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Makings Custodian Pty Ltd v Orchid Avenue Realty Pty Ltd

 

[2018] QCA 33

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Makings Custodian Pty Ltd & Anor v Orchid Avenue Realty Pty Ltd; Orchid Avenue Realty Pty Ltd v Makings Custodian Pty Ltd & Ors [2018] QCA 33

PARTIES:

In Appeal No 6008 of 2017:

MAKINGS CUSTODIAN PTY LTD
ACN 139 197 130
(first appellant)
MAKINGS PTY LTD
ACN 120 563 260
(second appellant)
v
ORCHID AVENUE REALTY PTY LTD
ACN 093 431 595
(respondent)

In Appeal No 6050 of 2017:

ORCHID AVENUE REALTY PTY LTD
ACN 093 431 595
(appellant)
v
MAKINGS CUSTODIAN PTY LTD
ACN 139 197 130
(first respondent)
MAKINGS PTY LTD
ACN 120 563 260
(second respondent)
STEPHEN GUY SOLOMONS
(third respondent)
DUNCAN IAN ROBERT McINNES
(fourth respondent)
CBRE (C) PTY LIMITED
ACN 003 205 552
(fifth respondent)

FILE NO/S:

Appeal No 6008 of 2017

Appeal No 6050 of 2017

SC No 7764 of 2014

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeals

ORIGINATING COURT:

Supreme Court at Brisbane – [2017] QSC 80

DELIVERED ON:

9 March 2018

DELIVERED AT:

Brisbane

HEARING DATE:

15 November 2017; 16 November 2017

JUDGES:

Gotterson and Morrison JJA and Henry J

ORDERS:

In Appeal No 6008 of 2017:

  1. Appeal allowed.
  2. Set aside the judgment entered on 13 September 2017.
  3. The appellants are to notify the registrar of the Court of Appeal within seven days of the date of publication of these reasons of the amount they agree is the interest payable on the amount $1,592,000 at the rate prescribed under Practice Direction 7 of 2013 until such date.
  4. Upon such notification, judgment is to be entered for the plaintiffs in an amount equal to the sum of $1,592,000 and the agreed interest.

In Appeal No 6050 of 2017:

  1. Appeal allowed.
  2. Set aside the judgment entered on 13 September 2017.
  3. The appellants are to notify the registrar of the Court of Appeal within seven days of the date of publication of these reasons of the amount they agree is the interest payable on the amount $1,592,000 at the rate prescribed under Practice Direction 7 of 2013 until such date.
  4. Upon such notification, judgment is to be entered for the plaintiffs in an amount equal to the sum of $1,592,000 and the agreed interest.
  5. The appellant is to pay the third, fourth and fifth respondents’ costs of the appeal on the standard basis.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – DEPARTURE – where the plaintiffs set out to prove that a defendant’s representations were false for reasons other than those pleaded – where the plaintiffs’ written submissions were consistent with how they ran their trial but not their pleadings – where there was no objection to evidence proving the representations were false for reasons other than those pleaded – where the primary judge did not ask the parties for submissions on the departure from the pleadings – where the primary judge determined the plaintiffs’ case according to their written submissions and evidence proved at trial, rather than their pleadings – whether the plaintiffs’ case should have been determined according to their pleadings – whether there was a lack of procedural fairness because the parties were not asked to provide submissions on the departure from the pleadings

TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – ENFORCEMENT AND REMEDIES – DEFENCES – PROPORTIONATE LIABILITY – where the real estate agent argued that the vendor was a concurrent wrongdoer – where the trial judge held that real estate agents and vendors are not concurrent wrongdoers when they perform a single set of acts causing loss – whether the real estate agent and vendor were concurrent wrongdoers

TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – ENFORCEMENT AND REMEDIES – ACTIONS FOR DAMAGES – ASSESSMENT OR AVAILABILITY OF DAMAGES – WHAT LOSS OR DAMAGE RECOVERABLE – OTHER CASES – where the trial judge adopted as the measure of damages the difference between the contract price and the property value at the time of purchase – where an appellant argued the measure of damages should have been the difference between the contract price and the property value at the date of the trial – whether the appropriate measure of damages was the difference between the contract price and the property value at the date of the trial

TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – ENFORCEMENT AND REMEDIES – ACTIONS FOR DAMAGES – ASSESSMENT OR AVAILABILITY OF DAMAGES – WHAT LOSS OR DAMAGE RECOVERABLE – OTHER CASES – where the trial judge deducted from the measure of damages an amount obtained by the plaintiffs by way of settlement of a separate claim – where the trial judge regarded the settlement amount as having mitigated the plaintiffs’ loss – where the appellants argued the settlement amount was unconnected with their loss – whether the settlement amount had mitigated the plaintiffs’ loss

TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – ENFORCEMENT AND REMEDIES – ACTIONS FOR DAMAGES – ASSESSMENT OR AVAILABILITY OF DAMAGES – WHAT LOSS OR DAMAGE RECOVERABLE – OTHER CASES – where the trial judge did not award transaction costs as a component of damages – whether transaction costs should have been awarded as a component of damages

Civil Liability Act 2003 (Qld), s 28(1)(a)

Trade Practices Act 1974 (Cth), s 52, s 53A, s 82(1B), s 87CB(3)

Banque Commerciale SA (In liq) v Akhil Holdings Ltd (1990) 169 CLR 279; [1990] HCA 11, considered

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60, cited

Hadgelias Holdings and Waight v Seirlis [2015] 1 Qd R 337; [2014] QCA 177, explained

House v The King (1936) 55 CLR 499; [1936] HCA 40, applied

HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; [2004] HCA 54, cited

Jamieson v Westpac Banking Corporation (2014) 283 FLR 286; [2014] QSC 32, considered

Potts v Miller (1940) 64 CLR 282; [1940] HCA 43, applied

Selig v Wealthsure Pty Ltd (2013) 94 ACSR 308; [2013] FCA 348, distinguished

Tomasetti v Brailey (2012) 274 FLR 248; [2012] NSWCA 399, cited

Williams v Pisano (2015) 90 NSWLR 342; [2015] NSWCA 177, approved

COUNSEL:

In Appeal No 6008 of 2017:

P Roney QC, with J Green, for the first and second appellants

R P Perry QC for the respondent

In Appeal No 6050 of 2017:

R P Perry QC for the appellant

P Roney QC, with J Green, for the first and second respondents

The third respondent appeared on his own behalf

The fourth respondent appeared on his own behalf

M Steele for the fifth respondent

SOLICITORS:

In Appeal No 6008 of 2017:

Ramsden Lawyers for the first and second appellants

Carter Newell Lawyers for the respondent

In Appeal No 6050 of 2017:

Carter Newell Lawyers for the appellant

Ramsden Lawyers for the first and second respondents

The third respondent appeared on his own behalf

The fourth respondent appeared on his own behalf

Kennedy’s Lawyers for the fifth respondent

  1. GOTTERSON JA:  On 26 August 2009, Makings Pty Ltd (“Makings”), of which Mr Brian Makings is a director, entered into a contract in writing to purchase a small shopping centre named “The Piazza” on Varsity Parade, Varsity Lakes.[1]  The vendor was Market Square No 1 Pty Ltd (“Market Square”).  The contract price was $6,900,000.
  2. Makings is the trustee of the Makings Family Superannuation Fund (“the superannuation fund”).  For the sake of compliance with superannuation law requirements, Makings Custodian Pty Ltd (“Makings Custodian”) was subsequently incorporated.  On 15 September 2009, the contract was rescinded and a fresh contract was entered into between Market Square and Makings Custodian for the same purchase price and on the same terms, except as to identity of purchaser.  Makings Custodian acquired The Piazza as bare trustee for Makings as trustee of the superannuation fund.
  3. The principals of Market Square were Mr Stephen Solomons and Mr Duncan McInnes.  That company is now in liquidation.  It had undertaken the development of The Piazza as part of a five lot development including a tavern, offices and residential units.  The different lots were regulated by the one Building Management Statement.  In the June prior to the sale, all of the 13 shops in The Piazza were leased.  There were 11 tenants, two of them having leased two shops each.
  4. Upon completion of the development, in February 2007, Market Square engaged CBRE (C) Pty Ltd (“CBRE”) to manage The Piazza.  CBRE produced each month a Monthly Report and an Owners’ Statement for Market Square.
  5. It is uncontroversial that by June 2009, The Piazza was performing poorly.  As the learned trial judge noted,[2] the Management Report for that month disclosed an actual Year to Date (“YTD”) net income of $297,896.34, against a budgeted YTD net income of $501,507.43, and rental arrears of $54,969.25.[3]
  6. In July 2009, Mr Solomons and Mr McInnes instructed Mr Gregory Bell, a principal of a Ray White Real Estate franchise, to market The Piazza.  Mr Bell’s company, Orchid Avenue Realty Pty Ltd (“OA Realty”), held the franchise and traded under the name “Ray White Commercial”.  Its employee, Mr David Djurovitch, an experienced real estate agent, undertook the marketing campaign.
  7. Mr Makings had been successful in business in the United Kingdom before retiring to the Gold Coast.  He formed the view that the superannuation fund ought to be deriving a better return than it was from its portfolio of stocks, shares and money on deposit.  He was minded to reinvest in commercial property with an annual net return of eight to 10 per cent.

Pre-contractual financial performance assertions: evidence and findings

  1. In August 2009, Mr Makings made enquiries of Mr Djurovitch as to whether he had any properties listed for sale which would yield a return in that range.  Mr Djurovitch sent Mr Makings an e-brochure on 18 August 2009.  The Piazza was listed in it.  Mr Makings emailed a request for details.[4]  The next day, Mr Djurovitch advised him that The Piazza was to be auctioned at 11 am on 20 August.  Also, on the evening of 19 August, Mr Djurovitch sent numerous emails to Mr Makings.
  2. The first email attached an Information Memorandum and was sent at 8.29 pm.[5]  It consisted of an executive summary, property details and some 13 annexures.  Each page had the logo “Ray White Commercial” printed on it.  The executive summary stated that “[t]he net rental for the 11 tenancies which has a total lettable area is (sic) approx.  1327m² is approx.  $607,175p/a (see Tenancy Schedule)”.[6]  The Tenancy Schedule was Annexure A.[7]  It listed the 11 tenants and had a column headed “Net Rent” at the foot of which was “Total Net Rent $607,175.04.”  Annexure B[8] was headed “Outgoings Statement” and also had CBRE’s logo printed on it.  It was an estimate of annual outgoings for the financial year 2008-2009.  It contained a table listing types of expenditure and the amount of each of them.  The total of the amounts was $106,140.  Underneath, the rate per square metre was stated to be $80.05.
  3. The second email sent at 8.32 pm attached an amended Tenancy Schedule and stated that net revenue had risen substantially; that rent rises for six of the tenancies had not been noted in the original Tenancy Schedule; and that further increases would occur as a result of impending rent reviews on three other leases.  The attachment showed a revised Total Net Rent of $619,630.50, to be augmented by a further $7,485.97.[9]
  4. The third email was sent at 8.34 pm.  It forwarded an email that Mr Solomons had sent to Mr Djurovitch with attachments.  One of the attachments was a three page Tenancy Schedule dated 31 July 2009.  At the foot of the schedule, the total base rental was stated to be $559,617.48 subject to a rental abatement of $60,000 with operating expenses (OPEX) recoverable from tenants of $67,261.20 or $75.21 per square metre for the area leased for the shops.[10]
  5. The fourth email, sent at 8.35 pm, forwarded a further email that Mr Djurovitch had received from Mr Solomons.  The latter had attached to his email a Rental Arrears Schedule which stated that after recent rental payments, collectible rental arrears had reduced to $10,705.51 as at 25 July 2009.[11]  Further emails were sent later that evening.  Principally, they enclosed the current shop leases.
  6. Mr Makings met with Mr Djurovitch at The Piazza on 26 August 2009.  After a site inspection, they had a conversation at the coffee shop.  The learned trial judge made findings with respect to the content of their discussions.  Before repeating those findings, I note that her Honour accepted Mr Makings’ evidence in this respect.[12]  Mr Djurovitch was not called as a witness although he was available to be called.  That factor, her Honour said, made her more comfortable in accepting Mr Makings’ evidence as to their conversation.[13]
  7. The learned trial judge’s findings were these:[14]

[27] Mr Makings asked Mr Djurovitch some questions about the material with which I have just dealt.  In answer to one such question Mr Djurovitch told Mr Makings that the estimate of outgoings (Annexure B) showed all the outgoings of the building – tt 2-59, ll 15-20, 3-18-19.[15]  In answer to a similar question Mr Djurovitch said the Piazza's “contributions to shared services [under the Building Management Statement] were all reflected within the estimate of outgoings that was in the IM.” – tt 2-57, 3-77-78, 3-80-81, 4-36 and 4-40.  These oral representations go well beyond anything stated in the estimate of outgoings.

[28] Mr Djurovitch produced a copy of Annexure A and spoke about the rental increases which he said had come into effect since it was prepared.  Mr Djurovitch used a calculator and totalled the net rent at $619,630, as opposed to the old figure of $607,175.  Mr Makings wrote these figures on the copy of Annexure A which Mr Djurovitch produced.  That document with Mr Makings' handwriting was exhibit 5 [AB1415] – tt 2-60-62 and 4-32.

[29] Then Mr Djurovitch gave Mr Makings a colour copy of the amended tenancy schedule (ex 4) [AB1414].  It shows much the same information as Mr Makings had written on the sheet which is exhibit 5.  By reference to this document Mr Makings asked Mr Djurovitch to tell him how he arrived at the net rental income shown on that sheet.  Mr Djurovitch said that it was “after deducting all the costs, including the shared services, that are payable by tenants.” – t 2-59.  The only qualification to that was that the landlord would be responsible for land tax.

[30]  Mr Makings told Mr Djurovitch that he wanted to achieve a 9% yield – t 4-32.  Mr Djurovitch responded that the owners had turned down $6.7 million at the auction and that there were other interested parties.  As to the calculation of yield, Mr Makings said he would only have regard to rental increases which had in fact come into effect, and not those which were due to come into effect later that year – t 4-32.  Mr Djurovitch then did “a quick calculation and said the 9% would – would give you a purchase price of 6.9 million.  So I – I checked that and I agreed with that.  At that point, he asked me if I was prepared to purchase it at 6.9, which I said, yes, I would.” – tt 2-62, 4-33.  At this point Mr Djurovitch produced a draft contract and Mr Makings signed it.”

  1. As to Mr Makings’ understanding of the financial data supplied to him, the learned primary judge found:[16]

[31] Mr Makings’ evidence was that he assessed yield as being the net revenue expressed as a percentage of the purchase price – t 2-40.  This is conventional enough in the marketplace and there was no evidence that Mr Djurovitch understood anything different.  In fact from the calculation performed during the conversation just discussed, it can be seen that Mr Djurovitch’s understanding was the same as Mr Makings’.

[32] Mr Makings never understood that the figures he was given as to net rent ($607,175 and then later $619,630) and outgoings ($106,140) were not actual figures which the owners had respectively received and paid.  In fact, it was apparent at trial that he still did not understand that – tt 3-50, 3-51-52, 3-93.  In the context of all the information he received, Mr Makings understood the words “total net rent” in Annexure A and the amended versions of this schedule were used to signify actual income after all actual expenses (except land tax) had been deducted – t 2-28.”

  1. Her Honour then made the following observations:[17]

[33] Annexure A did not state expressly that the figures shown as “net rent” were the figures payable under the leases, rather than actual rent received.  The expression “net rent” is ambiguous.  If one is told that the document summarises the rent due under the arrangements with tenants without regard to outgoings, the expression “net rent” can be seen to mean the equivalent to base rent payable under the leases.  But consistently with what Mr Djurovitch told Mr Makings (see [29] above), the expression “net rent” can be interpreted as Mr Makings understood it.

[34] The statement in the body of the Information Memorandum that the “... net rental ... is approx.  $607,175 p/a (see Tenancy Schedule)”[18], is an express (mis)statement that the actual net rent is about $607,175.  So is the statement, “Net annual rent for the 11 tenancies ... tops $607,000” made in Annexure I to the Information Memorandum.

[35] Another indication that the figures in Annexure A, and the amended version of it, were actual figures, rather than a list of rents payable, is found in the email sent at 20:32 on 19 August 2009.  The text of this email describing the amendments to Annexure A says, “the net revenue has risen substantially”.[19]  This statement is in the part of the email which is written by Mr Djurovitch to Mr Makings.  It was not shown to my satisfaction that Mr Solomons had any input into that statement – cf t 5-99, 110.

[36] What Mr Djurovitch said to Mr Makings on 26 August 2009 put the matter beyond doubt.  He explained that the word “net” meant the figure was after deducting all costs (except land tax) and he co-operated in the exercise of calculating yield from these documents, which exercise was not sensible if the figures did not represent net income – t 3-75.”

  1. A very significant finding made by the learned primary judge concerned the representations that she found had been made by OA Realty to Mr Makings via the Information Memorandum and things said by Mr Djurovitch at the meeting.[20]  They were that:

(a) the “total net rent” of $607,175.04 was the actual rent, net of expenses, which the owner of the Piazza had received in the year ending June 2009;

  1. since June 2009, actual net rent had risen to $619,630;
  1. all outgoings for the 2009 financial year for the Piazza were in the vicinity of $106,140 and at a rate of about $75-$80m²;
  1. Annexure B included the Piazza’s share of costs under the Building Management Statement;
  1. apart from land tax, all the outgoings of the Piazza, including under the Building Management Statement, were billed to, and recovered from, tenants.[21]

Falsity of representations: findings

  1. I have referred to disclosures in the Management Report for June 2009, exhibit 13.  Drawing largely upon them, the learned primary judge made the following findings with respect to falsity in the representations that she had found that OA Realty had made:

[60] The representations made by the second defendant were false.  First, Annexure A and its successors were summaries of the rent payable on the face of the leases for the shops in the Piazza.  The total $607,157 did not represent what was received in the year ending 2009 as net rent.  Net income for that year was around $297,896 (ex 13).  Second, exhibit 13 shows outgoings for that year were in the vicinity of $190,000, not $106,140.  The plaintiffs’ valuer originally recalculated this amount at $200,320 (ex 55, p 19).  However, by trial she had discovered that figure included an amount of $41,638 which was not recoverable from the Piazza’s tenants, but was costs under the Building Services Statement which the owner of the Piazza was obliged to pay and then recover from the other four lot owners.[22]  I find outgoings recoverable from tenants (ie, the subject of Annexure B) for the 2009 financial year (including the Piazza’s share of Building Management Statement costs, $13,879) were in the vicinity of $159,000.  The rate at which outgoings were charged was not $75 or $80m².  It was in the vicinity of $115m².[23]

[61] The following representations were also false: (1) outgoings properly chargeable to tenants included the amount paid by the landlord under the Building Management Statement, and (2) all outgoings, except land tax, were recoverable from tenants.  The leases are in evidence – ex 3.  They appear to provide for the tenants to pay most outgoings but only the landlord’s share of costs under the Building Management Statement.  The remaining amount of shared costs ($41,638) was payable by the owner of the Piazza who had a right to reimbursement from the other four lot owners.[24]

Reliance and causation: findings

  1. Her Honour found it “overwhelmingly clear” from Mr Makings’ evidence that the information contained in Annexure A (and amended versions of it), as understood by him to be actual income, and the oral statements of Mr Djurovitch, “mattered most” to him.[25]  He was primarily interested in the income that The Piazza would produce, net of expenses.[26]  The financial analysis verifying a return of nine per cent per annum on an outlay of $6,900,000 was, in her Honour’s view, “simplistic and naïve”.[27]  Notwithstanding, her Honour observed:[28]

“But it is logical to conclude, and I am very satisfied on the evidence, that the analysis he made was one which relied upon the information provided to him by the second defendant and in particular the representations which I have found were made.”

Reinforcing that observation, her Honour then said:[29]

“In the circumstances of this case, I have no doubt that had the second defendant not made the representations it did, Mr Makings would not have entered into the transaction to buy the Piazza.”

The litigation

  1. I have referred in some detail to the transaction and to pre-contractual representations and their falsity, in order to explain why it was that, in 2014, Makings Custodian, as first plaintiff, and Makings, as second plaintiff, commenced proceedings in the Supreme Court of Queensland against CBRE, as first defendant, and OA Realty, as second defendant.  OA Realty joined Mr Solomons, Mr McInnes and CBRE as first, second and third third parties respectively.
  2. The learned trial judge found that by making the false statements, OA Realty engaged in false and misleading conduct in contravention of s 52 and of s 53A of the Trade Practices Act 1974 (Cth) (“TPA”).  Her Honour also found that, as noted, the false representations caused the plaintiffs to purchase The Piazza and that, as a result, they had sustained a financial loss for which they were entitled to damages.
  3. Her Honour accepted expert evidence that The Piazza was worth $4,910,000 at the date of purchase.  That amount differed by $1,990,000 from the contract price.  In order to calculate damages, her Honour adopted the difference but deducted from it an amount of $349,748 that, early in the trial, CBRE had agreed to pay the plaintiffs in settlement of a separate claim that they had made against it for failing to collect rentals between 2010 and 2013.[30]  On 19 May 2017, judgment was given in the plaintiffs’ favour against OA Realty for $1,640,252 together with interest to be calculated.
  4. In the course of reasoning to judgment, her Honour also:
  1. rejected a contributory negligence claim made under s 82(1B) of the TPA by OA Realty against the plaintiffs,[31]
  1. rejected the plaintiffs’ representations-based claim against CBRE and, as a consequence, OA Realty’s proportionate liability-based claim against it,[32]
  1. rejected a defence pleaded by OA Realty which was based on the proportionate liability provisions in s 87CB(3) of the TPA and s 28(1)(a) of the Civil Liability Act 2003 (Qld) (“CLA”) and which had been advanced on the footing that it and Market Square were concurrent wrongdoers,[33] and
  1. rejected OA Realty’s third party claims against Mr Solomons and Mr McInnes.[34]

Consistently, with that reasoning, judgment was also given for CBRE against the plaintiffs and for the third parties against OA Realty.

  1. In giving judgment, her Honour said that she would hear the parties as to costs and calculation of interest.[35]  After a hearing on 13 September 2017, the learned trial judge awarded interest at the rate prescribed under Practice Direction 7 of 2013.  She varied the judgment sum by adding an interest component of $959,153.42, increasing the amount of the judgment in the plaintiffs’ favour to $2,599,405.42.  The decision on costs was reserved.

The appeals

  1. On 15 June 2017, Makings Custodian and Makings filed a notice of appeal against the judgment (CA 6008 of 2017).[36]  The respondent to that appeal is OA Realty.  The appeal concerns the assessment of damages.
  2. The following day, OA Realty filed a notice of appeal against the judgment (CA 6050 of 2017).[37]  It has since been amended by leave to add a challenge to the award of interest.  The first and second respondents to this appeal are Makings Custodian and Makings.  The third and fourth respondents are Mr Solomons and Mr McInnes.  CBRE is the fifth respondent.  No substantive relief is claimed against CBRE.  It was joined as a respondent because OA Realty seeks, by way of alternative relief, a retrial of the action.
  3. The appeals were argued over two days.  OA Realty’s appeal was heard first.  It is convenient to consider the appeals in the order in which they were heard.

CA 6050 of 2017

  1. OA Realty’s notice of appeal contains numerous grounds of appeal.  Generally, more than one ground of appeal relates to a given topic.  In addresses, counsel tended to make their submissions on a topic basis rather than on a ground by ground basis.  It is therefore convenient to consider this appeal by reference to the topics.
  2. I turn first to a broad topic on which senior counsel for OA Realty addressed first.  It concerns an alleged departure from the pleadings and associated lack of procedural fairness.

Alleged departure from the pleadings and lack of procedural fairness

  1. I preface my discussion of this topic by referring to certain aspects of the pleadings and the reasons of the learned primary judge.
  2. The operative statement of claim was the Third Amended Statement of Claim (“Statement of Claim”).[38]  Relevantly, as to the making of representations, the following facts were pleaded:
  1. that when Mr Makings contacted Mr Djurovitch by telephone, the latter told him that, inter alia, The Piazza suited his requirements for investing in commercial property and had a rental yield of between eight per cent and 10 per cent: para 21(b);
  1. that the annexures to the Information Memorandum emailed to Mr Makings by Mr Djurovitch on 19 August 2009 stated net rental for the year to June 2009 to be $607,175.04 (Annexure A) and total outgoings to arrive at that net rental to be $106,140 (Annexure B): para 23(d);
  1. that the amended Tenancy Schedule (Exhibit 4) emailed to Mr Makings on the same date represented that The Piazza “derived or would derive a rental return, net of all expenses and outgoings” of $619,630.50: paras 23(e), 25(a);
  1. that during the inspection on 26 August 2009,
  1. Mr Djurovitch represented to Mr Makings that the net rent was the income received by the owner of The Piazza after all costs associated with owning it, including outgoings and Shared Services, had been deducted: para 32(b); and
  1. Mr Djurovitch represented that the net rent shown on Exhibit 4 was about to increase by a further $1,586 to a total of $621,216: para 32(i).
  1. Paragraph 50 in the Statement of Claim is central to this topic.  Relevantly, it contained the following pleading:[39]

50. The Representations referred to in paragraphs 21(b), 25, 26(e) and (f), 33, 36 and 37 were made negligently, and were misleading or deceptive, or likely to mislead or deceive, in contravention of section 52 and/or section 53A of the TPA, and the preparation of the First Defendant’s Management Records occurred negligently in that:

  1. as at the time Representations were made, the rental yield for the Piazza complex was not between 8% and 10%, and was in fact much less, because:
  1. the tenants of the Piazza complex were not being invoiced and were therefore not paying for all recoverable outgoings of the lessor;
  1. the tenants of the Piazza complex were only being invoiced for a portion of total lessor’s outgoings in the sum of $80,382.84, whereas the actual lessor’s outgoings of the Piazza complex was (sic) significantly more than this amount;
  1. the owner of the Piazza complex was incurring costs it was not being reimbursed for in respect of the Shared Services where:
  1. the other owners were not being invoiced for their contribution to the cost of the Shared Services pursuant to the Building Management Statement;
  1. Market Square as owner of the Piazza complex was meeting the payment of all expenses in relation to the Shared Services; and
  1. owners of the Piazza complex, and the Plaintiff as purchaser of it would likewise be forced to meet without contribution from the tenants a substantial part of the recoverable outgoings from the Piazza complex and its net rental return thereby substantially diminished.
  1. the calculation of the net yield for the Piazza complex which was the subject of the Representations failed to take into account:
  1. the outgoings which were not being recovered from the tenants of the Piazza complex and which were being paid for by Market Square as owner of the Piazza complex; and
  1. costs associated with the Shared Services which were not being recovered from the other owners and which were being paid for by Market Square as owner of the Piazza complex.
  1. as at the time the Representations were made:
  1. the net rent for the Piazza complex was not $621,216.00 per annum and was in fact much less on the basis of the matters referred to at sub paragraph (a);
  1. the outgoings for the 2009 financial year were not $106,140.00 per annum, and were in fact $200,320.00 per annum, broken down in the manner set out in the third column of the table at page 19 of the Jones Lang LaSalle report of 26 April 2016 (which the plaintiff incorporates by reference) (‘26 April 2016 Report’);
  1. the outgoings for the 2009 financial year were not $80.05 per square metre per annum, and were in fact $189.34 per square metre, broken down in the manner set out in the third column of the table at page 19 of the 26 April 2016 Report; …”.
  1. The learned primary judge was critical of the way in which the plaintiffs’ case as to falsity of the representations was pleaded.  Before detailing the criticism, her Honour observed that it was pleaded that OA Realty represented[40] that the total net rent figure in Annexure A and its successors was the actual net rent received by the landlord of The Piazza in 2009.[41]  She noted that that had been proved.[42]
  2. The criticism that her Honour made was this:

[63] At paragraph 50(b)(i) of the third amended statement of claim the plaintiffs pleaded that that representation was false because the net rent for the 2009 financial year was “much less” than was represented.  That is, paragraph 50(b)(i), consistently with the preceding pleading, assumes the representation made was as to actual net rent for the 2009 year and says that representation was false.  However, remarkably, paragraph 50(b)(i) continues not, as one might expect, to say that representation was false because in fact the Piazza’s net income in the 2009 financial year was $297,896, as shown in exhibit 13.  It continues instead to say that the representation was false because:

  1. CBRE was not invoicing and collecting all recoverable outgoings, and
  1. CBRE was not requiring other lot owners to reimburse to the owner of the Piazza their share of costs pursuant to the Building Management Statement.[43]
  1. Her Honour noted that the plaintiffs did not set out to prove that the representations so pleaded were false only because of CBRE’s failure to invoice and collect outgoings for the 2009 financial year.[44]  Notwithstanding, as her Honour further noted, the plaintiffs’ written submissions were consistent with the way that the trial had been run and not with the pleadings.  She set out certain paragraphs in the plaintiffs’ written submissions as follows:[45]

135. Contrary to the content of the representations set out above, the true financial position of the Piazza was very different.  The yield obtained by Mr Makings was in the region of 4.3 per cent rather than 8 to 10 per cent, and the net rental for the 2008/2009 financial year was $297,896, not $607,175.

  1. Further, the annual outgoings for the 2008/2009 financial year were $200,320, not $106,140.[46]
  1. The effect of these facts, being contrary to representations made to Mr Makings, was that the Piazza was worth significantly less than $6.9 million at the time it was purchased ...”
  1. Her Honour then made the following observations about the pleadings and conduct of the trial:

[66] Senior counsel for the plaintiffs did not seem alert to the problem in his pleading and thus the matter was not helpfully advanced in his address.  This was notwithstanding that counsel for the first defendant and counsel for the second defendant had highlighted the problem during their addresses.  Counsel for the second defendant stated in addresses that he relied upon the plaintiffs’ pleading.  He did not identify any prejudice should the plaintiffs not be held to their pleading.  The plaintiffs' counsel did not seek leave to amend the pleadings in accordance with the evidence which had been led.”

  1. At that point, the learned primary judge considered how she should approach the pleadings, the state of the evidence and the submissions before her on this issue.  She expressed her conclusion, and reasons for it, as follows:

[67] Against that unsatisfactory background, I must decide whether fairness demands that the plaintiffs’ case be determined in accordance with the evidence proved at trial or in accordance with their pleading.  My conclusion is I should decide the plaintiffs’ case in accordance with the course of evidence and paragraphs 135-137 of their written submissions, rather than in accordance with their pleaded case40.  The matters which convince me to do this are the fact that the plaintiffs’ pleading clearly did make a case that (1) the net rent figures were represented to be actual figures for income received, and that (2) these figures were not the correct actual figures.  Further, that there was no objection taken by the second defendant to the plaintiffs proving reasons for the second of those propositions (other than the pleaded reasons) during the course of evidence.[47]  The point was not raised at all until submissions.  I regard the plaintiffs as having pleaded and proved that (1) the second defendant represented the total net rent as the actual figure for the 2009 financial year, and (2) the actual figure was inaccurate, but (3) having proved a reason in addition to the pleaded reason for that inaccuracy, namely that the total rent figure on Annexure A and its successors was not, and was never intended to be, a calculation of actual net rent for the 2009 financial year, but was simply a total of the rent which the leases obliged tenants to pay in that year.”

  1. In incorporating paragraph 67 into these reasons, I have retained her Honour’s numbering of a lengthy footnote, footnote 40, which I now set out in full:[48]

If I do not determine this issue this way, the plaintiffs’ case must fail.  The first difficulty is that the case as pleaded is illogical.  Paragraph 50(b) of the statement of claim assumes the figure in Annexure A is recording actual net rent received and that it would be correct if in calculating it, actual outgoings and shared services had been used.  But the evidence shows that the first assumption is wrong, ie, the figure in Annexure A is not recording actual net rent received.  It becomes illogical to then continue with the pleaded notion that it is inaccurate because only $106,000 outgoings has been deducted from it, rather than $200,320.  Overlooking the logical difficulty, as the written submissions set out above show, the plaintiffs never set out to make a case in accordance with paragraph 50(b) and Mr Makings gave no evidence as to what he would have done had he thought that the outgoings were at a rate of around $115m² and in an amount of around $159,000 per annum, and that the net rent figure in Annexure A and its successors ought to have been adjusted accordingly.  (I disregard the amount of $41,638 here as the other lot owners did contribute when asked).  There were indications in the evidence that such a high rate per square metre might have made Mr Makings disinclined to purchase – tt 2-33, 4-26, 4-69.  One could also speculate about whether Mr Makings would have proceeded having regard to the conversation about yield on 26 August 2009.  One could speculate about whether there may have been some productive negotiation and a lower purchase price – cf [58], above.  But there is really no safe basis for a finding.  I say this in circumstances where: (1) the decisions Mr Makings would have come to are not necessarily predictable having regard to his naïve approach to the whole purchase; (2) his evidence about outgoings rates suffers from his having learnt much about this topic since 26 August 2009 and in consequence having reconstructed memories about his state of mind at that time, and (3) these matters were simply not tested in the evidence.”

  1. Her Honour went on to find that the falsities pleaded in paragraphs 50(b)(ii) and (iii) were proved.[49]  She noted that paragraphs 50(b)(iv) and (v) related to representations about future matters on which she had not made any findings, and that paragraph 50(b)(vi) “adds nothing”.[50]
  2. OA Realty’s submissions: OA Realty submitted that the case should have been decided according to the pleadings.  Referring to her Honour’s footnote 40, it contended that had that occurred, it would have won the case.
  3. In developing the argument, OA Realty referred to the observations of Mason CJ and Gaudron J with respect to the function of pleadings in Banque Commerciale SA (In liq) v Akhil Holdings Ltd.[51]  It was submitted that there was no basis for a finding by her Honour that the case had not been conducted on the pleadings.
  4. Moreover, according to OA Realty, had the learned primary judge been contemplating taking the course she did take, she ought to have provided the parties with an opportunity to make submissions with respect to it and its consequences for the trial.  Not to have done so was a manifestation of procedural unfairness.
  5. The Makings parties submissions: The Makings parties submitted that, critically, her Honour was correct in finding that they had pleaded and proved that OA Realty had represented the total net rent figures to be the actual figures for the 2009 financial year and that those figures were inaccurate.  Paragraph 50(b)(i) did plead that the rent was “not $621,216… and was in fact much less”.
  6. In any event, it was submitted, no objection was taken to evidence that proved that the figures were inaccurate for a reason other than that pleaded.  It was open to her Honour to decide the case having regard to that evidence.
  7. The Makings parties argued that there had not been a lack of procedural fairness.  They had made it plain in written and oral submissions that their case was that the net rental after deduction of all costs, except land tax, for the 2008/2009 financial year was $297,896 and not $607,175.[52]  Mr Makings had been cross-examined about his understanding of what net rent meant.[53]  Further, OA Realty had not indicated what evidence it might have adduced to contradict Mr Makings’ evidence as to two highly significant matters; first, that Mr Djurovitch told him on 26 August 2009 when they had the Tenancy Schedule, Exhibit 5, in front of them, that net rent meant the figure arrived at after deducting all costs, except land tax; and, second, that he, Mr Djurovitch, cooperated in the exercise of calculating that the adjusted net rent of $621,216 would yield a return of nine per cent per annum on a purchase price of $6,900,000, as recorded on that document.[54]
  8. Discussion: OA Realty has sought to elevate the first sentence in footnote 40 to a finding in its favour.  However, in context, it was an observation only and one limited to the specific way in which paragraph 50(b)(i) of the Statement of Claim had been pleaded attributing, as it did, the difference between actual net rent and $621,216 to matters stated in paragraph 50(a), that is to say outgoings, and not to other matters.
  9. As much as I reject the submission of a finding, I would also reject the submission by the Makings parties that paragraph 50(b)(i) is to be read disjunctively such that the reference to matters in subparagraph (a) is applicable only to the words “was in fact much less”.  That, I think, is a strained reading which unnecessarily imports ambiguity into the paragraph.
  10. It is highly significant that her Honour regarded the plaintiffs as having pleaded and proved that OA Realty had represented that total net rent as stated in the Tenancy Schedule (Annexure A) was the actual net rent received for the 2009 year; that the representation was inaccurate in that regard; and that the proved inaccuracy provided an additional reason for the pleading in paragraph (50)(b)(i) that the actual net rent received by the owner of The Piazza for the 2009 financial year was not that stated as the total rent figure on Annexure A and its successors.[55]
  11. In my view, her Honour was justified in taking that approach.  There were the allegations in paragraphs 23(d), 25(a) and 32(b) of the Statement of Claim to which I have referred.  Each of those paragraphs was put in issue in OA Realty’s Defence.[56]  It is clear enough that an issue was raised on the pleadings as to whether the total net rental as stated was net of all expenses.  Furthermore, during addresses, her Honour expressly conveyed her view to senior counsel for OA Realty that the issue had been raised.[57]
  12. The Statement of Claim gave scope to the learned trial judge to make the findings based on the evidence that she did make at paragraph 38 of the Reasons.  Critically, her Honour found that, by means of the Information Memorandum and what Mr Djurovitch told Mr Makings at their meeting, OA Realty represented that the total net rent of $607,175.04 in Annexure A was the actual rent, net of expenses, which the owner of The Piazza had received in the year ending June 2009.
  13. There was a sufficient evidential basis for that finding.[58]  Also, there was a consistency between, on the one hand, Mr Makings’ evidence as to what Mr Djurovitch told him at the meeting as they discussed the revised rentals shown on Exhibit 4 and, on the other, the calculation noted on Exhibit 5 which established that total net rent as stated would yield an annual return of nine per cent on an acquisition price of $6,900,000.[59]
  14. Although the learned trial judge did not refer to the decision in Banque Commerciale, it is apparent that her Honour was conscious of the principles expressed in it.  She was at pains to identify what the Statement of Claim had pleaded beyond the narrowed paragraph 50(b)(i) and that it had been proved.  Moreover, as her Honour noted, there had been no objection to the receipt of evidence relevant to the proof.  She was justified in approaching the matter as she did in paragraph 67 of the Reasons.  No error of principle was committed on that account.
  15. Nor was there a lack of procedural fairness.  As her Honour noted, the plaintiffs’ written submissions addressed the inaccuracy in the figure of $607,175 as an expression of the actual net rental received.  The submission specifically referred to the proved actual net rental of $297,896 for the 2009 financial year.[60]  As well, in response to a question from her Honour in addresses, senior counsel for the Makings’ parties made it clear that his clients’ case was not limited to one that the actual net rent received was less than that shown on Annexure A ($607,175) on account of outgoings only.  Counsel’s response indicated that it did not matter to his clients’ case why it was that the actual net rent for 2009 was $297,896, and not $607,175.[61]  It must have been obvious to OA Realty what the plaintiffs’ case was in this regard.
  16. In any event, there is an absence of any evidence from OA Realty as to what sworn testimony Mr Djurovitch would have given had he been called, as to his dealings with Mr Makings.  In my view, this is a telling deficiency in an otherwise unpersuasive argument of lack of procedural fairness.
  17. For these reasons, I conclude that OA Realty has not established any viable ground of appeal in respect of this topic.  I would add that, in my view, OA Realty has quite failed to establish an absence, or insufficiency, of evidence for the findings that her Honour did make with respect to representations that were made by OA Realty, their falsity, reliance by the plaintiffs upon them and their causation of loss and damage.
  18. I now turn to other topics raised by OA Realty by way of appeal.

Self-characterisation as a “mere conduit”

  1. The learned trial judge rejected a submission made on behalf of OA Realty that its role was analogous to that of the real estate agent in Butcher v Lachlan Elder Realty Pty Ltd,[62] in that it had done no more than pass on to Mr Makings information prepared by CBRE or supplied by the principals of Market Square.  Her Honour noted numerous features of the Information Memorandum that associated it with “Ray White Commercial” and Mr Djurovitch.[63]  Even Annexure B, which had evidently originally been prepared by CBRE, was also marked “Ray White Commercial”.  This indicated, in her Honour’s view, endorsement of it by OA Realty.[64]
  2. Moreover, her Honour held that the way in which Mr Djurovitch used Annexure B to the Information Memorandum and Exhibits 4 and 5 in discussions with Mr Makings on 26 August 2009 exceeded the mere passing on of information from CBRE to the vendor.  In that regard, her Honour said:[65]

“Mr Djurovitch made several statements that went well beyond the information in the documents.  He amplified the information that was in them.  More importantly, Mr Djurovitch represented that the “net rent” figures in the schedules were actual income, net of all expenses received.  In assisting Mr Makings to calculate a purchase price based on yield on that basis, Mr Djurovitch was endorsing that figure as an accurate actual figure fit for that purpose.  Mr Djurovitch was doing much more than simply passing information on without any representation as to its truth or falsity.” (footnote omitted)

  1. OA Realty has challenged her Honours rejection of its submission.  The challenge reiterates that Annexure B originated from CBRE and that the amended Tenancy Schedule attached to the email sent by Mr Djurovitch at 8.32 pm on 19 August 2009 was supplied by the vendors but also originated from CBRE.
  2. It may be accepted that these documents did originate with CBRE.  However, that fact is no basis for criticism of her Honour’s rejection of the submission.  Importantly, it does not address the reasoning which I have quoted or the findings referred to in it.  In summary, OA Realty has not, by means of this topic, developed any viable ground of appeal.

Contributory negligence

  1. During the trial, OA Realty narrowed its case of contributory negligence on the part of the plaintiffs to the following:[66]

(i) that Mr Makings, for and on behalf of the plaintiffs, ought to have contacted the first defendant and sought to verify the proper amount of, and the actual collection of, outgoings payable by tenants of the Piazza under their respective leases, following his analysis of the documents received by him from the second defendant on 19 August 2009;

  1. that Mr Makings, for and on behalf of the plaintiffs, ought to have sought to verify the proper amount of, and collection of, outgoings payable by tenants of the Piazza under their respective leases, during, or after, his conversation with the first defendant’s representative, Anita Brown, on 23 September 2009;
  1. that Mr Makings, for and on behalf of the plaintiffs, ought to have made further inquiries of the first defendant with respect to the financial performance of the Piazza as a consequence of the content of, and lack of response to, the letter from the plaintiffs’ solicitors, Quinn & Scattini, to the first defendant dated 17 September 2009, which is exhibit 9 in the proceedings.”
  1. Her Honour rejected (ii) and (iii) as not viable.[67]  It is unnecessary to detail her Honour’s reasons for doing so.  They were fact based.  OA Realty has not alleged or demonstrated error in the finding of those facts nor in the reasoning based upon them.
  2. With the respect to (i), her Honour understood it to mean that Mr Makings himself ought to have taken those steps.[68]  She was not persuaded that Mr Makings would have been given permission by the vendor to approach CBRE had he sought it.[69]  Further, she saw as a difficulty with it that there was no pleading or case made either in evidence or in submissions as to what such an enquiry by him of CBRE would have produced.[70]  She thought it more likely than not that if he had made general enquiries as to whether or not outgoings were being properly invoiced and collected, he would have been told that they were.[71]  Beyond that, her Honour was not prepared to make findings based upon speculation.  A case of contributory negligence on this basis had therefore not been made out.
  3. In appealing against the rejection of the contributory negligence plea, OA Realty has not addressed the significant evidential deficit identified by her Honour.  Its argument leaves to speculation what evidence might have been given by CBRE personnel concerning information as to outgoings had the subject been broached with witnesses who did testify or by Ms Brown who was not called to testify.  In these circumstances, I am quite unpersuaded that there is merit in the challenge to the conclusion that contributory negligence had not been established.

Proportionate liability-based defence

  1. OA Realty pleaded by way of defence that the claim against it was an apportionable claim as defined in s 87CB(1)(a) of the TPA and s 28(1)(a) of the CLA.  That it was is uncontentious.[72]  As noted, the defence, in so far as concerned CBRE, failed since OA Realty had not proved that that party was a wrongdoer and hence it could not have been a concurrent wrongdoer.[73]
  2. OA Realty also pleaded that Market Square was a concurrent wrongdoer.  It did so notwithstanding that the plaintiffs had not sued it and therefore had not pleaded a case of wrongdoing against that company.
  3. The learned trial judge held that the case fell squarely within the ambit of the decision of this Court in Hadgelias Holdings and Waight v Seirlis[74] to the effect that where real estate agents and vendors performed a single set of acts which caused the subject loss, they were not concurrent wrongdoers so as to attract the application of s 87CB of the TPA.[75]  Her Honour noted that the provisions of the CLA were, if anything, less helpful to OA Realty.[76]
  4. In light of a subsequent decision of the Court of Appeal of New South Wales, Williams v Pisano,[77] her Honour went on to express her view that were OA Realty and Market Square concurrent wrongdoers, she would have limited the former’s liability to 80 per cent of the plaintiffs’ loss.[78]  In the end, she identified two respects in which she considered that Market Square would have been liable to the plaintiffs under s 52 of the TPA.[79]  One concerned non-correction of a misleading statement made by OA Realty in the Information Memorandum; the other concerned the provision of the outgoings schedule which inaccurately stated outgoings as being only $67,261.
  5. In Hadgelias, real estate agents (Hadgelias Holdings and its independent contractor, Mr Waight) had mislead a purchaser plaintiff, relying on false information that its vendor principals, knowing of its falsity, had given to them about carpark availability for an apartment.  At trial, judgment had been given for the plaintiff against the principals and the agents for the full amount of damages.  The agents pleaded a proportionate liability defence by which they sought to have the principals bear the entirety of the plaintiff’s loss.  The trial judge proceeded on a footing that the agents, on the one hand, and the principals, on the other, were concurrent wrongdoers.  The defence failed because his Honour, applying a decision of the New South Wales Court of Appeal, Tomasetti v Brailey,[80] held that as the relevant acts and omissions were those of the agents for which the principals were liable, their conduct and corresponding responsibility for the plaintiff’s loss were identical.  It followed that s 87CB did not require an apportionment between them.
  6. On appeal, consideration was given to an anterior question, namely, whether the agents and the principals were concurrent wrongdoers.  Holmes JA (with whom Morrison JA and I agreed) answered the question in the negative and affirmed the judgment under appeal on that basis.  As to construction of s 87CB(3), her Honour said:

[20] The phrase “independently of each other or jointly” in the s 87CB(3) definition qualifies the verb “caused”, rather than describing the acts or omissions.  In other words, the issue is not whether acts or omissions are jointly undertaken but whether they either independently produce the same outcome or combine in their effect to do so.  Thus, for example, although Mr Waight was not jointly liable with the other defendants for the statement found to have been made without their authority, it caused Mrs Seirlis’ loss jointly with the statements they made to the same effect.  In Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd,[81] on the other hand, the fraud of parties who had forged documents to obtain a mortgage and the negligence of the mortgagee’s solicitors in failing properly to secure the loan were independent causes of the loss.

[21] The majority of the High Court in Hunt & Hunt Lawyers v Mitchell Morgan Nominees observed that the equivalent definition of “concurrent wrongdoer” in the Civil Liability Act 2002 (NSW) posed two questions:

“…what is the damage or loss that is the subject of the claim? Is there a person, other than the defendant, whose acts or omissions also caused that damage or loss?”[82]

Consistently with the form of the second question, I would construe the definition in s 87CB as concerned with distinct acts (or omissions) or sets of acts (or omissions) by different actors, combining or working independently to cause loss or damage, and consequently inapplicable where there is but a single act or set of acts causing loss, attributable to more than one person.”

  1. Later, her Honour expressed the conclusion that, in terms of the dichotomy identified in her construction of s 87CB, the agents and their principals, in that case, performed a single set of acts which caused the claimed loss.  She observed:

[24] On my construction of s 87CB, the agents and vendors in the present case performed a single set of acts which caused loss.  They were not “concurrent wrongdoers” so as to attract the application of s 87CD.  If that view be wrong, however, I do not think that the same result as in Tomasetti v Brailey would necessarily follow.  Although the acts causative of loss were those of both the vendors and the agents, determination of the extent of those parties’ responsibility cannot be made solely on that basis:

“The value judgments involved in that exercise differ from, and are more extensive than, those which inform the question of causation.”[83]

This case is distinguishable from Tomasetti v Brailey: although the acts of Hadgelias Holdings and the vendors were the same, their minds were not.  In circumstances where the vendors knew that the representation was false but procured its making nonetheless, there is a strong argument that their responsibility for the loss was greater.”

  1. The appeal in Williams involved a case in which a purchaser had sued two vendors with respect to the sale of property.  The vendors’ appeal succeeded, the court holding that the representations made by them were not made in trade or commerce.  One of the members of the court, Emmett JA, discussed interpretive issues under the headings “Concurrent Wrongdoers” and “Apportionment”.  The other members of the court, Bathurst CJ and McColl JA, specifically expressed no concluded view on those topics.
  2. In the course of his discussion, Emmett JA referred to the decision in Hadgelias.  He did not express disagreement with the result.  He distinguished that case from the one before him, saying:

[76] In the circumstances of that case, the vendors were plainly vicariously liable for the acts of the agents, by the operation of s 84(2) and s 84(4) of the Consumer Act.  The question was not whether there should be apportionment among the vendors (as in the present case), but whether there should be apportionment between the vendors, on the one hand, and the agents, on the other.  Accordingly, s 87CI applied to the case, although it was not referred to by the Queensland Court of Appeal.  Section 87CI provides that nothing in Part VIA:

  1. prevents a person being held vicariously liable for a proportion of an apportionable claim for which another person is liable; or
  1. prevents a partner from being held severally liable with another partner for that proportion of an apportionable claim for which the other partner is liable; or
  1. affects the operation of any other Act to the extent that it imposes several liability on any person in respect of what would otherwise be an apportionable claim.

[77] Thus, the provisions in Pt VIA do not prevent a principal from being held vicariously liable for the wrongful actions of an agent within the scope of the agent’s authority.  That is to say, there need not be apportionment of liability as between principal and agent in such a situation.  Had it been contended in the present case that the Agent was a concurrent wrongdoer with Mr Williams and Ms Dandris, then it may have been that there should be no apportionment of liability as between the Agent, on the one hand, and Mr Williams and Ms Dandris, on the other.  That difference must qualify the otherwise broad language used by the Queensland Court of Appeal in its construction of s 87CB(3) to the effect that, in any case where there is a single act attributable to more than one person (as in the present case), those actors would not be concurrent wrongdoers.”

  1. I understand Emmett JA to imply that he would have regarded the agents and principals in Hadgelias as concurrent wrongdoers.  That it so, having regard to his later conclusion that s 87CB(3) should be construed as applying to a situation in which two or more persons contribute to the commission of a single act that causes the damage the subject of the claim.[84]  Thus, it was the principals’ vicarious liability for the wrongs of the agents that precluded apportionment.
  2. I do not consider the decision in Hadgelias to be one that requires characterisation of every act of a real estate agent and that of its principal in a sales transaction as constituting a single set of acts.  Such a conclusion may be the more readily drawn when, as in that case, misrepresentations made by the agent consist of a repetition of misstatements made to the agent by the vendor.  But where a principal has itself contravened s 52 of the TPA by acts or omissions which have no direct counterparts in conduct on the part of the agent, it is, I think, inappropriate to characterise those acts or omissions and the agent’s conduct as all within a single set of acts or omissions which caused the purchaser’s loss.
  3. Here, it is unnecessary to express a view on the correctness of the conclusion reached by Emmett JA as to single acts to which two or more persons have contributed.  In my view, the conduct on the part of Market Square which her Honour considered would have, independently of OA Realty’s conduct, infringed s 52, was not part of a single set of acts in which OA Realty participated.  It follows, in my view, that OA Realty and Market Square were, by virtue of their respective acts and omissions, concurrent wrongdoers.
  4. Accordingly, I would allow OA Realty’s appeal in respect of this topic.  I respectfully accept her Honour’s apportionment of responsibility for the plaintiffs’ loss and the reasons for it.  The amount for which damages are awarded to the plaintiffs against OA Realty should be a sum equal to 80 per cent of their damages as assessed.

The claim against the third parties

  1. In rejecting OA Realty’s third party claims against Mr Solomons and Mr McInnes, the learned trial judge noted that it had failed to prove that either was a tortfeasor.  There was, therefore, no occasion to consider the contribution legislation.[85]  Her Honour then considered what, in her view, was the only possible basis for a claim against them, namely one based on s 75B of the TPA.  She noted that no such claim was in any way proved against Mr McInnes.[86]
  2. As to Mr Solomons, her Honour reasoned that his involvement in providing to OA Realty the document which became Annexure B without checking it, was not an involvement on his part within the scope of s 75B(1).[87]  In its submissions on appeal, OA Realty has not challenged her Honour’s conclusion with respect to Mr McInnes.  The conclusion with respect to Mr Solomons at Reasons [164], it is said, is “not sustainable on the evidence”.  However, OA Realty has quite failed to suggest or demonstrate how that conclusion or the reasoning which supported it in the immediately preceding paragraphs, is not sustainable.  On this topic, too, the appeal has not been made out.

Quantification of damages

  1. The learned trial judge adopted as the measure of damages the difference between the contract price of $6,900,000 and the value that she found on the evidence that The Piazza had at 25 September 2009, $4,910,000.[88]  This measure contemplates as the value to be subtracted the real value at the time of purchase.  It was endorsed by the High Court in Potts v Miller.[89]  Its frequent application in assessing damages under s 82 of the TPA was later noted by the Court in HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd.[90]
  2. OA Realty has submitted that a different measure of damages ought to have been adopted, namely, one that took into account the value of The Piazza at the date of trial.  This submission must be rejected.  In the first place, the measure adopted by her Honour accords with well-established principle.  No error is shown in its adoption.  Secondly, the proposed measure would have the effect of depriving the plaintiffs of the capital gain they would have enjoyed if The Piazza had been purchased at real value at the time.  There is no reason in principle to advantage OA Realty by depriving the plaintiffs in this way.
  3. OA Realty has also challenged the preference of the learned trial judge for the valuation prepared by Ms L M Murdoch, a valuer engaged by the plaintiffs.  Her valuation method was to capitalise the rental income stream that The Piazza was, in her assessment, capable of generating on a sustained basis at 25 September 2009.  She adopted rentals that, in her opinion, reflected those obtainable in the market at the time.  They tended to be less than the face value of the rentals payable under the leases in place, which she regarded as unrealistically high, in excess of market, and unsustainable.
  4. The difficulty for OA Realty in this challenge is that the methodology used by Ms Murdoch was rationally explained by her in her evidence.  Its integrity was not impaired in cross examination or by other expert evidence.  Exhibit 2(b)[91] to which OA Realty referred in developing the challenge and which showed that of rental arrears at 25 July 2009 of $10,705.51, all but $59.59 had been paid on or by 9 August 2009, did not, in my view, undermine Ms Murdoch’s evidence concerning the sustainability of the face rentals.

Interest on damages

  1. The award of interest at the prescribed rate is also the subject of appeal, leave to amend the notice of appeal in that respect having been granted on 15 November 2017.[92]  The decision to award interest at that rate was, of course, an exercise of judicial discretion.  In order to challenge the award, it was therefore necessary for OA Realty to establish an error of a kind identified by the High Court in House v The King[93] as vitiating the exercise of a judicial discretion.  No such error was suggested, let alone established, in this case.  This aspect of the appeal therefore fails at the threshold.
  2. I would add that the learned trial judge rejected a submission for OA Realty that interest ought to have been awarded at the rate which applied to Macquarie Bank cash accounts from time to time.  Those rates were lower than the prescribed rate.  The basis for the submission was that funds used to settle the purchase of The Piazza had been invested in a Macquarie Bank cash account prior to settlement.
  3. Her Honour did not adopt the cash account rate for a reason which, in my view, was soundly based.  The funds which had been invested in the cash account belonged to Mr and Mrs Makings.  They withdrew them in order to lend them to their superannuation fund so that it could complete the purchase of The Piazza.  Their express purpose in doing so was to derive a better rate of return on the funds, a rate of the order of eight per cent to 10 per cent, in lieu of the cash account rate of 2 ½ per cent to three per cent.[94]

Disposition

  1. OA Realty has succeeded in challenging the decision at first instance on the basis of one only of the topics raised on appeal.  Its appeal ought therefore succeed in that respect and orders be made accordingly.

CA 6008 of 2017

  1. There are two respects in which the appellant plaintiffs challenged the quantum of the damages awarded to them.  The first concerns transaction costs of $369,949.57 incurred in acquiring The Piazza.[95]  These costs, they submit, ought to have been awarded as a component of damages.  The second concerns the amount of $349,748 received from CBRE and deducted by her Honour.  That amount, they contend, ought not to have been deducted.

Transaction costs

  1. In Potts, Dixon J enunciated by way of principle that “[t]he measure of damages in an action of deceit consists in the loss or expenditure incurred by the plaintiff in consequence of the inducement upon which he relied diminished by any corresponding advantage in money or monies worth obtained by him on the other side”.[96]
  2. I accept that the transaction costs have been incurred by the plaintiff appellants in consequence of the misleading and deceptive conduct of OA Realty.  In that sense they were a loss.  But that loss was matched by a corresponding advantage, namely, that by virtue of the incurrence of those costs, Makings Custodian became registered proprietor of The Piazza.  As such, it is the registered lessor and may convey legal title to a purchaser entity.
  3. A correct application of the Potts principle required recognition of that advantage.  The appropriate way to recognise it was, in my view, not to include those costs as a component of damages.  That the case was characterised by her Honour as a “no transaction” case[97] is, in my view, immaterial in this respect.
  4. I would add that transaction costs are not consequential losses.  They are not derivative losses, such as trading losses, which Jackson J reminded in Jamieson v Westpac Banking Corporation[98] may be a component of damages.
  5. As well, the circumstances of this case are relevantly different from those in Selig v Wealthsure Pty Ltd[99] to which these appellants referred.  There, the purchaser plaintiffs had resold.  The difference between acquisition price and resale price was inadequate as a measure of their true loss because the transaction costs they had incurred on acquisition were not, in effect, reimbursed to them by the resale price.  Thus they were allowed as damages.

CBRE receipt

  1. The learned trial judge explained the rationale for the deduction of the receipt of $349,748 in the following terms:

[182] Ms Murdoch was of the view that this settlement did not affect her valuation – t 6-103.  In my view, the correct way to regard this payment is as the plaintiffs having mitigated their loss.  The basis of the assessment of compensation is that the Piazza will not produce a sufficient income stream to justify the price paid for it.  It will continue to under-perform into the future.  The plaintiffs’ settlement with the first defendant has recouped some of that income stream.”

  1. The plaintiff appellants have challenged this deduction on the basis that the rents that CBRE had failed to collect were all ones that fell due for payment after settlement.  The loss arising from their non-collection was, therefore, unconnected with the loss incurred at settlement.  In support of the challenge, they note, as her Honour did, that Ms Murdoch acknowledged that her valuation at September 2009 was unaffected by the settlement with CBRE.[100]  In making her valuation, Ms Murdoch had deducted an amount equal to the capitalised value of the difference between the lease rents and her assessment of market rents.[101]
  2. On the face of it, the losses in question were incurred after, and separately from, the loss incurred upon acquisition of The Piazza.  For myself, I have difficulty in analogising the recovery of those losses with mitigation of the loss sustained on acquisition.  I say this because it was not established on the evidence that the rents that CBRE had failed to collect were equivalent to, or even broadly equivalent to, the difference between rents payable and notional market rents in the years 2010 to 2013.  To my mind, an equivalence of that kind would have been necessary in order to equate the CBRE payment to a difference between those two levels of rent during the years to which the payment related.
  3. It follows that, in my view, the plaintiff appellants’ damages ought not to have been reduced by the amount of $349,748.  Accordingly, I would allow this appeal as it relates to this topic.

Orders

  1. Consistently with these reasons, I would propose that orders be made in each appeal allowing it and setting aside the sum for which judgment was entered on 13 September 2017.  In lieu, I would substitute a judgment in the amount of $1,592,000 together with interest thereon at the rate prescribed under Practice Direction 7 of 2013.  The amount of $1,592,000 is 80 per cent of $1,990,000 which, itself, is $1,640,252 increased by $349,748.
  2. I would direct the parties to notify the registrar of the Court of Appeal within seven days of the date of publication of these reasons of the amount they agree is the interest payable at that rate until the date of publication of the reasons.  I would also direct that upon such notification, judgment be entered for the plaintiffs in an amount equal to the sum of $1,592,000 and the agreed interest.
  3. As to costs on appeal, it is, I think, highly relevant that each side has succeeded on a significant topic in its respective appeal.  I would therefore be inclined not to make any orders for costs on the appeals as between OA Realty and the plaintiff appellants.  OA Realty must, however, pay the costs of the successful third, fourth and fifth respondents to its appeal.
  4. I would propose the following orders and directions in respect of each of appeals CA 6008 of 2017 and CA 6050 of 2017:
  1. Appeal allowed;
  1. Set aside the judgment entered on 13 September 2017;
  1. Direct the appellants in each appeal to notify the registrar of the Court of Appeal within seven days of the date of publication of these reasons of the amount they agree is the interest payable on the amount $1,592,000 at the rate prescribed under Practice Direction 7 of 2013 until such date;
  1. Further direct that upon such notification, judgment be entered for the plaintiffs in an amount equal to the sum of $1,592,000 and the agreed interest,

and the following additional order in respect of appeal CA 6050 of 2017:

  1. The appellant is to pay the third, fourth and fifth respondents’ costs of the appeal on the standard basis.
  1. MORRISON JA:  I agree with the reasons of Gotterson JA and the orders his Honour proposes.
  2. HENRY J:  I agree with the reasons of Gotterson JA and the orders his Honour proposes.

Footnotes

[1]  AB1417-1475.

[2] Makings Custodian Pty Ltd & Anor v CBRE (C) Pty Ltd & Ors [2017] QSC 80 at [6].

[3]  Exhibit 13: AB1494-1495.

[4]  AB939.

[5]  Exhibit 2: AB940-979.

[6]  AB943 (emphasis supplied).

[7]  AB951.

[8]  AB952.

[9]  AB981.

[10]  AB995.  The learned primary judge noted at Reasons footnote 11 that the amount of the total base rental plus the amount of the rental abatement, $619,617.48, approximated the amount of the revised Total Net Rent in the amended Tenancy Schedule, $619,639.50.

[11]  AB998.  Representations as to arrears were not relied on by the Makings parties in the litigation.

[12]  [2017] QSC 80 at [15].  Her Honour indicated that his evidence was accepted unless she said otherwise.  She had found him to be an honest witness who tried to give honest answers at all times: Ibid at [12].

[13]  Ibid at [16].

[14]  AB2582.

[15]  I find that Mr Makings did mean to say that Mr Djurovitch told him that all expenses (except land tax) were recoverable from tenants even though he wrapped this up with net income to some extent in his answer in-chief.  He was definite about it in cross-examination (t 3-18-19) when challenged on the point – see t 3-48, ll 30-40, and on to 3-49.  That was the plaintiffs’ pleaded case – paragraph 32(b) of the statement of claim.

[16]  AB2582-2583.

[17]  AB2583.

[18]  [Her Honour’s] underlining.

[19]  [Her Honour’s] underlining.

[20]  [2017] QSC 80 at [38].

[21]  Paragraphs 23(d), (e)(i), (iv), 25(a), (b), (c), 26(b), (c) and 32(b) and (c) of the third amended statement of claim.

[22]  t 6-61-62 and exhibit 57.  This left an amount of $13,879 which the landlord of the Piazza paid for the Piazza’s share of costs under the Building Management Statement.  On my reading of the leases this was recoverable from the Piazza’s tenants.

[23]  By calculation, using the figure of $159,000 as outgoings.

[24]  For completeness it seems to me that the $106,000 figure in Annexure B did not include either the $41,638 figure or the $13,879 figure – t 7-6-7.

[25]  [2017] QSC 80 at [55].

[26]  Ibid at [56].

[27]  Ibid at [57].

[28]  Ibid.

[29]  Ibid at [58].

[30]  The plaintiffs accepted an offer of $425,000 plus costs on the standard basis.  Of that amount, $349,748 was attributed by them to the claim and $75,252 to interest: AB168 Tr2-88 ll27-37.

[31]  [2017] QSC 80 at [99].

[32]  Ibid at [100]-[116].  There is no appeal against the rejection of those claims.

[33]  Ibid at [125].

[34]  Ibid at [159]-[160], [164].

[35]  Ibid at [186].

[36]  AB2614-2616.

[37]  AB2617-2631.

[38]  AB2008-2052.

[39]  AB2035-2036 (emphasis supplied).

[40]  As the immediately preceding paragraph shows.

[41]  [2017] QSC 80 at [62].

[42]  See discussion at Reasons [60], [61] set out above.

[43]  Paras 50(b)(i), 50(a)(i), (ii), (iii)(1) and (2) and (iv).  I disregard para 50(a)(iii)(3) as I cannot make sense of it.

[44]  [2017] QSC 80 at [64].

[45]  [2017] QSC 80 at [65].

[46]  This is an incorrect comparison.  Annexure B was a list of outgoings recoverable from tenants.  The figure $200,320 included $41,638 which was not chargeable to tenants – see [60] above.

[47]  Proof that Annexure A and its successors were merely a list of leases showing their annual total rent came from exhibit 3, which went in by consent, and Ms Tambour’s evidence.  Proof of actual net rent came from exhibits 13 and 15 which went in by consent, again supported by Ms Tambour’s evidence.

[48]  AB2590.

[49]  [2017] QSC 80 at [69].  The proof was subject to one qualification which is not material for present purposes.

[50]  Ibid at [70].

[51]  (1990) 169 CLR 279 at 286-287; [1990] HCA 11.

[52]  Written submissions paragraph 135: AB933 Tr9-75 ll30-47.

[53]  AB269 Tr3-74 l44 – AB270 Tr3-75 l21.

[54]  AB108 Tr2-28 ll30-36; AB139 Tr2-59 l1 – AB143 Tr2-63 l2.

[55]  [2017] QSC 80 at [67].

[56]  AB2069-2118 at paragraphs 15(e), 17(b) and 24 respectively.

[57]  AB899 Tr9-41 ll21-42.

[58]  Information Memorandum at AB943, 951 and 963; Mr Makings’ testimony at AB108 and 139 to which I have referred.

[59]  See also, Mr Makings’ evidence at AB241 Tr2-61 ll4-40 and AB269 Tr3-74 l44 – AB270 Tr3-75 l21.

[60]  Exhibit 13: AB1494 and exhibit 15: AB1529.

[61]  AB933 Tr9-75 ll30-47.

[62]  (2004) 218 CLR 592; [2004] HCA 60.

[63]  [2017] QSC 80 at [41]–[43].

[64]  Ibid at [44].

[65]  Ibid at [46].

[66]  Ibid at [74]; AB199 Tr3-4 l39 – AB200 Tr3-5 l18.

[67]  Ibid at [83], [84].

[68]  Ibid at [87].

[69]  Ibid at [90].

[70]  Ibid at [88].

[71]  Ibid at [96].

[72]  Ibid at [117].

[73]   Ibid at [118].

[74]  [2015] 1 Qd R 337; [2014] QCA 177.

[75]  [2017] QSC 80 at [120].

[76]  Ibid footnote 67.  Section 30 of the CLA requires that the acts or omissions of the wrongdoers independently cause the loss or damage.

[77]  (2015) 90 NSWLR 342; [2015] NSWCA 177.

[78]  [2017] QSC 8 at, [125].

[79]  Ibid [149] at [151].

[80]  (2012) 274 FLR 248; [2012] NSWCA 399.

[81]  (2013) 247 CLR 613.

[82]  At page 627.

[83] Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613 at 638.

[84]  (2015) 90 NSWLR 342; [2015] NSWCA 177 at [84].

[85]  [2017] QSC 80 at [159].

[86]  Ibid at [160].

[87]  Ibid at [164].

[88]  Ibid at [166].

[89]  (1940) 64 CLR 282.

[90]  (2004) 217 CLR 640; [2004] HCA 54 at [35].

[91]  AB998.

[92]  Appeal Tr1-3 l35 – Tr1-4 l2.

[93]  (1936) 55 CLR 499 at 505; [1936] HCA 40 per Dixon, Evatt and McTiernan JJ.

[94]  AB173 Tr2-93 ll31-46.

[95]  Exhibit 10: AB1476.  These costs included stamp duty, transfer registration costs and legal fees.

[96]  (1940) 64 CLR 282 at 297.

[97]  [2017] QSC 80 at [58], [168].

[98]  (2014) 283 FLR 286; [2014] QSC 32 at [133].

[99]  (2013) 94 ACSR 308; [2013] FCA 348.

[100]  AB651 Tr6-104 ll27-39.

[101]  Exhibit 55A: AB1862; AB603 Tr6-56 ll6-12.

Editorial Notes

  • Published Case Name:

    Makings Custodian Pty Ltd & Anor v Orchid Avenue Realty Pty Ltd; Orchid Avenue Realty Pty Ltd v Makings Custodian Pty Ltd & Ors

  • Shortened Case Name:

    Makings Custodian Pty Ltd v Orchid Avenue Realty Pty Ltd

  • MNC:

    [2018] QCA 33

  • Court:

    QCA

  • Judge(s):

    Gotterson JA, Morrison JA, Henry J

  • Date:

    09 Mar 2018

  • Selected for Reporting:

    Editor's Note

Litigation History

Event Citation or File Date Notes
Primary Judgment [2017] QSC 80 19 May 2017 Dalton J.
Appeal Determined (QCA) [2018] QCA 33 09 Mar 2018 Appeals allowed: Gotterson and Morrison JJA and Henry J.

Appeal Status

{solid} Appeal Determined (QCA)