Legal database - View: Cases: Bowler & anor v Hilda Pty Ltd & ors

Bowler & anor v Hilda Pty Ltd & ors
BC 9605082

(Judgment by: Finn J)

Bruce William Bowler & Janelle Joy Bowler v
Hilda Pty Ltd ACN 008 556 616
Leader Real Estate Pty Ltd ACN 059 881 597 & Leader Holdings Pty Ltd ACN 008 567 726
John Frederick McDonald & Jennifer McDonald
Derek Whitcombe
Regency Apartments PTY LTD ACN 061 914 029

Court:

Federal Court of Australia

Judge:
Finn J

Subject References:
Trade Practices
Misleading and Deceptive Conduct
whether oral representations made by agent in conjunction with written documents misleading
statement that return on investment `guaranteed'
meaning of `guarantee'
statement that agent's father had bought property
whether either representation a material inducement
reliance
relevance of subsequent unequivocal legal advice
representation as to use of a unit on property to be redeveloped
representation that unit could be lived in, rented out or used as a serviced apartment
misrepresentation only pleaded against agent
no duty to disclose or correct information pleaded
whether agent's representation was to existing fact or future matter
whether agent had reasonable grounds for representations as to future matters
whether agent's representation as to future matter contained implied representation of belief as to principal's present intention
whether agent had reasonable grounds
Practice and Procedure
Amendment to Pleadings
deficiency in pleadings pointed out by respondent during directions hearings
no attempt to amend pleadings before hearing
deficiency raised again by respondent in closing address
application to amend pleadings made during reply
application too late

Legislative References:
Trade Practices Act 1974 (Cth) - 52; 53; 53A(1)(b)

Case References:
Gould v Vaggelas - (1985) 157 CLR 215
Kabwand Pty Ltd v National Australia Bank Ltd - (1989)11 ATPR 40-950
McMahon v Pomeray Pty Ltd - (1991) 13 ATPR 41-125
Metcalfe v NZI Securities Australia Ltd - (1995) 17 ATPR 41-418
Bell v Australasian Recyclers (WA) Pty Ltd - 8ATPR40-644
Cummings v Lewis - (1993) 113 ALR 285
Elders Trustee & Executor Co Ltd v Reeves Pty Ltd - (1987)78 ALR 193
John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd - (1993) 15 ATPR 41-249
James v ANZ Banking Group Ltd - (1986) 64 ALR 347
Jones v Dumbrell - [1981] VR 19
Yorke v Lucas - (1985) 158 CLR 661
Cummings v Lewis - (1993) 41 FCR 559
Ting v Blanche - (1993) 118 ALR 543

Hearing date: 1-3 April 1996 & 22-26 July 1996
Judgment date: 25 October 1996

Canberra

Judgment by:
Finn J

Introduction

This representative proceeding, brought under Part IVA of the Federal Court Act 1976 (Cth), is as notable for the issues it does not, as for those it does, raise. It arises out of the redevelopment and then sale to the public through the vehicle of a corporate Units Plan, of residential and serviced apartments. The applicants, Mr and Mrs Bowler, acquired a unit (unit 23) in the Units Plan which for convenience I will call the Regency Apartments.

The redevelopment was undertaken by the then lessee of the property, Hilda Pty Limited ("Hilda"), the first respondent. I should note in passing that the fourth and fifth respondents, Mr and Mrs McDonald, were directors of Hilda at all relevant times. The public marketing of the units can be said for the moment to have been undertaken by either or both of the two Leader companies, the second and third respondents, in consequence of an agency agreement with Hilda. I will not differentiate between the two and will, for convenience, refer to them collectively as the Leader companies. Mr Whitcombe, the sixth respondent, was a director of the Leader companies.

The essence of the complaint made by the Bowlers is that the Leader companies in promoting the sale of the units made representations to them which were misleading and deceptive and which induced them to acquire Unit 23 to their damage and loss. Contraventions of the Trade Practices Act 1974 (Cth), s52, s53(g) and s53 A(1)(b) were alleged. Relief was sought in consequence.

The contravening conduct alleged is claimed to have occurred during meetings between the Bowlers and a Mr Singh, an employee of one of the Leader companies, which, as I find, occurred on 22 and 23 July 1993. The impugned representations (said to have been both oral and written) were, in substance, that:

(i): the income the Bowlers were to receive from their unit would be at least equal to 10 per cent of the purchase price paid for up to nine years from the date of completion of the purchase and this was "guaranteed" (the "rental guarantee");
(ii): their unit could be lived in, rented out privately or rented as serviced apartments (the "unit use" representation); and
(iii): Mr Singh's father had bought one of the units.

A range of other representations were alleged in the pleading but, save for one I will later mention, were abandoned in the proceedings before me.

Notwithstanding the very confined compass of the alleged contravening conduct, the applicants have ranged widely in the matters claimed to be relevant in these proceedings. Because of this, and because of the vital significance the pleadings have come to assume in this matter it is necessary, before turning to the merits of the applicants' case, to consider both the pleadings themselves and the course the representative proceedings have taken. Consideration of these will be prefaced by a brief chronology of events said to be of relevance by either the applicants or the respondents. Much of it is without significance in the view I take of this matter.

A Chronology

1.: Hilda, as lessee of Crown leases of adjacent blocks in the Canberra suburb of Griffith, applied to the Australian Capital Territory Department of the Environment, Land and Planning on 17 February 1993 for a variation of the purpose clauses of the leases and for a boundary realignment of the two blocks. Insofar as presently relevant the application proposed that:

"Remainder of site (present Regency Motel area) to be changed to permit residential use - present motel to be refurbished, then unit titled."

An amended application was lodged the following day requesting "Development rights" as well. It in turn described the proposal as:

"Boundary re-alignment & purpose variation to include medium density residential units."

The applications were accompanied by an authorisation to a Mr Carl Ryman to act on Hilda's behalf in the matter. Mr Ryman, who apparently conducts his own business, had been engaged by Hilda for the purpose.

2.

On 26 February 1993 Mr McDonald on behalf of Hilda and Mr Whitcombe on behalf of Leader Real Estate executed an exclusive agency agreement under which Leader was appointed Hilda's sales agent of the "proposed refurbished units". Leader advertisements for the units began to appear sometime thereafter in The Canberra Times. These in terms would seem to suggest that the units were being sold for either owner-residence or rental purposes.

3.

On 4 March 1993, as required by s235(1) of the Land (Planning and Environment) Act 1991 (ACT) - "the L(P & E) Act" - the ACT Planning Authority was required to advise the Minister in writing whether it:

"(a): does not object to the approval of the application;
(b): does not object to the approval of the application if the approval is given subject to conditions ...; or
(c): objects to the approval of the application."

4.

A meeting occurred in mid-April between officers of the ACT Planning Authority and Mr Ryman at which, according to the evidence of Mr Stubbs (an officer of the Authority), the chief planner indicated by reference to a plan of the development that if units numbered 1 to 19 were used only for residential purposes and the remainder (42) were used as serviced apartments then he would be happy to support the application as it stood. Mr Ryman is said to have said that he would amend the application to reflect this. It is in dispute between the parties as to whether such an amendment was ever sought.

I should interpolate that the redevelopment was of three buildings. What were to become the nineteen residential only units were housed in what was referred to as building A. Almost all of the serviced apartments were in buildings B and C.

5.: In mid-May 1993 Hilda changed the manner in which the units were to be presented to the public. Nineteen units were to be sold as one bedroom residential only units, the remainder as serviced apartments. Furthermore, a management arrangement was to be offered for purchasers of serviced apartments under which units were to be sub-leased to the management company.
6.: On 17 May 1993, a Mr Hughes on behalf of Leader sent a facsimile to Hilda's solicitors to which was annexed what was to become the advertising brochure for the changed proposal. The facsimile was in terms (inter alia):

"This is the proposed hand out information re: serviced apartments. Can you check that it is accurate."

There is no evidence before me of any reply being made to this. A version of this brochure, somewhat varied in its detail, is said to contain the written representations alleged to constitute contravening conduct in these proceedings.

7.: From 22 May 1993, Leader advertisements began to appear in The Canberra Times which in varying ways drew attention to the possible management arrangement and that a 10 per cent "rental return" or "guaranteed rental return" was being offered.
8.: On 7 July 1993 Mr Ryman wrote to the Department of the Environment, Land and Planning in terms (omitting formal parts):

"I refer to the application currently before you in respect of the above property for a re-alignment of boundary between Blocks 5 & 6 and also a lease purpose variation in respect of the new parcels.

Following discussions with your Mr Guild, Mr Tomlins, Mr Stubbs and Mr Nowak, I can now outline the course proposed for the application which satisfies departmental criteria.

The boundary re-alignment between Blocks 5 & 6 will only affect the boundary between the two current blocks forming new blocks 9 & 10. The external boundaries of the two blocks will remain as for Blocks 5 & 6.

The purpose clause variations to the new blocks will add the following use:

Block 9 - residential purposes to permit a maximum of 72 townhouses;

Block 10 - residential purposes to permit a maximum of 19 residential units.

The use for Block 10 will be in addition to the proposed 42 serviced apartments currently permitted under the present lease. The 19 units will replace what is presently 27 motel units and a restaurant.

Would you please proceed to process this application as a matter of some urgency as my client is now in a position to commence work on both sites."

I should add that Block 10 is the one relevant to the present proceedings.

9.: On 22 July Mr Singh of the Leader Companies visited the Bowlers at their residence. It was at this meeting he is alleged to have made the representations and to have provided the Bowlers with the "Regency Apartments" brochure which constituted the contravening conduct. Insofar as presently relevant, the brochure stated:

"CHOICE OF TWO TYPES OF TITLE

1.: RESIDENTIAL: BLOCK A APARTMENTS 1-19

Ideal for live-in owners being the largest apartments in the development. May be rented out as with all properties, but not as serviced apartments at this point in time. However it is relatively easy to change titles from Residential to Serviced Apartments, as opposed to changing from Serviced Apartments to Residential.

...

2.: SERVICED APARTMENTS: UNITS 20-60 (BLOCKS B & C)

May be lived in, rented out privately, or rented to management company which will sublet them as serviced apartments. The management company will rent at 10% pa of purchase price. ie) on $66,000, $550pm ($127pw), on $70,000, $583pm ($135pw), on $75,000, $625pm ($144pw) on $110,000, $917pm ($211pw), all paid per calendar month.

The management company will enter into a lease with the unit owners at 10% rental in year 1, then 10% plus consumer price index increase for years 2 and 3. It is the intention that the management company will renew their lease indefinitely.

After 3 years, buyers may take up the option for another 6 years. Rental will be determined by negotiation, based on previous performance and prevailing market conditions. However, the rental is guaranteed never to fall below the initial rental."

The following day Mr Singh took the Bowlers to the site of the units for an inspection.

10.: Between 23 July and 24 August - the date on which contracts were exchanged - the Bowlers consulted a Ms Harris, a solicitor, on three or perhaps four occasions for professional advice concerning the transaction.
11.: By letter dated 7 August 1993 approval was given to the "application of 18 February 1993 to vary the purpose clause and realign the boundary between blocks 5 & 6". The approval though, was made subject to the conditions (inter alia):

" Upon registration of that lease it shall be surrendered in favour of two new leases with realigned boundaries, for the purpose of medium density residential units and/or a residential hotel with ancillary carparking;

...

That the lessee demonstrates that any development proposal meets the Development Guidelines to the satisfaction of the Authority and in accordance with Attachment A."

The attachment referred to commenced as follows:

"The proposed conversion of the motel rooms to residential units fails to satisfy a number of the Development Guidelines for Section 84, specifically:"

It then referred to five distinct matters and indicated the shortcomings in the proposal in relation to these. I will describe the five matters as referring to (1) landscaping; (2) air-conditioning units; (3) privacy and overlooking; (4) useable open space; and (5) building design and appearance.

The attachment concluded with the following two paragraphs:

"Although not specifically referred to in the Development Guidelines a comparison of of (sic) typical floor areas for each dwelling unit type shows that the proposed units are on average 25-50% smaller than comparable medium density developments elsewhere in the inner Canberra area. For example, the single bedroom units have an average floor area of 45m2 compared to 60m2 elsewhere and the proposed bedsitter units have an average floor area of only 20m2 compared to 54m2 elsewhere. A copy of the floor plan of a bedsitter unit is attached. This unit is little bigger than an average car port and concern is expressed about its ability to function effectively for permanent residential occupation.

It is considered that the amenity standards required for transient occupation of motel units are quite different to those required for long term or permanent residents. The Authority considers that in failing to meet the reasonable amenity standards set out in the development guidelines the proposal as submitted should not be supported."

12.: On 24 August the Bowlers contracted to buy Unit 23 from Hilda. The contract provided for a lease-back to Hilda or its nominee on the terms of a schedule to the contract. The lease-back arrangement put into effect the "management company" proposal for serviced apartments referred to in the "Regency Apartments" brochure set out above.
13.: On 14 September an application for approval of building plans was lodged on Hilda's behalf with the ACT Building Control section of the Department of Urban Services. Suffice it to say of it here that, in its reference to "Class of Building" (hence of occupancy), the application did not give a uniform designation to the three buildings which were to make up the redevelopment complex. The implication of this was a matter of sharp disagreement between the parties. The plans were approved on 29 October 1993. The approval endorsed on the plans, I would note, did not in terms differentiate between the classes of occupancy permitted for any of the three buildings.
14.: On 18 November 1993 a new lease was granted to Hilda under the L(P & E) Act in respect of the Regency Units property. The lessee covenants of that lease contained (inter alia) the following provisions (cl 3):

"COMMENCEMENT OF BUILDING

(a): That the lessee shall within twelve months from the date of commencement of the lease or within such further time as may be approved in writing by the Territory commence to erect nineteen one bedroom units carparking and landscaping on the said land at a cost not less than the sum of eight hundred thousand dollars in accordance with plans and specifications prepared by the Lessee and previously approved by the Territory;

COMPLETION OF BUILDING

(b): That the lessee shall within twenty four months from the date of the commencement of the lease or within such further time as may by (sic) approved in writing by the Territory complete the erection of the said nineteen one bedroom units carparking and landscaping in accordance with the said plan and specifications and in accordance with every Act Statute ordinance or Regulation applicable thereto;

PURPOSE

(c): To use the said land for residential units and serviced apartments;

SINGLE UNIT DWELLINGS

(d)

That the buildings on the said land shall contain a maximum of nineteen one bedroom residential units and forty two serviced apartments;"

15.: The Units Plan No 1000 for the redeveloped site was registered under the Real Property (Unit Titles) Act 1970 on 24 February 1994. The "Schedule of Provisions Covenants and Conditions Subject to which Leases of Units are Held" under Units Plan No 1000, provided (inter alia) in clause 3 that:

"PURPOSE

(c): To use the said parcel for residential units and serviced apartments;

SINGLE UNIT DWELLINGS

(d): That the buildings on the said parcel shall contain a maximum of nineteen one bedroom residential units and forty two serviced apartments;"

I would note that a later title search of the Bowler's interest in the property held under the Units Plan contains (inter alia) the following notification:

"RESTRICTIONS CONDITIONS AND EASEMENTS PURPOSES CLAUSE REFER UNITS PLAN"

This then, refers to clause 3(c) of the Units Plan set out above.

16.: Regency Apartments Pty Limited ("Regency"), the seventh respondent which took no part in these proceedings, was nominated by Hilda as the sublessee of units purchased subject to the lease-back arrangement (as was the case with the Bowlers) in March 1994.
17.: On 22 March 1994 settlement of the Bowler's purchase of Unit 23 occurred.
18.: For several months after completion the Bowlers received the contracted-for 10 per cent of their purchase price by way of rental from Regency. Nothing was received in July and August 1994, then a reduced amount was paid for several months as was one 10 per cent payment in December. Thereafter nothing was received from Regency.
19.: In 1995 a group of unit owners (apparently twenty-eight in number) began to lease out their units. A real estate agency had been engaged to act as the agent in this for at least some number of these owners.

Having outlined the sequence of principal events traversed in evidence before me, I should again emphasise that such contravening conduct as is alleged to have occurred, occurred on 22 and possibly 23 July 1993.

The Course of the Representative Proceedings

The Bowlers apart, there are twenty-eight other group members - all purchasers of units from Hilda - who are represented in these proceedings to the extent that the proceedings themselves are representative in character. As s33C(1) of the Federal Court of Australia Act 1976 indicates, one of the required conditions for the commencement of a representative proceedings is that the claims of all members of the group "give rise to a substantial common issue of law or fact".

After the original application and statement of claim filed on 20 February 1995 were revealed to be obviously defective, an amended application and an amended statement of claim were filed on 21 March 1995. The latter document contains in effect a standard form pleading for what are said to be claims common to the group members. It is clear, though, from paragraphs 17 to 19 of the amended statement of claim that not all matters contained in that part of the pleading which refers to claims common to the group members (ie paras 1 to 16) in fact arise in the Bowler's case or, presumably, in any other group member's case.

When the matter came on for hearing on 1 April 1996, I indicated at the outset to Mr Arthur, then sole counsel for the Bowlers, my concern with the representative dimension of the proceedings and required that he at least provide me and the other parties with an indication of those findings in the Bowler case which, if made, would carry over to the claims of the other members of the group.

It was necessary after three days of hearing for the matter to go part heard. Before adjourning, counsel for the respondents raised their own concerns about the representative character of the action. They were concerns I shared. There was simply nothing in the material then before me to provide any basis for the assertion that any fact finding I might make in the Bowler's case was one which could or should be carried over to the claims of other group members. Indeed, as the evidence unfolded, it seemed to me that it was distinctly possible that each of the cases in crucial respects might be relatively idiosyncratic. Accordingly I directed the applicants to file a statement which identified what were asserted to be the common issues of law or fact and that when they had been filed, a further directions hearing would occur to consider the future of the representative proceedings.

Such a statement was filed on 19 April. Put briefly the five issues it raised were whether

(i): The Canberra Times advertisements breached the Trade Practices Act;
(ii): the "Regency Apartments" brochure breached the Act;
(iii): the Leader companies were acting as agent for Hilda; (iv) Hilda was liable for the conduct of the Leader companies; and
(v): the natural person respondents knew or ought to have known particular matters.

Counsel for the respondents took vigorous and, in my view, entirely justifiable objection to this statement. They raised the prospect of a motion to have the proceedings declassified as a representative one. In the event the applicants submitted to a series of directions (proposed by the respondents) designed to expose (i) the actual claims, and their factual foundation, of the other members of the group; and (ii) the matters of fact or law said to be common to the group.

On 4 July in partial compliance with the directions given the applicants abandoned any reliance upon the five matters referred to in the statement of 19 April. In their stead the common matters of law and fact were now claimed to be:

"1.

Whether the unit in each case:

(a): could not be lawfully used as a dwelling.
(b): could be lawfully used only as a serviced apartment.

2.

Whether the conduct of the first Respondent, and of the second or third Respondents (as the case may be), in the circumstances [these relating to the making of the unit use representation and being particularised earlier in this statement] constituted conduct in trade or commerce which was misleading and deceptive in contravention of s52Trade Practices Act1974."

One can only say that a major wind-change in the representative proceedings had occurred. It is appropriate to say that the manner in which this aspect of the proceedings has been conducted has required considerable forebearance on the respondents' part. I mention this as a relevant consideration in my refusal to allow a very late application to amend the pleadings to which I will refer below.

I will later return to the "common issue".

Pleadings and Particulars

It is a matter of no little importance to identify precisely the matters which have been both pleaded and actually relied upon before me, as constituting contraventions of the Trade Practices Act.I emphasise both "pleaded and relied" upon because some number of matters pleaded were abandoned before or during final address by counsel for the applicants. I would further note that, given the representative character of the proceeding, the Amended Statement of Claim refers to representations as to particular matters which do not constitute part of the Bowlers' case though they may well be part of that of other group members. These other representations have not been considered in these proceedings.

Turning to the Amended Statement of Claim I would note by way of preface that the designations "LRE" and "LH" refer to Leader Real Estate and Leader Holdings respectively. I would also note that the representations (and particulars thereof) to which I will refer in the pleading were agreed between the parties as being the only ones now being advanced in these proceedings.

Paragraphs 5 and 6 of the Amended Statement of Claim, insofar as is agreed remain presently relevant, provide that:

"5.

In the course of promoting the sale of the Regency Units, LRE and, or in the alternative, LH, represented to persons who were interested in purchasing a Regency Unit that

(a): the purchasers of units would receive income from their unit at least equal to 10% of the purchase price paid for up to 9 years from the date of completion of purchase;
(b): each unit could be lived in by the purchaser, rented out privately, or rented as serviced apartments, and were therefore an attractive re-sale proposition;

...

(referred to hereafter as "the Primary Representations")

6.

The Primary Representations were constituted by or are to be inferred from one or more representations made by LRE and, or in the alternative, LH to the following effect ("the Secondary Representations"):

As to Primary Representation (a)
(a): Income of at least 10% of the purchase price paid was guaranteed.
(b): The purchase of a Regency Unit was a good investment.; ...
(d): The father of the salesman had bought one of the Units.; ...; As to Primary Representation (b)
(j): That each Unit may be lived in, rented out privately, or rented to the management company which will sublet them as serviced apartments.

..."

It is then alleged that, in making these representations, LRE or alternatively, LH engaged in conduct in contravention of s52, s53(g) and s53A(1)(b) of the Trade Practices Act.

The Amended Statement of Claim goes on to provide in paragraphs 8 to 11 that:

"8.

Primary Representation (a) was contrary to Section 52 of the Act in that

(a): there were no reasonable grounds to believe that purchasers would receive income as claimed (and the applicant relies on Section 51A of the Act);
(b): the purchasers have not received income as claimed and are not likely to do so in the future.

9.

Secondary Representations (a) [(b) and (d)] were contrary to Section 52 of the Act in that

(i): Representations (a), ... (d) ... were false;
(ii): the opinions expressed in Representations (b) ... were not held, or were not based on reasonable grounds.

10.

Primary Representation (a) was contrary to Section 53(g) of the Act because the sublease did not have the effect of guaranteeing income at the rate claimed.

11.

Primary Representation (b) was contrary to Sections 52 and 53A(1)(b) of the Act because the Units can not lawfully be lived in or rented out privately but can only be used as serviced apartments."

In that part of the pleadings which refers to claims specific to the applicants (paragraph 18), the primary and secondary representations noted above were alleged to have been made "[a]t meetings between Neil Singh [a Leader employee] and the Applicants at their home and/or subsequently while inspecting a demonstration unit ...".

In answer to a request for particulars made by the Leader companies and Mr Whitcombe on 28 March 1995, the applicants indicated that the representations made at that meeting were both oral and written, the latter being contained in what I have called the "Regency Apartments brochure".

Insofar as the applicants have sought to affix liability to the three respondents who are natural persons, the pleading raises a claim of aiding, abetting, counselling or procuring the Leader contraventions, or of being knowingly concerned, directly or indirectly, in the contraventions. The claims, in other words, are based solely on s75B of the TP Act.

As to the claim made against Hilda in these proceedings, it is founded on the conduct of Leader Real Estate or, alternatively, Leader Holdings, as agent of Hilda in which it is deemed to have engaged by virtue of s84(2) of the TP Act.

Given the submissions that have been made in relation to the pleadings, it is appropriate at this point to note the following features of the pleadings.

First, the parties that are alleged by their own actions actually to have engaged in the conduct said to constitute the contraventions of the TP Act were Leader Real Estate and/or Leader Holdings, ie the Leader companies. All other respondents are sought to be made responsible for that conduct either because (in the case of Hilda) the conduct itself is deemed to be that respondent's conduct as well: s84(2); or because (in the case of the natural person respondents) the respondents have acted so as to become "accessories" to that conduct: s75B. The matter to be emphasised in this is that if neither of the Leader companies was guilty of contravening conduct, no possibility exists for a finding of liability against any of the other respondents.

Secondly, in relation to Hilda, I would emphasise that no case has been brought against it on account of its own conduct and in particular on account of its remaining silent when it may have had a duty of disclosure to the Bowlers. The complaint against Hilda is limited to complaint against the conduct of its agent which is deemed to be its own.

Thirdly, the contravening conduct is all alleged to have occurred during the meetings Mr Singh had with the Bowlers. The evidence has established these to have been on 22 and 23 July 1993. No complaint is made of the conduct of any of the respondents subsequent to these meetings.

Pleading issues

Counsel for the applicants conceded, as they were bound to, that such representations as may have been made in The Canberra Times advertisements relating to rental return were not pleaded as constituting contravening conduct. Nonetheless, these advertisements having been admitted into evidence (though subject to the objection noted below), it was submitted that the applicants' case had expanded so as to encompass the advertisements within the contravening conduct on which they could rely. In any event, in his address in reply, the then junior counsel for the applicant sought to amend the Amended Statement of Claim to add the advertisements as further secondary representations of the primary rental guarantee representation.

Neither the "expansion" submission nor the amendment application could or should be allowed. I should here briefly give my reasons in relation to both matters.

(i): It is the case that evidence of the advertisements was admitted early in the proceedings before me. I was then unprepared to rule that they were not relevant to any of the issues raised in the pleadings. Indeed the applicants have relied upon them to help make out their alleged s75B claims against Mr and Mrs McDonald.

Counsel for the Leader companies did, though, raise the objection on the first day of hearing that, whatever other relevance they may have, the advertisements were not pleaded or particularised as contravening conduct relied upon by the applicants.

This objection to the use of the advertisements was reiterated at the directions hearing on 26 April in response to the "List of Issues of Law or Fact Common to Group Members" filed by the applicants in consequence of the directions made on 3 April. Item 1 on that List was:

"1.

Whether the representations conveyed by the advertisements published in the Canberra Times were in breach of Sections 52 and/or 53(g) Trade Practices Act 1974, including

(a)

the representations which the advertisements were capable of conveying

(b)

whether the representations were representations as to present or future matters

(i): if as to future matters, whether reasonable grounds existed for the making of the representations

(c)

whether any of those representations were false."

Counsel for the Leader companies again noted in particular the deficiency in the pleadings in relation to the advertisement.

No application to amend the pleadings was then made to accommodate what, at this stage, was said to be a common issue in the group proceedings. In any event, at a further directions hearing on 4 July, the representations conveyed by the advertisements were abandoned as a common issue as I previously have noted.

No further reference was made to the advertisements in this regard until the address of counsel for the applicants when it was submitted they could be relied upon as constituting contravening conduct.

It is not possible, in my view, in the face both of the objections taken by counsel for the Leader companies and of the inaction of the legal advisers of the applicants consequent upon those objections, to conclude here that the parties have deliberately chosen a different basis for the determination of their respective rights and liabilities from that revealed in the pleadings: see generally Cummings v Lewis (1993) 41 FCR 559 at 577 ff per Cooper J and the cases referred to therein. The respondents were not asked to meet, and have not sought to meet, a case in which the advertisements were alleged to constitute contravening conduct. The submission to the contrary must fail.

(ii): It was only during counsel's address in reply and at the end of a case that covered eight days of hearing that application was made to further amend the Amended Statement of Claim. In light of the circumstances noted above, bearing in mind the manner in which the respondents have been led to conduct their case after they had made plain their position on the matter of the advertisements, and given more generally the difficulty to which they have already been put in defending these proceedings, I concluded that I would not entertain the proposed amendment: "[i]t was simply too late": Ting v Blanche (1993) 118 ALR 543 at 551 per Hill J.

Quite distinct from the above, counsel for the Leader companies submitted that, with the pleading relying on the proof provisions of s51A of the Trade Practices Act in relation to the rental return guarantee, but not the unit use representation, the applicants could not avail of that provision in establishing the falsity of the latter representation. Given (i) the state of authority on this particular pleading matter - see eg Cummings v Lewis (1993) 113 ALR 285 at 291-292; see also The Hon Mr Justice C D Steytler, "Misleading or Deceptive Conduct by Representations as to Future Matters or Conduct" in C Lockhart,Misleading or Deceptive Conduct, Federation Press 1996, 41-42; cf Heydon,Trade Practices Law, Vol 2, para 11, 180 (Law Book Co); (ii) that the representation itself is clearly with respect to a future matter and could not be thought otherwise; and (iii) the state of the evidence relating to the representation to which I will refer - I am content to assume without deciding that the applicants are here entitled to the benefit such as it is of s51A.

Finally, I should note that as a result of evidence that emerged at the hearing which indicated that the Bowlers and others had entered into subleases of their units, the respondents sought, and were granted, leave to amend their defences to raise new defences to the Amended Statement of Claim. Rather than adjourn the hearing to allow the applicants to amass the "additional substantial body of evidence" necessary to meet the amendments, I took the course of cordoning off the new defences raised in the present hearing and of deferring consideration of them, if such proved necessary, to any later hearing dealing with the grant of relief.

The Witnesses and the Evidence

Both Mr and Mrs Bowler gave oral evidence. Both were honest and intelligent witnesses. They are school teachers. They have had some prior experience both in purchasing, and in renting out, real estate. Mrs Bowler had a better recollection of matters of detail than her husband and where their evidence on such matters is inconsistent I have preferred hers unless otherwise indicated.

Because I reject aspects of their evidence I should make plain that I do not in any way impugn their truthfulness. They have in their recollection of matters placed emphases upon particular statements that, in their settings, these are unable to bear or else are nullified by other matters.

Additionally, the applicants called (i) a person to put into evidence The Canberra Times advertisements and (ii) three government officials. These last were called to provide evidence on the Crown lease and building control aspects of the applicants' case. The respondents I should note objected to the officials' oral evidence in its entirety as being irrelevant to any issue to be decided by me. Suffice it to say here, that the officials' evidence has proved to be of little significance given the view I have taken of these proceedings.

For the respondents' part some documentary, but no oral, evidence has been adduced. There have, in consequence, been predictable submissions directed at my drawing of inferences on a Jones v Dunkel (1959) 101 CLR 298 basis. I will refer to these as appropriate.

The Alleged Contravening Conduct

It is the applicants' case that all of the representations said to constitute contraventions of the TP Act were made during their meetings with Mr Singh. I should state that while there was some uncertainty in the evidence as to the precise dates of the meetings I am satisfied that they were held on 22 and 23 July 1993. Before considering the representations individually, it is appropriate to provide a little of the context of the meetings.

Mr Singh was previously known to the Bowlers. He had sold two houses for them. It was he who made the initial approach (by telephone) to the Bowlers, seeking to interest them in an investment property. On 22 July he went to their home. There, after discussing property investment options, borrowing and the servicing of loans he suggested that a more attractive proposition for the Bowlers than acquiring a rental property to be rented out by themselves, would be to invest in a serviced apartment property. He then drew their attention to the Regency Apartments.

I should interpolate at this stage that Mrs Bowler had some prior knowledge of this particular redevelopment. She saw advertisements for it in February or March of 1993 and then drove by it. At that time she decided she did not wish to invest in the apartments. I am further prepared to find that she saw at least one advertisement for Regency Apartments after the new May advertising began in The Canberra Times. However, there is no reliable evidence identifying the particular advertisement seen or its precise message in relation to rental return. As I have already held the accuracy or otherwise of the advertisements themselves is not an issue in this case. The sole relevance they presently seem to have is the appreciation they may have given Mrs Bowler that Regency Apartment units were still being marketed at the time of the Singh meeting. Insofar as Mr Bowler is concerned he seems only to have seen advertisements some time after the Singh meeting.

1. The Rental Guarantee Representation

There appears to be no real dispute between the parties as to the various statements made by Mr Singh, or conveyed to the Bowlers through the medium of the Regency Apartments brochure (the relevant sections of which have been quoted earlier in the chronology) which are said to make up this representation.

In the process of taking the Bowlers through the brochure Mr Singh said on a number of occasions that the "10 per cent return was guaranteed" or used language to similar effect. He spoke of the responsibility that the management company would have under the lease back arrangement and compared this with what the Bowlers would have if they did the renting themselves. He indicated that if management did not carry out its duties then "the bottom line" was that the Bowlers could rent out the unit or live in it themselves. Both Mr and Mrs Bowler accepted that the 10 per cent guarantee statements were made in association with Mr Singh's discussion of the brochure.

Apart from Mr Singh's oral statements, the applicants rely as well upon the brochure itself and particularly on the paragraphs (that I will repeat here) which were referable to Serviced Apartments:

"May be lived in, rented out privately, or rented to management company which will sublet them as serviced apartments. The management company will rent at 10% pa of purchase price. ie on $66,000, $550pm ($127pw), on $70,000, $583pm ($135pw), on $75,000, $625pm ($144pw) on $110,000, $917pm ($211pw), all paid per calendar month.

The applicants' submission in address was that they understood the 10 per cent rental guarantee representation to mean, not necessarily that some third party was to hold itself answerable to the Bowlers for the performance of the management company's obligation (as sub-lessee) to pay 10 per cent, but that an assurance was being given that the management company would be of such standing or would be so circumstanced as to be able to perform its obligations. It was then alleged that Leader had no reasonable grounds for making the representation.

This submission, which was made by leading counsel for the applicant (whose participation in the hearing only began after the Bowlers had given their evidence) was, I would have to say, not readily suggested by the tenor of the evidence that I heard the Bowlers give. Be this as it may, the submission itself cannot be sustained.

Viewed in the context of the brochure which was being elaborated upon at the time Mr Singh's oral statements were made, it is reasonable to conclude that those statements had, and should properly be taken as having, a nexus with the rental provisions referred to in the brochure itself.

However, it is not clear on the evidence before me whether the language used by Mr Singh in elaboration or explanation of the brochure was itself capable of creating in the Bowlers' minds some misconception about the signification of the statement contained in the brochure concerning rental return. What I am prepared to accept is that the Bowlers took away from the meeting the understanding that the rental return was being guaranteed in some way. As I will indicate in a moment, when they later consulted their solicitor, the "guarantee" was one of the first matters raised with her. Likewise, Mr Bowler's evidence was that he was `a little bit surprised` to learn from the solicitor that no personal guarantee was being given.

I further find that the conception the Bowlers appeared to have of the guarantee being offered - and this is most apparent in the explanations given particularly by Mrs Bowler in cross-examination - was that some third party must have been guaranteeing the rent. She suggested at one stage, for example, that Leader Real Estate or else its directors were providing the guarantee.

That conception is, of course, inconsistent with what actually is said in the brochure and Mrs Bowler conceded that she read the brochure carefully. I am nonetheless prepared to infer that whatever the words of the brochure might properly signify in isolation, Mr Singh's repeated reference to the 10 per cent return being guaranteed may well have created the misunderstanding under which the Bowlers laboured when they first consulted their solicitor, Ms Harris.

Before turning to subsequent events I should also indicate my view that the brochure standing alone is incapable of conveying to any reader the reasonable impression that a third party is guaranteeing a ten per cent return. Moreover, when one looks to the final sentence of the extract from the brochure quoted above, the term "guarantee" is used merely to set a floor below which the rental will not fall. I can find nothing in the brochure alone which is misleading and deceptive on this matter. What I do find is that in his explication of it Mr Singh probably created some misunderstanding in the Bowlers as to what in fact was being offered by way of rental return.

I now turn to the bearing of the events which occurred subsequent to the Singh meetings, noting that the inspection meeting on site on 23 July seems not to have had any particular significance in relation to the representation presently under consideration.

I would indicate at the outset that what transpired prior to the exchange of contracts on 24 August 1993 can lead only to the conclusion that, at exchange, the Bowlers were fully aware of their rights in the matter; they were not relying upon any such assurance as was suggested in the submission I earlier noted; and they assumed the risk that the management company which was to take the lease back might fail to meet its obligations.

It was Mrs Bowler's evidence that, after the meeting with Mr Singh, they did not then decide to purchase the unit. They engaged the services of Ms Harris for advice on the investment. Though there is uncertainty as to the precise number of times, they saw Ms Harris on three or four occasions (including at the exchange of contracts). It is clear both on Mrs Bowler's and Mr Bowler's evidence that Ms Harris' unequivocal advice was that no personal guarantee was being given by anyone. Indeed, as I have already noted, Mr Bowler testified it was "a little bit of a surprise" to learn this.

It equally is clear that they had a concern, first expressed to Mr Singh and later taken up with Ms Harris, as to what would be "the bottom line" if the management company failed. They asked Ms Harris to find out who the manager was to be as they knew their contract with Hilda allowed for the unilateral appointment of a nominee. They sought like information from Mr Singh. Mrs Bowler accepted that they wanted to make sure as best they could before they signed the contract that Hilda's nominee would be "good for the money".

In the event the contract was signed without that knowledge. I will refer below to the Bowlers' acceptance of the apparent risks being run. Mr Bowler seemed to accept in the end that under the contract their sole recourse was against the company if it failed to pay the rent. Mrs Bowler's evidence in the main did not quite go this far because she refused in cross-examination to accept that no guarantee was being given and reaffirmed her belief in re-examination that the contrary was the case. I do not regard that part of her evidence as at all persuasive. I should note, though, that at the end of cross-examination she acknowledged under pressure that it was correct that "the only remedies [they] would have would be against the company".

Both Mr and Mrs Bowler accepted in cross-examination that they were prepared to take the risk that the management company might be unsatisfactory. As Mr Bowler put it they were prepared so to do because of their fall back rights, ie they could live in or rent out - "so the risk was not monumental". For her part Mrs Bowler tied acceptance of the risk to the guarantee being there. There was, in fact, considerable evidence extracted in cross-examination on the risks assumed by the Bowlers. I can only conclude from it that it is inconsistent with the submission made on their behalf that they understood that an assurance was being given to them as to the character and circumstances of whatever company was nominated as manager and that they were relying on this.

In cross-examination Mr Bowler gave the following evidence of the bases of their decision to contract:

"[Mr Foster]

And you had indeed been interested in what might happen if the manager did not work out right from the start, had you not?--- We looked at what we thought were all the possibilities if it did not work out.

And you asked Mr Singh about that, did you not?--- We did.

Well, you did. I am talking about you?--- Okay, I did.

And you asked him something to the effect of, "What if it flops," did you not?--- Yes.

Were they your words, "What if it flops"?--- Yes.

And he told you in answer to that, that if the management failed you would have an option of employing new managers or running it yourself?--- Yes.

And you understood the latter comment to mean that you could rent it out yourselves?--- Yes.

And that was his response, was it not?- -- Yes.

And, of course, you were not entirely satisfied with those as possibilities, were you?--- No.

And that is why you pursued the question of who it was to be through Ms Harris and again through Mr Singh, was it not?--- Yes.

But, ultimately, you decided, did you not, that in your view this was such a good investment that you were prepared to take the entire risk that the management would not work out on yourselves, did you not?--- Could you just give us that question again please?

Yes. Ultimately, when you decided to actually go ahead with this transaction, you and your wife had formed the view that this was such a good investment that you were prepared to take the entire risk that the management would not work out on yourselves?--- We did but we had in mind the fact that serviced apartments were operating successfully already in Canberra, we saw no reason why this one should not operate successfully, giving its locality and the fact that it had been operating as a motel reasonably successfully.

And they were all, if I might call, commercial-type decisions discussed and reached by you and your wife after discussion between yourselves?--- Yes, and with Neil, those ones, yes.

And with?--- With Neil.

Really? You had not even got close to deciding to buy this unit, having spoken to Mr Singh, had you?--- No.

No. The most he did was introduce you to the possibility?--- He introduced it as an attractive possibility.

Yes, but you were not fooled by that, you went off to get your own advice, did you not?--- Well, you have to, yes.

And you did, did you not?--- Yes.

And that advice was that there were no personal guarantees?--- Yes.

And that advice was that your solicitor did not know who was to be the tenant?--- It appears to be correct, yes.

And you took some six weeks or five weeks to make up your mind about this matter in the light of the advice that Ms Harris was giving you, did you not?--- Yes.

And it was only after all of that, and in the circumstances I put to you, that you were prepared to go ahead, was it not?--- We looked at the serviced apartments at the International, we were very interested in those, they were out of our reach so we thought that this was the next best thing.

Do you mean by that last answer that you were actually looking at other possibilities during this period?--- Yes."

I am unable to arrive at any other conclusion than that, whatever their understanding of the position in relation to rental guarantee after their meeting with Mr Singh, by the time of exchange of contracts on 24 August (i) they were, as a result of Ms Harris' advice and their own understanding of the contract, left in no doubt that no third party was guaranteeing the rent; (ii) their sole rights of recourse were contractual and against the management company nominated by Hilda; (iii) they had no actual basis for making any assumption that the nominated manager would be of any financial worth - Mr Bowler conceded this; and (iv) as they felt their contractual protections were sufficient and the investment itself of sufficient potential, they were prepared to accept the risk of signing the contract without knowing the identity or for that matter the standing of the company to be nominated by Hilda.

Given these findings it is not open to find that such misunderstanding as to rental return as may have been engendered by Mr Singh's statements was either relied upon by them or was an inducement to them in their decision to contract with Hilda: cf Kabwand Pty Ltd v National Australia Bank Ltd (1989) 11 ATPR 40-950 at 50, 378. Such force as those statements may have had was long since spent. It had been nullified both by Ms Harris' advice and by their own independent appreciation and evaluation of the matter and its possible risks: cf McMahon v Pomeray Pty Ltd (1991) 13 ATPR para 41-125 at 52, 859.

Accordingly the claim based on Primary Representation (a) in the Amended Statement of Claim must fail.

(ii) The Representation as to Mr Singh's Father

The Bowler's gave evidence that Mr Singh made the statement at the 22 August meeting that his father "was buying" or "had bought" a unit. Despite the suggestion made by counsel for Leader that this representation was unclear because it could refer as well to a past as to an anticipated transaction, I am prepared to infer that it referred to a state of affairs in which the father is represented to have contracted to buy a unit.

Counsel for the applicants tendered two documents, the one from Hilda's solicitors to Leader Real Estate of April 19 1993 which says (in part):

"The following contracts are not proceeding.

...

Unit 58: Lakshman and Singh."

the other, a list of owners as at 26 August 1994 which does not include a Mr Singh.

From these two documents I am asked to conclude that, when made on 22 July 1993, the representation concerning the father was false in fact although there is no evidence as to what was the actual state of affairs on that date. There was some suggestion that I could use the failure to call Mr Singh to give evidence as justifying resort to a Jones v Dunkel inference for the purpose of reaching this conclusion.

The respondents have submitted that, with there being a number of available and proper ways open to the respondents to prove whether or not Mr Singh had a contract at the relevant time, I should not reach the conclusion suggested. Neither should I use the Jones v Dunkel inference to remedy a deficiency in the applicants' own proof which deficiency they could and should have remedied themselves.

Notwithstanding the respondents' submission, I am prepared to conclude that the representation made was false in fact when it was made. I consider the documentary evidence adequate enough to justify this. But that is not the end of the matter.

The respondents have gone on to submit that this particular representation (a) could not properly be characterised as "a material inducement" to action on the Bowlers part; and (b) was not relied upon, or was not shown to have been relied upon, by the Bowlers in any event.

Counsel for the applicants, while conceding there no express evidence of reliance on the statement, submitted that such evidence was not necessary but could be inferred as the representation was calculated to induce the Bowlers to enter into the contract which they did. This submission drew directly on the observations of Wilson J in Gould v Vaggelas (1985) 157 CLR 215 at 236 on "material representations" and "inducement". The inducing quality, if I can put it that way, of the instant representation is said to lie in the implication that it represented the investment to be so reliable that Mr Singh junior did not attempt to dissuade his own father from buying into it.

Mr Bowler made brief reference in his evidence to this representation but did not indicate that it had any influence at all upon the decision to contract.

In her evidence Mrs Bowler encapsulated in a composite statement the principal factors on which she relied in committing herself to the contract. The "father representation" was not one of these. She said:

"I liked the area that Regency Apartments were situated in. I felt that it was central and it was accessible to a lot of traffic. I liked the idea that it was a 10 per cent guarantee, and that we would only have to pay $30 a week. I liked the idea that we could live in it if we needed to, if the management situation didn't work out. I liked the idea that it was at the lower end of the market, so families always need places to stay and our unit was a one bedroom unit, which would allow for that. They were the main thought processes going through my mind."

I would have to say that I am not at all surprised at the omission of this particular representation from this list. Even if it was of sufficient moment to constitute some inducement to them to retain some interest in exploring the investment, I cannot, in light of the subsequent events to which I earlier referred and of the Bowlers' own appreciation and evaluation of the matter, do other than conclude that it was of no materiality to them at the time they took their contracting decision and was not relied upon by them. I am unprepared to find that it played some part in inducing them to enter the contract with Hilda: cf Metcalfe v NZI Securities Australia Ltd (1995) 17 ATPR 41-418 at 40, 672.

(iii) The Unit Use Representation

The substance of the representation said to constitute contravening conduct was that the units, other than units 1 to 19, "may be lived in, rented out privately, or rented to management company which will sublet them as serviced apartments". A representation in the terms quoted was made in the Regency Apartments brochure. It is not seriously disputed that at the 22 July meeting, Mr Singh probably made statements to similar effect.

It is the applicants' submission (i) that the units, other than numbers 1 to 19, could not be used for owner-residential purposes either because such use was contrary, first to the authorised lease purpose clause and, then, to the units plan covenants, or because the buildings which housed these units did not permit such occupancy; (ii) that the representation was false at the time it was made; (iii) that the Leader companies had no reasonable grounds for making the representation to the Bowlers at the time they made it; and (iv) whether or not they had such grounds, they nonetheless made a representation which was false.

There are, in fact, alternative submissions embodied in this. These are first, that the Leader companies made a representation of fact which was false at the time of its making; and, secondly, that even if not of present fact, the Leader companies had no reasonable grounds for making the representation they made. In either event it is said they, hence Hilda, are liable to the applicants.

It needs again to be emphasised that it is the actual conduct of the Leader companies alone which is alleged to constitute the contravening conduct. Hilda's alleged responsibility arises not from any separate conduct of its own but because of the conduct of the Leader companies that is deemed to be its own: see TP Act, s84(2).

It was not seriously argued that the unit use representation as such was not one with respect to a future matter. At the time of its making, the application for a lease purpose variation had not been determined, let alone had a Units Plan been registered. The representation was that a particular state of affairs would exist in the future in relation to the units. Not surprisingly, the agreement for sale the Bowlers signed on 24 August 1993 was itself a conditional one.

Having this character, that the representation proved in the event to be false did not of itself make it misleading or deceptive for Trade Practices Act purposes: see James v ANZ Banking Group Ltd (1986) 64 ALR 347.

It is the case, though, that a representation relating to a future matter may contain an implied representation as to a present fact: see James v ANZ Banking Group Ltd above at 372. But in a case such as this, when it is sought to marry a representation of present fact to one as to a future matter, it is necessary to identify the conditions for such a marriage to occur.

(1): If it was Hilda that had made the actual unit use representation relied upon, then, to the extent that securing that use depended upon Hilda's taking steps necessary to bring about that use (whether or not third party approvals etc were also required), the representation could as well be said to embody an implied representation that Hilda's present intention was to take those steps: see Bell v Australasian Recyclers (WA) Pty Ltd (1986) 8 ATPR 40-644 at 47,220. No such representation has been pleaded against Hilda: cf para 13 of the Amended Statement of Claim where, in relation to alleged contravening conduct not pursued in these proceedings, it is alleged that, though a particular state of affairs was promised, Hilda had no intention of performing the promise.

As I have already indicated, the only contravening conduct pleaded as to unit use was the conduct of the Leader companies. Such responsibility as Hilda had in the matter was for the Leader conduct and for nothing more.

(2): Turning to the actual representors, the Leader companies, their representation as to the unit use could also properly be said to have an implied representation married to it. But unlike in Hilda's case, that representation ordinarily would, in a case such as this, be one of present belief or opinion, ie that the Leader companies were reasonably of the view that Hilda would take the steps within its power necessary to bring about the represented state of affairs: cf Miba Pty Ltd v Nescor Industries Group Pty Ltd, Federal Court of Australia, 17 September 1996, Merkel J unreported. In circumstances such as the present, it would have been entirely appropriate to find such an implied representation had been made. The estate agents, in assuming responsibility for the marketing of these units, were in some degree lending their own name and repute to the integrity of the redevelopment project itself and were inviting reliance upon this: cf John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) 15 ATPR 41-249.

Again I would note that no such statement of belief or opinion relating to the realisation of the project has been pleaded against the Leader companies. This, probably, is of no particular consequence. As I earlier noted, the unit use representation itself must be taken as relating to a future matter - notwithstanding that, as formulated, it seemingly refers to a present state of affairs: cf para 11 of the Amended Statement of Claim with paras 8, 12 and 13. In either case (ie opinion or future matter) one necessarily is concerned in circumstances such as these with the grounds of, or basis for, the opinion or representation.

If then, the matter is looked at simply from the standpoint of the Leader companies, one is confronted with a quite separate question from that which would have been raised were the unit use representation made by Hilda directly. That question is whether the Leader companies had reasonable grounds for making the unit use representation they did: see Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193 at 242.

I should add that, despite the difficulties they had with the pleadings, the respondents seem to have accepted that this issue did arise in relation to the unit use representations. For want of its pleading, though, they contested the applicability of the TP Act s 51A to those representations. I will return to this below.

(3): The applicants did not rely primarily on either of the above, though (2) seems to have been adopted late in their submissions as an alternative to their principal submission which involved an amalgam of the two. It is this. If Hilda had no intention at the time of the Leader unit use representation to take the steps necessary to make that representation good, then that representation was false at the time of its making. They then go on to say that awareness by the Leader companies of Hilda's intention - and hence of the falsity of their representation - is not a necessary element required to establish their liability. If they are to escape liability for this representation, they would need to have made it apparent to the applicants that they were not the source of it and that they expressly or impliedly disclaimed any belief in its truth or falsity, merely passing it on for what it was worth: see Yorke v Lucas (1985) 158 CLR 661 at 666.

If the unit representation was one as to an existing state of affairs and was false, then the conclusion noted above would be unassailable: see Yorke v Lucas, above. But the unit use representation as such was not such a representation. It was one as to a future state of affairs. What would make it a representation as to a present fact - and one which would falsify the express future representation - would be an implied but false representation by Hilda as to its present intention to bring about the represented state of affairs. In other words it would be Hilda's own conduct in making (or, for that matter, in knowingly allowing an agent to make a representation inconsistent with) the implied representation that would give rise to the contravening conduct.

As the pleadings stand in the present matter no such implied representation by, and no such conduct in, Hilda has been alleged. For that reason alone I would reject the submission advanced by the applicants. But there is a more fundamental objection to it.

It doubtless is appropriate for a principal to be held responsible for representations made by an agent as to future matters that the principal knows to be false at the time of their making. It is by no means equally appropriate, in my view, for the agent to be held responsible for those representations where it has reasonable grounds for making them and has been deceived into making them by the failure of the principal to disclose the true state of affairs to it. I can see no reason either in principle or in the policy of the TP Act that would warrant or require the conduct of the agent to be impugned in such circumstances. There is something distinctly unpalatable in so contriving an agent's liability for predictions and opinions as to future matters.

In the absence of authority to the contrary binding upon me, I am not prepared so to hold. In saying this I reject the foundation of the principal submission advanced by the applicants for imposing liability on the Leader companies, hence on Hilda, for the unit use representation.

Given the distinction I have drawn between principal and agent, I should again emphasise that the only presently relevant conduct alleged to have been engaged in by Hilda was the Leader conduct which the TP Act s84(2) deemed to be Hilda's. There is no pleaded basis for treating Hilda differently from the Leader companies.

The alternative approach advanced by the applicants in their written submissions - though not in their pleadings - and then somewhat obliquely, was that the Leader companies did not have reasonable grounds for making the unit use representation they did.

Notwithstanding the state of the pleadings (including the late amendment to the defence of the Leader companies and Mr Whitcombe), the respondents have conducted their defence - and have made submissions accordingly - on the basis that the unit use representation was one as to a future matter. In these circumstances it is appropriate to deal with this issue.

I should indicate that, notwithstanding the respondents' submission to the contrary, I am prepared to assume as I have earlier indicated that the TP Act, s51A applies to this particular representation despite the lack of pleading of it. It is unnecessary to set out the provisions of that section. I merely note that it provides that a corporation that makes a representation as to a future matter will be deemed not to have had reasonable grounds for making it - and the representation will be taken to be misleading - unless the corporation adduces evidence to the contrary.

The sole issue to be determined is, then, whether the Leader companies have adduced evidence that they did have reasonable grounds for making the representation. If they have, and if that evidence in its setting so satisfies me on the balance of probabilities, then the question of whether or not the representation proves later to be incorrect does not arise for determination. Neither does any question as to the possible liability of any other of the respondents. Their potential liability presupposes liability in one or other or both of the Leader companies.

To set both the "reasonable grounds" issue and the submissions made on it in context, it is necessary to add several more details to the chronology already given.

(a): The exclusive agency agreement of 26 February 1993 that appointed Leader Real Estate to effect sales of the proposed Regency Apartments refurbishment imposed on Hilda (inter alia) the obligation (cl 2(c)):

"To keep [LRE] informed of any changes to marketing details as to plans, government approvals, completion times etc."

Leader's remuneration under the agreement was by way of commission on sales.

(b): The annual returns of Hilda for 1991, 1992 and 1993 that were filed with the Australian Securities Commission revealed over the period a sharp decline in the financial position of the company. In the 1991 return the shareholders' equity in the company (there were two issued shares) was put at $230,164 and the after tax operating profit at $34,227. By the 1993 return, the shareholders' equity was put as the negative sum of $463,106 and the after tax net loss was $488,365.
(c): In mid-May 1993 the nature of the refurbishment proposal and with it Leader's advertising underwent a change. Nineteen units were to be sold as residential only, the remainder as serviced apartments. With this change those who had previously purchased units that were now available as part of the serviced apartments proposal were, seemingly, required to pay a higher price if they wished to avail of the lease back arrangement.
(d): As is evident from some number of business records both of the Leader companies and of Hilda's solicitors that were tendered by the applicants, Leader through its employees (but particularly a Mr Peter Hughes) was quite actively involved in making recommendations concerning both the redevelopment project and the configuration of project plans from the time of the agency agreement up to and including that of the representations impugned in these proceedings. There seems also to have been a reasonable level of Leader communication with Hilda's solicitors during the same period.

The kernel of the applicants' case was that there was no intention on the part of Hilda that two of the three buildings housing the Regency Apartments were to be used for "residential apartments" when the representation was made to the Bowlers in July 1993, their unit being in one of those two buildings. The applicants go on to submit that the Leader companies were then cognisant of Hilda's intention and hence were without reasonable grounds for making the representation.

I should add when counsel was asked whether he was now raising fraud against Leader, he indicated he was not seeking so to do. But he nonetheless seems ultimately to have accepted that he was making a grave allegation against both Hilda (as to its then intention) and the Leader companies (as to their then knowledge).

Put shortly, the applicants' allegations are that (i) as and from the meeting Mr Ryman had with officers of the ACT Planning Authority in mid-April, Hilda knew that it would only receive the Authority's support for the construction of nineteen residential units; (ii) it later amended its lease purpose variation application (in the Ryman letter of 7 July 1993) so as to seek "a maximum of 19 residential units" for the development; (iii) the building plans it submitted for approval in September 1993 were consistent with residential occupancy for the building housing the nineteen units alone and not for the other two buildings; (iv) the new lease issued on 18 November 1993, while having a purpose clause allowing the land to be used "for residential units and serviced apartments", contained as well the covenant:

"SINGLE UNIT DWELLINGS

(d)

That the buildings on the said land shall contain a maximum of nineteen one bedroom residential units and forty two serviced apartments;"

(v): the Unit Plans contained a like covenant; (vi) notwithstanding the terms of the exclusive agency agreement, the Leader companies particularly through Mr Hughes were closely involved with Mr Ryman and a Mr Dowling (the architect) in the practical working out of the redevelopment proposal; (vii) as the agenda of a meeting between Mr Mcdonald, Mr Hughes and Mr Ryman on 2 September 1993 is said to suggest, all three companies were alleged to be aware they had a problem with persons who had purchased serviced apartments for live-in purposes; and (viii) the units sold as serviced apartments could not be used by owners for their own residential purposes either because this was contrary to the covenants of the Unit Plan or because the buildings housing the units were not approved for such use.

Essentially from this - and with no little reliance on the Jones v Dunkel (1959) 101 CLR 298 inference, given that no witnesses were called by the respondents - I am asked to infer, first, that by 22/23 July 1993, Hilda had no intention of securing a state of affairs which would allow the unit use representation to be made good and, secondly, that Leader was at that time aware that such was Hilda's attitude.

It is suggested that Hilda's financial desperation at the time accounted for its allowing the advertising to proceed notwithstanding the falsity of it and that Leader was prepared to go along with this because its return only came from commission on units sold.

Not surprisingly, given the substance (though not the form) of the applicants' case, the respondents have submitted, in the manner of Briginshaw v Briginshaw (1938) 60 CLR 336, that I should require "clear or cogent or strict proof" of the intention attributed to Hilda and of the Leader companies' alleged awareness of this: see also Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 at 450. While they contest both the allegations made above (or else the significance of some of them) as also the inference I am asked to draw, they deny that there is evidence here of such "strength" as is necessary to establish the intention and the awareness of it claimed by the applicants.

As I will indicate, it is in fact unnecessary for me to make a positive finding as to Hilda's intention at the relevant time. Nonetheless, it should be said that the respondents' submission is entirely appropriate given the gravity of the actual allegations made against the corporate respondents.

It is important to reiterate the precise issue I am being called upon to resolve. It is whether the Leader companies had reasonable grounds for making the unit use representation they did at the time they did. I refer to the matter of time for this reason. It is no part of the applicants' pleaded case that matters came subsequently to the attention of the Leader companies that then required the correction or withdrawal of their original representation: cf Jones v Dumbrell [1981] VR 199.

The case made by the Leader companies as to the grounds of their unit use representation relied in part on evidence adduced by the applicants and in part on several documents they tendered. That case can be put in the following way.

(i): As noted above, cl 2(c) of the agreement appointing Leader Real Estate as agent for sale of the Regency units obliged Hilda to keep Leader informed "of any changes to marketing details" as to plans, approvals, etc.
(ii): Notwithstanding that the Leader companies were engaged in the estate agency business, the issue of permitted unit use in a case such as this involved complex questions of planning law for which it was proper and appropriate for them to rely upon the advice of Hilda's legal advisers.
(iii): The change in the project scheme from residential units only to a mix of residential only units and serviced apartments occurred in mid-May 1993 - although it should be noted that as early as 10 March 1993 a Leader company had independently suggested a possible marketing strategy involving a mix of residential units and serviced apartments: Ex 31, A4.
(iv): Shortly before that change was to be advertised Leader, through Peter Hughes, sent a facsimile to Hilda's solicitors on 17 May 1993 of a version of what became the Regency Apartments brochure. That version made the same separation of units into residential only and serviced apartments and contained the same representations as to unit use as were contained in the Regency Apartments brochure. The covering page of the facsimile contained (inter alia) the following message:

"This is the proposed hand out information re: serviced apartments. Can you check that it is accurate."

I would note that there was no recorded reply to this facsimile, but I would further note that in other matters, but not unit use, the Regency Apartments brochure varies from the faxed version.

(v): On 20 May 1993, Mr Hughes again sent another facsimile to Hilda's solicitors with a copy to Mr Ryman who was at the time still acting as Hilda's agent (inter alia) in relation to obtaining the necessary lease purpose clause variation. The message sent was:

"Copy of information, plans, inclusions re serviced apartments to be released this Saturday."

Such attachments as there may have been to this document have not been tendered.

The two facsimiles to which I have referred constitute the evidence adduced by Leader - though not the only evidence relied upon as I have noted - in support of its representation.

Before turning to the case put by the Leader companies it is appropriate to make the following observations about the two facsimiles. (a) Both were in the form of photocopies and were discovered by the Leader companies as part of their business records. (b) No objection was taken to the authenticity of the documents: cf Federal Court Rules, O18 r3. (c) Objection was taken to their tender but I was prepared to infer that the documents were copies of business records and as such were admissible under the Evidence Act 1995: see sections 183, 69 and 48(1)(e); see also Rakic v VHY Pty Ltd, NSW Court of Appeal, 23 September 1983. (d) There was no documentary evidence before me of the actual transmission of these facsimiles. (e) A considerable number of like discovered photocopy facsimiles from Leader business records were tendered by the applicants including the second of the two photocopies tendered by the Leader companies: see Ex 31, A13, A14, A16, A17, A18, A19, A28 and A33. (f) Leading Counsel for the applicants relied upon this sequence of Leader photocopy facsimiles to illustrate (inter alia) both the level of communication between, and the close working relationship of, the Leader companies and Hilda. (g) As with the two photocopy facsimiles tendered by the Leader companies, there was no evidence before me of their actual transmission. (h) I am prepared to infer that these Exhibit 31 photocopies were of actual communications to the persons to whom they were addressed and I understood the applicants to be inviting such an inference be drawn. (i) I see no reason to treat the two Leader photocopies any differently in this respect - one in any event is part of Exhibit 31 - and accordingly I infer that they were copies of facsimiles actually transmitted to Hilda's solicitors.

The case put by the Leader companies is this. Against the background of Hilda's obligation under the agency agreement and given the change in the project to a more complex arrangement of unit use, a document that contained the unit use representation was sent to Hilda's solicitors for verification - and, I would add, two months before that representation was made to the Bowlers. Given its known purpose, the Leader companies were entitled to rely upon it (ie were entitled to assume it was correct) in the absence of any indication to the contrary from the solicitors. The later facsimile is relied upon to indicate communication (i) with Hilda's solicitors on matters relating to the very subject of Hilda's obligation to Leader Real Estate under the agency agreement and (ii) before the brochure was put into use in circumstances in which, if there were any errors in representations made, a correction would have been expected.

In addition to the submissions made on Hilda's intention and Leader awareness of this, the applicants' response to the Leader submissions was that, in the absence of proof of receipt of, and reply to, the facsimile of 17 May 1993 by Hilda's solicitors, the Leader companies could not say they had reasonable grounds for believing that their brochure had received the imprimatur of Hilda's legal advisers. The best that could be said is that the Leader companies had an honest belief as to the accuracy of their representation and this is not enough: cf Cummings v Lewis (1993) 113 ALR 285 at 292.

I deal separately below with, and reject, the applicants' submissions on the Leader companies alleged awareness of the false intention Hilda was claimed to have. That matter, then, proving not to be relevant to the reasonable grounds issue, I can here indicate that I am in broad agreement with the Leader respondents' submissions outlined above.

The two facsimiles sent by the Leader companies carry a significant part of the burden of the Leader case. The context in which they were sent was of some real importance in my view. First, given the contractual obligation of Hilda to inform Leader Real Estate of "any changes to marketing details as to plans, government approvals ... etc", Leader was reasonably entitled to expect communication from or on behalf of, Hilda if in fact the mid-May scheme change effected a radical limitation on the residential use of about two thirds of the units to be sold. I cannot discern in the evidence before me any matter or circumstance affecting the relationship of Hilda and the Leader companies that would qualify or nullify that entitlement.

Secondly, there was apparently regular facsimile communication between Mr Hughes and Hilda's solicitors especially in the period immediately preceding the initial marketing of the serviced apartments: see Exhibit 31, A13, A16, A17, A18 tendered by the applicants.

Given these contextual matters, and given the known change to the redevelopment scheme that was being put into effect in late May and in which Hilda's solicitors clearly had some involvement: see Exhibit 31, A16 and A18; it was not unreasonable in my view for the Leader companies to have proceeded on the assumption that the unit use representation was approved by the solicitors in the absence of any indication to the contrary. I am prepared to infer that they so acted. I conclude, then, that the Leader companies had reasonable grounds in the circumstances for the unit use representations they made. In saying this I necessarily reject the applicants' submission in response that the Leader companies needed to prove receipt of, and reply to, the facsimile of 17 May. It is, in my view, inconsistent with the expectations the Leader companies could properly have, and the obligations Hilda owed, in the matter.

For the sake of completeness I should add that I do not regard the agenda to the meeting that occurred between Mr McDonald, Mr Ryman and Mr Hughes on 2 September 1993, or events which occurred thereafter as assisting in any way in answering the reasonable grounds question. At best they invite speculation.

Turning finally to the applicants' allegations, first, against Hilda as to its intention and, then, against the Leader companies concerning their awareness of that alleged intention. I have already set out in skeletal form the matters upon which the applicants appear to rely to support their claims.

To have any effect at all in these proceedings it would be necessary for it to be proved (i) that by 22 or 23 July Hilda had formed the intention not to take the steps within its power that were necessary to make good the unit use representation; and (ii) that the Leader companies were aware of this at that stage. It would not be sufficient to show that that intention was later formed even if then known to the Leader companies.

I would have to say that this submission came as no little surprise to me when made in final address. Even if I were to assume that Hilda had the alleged intention at the time of the Leader representation - and I make no finding to that effect - there is not evidence here of such cogency as would even distantly justify my drawing the inference that, on the balance of probabilities, the Leader companies knew or, for that matter, had reason to know that such was Hilda's intention: on the "had reason to know" formula see Restatement of Agency, Seconds9, comment d - although I should emphasise that the only case put was one of actual knowledge.

Counsel for the applicant has relied upon the documents contained in Exhibit 31 to suggest that Leader had a "close working involvement" with Hilda and Hilda's agents in the actual implementation of Hilda's project. Equally counsel pointed to the distinction between the 19 residential only units and the 42 serviced apartments that originated in the April meeting between officers of the ACT Planning Authority and Mr Ryman acting on Hilda's behalf, which distinction, it was said, was reflected thereafter in the course taken by Hilda in relation to the two groups of units - as witness, it is said, the Building Plans submitted in September for buildings B and C which housed almost all of the serviced apartments and which were unsuited, so it was alleged, for use as residential dwellings. Essentially from the "close working relationship" and from the 19 residential only - 42 serviced apartments distinction, I am being asked to infer Leader's awareness in July that Hilda did not intend to make good the unit use representation.

What is being asked for is speculation not inference. At bottom the allegation seems to invite little more than a finding of guilt by association. The improbability of what is submitted is exaggerated by the response made by counsel to a question I posed when counsel suggested that Leader in its "sales spiel" was representing the exact opposite of what it knew would be the case with the serviced apartments. I asked whether this conduct was not so extraordinary as to lead one to question whether it was what the Leader companies were in fact doing. The only explanation that counsel could advance was that, having committed significant time to the project, Leader was prepared to participate in this serious wrongdoing so as to obtain a return for its efforts. I find this to be quite implausible.

The applicants in their submissions have placed predictable reliance on the Jones v Dunkel inference in the absence of any witnesses being called by the respondents. Of present relevance they have pointed in particular to the failure to call Mr Ryman and Mr Dowling for Hilda and Mr Hughes for the Leader companies. Because of the nature of their respective involvements in the project, it was said that their evidence was critical to establishing the reasonable grounds for the Leader companies' representations.

As is well accepted the Jones v Dunkel inference cannot be invoked to fill gaps in a party's evidence or to convert conjecture and suspicion into inference: see Cross on Evidence (Aust ed) para 1215 and the cases referred to therein at fn 12; see also the observations of Kirby P in SS Pharmaceutical Co Ltd v Qantas Airways Ltd[1991] 1 Lloyds LR 288 at 305.

The Leader companies have chosen to substantiate the grounds for their representation in a particular way. They were entitled so to do. The allegation raised against them of their awareness of Hilda's intention could at best only be made out on the basis of inference. In my view that allegation lacks any resonance, or possible foundation, in the evidence before me. It is incapable of justifying any evidentiary requirement that the companies explain such evidence as the applicants seek to rely on to suggest that they had the awareness alleged. There is, simply, no evidence which could justify drawing an inference that the companies were so aware, Jones v Dunkel notwithstanding.

It has, in my view, involved considerable latitude on my part to allow the applicants to ventilate the intention/awareness issue in the manner they have. This notwithstanding, it has not been made out that Leader had that awareness. Accordingly I reject the submissions predicated upon such a finding.

In the end then I am unable to find that, as pleaded, the making of the unit use representation involved a contravention of the TP Act, s52 or, for that matter, s53A(1)(b).

Additional Matters

During address counsel agreed the primary and secondary representations referred to in the pleadings that were to remain alive in these proceedings. I have already dealt with three of these - the rental guarantee; the representation as to Mr Singh's father; and the unit use representation.

Additionally junior counsel for the applicants continued to press the representation in para 6(b) that:

"The purchase of a Regency Unit was a good investment."

It seems to have been accepted that when translated into the claims specific to the Bowlers this representation, as Mr Arthur suggested, assumed the form of the para 18(3)(b) statement of Mr Singh that:

"a Regency Unit was a better investment than a unit which they would have to rent out themselves;"

No written submission of the applicants addressed this representation. The only apparent reference made to it in oral submissions was by counsel for the Leader companies and this for the purpose of indicating that even if made, there was no evidence at all about whether the comparison contained in it was "right, wrong or anything else".

While there is some evidence that a statement having elements of that referred to in para 18(3)(b) was made to the Bowlers by Mr Singh, in the absence both of address by the applicants on the matter and of any indication at all that it was relied upon in any way by the Bowlers, I am unprepared to conclude either that it constituted contravening conduct or that, if it did, it could expose the respondents to liability to the Bowlers. What I said about reliance in relation to the representation concerning Mr Singh's father applies with like force to this one.

Conclusions

I have rejected all of the claims made which would establish liability in the Leader companies, and thus Hilda, on account of the oral and written representations made to the Bowlers at the meetings on 22 and 23 July 1993.

In consequence of this the claims made against the natural person respondents, which all are based on the accessorial liability provisions of s75B of the TPA simply do not arise for consideration.

I have made sufficient comment on the effect the pleadings have had in limiting and contriving how I have been required to consider this matter. I refrain from further comment here.

There is, though, a final matter which requires mention. This, as I noted at the outset, is a representative proceeding. As it finally emerged at the 4 July directions hearing, the common issues in the representative proceedings related to the permitted lawful use of the units.

On the view I have taken of the Bowler's application, the issue of permitted lawful use does not arise for determination and I have not made any finding on it. Notwithstanding that it is claimed to be an issue common to the claims of all the group members, I have no reasonable basis for concluding that it will arise for determination in proceedings brought by any other of the group members.

At the close of the hearing of this matter I raised with counsel the possibility of my reaching a conclusion which did not require that I determine the falsity or otherwise of the unit use representation. Despite the written submissions I allowed the applicants to put in subsequently, and notwithstanding the lengthy arguments put on the question, I decline to express a view on the representation. I do not consider it appropriate to provide what may be no more than an advisory opinion on a matter which, as in the Bowlers' case, may be of no legal consequence at all as between other group members and the respondents and which will be of no legal consequence as against the Commonwealth.

While I will dismiss the application insofar as it is specific to the claims of the Bowlers, I will invite submissions on the form my judgment should take in light of these reasons and of the provisions of s33ZB of the Federal Court of Australia Act 1976: cf Zhang v Minister for Immigration (1993) 45 FCR 384 at 399-406.

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