Malady v O'Shea (No 1)[2012] QDC 288

DISTRICT COURT OF QUEENSLAND

Introduction

1. [1]
   This is an application by the third and fourth defendants for summary judgment under UCPR r 293.  The action arises out of a contract for the sale by the first and second defendants (“the vendors”) to the first and second plaintiffs of a particular parcel of land, which sale was not completed.  The plaintiffs and the vendors each claim to have validly terminated the contract, and to be entitled to damages from the other.  The third defendant was the real estate agent engaged by the vendors to obtain a purchaser for the land.  The fourth defendant was the individual who is the natural person behind the corporate third defendant, and the individual agent who dealt with the plaintiffs in relation to this transaction.  For most purposes, the third and fourth defendants can be referred to collectively as the agent.

2. [2]
   The plaintiffs allege that the agent made certain representations which were misleading or deceptive, and which induced them to enter into the contract, as a result of which they have suffered loss and damage. They claim damages under the Australian Consumer Law, or in the alternative damages for fraud.^[1]

3. [3]
   The plaintiffs claim the misrepresentations made by the agent, as to potential uses of land they had contracted to purchase, were prohibited by the existence of a protective covenant.

4. [4]
   The agent denies making the representations, but in order to understand the basis of the agent’s application for summary judgment it is necessary to say a little more about the background to the transaction. This is because this application is brought by the agents on the basis that, upon proper interpretation of the covenant, it does not in fact bind the land.

Background

5. [5]
   The vendors were the joint registered owners of property at 16A Country Crescent Nerang. They appointed the agent, as their authorised real estate agent to market and sell this property.

6. [6]
   The plaintiffs contracted to buy the property from the vendors. Prior to entering into this contract, the plaintiffs attended two open house inspections at the property. The dates of these inspections are unclear; the plaintiffs allege that the first was in the first week of April 2011 and the second was in the second week of April 2011, the vendors believe the first inspection occurred on the weekend of the 16 and 17 April 2011 and the second occurred on Tuesday 19 April 2011.

7. [7]
   The plaintiffs’ case is that representations were made by the agent at these inspections as to the use of the land, namely that it was suitable for keeping dogs and running horses, and also for motorbike riding. The plaintiffs allege that the agent further represented that they would be able to fence off the back of the property for the purpose of keeping dogs and running horses. The plaintiffs maintain that they relied on these representations when entering into the contract.

The Contract

8. [8]
   On 22 April 2011, the plaintiffs made an offer, using the standard REIQ contract to purchase the property for $950,000. The first and second defendants made a counter offer, amending the purchase price on the contract to $1,000,000. This counter offer was accepted by the plaintiffs and the contract was counter-signed on 23 April 2011. As at 23 April 2011, the contract did not include any notation as to title encumbrances. This has been admitted by all the defendants on the pleadings.^[2] The date for settlement was 24 June 2011.

9. [9]
   On 26 April 2011, an email was sent from the fourth defendant to the plaintiffs attaching the contract and providing the trust account details for the deposit.^[3] The plaintiffs forwarded this email to their solicitors the following day.^[4] A copy of this email is found at Exhibit MT-4 of the affidavit of Mark Treherne, sworn 3 April 2012. Unfortunately Exhibit MT-4 does not contain a copy of the contract that was attached to this email. The plaintiffs allege that the attached version was the original contract that they signed, with no added title encumbrances.^[5]

10. [10]
    On 27 April 2011, the third defendant sent a fax to Greg Pointon of Q Property Lawyers, the plaintiffs’ solicitor. The fax consisted of a cover sheet and four documents: PAMD Form 30c – Warning Statement; the signed contract; PAMD Form 27C; and the current title search.^[6] The copy of the signed contract attached to this fax contained additions that were not present as at 23 April 2011. The details of the vendors’ solicitors had been added, as were the contact details of the plaintiffs’ solicitors. The area of land had been added as 7472m². Most significantly, Covenant 708084780 had been added as a title encumbrance over the property. The cover sheet to the fax merely listed the attached documents. It did not note that any amendments had been made to the signed contract.

11. [11]
    The plaintiffs claim that they remained unaware of the existence of the covenant over the property until 16 May 2011, when they received a letter from Mr Pointon advising them of the covenant and attaching a copy.^[7] On 23 May 2011, the plaintiffs’ solicitors wrote to the vendors’ solicitors, terminating the contract pursuant to clause 9.1 for breach of clause 7.2 as the title encumbrance had not been disclosed. 

12. [12]
    A further letter was sent from the plaintiffs’ solicitors to the vendors’ solicitors on 27 May 2011, seeking return of the deposit. On 17 June 2011, the vendors’ solicitors accepted the repudiation and rescinded the contract.

13. [13]
    The property was later sold at auction on 27 August 2011 for the sum of $795,000. To date the agent has refused to release the deposit.

The Covenant

14. [14]
    The land in question is Lot 4 on registered survey plan 167856.  The title to the land held by the vendors at all material times had registered against the title a covenant in favour of the Council of the City of Gold Coast.  As discussed above, it does not seem to be in dispute that, after some negotiations between the plaintiffs and the agent, when a written contract document was presented to the plaintiffs for signature by them it made no reference to this covenant, and that was the situation when the plaintiffs signed the contract as purchasers, the vendors signed the contract, and the vendors’ acceptance was communicated to the plaintiffs. 

15. [15]
    The effect of the contract was that the vendors were agreeing to transfer to the plaintiffs, title to the land free from any encumbrances. On its face the registered covenant was an encumbrance on the title. After the contract between the parties had been formed, the agent amended the contract, relevantly by inserting the registered covenant in the place in the contract where there was provision for identifying any encumbrance to which the title to be conveyed was to be subject. If this had been in the contract prior to the time when it was signed by the parties, the effect of the contract would be that the title to be provided by the vendors pursuant to the contract was title to the land subject to that encumbrance.

16. [16]
    The plaintiffs allege in their pleading, and the agent denied in the agent’s pleading, that certain representations had been made in relation to the use of the land. The plaintiffs allege that the presence of the registered covenant meant that those representations were misleading and deceptive, because the effect of the covenant was that the registered proprietors of the land would not be entitled to do the things that the agent had represented that the plaintiffs would be able to do if they purchased the land, at least without the consent of the Gold Coast City Council.

Argument for the agent

17. [17]
    The argument on behalf of the agent at the hearing appears to be as follows: the registered covenant, although registered against the title to the land, did not in fact adversely affect the land because the covenant operated by reference to an area identified as “Covenant A” on the survey plan, which did not include any part of Lot 4 to be purchased by the plaintiffs under this contract.  Although there was an area within Lot 4 which was marked “Covenant C” on the plan of that lot, the covenant did not on its true construction attach to that land.  Although the covenant was registered against the title to Lot 4, because of its terms it had no operation in relation to that lot because the land to which the covenant attached did not lie within Lot 4.  If the rights conferred on the Council by the covenant did not in fact extend to any of the land in Lot 4, then the presence of the covenant did not have the effect of falsifying the representations made by the agent, and the plaintiffs’ case against the agent necessarily fails.

Test for summary judgment

18. [18]
    The test under UCPR r 293 is whether I am satisfied that the plaintiffs have no real prospect of succeeding on the plaintiff’s claim against the third and fourth defendants, and that there is no need for a trial of the claim. That test is to be applied according to its terms,^[8] although it is necessary for me to approach such an application with appropriate caution, bearing in mind the serious consequences of this summary procedure.^[9]

Deficiencies in the evidence

19. [19]
    The first problem the agent faces in pursuing this application is that the affidavits in support of the application were defective. Much of the affidavit material is on its face hearsay. Evidence in the form of hearsay can be relied on in summary judgment applications, provided that the requirements of the rules for such evidence are adhered to.^[10]  That did not occur with most of the evidence in the present case.

20. [20]
    An affidavit of Joshua Roberts was read. He described himself as a solicitor. He deposed to his having on a particular day spoken to two unnamed “representatives” of the Titles registry at the Southport office of the Department of Environment and Resource Management, and went on to speak about what he showed them and what he asked them, none of which is of any evidentiary value except as laying the foundation for something else. He said that the representatives showed him on their computer the covenant having the dealing number of the covenant in question, and exhibited a true copy of that covenant. The copy of the covenant is probably admissible.^[11]  The affidavit then went on to record certain things which Mr Roberts pointed out to the representatives of the Titles registry, which again is of no evidentiary significance in itself, and records in, for example, paragraph 6 that “they acknowledged this”, a reference to something he had said to them about what appeared on a particular plan.  The relevance of their acknowledgement is not apparent.

21. [21]
    The following paragraph refers to an acknowledgement by those representatives that certain words appeared in Clause 3.1 of the covenant schedule.  That is plainly of no evidentiary value and indeed inadmissible as contrary to the best evidence rule.  The correct way to prove the content of a document is to prove the document in evidence, not to obtain from a person, who has no authority to make admissions on behalf of the plaintiffs, an admission that the document contains a certain statement.  The problem here goes somewhat deeper than any complaint about hearsay.

22. [22]
    The affidavit then records that “both representatives confirmed that there were no further covenants” apart from the particular numbered covenant that he had previously seen registered against the title, nor any evidence of documents on the Titles office file. Again, the correct way to prove the content of the Titles office records is by putting in evidence in the manner authorised by the legislation copies of those records, but assuming that statements by people working in the Titles registry can be put in evidence, they must be properly proved because in this form they are hearsay.

23. [23]
    The next paragraph, paragraph 10, is in the following terms:

“The representatives confirmed that the only protected area to which a covenantor’s obligation under s 4.1 applied was that area defined as ‘Protected Area A’.”

24. [24]
    At the very least, this is hearsay. There is a more significant objection to this passage, however, but I shall postpone that for the moment and address the hearsay point. The affidavit then continued:

“All the facts and circumstances above deposed to are within my own knowledge, save such as are deposed to from information only, and my means of knowledge and sources of information appear on the face of this my affidavit.”

25. [25]
    That is a conventional enough provision in an affidavit which contains hearsay in circumstances where hearsay evidence is admissible. Strictly speaking it says two things: where facts are not deposed to from information only they are within my own knowledge, and (where they are deposed to from information) the means of knowledge and sources of information appear on the face of the affidavit.

26. [26]
    Traditionally when hearsay is properly included in an affidavit, the practice has been to preface it with the statement: “I am informed by X and verily believe that … .”  It may be that the word “verily” is surplusage and can be omitted without detracting from the effect of that introduction, but its function is to identify that what follows is sworn to on the basis of information and belief.  The requirement for hearsay is more than simply that the deponent has been informed of something; the effect of r 295(2) is that hearsay can only be included in an affidavit in this way where the deponent actually has a belief in the correctness of the information provided.  In addition, the source of the information must be identified, and the reasons for the belief.  According to the latter part of the final paragraph that is what had occurred with this affidavit.  All that is said about the source of information is that it was two unnamed individuals whom the deponent came upon at the office referred to.  That in my opinion is not adequate identification of the source of information.  Neither requirement for hearsay was met by this affidavit and insofar as it purports to put before the court hearsay from the unnamed “representatives” of the Titles registry, it has not been made properly admissible under the rules.

27. [27]
    There is the further difficulty with paragraph 10, referred to earlier:  it purports to express an opinion as to the effect of the registered covenant.  Opinion evidence is governed by other rules, but at the very least it is confined to duly qualified experts,^[12] and nothing has been said about the qualifications or expertise of the unnamed “representatives” at the Titles registry.  The mere fact that somebody is found behind a counter in a government office is not evidence of any expertise for the purposes of the law of evidence.  Accordingly, as it purports to be expert evidence, this statement was inadmissible.  But there is an even more fundamental reason why it is inadmissible:  it purports to be expert evidence on a question of law.  The correct interpretation and legal effect of a document is a question of law, and that is not a subject upon which expert evidence is admissible,^[13] unless the question is one as to the content of foreign law.^[14]  Even if the statement had been formulated in terms which met the requirements of the rules for hearsay, and even if the expertise of the unnamed representatives of the Titles registry had been established, this statement would still not be admissible as evidence.  Most of this affidavit is devoid of evidentiary value. 

28. [28]
    The position is similar with the affidavit of Mr Treherne, also a solicitor.  He was entitled to put in evidence the search of the relevant certificate of title obtained from the Titles office, but not to be giving evidence as to the content of that document.  Paragraph 4 gives evidence of something the fourth defendant did, and evidence as to the effect of the Property Agents and Motor Vehicle Act 2000.^[15] The latter is inadmissible as the obligation upon the fourth defendant under that or any other legislation is a question of law.   Unless Mr Treherne was present at all of the open house inspections conducted by the fourth defendant on the subject property, ^[16] the former was hearsay though it was not identified as such, being presented as something deposed to of his own knowledge.  There was a failure to comply with the requirements of r 295(2), as discussed earlier.

29. [29]
    Paragraph 6 was again hearsay but purportedly something stated by Mr Treherne of his own knowledge and therefore in the same position as paragraph 4, and the same applies to paragraphs 7, 8 and 9.  It may be that paragraph 10 was deposed to from Mr Treherne’s own knowledge if he was the solicitor who handled the conveyance; but if his reference in paragraph 11 to Quinn and Scattini Lawyers as acting for the first and second defendants is correct, presumably he did not do so, in which case paragraph 10 is also improperly formulated.  Paragraph 11 initially contains inadmissible hearsay; the second sentence is speculation which is not admissible. 

30. [30]
    Paragraph 12 purports to verify a letter obtained on disclosure, and may well be appropriate for such a letter, though it then contains an assertion that the solicitors acting for the plaintiffs were “acknowledging the transparency of Mr Hill’s conduct in making known alternations to the contract on 26 April 2011”, which statement is not supported by the terms of the letter which is then exhibited.  What it actually says is that in a particular telephone conversation a solicitor in the office of Quinn and Scattini had “confirmed that Dale Hill has in fact verbally confirmed altering the contract after execution by all parties, including the addition of the covenant.”  In my view the natural reading of that passage is that the solicitor from Quinn and Scattini was saying that Mr Hill had confirmed to him, presumably on or near 25 May 2011, that that was what had occurred.  It contains nothing about what Mr Hill was supposed to have done on 26 April 2011.  It certainly says nothing to suggest any transparency in Mr Hill’s conduct.  The rest of the affidavit is irrelevant to an application under r 293.

31. [31]
    It follows that most of Mr Treherne’s affidavit was also inadmissible, as hearsay which had not been properly proved, or as being irrelevant, or an inadmissible attempt to give expert evidence as to the law.  Ordinarily, the appropriate course when confronted with such defective affidavit material would be to adjourn the application and give directions for fresh affidavits, in accordance with the rules, to be filed and served on behalf of the applicants, so that the plaintiffs have a proper opportunity to respond to proper material.  All costs thrown away by the adjournment should of course be met by the applicants. In practice, I allowed Mr Treherne to give oral evidence, which to some extent remedied some of the deficiencies in the affidavit evidence. It is unnecessary to say any more about the agent’s affidavit evidence, however, because it is clear that for other reasons this application must fail.

Substantive argument for the agent

32. [32]
    The agent’s argument turns on the proposition that the covenant or its obligations under Clause 4.1 related to what is described as “the protected area”, which in turn was defined as “those parts of the land depicted on the survey plan under the designation of Covenant A.”  The survey plan in turn is described as Plan SP 167856, certified by a particular individual and dated 24 June 2004.  I can find no copy of SP 167856 in the material put before the court.  Without seeing that plan it is impossible to know what land is depicted on it under the designation of Covenant A, and in those circumstances there is no evidence that the area so depicted does not include any material part of Lot 4 on that survey plan.  On that fundamental evidentiary point, the application must fail.

33. [33]
    There are, however, other considerations which arise in relation to this covenant. Assuming that in fact there is an area marked Covenant A on that survey plan and it does not include any part of Lot 4, it is by no means clear from Clause 4.1 of the covenant that the obligations arising in respect of the covenant arise only in the area marked Covenant A, so that it is only that particular area of land which can be affected by this covenant.  For example, Clause 2 setting out the intent of the covenant does refer in paragraph (b) to ensuring that the nominated protected area is utilised for certain conservation purposes and managed in accordance with an approved covenant management plan, but paragraph (a) refers to ensuring the covenantor and successors in title their agents do not intentionally or wilfully clear, damage or destroy any area relating to the conservation of the physical feature or natural feature the subject of the covenant or otherwise.”  Clause 4.1(f) prevents the performance of acts “on or in respect of the protected area” which may have detrimental impact.  There is reference to a covenant management plan, but that is not in evidence.

34. [34]
    It is arguable that, if part of the purpose of the covenant is to protect water quality and plants within the nominated protected area, this could be adversely affected by the construction of trails or paths, or the depositing of fill, rubbish, garbage, waste, or other foreign material, or the keeping of domestic animals, in other parts of the land. Accordingly, the notion that the covenant is irrelevant if no part of the land depicted on the survey plan with the designation of Covenant A lies within Lot 4 seems to me to invite a substantial leap of logic.  It is not one which I would be prepared to make.  I would certainly not be prepared to make it without the benefit of having the other party having an interest in this covenant, namely the Council of the City of the Gold Coast, before the court and given the opportunity to be heard.  Plainly, the council has an interest in what the legal effect of this covenant is, and that question should not be decided in the abstract or only between other parties.

35. [35]
    The argument also involves focusing on the Schedule to the covenant without looking at the first page of the covenant itself. Item 2 on the first page has been altered; originally it referred to Lot 19 on SP 130055, County of Ward, Parish of Nerang, Title Reference 14639001.  It has, however, been changed to “Covenants A, B, C and D, Lots 1, 2, 4 and 5 on SP 167856 County of Ward, Parish of Nerang, Title Reference CT to issue.”  When one looks at the title to Lot 4 on survey plan 167856 it shows that the previous title was 14639001, and this title reference was created on 18 October 2004, almost a month after the date on which the covenant was apparently presented for registration.  It may be that the covenant was drawn by reference to a different survey plan, but that before it was registered it became apparent that the land on the earlier plan was to be subdivided, and as a result the covenant came to be modified.  An issue may arise, therefore, as to whether the covenant is confined to the area marked “Covenant A” or whether it extends to each of the areas marked Covenant A, B, C and D if, as may be the case, they appear respectively on Lots 1, 2, 4 and 5 on the survey plan.  Whether that might be a plausible interpretation of the document cannot really be considered without seeing a copy of the survey plan, nor is it something which ought to be decided without hearing from the covenantee.

Other matters

36. [36]
    Counsel for the agent submitted that the registered proprietor for the time being of Lot 4 would have indefeasible title, as though that was proof against any registered covenant.  It may well be a useful thing to have if the registered proprietor is seeking to resist someone seeking to enforce an unregistered covenant, but the certificate of title to Lot 4 clearly shows that this covenant is registered against Lot 4, and in respect of “Covenant C”.  If, for example, the survey plan shows that there is a part of Lot 4 which is designated “Covenant C”, that looks as though some part of the land is affected by the covenant, though there may well be difficult questions of construction as to exactly what that effect is.  However, so long as the covenant has some effect, because the covenant is itself registered and registered against the title it also has the benefit of indefeasibility, and it is clear that the proprietor of Lot 4 holds title to that lot subject to the effect of that covenant, whatever that may be.  Speaking about indefeasibility of title is therefore of no assistance to the agent’s argument.

37. [37]
    During submissions counsel for the agent also made a number references to the issue on the pleadings as to whether or not the various representations relied on by the plaintiffs were actually made by the agent. It is clear, however, that the application was not advanced on the basis that the plaintiffs had no real prospect of success on this issue, as plainly could not have occurred given the nature of the issue and the absence of any evidence on the point. Also, counsel for the agent made reference at one point to the doctrine of caveat emptor. That is not a defence to an action in deceit, and it could perhaps be said that one of the purposes, though not the only purpose, of the legislative intervention currently manifested in the Australian Consumer Law is to overcome such doctrine. There is nothing in the Australian Consumer Law to suggest that such a doctrine affords a defence to a claim for damages for misleading or deceptive conduct.

38. [38]
    There was also a submission advanced as to the effect of the alteration on the contract between the plaintiffs and the vendors, with a view to excluding the operation of the rule in Pigot’s case.^[17]  That issue does not appear to me to be relevant to the real question in this application, which is whether the representations of the agent, which for the purposes of this application must be treated as having been made, could not have been falsified by the existence of the covenant registered against the title.  In any case, assuming that the rule in Pigot’s case would not apply, the effect would appear to be that the alteration has no effect, so the vendors’ contractual obligation remained to convey title free from any encumbrance.  But I am not concerned with the legal position as between the plaintiffs and the vendors.

Conclusion on application

39. [39]
    The position therefore is that the correct interpretation of this covenant is a matter which presents a degree of difficulty, and cannot be conveniently dealt with on a summary judgment application. It is by no means clear to me that on its true interpretation the effect of the covenant is limited in the way which the argument on behalf of the agent presented as being virtually self‑evident.  In any event, there has been no proper evidentiary basis laid for such an application.  Certainly on this material the application must fail, but I suspect that on any material the question of just what practical effect this covenant has on the registered proprietor for the time being of Lot 4 is of far greater complexity and difficulty than was assumed for the purposes of the agent’s argument.  I do not consider that it is a question which should be decided on a summary judgment application.  The application is therefore dismissed.

40. [40]
    The only application brought before me was the application on behalf of the agent for summary judgment. There was no application on behalf of the vendors, and they were not made respondents to the agent’s application. Nevertheless, on the hearing counsel for the vendors appeared, not to take any position as between the plaintiffs and the agent, but to submit that if the agent’s application were successful then the plaintiff’s claim against the vendors was also bound to fail and should also be dismissed. Accepting the logic of that proposition, I do not see how I could dismiss the plaintiff’s claim against the vendors unless there was at least an application seeking such relief properly before me, and there is not.

41. [41]
    Counsel for the vendors did make some submissions as to the effect of an amendment to the Land Title Act 1994 in relation to registered covenants^[18], the effect of which appeared to be that, in order to consider the legal effect of such a covenant, it was necessary to have regard to the terms of the legislation prior to an amendment in 2005. I was not referred to any transitional provisions of the legislation. Counsel for the vendor raised some interesting points, however it is I think unnecessary for me to express any opinion on how the legislation operates in relation to this particular covenant in light of what I have said above; the only practical consequence of the issue which was raised in this way is that it adds an additional layer of complexity to the question of determining exactly what legal effect this covenant has.  It provides yet another reason why it is inappropriate to decide that question on a summary judgment application.

42. [42]
    The application having failed, it is unnecessary to consider any possible consequences as between the plaintiffs and the vendors.