FEDERAL COURT OF AUSTRALIA
[2000] FCA 801
JOHN JAMES MURPHY
v
OVERTON INVESTMENTS PTY LIMITED
DAPHNE MURPHY
v
OVERTON INVESTMENTS PTY LIMITED
SUMMARY OF REASONS GIVEN 15 JUNE 2000 BY EMMETT J
In accordance with the practice of the Federal Court in certain cases of importance and complexity, the Court has prepared a brief summary to accompany the reasons that are to be delivered today, 15 June 2000, by Emmett J. It must, of course, be emphasised that the only authoritative pronouncement of the Court's reasons is that contained in the published reasons. This summary is intended to assist in understanding the principal conclusions reached by the Court, but it is necessarily incomplete.
The respondent, Overton Investments Pty Ltd (“Overton”), owns and operates the Heritage Retirement Village located at 33 Bernard Road, Padstow Heights (“the Heritage Village”). By lease dated 20 October 1992 (“the Lease”), Overton granted a term of 99 years to John James Murphy (“Mr Murphy”) and Daphne Lucy Murphy (“Mrs Murphy”). The Lease relates to Unit 53 in the Heritage Village (“Unit 53”). Mr Murphy still resides in Unit 53. However, Mrs Murphy has become too ill to remain a resident of the Heritage Village and ceased to reside there on 1 April 1997.
Mr and Mrs Murphy claim that prior to entering into the Lease, misleading statements were made on behalf of Overton concerning the extent of their liability under the Lease to contribute to the expenses of operating the Heritage Village. They say that those statements induced them to enter into the Lease and that, as a consequence, they have suffered loss. They seek a remedy in respect of that loss.
Prior to the commencement of these proceedings, there had been a history of litigation between Overton and persons who are lessees of units in the Heritage Village (“Lessees”). The litigation concerned the liability of Lessees to contribute to operating expenses in respect of the Heritage Village.
Proceeding N 159 of 1999 (“Mr Murphy’s Proceeding”) was originally commenced under Part IVA of the Federal Court Act 1976 (Cth) by Mr Murphy and others claiming to represent all persons who are presently Lessees. On 17 August 1999, I ordered that:
· Mr Murphy’s Proceeding no longer continue under Part IVA;
· the applicants other than Mr Murphy be removed as parties;
Following those orders, separate proceedings were commenced on behalf of most of the other Lessees. In particular, on 31 August 1999, proceeding N 946 of 1999 (“Mrs Murphy’s Proceeding”) was commenced on behalf of Mrs Murphy. On 16 May 2000 I made orders that Mr Murphy’s Proceeding and Mrs Murphy’s Proceeding be heard together and that evidence in one be evidence in the other.
Mr and Mrs Murphy claim relief under the following heads:
· damages under section 82 of the Trade Practices Act 1974 (Cth) (“the Trade Practices Act”) by reason of contravention of section 52 and section 51AA of the Trade Practices Act;
· orders pursuant to section 87 of the Trade Practices Act by reason of contravention of sections 52 and 51AA of the Trade Practices Act;
· damages under the general law for negligent advice;
· declarations that as a consequence of representations made by it relating to the outgoings under the Lease, Overton is estopped from claiming contribution to outgoings in excess of a particular level;
· orders under section 7 of the Contracts Review Act 1980 (NSW) in respect of provisions of the Lease relating to recovery of outgoings generally, and relating to recovery of outgoings in the nature of legal and accounting costs and interest, in particular.
While several causes of action are relied upon, all causes of action arise out of the same factual circumstances. Those circumstances are alleged representations and failure to inform Mr and Mrs Murphy of relevant matters during the period 27 May 1992 to 27 November 1996.
The Lease provides a mechanism for the recovery by Overton from Lessees of contributions to the expenditure incurred in operating the Heritage Village. Overton prepares a budget of estimated expenditure for each year and calculates the maintenance fees that Lessees are required to pay on the basis of that budget. At the end of the year, an account of the expenditure actually incurred in operating the Heritage Village is prepared. That income and expenditure are referred to as “the Maintenance Fund”.
Prior to their entering into the Lease, Overton furnished Mr and Mrs Murphy with information that “present budget figures would indicate a level of cost payable” in respect of their proposed unit of $55.71 per week. In fact, expenditure actually being incurred by Overton in operating the Heritage Village had not been taken into account in calculating the estimate of maintenance fees payable.
The maintenance fee of $55.71 per week was calculated on the basis of the budget for the period ended 30 June 1992 and the budget for the period ending 30 June 1993. Mr and Mrs Murphy were given a copy of the latter budget and Mr Murphy enquired as to whether it was accurate and was told that it was.
I consider that, in all of the circumstances, it was misleading or likely to mislead for Overton to furnish information about the estimated maintenance fee of $55.71 without disclosing that the estimate was calculated on figures that did not adequately provide for all expenditure actually being incurred in the operation of the Heritage Village. It was conduct engaged in by Overton in trade or commerce and contravened section 52 of the Trade Practices Act.
I also consider that, in the circumstances, Overton was under a duty to take care, in giving a response to the enquiry about the accuracy of the budget, to ensure that the response was accurate to the extent of information available to Overton at the time. For the reasons I have indicated, the response was not accurate because the budget failed to take account of all of the relevant expenditure. There was, therefore, a breach of duty.
Mr and Mrs Murphy say that as a consequence of the conduct of Overton, they suffered loss and damage. However, they say that the loss and damage that they suffered by entering into the Lease was not suffered until 27 November 1996 when Overton presented a redrafted budget for the year ending 30 June 1997 showing an increase in expenditure from $618,120 to $977,260.
Mr and Mrs Murphy’s primary claim is for orders restricting Overton’s right to recover maintenance fees from them. Alternatively, they seek to quantify their loss by reference to the difference in value of the Lease according to whether maintenance fees are calculated in accordance with Overton’s legal entitlement or whether there is some restriction on Overton’s entitlement to recover full reimbursement for expenditure incurred in operating the Heritage Village.
I consider that if Mr and Mrs Murphy suffered any loss or damage as a consequence of the conduct of Overton in 1992, they did so when they entered into the Lease. There is, however, no evidence of loss or damage at that time. There is no evidence that, as at that date, the Lease was worth anything less than the consideration paid to obtain it. There was no suggestion that, if there had been full disclosure by Overton, Mr and Mrs Murphy would have been able to negotiate a lease with a limit of the nature now claimed by them. Further, no attempt has been made to establish that the facilities and services to which Mr and Mrs Murphy are entitled under the Lease and the Trust Deed have a value less than the liability that Mr and Mrs Murphy have to contribute to the expenditure incurred in providing those facilities and services.
It follows that they have not established any loss or damage as a consequence of the conduct of Overton in 1992 that was in contravention of the Trade Practices Act or in breach of a duty of care owed in furnishing information. In any event, as I have said, any loss or damage suffered by Mr and Mrs Murphy in consequence of the conduct of Overton in 1992 was suffered when they entered into the Lease. Any cause of action for recovery of that loss was therefore statute barred by the time that Mr Murphy’s Proceeding and Mrs Murphy’s Proceeding were commenced during 1999.
From November 1994 at latest, Overton has maintained the position that, while up to that time there had been an under recovery of expenditure, Overton intended thereafter to seek to recover full reimbursement of all expenditure incurred in operating the Heritage Village. Mr and Mrs Murphy effectively had two years within which to rearrange their affairs, including selling their interest under the Lease or surrendering it if need be, so as not to be in a position where the maintenance fees would be beyond their means. If any estoppel arose, it was one that would have prevented Overton from requiring an increase in maintenance fees without giving reasonable notice of its intention to do so. It effectively gave in excess of two years’ notice before further increases were required. Accordingly, I do not consider that any actionable estoppel arises in relation to the conduct of Overton during 1992.
Mr and Mrs Murphy contend that they were in a position of special disability vis-á-vis Overton because they were misinformed as to the nature and effect of their liability under the Lease. That conclusion is said to follow from the fact that Overton kept from them the level of expenditure that was being incurred in operating the Heritage Village and was not being taken into account in calculating maintenance fees. They say that Overton knew that they lacked knowledge and understanding of the entitlement of Overton to increase fees and lacked assistance and advice in entering into the Lease where assistance and advice were plainly necessary.
Mr and Mrs Murphy were under a disadvantage, in the sense that they were unaware of the fact that the estimate of maintenance fees was not based on a calculation that took account of all expenditure that was being incurred by Overton in operating the Heritage Village. However, there was no special vulnerability or weakness of the part of Mr and Mrs Murphy. I do not consider that the evidence justifies any conclusion that Overton made any unconscientious use of any superior position or bargaining power to the detriment of Mr and Mrs Murphy. Accordingly, I do not consider that any basis has been made out that would establish a cause of action based on unconscionable conduct, either under the general law or under the Trade Practices Act.
Mr and Mrs Murphy also claim relief under section 7 of the Contracts Review Act 1980 (NSW). Quite apart from the question of whether they have made out a case for relief under the Contracts Review Act, a question arises as to the jurisdiction of the Federal Court to make orders under that Act. That Act does not purport to confer jurisdiction on the federal Court. Indeed, the State Parliament has no power to do so. I do not consider that jurisdiction under section 7 of the Contracts Review Act can be attracted by any principle that would invest this Court with the jurisdiction conferred on State Courts by section 7. The claims under the Contracts Review Act will have to be ventilated in a State Court. It is therefore inappropriate that I express any view on the application of the Contracts Review Act in the present circumstances.
Mr and Mrs Murphy allege, in the alternative, that the conduct of Overton during 1994 also contravened the Trade Practices Act and gave rise to estoppels binding Overton. I am satisfied that from March 1994 onwards, Overton made clear to the Lessees, including Mr and Mrs Murphy that it intended to enforce its legal entitlements to recover full reimbursement of all expenditure incurred in operating the Heritage Village and that, in order to do so, it would be necessary to increase the maintenance fees payable by Lessees quite significantly. I consider that by November 1994 at latest Overton had made clear its intention to recover all of the expenditure incurred by it in operating the Heritage Village. I do not consider that the conduct of Overton in the period to 27 November 1996 was in contravention of the Trade Practices Act. Nor did it give rise to any estoppel.
It follows from the conclusions I have reached that both Mr Murphy’s Proceeding and Mrs Murphy’s Proceeding should be dismissed. However, in view of the currency of the other proceedings to which I have referred above, I shall defer making any orders until the parties have had an opportunity to consider the reasons for my conclusions.
15 June 2000
Sydney
The full text of the reasons may be found at the Court’s internet site: www.fedcourt.gov.au
