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Babstock Pty Ltd v Laurel Star Pty Ltd [No 5][2024] QCA 3

Babstock Pty Ltd v Laurel Star Pty Ltd [No 5][2024] QCA 3

SUPREME COURT OF QUEENSLAND

CITATION:

Babstock Pty Ltd & Anor v Laurel Star Pty Ltd & Anor (No 5) [2024] QCA 3

PARTIES:

BABSTOCK PTY LTD

ACN 010 443 124

AS TRUSTEE FOR THE KENMAN REAL ESTATE UNIT TRUST

ABN 60 266 220 872

(first applicant)

WAG PROPERTY MANAGEMENT PTY LTD

ACN 136 174 242

AS TRUSTEE FOR THE WAG UNIT TRUST

(second applicant)

v

LAUREL STAR PTY LTD

ACN 624 444 862

AS TRUSTEE FOR THE ALAN AND DOROTHY MARBURG FAMILY TRUST

(first respondent)

DOROTHY ANN MARBURG

(second respondent)

FILE NO/S:

Appeal No 3051 of 2023

DC No 2326 of 2018

DIVISION:

Court of Appeal

PROCEEDING:

Application for Leave s 118 DCA (Civil)

ORIGINATING COURT:

District Court at Brisbane – [2020] QDC 305 (Barlow KC DCJ)

DELIVERED ON:

25 January 2024

DELIVERED AT:

Brisbane

HEARING DATE:

7 August 2023

JUDGES:

Mullins P and Bond and Dalton JJA

ORDERS:

  1. Application for leave to appeal allowed.
  2. Appeal allowed.
  3. The orders made on the remitted hearing below be set aside.
  4. Judgment for the appellants against the respondents in the sum of $189,227.65 together with interest from 10 February 2023 to the date of this judgment.
  5. The respondents pay the appellants’ costs of this appeal and of the proceeding in the District Court.

CATCHWORDS:

TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – CONSUMER PROTECTION – MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS – CHARACTER OR ATTRIBUTES OF CONDUCT OR REPRESENTATION – RELIANCE, INDUCEMENT AND CAUSATION – where the dispute between the parties concerns the sale of a real estate business – where there was a contract for the sale of the business (Business Contract) and a contract for the sale of the rent roll comprising of 148 properties (Rent Roll Contract) – where the buyer alleged that they relied upon two representations made by the sellers’ agent in entering into the Rent Roll Contract – where the representations related to Entry Condition Reports (ECRs) kept for the rented properties – where the primary judge found that the representations made by the seller’s agent were inaccurate – where it was accepted below and on appeal that the sellers engaged in misleading and deceptive conduct – whether the primary judge erred in fact finding in determining that the buyer relied upon pre-contractual representations in entering into the Rent Roll Contract

TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – CONSUMER PROTECTION – MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS – CHARACTER OR ATTRIBUTES OF CONDUCT OR REPRESENTATION – RELIANCE, INDUCEMENT AND CAUSATION – whether the primary judge erred in fact in finding that pre-contractual misrepresentations caused the buyer loss because they caused the buyer to become bound by the terms of the Rent Roll Contract

TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – ENFORCEMENT AND REMEDIES – OTHER ORDERS OR RELIEF – RESCISSION OR RESTITUTION – whether the primary judge erred in law in declaring the Rent Roll Contract void ab initio pursuant to s 237 of the Australian Consumer Law when it could not be shown that the buyer had suffered, or was likely to suffer, loss or damage as a result of misleading and deceptive conduct

Competition and Consumer Act 2010 (Cth), sch 2, s 237(1), s 237(2)

Residential Tenancies and Rooming Accommodation Act 2008 (Qld), s 65

Trusts Act 1973 (Qld), s 15(1)

Uniform Civil Procedure Rules 1999 (Qld), r 150, r 161, r 165, r 166

Babstock Pty Ltd v Laurel Star Pty Ltd (2022) 10 QR 522; [2022] QCA 63, related

Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; [1992] FCA 557, cited

Fox v Percy (2003) 214 CLR 118; [2003] HCA 22, cited

HW Thompson Building Pty Ltd v Allen Property Services Pty Ltd (1983) 48 ALR 667; [1983] FCA 166, cited

King & Ors v Australian Securities and Investments Commission [2018] QCA 352, cited

Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques (No 1) [2017] 2 Qd R 456; [2016] QSC 242, considered

Laurel Star Pty Ltd v Babstock Pty Ltd [2020] QDC 305, related

Laurel Star Pty Ltd v Babstock Pty Ltd [No 3] [2023] QDC 10, related

Sutton v AJ Thompson Pty Ltd (in liq) (1987) 73 ALR 233; [1987] FCA 167, cited

Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; [1992] HCA 55, cited

COUNSEL:

D A Savage KC, with B W J Kidston, for the applicants

P E O'Brien, with L E Gamble, for the respondents

SOLICITORS:

Carter Capner Law for the applicants

Sarinas Legal for the respondent

  1. [1]
    MULLINS P:  I agree with Dalton JA.
  2. [2]
    BOND JA:  I have had the advantage of reading in draft the reasons for judgment of Dalton JA.
  3. [3]
    I agree with Dalton JA’s review of and evaluation of the evidence relevant to the grounds of appeal, with her Honour’s application of the law, and, accordingly, with her Honour’s conclusions that error has been demonstrated to the extent requisite to justify the applicants’ success.
  4. [4]
    Accordingly, I agree with the orders which Dalton JA has proposed.
  5. [5]
    DALTON JA:  This is an application seeking leave to appeal pursuant to s 118(3) of the District Court of Queensland Act 1967 (Qld).  An earlier decision of this Court (the first appeal) remitted part of the proceeding to the original trial judge for further hearing.[1]  This application is in relation to the judgment on that remitted hearing.  In my view, leave should be granted in order to prevent substantial injustice having regard to the merits of the appeal which is sought to be made.  I would order that the application and appeal be allowed.  For this reason I will refer to the applicants as the appellants.  However, because there have now been so many separate hearings, I will refer to the appellants as the sellers, and the first respondent as the buyer where possible in this judgment.

Determination of Contractual Dispute

  1. [6]
    The dispute between the parties concerns the sale of a real estate business.  The trial judge described the contractual framework as follows:
  1. “[6]
    On 1 December 2017, Babstock, as seller, Marburg Investments, as buyer, and Mrs Marburg, as guarantor, entered into two contracts. At that time, Marburg Investments was trustee of the Trust. The first contract was for the sale of the business (other than the rent roll) for $5,000 (Business Contract). The second contract was for the sale of the rent roll, then comprising 148 properties, for approximately $820,000 (Rent Roll Contract). …
  2. [7]
    Subsequently, Laurel Star became the trustee of the Trust and was substituted as buyer under both contracts.  …”
  1. [7]
    Under the rent roll contract there were two settlement dates, as the trial judge explained:
  1. “[32]
  1. there were two settlement dates; the first was on 1 March 2018, on which date the purchase price payable in respect of each property to be included in the first settlement would be paid; the second was 14 days later, on which date the purchase price payable in respect of each property to be included in that settlement would be paid”.
  1. [8]
    The business contract was to settle on the same date as the first settlement under the rent roll contract.  The buyer was given several extensions of the first settlement date under the rent roll contract.  To resume the trial judge’s narrative:
  1. “[8]
    On the afternoon of 10 May 2018, with settlement of the Business Contract and the first settlement under the Rent Roll Contract due to occur on 11 May 2018, Laurel Star purported to terminate both contracts. Babstock rejected that termination, which it says constituted a repudiation, and affirmed the contracts. On 18 May 2018, the defendants say that Babstock accepted Laurel Star’s ongoing repudiation and terminated the contracts.”
  1. [9]
    In his first judgment in this proceeding, the trial judge found that:
    1. the buyer validly terminated the business contract on 10 May 2018;
    2. that termination was pursuant to a clause in the business contract which gave the buyer a right to terminate even though there had been no breach of contract by the sellers;
    3. because the sellers were not in breach of the business contract, the buyer had no right to terminate the rent roll contract simply because it was able to terminate the business contract.

There was no appeal from any of these decisions.  The trial judge also:

  1. found that the buyer had validly terminated the rent roll contract because there had been an anticipatory breach of that contract by the sellers;
  1. as a consequence, did not determine the claims under the Australian Consumer Law (ACL)[2] which were made by the buyer and guarantor;
  1. gave judgment against the sellers, the effect of which was to return the deposits to the buyer, and gave judgment in favour of the buyer on the counterclaim.
  1. [10]
    The finding at [9](d) above was set aside on the first appeal.  On the first appeal, this Court gave judgment in favour of the buyer on the claim relating to the business contract and ordered that the deposit on that contract be returned.  The issues concerning the rent roll contract, in contract and under the ACL, were remitted to the trial judge for further determination.
  2. [11]
    In the judgment now under appeal, the primary judge recorded the parties’ agreement that the issues which remained for determination “were the subject of submissions at the original trial and, unless the court required further assistance on any issue, they were content” for him to deliver a further judgment without any further hearing or submissions.[3]
  3. [12]
    To that point the buyer had not claimed an order under the ACL that the rent roll contract be set aside; it had claimed damages pursuant to the ACL.[4]
  4. [13]
    On 28 July 2022 the primary judge had his associate write to the parties:

“In the submissions at the conclusion of the trial, neither party addressed his Honour on the additional or alternative relief sought by the [buyers]: namely, whether the [buyers] were entitled to rescind the contract for breach of the Australian Consumer Law, or whether the court should make an order to that effect.

If his Honour were to find for the [buyers] on their ACL claim and to award damages only (the amount of which was agreed in the parties’ final submissions), so that the contracts were not terminated until the [sellers] terminated for the [buyers’] repudiation, the court may also find for the [sellers] on the counterclaim. If that were the case, it may be arguable that the [buyers’] loss arising from the breach of the ACL includes any damages for which they are liable on the counterclaim. Alternatively, if the contracts were rescinded (either by the [buyers’] actions or by an order of the court), presumably the [sellers] would not succeed on the counterclaim.

Obviously, if the [buyers] were not to succeed on the ACL claim, then the only remedy would be damages in the counterclaim (liability having effectively been determined, in that event, by the Court of Appeal), the amount of which remains to be determined.

His Honour invites submissions from the parties as to what relief should be given if the [buyers] were to succeed on their claim, having regard to the findings of the Court of Appeal.”[5]

  1. [14]
    In response to this invitation, for the first time, the buyer asked for the rent roll contract to be set aside.[6]
  2. [15]
    On 10 February 2023 the judge below delivered the judgment now under appeal.  He declared the business contract and the rent roll contract void ab initio and gave judgment against the sellers in an amount designed to refund the deposit.  He again gave judgment in favour of the buyer on the counterclaim, on the basis that there could be no contractual claim for damages by the sellers, because he had set aside the contract ab initio.
  3. [16]
    There were a great number of grounds of appeal in the notice to appeal.  I am grateful to senior counsel on behalf of the sellers for reducing those to four in his oral submissions.  In the end, it is only necessary to deal with three.  These are that the trial judge:
  • erred in fact in determining that the buyer relied upon precontractual representations in entering into the rent roll contract (ground 1);
  • erred in fact in finding that precontractual misrepresentations caused the buyer loss because they caused the buyer to become bound to the terms of the rent roll contract (ground 2), and
  • erred in law in declaring the rent roll contract void ab initio pursuant to s 237 of the ACL when it could not be shown that the buyer had suffered, or was likely to suffer, loss or damage as a result of misleading and deceptive conduct (ground 3).

As explained below, my view is that each of these three grounds is an independent reason why the appeal should succeed.

Scope of Remitted Hearing

  1. [17]
    In the judgment now under appeal the primary judge recorded his understanding that:

[5] The following issues remain for my determination:

  1. whether the Sales Information Booklet provided to the [buyers] by the [sellers’] agent contained misleading or deceptive information (misrepresentations) on which they relied in entering into the Rent Roll Contract and the Business Contract (both including guarantees by Mrs Marburg) and in continuing with those contracts after the due diligence date;
  1. if so, whether the [buyers] were entitled to rescind the Rent Roll Contract for misrepresentation, or the court should order relief to that effect and what loss (if any) the [buyers] suffered as a consequence of the misrepresentations;
  1. whether the [buyers] repudiated the Rent Roll Contract and that repudiation was accepted by the [sellers], who thereby terminated the contract;
  1. if so, what (if any) damages the [sellers] suffered as a result of the [buyers’] breach by repudiation.”[7]
  1. [18]
    The judge below ought not to have further considered the business contract.  The dispute concerning that contract was the subject of final orders made by this Court, [10] above.

Termination of Contract and the Counterclaim

  1. [19]
    In its judgment on the first appeal, this Court found that the sellers did not repudiate the rent roll contract on or before 10 May 2018 – [21] and [38].  This Court did not make any further factual findings as to the contract case – [52] of the judgment on the first appeal.  In the proceeding, the sellers claimed that, because there was no anticipatory breach, the buyer’s purported termination of 10 May 2018 was a repudiation.  They argued that in reliance on that repudiation, they legitimately brought the contract to an end on 18 May 2018.  This part of the contract case remained a matter for the primary judge on the remitted hearing.  This was recognised by the primary judge at [5](c) of his judgment, (above).  However, rather than distinctly determine this point,[8] the primary judge simply proceeded to examine the ACL case.
  2. [20]
    This was an unsatisfactory approach because when the judge came to determine what, if any, relief ought to have been granted under the ACL, he did so without having crystalised his findings as to what was the outcome of the contractual case between the parties.  The judge ought to have determined the issues he identified at [5](c) and [5](d) of his judgment first, because a finding that the sellers had lawfully terminated the contract meant that they had an accrued right to keep the deposit, and an accrued right to damages for breach of contract.  Those findings were relevant to what orders were appropriate on the ACL case, in particular whether orders should be made setting aside the rent roll contract ab initio, see [23] below.  As it was, the trial judge proceeded to determine the ACL claim and set aside the rent roll contract ab initio before saying that, given these findings, it was “strictly unnecessary to consider the sellers’ counterclaim” for contractual damages.[9]
  3. [21]
    While there was no specific appeal point, it seems appropriate to record that the judge below ought to have found that, in reliance upon the buyer’s purported termination of 10 May 2018, the sellers validly terminated the rent roll contract on 18 May 2018.  No-one argued to the contrary on this appeal.  That finding leads to a consideration of the sellers’ counterclaim, which was the subject of limited argument on the appeal.
  4. [22]
    The trial judge summarised the sellers’ counterclaim as follows:

“The [sellers] sought payment of the balance of the deposit under Rent Roll Contract ($41,500), damages of $80,581.40 for lost income (by way of incentive discounts made to landlords in order to retain their custom) and damages of $79,799.96 for loss of the capital value of the rent roll.” – [87].

  1. [23]
    The return of the deposit was not controversial on this appeal.  The trial judge’s assessment of the third of these components at $43,633.83 was also not controversial on this appeal.  It was common ground between the parties to this appeal that the trial judge’s assessment of damages for lost income proceeded on a misunderstanding of the evidence, and that the correct figure in relation to this claim should have been $86,729.30.  That is, it was accepted between the parties that if the sellers were entitled to damages on the counterclaim, it was in a sum of $171,863.13 which, together with interest to 10 February 2023 (the date of the second judgment below) was $189,227.65.  As explained above, these findings ought to have been distinctly made because they bore on whether it was appropriate to set aside the rent roll contract ab initio.  It is fundamental that any consideration of whether to set aside a transaction ab initio requires a consideration of: (a) the conduct of the parties after they became aware of the misleading conduct, and (b) to what extent it is possible to restore the status quo ante.[10]

The ACL Claim

Representations

  1. [24]
    The buyer’s case at trial was that four representations of fact had been made to it prior to contract by the sellers’ agent, Real Estate Dynamics (RED).  The trial judge described the four representations upon which the ACL claim was founded:
  1. “[9]
    In the Sale Information Booklet that was sent by RED’s employee … by email to Mr and Mrs Marburg on 17 November 2017, it stated, concerning Entry Condition Reports (ECRs) for the properties on the rent roll, that:
  1. 100% of current ECRs on all properties were held on file;
  1. 100% of current ECRs were fully signed by all tenants and agency staff; and
  1. 100% of photographs were held on file in the defendants’ office and were taken at the time of the ECRs.
  1. [10]
    The Sale Information Booklet also included a statement that the properties were located in Bellbowrie and Moggill and a table that listed the properties comprising the rent roll, namely 88 properties in Bellbowrie and 60 properties in Moggill.”
  1. [25]
    As to the representation in [10] of the above quote, the trial judge found that when the buyer became aware of a “discrepancy” with that representation, it was not concerned by it.  This finding was not contentious on this appeal.  That representation can be put to one side.  So can the representation at [9](c) of the above quotation; there was never a contention that it was inaccurate.

Falsity of Representations

  1. [26]
    The trial judge found that the representations at [9](a) and [9](b) of the above quote were both inaccurate.  He found that there were at least 19 entry condition reports which were not properly executed, and two which were missing altogether – [39] of the judgment below.  Judging from the footnotes to that part of the judgment, the trial judge made those findings by comparing the substance of the representations relied upon to statements in the schedule to exhibit 84.  That was an erroneous approach; there were two difficulties with it:
  • Exhibit 84 was a contentious solicitor’s letter.  It was not in evidence to prove the truth of matters summarised in the schedule.  The schedule expressed mixed conclusions of law and fact and summarised the different positions as between the parties to the contract at that point in time.
  • The list of 35 tenancies in the schedule to exhibit 84 was not the list of tenancies which was the factual basis of the buyer’s case below.  The buyer’s case was pleaded at paragraph 24(b) of the third further amended statement of claim; it was a list of only 24 properties with disputed entry condition reports.  With two additions, it was the list of 24 properties pleaded which was the basis for crossexamination on behalf of the buyer at trial.
  1. [27]
    To make a finding as to how many entry condition reports were not on the files and how many were not signed in accordance with the representation, the trial judge ought to have dealt with the evidence.[11]  Because he did not, this Court is obliged to do so.
  2. [28]
    It was agreed on appeal that three entry condition reports were missing.  The sellers conceded that five entry condition reports were not properly signed.[12]  In my view, there were another five entry condition reports which were not in a condition which would meet the description “fully signed by all tenants and agency staff”.[13]  Of these, I have treated three as not within the terms of the representation because they were not signed at the time the representation was made.[14]  This must be the relevant time for assessing whether the RED representation was or was not false or misleading.  In my view, the remainder of the contested entry condition reports fell within the literal terms of the representation, “fully signed by all tenants and agency staff”, or had such minor irregularities that they fell within a sensible understanding of what the representation meant.[15]
  3. [29]
    Thus, I find that the evidence in the case demonstrated that, at the time the RED representations were made, three entry condition reports were missing and 10 could not be described as “fully signed by all tenants and agency staff”.  The rent roll contract was in relation to 148 properties.  The case below was conducted on the basis that the literal terms of the RED representations were false, and, having regard to my findings, the buyer proved that below.  It seems to have been accepted both below and on appeal that that was sufficient proof that the sellers had engaged in misleading and deceptive conduct.

Disclaimers

  1. [30]
    The representations were in a sales information booklet prepared by RED.  The second page of that booklet was headed “Disclaimer of Liability” and contained a disclaimer which occupied the entire second page.  It said, inter alia:

“Real Estate Dynamics, for itself and for the vendor of the Business for whom it acts, advises that all potential purchasers of the Business should satisfy themselves as to the truth and accuracy of all information given to them by Real Estate Dynamics concerning the Business by conducting their own inquiries and investigations assisted, where appropriate, by their professional advisors.” (my underlining).

  1. [31]
    In dealing with the above disclaimer the trial judge wrongly characterised it as a provision which did not seek to “absolve the [sellers] from responsibility and liability for those representations” and “did not purport to alter the responsibility of the seller” – [35].  This was plainly a misreading of the disclaimer.
  2. [32]
    Because the trial judge did not properly understand the disclaimer, he did not deal with its effect.  Nor did he deal with the effect of cl 1.8 of the rent roll contract:

“The covenants and provisions contained in this Agreement comprise the whole of the agreement between the parties in relation to the Rent Roll and it is expressly agreed and declared that save as otherwise provided herein no further or other covenants or provisions whether in respect of the Rent Roll or otherwise are deemed to be implied in this Agreement or to arise between the parties by way of collateral or other agreement by reason of any promise, representation, warranty or undertaking given or made by any party to another party on or prior to the execution of this Agreement and the existence of any such implication or collateral or other agreement is hereby negatived.”

  1. [33]
    Decisions as to whether or not conduct is misleading and deceptive must be made on the whole of the evidence.  That will include whether or not a statement should be construed as being misleading and deceptive having regard to any disclaimer made at the time of a pre-contractual representation, and/or an exclusion clause in the resulting contract.[16]  The sellers did not seek to rely on either the RED disclaimer, or cl 1.8 of the rent roll contract, on the hearing of this appeal, so it is unnecessary to consider these matters further.

Grounds 1 and 2: Reliance and Causation

  1. [34]
    As explained above, on the remitted hearing, the buyer belatedly asked that the rent roll contract be declared void ab initio. Under the ACL it was entitled to such a remedy if it had suffered, or was likely to suffer, loss or damage by the false and misleading conduct of the sellers.  The primary judge found that the buyer relied on the representations and that reliance caused it to become bound to the terms of the rent roll contract – [55] of the judgment below.  The sellers challenged the primary judge’s findings on both reliance and causation.  The evidence as to these topics overlaps, so I shall deal with it together, and then separately deal with my conclusions as to these topics.

Failure to give Reasons

  1. [35]
    The sellers’ first point about reliance was that the trial judge failed to give reasons for dismissing one of its arguments.  In submissions before the trial judge, the sellers said that by reason of the application of rules 150, 161, 165 and 166 of the Uniform Civil Procedure Rules 1999 (Qld) to the buyer’s pleading, the buyer was deemed to have admitted that it did not rely upon the representations.  Nowhere in the judgment does the primary judge address this point.  While a trial judge is not bound to deal with every disputed factual issue in giving reasons for judgment,[17] this was not a minor point.  If it was correct, it was a complete answer to the ACL claim.  It ought to have been the subject of reasons and the primary judge’s failure to address it was an error of law which again obliges this Court to determine the matter for itself.
  2. [36]
    The sellers’ pleadings as to reliance were very detailed and the buyer’s pleadings were brief and, on first sight, inadequate.  However, even if it is assumed that an analysis of the pleadings and the rules would favour the sellers, it seems to me that they must still fail on this point, because their counsel below did not mention it until the time for submissions.  If the pleading point was correct, the buyer had no right to lead evidence about reliance.  No objection was made to the buyer’s evidence-in-chief as to reliance.  Trial counsel for the sellers devoted a significant amount of his cross-examination to reliance.  Rather than take the point that there was no live issue in relation to reliance, trial counsel for the sellers gave the point away.  Properly analysed, the position is that if there were deemed admissions on the pleadings, that is something which I can take into account, along with all the other evidence on reliance.  Given that the admissions were in a complicated pleading document prepared by lawyers, and were deemed, rather than express, it seems to me that they are of no significant weight.  This point must fail.

Relevant Contractual Provisions

  1. [37]
    Before examining the evidence as to reliance, I will set out the parts of the rent roll contract which provide the framework for its consideration.
  2. [38]
    Clause 3.1 gave the buyer’s representative a right to access the sellers’ business records “for the purpose of inspection and verification of the information contained in Schedule 2”.[18]
  3. [39]
    Clause 3.2 gave the buyer a right in its “sole discretion” to terminate the agreement by 5.00 pm on the due diligence date “in the event that the Buyer is not satisfied with its due diligence conducted in accordance with Clause 3.1”.  The clause gave the buyer the alternative right to nominate properties which the buyer reasonably believed were not documented in compliance with the requirements of any Act.  The words of this clause are apt to include properties which had entry condition reports which were not on a file or were not executed by both tenant and managing agent.[19]  The buyer was to make any such nomination by the due diligence date.  If there were such a nomination, the sellers were obliged to attempt to rectify any such defects “to the reasonable satisfaction of the Buyer”.  If the sellers did not satisfy the buyer, the buyer was entitled to give notice to the sellers no later than two business days before either of two settlement dates, excluding from the sale those properties about which it was not satisfied.
  4. [40]
    There was a similar right in the buyer given by cl 10.7.  This clause provided that notwithstanding completion of the sale, the buyer still had a right to require the production of, or rectification of, (inter alia) an entry condition report.  If the sellers failed to produce or rectify such a report, then the buyer could, in effect, retrospectively exclude such property from the bargain, and obtain a refund of the part of the purchase price attributable to that property from a “retention stakeholder”.

Time Relevant to Assessing Reliance

  1. [41]
    At the time the rent roll contract was signed, the buyer was D & A Marburg Investments Pty Ltd (Marburg Investments).  That company was the trustee of the Dorothy and Alan Marburg Family Trust.  After the contract was signed, and after the due diligence date had passed, the Marburgs caused a new company, the first respondent, to become trustee of their family trust (15 February 2018).  In March 2018 there was a formal Deed of Amendment to the rent roll contract by which the first respondent became the buyer.[20]  I accept the submission made on behalf of the buyer that by operation of s 15(1) of the Trusts Act 1973 (Qld), the contractual rights and obligations of the buyer under the rent roll contract vested in the new trustee on its appointment, so that the Deed of Amendment was strictly unnecessary.[21]
  2. [42]
    The sellers placed reliance on Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques (No 1)[22] to say that any extant cause of action under the ACL was not automatically transferred to the first respondent by s 15(1) of the Trusts Act.  The reasoning in that case was that the proviso to s 15(1) operated to exclude from automatic transfer a right to recover damages under s 82 of the Trade Practices Act 1974 (Cth) because s 82(1) “provides that only the person who suffers the loss or damage may recover it by action” – [42].  I have some doubt about this logic.  However, in this case, because the first respondent became bound to complete the rent roll contract in accordance with its terms, it seems to me that if any person had suffered loss or damage it was the first respondent.  Thus, on the facts here, there was no room for the operation of the proviso to s 15(1) and any chose in action under the ACL automatically vested in the first respondent upon its becoming trustee.
  3. [43]
    The buyer’s pleading below was that Marburg Investments entered into the rent roll contract on 1 December 2017 “in reliance upon the representations”.[23]  It was pleaded that “in further reliance upon the representations [Mrs Marburg] and Alan Marburg caused [the first respondent] and D & A Marburg Investments Pty Ltd” to enter into the Deed of Amendment.[24]  For reasons just explained, it seems to me that that part of the pleading was misconceived, and that the real issue for determination was whether there was reliance by Marburg Investments at the time it entered into the contract.[25]
  4. [44]
    The trial judge did not consider this issue, and there were contradictions in the judgment below as to what time the judge regarded as relevant to assessing reliance.[26]  However, in the part of the judgment which addressed reliance, the trial judge directed his mind to whether or not there was reliance at the time Marburg Investments entered into the rent roll contract.  He found:
  1. “[33]
    I have no difficulty in finding that Mr and Mrs Marburg relied on the representations made in the Sale Information Booklet about the ECRs in making their decision to have the former trustee of their family trust enter the contracts. Mrs Marburg also relied on them in giving her personal guarantee of the trustee’s performance of the contracts.”
  1. [45]
    That is, the matters I have canvassed under this heading were raised by the parties below, but not determined by the trial judge.  Nonetheless, I conclude that the trial judge did assess reliance at the correct time.

Evidence about Reliance

  1. [46]
    It was admitted on the pleadings that Mrs Marburg had been the sole director of Marburg Investments at all material times.  The starting point in examining the evidence about reliance must be her evidence.  In this respect the buyer had a significant problem.  Mrs Marburg gave extraordinarily unhelpful evidence.  She said that she had nothing to do with the proposed purchase of the rent roll – t 3-11, t 3-14.  She said that it was all her husband’s doing, without her.  While her evidence might have been at some points generally supportive of a reliance case (eg., t 3-8), I cannot see that any decision-maker could regard it as reliable, or a sufficient basis for a finding of reliance by Marburg Investments or by her as guarantor.
  2. [47]
    Counsel for the sellers [sic] led evidence at trial in his cross-examination of Mr Marburg which might have assisted the buyer.  Mr Marburg said he and his wife acted “in concert” in considering and discussing information supplied by RED from the time it was received – tt 1-33, 134, and t 146.  On one view of things, this made evidence about his reliance relevant even though he was not a director of Marburg Investments at the time of the representations, or at the time that company entered into the contract.
  3. [48]
    In his evidence-in-chief Mr Marburg was asked whether there were “any considerations that were significant in your mind at the time when you were looking at purchasing a rent roll business” – t 1-22.  The first thing he answered in relation to that question was in relation to the location of the rented houses.  He was asked, “What else might’ve been significant to you?” – t 1-22.  He responded, “… the fact that virtually all the paperwork was declared as being 100 per cent correct”.  He said this was significant because, in running a management rights business previously, he and his wife found that there were problems when tenants left and entry condition reports had not been signed or completed correctly.  He explained, “… as such, we were very reluctant to go into another business that wasn’t basically approaching 100 per cent.” – t 1-22.  (my underlining in both quotes).
  4. [49]
    Later in his evidence-in-chief, when apparently looking at the RED report, he said it was significant to him that, “Basically the condition of the documentation which was saying that all the – all the relevant documentation was 100 per cent completed”.  (my underlining).

Due Diligence

  1. [50]
    The due diligence date (as extended at the buyer’s request) was 22 December 2017.  The buyer engaged Complete Real Estate Services Queensland (CRESQ) to carry out due diligence for it.  On 8 December 2017 CRESQ sent the Marburgs an email saying that it had carried out the due diligence on the rent roll that day.  It provided a one page summary of its findings which, so far as is relevant, provided, “ECR – there is a few files that were lost in the floods but other than that all of ECR either returned and signed by tenant or copies initialled by tenant on collection” – exhibit 5, my underlining.  The first part underlined shows that the RED representation, “100 per cent of current ECRs on all properties were held on file” was not literally true.  It is not entirely clear to me what the second underlined part of that advice means, but I think it is fair to conclude that it means something different from the RED representation that “100 per cent of current ECRs were fully signed by all tenants and agency staff”.
  2. [51]
    Mr Marburg said in cross-examination that on reading the 8 December 2017 email, he understood that there were “some difficulties with some of the entry condition reports”.  He knew that, “100 per cent of them were not in perfect condition” and that there were “some deficiencies”.  He agreed that despite that, he still wished to proceed with the contract – tt 1-52-53.
  3. [52]
    Two days later, on 10 December 2017, Mr Marburg replied to the CRESQ email asking questions about three matters mentioned in the summary.  He did not ask anything about entry condition reports.
  4. [53]
    On 14 December 2017 the buyer’s solicitors asked for an extension of time for due diligence from 15 December 2017 to 22 December 2017.  The reason given was that the report received from CRESQ had insufficient substance to allow the buyer to make a decision.  Enquiries apparently continued, and by letter of 20 December 2017, the buyer’s solicitors advised CRESQ that they had sufficient information.  On 21 December 2017 the Marburgs emailed their solicitors saying that they were prepared to proceed with the purchase, subject to six queries which they had identified on the expanded due diligence material provided by CRESQ.[27]  None of these queries concerned entry condition reports.
  5. [54]
    The buyer’s solicitors made it very clear to the Marburgs that it was they who needed to be satisfied with the information – see the email of 21 December 2017, and Mr Marburg acknowledged in his evidence that he understood that he had until 22 December 2017 to make a decision in relation to whether he wished to proceed – t 155.
  6. [55]
    The Marburgs chased up two of their six questions with CRESQ on 21 December 2017 and wrote two emails that day to the representative of RED who had made the written representations initially.  Nothing was said about entry condition reports in these emails.  It is noteworthy that both the representative of RED, and the buyer’s solicitors independently, told the Marburgs on 21 December 2017 that if they were unsure about any property, they had the contractual right of declining to accept it on settlement.  That is, they advised them of their contractual rights at cl 3.2 of the rent roll contract.
  7. [56]
    At 7.12 pm on 21 December 2017 the Marburgs gave their solicitors instructions to “accept” due diligence.  Those instructions were communicated to the sellers the next morning.  Mr Marburg acknowledged that at the time he gave these instructions to his solicitors, he knew that a few of the entry condition reports were either lost or incomplete and that he made no complaint about that – t 1-60.  He also accepted that he and his wife “pored over the due diligence report” – t 1-64, and that he relied upon it – t 1-65.

Enquiries after Due Diligence Date

  1. [57]
    Notwithstanding that the due diligence date had passed, and notwithstanding Mr Marburg knew the significance of that, he continued to make enquiries of an unusually detailed kind in relation to the rent roll business.  On 9 January 2018 he followed up with both CRESQ and RED, complaining that he had not received the report which CRESQ was engaged to provide and asking again for answers to the six questions raised on 21 December 2017.  Entry condition reports were not mentioned.
  2. [58]
    A Ms Satherley gave evidence that she was the day-to-day manager of the sellers’ real estate business.  She said that between about 15 March and 20 April 2018 Mr Marburg attended the office for a couple of hours on a couple of days a week – t 3-109.  He was “going through the files in relation to the sale of the properties” – t 3-110.  Sometimes he asked for documents which were not in the files and she would find the documents for him – t 3-110.  Mr Marburg gave evidence that in April he went to the sellers’ office and sat beside Ms Satherley for several days.  He was given access to all the letting appointments to be sold pursuant to the rent roll contract.  He came to the conclusion that there were many deficiencies.  He thought these deficiencies were not just in relation to entry condition reports, but also as to other documents he found, or could not find, on the files.
  3. [59]
    On 5 April 2018 solicitors for the buyer requested entry condition reports for each property on the rent roll.  On 16 April 2018 the Marburgs wrote to Ms Satherley.  That email enclosed a spreadsheet which asserted deficiencies in a number of entry condition reports – t 3-112.  Ms Satherley disagreed, and created a new version of the spreadsheet recording her thinking in this regard (exhibits 82 and 83 respectively).  On 4 May the buyer’s solicitors wrote to the sellers’ solicitors saying that their client had issues with 35 entry condition reports.  A further version of the spreadsheet was attached.  This letter and spreadsheet became exhibit 84, which was discussed above.

Conclusions on Reliance and Causation

Reliance

  1. [60]
    The primary judge’s findings as to reliance were as follows:
  1. “[32]
    The defendants contended that I should not believe Mr Marburg’s evidence, in particular, that he relied on the ECR representations, because nowhere in the pre-due diligence date correspondence did he or Mrs Marburg raise any concerns about the ECRs. But that is not surprising, given what CRESQ told them about the ECRs, both before that date and on 9 January 2018. While a few were missing due to a flood, they were assured that the rest were on the files, properly completed and signed. There was little reason for them, at that time, to raise any concerns. In any event, this information was provided to them later, not before they entered into the contracts.
  2. [33]
    I have no difficulty in finding that Mr and Mrs Marburg relied on the representations made in the Sale Information Booklet about the ECRs in making their decision to have the former trustee of their family trust enter the contracts. Mrs Marburg also relied on them in giving her personal guarantee of the trustee’s performance of the contracts.
  3. [34]
    The defendants, however, contend that, while Mr and Mrs Marburg, on behalf of the former trustee, may have caused it to rely on the representations in deciding to enter the contracts, by the time Laurel Star became trustee and was substituted as purchaser, they were aware that the representations were not all correct, yet they caused Laurel Star to become the buyer. Therefore, Laurel Star, in committing itself to the contracts, did not rely on the representations. I shall discuss this submission later.” (my underlining).
  1. [61]
    One thing which is immediately apparent is that the primary judge paid no attention to the fact that it was Marburg Investments, not Mr or Mrs Marburg, who was alleged to have relied on the representations.  To an extent this reflects the way the parties ran the case.  Still, the question for determination was whether Marburg Investments relied upon the representations.[28]  I have discussed the difficulties with the evidence of its sole director.  The trial judge makes no mention of the quite extraordinary deficiencies in Mrs Marburg’s evidence.
  2. [62]
    The judge says there was evidence from Mr Marburg that “he relied on the ECR representations”.  However, the only direct evidence given by Mr Marburg was that the representations were significant to him.  Further, his evidence fell short of any statement that he acted as a de facto director of Marburg Investments, or even that he and his wife made a joint decision to cause that company to enter into the rent roll contract.
  3. [63]
    Having regard only to these circumstances, the trial judge would have been justified in coming to the conclusion that no reliance had been proved by the buyer.  However, there was other significant evidence which bore on the question of reliance and was in favour of the sellers which the judge either did not deal with or misunderstood.
  4. [64]
    The trial judge did not deal at all with the fact that Mr Marburg’s evidence-in-chief was that it was not critical to him that 100 per cent of the entry condition reports were on the files and were signed by both the tenants and managing agents – (see [48] and [51] above).
  5. [65]
    Further, at trial the sellers relied upon Mr Marburg’s evidence that, having received the CRESQ information, which indicated that the RED representations were not literally true, Mr Marburg made no enquiry at all about this topic during the due diligence period.  He knew that it was his responsibility to satisfy himself as to the state of the business in order to terminate under the due diligence clause.  He knew there were some difficulties with some of the entry condition reports.  He asked several questions about various other matters, but made no attempt at all to discover the true situation regarding the entry condition reports.
  6. [66]
    Although the trial judge referred to the sellers’ submission about the significance of this evidence at [32] of the judgment below,[29] he dismissed it because “there was little reason for [the Marburgs], at that time, to raise any concerns”.  There is no basis in the evidence for that conclusion.  To the contrary, the Marburgs did immediately raise concerns after having received the CRESQ information; the difficulty for the reliance case is that none of those concerns related to entry condition reports.
  7. [67]
    The trial judge further said, “In any event, [the CRESQ] information was provided to them later, not before they entered into the contracts”.  His Honour seems not to have understood the point that the Marburgs’ reaction to information provided by CRESQ was apt to illuminate whether in fact there had been reliance before entry into the contracts.  The Marburgs’ failure to raise concerns about the entry condition reports after the CRESQ information alerted them to the fact that the RED representations were not literally true, is significant support for a conclusion that Marburg Investments did not rely upon the literal truth of the RED representations.
  8. [68]
    It was rightly acknowledged by counsel for the sellers that to overturn the primary judge’s factual finding as to reliance was a considerable task.  However, it seems to me that the overwhelming weight of the evidence was against the trial judge’s finding; that he misunderstood the significance of some important evidence, and that he nowhere rests his finding on his observations of the Marburgs as they gave evidence.[30]  In those circumstances it falls to this Court to make a factual finding consistent with the evidence.[31]  Given the matters I have discussed, I think the trial judge was wrong to find that Marburg Investments relied upon the literal truth of the representations in the RED brochure; he ought to have found to the contrary.
  9. [69]
    Having regard to the way the case was run,[32] that conclusion is enough to mean that the buyer’s ACL case fails, for it did not prove that it entered into the rent roll contract in reliance upon the RED representations.  Had the case been run differently, there may have been room for a finding that Marburg Investments relied upon the substantial truth of the RED representations.  The difficulty on appeal is that the case below was not run on that basis; there is no evidence as to it, and the closest evidence which would bear on such a realigned case, was Mr Marburg’s evidence that if 110 of 148 proposed properties were acceptable, he considered the proposed purchase of the business was not economic – t 2-46.  Having regard to my finding that only 13 of the entry condition reports were deficient, that evidence does not help the buyer.

Causation

  1. [70]
    Independently, I think that the buyer’s case ought to have failed below on the question of causation.
  2. [71]
    The trial judge found:
  1. “[50]
    By the end of the formal due diligence process (which was extended by agreement to 22 December 2017), the [buyer] had been told by their due diligence agent, CRESQ, that:

  1. ECRs for ‘a few’ properties were not on file as they had been destroyed in a flood;
  1. other than those, all of the ECRs had been signed by the tenants or copies had been initialled by the tenants.”
  1. [72]
    The finding at [50](c) above is not on point.  Before the date for termination pursuant to the due diligence clause, doubt had been cast upon the representation that “100 per cent of current ECRs were fully signed by all tenants and agency staff”.  That is the only conclusion from the words of the CRESQ report, and that is how Mr Marburg understood the CRESQ report – [51] above.
  2. [73]
    The trial judge further found:
  1. “[55]
    However, even though [the Marburgs] relied in part on the information provided to them by CRESQ, in deciding that they would not terminate the contract, they still continued to rely on the representations about the number and quality of ECRs for the vast majority of the properties. They knew that there were a few ‘anomalies’, but not the extent of incomplete or unsigned ECRs. They discovered the full extent of the misrepresentations only in the following months, as Mr Marburg himself examined the full files. Therefore, they did rely on the representations about the ECRs when they did not take up the opportunity to terminate the contract by the end of the due diligence period. That reliance led to Laurel Star’s predecessor as trustee and buyer being irrevocably bound to complete the contracts, which ultimately Laurel Star breached by failing to settle after it was substituted as the buyer.”
  1. [74]
    This passage is problematic in two significant respects.  First, it proceeds on a wrong factual basis that there were more than “a few” anomalies.  As explained above, the correct factual finding was that three entry condition reports were missing and 10 entry condition reports were not properly signed.  Mr Marburg’s evidence gives rise to the clear inference that he was happy enough with “a few”[33] or “some difficulties with some of the entry condition reports”.[34]  He would not have been happy had there been problems with 38 of the entry condition reports – t 2-46.  Secondly, the judge does not deal with the facts that, rather than rely on the RED representations about entry condition reports, the buyer commissioned its own report from CRESQ.  That report showed the representations were not literally true.  Without any evidence on the topic at all, the judge could not rationally assume that any initial reliance on the RED representations continued in these circumstances.  The receipt of the information from CRESQ broke the causal chain.

Ground 3: Rescission

  1. [75]
    The third major appeal point made on behalf of the sellers was that the primary judge erred in thinking that a declaration that the rent roll contract was void ab initio was available relief in this case.
  2. [76]
    The remedy of rescission ab initio is given by s 237(1) of the ACL, (with some elaboration at s 243).  In terms, it is available only where the Court finds that a person “… has suffered, or is likely to suffer, loss or damage because of conduct of another person …” in breach of the ACL.  Furthermore, s 237(2) of the ACL provides that:

“The order must be an order that the court considers will:

  1. compensate the injured person, … in whole or in part for the loss or damage; or
  1. prevent or reduce the loss or damage suffered, or likely to be suffered, by the injured person …”
  1. [77]
    An order setting aside the rent roll contract ab initio was one which could only be made if the buyer had suffered loss, or was likely to do so, because of misleading and deceptive conduct.  This was not a requirement which was adverted to by the primary judge below.
  2. [78]
    Independently of my views as to both reliance and causation, I accept the sellers’ submission that the existence of the contractual rights at cll 3.2 and 10.6 of the rent roll contract meant that it had not been proved in this case that if the buyer was held to the terms of the rent roll contract, it was likely to suffer any loss as a result of deceptive and misleading conduct.  It could simply have rejected the tenancies which had entry condition reports which did not conform to the RED representations.  As explained above, there was no evidence before the trial judge that in fact, or even in Mr Marburg’s opinion, excluding 13 contracts from the settlements under the rent roll contract would have made the purchase of the rent roll business economically unattractive.  There was no evidentiary basis upon which the primary judge could have found that the buyer had suffered loss and damage or was likely to do so.  The buyer had not proven a complete cause of action under the ACL and was not entitled to relief.[35]

Guarantee

  1. [79]
    There were no separate arguments made on behalf of the guarantor on the appeal.  The result of the proceeding between the buyer and the sellers determines the result of the proceeding on the guarantee.

Orders

  1. [80]
    The application for leave to appeal should be allowed.  The appeal should be allowed.  The orders made on the remitted hearing below should be set aside.  There should be judgment for the appellants against the respondents in the sum of $189,227.65 together with interest from 10 February 2023 to the date of this judgment.
  2. [81]
    Undertakings of Andrew Reed Kenman and Warwick Stephen Hawthorne filed on 31 March 2023 on behalf of the sellers in relation to security for costs of this appeal should be discharged.
  3. [82]
    The costs orders of this Court on the first appeal were that the respondents were to pay the appellants’ costs of that appeal, but the costs of the proceedings in the District Court were remitted to the trial judge.  The appropriate order which should now be made as to costs is that the respondents pay the appellants’ costs of this appeal and of all the proceedings in the District Court, that is of the first trial, as well as the remitted hearing and determination.

Footnotes

[1](2022) 10 QR 522.  The primary judge’s first decision was delivered on 3 December 2020 after a hearing in May 2020.  The first appeal was filed on 4 January 2021.  That appeal was heard on 6 May 2021; the decision of the Court of Appeal was delivered on 29 April 2022.

[2]Sch 2 to the Competition and Consumer Act 2010 (Cth).

[3][3] of the judgment below.

[4]The buyer’s pleading did, however, include the general catchphrase “such further or other orders that the Court deems appropriate” in relation to its claims – prayer for relief in the third further amended statement of claim.

[5]It may be observed that the second paragraph of this communication betrays confusion as to remedies under the ACL, see below at [20] and [23].

[6]See sellers’ submissions below, 14 December 2022.

[7]The primary judge below also recognised that there was a rectification claim originally made which he had not determined in his first judgment.  He dismissed it in this second judgment.  No complaint is made as to the outcome of that.

[8]It appears from the introductory words of [71] of the judgment below, that the primary judge did regard the sellers’ termination on 18 May 2018 as valid.

[9]In fact the judge did determine the quantum of contractual damages at the end of his reasons, but on a hypothetical basis.

[10]Millers Annotated Trade Practices Act, 22nd Ed, Law Book Company, [1.87.65].

[11]The entry condition reports were in evidence, and relevant oral evidence was given about them.

[12]Dougy Place, Kerria Street, 29 Golden Crest Place, Pinkwood Street and Considen Place – see paragraph 39 of the appellants’ further written submissions on appeal.

[13]2 Sugars Road – t 4-49; Joseph Street – t 4-52; Sexton Place – t 4-53; Sugarwood Street – t 4-45; Makepeace Place – t 4-57-58 (transcript references to cross-examination at the trial).

[14]Sexton Place, Sugarwood Street and Makepeace Place.

[15]Carabeen Street was signed by one spouse on behalf of the other – t 4-44; so was Lagoon Crescent – t 4-55.  Cross-examination demonstrated no difficulty with the properties at Whistler Place and Jabiru Place – t 4-46.  A very minor irregularity was demonstrated in relation to 17B Golden Crest Place – tt 4-47-48; similarly in respect of Church Road, all that was demonstrated was that one page was not initialled by one of two tenants – t 4-50.  The report for 56 Lagoon Crescent showed that one of two tenants failed to initial two pages and, although the final page was signed, it was not dated.  Cross-examination failed to demonstrate difficulties with the entry condition reports for Joseph Avenue or Cornuta Close – tt 4‑61‑62.  In respect of Redbank Plains Road, one tenant did not initial one page – t 4-68.  There was no cross-examination in relation to Wirrabarra Road, and the report in relation to 691 Mount Crosby Road was signed by both tenants but was not dated – t 4-69.  The evidence demonstrated that Whistler Place and Ghost Gum Court were both adequately signed but, contrary to s 65 of the Residential Tenancies and Rooming Accommodation Act 2008 (Qld), the tenant had signed first and the landlord second.  I do not find this alleged defect to make the representation false or misleading in respect of these two reports.

[16]Sutton v AJ Thompson Pty Ltd (in liq) (1987) 73 ALR 233, 240, and HW Thompson Building Pty Ltd v Allen Property Services Pty Ltd (1983) 48 ALR 667, respectively.

[17]King & Ors v Australian Securities and Investments Commission [2018] QCA 352, [40]ff.

[18]Schedule 2 contained a description of each of the properties on the rent roll, together with its weekly rent and the management fees attributable to it.  Strictly then, it contained no information about entry condition reports.  However, this point never seems to have been litigated.  That is, the case seems to have been conducted by both sides on the basis that the buyer’s right to conduct due diligence extended to an examination of the entry condition reports.

[19]See s 65 of the Residential Tenancies and Rooming Accommodation Act 2008 (Qld).

[20]This is pleaded to have been made on 27 March 2018.

[21]Section 15(1) of the Trusts Act provides, “Where a new trustee is appointed the instrument of appointment vests, subject to the provisions of any other Act, the trust property in the persons who become and are the trustees as joint tenants without any conveyance, transfer or assignment”.

[22][2017] 2 Qd R 456, [50].

[23]Paragraph 8 of the third further amended statement of claim.

[24]Paragraph 10 of the third further amended statement of claim.  No attention appears to have been paid to whether or when the guarantee was amended, and if so, whether that was because of reliance upon the representations.

[25]If the issue pleaded at paragraph [10] of the statement of claim were to be determined, the determination would be that there was no reliance by the first respondent at the date of the Deed of Amendment (March 2018).  By that time it was impossible to say that either of the Marburgs were relying upon the RED representations.  They had by that stage been alerted to the fact that the RED representations were not literally true.  They had failed to make enquiries to ascertain the extent of the falsity of the RED representations, and allowed the date by which they had a contractual right (a) to terminate (after carrying out due diligence) and (b) to nominate properties under cl 3.2, to pass.

[26]See [56]-[59] of the judgment below.

[27]There were five numbered questions and one more unnumbered question.

[28]Evidently the Marburgs organise their financial life in a way which they think advantageous, namely they conduct their businesses through a corporate trustee.  No doubt that trustee is not regarded as a fiction for the taxation laws; nor is it to be regarded as a fiction in its other interactions with the world, including in relation to this litigation.

[29]There seems to be a mistake in the first sentence of [32] below in referring to “pre-due diligence”.  The only sensible way to read this sentence is that it is referring to “post-due diligence”.

[30]The primary judge regarded Mr Marburg as a credible witness.  I assume this to be correct in making the purpose of considering whether or not to reverse the factual finding as to reliance.  My factual findings accept the truth of Mr Marburg’s evidence.  Remarkably, the trial judge’s short discussion of Mrs Marburg’s evidence does not deal with the obvious problems as to the reliability of her evidence – see [25] of the judgment below.

[31]Fox v Percy (2003) 214 CLR 118, 127.

[32]See [29] above.  On appeal counsel for the respondents persisted in advancing their case as resting on the literal truth of the RED representations – see paragraph 10 of the written submissions and t 1-36 of the appeal transcript.

[33]See RESQ information.

[34]Transcript 1-52-53.

[35]Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, 534; Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31.

Close

Editorial Notes

  • Published Case Name:

    Babstock Pty Ltd & Anor v Laurel Star Pty Ltd & Anor (No 5)

  • Shortened Case Name:

    Babstock Pty Ltd v Laurel Star Pty Ltd [No 5]

  • MNC:

    [2024] QCA 3

  • Court:

    QCA

  • Judge(s):

    Mullins P, Bond JA, Dalton JA

  • Date:

    25 Jan 2024

  • White Star Case:

    Yes

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2023] QDC 1010 Feb 2023Judgment on remaining issues in litigation concerning sale of real estate business, remitted by Court of Appeal in Babstock Pty Ltd v Laurel Star Pty Ltd (2022) 10 QR 522; [2022] QCA 63; judgment for plaintiffs; defendants' counterclaim dismissed: Barlow KC DCJ.
Primary Judgment[2023] QDC 3103 Mar 2023Plaintiffs awarded costs of proceeding: Barlow KC DCJ.
Appeal Determined (QCA)[2024] QCA 325 Jan 2024Application for leave to appeal (District Court of Queensland Act 1967 (Qld) s 118(3)) allowed; appeal allowed; orders below set aside; judgment for defendants; defendants awarded costs of appeal and proceeding below: Dalton JA (Mullins P and Bond JA agreeing).

Appeal Status

Appeal Determined (QCA)

Cases Cited

Case NameFull CitationFrequency
Babstock Pty Ltd v Laurel Star Pty Ltd(2022) 10 QR 522; [2022] QCA 63
3 citations
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
2 citations
Demagogue Pty Ltd v Ramensky [1992] FCA 557
1 citation
Fox v Percy (2003) 214 CLR 118
2 citations
Fox v Percy (2003) HCA 22
1 citation
H W Thompson Building Pty Ltd v Allen Property Services Pty Ltd (1983) 48 ALR 667
2 citations
HW Thompson Building Pty Ltd v Allen Property Services Pty Ltd [1983] FCA 166
1 citation
King & Ors v Australian Securities and Investments Commission [2018] QCA 352
2 citations
Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques (No 2)[2017] 2 Qd R 456; [2016] QSC 242
3 citations
Laurel Star Pty Ltd v Babstock Pty Ltd [2020] QDC 305
2 citations
Laurel Star Pty Ltd v Babstock Pty Ltd [No 3] [2023] QDC 10
1 citation
Sutton v A J Thompson Pty Ltd (in liq) (1987) 73 ALR 233
2 citations
Sutton v Thompson Pty Ltd [1987] FCA 167
1 citation
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514
2 citations
Wardley Australia Ltd v Western Australia [1992] HCA 55
1 citation

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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