Case: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44 ; (1982) 149 CLR 191
Outcome: followed
argued that the applicants' case was built on an illusion created with the benefit of hindsight and self-serving assertions. The fact that the brochure conveyed confidence in the prospects of the development, Austcorp argued, did not mean that there was a high level of assurance that the project and the resort would succeed. I reject that argument. The words of the brochure were calculated to convey assurance. The admissions by Austcorp that that was the purpose of using the words of the brochure, of a 7% net guaranteed return for 10 years, namely that it was the "sure thing" referred to in Coudert Bros' letter to the Commission in August 1999 make it clear beyond doubt that the power of this message was realised and deliberate. Of course, liability under s 52 does not depend on the intention of the corporation which engages in the conduct: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44 ; (1982) 149 CLR 191 at 197. Mr Chappell gave this evidence: "And you knew at the time that the company Mustara Holdings was not offering any guarantee. Correct? --- It was through the lease they were proposing to enter into with the investor for a 10 year period. [...] Which was the whole basis of the offer. Mr Chappell, do you own any rental property? --- Not at the moment. You have in the past? --- I have, yes. And you've rented it out to people? --- I have. And if they enter into a lease that doesn't guarantee you payment of the rent, does it? --- It doesn't. There are certain obligations under the lease which they enter into, the lessee and the lessor, which you can rely on depending on the person. That doesn't guarantee you payment of the rent under the lease, does it? --- Well, no, it's not guaranteed. No, and the promise to pay under the lease, well, as I think you would accept, depends on the lessee's ability to pay from time to time? --- Correct. And the lessee might fall on hard times? --- Yes, it could. The lessee might encounter unforeseen circumstances? --- It may. And that might affect its ability to pay? --- Correct. And the lessee may simply walk away and choose not to pay? --- It's possible, yes. And if it does whether or not you get your payments depends on the financial position of the lessee? --- That's true. .... You're not suggesting seriously to his Honour, are you, that the mere fact of entry into a lease with a tenant involves a guarantee of payment of rent under the lease? --- No. Thank you, and you knew therefore that Mustara as the lessee under the proposed leases wasn't guaranteeing payment of the rent under the lease? --- It wasn't guaranteeing it, no. ..... Pacific International Hotels Pty Limited was not guaranteeing payment of the rent at seven per cent net return per annum for 10 years? --- No. HIS HONOUR: When you say 'No' you are agreeing with Dr Bell? --- I'm agreeing that it didn't." I am satisfied that the brochure achieved, objectively and in the subjective minds of each of the applicants who gave evidence before me, the purpose of instilling in them the belief that the rent would be paid as a "sure thing" [See 3. below]. However, I am also satisfied that the applicants' were worldly enough to realise that no-one would be able to give them a guarantee against the vicissitudes of the marketplace. No-one for example could have predicted the shocking events of 11 September 2001, or other economic events which might affect the Australian or international economies generally. It would be quite unreasonable for anyone to believe that a promoter of a resort hotel project in the Central Coast of New South Wales would be able to predict the outcome of the world economy over the succeeding 10 years and given assurance that nothing could happen which might so impact on the operations of the hotel that rent would not in any circumstances cease to be paid at the guaranteed rate. As Gibbs CJ said in Puxu 149 CLR at 199 (see also Campomar (2000) 202 CLR at 85 [102]-[103] per Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ): "The heavy burdens which [s 52] create cannot have been intended to be imposed for the benefit of persons who fail to take reasonable care of their own interests. What is reasonable will of course depend on all the circumstances." Austcorp argued that the nexus was, in effect, broken because the contract was a legal document which set out with considerable precision and at length the actual relationship that would exist if a person entered into the contract and the lease. For example, it argued that it was not reasonable for a person in the position of Ms Tan-Bounkeua not to have had a solicitor advising her and that, had she done so, the solicitor would have broken the chain of causation, even if he or she negligently failed to advise the purchaser of the provisions of cl 20.9 or the existence of Mustara. I discuss this specific issue below [See 2.18]. Gibbs CJ observed in Puxu [1982] HCA 44 ; 149 CLR 191 at 199 that the Act did not impose burdens which operated for the benefit of persons who failed to take reasonable care of their own interests: see too Campomar 202 CLR at 85 [102]. While I accept that a careful solicitor ought to have picked up the significance of cl 20.9 of the lease, the evidence before me indicates that solicitors did not always do so. Indeed, Austcorp recommended that Mr Walker distribute to purchasers the memorandum prepared by Penhryn Parker, solicitors, identifying the significant features of the transaction. That memorandum in itself did not pick up the limitation in cl 20.9. Nor did Mr Owers' solicitor pick it up. While Mr Fullerton, who advised the Luciani/Taldarmar applicants did pick it up, I am satisfied that by failing to advert in the brochure itself to any limitation of confidence by those promoting the venture such as is contained in cl 20.9, should sound against Austcorp where solicitors for purchasers or the purchasers themselves did not pick this up. After all, Austcorp set the misleading representations in motion. It cannot simply rely upon the overstatements in the brochure to be corrected where they were seriously made and used as powerful marketing tools by it in preparing the brochure with the knowledge that they had that affect. And as Mason J observed in Puxu 149 CLR at 210-211 in a passage applied by Jacobson and Bennett JJ in National Exchange Pty Ltd v Australian Securities and Investments Commission [2004] FCAFC 90 ; (2004) 61 IPR 420 at 437 [52] - [53] (a case where the communication was made in a letter of offer to individual shareholders in a company): "There may be situations where to exploit the mistaken views of the public would contravene s 52 and would not be corrected by an inconspicuous accurate representation e.g. in a concealed label or the 'fine print' of a contract ." (emphasis added) Austcorp attacked the claim by Ms Tan-Bounkeau. It contended that no-one would think that advertisements, brochures or the other promotional material would contain terms or representations that could be relied on as the basis of a serious investment in real property. It argued that she had failed to take reasonable care of her own interests relying on Puxu 149 CLR at 199 per Gibbs CJ and Poulet Frais 220 ALR at 233 [107] per Branson, Nicholson and Jacobson JJ. I reject that submission. Austcorp, the author of the false descriptions of the investment, should not be able to say that its representations could not be taken at face value. It had made misleading and deceptive representations of a guaranteed 7% p.a. return relying on the perception of the investors that "Pacific International Hotels" was the lessee. Yet, Austcorp was conscious that cl 20.9 of the lease made a fundamental qualification to this assertion and that its marketing message would have been far less compelling if accurate information had been conveyed about cl 20.9. The assurance of a return would have been undermined if Austcorp had complied with s 52. Potential investors, including Ms Tan-Bounkeua, would have been less enthusiastic had the promotional material revealed that the only promoter offering any long term financial commitment to an investor, Pacific International Hotels, was not prepared to back its judgment beyond the limited extent of cl 20.9. As Mr Hung acknowledged, the consequence of cl 20.9 meant that it was not a "sure thing" that the investors would receive their promised 7% p.a. net return for 10 years. In the context of the unqualified powerful assertions in the representations, the terms of cl 20.9 were inconspicuous and part of the "fine print" of the contract in the sense referred to by Mason J in Puxu 149 CLR at 210-211. As Jacobson and Bennett JJ said in National Exchange 61 IPR at 437 [50] (applied by Keane JA in Downey [2005] QCA 199 at [83] ): "A document which, when read as a whole, is factually true and accurate may still be capable of being misleading if it contains a potentially misleading primary statement which is corrected elsewhere in the document but without the reader's attention being adequately drawn to the correction."