Cox & Coxon Ltd v Leipst CA59/98 [1998] NZCA 202; [1999] 2 NZLR 15; (1999) 6 NZBLC 102,666; (1998) 8 TCLR 516 (24 November 1998)

Last Updated: 11 August 2011

BETWEEN COX & COXON LIMITED Appellant

AND BARRY FREDERICK LEIPST

and BARBARA JEAN LEIPST

_Respondent

Coram: Richardson P Gault J

Henry J Blanchard J Tipping J

Hearing: 6 July 1998

Counsel: P J Napier for Appellant

M B Lawson for Respondents

_{Judgment: 24 November 1998}

_{JUDGMENT OF RICHARDSON P}

I am in general agreement with the judgment of Tipping J which I have had the opportunity of reading in draft and, for the reasons he gives, I would dismiss the appeal.

Solicitors:

Keegan Alexander Tedcastle & Freidlander, Auckland, for appellant

Willis Toomey Robinson, Napier, for respondents

BETWEEN COX & COXON LIMITED Appellant

AND BARRY FREDERICK LEIPST

and BARBARA JEAN LEIPST

_Respondents

Coram: Richardson P Gault J

Henry J Blanchard J Tipping

Hearing: 6 July 1998

Counsel: P J Napier for Appellant

M B Lawson for Respondent

Judgment: 24 November 1998

_{JUDGMENT OF GAULT J}

In this appeal we are called upon to consider the measure of loss or damage suffered by purchasers of property to whom there was given information by a real estate agent constituting a contravention of s9 Fair Trading Act 1986 (The Act).

The respondents were the purchasers of a five acre “lifestyle block” of land in Hastings. The appellant company acted as agent for the vendor in the sale. In the course of an inspection of the property prior to purchasing, the respondents were provided with a sheet purporting to state the production and income of the property in the 1994 year. That sheet subsequently became an appendix to the agreement for sale and purchase. It included an item “58 bins of William Bon Cretian [sc Williams’ Bon Chrétien] pears to Watties - $12,000”. In fact in 1994 58 bins of pears were sold by

the then operator of the orchard on the property (not the vendor) for which J Wattie

Canneries paid $8,801.16.

The purchasers sued the vendor and the real estate agent in the District Court at Hastings. In their amended statement of claim they alleged against the vendor (inter alia) that the representation concerning the sale of pears in 1994 was made on behalf of the vendor and induced the purchasers to enter into the contract. The allegations continued:

THAT the representations referred to in paragraph 7 hereof were incorrect and were therefore misrepresentations in that in 1994 pears to the value of $8,801.16 were harvested from the property and sold to Watties

THAT as a result of the misrepresentation referred to in paragraph 23 hereof the Plaintiffs have suffered a loss of income at the rate of

$3,198.84 per annum the present value of which at a discount rate of

10% for 20 years is $27,233.64.

In a separate cause of action brought only against the real estate agent it was alleged (inter alia) that the making of the representation concerning the sale of pears in

1994 constituted misleading or deceptive conduct in trade in breach of ss9 and 14 of the Fair Trading Act and:

THAT as a result of the Second Defendant’s breach referred to in paragraph 29 hereof the Plaintiffs have suffered a loss in the sum of

$27,233.64 (being the present value of an annuity of $3,198.84 for 20 years at 10%) arising from income being lower than was represented to them.

As appears the claim against the vendor was in contract and that against the agent was under the Act.

The District Court Judge expressed his view of the representation relating to the pears as:

Had the purpose of this appendix been to state gross turnover in dollar terms a different conclusion might follow but, in context, I am satisfied

that the essence of the representation was as to production volumes expressed in bin units. In that regard it is accurate. Inevitably, the value of units so expressed will fluctuate from year to year. I am satisfied that no loss has been occasioned to the plaintiff by insertion of the mistaken proceeds figure.

On appeal to the High Court in a judgment delivered on 10 November 1997

Greig J (whose primary focus was on other aspects of the case on which the purchasers did not succeed and are not in dispute before us) took a different view. He said:

I do not agree that the appendix, so called, and the statement as to the pears was limited to production volumes expressed in bin units. That is to ignore entirely the monetary figures in a situation where the property comprised an operating orchard and income was clearly a matter of importance. It is a statement of fact relating to the past. It was made to persons who were without experience and knowledge in orchard or horticultural pursuits - their background was in motor mechanics - and this was a new venture. The figure of $12,000 is not insubstantial and is arithmetically a considerable proportion of the gross [total of the scheduled production figures] of $20,000.

...

The representation is a combination of quantity and value. It was wrong to a significant extent. It is not possible, I think, to say that in the circumstances of this case the purchasers could suffer no loss.

Greig J was moved to his view, in part, by advice that it had been agreed by all parties that the quantum of any loss flowing, if liability was found, was $16,000 as at

11 August 1995. He had difficulty reconciling that agreement with the finding of the

District Court Judge that there was no loss.

We were not provided with the memorandum recording the agreement of the parties but were informed by Mr Napier, who appeared for the appellant at all levels, that so far as concerned his client the agreement to the quantum was on the basis that liability should be established for loss of the kind claimed; that is loss of expected income in future years. Had that been appreciated by Greig J he would not have relied on the agreement as he did and would not have omitted to address the question of

entitlement to expectation damages. However, he seems to have accepted the position by the time he came to deal with the application for leave to appeal to this Court. In his separate judgment he recorded that leave was sought to enable the real estate agent to argue that under the Fair Trading Act liability for contraventions of the provisions of Part I does not extend to “expectation” damages. He made no comment then as to the apparent incompatibility of that argument with the agreement between the parties as to quantum of damages. He granted leave on the ground that an important point was in issue. He merely stated “this is a point which I did not advert to in my judgment”. That suggests that Mr Napier is correct and that the Judge at the time of his substantive judgment misunderstood the basis on which the appellant had agreed quantum. Mr Lawson for the respondents was not able to advance any strong position to the contrary. Mr Napier did not in light of that seek to have this Court depart from the finding by Greig J that in making the representation concerning the pears his client engaged in conduct in breach of s9 of the Act (the Judge did not deal separately with s14).

The issue then is whether the remedy available to the purchasers cannot extend to recovery of future profits that would have been earned had the representation been accurate. The relevant provision is to be found in s43 of the Act and the relevant parts read:

Other orders - (1) Where, in any proceedings under this Part of this Act, or on the application of any person, the Court finds that a person, whether or not that person is a party to the proceedings, has suffered, or is likely to suffer, loss or damage by conduct of any other person that constitutes or would constitute -

(a) A contravention of any of the provisions of Parts I to IV of this

Act; or

(b) Aiding, abetting, counselling, or procuring the contravention of such a provision; or

(c) Inducing by threats, promises, or otherwise the contravention of such a provision; or

(d) Being in any way directly or indirectly knowingly concerned in, or party to, the contravention of such a provision; or

(e) Conspiring with any other person in the contravention of such a provision -

the Court may (whether or not it grants an injunction or makes any other order under this Part of this Act) make all or any of the orders referred to in subsection (2) of this section.

(2) For the purposes of subsection (1) of this section, the court may make the following orders -

...

(d) An order directing the person who engaged in the conduct, referred to in subsection (1) of this section to pay to the person who suffered the loss or damage the amount of the loss or damage:

Under this section the amount of the loss or damage a person has suffered by the contravening conduct may be made the subject of an order to pay as a matter of discretion. In a contract claim, where a representation constitutes a term of the contract which is breached, there may be recovered from the party in breach such damages as will put the claimant in the position he or she would have been in had the representation been true. That was the position in this case as between vendor and purchasers. The loss of profits from pear production expected as a result of the representation was quantified by agreement at $16,000. Is the loss to be similarly assessed where the representation is in breach of the Act? If it is, then to take an extreme case, any person who is “in any way directly or indirectly knowingly concerned in, or party to, the contravention” (s43(1)(d)) is separately liable effectively as guarantor of the contracting party’s obligation to make good loss of expected profits. That would extend in the present case even to the previous operator of the orchard if, when giving information to the real estate agent, he had known it would be passed on to prospective purchasers. He too would have been liable for the purchasers loss of future profits. Is that broad construction to be given in furtherance of the consumer protection objectives generally ascribed to the Act?

For the appellant it was submitted that “loss of bargain” damages as here claimed should not be awarded under the Act and that the measure of damages in tort

is appropriate. He relied on the decision of the High Court of Australia in Gates v The

City Mutual Life Assurance Society Ltd (1986) 160 CLR 1.

The relevant difference between the measure of damages in tort and that in contract is explained clearly in McGregor on Damages (16 ed) at para 810.

Turning to the case of compensatory damages, which is more important because it represents the norm, there is at the very start a basic, though somewhat latent, distinction between contract and tort. This distinction is in the general rule which is the starting point for resolving all problems as to measure of damages. The distinction is latent because the leading formulation of the general rule is sufficiently wide to cover contract and tort equally: this formulation is that the plaintiff is entitled to be put into the same position, as far as money can do it, as he would have been in had the wrong not been committed. In contract, however, the wrong consists not in the making but in the breaking of the contract and therefore the plaintiff is entitled to be put into the position he would have been in if the contract had never been broken, or in other words, if the contract had been performed. The plaintiff is entitled to recover damages for the loss of his bargain. In tort, on the other hand, no question of loss of bargain can arise: the plaintiff is not complaining of failure to implement a promise but of failure to leave him alone. The measure of damages in tort is therefore to be assessed on the basis of restoring as far as possible the status quo ante.

In the Gates case the Court was presented with conduct contravening provisions of the Trade Practices Act 1974 including s52 which is equivalent to our s9. Misleading and deceptive representations were made by an insurance agent as to the scope of total disability cover. When injured but declined the cover he understood he had obtained, the insured claimed damages under s82(1) of the Australian Act which, although not expressed in discretionary terms, is to substantially the same effect as our s42(2)(d). He sought the policy benefits that had been represented to him. Gibbs CJ in his judgment said (p6):

Actions based on sec.52 and 53 are analogous to actions in tort and the remedy in damages provided by sec.82(1) appears to adopt the measure of damages applicable in an action in tort. That subsection refers to loss or damage by the conduct of another that contravened a provision of Pt IV or Pt V; it therefore looks to the loss or damage

flowing from the offending act of the other person. The acts referred to in sec.52 and 53 do not include the breach of a contract, and in awarding damages under sec.82 for a breach of either of those sections, no question can arise of damages for loss of a bargain. The contractual measure of damages is therefore inappropriate in such a case.

_(p14):

The joint judgment of Mason, Wilson and Dawson JJ includes this passage

The question then is whether it is appropriate to apply the contract measure of damages to the contraventions found to have taken place. The courts are not bound to make a definitive choice between the two measures of damages so that one applies to all contraventions to the exclusion of the other. However, there is much to be said for the view that the measure of damages in tort is appropriate in most, if not all, Pt V cases, especially those involving misleading or deceptive conduct and the making of false statements. Such conduct is similar both in character and effect to tortious conduct, particularly fraudulent misrepresentation and negligent misstatement.

The views expressed in these judgments substantially accord with those advanced in McGregor on Damages (15 ed, paras 1742-1748 and more succinctly in

16 ed paras 1997-2000) with reference to the measure of damages under the statutory entitlement in England in s2(1) of the Misrepresentation Act 1967.

The Australian Trade Practices Act has, in addition to s82, in s87 a discretionary power to compensate which may have influenced the drafting of the New Zealand s43 which appears to have been intended to encompass the general tenor of both of the Australian provisions. In the recent decision of the High Court of Australia in Marks v GIO Australia Holdings Ltd [1998] HCA69, 11 November 1998 all members of the Court have held that the measure of damages under s82 and the cognate s87 Trade Practices Act is not to be confined by analogies to established common law principles. In their joint judgment McHugh, Hayne and Callinan JJ recognise, nevertheless, that there may be help to be had from the common law in deciding what damages may be allowed in cases of conduct contravening s52.

Gaudron J in her judgment emphasised the need to consider the nature of the wrong and the loss or damage suffered in consequence. The joint judgment focussed on the loss said to have been suffered in consequence of the misleading conduct. They said (paras 47,48):

The bare fact that a contract has been made which confers rights or imposes obligations that are different from what one party represented to be the case does not demonstrate that the party that was misled has suffered loss or damage.

...

A party that is misled suffers no prejudice or disadvantage unless it is shown that that party could have acted in some other way (or refrained from acting in some way) which would have been of greater benefit or less detriment to it than the course in fact adopted.

They concluded that the plaintiffs in that case had not demonstrated that they were worse off even though a represented benefit had not materialised. On the facts of that case relief in terms of an expectation induced by the representation was denied even though the parties had entered into a contractual relationship.

It is necessary to keep in mind that there are not in Australia any equivalent statutory provisions to those contained in the Contractual Remedies Act 1979.

In Goldsbro v Walker [1993] 1 NZLR 394 this Court did not have before it the assessment of damages but the members of the Court commented on the discretion conferred by s43(2)(d) of the Act with particular reference to the issue of contributions to the plaintiff’s loss. Cooke P said (p399):

The remaining question in the appeal is discretion. A monetary award is but one of an extensive list of alternative or cumulative remedies that the Court “may” grant under the New Zealand Act. In this respect the New Zealand Act differs from s82(1) of the Trade Practices Act 1974 of the Commonwealth of Australia, which takes the form that a person suffering loss or damage “may recover” the amount: words which would seem to confer a right of action. Our s43 is of a different structure and I think that the difference is significant. As to a

monetary award, no right of action is conferred. It is one of a range of discretionary remedies. In that context there is no compelling reason to hold that if the defendant’s misleading conduct has contributed to cause the plaintiff’s loss, the only course open to the Court, where no other form of relief is appropriate, is to order payment of a sum representing the full loss. Nor is there any compelling reason to hold that the only discretion of the Court is to award all or nothing.

Richardson J said (p403-4):

As with other statutory powers the discretions under the section are to be exercised so as to give effect to the policy of the Act. In broad terms the underlying policy is that consumers should receive accurate information on which they can make rational economic decisions. If there is a clear infringement of the statute resulting in loss to any other person it would ordinarily accord with the policy under the Act to grant a remedy.

But it is not to be expected in policy terms that, when exercising its statutory powers under s43 and in deciding what, if any, remedy is appropriate in the circumstances, the Court should apply conventional common law rules relating to traditional causes of action. In particular I do not think the Court should be constrained under this legislation by consideration of the technical possibilities of contribution between joint and several tortfeasors under the Law Reform Act 1936 or of apportionment under the Contributory Negligence Act 1947. It is not necessary to impose a liability under s43(2)(d) as if the direction were to pay common law damages, leaving it to the infringer to seek contribution from someone else. The Fair Trading Act is important economic and social legislation. In exercising the powers under the statute it is a matter of doing justice to the parties in the circumstances of the particular case and in terms of the policy of the Act. In many cases there may be no reason why the plaintiff should not obtain full recovery in respect of his or her loss but in others the culpability of third parties, the gross carelessness of the consumer, the minor role of the contravener of s9, may lead to the conclusion that the justice of the case does not require that the full loss sustained by the consumer be visited on the contravener.

At High Court level in New Zealand there have been comments that can be construed as favouring in appropriate cases awards of loss of future income: Crump v Wala [1994] 2 NZLR 331 (though the claim in that case was also in contract), Smythe v Bayleys Real Estate Ltd (1993) 5 TCLR 544 and Quick Snax Ltd v Uncles Group

(NZ) Ltd, High Court Auckland, CP1137/92, 19 June 1998, Thorp J (though in that case such loss was not established).

The view that the issue is one of statutory interpretation and not of invoking established common law principles is of importance. The task is to identify the loss or damage suffered by (i.e. caused by) the misleading or deceptive conduct. In particular circumstances that will involve enquiry as to what the conduct caused the plaintiff to do or not do and the consequences flowing from that.

I turn to the words of s43. Subsec (1) identifies who may obtain relief as a person whether or not a party who has suffered or is likely to suffer loss or damage by contravening conduct. The Court may make orders including that referred to in subsec

2(d) of directing the person who engaged in the conduct to pay to the person “who suffered the loss or damage” the amount of the loss or damage. Whereas subsec (1) refers to likely loss or damage, subsec 2(d) is limited to loss or damage suffered. In its terms it does not extend to an order to pay the amount of loss or damage likely to be suffered in the future. Other orders which may be made under subsec (2) seem more apt to address likely future loss. They include powers to avoid or vary a contract between the person who engaged in the conduct and the person likely to suffer the loss and orders for remedial action.

More fundamentally however there is to be considered the basic rationale for the award of expectancy losses. As pointed out in the passage already quoted from McGregor on Damages, the loss of bargain or of expected future returns flows not from the conduct that is wrongful, but from the failure to implement a promise. Where no contract exists between the person who engaged in the conduct and the person who suffered the loss, there is no promise which failure to implement deprives the other party of expected benefits.

Section 9 of the Act prohibits conduct it does not render representations binding. It is s6 of the Contractual Remedies Act which in New Zealand has that

effect. The representation, if it induced entry into a contract, gives rise to a claim as on breach of contract with the measure of damages appropriate for that.

There is also to be considered the implications of a construction extending to the ordering of the payment of loss of expected future benefits. Although discretionary, the section so construed would lead to potential claims against all persons who directly or indirectly knowingly were concerned in conduct which subsequently is held likely to mislead or deceive in trade for all expectation losses suffered by that conduct. That seems to me to be more far reaching than is justified by the consumer protection purpose of the Act. That purpose is adequately met by the ability to recover the amount of loss caused by the wrongful conduct, flexibly assessed in the circumstances of each case. I do not accept that it calls for orders requiring non-contracting parties to make good promises they have not made.

In the present case the purchasers did not sue the vendor under the Act relying on the conduct of the real estate agent. There may have been good reason for that. But in appropriate cases a principal could be sued in respect of the representation of an agent. Section 45(4) deems the conduct of an agent to be also the conduct of the principal. Each is independently liable. That does not mean however that the measure of damages to be paid by the principal under the Act must be the same as in contract nor that the amount ordered to be paid under s42(2)(d) of the Act must be the same both for principal and agent. The discretionary nature of this section clearly makes it sufficiently flexible to fashion the remedy to the wrongdoing of each person. Goldsbro v Walker made that clear.

The agent in this case, in effect, represented on behalf of the vendor that in respect of the property available for purchase the pear production in the 1994 year earned $12,000. That was a misrepresentation of fact. It was misleading when it was made. It may have provided a basis for an inference as to likely returns in future years. It was found to have operated as an inducement to the purchasers to enter into the contract to buy the property. However, the value of the contract to the purchasers has not been shown to be less because of the misrepresentation. The agent was not shown

to be responsible for any loss of bargain. The purchasers did not plead and did not seek to prove any loss other than expected future returns from the sale of pears at the represented level of production discounted to present value. I am of the view that that is not loss or damage suffered in consequence of the agents wrong so as to be remedied by an order under s43(2)(d) of the Act.

For these reasons, and those set out in the joint judgment of Henry and

Blanchard JJ which I have read in draft, I would allow the appeal.

In accordance with the view of the majority the appeal is allowed and the judgment of the District Court in favour of the appellant is restored.

The appellants are entitled to costs in all three Courts. Because there was an appeal against the award of costs in the District Court which it became unnecessary for the High Court to determine, counsel are to submit memoranda on costs within 14 days if they are unable to agree.

Solicitors

Keegan Alexander Tedcastle & Friedlander, Auckland, for Appellant

Willis Toomey Robinson, Napier, for Respondent

IN THE COURT OF APPEAL OF NEW ZEALAND CA 59/98

BETWEEN COX & COXON LIMITED Appellant

AND BARRY FREDERICK LEIPST

and BARBARA JEAN LEIPST Respondents

Coram: Richardson P Gault J

Henry J Blanchard J Tipping J

Hearing: 6 July 1998

Counsel: P J Napier for Appellant

M B Lawson for Respondents

_{Judgment: 24 November 1998}

JUDGMENT OF HENRY J AND BLANCHARD J DELIVERED BY HENRY J

This appeal concerns the measure to be applied to a claim for loss or damage brought under the Fair Trading Act 1986. It raises an issue concerning the liability of an agent who has made an innocent misrepresentation in the course of negotiations for the sale of land.

The appellant company (the agent) is a real estate agent which was employed by the owner of what is described as a lifestyle block of land situated in Hastings. It comprises some 2.4 hectares, on which was erected a residential home. It had a pear and apple orchard in production, and glasshouses serviced by a boiler heating system.

The agreement entered into between the vendor and the present respondents as purchasers provided for a price of $225,000. Settlement was effected on 11 August

1995.

The purchasers commenced proceedings in the District Court at Hastings, claiming against the vendor $43,875 for the cost of repairing the glasshouse heating systems, $35,000 for consequential loss resulting from the inability to grow winter crop, and $27,233 for consequential losses arising from a misrepresentation as to the sale proceeds for the 1994 orchard crop. The claims were based alternatively on breach of contract and misrepresentation. The purchasers also claimed against the agent under sections 9 and 14 of the Fair Trading Act 1986, seeking damages in the same three separate amounts. All claims were unsuccessful in the District Court. An appeal to the High Court was allowed in part by Greig J, who held that the agent was liable under the Fair Trading Act 1986 for losses under the claim for misrepresenting the 1994 crop proceeds. The vendor was also held liable for the same losses, presumably under the Contractual Remedies Act 1979. The sum of $16,000 was awarded, being the amount the parties had agreed upon at trial was the present value of the loss of income over an unspecified future period of time. The appeal was otherwise dismissed.

As to the loss of income claim, the evidence disclosed that prospective purchasers of the property were provided with a sheet which contained a schedule with details of the trees in the orchard and a schedule detailing the volume and proceeds of sale for the 1994 year. The schedule included a reference to Williams’ Bon Chretien pears, and a figure of $12,000 for 58 bins. In fact the return, although for 58 bins, was

$8,801. It is common ground that the misrepresentation was innocent, and the District Court Judge’s finding that the agent had not been negligent in making it was not challenged.

The issue

The issue on appeal to this Court, which comes by way of leave granted by the High Court, is whether in these circumstances expectation damages are available to the purchasers against the agent under the Fair Trading Act 1986.

It is helpful to put the issue into its context. The agent was at all times acting in its capacity as agent for the vendor of the property. The misrepresentation induced the purchasers to enter into a contract of sale which was then fully executed. At common law the only remedy available to the purchasers for a misrepresentation which was innocent, being neither fraudulent nor negligent, lay in seeking rescission. An agent who had made the misrepresentation was under no liability.

As in other jurisdictions, in New Zealand the unsatisfactory nature of that rule led to statutory intervention. Here it takes the form of the Contractual Remedies Act

1979. Subject to express provisions in the particular contract, under s6(1)(a) a party induced to enter into a contract by a misrepresentation, innocent or fraudulent made by or on behalf of another party is entitled to damages as if the representation were a term of the contract which has been broken. It is this provision which must have been the source of the High Court finding that the vendor was liable in the present case. Because the statement as to the 1994 crop proceeds became a term of the contract, the vendor was liable to make good the bargain, and put the purchasers in the position they would have been had the contract been performed. This is the classic contractual measure of damages, which entitles the wronged party to recover expectation losses. The 1979 Act also declared that damages for deceit (fraudulent misrepresentation) or for negligent misrepresentation were no longer available against a party (s6(1)(b)). The Act created no right of action against an agent for misrepresentation, nor did it remove any existing liability in that respect.

To complete this background, it can be noted that the common law measure of damages in tort for deceit or fraudulent misrepresentation, and also for negligent misrepresentation, is to put the wronged party in the same position as if the representation had not been made - not as if it had been true. A purchaser fraudulently or negligently induced to enter into a contract of sale and electing not to rescind it could recover from the representor the difference between the price and the (lower) actual value of the property. This was the measure of the detriment to the purchaser resulting from the inducement of the purchase. Loss of bargain, or expectation losses, were excluded. The purchaser also appears to have been able to claim any other consequential loss which directly flowed from reliance on the

misrepresentation including a claim for lost opportunity - both in relation to another purchase foregone or in relation to bargaining with the vendor. In the present case no attempt was made to claim for any such difference because the purchaser concentrated on an expectation or promissory claim.

Because of the reform of the law relating to innocent misrepresentation by the Contractual Remedies Act, New Zealand courts have not found it necessary to determine as separate issues claims for misrepresentation between contracting parties under the Fair Trading Act to the same extent undertaken by the Australian courts. They generally arise in this country, as in the present instance, in relation to claims against non-parties, usually agents, who have innocently or otherwise been guilty of a misstatement prior to the formation of a contract. We turn now to the Fair Trading Act 1986.

It is accepted that an agent can incur liability under s9 and s14 although acting only in the capacity of an agent for another person (Goldsbro v Walker [1993] 1

NZLR 394). That is not a present issue. The remedy invoked for the statutory breach which occurred here is that provided under s43(2)(d), being compensation for loss or damage suffered “by the conduct” (s43(1)), namely the misrepresentation. The enquiry therefore was to ascertain the loss or damage which was caused to the purchasers as a result of the misrepresentation. The pleading under this head is framed only as a claim for loss of profits. It was not presented or argued on any other basis in either of the Courts below.

Although the distinction between the measure of damages available in tort and in contract is well established, there is no need to classify a breach of the Act giving rise to a possible monetary claim under one or other of those categories. It is the statute which is the source of relief, and it is the statute which must be applied to the particular factual circumstances. Nevertheless, the rationale behind the two concepts may well be relevant when considering a particular set of circumstances.

The power to make a monetary award under the Act is discretionary, as was emphasised by this Court in Goldsbro v Walker in indicating a sum less than the actual loss or damage suffered by a claimant. As the case has on occasions been used as authority for the proposition that the Court has an untrammelled discretion to award damages as it thinks fit, it is important to keep in mind the limits of what was there decided. First, it held that an agent who passed on misleading information either inaccurately or in some way adopting it, could be liable under the Act. Secondly, it held that the common law rule that a tortfeasor whose wrongful conduct contributed to the damage was liable for the whole damage was not to be imported into the statutory remedy provided by s43(2)(d). Accepting that the Court is vested with a discretionary power, and accepting also that traditional common law rules as such need not be applied, it is still necessary to give proper effect to the words of the statute.

Section 9 creates a duty not to mislead. If the duty has been breached money may be awarded to make good, or compensate for, loss or damage which has been caused by the breach. Where there has been an actionable wrong, it is a general and basic principle of law that the remedy by way of monetary award is to put the wronged party in the same position as he or she would have been but for the wrong. Where the wrong is misrepresentation leading to a contract for purchase of property, the position to be restored is that which would have enured had the misrepresentation not been made. This demonstrates what we see as the fallacy in Mr Lawson’s argument. Had there been no misrepresentation, that is no breach of duty, there is no logical basis for asserting the purchasers here would have obtained the benefit now claimed. If they would not have purchased at all, then prima facie the loss would be based on the difference between the value of the property and the price paid or, in some circumstances, the loss of an opportunity to buy a different property. On the other hand, if they still would have purchased, the resulting loss could only be one arising in some collateral way, such as lost opportunity to buy at a reduced price or some other direct out of pocket consequence.

The only duty which can give rise to a claim for lost benefit or loss of expectation is one which imposes an obligation to perform the representation. Here

the wrong complained of is making the representation, not in failing to honour it. To say that a particular representation is promissory in nature is unhelpful and does not assist the present argument. The promise must be one which is enforceable at law if it is to give rise to a remedy. Section 43(1) does not purport to make a representation enforceable against a representor. It says there is liability for loss or damage resulting from the representation. The difference is real and substantive.

To hold that misrepresentation inducing a contract can give rise to a claim for expectation losses under s43(2)(d) is to turn on its head the whole rationale of the measure of damages for a civil wrong. As we have said, the wrong here was making a misleading statement. Failing to make good a misleading statement does not constitute a breach of the Act. It is fundamental that the remedy must be directed to the consequences of the breach of the imposed duty, and not to consequences which are attributable to some other cause which is not the subject of an actionable duty.

In short, there is no justifiable basis for construing s43(1) in such a way as to give a representee a right to enforce a representation which is misleading. Absent such a right, entitlement to damages for non-performance of the representation, i.e. for loss of benefit, cannot lie. A person cannot claim that to which he or she is not entitled.

Provisions analogous to the New Zealand Act have been the subject of litigation in Australia under the Trade Practices Act 1974, and in particular s82 of that Act. At the time of hearing of the present appeal the leading authority in Australia was that of its High Court in Gates v The City Mutual Life Assurance Society Ltd (1986) 160 CLR 1. The Court there held that in a case concerning misleading or deceptive misrepresentations, a measure of damages other than based on the tort principle would only be appropriate in exceptional circumstances. Later in Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 109 ALR 247, the High Court was concerned with a limitation question and held that “loss or damage” resulting from a guarantee induced by misrepresentation was suffered when the guarantee was called upon. The common law measure was observed as being an appropriate guide in many

cases, but it was signalled that the s82 measure was not necessarily the same. In Kizbeau Pty Ltd v WG & B Pty Ltd [1995] HCA 4; (1995) 184 CLR 281, the rules for assessing damages in tort rather than those in contract were again said by the High Court to be an appropriate guide in most, if not all, cases.

Subsequent to the hearing of the present appeal and to preparation of this judgment in draft, the High Court of Australia has delivered its judgment in Marks v GIO Australia Holdings Limited [1998] HCA, 11 November 1998. The Court there reviewed its earlier decision in Gates. For present purposes it is sufficient to note that the claim arose from the plaintiffs entering into loan agreements in reliance on a representation that a particular rate of interest to be charged was set and would not be changed. The contracts provided for the interest rate, but also allowed for a variation. The misleading representation was not contractual, and again it was a case where the representors were contracting parties. Unlike the New Zealand situation, no remedy outside the Trade Practices Act was available. In a joint judgment, McHugh Hayne and Callinan JJ, held that s82 of the Australian Act (the equivalent of our s43(2)(d)) required identification of a causal link between loss or damage and the contravening conduct. Their judgment records at paras 47 and 48:

The bare fact that a contract has been made which confers rights or imposes obligations that are different from what one party represented to be the case does not demonstrate that the party that was misled has suffered loss or damage.

....

A party that is misled suffers no prejudice or disadvantage unless it is shown that that party could have acted in some other way (or refrained from acting in some way) which would have been of greater benefit or less detriment to it than the course in fact adopted.

Gaudron J held that there was no evidence to establish loss or damage, noting that the plaintiffs’ case was simply that they suffered loss by reason of the interest being varied, and that was insufficient. The Judge noted that it was not asserted by the plaintiffs that they would have entered into the loan agreements either of the kind they had anticipated or more beneficial to them, nor that they had lost the opportunity of doing so. Gummow J, in denying the plaintiffs relief, relied primarily on the fact

that they had chosen not to take the opportunity to escape the imposition of the increased interest rate by refinancing the loans as offered by the lenders. Kirby J, dissenting, would have given relief under s87 of the Australian Act. Section 87 permits the Court to make orders of a discretionary kind where a person is likely to suffer loss or damage. With respect we agree with the approach taken by McHugh Hayne and Callinan JJ, which in our view conforms with the meaning and intent of the New Zealand legislation.

In Smythe v Bayleys Real Estate Ltd (1993) 5 TCLR 544 the defendant real estate agent recommended a commercial property for purchase and falsely represented that a nation-wide company held a long term lease guaranteed by its directors. In fact the company was already insolvent, and was forced to surrender the lease soon after the purchase. The agent was aware that the plaintiffs were seeking a low risk investment with secure returns higher than available on bank deposit. Thomas J cited Goldsbro v Walker in support of not adhering to the tort measure. He awarded the rental income for the entire remaining term of the lease. In rejecting diminution of value in favour of this measure of damages Thomas J observed that he was applying the fundamental objective of damages “to put the plaintiffs in the same position, as far as money can do, as they would have been but for the wrongdoing of the defendants”. We therefore do not see this as a loss of profits claim, but rather as an example of ascertaining in the particular case, the actual loss suffered by the plaintiffs. If it is not to be analysed in that way and as a lost opportunity case but as an expectation loss case, we would, with respect, not follow it.

In New Zealand, Hammond J in Crump v Wala [1994] 2 NZLR 331 appears to have awarded loss of profits under s43(2)(d) for misrepresentation as to the quality of goods purchased for resale. The basis being that a certain gross profit on resale was an expectation common to the parties. With respect, we do not see s43(2)(d) as an open door to recovery of lost profits in cases of misrepresentation. For the reasons explained earlier the remedy is concerned with making good loss or damage which has been suffered by reason of the misrepresentation, which is something conceptually

different from a starting point of what would have resulted had the representation been true.

We would therefore hold that the loss of income awarded in the present case does not constitute loss or damage suffered by the purchasers caused by the agent’s misrepresentation. It is therefore outside s43(1).

There is in our judgment a further reason for declining liability as a matter of principle. In the case of parties to a contract, the effect of the approach adopted in the High Court is to make the representation a term of the contract which is something expressly achieved by the 1979 Act. We do not see that as also being the intention of the 1986 Act. It is unnecessary and requires an implication which does not sit comfortably with the words of the statute. More importantly, the further effect would be to make an agent acting in the course of trade potentially liable for performance of the principal’s contract as though a contracting party - the agent becomes a promisor. The consequences of that are far-reaching and would result in a dramatic shift in legal responsibility, in particular for conduct which is neither fraudulent nor negligent. It is no answer to say that relief is discretionary, or that the obligation to mitigate may relieve a representor from a loss of expectation claim. The availability of such relief is either right in principle or it is not.

There are good reasons for making a party to a contract responsible in the way accomplished by the Contractual Remedies Act. Equally, there are good reasons for making agents responsible for actual losses incurred as a result of their misrepresentations. However, there are none apparent for imposing liability for performance on an agent who reaps only limited and indirect benefit from the contract.

In this judgment we have been concerned to consider only what are truly expectation losses where a contract has eventuated as a result of the misrepresentation. Other consequential losses, such as loss of opportunity to obtain an alternative asset, loss of opportunity to obtain the asset in question at a lesser price, wasted expenditure, trading losses, and so on may well be compensable in some circumstances. Some of those consequences have come under consideration in respect of the Australian

legislation. All would appear to be of a kind which, if established by evidence, could well come within s43. This however is not, as pleaded and run, one of those cases.

We would allow the appeal.

Solicitors

Keegan Alexander Tedcastle & Friedlander, Auckland, for Appellant

Willis Toomey Robinson, Napier, for Respondents

IN THE COURT OF APPEAL OF NEW ZEALAND CA 59/98

BETWEEN COX & COXON LIMITED Appellant

AND BARRY FREDERICK LEIPST

and BARBARA JEAN LEIPST Respondent

Coram: Richardson P Gault J

Henry J Blanchard J Tipping J

Hearing: 6 July 1998

Counsel: P J Napier for Appellant

M B Lawson for Respondents

_{Judgment: 24 November 1998}

_{JUDGMENT OF TIPPING J}

Introduction

The appellant (the agent) is a real estate agency. It acted for the vendor, when in 1995 she sold her 5 acre property to the respondents, Mrs and Mrs Leipst. The land was a lifestyle block. In addition to the house there was an apple and pear orchard. There were also some glasshouses. The purchasers inspected at an open day. The appellant’s representative told them that in 1994 58 bins of Williams Bon Cretian pears had been produced on the property and sold to Watties for $12,000. This statement was incorrect. The true value was substantially less. What the agent told the

purchasers was therefore a misrepresentation and amounted to misleading conduct in breach of s9 of the Fair Trading Act 1986 (the Act). The purchasers sued both the vendor and the agent on various heads. The sole issue now is the amount of their loss consequent upon the misrepresentation.

Rival contentions

In spite of an agreement between the parties that the purchasers’ loss on this head was $16,000, the District Court Judge held that no loss had been proved. On appeal, Greig J awarded $16,000. With the leave of the High Court, the agent now appeals against that assessment contending that it was not in the event bound by the

$16,000 figure. That contention is based on the proposition that the figure was agreed only if the contractual measure of damages was applicable. This the agent denies. It claims that the tort measure was the appropriate one. On that basis the agent contends that the purchasers demonstrated no loss because there was no established diminution in value of the property on account of the misrepresentation. According to the agent, the figure which Greig J awarded resulted from a misunderstanding of the basis of the agreement as to quantum.

The agent’s essential stance on this appeal is that loss of bargain damages are not available for breaches of the Act. As a fallback position, the agent contends that, if that general proposition is not accepted, there can be no loss of bargain damages under the Act unless the parties are in a contractual relationship. The agent was not of

course in any contractual relationship with the purchasers. They contend that the Court’s discretion to award damages for breaches of the Act is not trammelled by historical matters such as the different measures of damages in contract and in tort; they say the Court’s task is to award whatever damages are a fair and reasonable consequence of the breach.

The purchasers accept that the misrepresentation in the present case was as to

a past fact i.e. the number and value of the pears produced on the property in 1994 and sold to Watties. But they say that this past fact was a fact from which the future profitability of the orchard could be expected to be inferred and was in fact inferred.

The purchasers therefore contend they are entitled to damages designed to fulfil the expectation which the agent’s misleading conduct engendered in them.

The agent’s liability, which is no longer challenged, derives from s9 of the Act, providing as it does that no person shall, in trade, engage in conduct that is misleading or deceptive, or is likely to mislead or deceive. The agent now accepts that it did engage in conduct that misled, or at least was likely to mislead the purchasers.

Appropriate measure - discussion

The question becomes what qualifying loss or damage the purchasers suffered as a result of the misrepresentation. If a person has suffered, or is likely to suffer, loss or damage by dint of a breach of the Act, s43 empowers the Court to make an order directing the party in breach to pay the claimant “the amount of the loss or damage”: s43(2)(d). The use of the words “loss or damage” demonstrates that Parliament was intending to define the ambit of compensation available under the Act in a broad and general way. The Act does not expressly import any notions of contract or tort for the purpose of assessing compensation, nor indeed for any other purpose. Nothing in the

language of the Act suggests that such notions were intended to be imported implicitly. In cases covered by the Act, Parliament was signalling a new approach untrammelled

by historical causes of action and their criteria for the assessment of damages.

The nature of the conduct creating the liability to pay compensation will have a bearing on the basis on which that compensation ought fairly to be assessed. So, too, will the nature of any associated transaction and its subject-matter. In a contractual context, such as that which exists when a real estate agent is dealing with a potential purchaser on behalf of a vendor, whatever the agent says about the property is likely to be regarded as relevant to the price at which it is sold. The future profitability of a trading enterprise will obviously be influential in a purchaser’s decision whether to buy and how much to pay. But against that, the transaction may not, as in the present

case, be wholly commercial.

The property with which the present case is concerned was an amalgam of residential and income earning features. If the loss or damage caused by the misrepresentation is confined to diminution in value, or what is effectively the same thing, namely such loss as the purchasers would have made on an immediate resale, the transaction is thereby treated as if it had been one in which the purchase was of goods in a ready market. In such a situation, the subject-matter is readily substitutable. But such an approach will often be inappropriate if the transaction relates to something which is not so readily substitutable.

If an agent for the vendor of a popular model of car misrepresents its mileage, the purchaser can reasonably be expected, notionally at least, to sell the deficient vehicle and recover, as loss or damage, the difference between what was paid and the car’s actual worth with its true mileage.

When the defendant to a claim under the Act is not a party to any relevant contract, it is appropriate to enquire whether the misleading conduct had a promissory connotation, either directly or indirectly. If there is a promise directly or indirectly inherent in the misrepresentation, it is a relatively short step to require the person who made the representation to compensate the other party for the failure of the facts to fulfil the promise. It can fairly be said that the representee’s expectations, having been legitimately formed as a result of the representation and not fulfilled, must now be made good by a sum of money.

If a real estate agent acting for a vendor represents that the subject-matter of the contract will perform in a particular way, or is likely to produce a particular result, either financially or otherwise, and the actual performance is deficient against the representation, the party who has suffered damage or loss as a result should prima facie be able to obtain compensation for the consequences of the deficiency. That statement does not of itself necessarily assist in determining the basis upon which such compensation should be assessed. For that purpose it is appropriate to consider whether it is reasonable to expect the purchaser, on discovering the falsity of the representation, to sell so as to crystallise the loss in that way. If that is so, compensation should be fixed on the basis of a notional sale, irrespective of whether

the purchaser has in fact elected to sell. The loss will then be measured on the basis of the difference between the price paid and the price notionally obtained, with such adjustments as may be necessary to reflect events between purchase and notional resale and the expenses of a notional resale.

If, however, it is not in the circumstances reasonable to expect the purchaser to resell and the purchaser does not do so, the notional resale method will be inappropriate and compensation should be fixed by discounting to present value such future losses as the purchaser can establish are likely to occur as against what the position would have been had the representation been accurate. Appropriate

allowance should be made for contingencies.

The first approach, notional resale, has some analogy with the tort measure. The second approach, present value of future losses, has some analogy with the contract measure. In tort, money is used to place plaintiffs in the position they would have been in had the wrong not been committed. In contract, money must take the place of the promised benefit. There may be cases where different methods will be appropriate for different aspects of the case. Likewise, some cases may not fit readily into either of these two primary methods. The ultimate objective, as in all aspects of damages, is to be fair to both sides.

Assessment of damages is essentially a question of fact. Such rules or general principles as are formulated are simply for general guidance. An unduly rigid approach is not appropriate: see New Zealand Land Development Co Ltd v Porter [1992] 2

NZLR 362 and the cases there cited. The most the Court can usually do in the damages area is to lay down prima facie rules which will apply in particular situations in the absence of good reason to depart from them.

If it is reasonable to expect the purchaser to resell on discovering the misrepresentation, the notional resale method will prima facie be appropriate. If it is reasonable for the purchaser to retain the property purchased, despite the misrepresentation, the present value of future losses method will prima facie be appropriate. There is a conceptual link with the contrast in building and structural

damage cases between diminution in value and reinstatement. This was a topic which I

discussed in some detail in Dynes v Warren & Mahoney & Ors (unreported A242/84

Christchurch Registry, judgment 18 December 1987 - on appeal CA49/88, judgment

26 October 1988). In that area the reasonableness of reinstatement usually guides the

Court’s decision.

New Zealand authorities

I turn to consider whether the foregoing approach is consistent with the authorities. The leading New Zealand case is Goldsboro v Walker [1993] 1 NZLR

394 (CA). In that case a distinction was drawn between an agent who acts merely as a conduit, and an agent who purports to do more. For present purposes, this is the difference between an agent who says “the vendor tells me that last year’s crop was such and such” and an agent who says “last year’s crop was such and such”. The

agent in the present case fell into the latter category: hence its liability, no longer under challenge.

In relation to damages, this Court held in Goldsboro that the Court has a discretion as to the amount awarded. It does not have to be to be an all or nothing approach. The power to award the full amount of the loss encompasses the power to award part. In the light of this discretion as to amount, it would be surprising if there was no discretion as to measure, with the measure being designed to reflect the circumstances of the particular case. At page 399, Cooke P said:

The remaining question in the appeal is discretion. A monetary award is but one of an extensive list of alternative or cumulative remedies that the Court "may" grant under the New Zealand Act. In this respect the New Zealand Act differs from s 82(1) of the Trade Practices Act 1974 of the Commonwealth of Australia, which takes the form that a person suffering loss or damage "may recover" the amount: words which would seem to confer a right of action. Our

s 43 is of a different structure and I think that the difference is significant. As to a monetary award, no right of action is conferred.

It is one of a range of discretionary remedies. In that context there is no compelling reason to hold that if the defendant's misleading conduct has contributed to cause the plaintiff's loss, the only course open to the Court, where no other form of relief is appropriate, is to

order payment of a sum representing the full loss. Nor is there any compelling reason to hold that the only discretion of the Court is to award all or nothing.

In his judgment, Richardson J, after saying at page 403 that the discretion inherent in the Fair Trading Act as to remedy should be exercised to give effect to the policy of the Act, observed:

But it is not to be expected in policy terms that, when exercising its statutory powers under s 43 and in deciding what, if any, remedy is appropriate in the circumstances, the Court should apply conventional common law rules relating to traditional causes of action.

His Honour emphasised that it was a matter of doing justice to the parties in the circumstances of the particular case. In his judgment, Hardie Boys J also emphasised the discretionary nature of the remedies available under the Act. He stated that it would wrong to attempt any categorisation of factors relevant to the discretion. That suggests that it would be wrong to maintain the historical tort and contract classification of appropriate measures for assessing damages. The discretion should be flexible, both as to measure and amount.

The decisions of Hammond J in Crump v Wala [1994] 2 NZLR 331 and Gloken Holding Creditors Ltd v CDE Co Ltd (1997) 6 NZBLC 102, 272 both involved issues as between a vendor and a purchaser, albeit in Gloken there was, as here, a concurrent claim against an agent. Hammond J was prepared in the case of the agent to adopt an expectation based measure, albeit there was no contract between

him and the purchaser. His Honour did so under the Fair Trading Act. The existence of a further claim against the agent in deceit was a factor but the point remains that the Judge was prepared, after considering a number of authorities, to depart from a tort based measure for a breach of s9 of the Fair Trading Act.

In Smythe v Bayleys Real Estate Ltd (1993) 5 TCLR 454, 474, a disappointed purchaser brought a claim against the vendor’s agent. The agent had misrepresented the terms on which the subject premises were leased and the strength of the tenant.

The purchaser, who was an investor, suffered a loss following the failure of the lessee.

As here, there were claims against both the vendor and agent. Thomas J, sitting in the High Court, after citing Goldsboro, declined to confine the award of damages to the tort measure (i.e. diminution in value). He made an award based on the rent that would have accrued for the entire term of the lease. The Judge regarded it as appropriate to do so, both to do justice between the parties and in the light of the policy of the Act. I agree with His Honour’s reasoning and his refusal to allow the statutory remedy to be confined within historical categories.

Decisions of High Court of Australia

In Australia, the leading case at the date of the hearing of the present appeal was the decision of the High Court in Gates v The City Mutual Life Assurance Society Ltd (1986) ATPR 47-360, followed in Kizbean Pty Ltd v WG & B Pty Ltd [1995] HCA 4; (1995) 184 CLR 281, and applied in a limitation context in Wardley Australia Ltd v State of Western Australia [1992] HCA 55; (1992) 175 CLR 514. At issue in Gates was the scope of damages following a misrepresentation by an insurance company concerning a disability policy. In his judgment at 47-364, Gibbs CJ stated that while the appellant

was entitled to recover the difference in value between the policy as represented and as written (the classic tort measure), he was also “entitled to recover consequential loss,

at least if it was foreseeable”. That extension of the ordinary tort measure seems to me to reflect the discretionary nature of the exercise and to tell against any strict categorisation. In their joint judgment, Mason, Wilson and Dawson JJ took the view,

at 47-366, that the misrepresentation in that case was not of a promissory kind. They said it had no contractual flavour and indeed was inconsistent with the contract.

The present case is different on both counts. Here the agent’s representation was indirectly of a promissory kind and it was not inconsistent with the contract. While Their Honours in Gates did not directly say as much, their reference to those aspects suggests that had the Gates’ representation been seen as promissory and not inconsistent with the contract, their views about the appropriate measure of damages might have been different. In coming to the view that in Gates the tort measure was the appropriate one, Their Honours appear to have taken the view that they were

presented with a stark choice - tort or contract. They said that these two established measures “compete for acceptance”. With respect, I do not see the matter in that way so far as the New Zealand Act is concerned.

Our remedy is statutory and discretionary. There is no need for the Court to tie itself to any historical measure, albeit such measures may be of assistance in deciding what approach to take in the particular case. Indeed, in Gates at 47-368,

Their Honours said that “the Courts are not bound to make a definitive choice between the two measures so that one applies to all contraventions to the exclusion of the other”. Their Honours did, however, go on to say that there was much to be said for the view that the tort measure would be appropriate in “most, if not all” misleading or deceptive conduct cases and those involving false statements.

Their Honours were, however, prepared to allow a claim for the loss of such benefits as the plaintiff would have obtained under a contract which the plaintiff could and would have entered into but for reliance on the misleading conduct of the defendant. Under this reasoning a plaintiff can claim expectation losses under a contract not entered into because of misrepresentation but no such losses can be claimed under a contract actually entered into as a result of misrepresentation. This distinction is not immediately easy to justify. Its basis seems to have been the difficult proposition that in the former case the loss is consequential upon the misleading conduct, but not in the latter.

The reasoning in Gates must be considered in the light of later Australian decisions. First, there are the decisions of the High Court in Sellars v Adelaide Petroleum NL and Poseidon Ltd v Adelaide Petroleum NL [1994] HCA 4; (1994) 120 ALR 16. In their joint judgment in these combined appeals, Mason CJ and Dawson, Toohey and Gaudron JJ said, at page 25, that if a misrepresentation resulted:

in economic or financial loss, it will ordinarily be recoverable under s82(1) so, in a case such as the present, the applicant is entitled to recover ‘a sum representing the prejudice or disadvantage [the applicant] has suffered in consequence of his altering his position under the inducement [cases cited]’

In those cases the misleading conduct caused the plaintiffs to lose the chance of securing a commercial benefit by completing an agreement for which they were negotiating. The misleading conduct caused them to break off those negotiations. The Court accepted that the absence of such future benefit was a qualifying loss. The issue related to how the lost chance of acquiring the benefit was to be assessed. In cases involving a loss of the chance of obtaining a benefit (like Sellars and Poseidon), the plaintiffs have made a loss as against their likely position had there been no misleading conduct. Such loss (in reality being deprived of a future benefit) is essentially an expectation loss. The benefit is one which the plaintiff could expect to receive under the contract which has not come about as a result of the misleading conduct.

In the present case, the agent’s misrepresentation has similarly caused the plaintiffs losses (in the form of lost benefits) as against their likely position had there been no misleading conduct, i.e. had the facts been correctly stated.

If, as was recognised in Sellars and Poseidon, the Court has power to compensate in one kind of case on the basis that the plaintiff has lost the chance of acquiring a future benefit it seems anomalous not to allow the Court, in the other kind of case, to compensate, when appropriate, on the basis of the benefit the plaintiff was entitled to expect had the facts been correctly stated.

In circumstances like the present, I do not consider it appropriate to limit the inquiry to a consideration of what a plaintiff’s position would have been if no representation at all had been made. The fact is that a false representation has been made and it has induced the plaintiff to enter into the contract. That contract will involve committing resources to its performance and the plaintiff to a particular course of action which might not otherwise have been taken. The fact that the plaintiff is not in a contractual relationship with the maker of the false representation should not be decisive against allowing the plaintiff to claim damages which have historically been available only in a contractual setting. The absence of a contract may be a factor of greater or lesser significance in deciding on the appropriate measure of damages but,

as a matter of policy, it should be possible for the Court to award a money sum against the maker of the false representation having the effect of requiring that person to fulfil any promise inherent in the representation. While the misrepresentation in the present case was innocent, others may be less so or downright fraudulent. The culpability of the representor may well be a factor in deciding what is fair and reasonable between

the parties both as to measure and as to amount.

In short I consider the correct approach to assessing damage or loss under s43(2) is to recognise that the Court has a discretion both as to measure and as to amount. The object is to tailor the remedy to the particular facts so as to do justice in the individual case. The ability of the Court to award a money sum under s43 is a statutory and discretionary remedy, which, as Cooke P said in Goldsboro, does not equate a cause of action such as exists in tort or contract. Cooke P also noted that the New Zealand s43 has a different structure from s82 of the Australian legislation. I agree that the difference is significant. That brings me to further Australian authority.

Further Australian decisions

The most recent case of which I was aware on this topic in Australia prior to Marks in the High Court is the decision of the New South Wales Court of Appeal in Collings Construction Co Pty Ltd v The Australian Competition and Consumer Commission [1998] NSWSC 32. The principal judgment was delivered by Cole JA, with whom Stein JA and Sheppard AJA agreed. The appellants offered to certain land owners a design and construct arrangement for a home to be built on their land. They represented to the owners that they the appellants were responsible for performance of all aspects of the package when that was not so. The contract price contained a large number of hidden aspects for which the owners were liable to pay as extras. The owners became locked in and paid a non-refundable deposit before becoming aware of the true position. The owners sought damages for their losses consequent upon the appellant’s misleading conduct. The appellants contended that the trial Judge had

erred in adopting an expectation based measure of damages in a misleading or deceptive conduct case. They argued that under s87 of the Australian Act the plaintiff is not entitled to expectation losses designed to make good a representation. It was

submitted that the trial Judge had wrongly interpreted or applied the decisions of the

High Court of Australia in Gates and Wardley referred to above.

In assessing the validity of what the trial Judge had done, Cole JA referred first to a point I have mentioned above, namely that “assessment of damages [does] not permit the application of rigid rules based on categories of action”: per Mason CJ in Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351, 355-356. Next, Cole JA proceeded to examine an argument that Gates made the tortious measure mandatory, or practically so. His Honour pointed out that Gates was a claim under s82 of the Australian Act, whereas in the Collings’ case relief was sought under s87, which had not been in issue in Gates. The New Zealand s43 is something of an amalgam of both these Australian sections.

After referring to Demagogue Pty Ltd v Ramensky (1992) 110 FLR 608, Akron Securities Ltd v Illiffe (1997) 143 ALR 457 and GIO Australia Holdings Ltd v Marks (1997) 70 FCR 559, and having distinguished Gates on the basis that it was concerned only with s82 and not with s87, Cole JA said:

In the light of the submissions put, this Court must now decide whether to adopt the wider interpretation of the relief which may be granted under s.87 espoused by all three judges in Demagogue and by the majority in Akron, or the narrower view espoused by the judges in GIO.

I prefer the wider view expressed in Demagogue and Akron. The reasons are those advanced in those decisions which I have quoted. I see no reason to give the expressions contained in s.87 other than their natural meanings. Orders may be made which “compensate” the party affected for the “loss or damage suffered by such person”. That

directs a court to define with particularity the proscribed conduct and thereafter to determine the “loss or damage” suffered in consequence of that conduct. That is the approach which Hunter J adopted. In my opinion he was correct in so doing.

It follows, in my view, that if it be established, as it was to the satisfaction of Hunter J, that so-called “consequential losses” were caused by the proscribed conduct, the trial judge was entitled to award damages equating to those consequential losses.

It is helpful now to refer briefly to Akron. This, too, was a decision of the New South Wales Court of Appeal, which, by a majority, held that s87 should not be given a restrictive interpretation and that historical approaches to damages should not fetter the wide discretion under the statute as to available relief. In making these points, Mason P said at 467:

Unlike s82, which is concerned only with compensation for actual loss or damage, s87 extends to the prevention and reduction of loss or damage which is likely to be suffered. In the phrase “likely to be suffered” the word “likely” speaks of a “real chance or possibility”: Western Australia v Wardley Australia Ltd [1991] FCA 314; (1991) 30 FCR 245 at

261; [1991] FCA 314; 102 ALR 213. Section 87 goes beyond permitting orders for

pecuniary recovery as understood in the law of tort, as Deane J

pointed out in Wardley Australia Ltd v Western Australia (1992) 175

CLR 514 at 543-4; [1992] HCA 55; 109 ALR 247. There he referred to the power to make orders in respect of persons “likely to suffer” loss or damage by conduct in contravention of Pt IV or Pt V and to make appropriate orders which will “prevent or reduce” actual loss or damage. These principles were demonstrated in Demagogue, where the Full Court of the Federal Court held that the loss or damage for the purposes of both s87(1) and s87(1A) will include the detriment suffered by being bound to a contract induced by misleading or deceptive conduct in contravention of s52. The court also decided that entitlement to

damages under s82 is not a prerequisite to relief under s87: see (1992)

[1992] FCA 557; 39 FCR 31 at 32-3 per Black CJ, at 43-4 per Gummow J, at 47 per

Cooper J; see also Wardley at CLR 527.

Mason P then noted a submission that the decision of the Full Federal Court in GIO Australia meant that “neither damages nor any other order effectively making good Ms Bollard’s representation was available under s87”. After some further discussion, His Honour then said:

In the Full Court GIO was successful in having the order for damages set aside. It was held that the borrowers were seeking no more than an order making good their expectations as represented in the brochure, and that s87 could not be used for that purpose. The court reasoned that the normal measure of damages for misrepresentation was the difference at the time of purchase between the real value of what was acquired, and the price paid: Potts v Miller (1940) 64 CLR

282 at 289, 297; Toteff v Antonas [1952] HCA 16; (1952) 87 CLR 647 at 650-1, 654; Gould v Aggelas (1984) 157 CLR 215 at 220; 56 ALR 31. The borrowers’ inability to prove that an alternative facility (with a “set” margin) could have been purchased on the market meant that no

damages were recoverable under s82. Section 87 was said to be unavailable to circumvent this result, because the reasoning in Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; 63 ALR

600 precluded it.

With respect to their Honours in the Full Court, I have real difficulty in construing s87 in this way. Granted that no damages under s82 were recoverable in GIO in the light of Gates, at least as that case is currently understood, it simply does not follow that s87 could not be pressed into service according to its terms. That appears to me to be expressly what s87(1) provides (cf “whether or not it ... makes an

order under s 82”) and expressly what was decided in Demagogue. Foster J recognised this in Gio when he said (at 30) that “the borrowers’ inability in the present case to demonstrate any financial loss resulting from the misrepresentation is no bar to their seeking relief under s87”. Section 87(2)(d) speaks in terms of “an order ... to pay ... the amount of the loss or damages” (contrast s45D(1)(a) referred to in a passage from Barneys Blue-Crete Pty Ltd v Australian Workers’ Union [1979] FCA 89; (1979) 43 FLR 463 at 473 cited by

Foster J in GIO). I find it difficult to see that Gates stands in the way, because relief under s87 was not sought in that case, and because the passages cited by the Full Court from Gates (160 CLR at 7, 12-13 and

14-15) do not, in my respectful opinion establish that s87 offers

nothing but rescission in cases such as the present.

Akron was a case between contracting parties, but the existence of a contract was not the rationale for the Court’s approach to s87, which depended substantially on the different focus of that section from s82 upon which Gates turned.

Comparison of Australian and New Zealand legislation

As noted earlier, the New Zealand s43 is an amalgam of the two Australian sections, albeit the end note to our section suggests that it is based more on s87 than on s82. Section 82 provides that a person who suffers loss or damage by misleading conduct of another person “may recover the amount of the loss or damage by action against that other person”. As Cooke P observed in Goldsboro, that suggests a

statutory cause of action for a specific amount, rather than a discretionary remedy for a discretionary amount. Section 87(1) provides that whether or not the Court makes an order under s82, if it finds someone has suffered, or is likely to suffer loss or damage

by conduct amounting to a contravention of stated provisions, the Court may make

such order as it thinks appropriate, including the orders mentioned in ss(2), if it considers any such order will compensate the plaintiff “in whole or in part” for the loss or damage, or will prevent or reduce the loss or damage.

Section 87(2) sets out a series of possible orders like those referred to in s43(2)

of the New Zealand Act. For present purposes, s87(2)(d) is identical to s43(2)(d). Both speak of an order directing the contraventor to pay the person who suffered the loss or damage the amount of the loss or damage. That formulation, linked as it is

with the introductory concept of likelihood of suffering loss or damage, is now viewed in Australia as enabling monetary compensation to be ordered for future losses. Those who drafted the New Zealand s43 obviously thought it appropriate to combine ss82 and 87 of the Australian Act into one section. They may not have appreciated that s82 created a statutory cause of action, whereas s87 was discretionary. Section 43 adopts the discretionary approach. But in terms of the Court’s ability to award a money sum as compensation for loss or damage, or likely loss or damage, no material difference can be seen between s87 and s43. There is certainly no basis for holding that s43 is narrower in focus in this respect than s87.

Simply because s43(2)(d) speaks, as does s87(2)(d), of the amount of the loss or damage and makes no specific reference to likely future loss or damage, I am not persuaded that future losses may not be awarded on a present value basis. In each paragraph (d) there is reference to the contravening conduct. That, by definition, is conduct by means of which the plaintiff “has suffered or is likely to suffer loss or damage”. Thus the loss or damage referred to in each of the paragraphs (d) must include loss or damage likely to be suffered by the plaintiff. In other words, the expression in paragraph (d) “the amount of the loss or damage” is not confined to loss or damage which has already occurred at the time of the assessment.

Causation

It is always necessary for the plaintiff to show a sufficient nexus between the loss or damage claimed and the contravening conduct. Section 43(1) speaks of a person having suffered, or being likely to suffer loss or damage “by” contravening

conduct. Questions of causation can become over refined. The policy of the Act suggests a broad and pragmatic approach to whether the required nexus has been shown. In short, there must be a sufficient relationship between the impugned conduct and the loss or damage to make it reasonable to say that the loss or damage is the consequence of the conduct. Has the loss been caused by the conduct; has the loss resulted from the conduct; has the loss been brought about by reason of the conduct? - all these are possible formulations capturing the same essential idea.

In the present case, the plaintiffs were interested in buying the lifestyle block. The agent misinformed them about the value of a previous pear crop. The erroneous statement misled the plaintiffs about the probable cash flow from and profitability of the orchard. The agent’s misleading conduct in making the erroneous statement induced the plaintiffs to enter into the contract. The contract was not as profitable for the plaintiffs as they had been led to believe. That diminished profitability was clearly loss or damage suffered by the plaintiffs. The diminished profitability could be

assessed by comparing the value of the property as represented against its value in fact; equally the diminished profitability could be assessed by means of the present value of future likely losses. Each method represents a loss or damage resulting from, caused by, brought about by, the misleading conduct. It can hardly be said that the diminished value of the asset represents loss or damage caused by the contravening conduct, whereas the present value of future losses does not.

If an agent makes a misrepresentation it has been said that actual losses incurred as a result are recoverable, but, presumably for privity reasons, such agent cannot be required to compensate for non-performance of what in contract becomes a term. That analysis introduces a limitation based on the law of contract, namely that only a contracting party is liable for non-performance. But if an agent induces entry into a contract by a promissory misrepresentation, it is both conceptually reasonable, and in accordance with the policy of the Act, to allow the Court in appropriate cases to require the agent to pay a sum of money so as to honour the promise inherent in the representation. Certainly such relief cannot be excluded by saying that the misrepresentation has not caused the loss resulting from the failure of the

subject-matter to live up to the promise. Furthermore, I can see no policy reason for

limiting the ambit of available relief under the Act by reference to historical notions derived from the law of contract. Of course, the availability of promissory relief under the Act is one thing; whether, in the particular case, it is appropriate to measure the loss in that way, is another.

Concurrent liability of agent and vendor

Before relating the foregoing discussion to the circumstances of the present case, I must consider an issue which arises as a result of the purchasers also having a right of action against the vendor. Indeed they obtained a concurrent judgment against her. The agent’s misrepresentation is, of course, to be attributed to the vendor under the ordinary law of principal and agent. The vendor is therefore deemed to have made the same misrepresentation as that made by the agent on her behalf. Whether the vendor is also deemed to have conducted herself in breach of s9 may depend on whether the vendor as well as the agent was or is deemed to have been in trade. If the agent and the vendor are both guilty of misleading conduct in breach of s9, they are both concurrently liable to the purchasers for the consequences of that breach.

Section 45(4) says that any conduct engaged in by an agent, within the scope of the agent’s actual or apparent authority, shall be deemed for the purposes of the Act to have been engaged in also by the principal. It is treated as both the agent’s conduct and the principal’s conduct. But the vendor as principal also has contractual liability for the misrepresentation under s6 of the Contractual Remedies Act 1979. The agent, of course, has no such liability, not being a party to the contract of sale and purchase.

The purchasers are entitled to damages from the vendor under s6 “as if the representation was a term of the contract that had been broken”. It was suggested that the vendor’s liability to the purchaser in contract entitles the agent to deny its concurrent liability to the purchaser under s9 of the Fair Trading Act.

There can be no outright denial of liability by the agent in the light of s45(4). At most, the agent can contend only that the vendor’s liability in contract means that the agent’s liability must be confined to the tort measure. But that does not follow and

would cut across the appropriate approach to assessing loss and damage under the Fair Trading Act, as earlier discussed. Nor do I consider the absence from the Australian landscape of a statute equivalent to our Contractual Remedies Act, and in particular

s6, makes any significant difference when comparing our approach to theirs. I appreciate that in Australia their Act is used to deal with innocent misrepresentations in a contractual context, it being the only vehicle to award compensation on that

account. But I do not see the trend of the Australian cases as supporting the view that under the New Zealand Act future losses cannot be awarded unless there is a contractual relationship.

Furthermore, when considering this point, it is important to identify the nature of the representation which the agent made to the purchasers. The agent did not represent that it would procure a contract giving the purchasers a contractual right to sue the vendor if the statement about the pears was incorrect. If that had been the representation, the agent would be able to say that there was no breach of s9, because a contract fulfilling the representation was negotiated. The agent’s conduct misled the purchasers about the value of the 1994 pear crop. That was conduct which gave the purchasers a statutory remedy against the agent. The fact that the purchasers may have had a concurrent statutory remedy against the vendor and also had a contractual cause of action for the same conduct, does not limit the purchasers in the scope of

their Fair Trading Act remedy against the agent. Rather it is a case of concurrent liability for the same damage. I acknowledge that in effect this approach makes the agent a guarantor of the vendor’s contractual liability. But this consequence appears

to be inherent in s45 of the Fair Trading Act which in present circumstances is capable of making both vendor and real estate agent (i.e. both principal and agent) liable for

the misleading conduct of the agent. The only potential variable is the measure of damages.

This concurrent approach raises the possibility that, in some cases, although the damage is essentially the same, different measures may be appropriate as regards the vendor and the agent. This could happen if the Court took the view that, as between the purchaser and the vendor a fully “contractual” i.e. expectation approach should be taken, whereas between purchaser and agent, damages should be assessed on a

different basis. The limited potential for this inconsistency should not result in the remedy against the agent being artificially limited in its scope; if anything that would entrench the inconsistency.

There is a further point. Under s45, the agent and the principal are potentially liable for the same conduct. That conduct leads to the same loss. It would be rather anomalous if the loss could be measured one way as against the principal (the vendor), but not in the same way as against the agent. The distinction is, of course, that the plaintiff purchasers have a contract with the vendor, but not with the agent. While the circumstances may sometimes justify the loss being assessed differently against the agent, what I resist is the suggestion that the loss cannot, even if it is wholly appropriate to do so, be measured against the agent in the same way as against the vendor principal. If the vendor is insolvent, the risk of that insolvency should fall on the agent rather than on the purchasers. It is the agent who is responsible for the

misleading conduct, not the misled purchasers, who would otherwise suffer on account of the failure of the vendor. The agent can always tailor what is said so as to exclude personal liability by making it clear that the agent is not vouching for the accuracy of the information conveyed.

Summary of position

My consideration of the authorities and the other topics I have covered has not caused me to depart from the approach which I consider best reflects the policy and purpose of the Act. That approach is set out earlier in this judgment under the heading “Appropriate measure”. The trend of authority, both in New Zealand and more recently in Australia, supports the existence of a general discretion both as to amount and as to measure. The Fair Trading Act introduced a new and flexible approach to

the way in which those damaged by misleading conduct in trade are to be compensated. When Parliament has in no way limited the measure of damages available, it is not appropriate for the Courts to impose limits on the discretion which they have been given, beyond the limits inherent in the need for (a) misleading conduct, (b) loss or damage for which it is reasonable in the circumstances to make an award

and (c) a sufficient nexus between the two.

To exclude any possibility of relief under the Act for expectation losses seems to me to represent an inappropriate fetter based on the law of contract and perhaps an unconscious incorporation into Fair Trading Act cases of the concept of privity of contract. It has always been deeply ingrained in the common law that promises can be enforced only between contracting parties. The Contractual Remedies Act 1979 is in the same common law mould by making the representation a term of the contract. The law of estoppel has in some circumstances provided relief from the rigours of the contract/privity approach. The Contracts (Privity) Act 1982 has ameliorated the position when its terms are fulfilled.

The Fair Trading Act represents a significant shift away from traditional contract theory. A misleading or deceptive statement may be made in circumstances, as here, when there is no contract between the representor and the representee, but in a broadly contractual setting. There may be a promise, express or implied, in what is said. Representees may act in reliance on that promise to their detriment. It may be perfectly reasonable, in spite of the lack of privity, to allow the representee compensation based on the non-fulfilment of the promise. It is only the influence of the law of contract which prompts the view that a contract is necessary before the law can compensate by putting the promisee into the same position as if the promise had been kept. In representation cases, that involves fixing compensation as if the

representation had been true, rather than as if it had not been made. Indeed, with most representations it may be perfectly reasonable to take the view that the representor is

at least implicitly promising the representee that the facts stated are true and the representee may act accordingly.

Decision of High Court of Australia in Marks’ case

My judgment to this point had been written before the High Court of Australia delivered judgment on the appeal from the Full Court of the Federal Court in Marks v GIO Australia Holdings Ltd (judgment 11 November 1998). All the Judges who sat (Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ) were in agreement that,

Gates notwithstanding, there was no basis for thinking relief under the Trade Practices

Act is to be confined by analogy either with actions in contract or in tort: per Gaudron J at 5. Her Honour appears to have distinguished between representations which were contractual and those which were not. Placing definitive reliance on that distinction seems to me, with respect, to be an analogue with contract which, on the basic premise Their Honours adopted, should not be regarded as confining.

In their joint judgment, McHugh, Hayne and Callinan JJ pointed out that the Australian legislation contained “no stated limitation of the kinds of loss or damage that may be recovered and ... no express indication that some kinds of loss or damage are to be regarded as too remote to be recovered” (at 8). I respectfully agree and observe that the position is the same in New Zealand. Their Honours emphasised the need for the damage claimed to be caused by the misleading conduct. I see no difficulty in that respect when it comes to expectation losses. As in a contractual setting, the loss suffered by non-fulfilment of a promise is a loss caused by that

non fulfilment. It is the non-fulfilment which makes the conduct misleading or deceptive. If the promise is fulfilled, i.e. if the representation is true, there is no loss or damage.

Their Honours also observed that what is important is what the representee could have done if aware that the representation was in error, not what the representee might have hoped for or expected (see p 11). Here I part company. The very nature

of a promise for the future, either direct or indirect, is that the promisee is led to believe that what is promised will be delivered. The conduct only becomes misleading or deceptive when what is inherent in the promise is not delivered. Therefore, with respect, what the representee hopes for or expects is the important point; it is at the heart of the wrongful conduct of the representor. That does not mean that it will always be appropriate to award compensation on the basis of fulfilling the promise. The examples cited by Their Honours, at p 12, clearly bring this out. The approach of Their Honours also seems to me not to put enough emphasis on the power of the Court to compensate for loss or damage likely to be suffered in the future, albeit that lack of emphasis may have been a product of the circumstances of the Marks case. It

involved essentially a promise that an interest rate was fixed, whereas the lender had the capacity on notice to increase it. Their Honours expressed their conclusion thus (at 13):

Accordingly, the position of the borrowers is that they were misled into taking a loan which cost them more than was represented to them but which, even so, cost less than any other loan available to them in the market. They suffered and will suffer no loss or damage as a result of the misleading and deceptive conduct of the respondents. No order can be made under ss82 or 87.

That approach may have been justifiable as a matter of discretion in those circumstances, but the loss could, in my view, properly have been measured by the extra interest charged but which the borrowers had been promised would not be charged. Indeed, as was the view of Kirby J, I would myself have been inclined to consider enforcement of the promise by a monetary award, albeit not necessarily to the full extent.

Gummow J emphasised the ability of the borrowers to escape without penalty before the increased interest rate came into force. He saw their loss as deriving from their choice not to escape. The reality of that choice is not for present discussion. The nature of the loss and the capacity to compensate for non-fulfilment of a representation were not the principal focus of His Honour’s judgment. But Gummow J appears to have kept open that possibility when saying that the discretionary remedies under the Australian Act were of sufficient width even to vary contractual terms “themselves” (see p 23).

Kirby J emphasised the borrower’s reliance in argument on s87, rather than s82, a point discussed above. In so doing, he pointed out that Gates’ case was concerned only with s82. He held that the wide ambit of s87 suggested large remedial powers. He rejected the argument that inherent in the idea of loss or damage was a detriment falling short of the damage consequent upon the deprivation of the expectation of profit which would have accrued if the contravention had not occurred. He held that the borrower’s loss of the expectation of a fixed rate of interest was a qualifying kind of loss or damage. Loss or damage is no more than a disadvantage

consequent upon a contravention. How that disadvantage is quantified is a matter of discretion in the particular circumstances.

I am bound respectfully to observe that no consistent theme emerges from the several judgments in Marks; much less a consistent and persuasively reasoned theme which suggests that the Courts have no discretion to enforce a representation (i.e. to prevent it from becoming a misrepresentation) when that is appropriate. I find the views of Kirby J more persuasive than those of the other members of the Court. After giving full consideration to the reasoning in Marks, I adhere to the view that the Court may compensate for a false representation under the Fair Trading Act, either by assessing the plaintiff’s position had the representation not been made at all, or when appropriate, by requiring the representor to put the representee into the position the representee would have been in had the representation been true. Which of those approaches, or any other which may be suggested, should be adopted will depend on which approach is best calculated to do justice to all concerned in the individual case.

This case

It is now time to apply my approach to the circumstances of this case. In coming to their agreement about quantum the parties fell into the error of assuming the purchasers’ loss had to be assessed either on the tort measure or on the contract measure. The quantum agreement, as recited by Greig J in his judgment, was that:

the quantum of any loss may (sic) follow if liability is found against

[the vendor and/or agent] is $16,000 as at 11 August 1995.

That cryptic record of the agreement was said not to mean what it literally conveyed. Counsel for the agent informed us that the agreement was meant to say that the quantum of any loss which flowed was fixed at $16,000 if liability for the type of damage claimed by the purchasers was established. The type of damage claimed in the purchasers’ pleadings certainly had a contractual flavour. But in substance, what appears to have been addressed by the parties was the inappropriately stark contrast between the tort and the contract measures. The agent was asserting that the tort measure was the correct one, indeed the only one available. The purchasers were arguing that they were entitled, in the particular circumstances, to go beyond the tort measure and they pitched their claim in their pleadings on a fully contractual basis.

The agent’s point in substance was that diminution in value was the proper approach, and that as no such diminution had been established, the purchasers had proved no loss or damage.

In the circumstances of this case, I consider it was reasonable for the purchasers to elect not to sell the property on ascertaining the misrepresentation and its consequences. The property was both their home and an income producing venture. It was not readily substitutable. In these circumstances, the purchasers were entitled to retain the property and seek compensation for the agent’s misleading conduct on a basis reflecting the present value of future losses.

In terms of the agreement about quantum, the agent has failed to demonstrate that the tort measure is mandatory or, indeed, is appropriate in the present case. That

being so, I regard the agreement as having come into operation. This approach seems to me to reflect the justice of the matter as between the parties. In substance, while the purchasers have failed in demonstrating that the contract measure was per se

appropriate, they have demonstrated that an analogous measure was appropriate under the Fair Trading Act to their particular circumstances. I would, therefore, dismiss the appeal, thereby leaving Greig J’s award of $16,000 to stand.

Solicitors

Keegan Alexander Tedcastle & Friedlander, Auckland, for Appellant

Willis Toomey Robinson, Napier, for Respondent