Home Page | Cases | Butcher v Lachlan Elder Realty

Butcher v Lachlan Elder Realty Pty Ltd

High Court of Australia [2004] HCA 60

Overview

Mr Butcher and Ms Radford (a couple - the appellants) purchased a property in Sydney for $1.36m.

Prior to auction appellants were given brochure by estate agent (respondent) including pictures and survey diagram. It also included a disclaimer (on both sides) in small print stating:

All information contained herein is gathered from sources we deem to be reliable. However we cannot guarantee it's [sic] accuracy and interested persons should rely on their own enquiries.

The survey document on the brochure showed the pool as being within the boundaries of the property ('above the mean high water mark'). This was important to the appellants because they wanted to move the pool and could do so only if it was within the boundaries of the freehold property. Mr Butcher also visisted the property with the agent prior to the auction - it became apparent during that visit that Mr Butcher wanted to move the pool and could do so only if it was within the relevant boundaries.

After purchasing the property the appellants discovered the pool was not entirely within the boundaries and could not be moved; they would not have bid for the land had they known this.

At issue before the High Court case was whether the agent/respondent was liable for misleading and deceptive conduct.

The trial judge and court of appeal all held that there was no misleading or deceptive conduct.

The majority in the High Court agreed, finding that a reasonable purchaser would have read the full document (including disclaimer) and it would have been plain to a reasonable purchaser that the agent was not the source of the misleading information and did not purport to do anything but pass on information supplied by others.

Justices McHugh and Kirby, in separate judgments, dissented. Neither considered the disclaimer sufficient to escape liability under s 52.

Document exchange

 

Facts

Mr Butcher and Ms Radford (a couple - the appellants) purchased a property in Sydney for $1.36m - intended as an investment. They paid $200,000 of a total $272,000 payable as a deposit.

Prior to auction appellants were given brochure by estate agent (respondent) including pictures and survey diagram and a disclaimer. On the property was a pool, which the appellants wanted to move around to open up space for entertaining. The diagram suggested a swimming pool was 'above the mean high water mark', which meant it was within the boundaries of the freehold property and could be 'moved'.

The disclaimer, which appeared on both sides of the brochure, stated:

All information contained herein is gathered from sources we deem to be reliable. However we cannot guarantee it's [sic] accuracy and interested persons should rely on their own enquiries. Williams Design Associates ph (02) 9905 7372

In addition to reading the brochure, Mr Butcher visited the property with the estate agent (Mr Elder), an architectural designer and a builder; they advised the pool could be moved if it did not go beyond the mean high water mark.

It transpired that the swimming pool was not entirely above the mean high water mark and therefore could not be moved; the trial judge found the appellants would not have bid for the land had they known this.

At issue before the High Court case was whether the agent/respondent was liable for misleading and deceptive conduct. The plaintiffs had claimed that they had engaged in such conduct with respect to the location of the mean high water mark and swimming pool by:

  • distributing and endorsing the brochure
  • failing to 'verify or resile from the information in the brochure' (para 167 trial judgment)

Action against the vendor

The appellants commenced proceedings against the vendor, alleging fraudulent misrepresentation, innocent misrepresentation and misleading or deceptive conduct. Subsequently, the failed to pay the balance of the deposit ($72,000) when due and the vendor purported to terminate and claim the deposit of $272,000. The purchasers alleged the termination was invalid and the vendor had repudiated the contract - the purchaser and vendor subsequently treated the contract as no longer 'on foot' (para 19 HCA).

Separately, the trial judge considered the claim against the vendor, concluding the vendor had made an innocent misrepresentation by authorising the brochure, but the conduct was not misleading in contravention of the Fair Trading Act 1987 because it did not take place in trade or commerce; the vendor was ordered to repay the deposit that had been paid, with interest.

This action was also appealed to the Court of Appeal and was dismissed (other than to alter orders in relation to costs)

Held

No misleading or deceptive conduct

Trial judge (Austin J)

There was no misleading or deceptive conduct by the agent because of the disclaimers at the bottom of each side of the brochure.

For misleading conduct the relevant provisions at the time were s 52 of the Trade Practices Act 1974 and s 42 of the Fair Trading Act (NSW).

The trial judge focused on the 'class of persons' likely to be affected by the conduct (para 165) and considered that in this case:

'... the class of persons likely to be affected is the class of potential home buyers for Pittwater waterfront properties in a price range in excess of $1 million ... As home buyers in that price range, they can be expected to have access to legal advice. They are a small class (the evidence that only 100 colour brochures were prepared supports this). The Court should test the effect of the defendant's conduct on a reasonable member of the identified class ...'

In relation to the representation made by the agents, the trial judge held that the effect of the brochure (as it related to the high water mark and swimming pool) was to say to prospective purchasers:

'Here is a diagram showing that the mean high water mark is located beyond the swimming pool. It is a diagram provided to us from a source that we believe to be reliable. However, we cannot vouch for the accuracy of what is shown in the diagram, and if the matter interests you, you should rely on your own inquiries.' [para 169]

His Honour further concluded:

In my opinion, the class of potential purchasers of waterfront homes in a price bracket above $1 million, independently advised by their own solicitors, would be unlikely to be misled by the brochure read as a whole, including the two propositions set out above ... [para 170]

Apart from the brochure the trial judge did not consider that there was any evidence that the agent had made any other representations with respect to the high water mark and that, in fact, there was evidence Mr Elder had warned Mr Butcher that the proposal to move the pool may encroach the high water mark (para 172).

Court of Appeal

Justice Handley

The agents were merely passing on information - the did not claim expertise and the brochure itself indicated it was the work of another that they did not endorse.

Despite acknowledging the disclaimers, his Honour did not consider them decisive.

The agent’s brochure carried disclaimers in fine print at the foot of the front and back pages, but I would not accord these decisive significance on the present question. They are however relevant as showing that the agents did not accept responsibility for the accuracy of the information in the brochure. [para 46]

The agent did not make any representation as to accuracy of the survey diagram - although they would be:

'... impliedly representing that they had an honest, or perhaps honest and reasonable, belief that the copies were genuine and recorded the surveyor's opinion on the matters disclosed ... [t]hey would also impliedly represent their belief that the report and diagram were accurate ... but I see no good reason why they would intend to represent that it was in fact accurate, or why the recipients would think that the agents were making any such representation. ...

Justice Beazley

Agreed with Justice Handley

Justice Hodgson

Agreed with Justice Handley

High Court

Gleeson CJ, Hayne and Heydon JJ

After discussing the dispute and decisions in lower courts, their Honours considered the representations alleged to have been made (from para 36):

The relevant class

On the issue of the relevant class, their Honours considered that class could be analysed in two ways:

  • members of a class to which the conduct is directed generally;
  • identifiable individuals considered apart from any class they might fall within.

Their Honours noted the first was common when remedies other than damages (or other remedies specific to an individual) are concerned, but considered it inappropriate where monetary relief is sought by a plaintiff alleging a representation was made to identifiable people, including the plaintiff.

[37] [H]ere, it is necessary to consider the character of the particular conduct of the particular agent in relation to the particular purchasers, bearing in mind what matters of fact each knew about the other as a result of the nature of their dealings and the conversations between them, or which each may be taken to have known. Indeed, counsel for the purchasers conceded that the mere fact that a person had engaged in the conduct of supplying a document containing misleading information did not mean that that person had engaged in misleading conduct: it was crucial to examine the role of the person in question.

The relevant principles

Their Honours then considered the relevant principles, first referring to External linkYorke v Lucas where the majority said that a corporation could contravene s 52 even though acting honestly and reasonably, but this:

[38] ... does not ... mean that a corporation which purports to do no more than pass on information supplied by another must nevertheless be engaging in misleading or deceptive conduct if the information turns out to be false. If the circumstances are such as to make it apparent that the corporation is not the source of the information and that it expressly or impliedly disclaims any belief in its truth or falsity, merely passing it on for what it is worth, we very much doubt that the corporation can properly be said to be itself engaging in conduct that is misleading or deceptive.

Applied here it is necessary to look at the agent's conduct has a whole. Their Honours did not consider that, taking this approach, the agent had engaged in misleading conduct toward the purchaser (para 40). The agent merely communicated 'what the vendor was representing, without adopting it or endorsing it.' (para 40)

The nature of the parties

Their Honours also considered the nature of the parties, describing them in the following way:

  • the purchasers were a company director and his de facto wife, who were already quite wealthy and aspired to become wealthier 'by means of complex property and financial details'. They were 'intelligent, shrewed and self-reliant' and no doubt appeared to be to the agent (para 41)
  • the agent was a suburban real estate with a small staff. Suburban real estates, they considered, did not hold themselves out as possessing the skills or means to independently verify the title details of properties they sell (para 42)

The character of the transaction

The transaction involved purchase of a 'very expensive property' to be used as an investment. The purchasers engaged professionals to assist - an accountant, solicitors, an architectural designer and building consultant and a licensed builder (para 45).

Contents of the brochure

The diagram on the back of the brochure was a survey diagram and 'Mr Butcher appreciated that it was a survey diagram' (para 47). It was also clear that it had not been made by the agent and that the agent had not adopted the diagram or verified its accuracy.

Their Honours then considered the disclaimers on the front and back of the brochure. They noted (it appeared with some scepticism) that Mr Butcher said he did not notice the disclaimers and there was no evidence in appeals papers that he noticed them. Nevertheless, they considered that while the disclaimers were in small type,

'the brochure was a short document, there was very little written on it, and the disclaimers were there to be read. Only persons of very poor eyesight would find them illegible, and there is no evidence that the eyesight of Mr Butcher ... was in any way defective' (para 49)

Their Honours considered that while the Court of Appeal declined to accord the disclaimers 'decisive significance', they were in fact of 'some significance' because if the conduct of the agent is 'what a reasonable person in the position of the purchasers, taking into account what they knew, would make of the agent's behaviour, reasonable purchasers would have read the whole document ... ' (para 50)

Here, the brochure, read as a whole, meant:

The diagram records what a particular surveyor found on a survey in 1980. We are not surveyors. We did not do the survey. We did not engage any surveyor to do the survey. We believe the vendor and the surveyor are reliable, but we cannot guarantee the accuracy of the information they have provided. Whatever you rely on, you must rely on your own inquiries. (para 50)

It would, as a result, have been plain to a 'reasonable purchaser' that the agent was not the 'source of the information which was said to be misleading' and they 'did not purport to do anything more than pass on information supplied by another or others'.

[The brochure] both expressly and implicitly disclaimed any belief in the truth or falsity of that information. It did not more than state a belief in the reliability of the sources ... (para 51)

Their Honours then considered several specific contentions of the purchasers and the 'extreme' consequences of those arguments before considering authorities relied upon by the purchasers.

The authorities

Their Honours considered a number of authorities regarding disclaimers and misleading conduct claims. However they observed that those authorities did not say that disclaimers cannot make clear who is the author of the misleading conduct and, in particular, they distinguished the case of External linkJohn G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd [1993] FCA 431, which also involved a real estate agent and a disclaimer. Their Honours noted in that case that the real estate agent held itself out as 'consultants to institutional investors and to developers of major properties' and that the information relied on related to a matter of 'hard physical fact' essential to the profitability of the building. In addition, it appeared the figure had been calculated by the agent and was not merely being passed on.

Their Honours distinguished a number of other cases.

Appropriate level of analysis

The purchasers submitted that 'it was wrong to analyse the structure and language of the brochure too minutely' (para 76). Their Honours accepted that the appropriate level of analysis may vary between cases, so that in some cases a 'more impressionistic analysis' might be appropriate. But in this case the purchasers had the brochure for 12 days before auction, relied on it when instructing professional advisors and 'were embarking on a very serious venture'. In those circumstances it was appropriate to look closely at the contents of the brochure 'before deciding whether the agent had made a representation'.

Justice McHugh (dissenting)

Justice McHugh set out the facts in the case and continued. His Honour noted that section 52 was 'capable of flexible application and should be construed accordingly' - this 'gives effect to the consumer protection objectives that underpin Pt V' (para 97).

In relation to the words 'engage in conduct' appearing in the section, his Honour noted that s 52 prohibits 'conduct' that is misleading or deceptive and the Act defines both 'conduct' and 'engaging in conduct' in s 4(2). His Honour referenced those provisions, noting that s 4(2) provides that engaging in conduct includes refraining to engage in conduct, but contains one important limitation on the meaning of conduct - it excludes inadvertent refraining from doing an act'. 'Section 4(2) requires actual knowledge for a failure to disclose to be actionable'. (para 101)

His Honour noted that there were two significant aspects to the expression 'engage in conduct' in this context:

  • it is not confined to 'representations'; and
  • it 'requires the court to examine the impugned conduct as a whole, not in isolated parts' (para 102)

His Honour noted that the question of whether conduct is misleading or deceptive or likely to mislead or deceive is a question of fact and that it is an objective question to be determined by looking at the evidence as a whole and not isolated parts of the conduct. His Honour considered that the Court of Appeal had erred by finding that conduct is not misleading or deceptive unless it contained or conveyed a representation.

Misleading or deceptive conduct

His Honour noted that:

'Conduct is misleading or deceptive if it induces or is capable of inducing error' (para 111)

It does not cease to be misleading simply because a person subjected to the conduct could have discovered the truth through proper inquiry:

'Conduct that objectively leads one into error is misleading' (para 111)

It is also not necessary to demonstrate a person was actually deceived (the words 'likely to mislead or deceive' make this clear). The section establishes a 'norm of conduct' and failure to observe that norm has consequences (para 112).

Liability for disseminating third party information

It is possible to contravene s 52 by passing on 'erroneous information supplied by a third party' (para 113). Two factors are important (para 115):

  • 'whether the corporation assumed responsibility for or adopted (or endorsed or used its name in association with) the information so that it would be reasonable for a recipient to rely on the information; and
  • whether the corporation disclaimed any belief in the truth or falsity of the information or disclaimed any personal responsibility for what it conveyed.'

His Honour discussed a number of case authorities relating to passing on information and then stated that the courts have held that there are three situations in which a corporation will not contravene s 52 when passing on erroneous information (para 123, footnotes omitted):

  1. where the circumstances make it apparent that the corporation is not the source of the information and that it expressly or impliedly disclaims any belief in its truth or falsity and is merely passing on the information for what it is worth;
  2. where the corporation, while believing the information, expressly or impliedly disclaims personal responsibility for what it conveys, for example, by disclaiming personal knowledge; and
  3. where the corporation, while believing the information, ensures that its name is not used in association with the information.

A corporation acting as a 'mere conduit' for information will normally not be taken to have engaged in misleading conduct (para 124).

Lachlan Elder engaged in conduct that was misleading

After discussing how the Supreme Court and Court of Appeal treated Lachlan Elder's conduct in this case, his Honour explained why he considered they did engage in misleading conduct.

[128] In the courts below, the case turned on the nature of the "representation". However, the issue is whether the conduct of Lachlan Elder was misleading or deceptive or was likely to mislead or deceive, having regard to all the circumstances of the case. They included but were not limited to the representations Lachlan Elder made, its actions (and inaction or silence) and the impression conveyed by its conduct. The phrase that best describes the relevant conduct of Lachlan Elder is "selling the Rednal Street property". In determining whether a breach of s 52 occurred, all that Lachlan Elder did in relation to the sale is relevant. Hence, the presence of and participation in the inspections of Lachlan Elder's staff, their knowledge of the purpose of the inspections and the conversations at those inspections as well as the distribution and content of the brochure must be considered. To focus on whether a representation was made and the content of the representation diverts attention from the substantive issue, that is, whether in all the circumstances Lachlan Elder engaged in misleading or deceptive conduct or conduct that was likely to mislead or deceive.

 

Considering the conduct as a whole, his Honour considered its likely impact on a relevant class of persons: 'reasonable potential purchasers of waterfront properties in the price range of over $1 million'. These potential purchasers would have access to legal advice and would be aware that it was not a part of the agent's function to obtain or verify survey plans (para 129). Nevertheless, this case:

... falls within the category of a corporation not being the source of the information and believing in its accuracy but not expressly or impliedly disclaiming personal responsibility for what it conveys. [para 130]

His Honour considered the fact the survey was included in a brochure for marketing purposes was very important:

[131] That Lachlan Elder incorporated the survey diagram in a brochure prepared for marketing purposes is a matter of great importance. The irresistible conclusion is that Lachlan Elder did so because it would influence potential purchasers to purchase the property. The importance that Lachlan Elder gave to the survey diagram is emphasised by its place in the brochure: the top right hand side of the second page.

...

[131] ... the reproduction of the diagram in the brochure does not identify the author of the survey diagram, an omission that suggests that Lachlan Elder had adopted the diagram as its own. ...

[135] Thus, while a potential purchaser would be likely to conclude that the diagram was a reproduction of a survey identification report and that Lachlan Elder had not prepared it, a potential purchaser could not have identified the author of the survey diagram. At the least, the omission of the identity of the surveyor in a marketing brochure prepared by Lachlan Elder was likely to induce a potential purchaser to believe that that corporation was asserting that the details of the diagram were accurately stated.

In addition, his Honour held that what happened later, at the inspection, was 'of cardinal importance':

[138] ... Mr Elder was present at a conversation that showed that the purchasers were intending to move the pool and were relying on the accuracy of the survey diagram to do so. On that occasion, Mr Gillmer, the architectural designer retained by the purchasers, advised Mr Butcher that the idea of "moving" the pool was feasible, based on the position of the high water mark indicated by Mr Butcher, in reliance on the diagram in the brochure. Mr Elder was sceptical about the proposal because he thought the plan would be expensive and that the pool would encroach on the mean high water mark. But everything he said was premised on the pool being within the boundary of the freehold land. ...

[139] The conduct of Mr Elder at the inspection on 14 February 1997 and the conduct of Lachlan Elder in distributing the brochure were significant factors in inducing the purchasers to buy the property. Lachlan Elder not only distributed a brochure containing an inaccurate survey diagram but at the inspection it did nothing to correct the misapprehension under which the purchasers laboured. It is not to the point that Lachlan Elder was unaware that the survey diagram was inaccurate. Section 52 looks at the conduct of a corporation and is concerned only with whether that conduct misled or was likely to mislead a consumer. It is not concerned with the mental state of the corporation. [footnotes omitted]

His Honour concluded Lachlan Elder's conduct was likely to mislead purchasers (para 140)

[140] Lachlan Elder put out a brochure containing an incorrect survey diagram in a context that suggested that it had adopted the survey diagram as its own. It knew of the purchasers' intention to relocate the swimming pool. It knew that its subsequent conduct in continuing to "endorse" the brochure was likely to induce the purchasers to buy the property because they believed that they would be able to move the pool to a location within the freehold boundary. Its conduct led the purchasers into error and was, therefore, conduct that was misleading or deceptive [footnote omitted]

In addition, his Honour considered that potential purchasers would be unlikely to regard a specialist in selling prestige properties as merely 'passing on information' but rather it was reasonable to expect they would rely on the accuracy of the information.

[144] Lachlan Elder did not hold itself out as a professional surveyor or conveyancer or as having particular surveying or conveyancing expertise. However, it did hold itself out as a specialist for the sale of prestige properties in the Pittwater area and was in fact an experienced selling agent of properties in that area. In these circumstances potential purchasers of such properties would be unlikely to regard the agent as merely passing on information about the Rednal Street property, including the location of the swimming pool, "for what it is worth and without any belief in its truth or falsity". It is reasonable to expect potential purchasers, even potential purchasers advised by solicitors, to rely on the accuracy of a survey diagram reproduced in a promotional brochure for the sale of a property.

 

The disclaimer

His Honour then went on to consider the disclaimer in more detail. His Honour noted that where a corporation expressly or impliedly disclaims belief in the truth or falsity of the information or 'disclaims personal responsibility for what it conveys' this may preclude a finding of contravention of s 52 (para 150). The presence of a disclaimer is particularly important where it is alleged the conduct induced a contract, because the remedy sought requires that damage be demonstrated. His Honour set out the following principles [para 150]:

  1. The complainant must rely on the representation or conduct.
  2. If a material representation is made (or if certain conduct occurs) which is calculated to induce the complainant to enter into a contract and that person in fact enters into the contract, an inference arises that the person was induced to do so by the representation or the conduct.
  3. The inference may be rebutted by showing, for example, that the complainant, before entering into the contract, had actual knowledge of the true facts and knew them to be true or that the complainant did not rely on the representation or the conduct.
  4. The representation or conduct need not be the sole inducement. It is sufficient that it played some part, even if only a minor part, in contributing to the formation of the contract.

 

His Honour then noted that intention is not relevant for purposes of s 52 so a disclaimer as to truth will not, by itself, 'absolve the corporation from liability'(para 151), but that does not mean a disclaimer should be ignored, because conduct must be considered as whole (para 152).

[152] If a disclaimer clause has the effect of erasing whatever is misleading in the conduct, the clause will be effective, not by any independent force of its own, but by actually modifying the conduct. However, a formal disclaimer would have this effect only in rare cases. ...

[158] ... If misleading conduct has induced a contract, that fact cannot be negated by the mere circumstance that there is a statement to the contrary ...

The disclaimer in the present case was not sufficient to 'allow Lachlan Elder to disclaim personal responsibility for the information conveyed by the inclusion of the survey diagram.' (para 160). In all the circumstances of the case, the 'disclaimer did not operate to obliterate the effect of Lachlan Elder's misleading or deceptive conduct ... once misleading or deceptive conduct is shown, the Act prevails over the disclaimer. ...' (para 160).

Justice McHugh would have allowed the appeal.

Justice Kirby (dissenting)

Justice Kirby concluded error had been shown with the decision in the court below and the appeal should be allowed. His Honour did not hide his displeasure at the outcome preferred by the majority:

[165] Once again, this Court gives the Act, with its large purposes of consumer protection and regulation of corporate conduct in Australia, an unduly narrow construction. That construction is warranted neither by the language of the Act, nor by the stated objects of the Parliament, nor by past authority. [footnote omitted]

A corporation engages in "conduct that is misleading"

Justice Kirby set out the 'simple facts' of this case, noting the respondent prepared and gave to the appellants a one-sheet promotional pamphlet depicting the boundaries of the property as being well clear of a swimming pool. In fact is was not and ran through the swimming pool.

The appellants had made known that the location of the boundary was important because it wanted to relocate the pool. It would not have entered into the contract had it known the true boundary location. It suffered loss and damage as a result of having done so. 'That loss and damaged flowed from the "conduct" of the respondent" in distributing the pamphlet and that conduct was "misleading or deceptive or ... likely to mislead or deceive" (para 167).

His Honour rejected the contention that the disclaimer was sufficient to exempt the appellants from liability under the Act (para 168).

The facts, legislation and decisional history

His Honour ran through the facts (largely adopting the same description as the joint reasons) and then noted that he took a different approach to the majority about the operation of the legislation:

[172] At the heart of the difference between my reasons and those of the majority lies a different conception of the intended operation of the provisions of the Act invoked in this case. If, in a transaction such as was entered into between the parties, liability under the Act may be escaped in circumstances such as these (and particularly by reliance on a printed disclaimer of the kind involved in this case) this Court might just as well fold up the Act and put it away so far as dealings between real estate agents and purchasers are concerned. By similar printed disclaimers, such agents and others like them will walk straight out of the operation of the Act in many and varied circumstances.

[173] Neither the printed disclaimers nor the other circumstances the agent relies upon, permits it to avoid the Act. Adopting such a view of the Act would not only be contrary to its proclaimed objectives. It would also be destructive of the beneficial operation of the Act in requiring corporations, engaged in trade and commerce in Australia, to desist from conduct that is misleading or deceptive or likely to mislead or deceive.

Justice Kirby went on to consider the 'large purposes of the Act' observing that s 52 sets 'standards for corporate behaviour, care and responsibility.' (para 174)

[174] Disclaimers there can be. But, if they are to be effective, the language of the Act, legal authority and legal principle suggest that they must be made much more clearly than those invoked here were.

[175] Tiny printed disclaimers and inferences to be implied from the facts would not ordinarily have the effect of exempting a corporation from the regime established by the Act. The interpretation now adopted reduces the Act to a paltry thing of little real protection for the multitude of persons whom the Parliament intended to protect. It is inappropriate for this Court to send a signal to the industry of corporate real estate agents, and other industries, that they can avoid the requirements of the Act by the simple expedient of publishing disclaimers illegible to many eyes and easily overlooked. It is no answer to the operation of the Act that those who suffer damage by "conduct that is misleading" can be expected to get their own solicitors and surveyors to advise them. In many cases, they can. But the Act takes effect first and independently of that entitlement. It imposes duties and liabilities. In this case, those duties and liabilities applied to the agent and were contravened.

Response to the agent's arguments

His Honour then considered the agent's arguments, drawing again on the purpose of the Act. Justice Kirby noted that absence of deliberate deception was not relevant to the claim under s 52. His Honour also expressly agrees with Justice McHugh (and the majority on this point) that conduct in s 52 is not limited to 'representations' - that 'conduct' is a broader word that was deliberately chosen to give the Act wide application (para 179).

However, even if it was confined to representations, his Honour considered that the agent's conduct was 'unarguably "misleading"'. The preparation and distribution of the brochure with information about the boundary that proved to be incorrect was 'conduct that is misleading'.

The supposed contextual exemptions

His Honour was not convinced by the arguments that 'found favour with the majority' and which enabled the agent to 'escape what seems to be a fairly clear case' of misleading conduct (para 181). It is worth extracting his Honour's reasons in full:

[182] First, it is suggested that the agent did no more than to convey representations to the purchasers concerning the Rednal land that were being made by the vendor. I cannot accept this interpretation of the facts. It would impermissibly erode the operation of the Act which, by its terms, applies to corporations for their own conduct. The agent chose to convey the representations that it did. For that conduct, it must accept accountability measured against the requirements of the Act. Others may indeed be liable ... But the Act is addressed to the "conduct" of corporations. Corporations must conform to its requirements. If they engage in "misleading" conduct, it is no excuse that others may have done so too. The primary judge specifically found that the agent's pamphlet conveyed a representation as to the location of the pool wholly within the freehold and that the vendor's conduct in that respect was misleading or deceptive.

[183] This was not a case where the agent was merely passing on information supplied by another within the words used by this Court in Yorke v Lucas. Nor was it a case where the agent was simply passing on the information "for what it is worth". ... Here, in a unique dealing, the agent was performing the corporation's precise function, namely promoting the sale of the subject land to purchasers and describing that land. The agent did not have to include in its pamphlet the diagram showing the boundary line designated by the mean high-water mark. Having done so, it was obliged to accept the legal consequences. Clearly, its conduct occurred in the performance of its professional activity as a corporate real estate agent. Moreover, it acted as it did for its own economic advantage. It stood to gain the agent's fee for the sale of the property. The more attractive it could make the property seem, the more likely was it to succeed in effecting a sale.

[184] Self-evidently the agent would have known that the position of the boundary line of the land abutting the Pittwater was likely to be important to a purchaser. The property had advantages. These were shown to excellent effect in the pamphlet prepared by the agent. The large photograph of the deep waterfrontage of the land, viewed from the water, was the dominant image of the pamphlet, and understandably so. That was the property's chief selling point. However, the property also had an obvious defect. This was the very high development-to-land ratio. Most of the subject land was taken up by the three developments shown in the diagram. They were an extremely large garage, the "brick house" residence and the swimming pool. This left a relatively small area between the "brick house" and the Pittwater available for use by a purchaser for living and entertainment purposes. The limits of the availability of the land for such purposes were fixed by the line shown on the deposited plan constituted by the mean high-water mark. As the agent would well have known, that line was therefore of great significance to potential buyers. It indicated the extremity of the land available for redevelopment by a purchaser.

[185] Moreover, whereas the boundary line indicated in the diagram would have been of importance to virtually every purchaser, it was (as the agent knew) of special importance to the appellants. Mr Butcher made clear the importance of securing a larger open space for entertainment and that a redesign of the position of the pool would be necessary. He did this in a conversation with Mr Elder, a director and principal of the agent. ...

[186] The only available inference therefore is that Mr Elder, for the agent, affirmed the correctness of the survey diagram by his response to Mr Butcher's plans to reposition the swimming pool. Certainly, he said nothing to indicate any doubts concerning the description in the diagram of the position of the mean high-water mark and the boundary that it apparently signified.

[187] It follows that this was not a case of immaterial "puffery" about a property for sale by a real estate agent, as might sometimes appear innocently enough in a promotional pamphlet. It was a representation of a very important detail concerning the subject property. Important for virtually every purchaser of such a valuable piece of land. Specially important for the appellants because they had made that fact known to the agent.

[footnotes omitted]

Justice Kirby also rejected the argument that 'personal characteristics of the parties' in some way exempted the agent:

[188] ... the facts that Mr Butcher had at one stage enjoyed a high profile as a former professional football player, was a successful businessman, had decided with Ms Radford to engage in a venture of prudent investment in real estate or was intelligent, shrewd and selfreliant are all ultimately irrelevant considerations. It may be true that the Act is vigilant to protect the weak, the impressionable and the vulnerable. But there is nothing in its language, or purpose, to exclude from its protection, in a proper case, domestic partners who rely on the printed material of a real estate agent when proceeding to purchase a significant parcel of land.

[189] Throughout Australia it is not at all uncommon for individuals and couples to endeavour to improve their economic position by acquiring, and ultimately reselling, valuable parcels of real property. To exclude from the protections of the Act those who do so, because they are investors or shrewd and so forth is as irrelevant to the language and purpose of the Act as to exclude them because they were once professional footballers. The Act is a law of general application. It focuses on the conduct of corporations. None of the personal considerations nominated in this case, to exclude the purchasers from the Act's protection, is in the slightest convincing.

[footnotes omitted]

Justice Kirby also rejected as irrelevant the 'extreme consequences' referred to by the majority for imposing liability for representations conveyed in pamphlets.

[197] ... This court's function is to resolve questions before it. We are deflected when we needlessly resort to hypotheticals not relevant to the question in issue.

 

The written disclaimers are ineffective

Justice Kirby then considered the disclaimers in detail, expressly disagreeing with the approach adopted by the courts below and by the majority.

The disclaimers tiny typeface

His Honour first pointed to the 'tiny' typeface used, when contrasted against the very large typeface used elsewhere in the document. He considered that a 'youth with 20/20 vision could possibly read the disclaimers without undue difficulty' but he did not imagine an 'ordinary adult' could without 'some form of magnification' (para 201).

Viewing disclaimers in context

His Honour noted that the cover of the pamphlet comprised a 'large and arresting photograph' of the property along with other attractive photographs. The print size of most text was large, clear and easy to read 'without the need for magnification' (para 202).

[203] In such a context, the typeface used for the printed disclaimers suggests (and I think was intended to suggest) that the ordinary person reading the pamphlet did not need to bother with information so insignificant that it could be reproduced in such a typeface.

Presentation of the disclaimers

His Honour noted that that impression (that one need not bother to read the small print) was reinforced by the position of the disclaimers - both appearing 'below the line'. Presentationally, his Honour found, 'these disclaimers do not appear as true communications to the readers of the pamphlet. They are placed symbolically outside the sphere of such communication' (para 205).

No oral reinforcement of disclaimers

Justice Kirby noted that when given the pamphlet by an employee of the appellant, Mr Butcher was told that it contained all the details for the property - 'everything you need to know'. Save for the disclaimer no indication of doubt concerning the boundary line was given (para 209).

[211] By holding that the printed disclaimer in this pamphlet was effective to exclude liability under the Act, this Court, in my respectful view, strikes a blow at the Act's intended operation. Henceforth, in effect, the Act may not operate to protect the ordinary recipient of the representations of corporations engaged in trade or commerce. Many such corporations will be encouraged by this decision to believe that they can avoid the burdens of the Act by the simple expedient of tucking away in an obscure place in minuscule typeface a disclaimer such as now proves effective. This approach is contrary to the language and purpose of the Parliament.

The trend of authority on disclaimers

His Honour noted this the approach he preferred was consistent with the way intermediate courts have considered disclaimers. This was considered unsurprising:

[213] The Act generally sets its face against contractual exemptions. Yet this, in effect, is what a printed disclaimer seeks to secure. To treat the disclaimers in the present case as effective is difficult to reconcile with the high national and economic purposes of the Act. At the very least, if a disclaimer is propounded to exempt a corporation engaged in trade or commerce in Australia from the important obligations of the Act, it is reasonable to demand that this be done clearly, emphatically and so as reasonably to impinge on the consciousness of persons who thereby lose protections enacted by the Parliament for their benefit.

[footnotes omitted]

His Honour compared the disclaimer here to those that had failed in other cases - finding the one relied on here to be less 'ample' or 'prominent' as others that had failed.

Disclaimers and commercial reality

His Honour noted that self-interest often inclines parties to try to limit warnings to 'seduce consumers with attractive communications, unembarrassed by messages of restraint' and it is important that the court insist that, to be effective, disclaimers be 'clear, detailed and prominent'. That was not the case here (para 216).

[217] For centuries, lawyers have lamented the disinclination of their clients to read the fine print of documents. For a long time they have realised that it usually takes binding obligations of professional duty, a peculiar turn of mind and strong spectacles to combine in that result. Whatever they should do in theory, ordinary people cannot be converted to reading hidden messages contained in tiny print. It requires a large measure of judicial self-deception to say that the purchasers should have read the written disclaimers invoked here. The decisions of the judges below in this case are out of line with the general approach of intermediate courts with larger experience in the application of the Act.

[footnotes omitted]

Expert commentary

His Honour referred to expert commentary which he considered supported his conclusion.