FEDERAL COURT OF AUSTRALIA

Eckford v Six Mile Creek Pty Ltd (No 2) [2019] FCA 1307

ORDERS

THE COURT ORDERS THAT:

1.    The matter be listed for case management hearing at 9.30am on 22 August 2019 for the purpose of making orders in accordance with the reasons given on 20 August 2019.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

FINAL ORDERS

THE COURT ORDERS THAT:

Judgment Amount

1.    There be judgment for the applicant against the first and second respondents in the sum of $2,573,542.46, made up of the following amounts:

(a)    $936,304.26 on account of the Purchase Claim;

(b)    $1,153,396.55 on account of the Loan Claim;

(c)    $915,936.65 on account of the Construction Cost Claim;

(d)    $592,905 on account of pre-judgment interest in accordance with s 51A of the Federal Court of Australia Act 1976 (Cth); and

(e)    less the sum of $1,025,000 being the current value of lot 10.

Costs

2.    The first and second respondents pay the applicant’s costs.

3.    The question of whether the applicant’s costs payable by the first and second respondents be on the ordinary basis or otherwise be reserved.

4.    The applicant file and serve written submissions of no more than 3 pages on the question of costs by 30 August 2019.

5.    The respondents file and serve written submissions in reply of no more than 3 pages on the question of costs by 6 September 2019.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

RARES J:

Introduction

1    In about late September, the applicant, Derek Eckford, and his late wife, Gale, were on a family holiday on the Gold Coast in Queensland. At that time, they resided in Dubbo, New South Wales. They both had lived there for about 40 years and had raised their family of three sons, one of whom subsequently died. One of their sons, Jason Eckford, and his wife, was on the holiday, together with his parents.

2    One day in late September or early October 2007, Mr and Mrs Eckford drove from the Gold Coast to the Sunshine Coast. There, they noticed a sign advertising undeveloped lots of land for sale in an estate then called “Avalon @ Coolum”. They drove around the estate, which consisted of about 60 parcels of undeveloped, subdivided lots. The estate was located on hilly terrain. They drove up to the sales office for the estate where Ken Guy Real Estate, the selling agent, had a site office. It was located on the highest point and had views to the Pacific Ocean and Coolum Beach on the eastern side, and to Mount Coolum on the south.

3    Six Mile Creek Pty Ltd owned the estate and it, together with its principal and controlling mind, Daniel (Danny) McLaughlin, are the respondents. The site office was on lot 10. Lot 10 had a “sold” sign placed next to the site office. The real estate agent at Ken Guy responsible for conducting sales of Avalon @ Coolum lots was Mark Boulter. His daughter, Angela, was on duty in the site office at the time Mr and Mrs Eckford called in to enquire about whether any lots were for sale. She arranged for her father, Mr Boulter, to attend and he gave Mr and Mrs Eckford a sales brochure, a price list dated 14 September 2007 and a copy of the plan of subdivision for the estate. The latter two documents had highlighting that showed that certain lots had been “sold” and their prices were recorded on the price list.

4    It is common ground that Mr Boulter made four representations to Mr and Mrs Eckford on both this and a subsequent visit on a Saturday, probably 29 September 2007. The representations in substance were that three lots (lots 17, 18 and 19), located on the southern boundary of lot 10, had building covenants on them that contained height restrictions limiting the height of any buildings, trees and vegetation that could be on those lots, so as to ensure, as the brochure promised, that lot 10 would keep its ocean views “FOREVER”, and, also, that lots 8 (which was directly north of lot 10, but below and separated from it by lot 9, and had a similar aspect), 17, 18 and 19 had been “sold” at the prices specified in the price list.

5    Subsequently, Mr and Mrs Eckford agreed with Jason Eckford that he would lend them the money to buy lot 10 for its list price of $895,000 plus stamp duty. On 20 November 2007, they entered into a contract to purchase lot 10 from Six Mile Creek that contained the building covenants including the height restrictions that supposedly would bind the owners of lots 17, 18 and 19 “FOREVER”. Mr and Mrs Eckford then sold their Dubbo home and built a house using their funds on lot 10, all the while believing that lots 17, 18 and 19 were burdened with the height restrictions.

6    In February 2016, Mr Eckford and Jason Eckford learnt that, at some time after Mr Boulter had shown them the price list, Six Mile Creek had sold lots 17, 18 and 19 to third parties on contracts which contained none of the height restrictions to bind the new purchasers of those lots.

7    Mr Eckford, as the surviving joint tenant of lot 10, contends that Six Mile Creek and Mr McLaughlin engaged in misleading or deceptive conduct and made false or misleading representations in contravention of each of ss 52(1) and 53A(1)(b) of the Trade Practices Act 1974 (Cth) (TPA) in making representations concerning the effect and operation of the height restrictions and the nature of existing “sales” of lots in the estate as stated in the price list.

8    Mr Eckford also contends that Six Mile Creek and Mr McLaughlin made a fraudulent representation that lots 17, 18 and 19, together with lot 8, had been “sold”. That was because, previously, Six Mile Creek, through Mr McLaughlin, had agreed to terminate the contract for lot 19, so that the purchaser of that lot could buy lot 9 (and in fact had terminated the contract for lot 19 on 1 October 2007), and lots 8, 17 and 18 were the subject of contracts under which the purchasers had either paid no deposit at all, or a partial deposit of $1,000, were persistently in default and were never likely complete those contracts. Mr Eckford contends that the statement that those lots had been “sold”, unqualified as it was, conveyed the representation that the lots were, in the belief of the vendor, the subject of contracts that either had been completed already or would be completed so as to ensure that the height restrictions in the building covenants would be enforceable to protect Mr and Mrs Eckford’s views from lot 10 to the south. Mr Eckford claims damages for the tort of deceit against both respondents in respect of this representation.

9    Mr Eckford alleges that Six Mile Creek made two representations about the height restrictions with respect to future matters and that it did not have reasonable grounds for making them by reason of which they were taken to be misleading, pursuant to s 51A(1) of the TPA. In addition, Mr Eckford also alleges that Six Mile Creek and Mr McLaughlin had fraudulently concealed from him, until 2016, the falsity of the height representations.

10    Mr Eckford says that, had he realised that the representations were not correct in stating that the views of lot 10 were protected by the height restrictions by reason of the “sales” of lots 17, 18 and 19, he and his wife would never have bought lot 10. Mr Eckford claims injunctions under s 80 of the TPA restraining Six Mile Creek from approving any development on lots 17, 18 and 19 exceeding the height restrictions on each of those lots in the building covenants forming part of the contract of purchase for lot 10, declarations that Six Mile Creek and Mr McLaughlin, as an accessory, engaged in conduct in contravention of ss 52 and 53A(1)(b) of the TPA, and damages under ss 82 and 87(1) of the TPA on the basis of a no transaction case.

11    Mr Eckford claims damages under the following five heads:

12    The respondents deny all liability. They assert that Mr and Mrs Eckford did not rely on any representation. Mr McLaughlin also denies that he has any personal liability for any of the representations.

13    In essence, Six Mile Creek and Mr McLaughlin accept that the representations about the height restrictions were made, but say that, first, they were true at the time they were made because of the contemporaneous existence of exchanged contracts for the sale of lots 8, 17, 18 and 19 when Mr and Mrs Eckford first visited the site office, and, secondly, even if those representations and the representation in the price list that those lots had been “sold” were misleading or deceptive or false or misleading, the conduct occurred more than six years before Mr and Mrs Eckford entered into the contract of purchase on 20 November 2007 and completed it on 11 January 2008, and ss 82(2) and 87(1CA) of the TPA made the claims unmaintainable. In addition, Six Mile Creek and Mr McLaughlin deny that they were in any way fraudulent in representing that lots 8, 17, 18 and 19 had been sold or that Mr and Mrs Eckford had relied on that representation in going into the contract to purchase lot 10. They also contend that Mr Eckford cannot succeed on his claim that they had made a fraudulent representation because he had, or with reasonable diligence could have, discovered the alleged fraud more than 6 years before he commenced this proceeding on 24 February 2017.

14    The respondents say that any damages, on a no transaction case, should be limited to $627,248.16, being the difference in the total of the purchase and construction cost claims, and what they asserted, based on the valuation evidence that they adduced, as the current value of lot 10 of $1,225,000.

The pleaded representations and issues

15    Mr Eckford pleaded that Six Mile Creek engaged in conduct that conveyed the following representations to Mr and Mrs Eckford, namely that:

(1)    Six Mile Creek had sold, at least, each of lots 17, 18 and 19 on conditions that included a covenant that restricted the maximum height of any buildings on each lot, and that would be passed on to future owners of those lots;

(2)    Six Mile Creek would not approve or permit the construction of any building on any of lots 17, 18 or 19 that exceeded the respective height restriction in the building covenants in respect of that lot;

(3)    Six Mile Creek would remove or prune, or cause to be removed or pruned, any trees or shrubs located on at least each of lots 17, 18 and 19 that interfered with the sea view sight lines of lot 10 (I will refer to representations (1), (2) and (3) collectively as the height representations); and

(4)    Six Mile Creek had sold already:

(a)    lot 8 for a price of $795,000;

(b)    lot 17 for a price of $675,000;

(c)    lot 18 for a price of $715,000;

(d)    lot 19 for a price of $565,000.

(the price list representation)

16    The following issues arise in the proceeding:

(1)    did Six Mile Creek and or Mr McLaughlin engage in conduct that conveyed any of the representations on which Mr and Mrs Eckford had relied and was any such representation misleading or deceptive, or false or misleading, or, in respect of representations (2) and (3), made without reasonable grounds (the liability issue);

(2)    did Six Mile Creek and or Mr McLaughlin make the price list representation knowing that it was untrue or recklessly indifferent as to whether it was true or false (the fraud issue);

(3)    are Mr Eckford’s claims statute barred and did Six Mile Creek and or Mr McLaughlin fraudulently conceal from Mr Eckford the fact that Six Mile Creek had sold each of lots 17, 18 and 19 without any height restrictions (the limitation issue); and

(4)    did Mr Eckford suffer any, and if so what, loss or damage or become entitled to any, and if so what, relief (the relief issue).

The legislative scheme

17    The TPA provided, as at September to November 2007, relevantly:

4K  Loss or damage to include injury

In this Act:

(a)  a reference to loss or damage, other than a reference to the amount of any loss or damage, includes a reference to injury; and

(b) a reference to the amount of any loss or damage includes a reference to damages in respect of an injury.

51A Interpretation

(1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.

(2) For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation.

52  Misleading or deceptive conduct

(1)  A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

53A  False representations and other misleading or offensive conduct in relation to land

(1) A corporation shall not, in trade or commerce, in connexion with the sale or grant, or the possible sale or grant, of an interest in land or in connexion with the promotion by any means of the sale or grant of an interest in land:

[…]

(b) make a false or misleading representation concerning the nature of the interest in the land, the price payable for the land, the location of the land, the characteristics of the land, the use to which the land is capable of being put or may lawfully be put or the existence or availability of facilities associated with the land;

    […]

80  Injunctions

(1)  …where, on the application of the Commission or any other person, the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute:

(a)  a contravention of any of the following provisions:

(i)  a provision of Part IV, IVA, IVB, V or VC;

[…]

(b)  attempting to contravene such a provision;

(c)  aiding, abetting, counselling or procuring a person to contravene such a provision;

(d)  inducing, or attempting to induce, whether by threats, promises or otherwise, a person to contravene such a provision;

(e)  being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or

(f)  conspiring with others to contravene such a provision;

the Court may grant an injunction in such terms as the Court determines to be appropriate.

[…]

(5) The power of the Court to grant an injunction requiring a person to do an act or thing may be exercised:

(a)  whether or not it appears to the Court that the person intends to refuse or fail again, or to continue to refuse or fail, to do that act or thing;

(b)  whether or not the person has previously refused or failed to do that act or thing; and

(c)  whether or not there is an imminent danger of substantial damage to any person if the first-mentioned person refuses or fails to do that act or thing.

82  Actions for damages

(1)    Subject to subsection (1AAA), a person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV, IVA, IVB or V or section 51AC may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.

[…]

(2)    An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued.

87  Other orders

(1) Subject to subsection (1AA) but without limiting the generality of section 80, where, in a proceeding instituted under this Part, ….the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this subsection) in contravention of a provision of Part…V…, the Court may, whether or not it grants an injunction under section 80 or makes an order under section 82…make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (2) of this section) if the Court considers that the order or orders concerned will compensate the first-mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage.

[…]

(2) The orders referred to in subsection (1) and (1A) are:

[…]

(c)  an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to refund money or return property to the person who suffered the loss or damage;

(d)  an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to pay to the person who suffered the loss or damage the amount of the loss or damage;

[…]

(g) an order, in relation to an instrument creating or transferring an interest in land, directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to execute an instrument that:

(i)  varies, or has the effect of varying, the first-mentioned instrument; or

(ii)  terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the first-mentioned instrument.

(emphasis added)

18    The Limitation of Actions Act 1974 (Qld) (the Limitation Act) provided:

38 Postponement in cases of fraud or mistake

(1)    Where in an action for which a period of limitation is prescribed by this Act—

(a) the action is based upon the fraud of the defendant or the defendant’s agent or of a person through whom he or she claims or his or her agent; or

(b) the right of action is concealed by the fraud of a person referred to in paragraph (a); or

(c) the action is for relief from the consequences of mistake;

the period of limitation shall not begin to run until the plaintiff has discovered the fraud or, as the case may be, mistake or could with reasonable diligence have discovered it.

(emphasis added)

The assessment of the evidence

19    In this case, as will appear, there is little doubt that Six Mile Creek made the representations substantively in the contemporaneous documents which Mr and Mrs Eckford received and that the real estate agent whom they met at the estate, Mr Boulter, also made them, orally, to reinforce the selling message. There are issues whether, so far as Mr Eckford’s evidence is concerned, he and his wife relied on what they read and heard and how, relevantly, Mr Eckford understood those representations and, so far as the respondents’ evidence is concerned, what they intended to convey to Mr and Mrs Eckford.

20    As the principal events in dispute occurred over 12 years before the non-expert witnesses gave evidence at the trial, it is particularly apposite to apply the principles identified by Dowsett, Rares and Logan JJ in Julstar Pty Ltd v Hart Trading Pty Ltd [2014] FCAFC 151 at [73]-[74]:

The assessment of the evidence of witnesses in such a case, ordinarily, will be approached in the manner discussed by McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318-319 as follows:

“Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously described [sic] as “misleading”) within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.

Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court “must feel an actual persuasion of its occurrence or existence”. Such satisfaction is “not … attained or established independently of the nature and consequence of the fact or facts to be proved” including the “seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding”: Helton v Allen (1940) 63 CLR 691 at 712.

Considerations of the above kinds can pose serious difficulties of proof for a party relying upon spoken words as the foundation of a causes of action based on s 52 of the Trade Practices Act 1974 (Cth) … in the absence of some reliable contemporaneous record or other satisfactory corroboration.” (non-italic bold emphasis added)

That caution is also reflected in s 140 of the Evidence Act 1995 (Cth) and in what Dixon J said in Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-363 about the standard of proof. Dixon J emphasised that, when the law requires proof of any fact, the Court must feel an actual persuasion of its occurrence or existence before it can be found. He said that a mere mechanical comparison of probabilities, independent of any belief in its reality, cannot justify a finding of fact: see too Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission (2007) 162 FCR 466 at 479-482 [29]-[38] per Weinberg, Bennett and Rares JJ. As Dixon J said (60 CLR at 362): “In such matters ‘reasonable satisfaction’ should not be produced by inexact proofs, indefinite testimony, or indirect inferences”. But, the nature of the fact to be proved necessarily affects the sufficiency of the evidence by which it can be established.

(bold emphasis in original; underline emphasis added)

21    In addition, in evaluating whether a person has contravened the statutory norm in s 52 of the TPA and its analogues, the tools of analysis drawn from the laws of deceit, namely misrepresentation and reliance, can sometimes be helpful in identifying such conduct and deciding whether loss or damage has been suffered by the contravention. However, Gummow, Hayne, Heydon and Kiefel JJ noted in Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at 341-342 [102]:

But as McHugh J correctly pointed out in Butcher v Lachlan Elder Realty Pty Ltd [(2004) 218 CLR 592 at 623 [103]], the “conduct” with which s 52 of the Trade Practices Act 1974 (Cth) deals is not confined to “‘representations’, whether they be representations as to matters of present or future fact or law” [McHugh J dissented in the result of the particular case but not as to these questions of principle]. This proposition applies with equal force to s 42 of the Fair Trading Act. References to misrepresentation or reliance must not be permitted to obscure the need to identify contravening conduct (here, misleading or deceptive conduct) and a causal connection (denoted by the word “by”) between that conduct and the loss and damage allegedly suffered. As McHugh J also pointed out in Butcher [(2004) 218 CLR 592 at 625 [109]. See also the judgment of the Court in Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 84 [200]], with particular reference to s 52 of the Trade Practices Act, but with equal application to s 42 of the Fair Trading Act:

“The question whether conduct is misleading or deceptive or is likely to mislead or deceive is a question of fact. In determining whether a contravention of s 52 has occurred, the task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. It is an objective question that the court must determine for itself [See Equity Access Pty Ltd v Westpac Banking Corporation [1990] ATPR ¶50,943 (40-994) at 50,950 per Hill J; see also Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202-203 per Deane and Fitzgerald JJ]. It invites error to look at isolated parts of the corporation’s conduct. The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct [See, eg, Trade Practices Commission v Lamova Publishing Corporation Pty Ltd (1979) 42 FLR 60 at 65-66; 28 ALR 416 at 421-422 per Lockhart J]. Thus, where the alleged contravention of s 52 relates primarily to a document, the effect of the document must be examined in the context of the evidence as a whole [See, eg, Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 35 FCR 535 at 541 per Sheppard J, Hill J agreeing]. The court is not confined to examining the document in isolation. It must have regard to all the conduct of the corporation in relation to the document including the preparation and distribution of the document and any statement, action, silence or inaction in connection with the document.”

(italic emphasis in original)

22    Mr Eckford is in his early 80s, and Mr McLaughlin is 86 years old. Both men gave evidence over what for them was a relatively long period in the witness box. I attempted to give each of them breaks on a regular basis, particularly when it appeared either was looking or, appearing by his answers, to be exhausted or needing a rest. That said, each generally gave evidence in a way which satisfied me that he fully understood what he was asked and was alert and responsive to the question. To the extent that, on isolated occasions, particularly Mr McLaughlin, appeared tired when he gave particular answers, I have given those answers no probative weight.

23    In Mr McLaughlin’s case, I have also taken into account, in assessing his overall evidence, the fact that the events that he had been asked to recall and the state of mind that he formed at the relevant times, all occurred over 12 years ago, and that the passage of time and the advancing of his age have appeared to play a greater role, than with Mr Eckford, in some aspects of his recollection. Nonetheless, contemporaneous documents and Mr McLaughlin’s obvious astuteness, as an experienced property developer as at 2007 and in his oral evidence, have enabled me to form what, I am comfortably satisfied, is a reliable view of his overall credibility.

24    Of course, here, Mr Eckford claims on the basis of contraventions of ss 52 and 53A and fraud against each of Six Mile Creek and Mr McLaughlin. In evaluating the fraud allegations, I also have had regard to s 140 of the Evidence Act 1995 (Cth) and Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australian v Australian Competition and Consumer Commission (2007) 162 FCR 466 at 480 [30] per Weinberg, Bennett and Rares JJ.

Mr and Mrs Eckford decide to buy lot 10

25    When Mr and Mrs Eckford first drove around the estate in late September 2007 and reached its highest point, they found the site office. It was located on lot 10. Mr and Mrs Eckford went into the office and spoke to Ms Boulter. They told her that they were rather interested in the estate. She asked whether they would like to see a sales representative. As a result, Mr Boulter arrived at the site office shortly afterwards and introduced himself.

26    Mr and Mrs Eckford told Mr Boulter that they had an interest in lot 10. He said that it was the “premier lot”. They went out onto the verandah, which had an elevated view, while Mr Boulter paced out the block (lot 10), by reference to the boundary pegs from the survey, to give them an indication of its size. They all then went inside the site office. Mr Boulter handed Mr and Mrs Eckford the brochure, the plan, that had highlighted on it the lots that had been sold, and the price list dated 14 September 2007, similarly highlighted.

27    Mr Boulter pointed out the various features of the subdivision and made frequent reference to the sea views. He discussed lot 10 and, when Mr Eckford pointed out that it had been marked as “sold”, Mr Boulter told him that the purchaser had not settled and had been delaying settlement. Mr Boulter then said lot 10’s views of the ocean were protected. He explained that was because the lots to the south between it and its sea view (lots 17, 18 and 19), which abutted onto, and fell away from, lot 10, had already been sold with the building covenants and height restrictions.

28    Lots 17, 18 and 19 were located on land that was running downhill from the summit on which lot 10 was located. Thus, lot 10 overlooked the hillside to its south on which lots 17, 18 and 19 were located on land falling away from the southern boundary of lot 10. As Mr Eckford went through the brochure, what caught his eye was its emphasis on there being ocean views “FOREVER”. Mr Boulter showed Mr and Mrs Eckford a copy of the building covenants. He told them that the purpose of the building covenants was to protect their investment in the land they would be buying because it restricted the heights of any buildings that could be constructed in front of lot 10 (i.e. to the south). Mr Boulter told Mr and Mrs Eckford that the building covenants applied to all lots on the estate including the existing purchaser of lot 10. He pointed out cl 4.5, which contained the height restrictions that applied to lots 15, 16, 17, 18, 19 and two other blocks. He emphasised that lots 17, 18 and 19, as immediately below lot 10, had already been sold with the building covenants (including the height restrictions on them) in force, saying “so that protects your view from hereon in”. Mr Boulter also said that the building covenants would apply to, and benefit, Mr and Mrs Eckford if they bought lot 10. He said that the building covenants had to be transferred by persons when selling the land.

29    Mr Eckford also noticed in the brochure that all plans for building work had to be approved by both the developer and the owner before they went to the local Council (for approval) and that there also were covenants restricting landscaping. Mr Boulter told them again that because the height restrictions were in place, and lots 17, 18 and 19 had been sold with them, this would protect views from lot 10 for all time. He added that the landscaping restraints also ensured that lot 10’s sea views could never be interfered with by another lot. Mr Boulter said that he wanted to reinforce the fact that the building covenants offered Mr and Mrs Eckford protection, were they to buy lot 10, and “was your insurance for your investment”. Mr Boulter said to them:

We [i.e. Six Mile Creek or Ken Guy] had already ascertained what the safe maximum height limits were on specific lots so that we could keep in perpetuity those view lines and give people quiet enjoyment of what they bought [so] that they had certainty and surety of that.

30    When Mr and Mrs Eckford looked through the building covenants with Mr Boulter at the site office, they raised a concern with him that cll 1.1 and 11 permitted the owner to waive, vary or relax the building covenants. Mr Boulter told them that that was not a concern because lots 17, 18 and 19, where building work could affect their views, had been sold with the building covenants attached so that “you have no problem with this”. Mr Boulter also explained that the height restrictions relating to trees and other plants, limited the height of vegetation on the burdened lots (17, 18 and 19) to three metres, and when the growth exceeded that height, the owner (i.e. the existing vendor) had the right to go onto the relevant lot to prune or remove the excess trees or plants. Mr Eckford said that he and Mrs Eckford discussed with Mr Boulter the fact that future purchasers would also be bound by the building covenants, both for lot 10 and the burdened lots. Mr Boulter did not have a copy of the building covenants for Mr and Mrs Eckford to take away with them, but they took the brochure, price list and plan with the lots sold highlighted on it.

31    Mr Boulter said that if they were interested, he would speak to the owner (i.e. the vendor) to see whether it would be prepared to “forego” the existing contract for lot 10 and give Mr and Mrs Eckford the opportunity to purchase lot 10. Mr and Mrs Eckford responded that, of course, they were interested, and that they wanted to have their son have a look at the property because he would have to help them with the finance.

32    I have reproduced below the price list that Mr and Mrs Eckford received when they first visited the estate in late September 2007, which had the shading or highlighting that indicated lots that had been sold, as it appeared in the reproduction. (The abbreviation “nsv” signified “no sea view”.)

33    The brochure showed, on page 2, a road plan of the estate with the site office and indicated that an ocean and a beach walk were to the east of the estate. The heading on page 2 included “Ocean View Land Estate” and a box on its right side had the heading “A new exclusive subdivision, many with OCEAN VIEWS FOREVER”. A contour plan of the estate was on page 3, and the next four pages contained extracts from the plan that showed the location of the various lots and their areas in square metres. Page 8 was headed “Summary of Building Covenants” and stated:

    (emphasis added)

34    Below is an extract from the plan that Mr Boulter gave Mr and Mrs Eckford, with shading to indicate the lots already sold. (North is at the top.)

35    Mr Eckford said that he observed that his wife was involved in all the conversations and was perusing the documents with him. Sensibly, senior counsel for the respondents said that I could infer, if I accepted Mr Eckford’s evidence, that Mrs Eckford would have understood and relied on the same matters as her husband. I have drawn that commonsense inference.

36    When Mr and Mrs Eckford returned to their holiday accommodation, they had a discussion with Jason Eckford and showed him the documentation they had brought back, being the brochure, price list and plan. They told him that they were both quite interested but could not afford to both buy the land and build a house on it and asked whether he would be prepared to assist them. Jason Eckford said that he would have to see the lot they were interested in first, and they then arranged to meet Mr Boulter at lot 10 again.

37    They all returned on the following Saturday (probably 29 September 2007) and met Mr Boulter. He said that he had spoken to “Danny”, the owner, and that he (Danny) would be prepared to “forego” the existing contract for lot 10 if Mr and Mrs Eckford were prepared to put down a deposit of $1,000 on that day, because the other purchaser had been delaying settlement. Mr Boulter said that the purchase price would have to remain at $895,000. He said that when the contract was signed later, Mr and Mrs Eckford would have to pay the balance of the 10% deposit and that settlement would have to occur within 30 days.

38    Jason Eckford spoke with Mr Boulter, and asked him about the building covenants and height restrictions, and in particular, how they affected lots 17, 18 and 19. Mr Boulter told Jason Eckford, in his parents’ presence, that lots 17, 18 and 19 had already been sold with the building covenants attached and that those covenants would also apply to unsold lots.

39    Jason Eckford said that he would be prepared to finance his parents if they could afford the construction of a home on the new property. Mrs Eckford said that she was very thrilled that they could acquire the block and looked forward to building a home on it where their children and grandchildren could visit the couple on the holidays. After discussing matters with Jason Eckford, Mr and Mrs Eckford agreed and they paid $1,000 to Mr Boulter to secure the purchase.

40    Importantly, prior to paying the $1,000 holding deposit and signing a document that Mr Boulter wrote out about the proposed sale, Mr Eckford considered the asking price of $895,000 for lot 10 and decided that it was “an acceptable figure in view of what else was sold of the properties” that he noted as recorded on the price list. However, Six Mile Creek only terminated the existing contract for lot 10 on 1 October 2007 (see [123] below).

41    The prices that Mr Eckford saw in the price list had “a big influence” on his decision to purchase. He explained that, for example, the price list recorded a sold price (of $795,000) for lot 8. He said that lot 8 was one lot removed from, and behind, lot 10 (i.e. to its north) and its views (to the south) would be restricted by the building that he and his wife intended to construct because lot 10 had no height restrictions. He said that he considered the information about other lots that were smaller in area than lot 10 (which was 952m2), like lots 17 and 18 (which, he said, were around 700m2) and had sold for, he thought, $735,000. He gave those estimates of size and price in his evidence in chief without referring to the price list. I am satisfied that, at the time of his actual consideration of those matters in 2007, he took the actual sizes and prices set out in the price list into account in his thought process.

42    In fact, the price list stated that each of lots 8, 17, 18 and 19 was “sold”, and that lot 8 was 803m2 and had sold for a price of $795,000, lot 17 was 871m2 and had sold for a price of $675,000, lot 18 was 768m2 and had sold for a price of $715,000, and lot 19 was 615m2 and had sold for a price of $565,000. The price list had a comment “Great sea views/build envelope” next to each of lots 8, 17 and 18 and the comment “Good sea views” for lot 19. Lot 10 had the same comment as lots 8, 17 and 18 but it was 952m2 and had sold for $895,000. At the foot of the price list, there appeared a concluding section stating that there were, in total, 60 lots, 34 of which had “definite Sea Views” and the average size of the lots was 923m2.

43    Mr Eckford said that if lots 17, 18 and 19 did not have the height restrictions controlling the height of buildings on them, he would not have purchased lot 10. For him, the importance of the height restrictions was strictly to preserve the views from lot 10 and it was essential that lots 17, 18 and 19 be restricted to the heights that were set out in the building covenants that he saw at the site office (and which were later included in the contract for purchase of lot 10).

44    On Friday, 5 October 2007, Ken Guy sent Mr and Mrs Eckford a proposed contract for lot 10 together with a note of instructions on how it and its annexures should be completed and a request that deposits be made out to Brennans Solicitors’ trust account. I infer that on or shortly after 1 October 2007, Mr Boulter told Mr and Mrs Eckford that the “owner” had terminated the existing contract for lot 10 and would sell it to them. One of the annexures to the note was a selling agent’s disclosure to buyer form under the Property Agents and Motor Dealers Act 2000 (Qld) (form 27c). That form stated that its purpose was to make the purchaser aware of the relationships that the selling agent had with persons to whom the agent referred the purchaser and of the benefits that the agent and other people received from the sale.

45    The selling agent’s disclosure in the form 27c stated that the agent had referred Mr and Mrs Eckford to a company called Pangus Pty Ltd, and that its relationship with the selling agent was as “the Developer”. The disclosure in that form 27c was somewhat obscure. It stated that the selling agent would receive a total of $59,070 including GST, as marketing fees from the sale. Under the column headed “Benefit to person/entity to whom buyer referred (if any) $ Amount” was the following: “Avalon @ Coolum Sales/The Project Marketing Group acting for The De Angelis Group trading as Pangus Pty Ltd”. The selling agent’s disclosure declaration on the form 27c stated that the selling agent was Sydney Fish Pty Ltd and Cross Match Holdings Pty Ltd [t/as Avalon @ Coolum Sales] which signed and dated it 5 October 2007. (That document was later signed by Mr and Mrs Eckford.)

The contract for the sale of lot 10 to Mr and Mrs Eckford

46    On 20 November 2007, Mr and Mrs Eckford exchanged contracts with Six Mile Creek for the purchase of lot 10 for the price of $895,000. The contract contained a number of standard and special conditions, and included the whole of the building covenants. Special condition 7.1 provided that the purchaser acknowledged that the building covenants, special conditions and annexures to the contract formed part of it and that:

The Buyer acknowledges that:

[…]

(c) it shall be at the discretion of the Seller as to whether or not the Seller seeks to enforce covenants which are obtained from any other Buyer of Land within Avalon@Coolum Development.

(d) the Buyer has no claim or action against the Seller if the Seller adopts an altered form of Building Covenants in contracts of sale for other land within the Avalon@Coolum Development.

(emphasis added)

47    Clearly enough, special condition 7.1(d) applied to future sales, not (what Mr and Mrs Eckford had been told were) completed sales of other lots which included all of the building covenants, especially the height restrictions.

48    The building covenants (as Mr and Mrs Eckford saw at the site office and included in their contract for purchase of lot 10), relevantly provided:

1    BENEFIT OF COVENANT

1.1     Avalon @ Coolum is a prestige residential estate. In order to encourage the ‘At One with Nature Theme’ and the Green Smart HIA initiative, these Covenants have been developed to continue to encourage this quality environment and are intended to establish standards of construction for all residences constructed in the estate, with a consistently high standard of house design encouraged with due recognition given to interest, variety and compatibility within the streetscape and be for the benefit of the Buyer and any party to whom the Buyer assigns the benefits of these covenants and to SIX MILE CREEK PTY LIMITED ACN 059 767 994 the Seller and its assigns. However, notwithstanding the Covenants contained herein the Seller reserves the right at the request of a Buyer or at its own discretion to vary, add to or exclude any of the obligations under the Covenants in respect of any Lot provided that such action will only be taken by it in keeping with the aims to establish a modern well designed residential estate. The Seller will not be liable to the Buyer or any other owner for any variation, addition or exclusion of these Covenants.

1.2    The Building Covenants and Design Guidelines are intended to act as investment protection so all proposed homes must satisfy the requirements, hence owners can be confident that future houses, garages and gardens will be constructed in a manner complimentary [sic] to the streetscape and the character of this environment.

2    APPROVALS

2.1.1    No construction of any improvements or structures on the site (including any dwelling, outbuildings or other structures such as a pergola, carport, fences and pools) is to take place unless all plans and specifications are approved in writing by the Seller.

[…]

4.5    Building Heights – Restrictive covenant.

With the object and intent of preserving the views of other lots the maximum permitted height to the top of the eaves of the upper storey of the following lots above and relative to the maximum natural ground level at the rear of these lots individually shall be as follows:--

Lot 15 – 5 metres

Lot 16 – 4 metres

Lot 17 – 3 metres

Lot 18 – 4 metres

Lot 19 – 4 metres

Lot 57 – 4 metres

Lot 58 – 4 metres

[…]

8.3    Restrictive covenant

8.3.1     With the object and intent of preserving the sea views envisaged by the estate layout trees and shrubs on Lots 2, 3, 14, 15, 16, 17, 18, 19, 21–26, 30, 33, 51–59 inclusive shall be of a type that will not interfere with the sea view lines from Lots 1–40.

8.3.2     Should trees or shrubs planted initially or subsequently interfere with the sea view lines of any of the Lots 1–40, then the trees shall be (at the option of the Seller) removed or pruned at the cost of the Buyer and where the Buyer falls [sic] to act promptly after a request to either remove or prune the trees then the Buyer shall allow access to the lot by the seller or its agents to do so at the cost of the Buyer.

[…]

11.1    Seller may vary or relax Building Covenants and Design Guidelines

The Buyer agrees that the Seller has the right to waive, vary or relax the Building Covenants and Design Guidelines, particularly in relation to any other sale of any part or stage of the Estate, and in that event, the Buyer agrees that it will have no claim whatsoever against the Seller.

The Buyer may not bring any action or make any claim against the Seller in respect of:--

(a) any change to the Building Covenants and Design Guidelines from time to time; and

(b) any non-compliance with the provisions of Building Covenants and Design Guidelines by any third party or by the Seller.

11.2    Enter and Remedy

The Seller or its agents may come onto the Land after reasonable notice and remedy any breach of these Building Covenants and Design Guidelines by the Buyer or any future owner (or the Buyer’s or the future owner’s tenants or agents) and the Seller’s costs (including legal costs) of notifying and (if necessary) remedying that breach may be recovered from the Buyer as a liquidated debt.

[…]

(underline emphasis added; bold emphasis in original)

49    Clauses 4.5 and 8.3 contained the height restrictions.

The loan deed with Jason Eckford

50    On 27 December 2007, Mr and Mrs Eckford entered into a deed of arrangement and debt with their son, Jason Eckford (the loan deed). The loan deed contained a preamble reciting that:

    Jason Eckford had lent his parents $930,000 to purchase lot 10 and pay stamp duty; and

    it was an essential term that interest on the balance of the loan would be calculated annually and that the repayment of the loan, plus accrued interest, had to be made within six months of any of the parties electing to bring it to an end.

51    The interest rate under the loan deed was to be the Reserve Bank of Australia cash rate, plus 4% per annum, with accrued interest to be added at the end of each year. The loan deed provided that:

    in the event that each of the borrowers died, the last surviving borrower would direct his or her executor to repay the balance of the loan plus accrued interest before any distribution to other beneficiaries of the balance of the estate under a will; and

    the surviving parent agreed that the balance of the loan plus interest and obligations accrued by the deceased parent would be assumed by the survivor.

52    On 11 January 2008, Mr and Mrs Eckford completed the purchase of lot 10 from Six Mile Creek using about $936,000 that Jason Eckford had lent them to do so and to pay the stamp duty on the contract and their associated expenses.

Six Mile Creek begins marketing the estate

53    I accept Mr Boulter’s evidence generally as reliable. He said that, in about early 2007, he and Mr McLaughlin discussed the proposed plan of subdivision for the estate, local government requirements, the encumbrances that would be placed on specific lots and the proposed building covenants, including those relating to the maximum height of buildings and vegetation growth allowable on particular lots so as to protect the views from lots situated above those (to be burdened) lots. Mr Boulter explained that this occurred in the context that Six Mile Creek had engaged Ken Guy to sell the estate as a whole. That activity culminated in the entry, on 29 May 2007, into a put and call option deed between Six Mile Creek, Pangus and Agostino (Gus) De Angelis as guarantor of Pangus’ obligations.

(a) The put and call option

54    Mr McLaughlin received advice from his accountant, James Whitelaw, about the commercial terms that came to form part of the put and call option, including the values given for the lots in each of the list price and minimum resale price in schedule 1 of the put and call option. Mr Whitelaw recommended to Mr McLaughlin that Paul Baynes of Nicholsons solicitors act for Six Mile Creek in drafting the put and call option and in respect of matters arising under it. Mr McLaughlin accepted that advice.

55    Mr Whitelaw composed the prices for the list price in schedule 1 by averaging the values for each lot that Six Mile Creek had obtained from each of Mr De Angelis, Watpac (another entity which had also negotiated to buy or arrange sales of lots in the estate) and PRD Nationwide’s Andy Lake. Mr Whitelaw suggested (and Mr McLaughlin accepted) that the list price effectively would represent the net minimum proceeds Six Mile Creek had to receive after all selling costs had been paid while the minimum resale price would ensure that, after any sale, Pangus had achieved a sufficient margin to meet those selling costs, as well as enabling each of Six Mile Creek and Pangus to receive 50% of any excess, which would build up Pangus’ equity in meeting the total of the project fee.

56    The put and call option relevantly provided that:

    Six Mile Creek granted Pangus a call option, being the right to require Six Mile Creek to enter into a contract for the sale of a lot in the estate with a third party purchaser on specific terms, including that:

    the purchaser had to pay, at least, the minimum resale price for that lot set out in schedule 1;

    the purchaser had to pay a deposit equal to 10% of the purchase price;

    settlement had to occur 30 days after the date of the contract;

    the purchaser had to “abide by and be bound by the building covenants for Avalon@Coolum (as notified by [Six Mile Creek])”; and

    where a company was the purchaser, the purchaser had to include its directors as guarantors (cl 2.1(b)).

    When Pangus exercised a call option, it had to deliver to Six Mile Creek’s conveyancing solicitors (who were Bakers Lawyers of Buderim, Queensland) a notice doing so, two copies of the contract executed by the purchaser (and any guarantor) and the amount of the deposit then payable in accordance with the contract (cll 2.4 and 2.5). Unless Six Mile Creek had agreed in writing, a call option would not be exercised validly if the purchase price shown in the contract were less than the minimum resale price (for the lot set out in schedule 1), the provisions of cl 2.4 were not complied with, completion was specified to occur more than 30 days from the contract date, or Pangus was in default of its obligations under the put and call option (cll 2.6 and 2.7).

    Pangus had to pay Six Mile Creek:

(a)    $500,000 as an advance on the project fee of $16.112 million on the next business day after execution of the put and call option; and

(b)    $6.925 million, as a second advance on the project fee, by 28 June 2007 (cl 4.1).

    When a sale of a lot completed, Six Mile Creek had to pay its bank, as mortgagee, what the bank required, any balance up to the list price in schedule 1 (being a price for each lot (and which was less than the minimum resale price), the total for which equalled the project fee of $16.112 million), any other sum then due to Six Mile Creek, the selling agent’s commission, and half of any residue paying the balance, if any, to Pangus (cl 5.1).

    Bakers had to advise Pangus of any requests by purchasers for extensions of the finance date in any contract, alterations to the standard form of the contract, settlement figures and the occurrence of completion of a contract (cl 5.2).

    Pangus would engage the selling agent (which, in the event, was Ken Guy) and agreed to indemnify Six Mile Creek against all claims for commission and marketing fees (cl 5.3) while Six Mile Creek agreed to give the agent access to the estate to market it (cl 9).

The put and call deed also provided:

9.2    The Grantee [Pangus] must use its best endeavour to market, advertise and otherwise promote the sale of the Lots as soon as possible after the date of this Deed but otherwise generally in the manner necessary to achieve the payment of the Project Fee to the Grantor [Six Mile Creek] in the time and in the manner detailed in this Deed.

[…]

9.4    The Grantee is responsible for and must ensure that in respect of each Third Party Contract any agent engaged by the Grantee to sell the Lot has compiled with the provisions of PAMDA [the Property Agents and Motor Dealers Act 2000 (Qld)] with respect to the provision of statements and warnings to the third party purchaser prior to the Contract being signed by the buyer.

57    In particular, cl 14.2 prohibited Pangus, without Six Mile Creek’s prior consent, from exercising a call option if it was in default under the put and call option, and cl 18.1 made time of the essence of the put and call option. Clause 24.1 provided:

The parties are to act in good faith towards the other parties in respect of this Agreement including being just and faithful in all activities and dealings with the other party.

58    The two sets of prices in schedule 1 to the put and call option referred to four lots (20, 21, 56 and 60) that a previous agent, Kevin Ball, had already sold and did not comprise part of the total of the project fee. The list price for lot 10 was $537,933 and its minimum resale price was $600,968.

(b) The “sale” of lots in the estate

59    Mr Boulter said that he and Mr McLaughlin formulated together the brochure and the terms of the building covenants (including the height restrictions) and that Mr McLaughlin specifically approved the final form of each of those documents.

60    On 9 June 2007, Mr McLaughlin left Australia and travelled to Ireland. He remained overseas until 12 September 2007. Mr Whitelaw appears to have had day-to-day carriage of the commercial decision-making for Six Mile Creek in Mr McLaughlin’s absence, while Mr McLaughlin’s daughter, Elizabeth Sutton, acted as the office manager and executed contracts under a power of attorney on its behalf. Mr Whitelaw spoke with Mr McLaughlin while the latter was overseas in 2007, about once per fortnight.

61    Initially, Mr McLaughlin had agreed to pay Mr Boulter’s firm, Ken Guy, project marketing fees or commission (as Mr Boulter indicated in his email of 14 June 2007 to Mr De Angelis), but subsequently Pangus took over that obligation under the put and call option.

62    On 20 June 2007, Mr McLaughlin had a telephone conversation with the proposed purchaser of lot 20 (which was not part of the put and call option) concerning the issue of whether he would extend the 30 day settlement date for that purchase. Ultimately, Mr McLaughlin, through Mrs Sutton, advised Chris Baker of Bakers (Six Mile Creek’s solicitors for conveyancing of lots on the estate) that the 30 day settlement period for lot 20 would remain.

63    On 28 June 2007, Pangus defaulted in paying the sum of $6.925 million under the put and call option. Soon after, Mr McLaughlin became aware that Pangus had defaulted, while he was on his holiday in Ireland. Mr De Angelis had made efforts to obtain finance for Pangus to make the outstanding payment during June 2007, before the default occurred and had sought help, through Mr Boulter, from Six Mile Creek and Mr Whitelaw.

64    On 25 July 2007, Rob Buckland of McDonald, Balanda & Associates (MBA), acting on behalf of Trent Caruana, sent a letter to Paul Brennan of Brennans (who acted for Pangus and Mr De Angelis). MBA wrote that they enclosed contracts for lots 10, 43, 44, 45, 50 and 57 signed by their client (the Caruana contracts). They requested that the vendor sign the contracts and return one copy of each to the intending purchaser. The letter stated:

The signing of the Contracts by our client, and submission of same to you for signing by the Seller is subject to and conditional upon the separate Agreement between our client, ACN 097 611 535 Pty Ltd [the ACN company], [Pangus] and [Mr De Angelis] being signed [the Caruana agreement].

65    On 30 July 2007, when Mr Baker received the letter together with the contracts, he sent an email to Mr Whitelaw (he misaddressed the copy of this email that he intended also to send to Six Mile Creek by leaving a letter off its email address). He headed his email, “Deed of Release – Trent and Gus”, referring to Mr Caruana and Mr De Angelis. The heading suggested that the existing commercial relationship between Mr Caruana and Mr De Angelis was already known to Six Mile Creek and Mr McLaughlin. He observed in the email to Mr Whitelaw and its intended recipient, Mrs Sutton, that:

It seems they have done a deal on these 6 lots with someone who has lent finance to Pangus. 2 of the contracts are on terms (180) days that I would imagine will not be acceptable. You will see there are rebates in the agreement which reduce the price and with 1 contract conditions that need to be attended to before it goes unconditional. On the whole I imagine that the terms will not be acceptable to you, but of course I will await your instructions.

66    Mr Whitelaw thought that the Caruana contracts “looked a bit skinny”. Coincidentally, on 27 July 2007, Mr McLaughlin had sent a fax in his handwriting (which was not easily legible) to Mr Whitelaw’s firm without indicating that it was for his attention. Ultimately, Mr Whitelaw received the fax on 31 July 2007 and asked Mrs Sutton to translate it. She wrote back that Mr McLaughlin had written:

Re: Coolum & Gus

Hows [sic] the non payment going. How are sales & settlements? Can u fax me an update

67    Later on 31 July 2007, Mr Whitelaw emailed Mr Baynes of Nicholsons saying that he had spoken to Mr De Angelis that day and they had made arrangements for Mr De Angelis to make an appointment for them to meet later that week. Mr Whitelaw noted that Pangus was in breach of the put and call option and had not paid the $6.925 million. He said that Mr De Angelis had sold approximately nine lots “but 6 are at a relatively low value, but above the release value” (i.e. within the list prices making up the projected $16.112 million). Mr Whitelaw wrote that he had told Mr McLaughlin on the phone on the previous night (30 July 2007):

that we need to start talking to Gus’s agents with a view to cutting Gus loose. We cannot miss the peak selling period which is fast approaching.

(emphasis added)

68    The references to “Gus’s agents” appear to be a reference to Mr Boulter and his firm, and the “peak selling period” to the forthcoming spring and summer.

69    On 6 August 2007, MBA sent to Brennans a signed version of the Caruana agreement. In it, the ACN company had the same address as Pangus and Mr De Angelis and, I infer, it was a related company. The Caruana agreement recited that:

    Mr Caruana and the ACN company were parties to an investment agreement dated 5 October 2006 to develop land at Peregian Beach in Queensland under which Mr Caruana had lent the ACN company $580,000 and Mr De Angelis had guaranteed the obligations of the ACN company to Mr Caruana; and

    the put and call option and the fact that Mr Caruana was desirous of purchasing lots 10, 43, 44, 45, 50 and 57.

70    The Caruana agreement provided that purchases of the six lots in the Caruana contracts would occur relevantly at discounts, including for lot 10, of $290,000, from its price of $895,000 in the price list. The structure of the Caruana agreement was that, notwithstanding the nominal purchase prices in the Caruana contracts, Six Mile Creek as vendor would enter with Mr Caruana as purchaser, as between the De Angelis entities and Mr Caruana, he would only have to pay the discounted price (in the case of lot 10 of $605,000) and the De Angelis entities would be responsible for paying the total difference of $290,000 to Six Mile Creek.

71    The details of this arrangement were not known to those on Six Mile Creek’s part, save for Mr Baker’s deduction in his email of 30 July 2007 that Mr Caruana had “done a deal on those 6 lots with someone who has lent finance to Pangus”. Obviously enough, Mr Caruana’s ability to complete the Caruana contracts depended on Mr De Angelis’ ability to supplement Six Mile Creek’s 50% share of the amount by which the purchase price exceeded the minimum resale price under the put and call option (being, in lot 10’s case, $600,968) and the amounts Mr Caruana would pay under the Caruana agreement. The total difference between the contract prices for the six lots and the prices Mr Caruana had agreed to pay the De Angelis entities was $580,000. The settlement times for lots 50 and 57 were to be 180 days, and for the other four lots, 30 days.

72    Thus, by about 31 July 2007, Six Mile Creek had received the Caruana contracts signed by Mr Caruana and needed to decide whether it would execute them. And, Mr De Angelis was in the position where, to use Mr Whitelaw’s words, if he did not perform, he would be “getting the boot”.

73    On 10 August 2007, Mr Brennan emailed Mr Buckland of MBA and Mr Baker, informing them that, among other matters, the settlement time for lot 10 was to be amended to 37 days from the date of the contract, and all of the Caruana contracts were to be amended by deleting the special conditions that made them subject to the Caruana agreement. Mr Brennan wrote to Mr Baker later that day attaching a copy of Mr Buckland’s email in which he had noted that the Caruana contracts had been delivered to Mr Baker’s office but “stand in “limbo” due to special conditions which your client is not prepared to accept”. Mr Brennan said that Mr Caruana now wished to proceed on the basis that the special conditions be deleted, but that he would require finance and asked whether that was acceptable to Six Mile Creek.

74    Next, on 15 August 2007, Brennans delivered to Bakers contracts for the sale of lots 17 and 18. The purchaser of lot 17 was Leighton Dial, whose address was a post office box in Kent Town, South Australia, at a price of $725,000. A deposit of $1,000 was payable after execution of the contract and 5% of the purchase price was payable later at an unspecified date. The purchaser of lot 18 was Nick Dean Properties Pty Ltd which had exactly the same post office box address in Kent Town as Mr Dial. The price was $715,000, with a deposit of $1,000 payable after execution, together with 5% of the purchase price at an unspecified time. Each of the contracts for lots 17 and 18 incorporated the building covenants with the height restrictions. Nick Dean Properties and Mr Dial signed their contracts on 9 and 10 August 2007 respectively.

75    On 15 August 2007, Mr Brennan emailed Mr Baker the then current position in respect of 15 contracts that Pangus had negotiated thus far. The email noted that lots 47 and 49 had a settlement date fixed and the Caruana contracts had been signed by Mr Caruana and submitted to Bakers. Mr Brennan noted that Mr Caruana’s solicitor had confirmed that the Caruana contracts could be amended by deleting the special conditions that Mr Caruana had sought previously to include in relation to the Caruana agreement. Mr Brennan said that Mr Baker had told him earlier that day that he was awaiting instructions from Mr Whitelaw about a contract for lot 46 that had already been delivered to Bakers and contracts for lots 8, 17, 18, 19, 40 and 48 that Mr Brennan had caused to be delivered to Bakers that day. He added:

It is clearly apparent from the number of contracts in existence that our client has worked very hard and redoubled his efforts since meeting with Mr Whitelaw to discuss the delay. I am instructed to advise that our client visited the Sunshine Coast today in order to negotiate 4 further contracts which shall be available within 48 hours. Further, three more contracts are being negotiated and are likely to be available next Monday.

(emphasis added)

76    The contracts for lots 43 and 44 provided for settlement to take place 30 days from the contract date, but the contracts were subject to Mr Caruana obtaining sufficient finance to complete the contract, to be notified within 14 days of the contract date. The price for lot 43 was $300,000 and for lot 44 was $295,000 and each contract had a deposit of $1,000 payable when the buyer signed the contract, and a further deposit of $4,000 payable 14 days from the contract date.

77    The purchaser in the contracts for lots 8 and 19 was Bolivar Road Pty Ltd, which had an address in Kensington Gardens, South Australia. The price for lot 19 was $725,000, with deposits of $1,000 due on the buyer’s signature and $10,000 payable within 14 days of the contract date. The price for lot 8 was $995,000, with deposits of $1,000 due on the buyer’s signature and $14,000 within 14 days of the contract date. Mr De Angelis had an interest in Bolivar Road, as did his business associate in Pangus, Walid Najjar, although there is no evidence that, at this time, Mr McLaughlin knew of Mr Najjar’s involvement in Bolivar Road. Both contracts incorporated the building covenants and height restrictions and provided for settlement to occur 45 days after exchange (without any conditions such as the contract being subject to finance). Curiously, the price list (as at 14 September 2007) stated that lot 8 had been sold for $795,000. There was no evidence (including of some other extant contract) to explain how that sum, rather than the sum of $995,000 in the contract for lot 8, came to be used in the price list.

78    On 20 August 2007, Mr Whitelaw emailed Mr Baynes to bring him up to date with the current position under the put and call option, noting that “We have told Gus he has to perform or he gets the boot”. That referred to an earlier conversation between Mr Whitelaw and Mr De Angelis to which Mr Brennan’s email to Mr Baker of 15 August 2007 above, in turn, referred (see [75] above). Mr Whitelaw wrote that he had sent Mr De Angelis an email in the previous week informing Mr De Angelis that his finance broker was not performing and “would be the end of him”. The email continued:

We are just giving him enough time to convert his leads to contracts and then a decision will be made, probably this week.

(emphasis added)

79    Mr McLaughlin gave evidence about the above ultimatum that Mr Whitelaw had given Mr De Angelis while he was in Ireland. He had agreed with Mr Whitelaw that Pangus or Mr De Angelis be allowed to convert whatever leads that they had at that particular point in time into contracts because he, Mr McLaughlin, was thinking of terminating the put and call option. He was concerned that Pangus could not actually perform. Mr McLaughlin said that if the leads had been converted into contracts, then Six Mile Creek would be in a lot better position to influence prospective purchasers to take interest in other lots because it could say that those lots had been “sold”. He gave this evidence:

But but good for Six Mile Creek because you were wanting these lots to be sold, particularly as this was the peak period? --- Yes. That’s correct. Yes, yes.

And if lots were sold, it would then enable the agent to inform other purchasers that this particular lot has sold for X or Y dollars and that might influence a prospective purchaser to buy another lot? --- Yes. That yes, that’s the way that real estate works, I think. Yes. Yes.

(emphasis added)

80    On 21 August 2007, Mr Baker emailed Mr Whitelaw and Mrs Sutton copies of the Caruana contracts, together with contracts for lots 17, 18, 40, 46 and 48. He said that there were two more contracts, namely for lots 8 and 19, but that they had not been completed properly and he needed to amend them before sending them. Mr Whitelaw emailed Mr Baker on 22 August 2007 saying that he was preparing a schedule to send over to Mr McLaughlin that night. Mr Whitelaw enquired about what the prices for lots 8 and 19 were and Mr Baker responded with the prices.

81    Importantly, on 22 August 2007, Mr Baker settled a letter with Mr Whitelaw that Bakers sent on 23 August 2007 to Brennans in relation to the put and call option. The letter referred to Pangus’ breach in failing to pay the $6.925 million and previous discussions between Mr De Angelis and Mr Whitelaw on this topic. It stated that Six Mile Creek was not prepared to allow the breach to continue any further and required Pangus to pay default interest of 15% per annum, to apply from 28 June 2007, in respect of the unpaid amount that would continue to accrue until it had been paid in full. Next, the letter required that any funds received from completed contracts be applied, first, in payment of the interest due on the outstanding $6.925 million, secondly, in reduction of the balance of the remaining principal due of $8.687 million and, thirdly, in reduction of the unpaid $6.925 million. The letter stated that nothing would be paid to Pangus until the breach was rectified or the put and call option had been completed.

82    Mr McLaughlin learnt of the contract for lot 8, probably either from Mr Whitelaw’s summary sent on about 22 August 2007 or from earlier reports given to him by his daughter, while he was in Ireland. He gave this evidence about what he appreciated about the contract for lot 8 at that time, which I accept:

And the fact that only $1000 was nominated on this contract was another reason to cause you to think that there was something wrong with this contract? --- Yes. Well, yes, I thought it was, probably, they would never find the money to you know, to pay for it. Yes.

And you see that below the $1000 is $14,000? --- Yes. Yes.

And adding those two sums together obviously gives $15,000, and that is nowhere near a 10 per cent deposit, is it? --- That’s right.

And you know that the option deed with Pangus required third-party contracts, such as this, to provide 10 per cent, didn’t you? --- Correct.

In other words, a deposit of $95,000? --- That’s right.

And you knew that there was something wrong with this contract, didn’t you? --- Yes, well, I thought they would never they had to borrow that sort of money against it, yes.

And you knew also that they wouldn’t be able to actually purchase they wouldn’t be able to complete this contract? --- Yes, and I thought that in my own mind, yes.

(emphasis added)

83    Moreover, Mr McLaughlin knew that lot 8 was a difficult block on which to build a house and “wasn’t one of the better blocks”. He considered that the price of $995,000 was an overpayment. I am satisfied, having seen Mr McLaughlin give evidence about the contract for lot 8, that he knew at the time that he learnt about it, in the second half of August 2007, that it was a commercially unrealistic contract that involved a very substantial overpayment for the lot and was never likely to be completed.

84    Mr McLaughlin said that he did not remember too much about the contracts for lots 8 and 19. Senior counsel for Mr McLaughlin had objected to Mr McLaughlin being asked questions based on documents, such as the contracts for lots 8 and 19, that were open in front of him in the witness box. Senior counsel asserted that it was obvious that Mr McLaughlin was responding to questions about them on the basis that he was reconstructing his evidence from the documents. However, I did not form that impression.

85    I sought to clarify with Mr McLaughlin what his actual evidence was in circumstances where he said it was his practice to look at contracts either when they were made or when he returned to Australia. Mr McLaughlin said, “well I don’t remember too much about them, but I do remember that the deposits [for lots 8 and 19] were very weak and I always thought to myself, these contracts will fall over anyhow, you know. That was my opinion” (emphasis added). Mr McLaughlin said the fact that he knew that Brennans were acting for both Pangus and Bolivar Road caused him to think at this time in late August 2007 that there could be an association between those two companies. Mr McLaughlin learned of the details of the contract for lot 19 at the same time as that for lot 8 and that Bolivar Road was the purchaser for each. He noticed the small amounts of the deposits of $1,000 and $10,000 for lot 19, and considered at the time that “it wasn’t a solid contract”, meaning (in his mind) that it could have fallen over or not proceeded the next day. He gave this evidence:

And you realised that this was not a bona fide contract that would go to completion and result in Bolivar Road Proprietary Limited purchasing Lot 19 for $725,000? ---Yes, well, again, again, I did think it could be a bodgy contract, yes.

(bold emphasis added)

86    Mr McLaughlin said that he was sure that he learned of the details of the contract for lot 17 (and, I infer, all the other contracts for the lots marked as “sold” in the price list to the extent he did not already know of them in Ireland) when he returned on 12 September 2007 or shortly thereafter. When he learned the details of the contract for lot 17, he noticed the deposit was only $1,000 and realised there was something unusual about that contract. He thought, like the other contracts, it was “bodgy”. He gave this evidence concerning not just lot 17 but also each of the contracts for lots 8, 18 and 19:

Yes. And you as at the time you became familiar with the terms of this contract, were of the opinion that because the deposits were very weak, you always asked yourself whether this contract would fall over anyway. Correct? --- Correct. Yes.

And as a result of that state of mind, you didn’t intend that Six Mile Creek would complete this contract, did you? --- No. Well, I wasn’t 100 per cent sure. No.

You agree with me that Six Mile Creek your state of mind was that Six Mile Creek would not be completing this contract, correct? --- Well, I wasn’t, I wasn’t fully sure. No.

[…]

[W]hen you saw the terms of this contract you understood that the contract would not settle, in other words, it wouldn’t go through with Nick Dean Properties Proprietary Limited becoming the owner of Lot 17? --- Well, it looked dodgy. Yes. I said it looked dodgy.

It looked dodgy? --- Yes

So you accept, don’t you, Mr McLaughlin, that the four contracts I’ve taken you to, you formed the view when you saw them that they looked dodgy? --- Yes.

(emphasis added)

87    Mr McLaughlin had serious doubts that the purchaser under each of those four contracts would ever be able to come up with the funds to become the owner of the lot, although he was not 100% certain of that outcome. He said that, as at late August and early September 2007, he considered that the contracts for lots 8, 17, 18 and 19 “were very dicey”. That accords with a contemporaneous note that Alan Cumming, a partner of Bakers, later made when taking instructions from Mr McLaughlin on 25 September 2007, in which he said that he regarded those contracts and the Caruana contracts as “all a joke” as explained at [109] below.

88    On 24 August 2007, Brennans replied to Bakers’ letter of 23 August 2007 confirming that Pangus accepted all of the terms of the offer made in that letter, including the requirement to pay interest at 15% per annum on the overdue $6.925 million.

89    On 24 August 2007, Mrs Sutton, under a power of attorney on behalf of Six Mile Creek, executed the contracts for lots 10, 17, 18, 45, 50 and 57 and, on 27 August 2007, Bakers wrote to MBA enclosing some of those executed contracts. On 29 August 2007, Mrs Sutton returned the contracts for lots 8 and 19 to Bakers noting that they did not appear to include the building covenants signed by the purchaser.

90    On 3 September 2007, Mr Cumming wrote to Mrs Sutton enclosing a copy of a transfer form for registration at the Queensland land registry in favour of Mr Caruana, as transferee, for a consideration of $895,000 in respect of lot 10. The letter noted that the purchaser “was to have paid an initial deposit of $1,000.00 upon signing of the Contract, with the balance deposit of $4,000.00 payable by Friday, 7 September 2007” and that the contract was subject to finance being obtained by 7 September 2007 (original emphasis). There is no evidence that Mr Caruana paid any deposit on lot 10. I infer that he did not do so because the ACN company already owed him $580,000. Also on 3 September 2007, Mr Cumming wrote in similar terms to MBA, who acted for Mr Caruana, stating that he was to have paid the initial $1,000 deposit on signing the contract for lot 10. Mr Cumming also wrote similar letters on 3 September 2007 to MBA in respect of lots 43, 44 and 45, each of which referred to the requirement that the initial deposit of $1,000 was to have been paid on signing the relevant contract.

91    On 5 September 2007, Mrs Sutton executed the transfer form in respect of lot 10 and a discharge authority addressed to the Commonwealth Bank from Six Mile Creek, requesting it to inform Bakers of any information or documentation the bank required to complete a sale of the lot. The respondents argued that their contemporaneous conduct in pursuing routine conveyancing steps such as this in anticipation of the completion of these contracts were indicative of their state of mind, namely that the contracts were not unusual and that they expected them to be completed. However, I do not consider that this conduct takes matters beyond Six Mile Creek putting itself into the position that it would be ready, willing and able to complete if, in the event, a purchaser was also in a position to complete, and that it could provide evidence of this being its position if it terminated a contract for a purchaser’s breach. That was a prudent conveyancing step, particularly in light of the respondents’ contemplation that Pangus and its associates would be unable to raise the money to fulfil their various contractual obligations.

92    On the same day, Mr Cumming wrote to Mrs Sutton concerning lot 19, reminding her that the buyer was to have paid an initial deposit of $1,000 on the signing of the contract and a balance of $20,000 by 12 September 2007, with settlement due on 15 October 2007.

93    On 5 September 2007, Mr Buckland of MBA wrote to Mr Brennan about the Caruana contracts, noting that all the contracts were dated 24 August 2007 and that the 14 day finance period would expire on the following Friday, 7 September 2007. Mr Buckland said that finance approval would not be available by that date and sought an extension of time, adding “My client [Mr Caruana] has told me his finance application has stalled as he is waiting for a ‘letter of irrevocable authority’ from your client [Pangus]. My client is going to call your client re the letter”. Mr Brennan replied shortly afterwards on 5 September 2007 in an email saying that he would shortly send an amended deed of agreement dealing with a handwritten agreement between their respective clients for approval, and reminding Mr Buckland that the irrevocable authority was one of the terms of that handwritten agreement. Mr Buckland responded immediately afterwards saying that Mr Caruana was still a bit unclear about the “letter”.

94    On 7 September 2007, MBA wrote to Bakers seeking extensions of time for the Caruana contracts in order to obtain finance to 21 September 2007 for lot 10 and to 5 October 2007 for the other five lots. On the same day, Bakers wrote to MBA in respect of lot 57, noting that the balance of the deposit of $4,000 was due that day and that settlement was scheduled for 20 February 2008.

95    On 10 September 2007, Bakers wrote to Brennans separate letters in respect of lots 17, 18 and 19, and the Caruana contracts. Bakers noted that the contract for lot 17 was subject to Mr Dial obtaining finance approval by 14 September 2007 and paying the total deposit of $37,250 by 24 August 2007. They sought confirmation that Brennans were holding that total deposit in their trust account. The letter noted that settlement was due on 23 October 2007. In respect of lot 18, Bakers wrote that the contract was subject to the conditions that finance be approved on the date of the letter, namely 10 September 2007, and that Nick Dean Properties pay the total deposit of $36,750 by 24 August 2007. They sought confirmation that Brennans was holding that total deposit in their trust account. The letter confirmed that settlement was due on 22 November 2007.

96    Bakers’ letter in respect of lot 19 noted that the contract was subject to the condition that Bolivar Road pay the balance of the deposit of $20,000 by 12 September 2007 and that settlement was due on 15 October 2007. The letter in respect of the Caruana contracts confirmed that Six Mile Creek had granted an extension to 21 September 2007 of the finance date for lot 10, with time to remain of the essence, and that Bakers were awaiting final instructions from Six Mile Creek in respect of the requests concerning lots 43, 44, 45, 50 and 57.

97    On 10 September 2007, Mr Brennan wrote two emails to Bakers. The first was in respect of lot 18 and sought an extension of two weeks to the finance date that was due to expire that day. In the second email, Mr Brennan noted that he was also acting for the buyer of lot 17 for which the finance date was 14 September 2007. Mr Brennan stated that finance was being arranged by the same broker as for lot 18, and referred to his earlier email and sought a similar extension of two weeks for lot 17 with time to remain of the essence. Both emails made no response to Bakers’ requirement of confirmation that the two deposits had been paid into Brennans’ trust account. The absence of this confirmation supports the inferences, that I draw, that first, Brennans held no deposits for either lot 17 or 18 in their trust account and, secondly, Six Mile Creek and Mr McLaughlin understood this by around 12 September 2007.

98    On 11 September 2007, Bakers wrote to Brennans advising that Six Mile Creek had granted extensions of the finance conditions in both contracts for lots 17 and 18 to 24 September 2007.

99    The correspondence above suggested a clear connection between the purchasers’ efforts in seeking finance for both lots 17 and 18, in circumstances where Mr Brennan was also acting for Pangus and Mr De Angelis.

100    Mr McLaughlin said that he visited the site office on lot 10 soon after his return from Ireland, on 12 September 2007, and met Mr Boulter then. Mr McLaughlin was aware at this time that Mr Boulter was marketing lots on the estate and providing members of the public with the brochure, a price list and information about the lots. Mr McLaughlin said that Six Mile Creek provided the information in the price list that Mr Boulter used.

101    On 12 September 2007, Bakers wrote to the Commonwealth Bank in respect of lot 10, noting that settlement was due on 1 October 2007, and seeking that the bank organise itself to be in a position to grant a release of that lot from Six Mile Creek’s mortgage of the estate if the purchaser completed.

102    On 19 September 2007, Mr Cumming emailed Mr Brennan concerning three different contracts. Significantly, the email stated that Six Mile Creek agreed to Bolivar Road’s proposal to “swap” its contract to buy lot 19 with a new contract to buy lot 9 if Bolivar Road delivered a signed copy of the new contract (for lot 9) that included a waiver of any cooling off period. Mr Cumming wrote that if Six Mile Creek were satisfied with the terms of the new contract, it would terminate the existing contract for lot 19 “on the basis of your client’s [Bolivar Road’s] failure to pay the deposit”. Next, Mr Cumming wrote that Bolivar Road was in default under the contract for lot 8 for failure to pay the deposit. The email requested that Bolivar Road immediately remedy that default by paying $15,000 into Brennans’ trust account, noting that Six Mile Creek reserved its rights in respect of that breach. I infer that Bolivar Road had not paid any deposit for lots 8 and 19 and that, at this time, Six Mile Creek and Mr McLaughlin were aware of this.

103    On 20 September 2007, Bakers wrote to MBA in respect of lots 43, 44, 45, 50 and 57 informing MBA that Six Mile Creek agreed to an extension of the finance date to 5 October 2007 for all of those contracts, on condition that “given that your client is in default of the Contract for failure to pay the Deposit, our client requires your client to pay to Brennans Solicitors Trust Account a non-refundable deposit in the amount of $10,000.00 for each lot by Friday, 21 September 2007” and that the settlement date for the contracts was to remain unaltered. The letter went on to say that if Mr Caruana agreed to those conditions and subsequently failed to obtain finance, the deposit would be forfeited.

104    On 20 September 2007, Bakers wrote to Brennans informing that the purchaser of lot 17 was in default “for failure to pay the Deposit” and stating that Six Mile Creek required Mr Dial to pay the deposit of $37,250 to Brennans’ trust account by no later than 21 September 2007.

105    By 21 September 2007, it was becoming increasingly obvious to all concerned that Mr Caruana was in considerable financial difficulty in raising money to proceed with the purchase of any of the six lots for which he had contracted. On that day, he emailed his solicitor, Mr Buckland, under the heading “Update on the mess”. Mr Caruana wrote that he had spoken to Mr De Angelis about “how to deal with Six mile creek (Danny)” and that Mr De Angelis had advised that Mr Caruana needed to show that he had attempted to get finance but had been required to bring one of his other properties in as security, which had delayed the approval process. Mr Caruana asked that Mr Buckland negotiate an extension for completion of the contracts for lots 43, 44 and 45 for a further six months and instructed him to offer a non-refundable deposit of $2,000 for each lot. He asked that Mr McLaughlin be informed that Mr Caruana would need to sell two properties in order to obtain finance to purchase lots 43, 44, 45, 50 and 57. As he observed, “My take on it is that what we are asking is probably going to be rejected by Danny and he will cancel the contracts. This will take us back to square one”. Mr Caruana then turned to the contracts between himself and Mr De Angelis. Understandably, Mr Caruana was concerned about the $580,000 that Mr De Angelis or his companies still owed him in respect of the Peregian Beach development (see [69] above). Mr Caruana was proposing to use a second mortgage offered by Mr Najjar, in support of Mr De Angelis and Pangus, to enable him to finance the purchase of lot 10. Mr Caruana accepted that he was in default and Mr McLaughlin had the right to cancel the six contracts.

106    As a consequence, later on 21 September 2007, Mr Buckland wrote to Bakers in respect of the Caruana contracts. He noted that Mr Caruana was pursuing finance approvals for lot 10 as expeditiously as possible, but that the financier for lot 10 had asked Mr Caruana to include another property as security which had delayed the approval. The letter sought an extension for Mr Caruana to obtain finance for lot 10 to 28 September 2007. It also sought an extension of time in which lots 43, 44 and 45 could be settled to six months so as to bring them in line with the settlement dates for lots 50 and 57. MBA proposed, on behalf of Mr Caruana, for a non-refundable deposit of $2,000 to be payable in respect of each lot (excluding lot 10) by 28 September 2007. The letter said that finance approval for lots 43, 44, 45, 50 and 57 was available subject to Mr Caruana being able to sell two other properties.

107    Bakers forwarded that correspondence later on Friday, 21 September 2007 to Mr McLaughlin and Mrs Sutton seeking instructions. The following Monday, 24 September 2007, Mr McLaughlin instructed Mr Cumming, as recorded in his file note, that a $2,000 deposit was too low for a six month settlement period and insisted on a deposit of $10,000. Mr McLaughlin said that if Mr Caruana was “serious”, there needed to be “hurt money”. Mr McLaughlin told the solicitor that he thought that the Caruana contracts would just be rolled along by Mr Caruana. He said that the price for lot 10 was $895,000. Mr Cumming raised a concern that Mr Caruana might pull out if Mr McLaughlin did not agree to his terms and that settlement was due on 1 October 2007. Mr McLaughlin said that he would speak to Mr Whitelaw and revert with his instructions to Bakers.

108    Also on 24 September 2007, Bakers emailed Mr Brennan concerning lots 17 and 18 noting that finance approval for those lots was due on that day. Shortly afterwards, Brennans responded in letters on behalf of each of Mr Dial and Nick Dean Properties seeking an extension to 7 October 2007 for finance to be granted and Mr Cumming immediately sought instructions from Six Mile Creek about that.

(c) The circumstances in which Six Mile Creek came to sell lot 10 to Mr and Mrs Eckford

109    Significantly, on 25 September 2007, Mr McLaughlin told Mr Cumming, as recorded in Mr Cumming’s file note, that he (Mr McLaughlin) considered that the extension applications for lots 10, 17, 18, 43, 44, 45, 50 and 57 “were all a joke”. Mr McLaughlin told Mr Cumming that he had “been in the game a long time” and that contracts were “not worth anything until they settle”. He said that he would let Mr Cumming know, the following day, what his decision was.

110    By mid to late September 2007, Mr McLaughlin gave evidence that he had familiarised himself with all the contracts that Mrs Sutton had signed while he was away and had discussed with Mr Boulter using up-to-date information in the price lists. Mr McLaughlin said that he had no doubt that he visited Mr Boulter on site in September 2007 and was aware that Mr Boulter was engaging with members of the public about the sale of lots because that was his job, including providing them with the brochure and the price list.

111    Mr McLaughlin agreed in cross-examination that Six Mile Creek provided Mr Boulter with the information used in the price list. However, the respondents argued that I should not accept this admission on the basis that it conflicted with what Mr Boulter had said that the information in the price list was compiled by persons working in the office of his real estate agency, Ken Guy. I reject that argument. Mr Boulter’s office had to ascertain from the vendor, Six Mile Creek, whether any particular lot had in fact been “sold”. That is because Pangus had to submit contracts under the put and call option for Six Mile Creek to decide whether or not it would accept, and then execute, them. On any view, the word “sold” could only properly be applied once both the purchaser and Six Mile Creek, as the vendor, agreed that the sale was going to proceed by each of them exchanging a contract. Once Six Mile Creek, in fact, had exchanged a contract, Mr Boulter and his firm would be informed that the property was “sold”. It was in Six Mile Creek’s interest to ensure that this information was provided promptly to Ken Guy, Mr Boulter or his office because, as Mr McLaughlin knew and intended, use of that information would enhance the agents’ ability to market the estate (see [79] above).

112    In my opinion, what both Mr Boulter and Mr McLaughlin said reflected two sides of the one coin, namely, each man’s perspective on how the information in the price list in fact was compiled. For Mr Boulter, the price list itself was made from information that his office had, but the source of that information (given that he had been trying to effect the sale) received in his office, must have been the vendor (directly or indirectly through the solicitors acting for one or both of the parties to the proposed transaction) communicating it to the real estate agency. It was only when Six Mile Creek was bound under a contract that Mr Boulter or his firm could have used the word “sold” in the price list with any confidence, and Mr McLaughlin wanted Mr Boulter to have and use that information.

113    On 26 September 2007, Bakers wrote to Brennans in respect of lots 17 and 18 and to MBA in respect of the Caruana contracts. Bakers advised Brennans that Six Mile Creek had agreed to extend the finance date to 5 October 2007, with time to remain of the essence. Bakers informed MBA that Six Mile Creek agreed to extend the finance date for lot 10 to 28 September 2007, but did not agree to the payment of a non-refundable deposit in the amount of $2,000 for each of lots 43, 44, 45, 50 and 57 and required a non-refundable deposit in the amount of $10,000 for each lot to be paid by 28 September 2007. The letter said that if Mr Caruana agreed to those conditions, Six Mile Creek would agree to the extension of the settlement dates and to change the finance dates as sought in MBA’s letter of 21 September 2007, with time to remain of the essence.

114    Also on 26 September 2007, Mrs Sutton emailed Mr Cumming and Mr Baker, raising queries about matters that her father, whom she called “the Boss”, had raised based on Mr Whitelaw’s latest summary of the contractual position of sales and settlements for the estate relating to lots 8, 9, 17, 25, 40 and 55. Later that day, Mr Baker emailed Mr McLaughlin telling him that he had a new contract that he would send for lot 19 with a sale price of $565,000 and a deposit of $29,750, subject to a satisfactory soil test within 14 days and settlement in 45 days. Mrs Sutton responded later that day noting that lot 19 already had a buyer and asking Mr Baker to check the lot number, prompting Mr Baker to ask Mr Cumming what was happening with the current lot 19 contract and whether it had been terminated at that stage.

115    On 26 September 2007, Bakers made arrangements with the Commonwealth Bank to attend at settlement for lot 10 at 3pm on 1 October 2007. But, on the same day, MBA wrote to Bakers seeking an extension of the settlement date for lot 10 to 1 November 2007 saying that “Obviously our client’s financier (assuming he receives finance approval) will not be ready for settlement” on 1 October 2007.

116    Later on 26 September 2007, Mr McLaughlin spoke with Mr Cumming about that letter and instructed Mr Cumming to respond that he would agree to an extension of the settlement date to 1 November 2007 for lot 10 on condition that Mr Caruana pay a non-refundable deposit of $10,000 by Friday 28 September 2007, with time to remain of the essence. However, Mr McLaughlin instructed Mr Cumming not to terminate the contract in the same letter. Mr Cumming wrote to MBA as instructed on 27 September 2007.

117    On 28 September 2007, MBA responded on Mr Caruana’s behalf in respect of the contract for lot 10, saying that he could not give any advice about obtaining finance approval on that day and could not agree to the condition that Six Mile Creek had imposed on the extension of the settlement date to 1 November 2007. Notwithstanding that, MBA asserted that Mr Caruana wanted to proceed with the matter and “regrets the delays and inconvenience caused to your client in this regard”. He attached an email addressed to Mr McLaughlin that Mr Caruana had sent to MBA, and asked that this be forwarded to Mr McLaughlin. The letter concluded by seeking an extension for finance approval to 26 October 2007 and for settlement to occur by 23 November 2007. Mr Caruana’s email, dated 28 September 2007, introduced himself and said, “By now you would be asking yourself whether I am serious about completing the contracts because I have asked for finance extensions and settlement date extensions”. He asserted that due to current business dealings “out of my control”, he could not obtain finance approval immediately and that his financier had predicted that it would take up to four weeks to settle lot 10 but that he was still working on seeking to achieve it. He said that he felt “a deal of reluctance to pay the deposits when the business dealings are as yet not sorted out. I understand that you can cancel these contracts” but expressed hope that Mr McLaughlin would enter into further contracts with him in the future when his financial position changed, and apologised for not being able to complete the contracts at that stage. Mr Cumming forwarded MBA’s letter and Mr Caruana’s email to Mr McLaughlin for instructions later on 28 September 2007.

118    In the meantime, unbeknownst to Mr McLaughlin, on 27 September 2007, the National Australia Bank had advised Mr De Angelis that it was not prepared to provide finance to support Pangus’ obligations under the put and call option. Indeed, the bank noted that features of Mr De Angelis’ proposal that it found unacceptable included that Pangus did not acquire title to the estate but simply had certain rights to sell parcels under the put and call option in circumstances where the bank was being asked to provide Pangus with funding of $6.9 million supported by a third party mortgage given by Six Mile Creek (as contemplated by cl 10 of the put and call option). The bank noted that it had become apparent that Six Mile Creek was not prepared to provide the bank with a guarantee creating liability on its part under the mortgage that Pangus wanted it to grant to secure Pangus’ proposed borrowing to pay the overdue $6.925 million.

Mc McLaughlin’s state of mind at the time of the making of the representation

119    Mr and Mrs Eckford first visited the estate shortly before their second visit which was probably on 29 September 2007. As is apparent from the above, Mr McLaughlin was intimately involved in giving instructions to his solicitors, his daughter and Mr Whitelaw about how to progress the various contractual and financial matters affecting his and Six Mile Creek’s interests. He knew by now that Mr Caruana actually could not complete the Caruana contracts at that time, reaffirming the view that he had formed previously that those contracts, along with those for lots 8, 17, 18 and 19, were “not worth anything unless they settle”. Moreover, on about 19 September 2007, Mr McLaughlin knew that the contract for lot 19 would be terminated because Bolivar Road wanted to “swap” it for lot 9 even though that termination had not occurred by late September 2007. Bolivar Road was a company related to Mr De Angelis and Pangus. Pangus was by now three months in default of paying the $6.925 million due as the second instalment of the put and call option. Mr McLaughlin knew that the purchasers of lots 17 and 18, Mr Dial and Nick Dean Properties, had requested and been granted two extensions of two weeks, first, on 10 September 2007 and, secondly, on 24 September 2007, of the date by which they could obtain finance to 5 October 2007. There is no evidence that any of the previously unpaid deposits for lots 17 and 18 had been paid at this time, or subsequently.

120    I find that Mr McLaughlin was aware by late September 2007 that the purchaser for each of lots 17 and 18 had paid no money at all as deposits on those contracts and “having been in the game a long time”, he knew that although those contracts were “not worth anything until they settle”. Mr McLaughlin considered those extension applications to be demonstrative of contracts that he regarded as “dodgy” or “bodgy”, as he said in the witness box.

121    Mr McLaughlin was an astute businessman who involved himself in the oversight of sales on the estate. He understood that Pangus was doing whatever it could to keep Six Mile Creek from terminating the put and call option. He saw the contracts that Pangus had arranged in August 2007 with the South Australian purchasers, Mr Caruana, Bolivar Road, Mr Dial and Nick Dean Properties as “all a joke”. That was because, by 25 September 2007, the purchasers in each of those contracts had exhibited the same lack of financial resources as Pangus was displaying. Moreover, first, the price for each of those lots was higher than the minimum resale price in the put and call option (indeed the price for lot 8 was uncommercially high), secondly, the contract for each required a deposit of only $1,000 that did not exhibit the purchaser’s commitment (such as with Bolivar Road’s contracts for lots 8 and 19 where Mr McLaughlin thought that the deposits were “very weak…and these contracts will fall over anyhow”), thirdly, most of those contracts also required a subsequent payment of a further deposit (still short of 10% of the purchase price) that were the subject of extension requests and never appeared to have been paid, fourthly, many of the contracts were subject to finance and, by 25 September 2007, the purchasers were seeking a second extension to obtain finance without having paid any substantive deposit at risk of forfeiture and, fifthly, Mr Caruana appeared to be trying to recoup all or some of an earlier investment he had made with Pangus in his contracts in circumstances where Pangus had no cash and had agreed to pay 15% per annum (or $1,038,750 per annum) from 28 June 2007 on the outstanding debt of $6.925 million when its only realistic prospect of funding such a payment would be from profits derived from sale of lots on the estate.

122    I find Mr McLaughlin’s state of mind to have been that, on 25 September 2007 and thereafter until each contract was terminated, the Caruana contracts and the contracts for lots 8, 17, 18 and 19 were “all a joke”, as he told Mr Cumming. But, he wanted to use their existence as a means to market other lots in the estate because, as he said in evidence, “that’s the way real estate works” (see [79] above). And that is what Six Mile Creek and he did with those contracts, in using, or authorising Mr Boulter to use, the price list (being that dated 14 September 2007) in dealing with persons in the position of Mr and Mrs Eckford.

The events following Mr Boulter’s meeting with the Eckfords

123    On Monday, 1 October 2007, at 8.23am, Bakers forwarded MBA’s letter of 28 September 2007 to Brennans informing them that they were awaiting Six Mile Creek’s instructions. However, at 1.40pm that day, Bakers wrote to MBA terminating the Caruana contracts on the basis that Mr Caruana had failed to obtain finance approval by the finance date (which by then had been extended only to 28 September 2007) and had not complied with Six Mile Creek’s conditions for granting a further extension. The letter stated that the contracts were then at an end. Thus, Six Mile Creek was free to sell lot 10 to Mr and Mrs Eckford. I infer that this occurred after Mr Boulter had informed Mr McLaughlin that he had people (namely Mr and Mrs Eckford) genuinely interested in purchasing lot 10.

124    Also on 1 October 2007, Bakers wrote to Brennans terminating the contract for lot 19, on the basis of Bolivar Road’s failure to pay the balance of the deposit. There is no evidence that this termination was connected to any “swap”, as Bolivar Road had proposed originally in respect of lot 9, which remained for sale (see [102] above).

125    On 5 October 2007, Bakers wrote to Brennans separately about lots 17 and 18, noting that the finance approval for each contract was due that day and enquiring whether Brennans held the full deposit. Brennans replied saying that Mr Dial had not given them instructions and added, “We are advised that he works on the oil rigs in the north of Australia”. Brennans responded on behalf of Nick Dean Properties seeking an extension to obtain finance until 19 October 2007 and added that Nick Dean Properties had sold a property, the sale of which would complete in two weeks’ time, at which point it would pay the deposit specified in the contract for lot 18. Brennans added that Nick Dean Properties would pay $2,000 into Brennans’ trust account on the following Monday, 8 October 2007, as a part payment of the deposit, adding that if this was not acceptable, Six Mile Creek should accept the letter as notice that the contract was terminated because the purchaser had been unable to obtain finance. I infer that, by no later than soon after Bakers received this correspondence, the respondents were aware that neither Mr Dial nor Nick Dean Properties had paid anything yet as a deposit on lots 17 and 18.

126    As noted in [44] above, on 5 October 2007, Ken Guy sent Mr and Mrs Eckford the proposed contract for lot 10 and associated documents.

127    On 8 October 2007, Bakers wrote to Six Mile Creek and Mr McLaughlin. The first letter attached Brennans’ letter of 5 October 2007 in respect of lot 18, noting that when the property settlement of Nick Dean Properties’ sale occurred, it would pay the full deposit of $36,750 and, in the meantime, Nick Dean Properties would pay $2,000 as part payment of the deposit on 8 October 2007. The second letter was in respect of lot 17, attaching Brennans’ letter of 5 October 2007 and noted that finance approval had been due by 5 October 2007.

128    On 9 October 2007, Brennans wrote again to Bakers concerning lot 18, saying that they had not received the sum of $2,000, but had received a copy of a contract for the sale of five lots in South Australia by Nick Dean Properties. Those properties appeared to be home units. Brennans advised that settlement of that attached contract was due on 26 October 2007 and that they believed that Nick Dean Properties, after that time, would be able to pay the deposit. They also noted that completion of that contract would not affect their client’s ability to obtain finance.

129    On 10 October 2007, Bakers wrote to Brennans about lot 18, noting that Six Mile Creek had agreed to extend both the finance date, along with the date for payment of the total deposit, to 26 October 2007.

130    On the same day, Bakers advised Brennans in respect of lot 17 that:

Our client [Six Mile Creek] has instructed us to request that the agent continues to market the property for sale.

If our client receives another offer on the property, it is likely that our client will terminate this Contract unless your client confirms that he has obtained finance and pays the deposit.

(emphasis added)

131    Mr Cumming emailed Mr Boulter shortly afterwards on 10 October 2007 noting, in relation to lot 17, that the deposit was payable on 24 August 2007 and finance approval was due on 5 October 2007. Mr Cumming conveyed Bakers’ instructions “to request that you place Lot 17 back on the market”. The email noted that if Mr Boulter obtained another offer in respect of lot 17, it was likely that Six Mile Creek would terminate the existing contract unless the current purchaser declared it to be unconditional and paid the deposit.

132    Thus, as at 10 October 2007, the position continued to be, to the respondents’ knowledge, that no deposit had been paid for either of lots 17 or 18 and, in addition, lot 17 was “back on the market”.

133    On 12 October 2007, Mr Brennan wrote to MBA requesting Mr Buckland to obtain Mr Caruana’s instructions as to whether or not he would be “prepared to reenter [sic] the contracts for Lots 10, 43, 44, 45, 50 and 57”. Mr Brennan then asked Mr Buckland to send an email confirming Mr Caruana’s willingness, if he expressed it, to proceed with the purchase of the remaining unsold lots and what the terms would be, adding “We intend to send a copy of your email to Bakers Lawyers to demonstrate that our client does have willing purchasers” (emphasis added).

134    Also on 12 October 2007, Brennans, on behalf of Pangus, wrote to Bakers attaching a number of documents that suggested that Pangus was working towards obtaining finance. The letter sought to demonstrate Pangus’ “commitment to achieving a goal of the early payment of your client in the shortest possible time possible in the circumstances. We believe that this is the “concrete” assurance that you require”. The letter went on to say that:

As far as the Caruana contracts are concerned your client did have a choice as to whether or not the contracts were terminated. Now your client can see that our client is working towards the solution we trust that he will not do anything further to make matters worse.

(emphasis added)

Brennans stated that they had written to Mr Caruana’s lawyer on the same day requesting a letter confirming that he would be prepared to re-enter into the contracts, except that for lot 10 that was being sold to another purchaser (obviously Mr and Mrs Eckford). The letter said that Brennans did not believe that it was fair for Six Mile Creek to complain about the lack of contracts when it had cancelled six of those (being the ones with Mr Caruana).

135    Brennans said 10 lots were “in progress” as at 12 October 2007, namely four contracts where the purchasers had paid only $1,000 each as a deposit, one that was subject to finance where a purchaser had paid a part deposit of $2,000, and two unconditional contracts where the purchaser had paid no deposit at all. Only one of the contracts in progress had had a full deposit paid, but that contract had not been signed. Pangus was still in default in respect of the $6.925 million that, by now, was almost four months overdue. Brennans asked for an extension of settlement (by Bolivar Road) on lot 8 to 2 November 2007 (which was within the timeframe that their letter outlined by which Pangus hoped to raise finance to be able to satisfy its obligations). The letter also stated that five purchasers had cancelled their contracts and asserted the above activity was “hardly a sign of a lack of effort on the part of our client or the Real Estate Agents”. The letter also noted that four lots had settled.

136    On 15 October 2007, Bakers responded, agreeing to an extension but only to Thursday, 18 October 2007, with time to remain of the essence, and on condition that Bolivar Road pay the total deposit of $15,000 into Bakers’ trust account by 5pm on 17 October 2007, in which case settlement would be extended to 2 November 2007. Brennans responded later that day under the heading “Pangus Pty Ltd – Avalon@Coolum – Lot 8” agreeing to the proposal, subject to settlement being extended to 15 November 2007 in order to ensure that funding would be available to settle.

137    On 16 October 2007, Peacockes Solicitors, acting on behalf of Mr and Mrs Eckford, wrote to Bakers advising that the contract had been signed and that they held a cheque for $88,500, being the balance of the deposit payable to Brennans’ trust account. They requested some amendments to the contractual terms and made an enquiry, based on their understanding that an option had been entered into between the vendor and Pangus, adding:

Furthermore Special Condition 6 entitles [Pangus] to enter a caveat. Are you aware whether Pangus intends to enter a caveat and if so, the reasons for such caveat being entered into[?]

138    On 18 October 2007, Bakers sent to Six Mile Creek a contract for sale of lot 25 from Aerodrome Pty Ltd for it to sign. On 1 November 2007, Mr McLaughlin handwrote on his copy of that letter that he would agree to a 90 day settlement provided that this contract was unconditional and a non-refundable deposit of $29,750 was paid. When challenged in cross-examination about the imposition of the term for the non-refundable deposit, Mr McLaughlin sought to say that he had not been able to make a similar stipulation for lots 17, 18 and 19 because Mr De Angelis was in control of selling those properties. I do not accept Mr McLaughlin’s explanation. That is because he had power to determine whether or not he, on behalf of Six Mile Creek, would sign any contract that Pangus had presented under the put and call option, when Pangus was in default. His decision to insist on a substantive deposit in this instance demonstrated that he could have made similar stipulations about lots 17, 18 and 19, had he decided that to do so was in his or Six Mile Creek’s commercial interest.

139    On 19 October 2007, Mr Brennan emailed Peacockes with a draft letter from Mr and Mrs Eckford to Pangus, offering a licence of lot 10 to enable Pangus to maintain the site office there for a fee of $200 per week, terminable on one month’s notice. After they purchased lot 10, Mr and Mrs Eckford granted a licence on those terms.

140    On 26 October 2007, Bakers and Brennans exchanged letters about lot 18 for which finance approval was due that day. Brennans responded that they were unable to make contact with their client, and sought an extension over the weekend until the following Monday. On 30 October 2007, Bakers wrote to Brennans in response to a telephone conversation that the solicitors had had, agreeing to extend the finance date for lot 18 to Wednesday, 31 October 2007 and also making that the date for payment of the total deposit.

141    On 1 November 2007, Six Mile Creek sought to exchange a contract with Aerodrome for the sale of lot 25, requiring payment of $335,000 and requiring payment of the deposit of $29,750 within one business day.

142    However, on 2 November 2007, Thompson McNichol, as solicitors for Aerodrome, wrote to Bakers referring to an earlier email of 17 October 2007, in which Aerodrome had offered to buy both lots 19 and 25 as a joint offer. They pointed out that Aerodrome was not prepared to be bound unless it could purchase both lots. The letter stated that Aerodrome was prepared to effect settlement on 3 December 2007 if contracts for the sale of lot 25 were also exchanged. On 7 November 2007, Bakers responded to Thompson McNichol extended the time for payment of the deposit on lot 19 to 12 November 2007, and indicated that a signed contract for lot 25 was being sent by post.

143    On 7 November 2007, Bakers asked Brennans whether Mr Dial had returned from the oil rig or they held any instructions in relation to sale of lot 17. On the same day, Bakers wrote to Brennans about lot 18, noting that finance approval and payment of the deposit had been due to occur on 31 October 2007, but that Bakers had received no information about those matters. They asked whether Nick Dean Properties had received finance approval and paid the deposit.

144    On 8 November 2007, Bakers wrote to Six Mile Creek confirming that the contract for lot 8 was then unconditional and that settlement was due to occur on 15 November 2007. On the same day, Brennans replied to Bakers advising that they had no instructions in respect of either lots 17 or 18.

145    On 8 November 2007, Thompson McNichol wrote to Bakers advising them that Aerodrome had been in discussion with Pangus and understood that it would be appropriate for the dates for payment of the deposits under each of the contracts for lots 19 and 25 to be extended to 1 December 2007, and that settlement for lot 19 occur on 10 December 2007 and for lot 25 on 1 March 2008. Bakers replied on 12 November 2007, agreeing to the amendments on condition that deposits were paid by 16 November 2007.

146    On 16 November 2007, Bakers wrote an email to Six Mile Creek, advising them that the purchaser of lot 8, Bolivar Road, did not agree to pay an additional $5,000 “and wanted to include this Lot as part of the whole package as the Buyer is a related company of Pangus” (emphasis added). Mr Cumming said that as Bakers could not obtain instructions from Six Mile Creek, they had decided to tender at the settlement meeting, and to reserve the vendor’s rights to terminate the contract and forfeit the deposit. The email also advised that Aerodrome had now terminated the contract for lot 19 so that both contracts for it and lot 25 had been terminated.

Mr and Mrs Eckford and Six Mile Creek exchange contracts

147    On 20 November 2007, Mr and Mrs Eckford and Six Mile Creek exchanged contracts for lot 10.

148    On 5 December 2007, Six Mile Creek’s solicitors wrote to Pangus giving notice under the put and call option for Pangus to remedy its default in failing to pay the $6.925 million due on 28 June 2007. On 14 December 2007, Six Mile Creek terminated the put and call.

149    I infer that Six Mile Creek terminated the contract for lot 8 soon after 16 November 2007 and, certainly by 14 December 2007, when it terminated the put and call option. (The respondents admitted in their further amended defence that the contract for lot 8 was terminated not before 17 November 2007).

150    On 11 January 2008, Mr and Mrs Eckford settled their purchase of lot 10.

151    On 21 January 2008, Bakers wrote to Brennans in respect of lot 18, noting that finance approval had been due on 31 October 2007 and, given the delay, Nick Dean Properties had clearly evinced an intention not to be bound by the contract and, accordingly, Six Mile Creek terminated it. On the same day, Bakers wrote a similar letter to Brennans in respect of lot 17, noting that finance approval had been due on 5 October 2007, and that Six Mile Creek terminated the contract for lot 17.

152    On 1 February 2008, Pangus began proceedings in the Supreme Court of Queensland against Six Mile Creek in respect of the termination of the put and call option, relying on Six Mile Creek’s letter of 23 August 2007 as amounting to an offer to vary Pangus’ obligations in relation to the payment of the $6.925 million instalment, that Pangus had accepted in its solicitors’ letter dated 24 August 2007.

153    On 29 February 2008, Six Mile Creek filed a defence to Pangus’ statement of claim, stating that it was ready and willing to perform the put and call option as varied and the proceeding settled.

Six Mile Creek appoints a new agent to sell the estate

154    On 14 April 2008, Six Mile Creek entered into an agreement with Ken Guy and Mark Boulter Realty to project market the sale of lots in the estate. At some point thereafter, that agency came to an end and, on 1 September 2008, Six Mile Creek appointed Mr Lake and PRD (see [55] above) to be the real estate agent marketing properties in the estate.

155    At some stage, which I infer was shortly after his appointment, Mr Lake developed a new marketing brochure and name for the estate, calling it “Grande Vista” in the new marketing brochure. The brochure made no mention of the building covenants having any height restrictions, and PRD issued a pricing schedule which identified, without stating a price, those lots that had been sold. In the pricing schedule, lot 8 was for sale for $720,000, lot 17 for $480,000, lot 18 for $500,000 and lot 19 for $465,000.

156    As Mr McLaughlin said in evidence, the explanation for the difference in prices from the time of the price list issued by Mr Boulter on 14 September 2007 and the subsequent ones issued by Mr Lake, was that “the market dropped away with pretty slow selling”. The commercial reality was that the height restrictions on lots 17, 18 and 19 limited the use that purchasers could make of those lots and their ability to get the full benefit of views from them, and the removal of the height restrictions in that slow market enhanced the prospects of sales at better prices.

157    On 16 December 2008, Mr Lake wrote to the architect for Mr and Mrs Eckford informing them that he and Mr McLaughlin had just perused the plans for the new house to be built on lot 10 and that they had approved those plans in their current format. The letter added, “Please ensure that the Estate Covenant is adhered to throughout the construction phase”. The reference to “the Estate Covenant” was to the building covenants.

158    On 30 July 2009, Mr and Mrs Eckford wrote to Mr McLaughlin, whom they stated that they understood to be “the responsible authority who developed the site”, informing him that their builder and architect had identified that the road, which should have been completed up to the boundary of lot 10 consistently with the plan, had stopped about 15 metres short of where it ought to have been built. They asked if that could be remedied, and Mr McLaughlin subsequently did so.

159    On 8 September 2009, Six Mile Creek entered into a contract with Ranjit Paul and Nicole Wall for the sale of lot 18 for $465,000. The building covenants were in a similar format to those contained in the contract which Mr and Mrs Eckford signed, except that they omitted cll 4.5 and 8.3 containing the height restrictions that had limited the height of buildings that could be constructed on lot 18 to four metres above the highest AHD (Australian Height Datum) level on the land.

160    On 16 September 2009, Jason Eckford and Mr and Mrs Eckford wrote to Mr McLaughlin thanking him for a meeting that they had on site the previous day to discuss the unfinished road and Mr McLaughlin’s undertaking that he would attend to having it completed.

The circumstances in which Mr Eckford claims there was fraudulent concealment

161    On 1 October 2009, Mr and Mrs Eckford wrote again to Mr McLaughlin and Six Mile Creek concerning, first, the completion of the road work to the commencement of the driveway on their property, and secondly, their recent meeting with the new owners of lot 18, adding that:

[i]f adhered to, Lots 19, 18 and 17 are subject to height restrictions under your Building Covenants to protect the views of other Lots. Lots 19, 18 and 17 directly relate to our view and to some extent the view and value you receive from surrounding other unsold lots.

Would you be kind enough to allow us to view plans upon the construction proposal being presented to you of lots 19, 18 and 17. We would like to submit, if necessary on the levels and cut as they relate to the appearance of Lots 9, 10, 17, 18 and 19 and also how they relate to the appearance of the peak of the estate in general.

(emphasis added)

162    On 12 October 2009, Mr and Mrs Eckford emailed Mr McLaughlin asking for approval for amendments to their plans for construction of a dwelling on their lot to add a one metre increase in the height of the first floor. They wrote that “There are no restrictions in your Building Covenants to our Lot that we know would prevent approval”. Mr McLaughlin emailed back on 14 October 2009 that he had no problem with the extra metre of height on their property and authorised it.

163    When Mr McLaughlin was cross-examined about his knowledge of the contract of 8 September 2009 between Six Mile Creek and Mr Paul and Ms Wall, he gave this evidence:

After Six Mile Creek had entered into this contract with this couple, you did not and to your knowledge nobody on behalf of Six Mile Creek informed the Eckfords that this contract did not have the form of the covenants that were in the Eckfords’ contract, correct? --- That’s correct. Yes.

And you knew in September 2009 that the contract in front of you did not contain the building covenants that the Eckfords’ contract had, didn’t you? --- I didn’t know at the time. No.

(emphasis added)

164    Having considered the whole of the evidence, I do not believe Mr McLaughlin’s answer that he did not know, as at September 2009, that the height restrictions had been removed from the building covenants and that he had simply left it to Mr Lake to include whatever covenants Mr Lake thought the contracts for sale should contain. Mr McLaughlin said that he had approved Mr Lake’s brochure for the marketing of the estate under Mr Lake’s supervision. Having regard to his close involvement, earlier, in giving instructions for the extensions of time and contractual terms to which I have referred above, and his experience as a property developer of considerable ability over a long period, I do not believe that when Mr Lake was marketing the estate, Mr McLaughlin had no role in removing the height restrictions from, and was unaware that there were no height restrictions in, the contracts for lots 17, 18 and 19. In my opinion, his evidence as follows demonstrated he knew that he was giving a false account about those matters:

I’m suggesting to you that you knew full well that when Mr Lake took over as the real estate agent to market this estate that there was no inclusion in his brochure to the building covenants; you knew that, didn’t you? --- No, I didn’t know that. I was - - -

You must have known that because you read the document, didn’t you? --- I didn’t read it properly, no.

You are - - -? --- I just - - -

- - - saying this now, Mr McLaughlin, because you understand you’re in a very difficult position, don’t you? --- I understand that, yes, yes.

And I have to do this, you are giving false evidence about the non-inclusion of the building covenants in the contracts from 2009 onwards, aren’t you? --- That’s right.

(emphasis added)

165    Senior counsel for the respondents argued that, when Mr McLaughlin made the above admission, namely he had been giving false evidence about his knowledge of the non-inclusion of the height restrictions in the contracts from 2009 onwards, he had been confused. However, I was observing Mr McLaughlin closely at the time, and am satisfied that he was seeking to deflect responsibility from himself for the removal of the height restrictions. I was fully satisfied then (and on reflection in preparing these reasons, remain so) that he made that admission after realising that his attempt to paint a different picture was inconsistent with his close attention to the way in which he approved all the contracts for sale (including those resulting in the conveyance of lots 17, 18 and 19) as well as the terms of Mr Lake’s brochure and he kept himself informed of issues that arose as each contract progressed to completion. I do not accept that Mr McLaughlin, as at September 2009 and thereafter, was not fully cognisant (as he had been earlier in 2007 and 2008) of the importance of the removal of the height restrictions in marketing lots 17, 18 and 19 which, following the cancellation of the earlier contracts for those lots in late 2007 and early 2008, he and Six Mile Creek had not been able to re-sell under Mr Boulter’s agency.

166    On 30 May 2011, Jason Eckford emailed Mr McLaughlin (copying Mr Lake) that his mother had passed away the previous month and that his father had asked him to assist with matters relating to the development, because his father rarely checked his emails. The email continued:

We have previously asked if you would kindly notify us of any applications for development approval for Lots 17, 18 and 19. We would appreciate the opportunity to make submissions to you regarding the height limits in the Building Covenants if it appears that any application does not comply. This is because we have looked closely at the Covenant and it is open to varying interpretations. It is a very important issue to us as it could effect [sic] our views and the views of most blocks North of them, which the Covenant intends to protect.

(emphasis added)

167    The email asked if Mr McLaughlin could confirm receipt, and inform Jason Eckford whether he was prepared to include them in the process so that he need not make further enquiries. On 5 July 2011, Jason Eckford emailed Mr McLaughlin again saying that he had not had a response to his email of 30 May 2011.

168    On 6 July 2011, Mrs Sutton responded saying that her father was overseas until the end of August. She commiserated about the death of Mrs Eckford and stated, “At this stage there are no plans to build on the blocks mentioned”. Jason Eckford replied later that day, asking that his request be brought to Mr McLaughlin’s attention for a reply when he returned.

169    On 31 October 2011, Jason Eckford emailed Mr McLaughlin again, referring to the previous emails, and asking for a response. Mr McLaughlin responded on 3 November 2011, saying:

[s]till no pending sales or contracts on these blocks. Thus no building happening in the near future. As you know the market has quietened and quietened. Andy Lake will try and keep you updated.

(emphasis added)

170    Jason Eckford replied soon afterwards on 3 November 2011 saying that he understood that lots 17 and 18 had been sold and that he and his father anticipated that the next step would be development approvals being sought from Mr McLaughlin or Six Mile Creek. He wrote:

[a]s per the below email [being the initial email in the chain of 30 May 2011, see [166] above], our reason for contacting you is [to] request the opportunity to submit to you on the height covenents [sic] because they are very open to varying interpretations which may not be appreciated. Are you ok with giving us that opportunity when the applications are submitted? Obviously this is a big concern of ours given the price we paid for our lot.

(emphasis added)

171    Mrs Sutton replied soon afterwards on 3 November 2011, saying:

Sorry I wasn’t on the ball with the Lot nos. We have not received any applications to date for building on Lots 17 & 18 and Lot 19 is unsold. [K]eep you informed.

172    As can be seen from this exchange of emails, neither Mr McLaughlin nor Mrs Sutton directly stated that there were no height restrictions in the building covenants that applied to lots 17, 18 or 19 or that the position had changed since Mr and Mrs Eckford contracted to buy lot 10 in late 2007. That set the context for Jason Eckford’s next email to Mr McLaughlin on 27 April 2012. In it, he said that, recently, his father had received a phone call from Mr Lake to enquire as to his interest in purchasing lot 18 from the current owners. The email continued:

Andy seemed to indicate that it would be in his interest to do so because any future purchasers would not be bound by the height restrictions in the Avalon Building Covenants, thus losing our views on Lot 10. As you no doubt appreciate given our earlier emails to you, we were quite concerned by this given our views are predicated on their compliance. We therefore revisited the Covenants. It appears that you have the right to relax them to achieve a sale of unsold lots, although limited within certain objectives. As you have sold Lot 18 we presume you no longer have a financial interest in waiving the height restriction of Lot 18, and for that matter Lot 17 as well. In fact, still unsold lots held by you suggest to us that you still have a financial interest in ensuring their compliance.

If you are approached regarding their waiving would you be kind enough to advise us? We stand to suffer a massive financial loss if they weren’t retained by any future purchaser and or complied with by current owners. If those circumstances arise and you are indifferent, as an exercise of good faith under our contract, we will kindly ask that you assign your rights to us (as permitted under the Covenants) to Lot 18 and Lot 17 so we can protect our views and those of other surrounding Lots without concerning you.

(emphasis added)

173    He concluded:

If you have no intention of waiving them we thank you for that and look forward to our opportunity to submit to you on any proposed development heights given as we have previously raised with you the fact that the Covenants are open to varying interpretation [sic].

174    Later on 27 April 2012, Mrs Sutton wrote back saying that Mr McLaughlin was away on annual leave at that time but that “I will attempt to convey your concerns”. Thereafter, Six Mile Creek and Mr McLaughlin made no response to the requests, far less did either clarify that lots 17 and 18 no longer had any height restrictions in the building covenants governing those lots.

175    Mr McLaughlin said, and I find, that he was sure that he would have read the email of 27 April 2012 from Jason Eckford when his daughter brought it to his attention at some stage after he returned from leave. He gave this evidence:

My question is that you knew that Jason Eckford was concerned about the loss of the view from lot 10 at this time, because you’ve said this email would have come to your attention? --- Yes.

HIS HONOUR: Is that right? --- Yes. No. At no time did Andy Lake come back to me and say, “Well, I’ve got the wrong covenant for Eckford that we had in the beginning”, you know?

MR STUDDY: Mr McLaughlin, that’s not my question. You know my question is: you knew some time shortly after or some time in April or May 2012 that Jason Eckford was concerned about the loss of the views from lot 10, didn’t you? --- Yes, of course. Yes.

And you did not, at that time, or in 2013, 14, 15, or 16, indicate to Jason Eckford that there was an issue with the height covenants, did you? --- No, I just thought that Jason was - - -

Concerned? Worried? --- Well, I thought - - -

MR McCULLOCH: Well, your Honour, the witness really should be permitted - - -

THE WITNESS: As I said before, I never realised that we didn’t have the right covenant. That’s - - -

MR STUDDY: The situation is this, isn’t it, that you were aware that the Eckfords had made an inquiry and were concerned about their views - - -? --- Yes.

- - - and at no time did you say to them, “This is the true situation”, did you? --- No, I admit that.

And you didn’t do that because you didn’t want the Eckfords to know that there weren’t building covenants that governed lots 17, 18 and 19; correct? --- No. No, I didn’t know. I didn’t know that. I still thought Andy Lake was using the same covenant […]

(emphasis added)

176    Mr McLaughlin’s evidence, that I have emphasised in the passage in [175] above, that at no time did Mr Lake tell him that there had been a change to the building covenants, demonstrates the implausibility of Mr McLaughlin’s evidence had he consulted Mr Lake on how to reply to Jason Eckford’s emails. If Mr Lake had told Mr McLaughlin that there were no height restrictions in force to protect the views from lot 10 against interference by development activity on lots 17, 18 and 19, Mr McLaughlin would have been reminded of the change in covenants. If, on the other hand, Mr Lake had told him that the height restrictions that the contract for lot 10 included were still in place, then Mr McLaughlin would have been able to reply to that effect to Jason Eckford’s emails.

177    In my opinion, having considered all of the circumstances (cf. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at 384 [91] per Heydon, Crennan and Bell JJ), Mr McLaughlin’s difficulty in answering questions on this subject in his cross-examination arose because he knew that he had taken the risk in his much earlier conduct based on his appreciation that any direct answer to Jason Eckford’s email enquiries would have revealed that lots 17, 18 and 19 either had been sold, or were being marketed, without the height restrictions. Between late September 2007 and November 2007, Six Mile Creek had included those height restrictions in the contract for lot 10 and had represented that lots 17, 18 and 19 had already been sold with the burden of the height restrictions on them in order to induce Mr and Mrs Eckford to pay the highest price on the price list of $895,000.

178    Mr McLaughlin took a calculated approach of not responding directly in answer to the enquiries Jason Eckford was making to Six Mile Creek and him after the sale of lot 10. That was because he did not want to expose the difficult situation in which his conduct, by removing the height restrictions from lots 17, 18 and 19, had placed Six Mile Creek and himself. I find that he intentionally concealed from Mr Eckford and Jason Eckford the change that removed the height restrictions from the building covenants in the contracts that he had caused Six Mile Creek to enter for the sale of lots 17, 18 and 19. This is why he gave false evidence about that issue in this proceeding. In my assessment, Mr McLaughlin knew, at all times in his dealings (directly or through Mrs Sutton or Mr Lake), when responding to the enquiries above by Mr and Mrs Eckford and Jason Eckford, that he had made, or authorised, the changes to the building covenants in order to secure sales of lots 17, 18 and 19 at higher prices than they would otherwise have obtained had the height restrictions continued to apply to those lots.

179    On 11 June 2012, Mr Lake emailed Mr McLaughlin attaching a copy of the plans for lot 17 and saying that he could see no reason:

why we wouldn’t approve them. It’s a very high quality home that can only add value to the overall estate. The only reason I’m wanting you to OK these is because of the persistent concern the Eckford’s (Lot 10) have had with losing their view. I can’t see this house impacting their view. Let me know if you are fine with it and I’ll send them the approval letter.

(emphasis added)

180    Mr Lake worked closely with Mr McLaughlin (as had Mr Boulter earlier) on sales of lots in the estate. Thus, Mr Lake’s description in his email of “the persistent concern the Eckford’s (lot 10) have with losing their views” is revealing. It showed that both he and Mr McLaughlin knew, first, of that concern and, secondly, that there may come a time when the change removing the height restrictions from the building covenants could cause problems.

181    On 18 July 2013, Mr Eckford and Jason Eckford wrote another email to Mr McLaughlin referring to their earlier emails and saying that lot 18 was the only undeveloped lot which concerned them:

…regarding compliance with the height covenants (and in turn the views of our Lot 10 and others). We understand that Lot 18 has been on sold and as such we anticipate a building proposal will be submitted for your approval shortly.

…we wish to take the opportunity to reiterate our offer set out in our email of date 27 April 2012. That offer, includes if necessary, assigning the Building Height Covenant should a proposal to build above the height limit be submitted and you are indifferent. As previously mentioned, the Covenant is open to interpretation so an opportunity to submit to you at an early stage would be appreciated as well.