sir.

Q. Too long. I'll break it up for you. Did you propose any particular condition for the contract about identifying any particular areas in terms of number of acres or hectares for farming?

A. No.

Q. Or cropping?

A. No.

Q. Or any other particular activity?

A. No.

Q. Of course, you generally were aware that the contract contained a number of special conditions?

A. Yes.

Q. Including the ones Mr Rayment read out this morning?

A. Could you repeat which once please?

Q. I will just give you generally clause 3 of the contract or contracts?

A. Whereabouts is that please?

Q. If you have a look at page 44 of volume 4, page 42 of volume 4. I am not going to take you to the detail of those?

A. I would like to know what you are referring?

Q. Look at 42 and over to 43, you can see there are under the heading paragraph 3 Acceptance of Improvements and Encroachments?

A. Yes.

Q. You generally read and understood it to the best of your ability because you are not lawyer what is proposed in those provisions?

A. That's my understanding.

Q. You understood that at the time you read those provisions and signed the contract the whole deal was in the contract?

A. That's –

Q. In general –

A. That's a fairly broad question. I can't specifically answer, give an answer to it, sir.

Q. You knew that it was the contract which contained provisions any way, that as you understood it – I am suggesting to you that you were acknowledging you made a detailed inspection of the property, and so far as the areas of the property described in the contract were concerned at least you weren't going to make any complaint about it?

A. That's right.

Q. You thought that's fine, you agree to that?

A. There was an issue about the contract finalised. That wasn't anything to do with the clause you mentioned. That's why I wanted to know which clause you were taking me to.

*Q. You understood there were clauses in the contract you appreciated had the effect that you were going to be bound by the contract and not by things said or talked about before the contract was made, didn't you?

....

A. Yes.

...

Q. And you understood that the rights that you were getting under this arrangement were the rights that were in the contract?

A. In this part of the contract, yes.

Q. And obligations to which the vendors were subject were the obligations set out in the contract?

A. Yes.

Q. And you didn't propose any particular change or alteration to the contract to ensure that anything of particular importance to you got mentioned in the contract, did you?

A. Yes, I did.

Q. And to the extent that you might have made such proposals, they didn't include any statement in the contract about areas for cropping or areas for farming or matters of that kind; did they?

A. That's right.

Q. You agree with me?

A. I do.

Q. And you agree that you had the opportunity to do so, if that had been something you had thought of doing?

A. Yes.

48 In re-examination, he gave the following further evidence:

Q. Now, you have given evidence in chief about the advertisement in the Stock and Land?

A. Yes.

Q. And about what you have described in your affidavit as heavy reliance that you placed on it?

A. Yes.

Q. With respect to the acreage?

A. Yes, yes.

*Q. And you have given evidence of the calculations that you made with respect to the land before you bid for it?

A. Yes.

*Q. In your affidavits?

A. Yes.

*Q. And you have also said that you read the contracts I think before the auction?

A. Yes.

Q. What impact, if any, did the reading of the contract have in your mind on the truth or any other aspect of the reliability of the statements in the advertisement about acreage?

...

Q. Is that question clear to you? I will put it again if it is not?

A. I believed from the contract I had to make my own enquiries and I believed that having done so I couldn't complain about things in ads or said to be by the vendors.

...

Q. You have given evidence of your thought processes which led you to formulate a bid for this property?

A. Yes.

Q. And you have reconstructed the calculation of the bid that you put forward?

A. Yes.

Q. Did that represent your state of mind when you made the bid?

A. Yes.

49 The Purchasers were subsequently given leave to file and read a supplementary affidavit, in order to correct what was said to be an error in the evidence set out above. In that affidavit, sworn 18 March 2009 (the third day of the trial), Mr Tayles deposed as follows:

1. My attention has been directed to an answer of mine transcribed at transcript page 71, lines 20-22 [this is the answer given in re-examination and highlighted in italics in para 48 above].

2 When I gave that answer I assumed that I was being asked about my state of mind when, after I signed the contract but before I obtained legal advice, I first realised that the plaintiffs had been sold land containing less than 7000 croppable acres. My answer related to that point in time, and not to the point in time when I agreed to buy the land and signed the contracts on 1 June 2007.

3. On 1 June 2007 although I had read the contract, it did not occur to me that what I had learned about available cropping acreage on the land from the advertisement might be something upon which I should not rely or on which it might be unwise to rely.

...

5. When, shortly after I signed the contract, I first ascertained that the land contained less than 7000 croppable acres, I re-read the contract and formed the view that because of its terms, I could not complain about the fact that less than 7000 croppable acres existed on the land. That is why I gave the answer at T71 referred to above.

50 Unsurprisingly, Mr Tayles was further cross-examined on this, as follows:

Q. Mr Tayles, you have given evidence in these proceedings yesterday morning and the preceding afternoon; haven't you?

A. Yes.

Q. And you have listened very carefully to each question that has been asked of you; haven't you?

A. Yes.

Q. And you have been very careful not to answer questions which you didn't understand?

A. I tried.

Q. And if a question was unclear to you, you understood that you were entitled to assert that it should be made clearer before you were obliged to answer it?

A. Yes.

Q. Do you agree that, on many occasions in the course of giving your oral evidence in these proceedings, you have declined to answer questions because you thought they were not clear, or were too long, or for some other reason you gave at the time?

A. Yes.

Q. And that is because, in connection with every question you have been asked, you have listened very carefully to its content?

A. I tried.

Q. You have satisfied yourself distinctly that you understood the question that you were being asked?

A. I tried, yes.

Q. And you have been very attentive to making sure you gave a careful and accurate answer; is that what you would say?

A. I tried. Obviously, I have not succeeded.

Q. I see and yesterday, you were asked a number of questions by your counsel, Mr Rayment, you recollect that?

A. Yes.

Q. And he said to you, amongst other questions, "And you have also said that you read the contracts before the auction"; do you recall being asked that?

A. Yes.

Q. And that was a very clear question, as far as you understood it?

A. Yes.

Q. You had no trouble or difficulty understanding it?

A. That's correct.

Q. And you did not ask for it to be repeated, or explained?

A. No.

Q. You didn't think it was too long?

A. No.

Q. And it was very plain to you that you were being asked in that question – it was being put to you that you had said that you read the contracts before the auction?

A. Yes.

Q. And you answered that question, "Yes"?

A. Yes.

Q. And that was because you had, indeed, read the contracts before the auction?

A. Yes.

Q. And you were then asked, "What impact, if any, did the reading of the contracts have in your mind on the truth or any other aspect of reliability of the statements in the advertisements about acreage"; you remember that question, don't you?

A. That is a long question and I am still grappling with that.

Q. You remember being asked that question?

A. I think so.

Q. You didn't protest that the question was too long; did you?

A. I didn't then.

Q. Because it was not your impression at that time that you thought the question was too long?

A. I don't agree with that.

Q. Well, there were numerous instances in your evidence yesterday where you said a question was too long; weren't there?

A. Yes.

Q. And I am suggesting to you it was not your reaction to that question, that you thought it was too long?

A. It is my reaction.

Q. Well, it was not your reaction when you were asked the question by Mr Rayment though yesterday, was it?

A. It was.

Q. Because you answered the question and you answered it quite specifically; didn't you?

A. Yes.

Q. And you knew you were being asked in that question to describe the impact, if any, which the reading of the contracts had on your mind in relation to the truth or any other aspect of the reliability of the statements in the advertisements?

A. That is it; that is my problem. I can't handle questions that complex, sir.

Q. I see. Well, you didn't ask for it to be broken down?

A. I should have.

Q. Well, you knew, anyway, you were being asked about the impact on your mind of reading the contracts; didn't you?

A. Yes.

Q. And you knew that you were being asked about the impact on your mind of reading the contracts before the auction?

A. It was a mistake I made.

Q. Because that was the question immediately preceding it; wasn't it?

A. I didn't make the connection.

Q. There was no connection to be made, was there, Mr Tayles? The topic you were addressing your own mind to was the question of reading the contracts before the auction when you were asked the question, "You have also said you read the contracts I think before the auction". You knew what you were being asked; didn't you?

A. It is not that.

Q. Your reading the contract before the auction?

A. I do have trouble with these long questions.

Q. Well, the question, "You also said you read the contracts before the auction", was not a long question; was it?

A. No.

Q. And you knew it related to reading the contracts?

A. Yes.

Q. You knew it related to reading them before the auction?

A. Yes.

Q. Then you were asked about the impact of that reading; weren't you?

A. There was questions asked before and after I sat outside. I am not quite sure what you are referring to.

Q. I am referring to the question that you were asked, the very next question you were asked. After you confirmed that you read the contract before the auction, the next question asked about the impact on your mind of that reading; didn't it?

A. Yes.

Q. And that reading unmistakably in your mind related to the reading of the contracts before the auction; didn't it?

A. No.

Q. There was no ambiguity about it; was there?

A. Clearly, there was.

Q. Well, focussing, if you will, Mr Tayles, on reading the contracts before the auction, can you focus on that, the question you were asked yesterday? Can I invite you to focus your mind on reading the contracts before the auction?

A. Yes.

Q. Now, you, in fact, said, you have given evidence that you read the contracts before the auction?

A. Yes.

Q. What impact, if any, did the reading of the contracts have in your mind on the truth or any other aspect of the reliability of the statements in the advertisements about acreage?

A. There you go again. Please don't do that to me, sir.

Q. Can you answer the question?

A. The question is too long, sir.

Q. I see. Is that your answer? Are you asserting you don't understand the question?

A. Please, can you please make the question simpler?

Q. I will do it slowly. What impact, if any, did the reading of the contracts have in your mind on the truth or any aspect of the reliability of the statements in advertisements about acreage?

A. What impact on my mind about the truth in the advertisements?

...

Q. The truth or reliability?

A. I believed the advertisements.

Q. What impact did reading of the contract have on that?

A. None.

...

Q. None at all?

A. None at all.

...

Q. Well, can you explain why it had no impact then, but when you read it the next time, it did have an impact?

A. I can't explain why, other than I read it with a purpose in mind, much clearer purpose in mind, sir.

51 I do not accept Mr Tayles’ belated attempt to suggest that he did not understand the impact of the special conditions on pre-contractual representations when he first read the contract, yet did so when he read it a second time after exchange. He was an uncommonly careful and cautious witness, who took great care to ensure that he understood questions before answering them. As the further cross-examination showed, the context of the question and answer that he later sought to qualify was quite clear; the timeframe to which it was addressed was plainly pre-auction, when he first read the contract; and there is no possible basis on which it could have been misunderstood, as Mr Tayles later claimed, as being referable to a second post-contractual reading of the contract. Moreover, his original cross-examination, which naturally preceded the answer in re-examination which he sought to explain away, contained similar statements plainly referable to a time before he executed the contracts: see the italicised passages in the extracts from his cross-examination in para 47 above. Accordingly, I conclude that Mr Tayles entered into the contracts believing that he was not entitled to rely on pre-contractual representations dehors the contract.

52 Mr Tayles suspected that there was a shortfall in croppable land as early as 5 June 2007, but he said nothing of it; he kept his thoughts to himself. Indeed, he effectively told the Vendors that the only impediment to settlement was the chattels dispute. He did not raise complaint about any shortfall of croppable land, despite agitation of other matters with the Vendors, until 10 March 2008, the date due for completion under the notice to complete – he says because only then did he receive legal advice that under the Trade Practices legislation he might be entitled to raise the matter notwithstanding the special condition. Yet he had not refrained from advancing all manner of other complaints, ill-conceived or not, and it is quite remarkable that they contained no word about the shortfall in croppable acres. Although he claimed that this was because he thought he was precluded by the contract from doing so, he felt no inhibition in raising the alleged “oral” deal in respect of plant and equipment, and his protestation that he did not raise the issue of croppable land because he thought he was precluded by the contract from doing so is not credible.

53 I accept that Mr Tayles entered into the contracts influenced by a belief that there were 7,000 croppable acres available. However, although that belief was initially generated by the advertisements in The Land and in Stock & Land, Mr Tayles knew that he had to rely on his own inquiries, and by the time of the auction his relevant belief was founded on what he had ascertained by inquiry from Mr Kerr and Mr Macleod and by inspection. Moreover, he believed from the contractual provisions that he was not entitled to rely on representations dehors the contract, and that he did not do so is confirmed by the absence of complaint on his part until the completion date – despite his discovery that there was a shortfall against his expectations as early as June 2007, and despite his having raised all other manner of complaints with the Vendors. He did not rely on the contravening conduct complained of in the proceedings, namely the advertisement in Stock & Land, and that conduct was therefore not productive of loss or damage.

Should the contract be avoided?

54 Had Mr Tayles relied on the contravening conduct in entering into the contracts, it would have been necessary to consider whether it was appropriate to avoid the contract under s 72(2) and (5)(a). At this point two main questions would have arisen: would such an order compensate for, prevent or reduce loss or damage caused by the contravening conduct, and whether, as a matter of discretion, avoidance would be an appropriate remedy.

55 As to whether avoidance would compensate for, prevent or reduce loss or damage resulting from the contravening conduct, prima facie, the damage suffered by a purchaser whose entry into the contract is procured by a misrepresentation is the difference between the purchase price and the true value of the subject matter; this method of measuring damage assumes affirmation of the contract [Toteff v Antonas [1952] HCA 16; (1952) 87 CLR 647, 651; McAllister v Richmond Brewing Co (NSW) Pty Ltd (1942) 42 SR (NSW) 187, 192; Alati v Kruger [1955] HCA 64; (1955) 94 CLR 216, 222; Munchies Management Pty Ltd v Belperio [1989] FCA 413; (1988) 58 FCR 274, 280-1; [1989] FCA 413; 84 ALR 700, 706]. In addition, where a purchaser of a business, having gone into possession, continues for sufficient reason to trade and incurs losses, the purchaser may also recover damages in respect of losses so incurred, to the extent that they are not taken into account in the diminished value of the business [Gould v Vaggelas (1985) 157 CLR 215, 221-2; Munchies v Belperio, 707] – although the mere fact that a purchaser incurs losses following completion of a contract induced by a misrepresentation does not mean that those losses are attributable to the misrepresentation; they may result from “some supervening cause such as the folly, error or misfortune of the purchaser” [Gould v Vaggelas, 222].

56 There is no evidence that the subject matter of the land contracts was worth less than the contractual purchase price, and thus no basis for finding that the Purchasers suffered or would have suffered damage attributable to the contravening conduct had they completed the contracts. Accordingly, it is not established that avoidance would compensate for, prevent or reduce loss or damage caused by the contravening conduct. The Court could not declare the land contracts void, because a condition of that power in s 72 is not satisfied.

57 As to discretion, it is well-established that, although affirmation may not necessarily be fatal to a claim for statutory avoidance under Trade Practices Act, s 87, and its equivalents, nonetheless the equitable principles concerning rescission provide safe if not exclusive guidance as to the exercise of the discretion given by that section [Yorke v Ross Lucas Pty Ltd (No 2) [1982] FCA 180; (1982) 45 ALR 299; (1982) 69 FLR 116, 134-5; Myers v Transpacific Pastoral Co Pty Ltd (1986) ATPR 40-673; Crisp v Australia and New Zealand Banking Group (1994) ATPR 41-294, 41,942; Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd [1988] FCA 40; (1988) 39 FCR 546, 564-5; [1988] FCA 40; (1988) 79 ALR 83, 102-3; Munchies v Belperio, 705, 714].

58 Assuming that reliance had been established, then – had a claim for avoidance been brought unequivocally, and before termination of the contracts – it may have been on strong ground. However, the Purchasers advanced no such claim before termination. To the contrary, far from rescinding the contracts when they discovered the shortfall in croppable land compared to what they had expected, they repeatedly affirmed them. Having gone into possession, they remained in possession, and asserted that they were entitled so to do. They cultivated the land, harvested the crops, and asserted that they were entitled to their proceeds. They lodged a caveat claiming an interest in the land. They sued for specific performance of the contracts (albeit at a reduced purchase price). They first mentioned rescission only much later, in their opening address at the final hearing on 16 March 2009; until then they maintained that they were ready, willing, able and entitled to complete the contracts.

59 In that context, the Purchasers must be taken to have elected to affirm the contracts and sue for any damages occasioned by the misrepresentation – which, as already mentioned, are prima facie the difference between the contract price and the true value of the subject matter. It would be inappropriate now to permit rescission, in circumstances where it would properly be characterised as not being for the purposes of avoiding the consequences of the contravening conduct, but for the purposes of avoiding the consequences of a default attributable not to the misrepresentation but to the Purchasers’ inability or refusal to complete, in accordance with their terms or at all, the contracts that they had elected to affirm.

60 As I am not prepared to make an order avoiding the contract, it follows that the prima facie entitlement of the Vendors to terminate is sustained. Other than the relief sought under the Fair Trading Act, no basis was advanced on which the Vendors might not be entitled to terminate. It follows that the Vendors have validly and effectively terminated the contracts for default by the Purchasers, and have forfeited the deposits (subject to the claim for relief against forfeiture under s 55(2A), addressed below.

Is any additional or alternative monetary remedy appropriate?

61 Do the Purchasers nonetheless have a monetary remedy, for damages caused by or arising from the misrepresentation?

62 Where a purchaser rescinds for misrepresentation, equity will exercise its powers, including to direct accounts and inquiries, to ascertain what adjustments may be necessary to achieve what is practically just by way of restitution, even if practical restitutio in integrum cannot be achieved simply by returning the subject matter and purchase money [Alati v Kruger, 223-4; Munchies v Belperio, 709-10]. Typically, the vendor must pay interest on any purchase money received, the purchaser must account for rents and profits or the use of the property whilst in possession, and (but only in a case of fraudulent misrepresentation) any loss directly occasioned to the purchaser must be made good (including expenses incurred in effecting the purchase, the value of improvements made by the purchaser before notice of the fraud, and any other detriment suffered as a direct consequence of the fraud [McAllister v Richmond Brewing Co (NSW) Pty Ltd, 192; Newbigging v Adam (1886) 34 Ch D 582, 592; Munchies v Belperio, 710-711]. Underlying these heads of damage is the assumption that, but for the misrepresentation, the purchaser would not have entered the contract, and has wasted those expenses by performing the contract until rescission; effective rescission is therefore an essential pre-condition to recovery of such damages.

63 The approach of the common law and equity to the remedies of damages and rescission for misrepresentation informs the application of the similar statutory remedies provided by the Fair Trading Act [Munchies v Belperio, 712-4], except that in respect of the statutory remedy of avoidance under the Trade Practices Act, fraud is not a necessary precondition to the award of damages in addition to restitution, although it may bear on the remedy as a matter of discretion [Munchies v Belperio, 713-4].

64 As already observed, there is no evidence that the subject matter of the contracts was worth less than the contractual purchase price, and thus no basis for finding that the Purchasers suffered or would have suffered damage attributable to the contravening conduct had they completed the contracts. Even if there were, then the effect of affirmation was that the Purchasers acquired a right to claim such damages upon completion of the contract. Ultimately, they did not complete; the Vendors terminated for the Purchasers’ default, and the Purchasers thereupon lost their incipient right to damages on this basis – not as a result of the misrepresentation, but because of their own default.

65 The Purchasers incurred trading losses while they were in occupation, which they would not have incurred had they never entered into the contracts. These might have been recoverable (a) in addition to damages measured by the deficiency of value under the purchase price upon completion, to the extent that they were not taken into account in striking that value; or (b) in connection with restitution upon rescission. However, the basis for any such claim as in (a) has been destroyed by the Vendors’ termination for the Purchasers’ default; and the basis for any such claim as in (b) is dependent upon rescission, which I have refused. By electing to affirm the contracts, the Purchasers elected to assume the risk of ongoing trading losses [cf Munchies v Belperio, 714 (where the Vendors were held to have so elected by not accepting the return of the subject matter when the Purchasers communicated their election to rescind)]. Alternatively put, such losses were not attributable to the contravening conduct.

66 Assuming that the Purchasers had relied on the contravening conduct in entering into the contracts, the position may be summarised as follows:

The Purchasers had an election to affirm or rescind;

They repeatedly affirmed, knowing of the shortfall in croppable area. As a result, they had a potential claim for damages for misrepresentation, measured by the difference between the contract price and true value of the subject matter;

However, having affirmed, they failed to complete in accordance with the contract and notice to complete, and the Vendors terminated for the Purchasers’ default, which was attributable, not to the contravening conduct, but to the Purchasers’ inability or refusal to complete the contracts in accordance with their terms. They thereupon lost any right to damages for misrepresentation, because they did not acquire something less valuable than they paid for it;

Had they rescinded, they would have had a restitutionary claim for the expenses wasted and trading losses incurred while in occupation;

There is no evidence that upon completion the subject matter would have been worth less than the purchase price. Statutory avoidance under s 75 is therefore not available (because it would not be for the purpose of avoiding loss occasioned by the contravening conduct). Even if statutory avoidance were available, I would decline it on discretionary grounds;

As avoidance will not be granted, the Purchasers are not entitled to restitution for their trading losses while in occupation, and other expenses associated with the contract, such as the forfeited deposits, legal expenses of purchase, and stamp duty paid.

67 In those circumstances, it is also unnecessary to consider in detail the quantification of the Purchasers’ claim for damages in respect of trading losses, but lest it become necessary to do so I shall record my conclusions on the matters of principle in dispute. Ultimately, the parties agreed upon a schedule of income earned and expenditure incurred by the Purchasers while in occupation. The total expenditure, including disputed items, was $1,848,385.80; and the total income was $937,476.73. This resulted in net losses of $910,909.07. Three heads of expenditure included in that claim were disputed by the Vendors: losses incurred after termination in March 2008, interest, and survey costs.

68 As to post-termination losses, by mid March 2008, the Purchasers had failed to complete; they knew the Vendors claimed to have terminated; they were in receipt of a notice to quit, but they chose to remain in occupation and continue to farm the properties. Their expenditure incurred after that date was incurred with knowledge of the Vendors’ position that the contracts were terminated, and at their own risk. Even if the contracts were avoided for misrepresentation, these losses should be the Purchasers’ account [cf Gould v Vaggelas, 222].

69 The Purchasers’ claim included interest on inter-company loans. This was not in the nature of interest on finance for the purchase price, but interest on finance for working capital. No evidence links the necessity to borrow working capital to the purchase of the properties. I would exclude the claim for interest from the restitutionary relief, even if the Purchasers’ were entitled to such relief.

70 As to survey costs, they fall under two heads. Some were incurred in connection with the proposed re-subdivision of the properties, which was one of the purposes of Purchasers in acquiring the properties. The costs of that survey work were incurred as a result of the purchase and would not otherwise have been incurred. In that context, it matters not that the decision to incur them was not directly related to any representation about croppable areas. They were expenses incurred in connection with the purchase which (on relevant assumptions) would not have been incurred but for the misrepresentation. Had avoidance been granted I would have allowed them as part of the restitutionary relief. However, those survey costs that were incurred for the purposes of ascertaining the croppable areas, and for the litigation, would be recoverable, if at all, only as costs.

The Vendors’ claim for damages

71 The Vendors claim:

damages for breach of contract: unpaid interest and outgoings for which the Purchasers were responsible under the contract, until it was terminated, and holding costs thereafter; and

damages for trespass, for the period while the Purchasers remained in occupation following termination of the contract and service of the notice to quit.

72 By special condition 20 of each land contract, the Purchasers agreed to pay interest on so much of the purchase moneys as remained unpaid from 31 August 2007, monthly in arrears. By special condition 23 of each land contract, the Purchasers agreed to meet all outgoings in respect of the subject properties from 1 June 2007. When assessing damages for breach of contract, it does not follow that, just because the Purchasers agreed but failed to pay the outgoings and interest, unpaid outgoings and interest represent the Vendors’ damages upon termination for repudiation. Just as the Vendors, because they will retain the land, could not claim by way of damages the whole purchase price (but only any difference between the purchase price and resale price or true value), so they are not necessarily entitled by way of damages to all sums payable under the contract. The Vendors’ loss is to be measured by reference to the position in which they would have been had the contract been performed, and their position upon termination for breach.

73 Had the contract been performed, they would (until completion) have received interest and been exonerated from the outgoings, and (upon completion) would have received the purchase moneys, but would no longer have the properties and would not have received the benefits of the crops. In the events which have happened, they have not received interest, they have not been exonerated from the outgoings, and – consequent upon termination for breach – they will not receive the purchase moneys, and they remain liable for the outgoings until resale; but they retain the properties, and they retain the deposits (subject to the claim for return of the deposits addressed below).

74 There is no evidence of any deficiency in the value of the properties against the purchase price. That leaves the Vendors out-of-pocket in respect of interest and outgoings, but in an improved position by reason of forfeiture of the deposits (subject to the claim for their return).

75 The deposits paid in respect of the three land contracts totalled $436,000. The Vendors must give credit for the forfeited deposits [Zieme v Gregory [1963] VicRp 34; [1963] VR 214; Loughridge v Lavery [1969] VicRp 112; [1969] VR 912; Cratchley v Bloom (1984) NSW Conv R 55-203]. However, a forfeited deposit need not be set-off against items which are not in the nature of deficiencies in the price and expenses (such as costs of resale) necessarily flowing from the purchaser’s default [Cratchley v Bloom]. In that case, it was held (by Hutley, Samuels and Mahoney JJA) that while solicitors’ costs on termination and on resale, rates and disbursements were to be set off against the deposit, an occupation fee payable if the purchaser remained in possession after 26 weeks without completion having taken place, and costs associated with restoring the property upon the purchaser vacating, were not. In my view, although not on all fours, it is consistent with Cratchley v Bloom to hold that the claim for holding costs pending resale must be set-off against the deposit, but that the claims for unpaid rates and interest while the contract remained on foot need not. Those unpaid rates and interest, referable to a period while the Purchasers were in occupation, do not represent any part of the deficiency resulting from any difference between price and value (or price upon resale) and expenses necessarily flowing from the breach, and thus are not liable to be set off against the forfeited deposit [cf Cratchley, per Samuels JA]. I would therefore allow unpaid interest and outgoings under the contract until the date of termination.

76 The Purchasers paid none of the interest payable under special condition 20. On the Billabidgee contract, the unpaid balance of the purchase price was $747,000; interest at 1% per month from 1 September 2007 until 12 March 2008 amounts to $47,711.61. On the Towool contract, the unpaid balance purchase price was $1,773,000; interest at 1% per month from 1 September 2007 until 12 March 2008 amounts to $113,243.23. On the Warrawool contract, the unpaid balance purchase price was $1,411,200; interest at 1% per month from 1 September 2007 until 12 March 2008 amounts to $90,134.71. These amounts total $251,089.55, which should carry interest from 13 March 2008.

77 The Purchasers did not pay the Murray Shire Council and Riverina Rural Lands Protection Board rates payable under special condition 23. As the contract was terminated with effect from 7 March 2008, it entitles the Vendors to recover the 2007/08 rates only in respect of the period to that date, which is 250/365 days. Accordingly, I would allow a total of $12,109.68, made up as follows, which should carry interest from 1 September 2008:

Murray Shire Council 3312-0000-6 07/08 $5393.81 (including interest to 30 August 2008) x 250/365 = $3,694.39

Reimburse Murray Shire Council 3312-0000-6 2006/07 for period 1 – 30 June 2007 = $413.33

Murray Shire Council 1908-0000-1 07/08 $9540.99 (including interest to 30 August 2008) x 250/365 = $6,534.92

Reimburse Murray Shire Council 1908-0000-1 2006/07 for period 1 – 30 June 2007 = $731.37

Riverina Rural Lands Protection Board 2008 $1,019.19 x 67/366 = $186.57

Reimburse Riverina Rural Lands Protection Board for period 1 June – 31 December 2007 = $549.10

78 Charges have also accrued for water used by the Purchasers while in occupation. I would allow $4,048.35, up to termination of the contract, as follows:

Licence 50AL504489 – proportion of 2006/07 charges applicable to period 1 – 30 June 2007 = $377.37

Licence 50AL504489 – 2007/08 charges $5,271.40 x 250/365 = $3,610.54

Licence 50AL504490 – 2007/08 charges $88.25 x 250/365 = $60.44

79 As to the claim for damages for trespass, the Purchasers had use and occupation of the properties until 6 April 2009. They became trespassers when they remained in occupation after the notice to quit was given on 20 March 2008. The Vendors are entitled to damages for trespass thereafter. The purpose of damages for trespass to land is to compensate the party entitled to possession for the loss of use of the land. One conventional measure of this is the rental value of the relevant land.

80 Evidence of the rental value of the property was given by Mr Henderson, valuer, who – on the basis that the croppable areas were as asserted by the Purchasers – concluded that the annual rental value was $350,000. He said that the general market for lease country was around 5-7% of market value, but the comparables to which he referred were (1) that Glencore, a company that leased widely in South Australia and New South Wales, typically paid 5% of market value of arable land; (2) that at Hartwood Station, Jerilderie, Glencore was paying $85.25/ha for 1,740 hectares, all of which was arable, which he analysed to 8.25% on a capital value of about $1,000/ha; and (3) that John Walmsley at Deniliquin was paying $32.96/ha for 364 hectares, which he analysed to 2.64% on arable land worth about $1,250/ha (excluding water). However, his calculation overlooked that only about 80% was arable, so applied to arable land the yield was about 3.3%, and rate $41.25. His evidence suggested that Walmsley’s property might be slightly superior to the subject, and its small size would normally involve a somewhat higher rate per hectare than the subject (which at 3,691.8 ha is ten times the size).

81 Mr Henderson attributed $193,900 per annum to water rights, at $100 per megalitre. In cross-examination, he conceded that $100 was too dear, and that the “going rate” was about $75; as a result, I would reduce the “water” component to $145,425. So far as the land component is concerned, he allowed varying rates between $20/ha for timbered country to $60/ha for lasered contour arable or irrigated country, and $55/ha for dry cropping, totalling $157,925 for 3,691 hectares, and equating to $95/ha or $38/ac – higher than Hartwood and three times higher than Walmsley.

82 The discrepancies between the comparables, including whether or not they include water rights, make this an unusually difficult valuation exercise. Mr Henderson eventually conceded that the appropriate yield was in the range of 4 – 7 % on market value. I cannot see how the evidence supports a yield of more than 5% without water rights, and the Walmsley comparable suggests less. Although the Hartwood comparable might suggest more, the assumption of the underlying market value was one made by Mr Henderson with, as it seems to me, little analysis. I think Walmsley – remembering that although it is a smaller property with superior soils, Mr Henderson thought it overall comparable and the rental cheap – is the most useful comparable, because of proximity, and because the evidence establishes that it can be treated on an exclusive of water basis, producing a result to which the value of the water rights can be added, while Hartwood is less clear in this respect.

83 Application of the rate derived from Walmsley for arable land ($41.25/ha) to the subject’s 5,325 acres of arable land (being 2,156 ha) would suggest a rental valuation for the subject, exclusive of water, $88,929 per annum. Allowing that that rental is “cheap” according to Mr Henderson, and adopting instead a yield of 4%, at the bottom of his range, produces a result of $107,793, which added to the water rights at $145,425, this results in an annual rental value of $253,219, in place of Mr Henderson’s $351,825. I adopt $250,000 per annum. For the period from 20 March 2008 until 6 April 2009, being 1 year and 17 days, that amounts to $261,644.

84 However, the Vendors were not entirely deprived of the benefit of the use of the land during that period: upon becoming entitled to possession of the properties, they also became entitled to the crops growing on them, or their proceeds, for the value of which they must give credit. The evidence does not at this stage establish the amount of those proceeds, and the evidence on the interlocutory application would suggest that the net proceeds of the first crops may have been nil after related expenses were paid out of the funds received by Ricegrowers. However, I will entertain the possibility of further evidence on this topic.

85 The Vendors are entitled to damages for trespass for the period from 20 March 2008 until 6 April 2009 in the sum of $261,644, less the value to them of crops grown on the properties during that period.

Discretionary return of deposit

86 The discretion to order return of a deposit under Conveyancing Act, s 55(2A), has been illuminated by observation of the High Court of Australia, in Romanos v Pentagold Investments Pty Ltd [2003] HCA 58; (2003) 217 CLR 367 (at 376), that the primary judge had erred in the exercise of the discretion to order return of the deposit where the evidence was insufficient to show that it would be unjust or inequitable to allow the Vendors to retain the total sum paid as deposits under the contracts. Thus, the question is whether it would be unjust or unconscionable for the Vendors to retain the forfeited deposit.

87 There are three main considerations. The first is that to order return of the deposit would deprive the Vendors of the security for performance which it was intended to afford, in circumstances where the Purchasers now concede that they are unable to complete even at a reduced price, and where on my findings they were never ready willing and able to complete, although they went into and remained for a lengthy period in occupation.

88 The second is that there is no evidence that the Vendors have suffered any loss arising from the Purchasers’ default, in the nature of loss of bargain damages. However, the properties have not been resold and whether there will be a deficiency overall remains unknown. There is no reason to suppose that the Vendors will obtain any windfall. The Purchasers will certainly incur holding costs in the interim, and I have in declining to award damages in that respect taken into account the availability of the forfeited deposit as a set-off.

89 The third is that the Purchasers entered into the contracts on the misapprehension, to the adoption of which the Vendors undoubtedly contributed, that the property contained more farmable land than it in fact did. That a contract has been entered into upon a misapprehension in the purchaser’s adoption of which the vendor is implicated will often be a highly significant matter tending in support of an order for return of the deposit. However, the significance of the misapprehension in this case is much diminished by the circumstance that the Purchasers elected to affirm the contracts, and it is not apparent that the misapprehension was productive of any loss.

90 In this case, when the Purchasers elected not to rescind but to affirm the contract, they notionally acquired a right to damages for breach upon completion. The loss of that right was not attributable to any misapprehension or misrepresentation, but to their refusal or inability to complete in accordance with the contract or at all. Ultimately, I see no unconscionability or injustice in the Vendors retaining the deposit, in circumstances where they will incur holding costs, it is not apparent that they will receive a windfall, and the Purchasers, knowing of the misrepresentation of which they complain, elected to affirm the contracts, but thereafter defaulted in completion, and have not established that they would have suffered any loss on completion.

91 I therefore decline to order return of the deposit, in part or whole, under s 55(2A).

Conclusion

92 My conclusions may be summarised as follows.

93 In making the representation in the Stock & Land advertisement that the property comprised 7,000 croppable acres, when in fact it comprised only 5,325 croppable acres, the Vendors in trade or commerce engaged in misleading and deceptive conduct in contravention of Fair Trading Act, s 42.

94 The Purchasers entered into the contracts influenced by a belief that there were 7,000 croppable acres available. However, although initially generated by the advertisements in The Land and in Stock & Land, Mr Tayles knew that he had to rely on his own inquiries, and the relevant belief was ultimately founded on what he ascertained by inquiry from Mr Kerr and Mr Macleod; the original advertisement was not of continuing operation in his decision-making process. Moreover, he knew from the contractual provisions that he was not entitled to rely on representations dehors the contract, and he did not do so. He did not rely on the contravening conduct complained of in the proceedings, namely the advertisement in Stock & Land, and that conduct was therefore not productive of loss or damage.

95 Assuming (contrary to my finding) that the Purchasers had relied on the contravening conduct in entering into the contracts, the position may be summarised as follows:

The Purchasers had an election to affirm or rescind;

They repeatedly affirmed, knowing of the shortfall in croppable area. As a result, they had a potential claim for damages for misrepresentation, measured by the difference between the contract price and true value of the subject matter they acquired;

However, having affirmed, they failed to complete in accordance with the contract and notice to complete, and the Vendors terminated for the Purchasers’ default, which was attributable, not to the contravening conduct, but to the Purchasers’ inability or refusal to complete the contracts in accordance with their terms. They thereupon lost any right to damages for misrepresentation, because they did not acquire something worth less than what they paid for it;

There is no evidence that upon completion the subject matter would have been worth less than the purchase price. Statutory avoidance under s 75 is therefore not available (because it would not be for the purpose of avoiding loss occasioned by the contravening conduct). Even if statutory avoidance were available, I would decline it on discretionary grounds;

Had the Purchasers rescinded, or had the court avoided the contract under Fair Trading Act, s 72, they would have had a restitutionary claim for the expenses wasted in connection with the transaction, and trading losses incurred while in occupation. However, no such claim is sustainable in the absence of avoidance of the contracts.

96 The Purchasers’ claim for avoidance of the contracts having failed, and no other basis appearing for impugning the Vendors’ entitlement to terminate for failure to comply with the notice to complete, it follows that the Vendors effectively terminated, for the Purchasers’ default, on 12 March 2008. The Vendors are entitled to damages for breach of contract as follows:

Unpaid interest totalling $251,089.55 and interest thereon from 13 March 2008;

Unpaid rates totalling $12,109.68 and interest thereon from 1 September 2008; and

Unpaid water charges totalling $4,048.35 and interest thereon from 13 March 2008.

97 It also follows that the Purchasers have been trespassers since the notice to quit expired not later than 20 March 2008, whereupon the Vendors became entitled to recover possession, including of the crops then on the land. The Vendors are entitled to damages for trespass for the period from 20 March 2008 until 6 April 2009 in the sum of $261,644, less the value to them of crops grown on the properties during that period.

98 There is no injustice or unconscionability in the Vendors retaining the deposit, in circumstances where they will incur holding costs, it is not apparent that they will receive a windfall, and the Purchasers, knowing of the misrepresentation of which they complain, elected to affirm the contracts, but thereafter defaulted in completion, and have not established that they would have suffered any loss on completion. I therefore decline to order return of the deposit, in whole or in part, under s 55(2A).

99 I direct that the defendants (Vendors) bring in short minutes to give effect to this judgment. Consideration will also have to be given to what if any orders need be made in connection with the proceeds of the crops grown during the Purchasers’ occupation, and whether the Purchasers should be permitted to adduce evidence of their value to the Vendors, in diminution of the damages for trespass.

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LAST UPDATED:
4 March 2010