Citation: Vickers v Taccone [2005] NSWSC 514
Court: Supreme Court of New South Wales, Equity Division
Date: 31 May 2005
Judge(s): Hamilton J
Background
The plaintiff was the registered proprietor of a residential property at Gladesville. He engaged a real estate agent (the third defendant) to sell the property. In the course of marketing, the agent made oral statements and produced a brochure that the first and second defendants (two brothers) relied upon as representing that the land could be developed by erecting four villas on it.
The brothers purchased the property at public auction in March 2002 for $900,000 and signed a contract, paying a $45,000 deposit. The land did have sufficient area for four villas, but it had a frontage below the council's 20-metre requirement for a four-villa development. Critically, the property also had a serious water flow problem that further impeded development approval. Both issues were noted on the section 149 Environmental Planning and Assessment Act certificate included in the contract, though the brothers did not read it before signing.
The brothers did not complete the contract. In June 2002 they purported to rescind on the basis that the representation was false. The plaintiff then purported to terminate the contract and forfeit the deposit. Each side claimed the other was in the wrong, and the plaintiff also brought a cross-claim against the agent, while the brothers cross-claimed against both the plaintiff and the agent.
Legal Issues
- Whether the agent made a representation, in absolute terms, that four villas could be erected on the land
- Whether that representation was attributable to the plaintiff (that is, whether the agent was authorised to make it)
- Whether the representation was false
- Whether the brothers relied on the representation when entering into the contract
- Whether the brothers validly rescinded the contract in June 2002
- Whether the plaintiff validly terminated the contract and was entitled to forfeit the deposit
- Whether the plaintiff was entitled to damages from the brothers for failing to complete
- Whether the brothers were entitled to damages under the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (NSW)
Decision
Hamilton J found that the agent's statements did not amount to an absolute representation that four villas could definitely be erected on the land. The agent had acknowledged the frontage shortfall to the brothers' father during pre-auction discussions and suggested only that a precedent existed for approval on narrower frontages. The court characterised the agent's position as qualified rather than a firm guarantee of four-villa development approval.
On the question of reliance, the court found that the brothers had not established the requisite causal link between any misrepresentation and their entry into the contract. Their own evidence showed they were experienced in property development, and the section 149 certificate (which disclosed the water flow problem) was part of the contract documents. The brothers' failure to read that certificate was material to the reliance analysis.
Because the representation was not made in the absolute terms alleged, and because the necessary degree of reliance was not established, the brothers were not entitled to rescind the contract. Their purported rescission in June 2002 was therefore invalid. The plaintiff's subsequent termination of the contract was valid, and the deposit was properly forfeited.
The plaintiff was awarded damages against the brothers for their breach in failing to complete. Questions of quantum were reserved for short minutes. The plaintiff's claim against the agent (for breach of warranty of authority) and the agent's cross-claim against the plaintiff for indemnity both fell away given the outcome, and were dismissed.
Orders Made
- Judgment for the plaintiff against the first and second defendants: their purported rescission was invalid and they are liable in damages (quantum to be determined on short minutes)
- The deposit was forfeited to the plaintiff
- The first cross-claim by the brothers against the plaintiff and the agent was dismissed
- The plaintiff's claims against the third defendant (agent) were dismissed
- The second cross-claim by the agent against the plaintiff was dismissed
- Costs questions reserved to the short minutes hearing
Key Takeaways
- A representation about development potential will not be treated as absolute where the agent's own statements acknowledged limitations and expressed only qualified optimism about council approval.
- Reliance as an element of both equitable misrepresentation and statutory misleading conduct claims requires a genuine causal connection between the representation and the decision to contract. Experienced buyers who fail to read contract documents bearing on the very matter in issue face significant difficulty establishing that connection.
- Where purchasers purport to rescind a contract on grounds that are not made out, the purported rescission is itself a repudiation, entitling the vendor to terminate and forfeit the deposit.
- The Supreme Court confirmed that consequential claims (here, the agent's indemnity claim and the vendor's warranty-of-authority claim) may fall away entirely depending on the primary finding between vendor and purchaser, without needing separate determination on their merits.
- Quantum of damages for a vendor's loss following a purchaser's failure to complete was reserved for determination at the short minutes stage, leaving the measure of loss to be argued separately from liability.
Legislation and Cases Referenced
Legislation
- Environmental Planning and Assessment Act 1979 (NSW), s 149
- Trade Practices Act 1974 (Cth)
- Fair Trading Act 1987 (NSW)
Cases
- Butcher v Lachlan Elder Realty Pty Ltd (2004) 79 ALJR 308
- Lam v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458