Murphy v Overton Investments Pty Ltd

• Jurisdiction: Australia Federal only
• Court: High Court
• Judge: Gleeson CJ,McHugh,Gummow,Kirby,Hayne,Callinan,Heydon JJ
• Judgment Date: 05 February 2004
• Neutral Citation: [2004] HCA 3,2004-0205 HCA A
• Docket Number: S78/2003
• Date: 05 February 2004

[2004] HCA 3

HIGH COURT OF AUSTRALIA

Gleeson CJ, McHugh, Gummow, Kirby, Hayne, Callinan AND Heydon JJ

S78/2003

John James Murphy & Anor

Appellants

and

Overton Investments Pty Limited

Respondent

Trade Practices Act 1974 (Cth), ss 4K, 82, 87.

Murphy v Overton Investments Pty Ltd

Trade Practices — Remedies — Misleading conduct — Lease for unit in retirement village — Lessee liable to pay proportionate part of all expenditure incurred in operating village — Estimate of likely expenditure given to prospective lessees — Estimate misleading — Estimate did not include all expenditure being incurred in operation of the village — Accepted that respondent engaged in conduct in contravention of Pt V of the Trade Practices Act 1974 (Cth) — Relief available under Pt VI of the Trade Practices Act — Whether appellants suffered ‘loss or damage’ within meaning of ss 82 and 87 of the Trade Practices Act — Whether ‘loss or damage’ confined to economic loss — Whether incurring unexpected expenditure can be loss or damage — Whether ‘loss or damage’ is necessarily singular — Whether loss or damage constituted only by any diminution in value of the lease — Whether increased future contributions could be awarded as damages.

Words and phrases — ‘loss or damage’.

1 Gleeson CJ, McHugh, Gummow, Kirby, Hayne, Callinan AND Heydon JJ. In 1992, the appellants, Mr and Mrs Murphy, were considering moving into a retirement home. The respondent, the developer and then owner of the Heritage Retirement Village, at Padstow Heights, a suburb of Sydney, gave the appellants an information brochure about the village. The brochure explained that the respondent was selling leasehold interests in units at the village. (The leases were to be registered leases for a term of 99 years.)

Gleeson CJ

2 The brochure said that there would be an ‘on-going management and maintenance program’ at the village. It said that ‘[p]resent budget figures would indicate’ that, for a unit of the kind that the appellants were considering leasing, a pensioner would incur a weekly cost of $55.71.

3 The lease which the respondent offered obliged the lessee to contribute to outgoings. The relevant provision of the lease (cl 5) gave a long, but not exhaustive, list of items which could be included in the amount of outgoings. They included such things as rates, insurance premiums, and a great variety of maintenance and like expenses, but in effect extended to all expenditure incurred in carrying on the operations of the village. The lease provided that the respondent would make a periodical estimate of likely outgoings, which tenants would then pay by monthly or other instalments, and that, as soon as practicable after the end of the period, the respondent would charge or credit tenants with the amount of any difference between the estimate and the actual outgoings incurred.

4 In 1992, the appellants agreed to take a lease of Unit 53 in the village. Before they executed the relevant documents, which they did on 20 October 1992, the appellants sought legal advice about the lease. The first appellant read and understood the provisions of the lease dealing with outgoings. The reference schedule annexed to the appellants' lease said that the estimated initial outgoings for their unit, in the case of pensioner tenants (as the appellants were), was $55.71 per week.

5 The lease made plain that the figure of $55.71 given in the schedule was no more than an estimate, and that the amount of outgoings to be charged to tenants was subject to determination and variation from time to time. But the figure of $55.71 was calculated ‘on figures that did not adequately provide for all expenditure actually being incurred in the operation of the Heritage Village’1. It

is now not disputed that it was misleading, or likely to mislead, for the respondent to give this estimate to the appellants without disclosing that it did not adequately provide for all the expenditure then actually being incurred in the operation of the village. It is accepted, therefore, that the respondent engaged in conduct in contravention of Pt V of the Trade Practices Act 1974 (Cth) (‘the Act’).

6 The ultimate question in the appeal is what, if any, relief under Pt VI of the Act the appellants should have for this contravention of Pt V. That question arises in an appeal brought against orders of the Full Court of the Federal Court of Australia2. Those orders were made in appeals against the dismissal of the proceedings at first instance3. The Full Court ordered that the proceedings be remitted to the trial judge for further consideration of certain claims that had been made by the appellants under the Contracts Review Act 1980 (NSW) and a costs order. Otherwise, the appeals were dismissed.

7 The claims under theContracts Review Act were held, on remitter, to fail. An appeal against those orders was abandoned.

8 In this Court, the appellants contended that the Full Court was wrong to dismiss their appeal against the trial judge's refusal to award damages. Recognising that this Court was not in a position to assess the damages which should be allowed, the appellants contended that the assessment of damages should also be remitted to the trial judge. That contention should be accepted.

9 It will be necessary to say more about the history of the proceedings in the Federal Court but, to understand that history and the issues which fall for decision in this Court, it is necessary to begin the description of the dispute between the parties at an earlier point.

The dispute about outgoings

10 Until 1997, the respondent did not charge tenants of the village all outgoings that could properly be charged under the leases. It seems that the

prospect of increasing tenants' contributions was first raised in early 1993. Tenants opposed this suggestion. Reference was made to a code of practice known as the Retirement Village Industry Code of Practice 1989, it being said that this prevented the respondent increasing the level of contributions without tenants' approval. (This, and a later Code made in 1995, were made by regulation under the Retirement Villages Act 1989 (NSW).)

11 In March 1994, the respondent received advice from an accountant that much more could be charged for outgoings than was then being charged, and that to continue charging outgoings at the level then being charged ‘would be undesirable to the financial position’ of the respondent. Thereafter the respondent attempted to increase the amounts it charged tenants for outgoings. These attempts led to several meetings between groups of tenants and representatives of the respondent in which there was much discussion, and dispute, about the rights and wrongs of increasing the levies for outgoings.

12 In July 1994, the respondent told tenants that, with effect from 1 July 1994, it would increase the levy for outgoings by more than 18 per cent and would make some other changes to the way in which outgoings would be calculated. The respondent did not demonstrate that in arriving at the increase of more than 18 per cent, categories of outgoings were taken into account which were additional to those taken into account in arriving at the estimate of $55.71.

13 The increase of more than 18 per cent appears later to have been understood as no more than an interim measure. Nonetheless, tenants consulted solicitors; consideration was given to tenants commencing proceedings in the Residential Tenancies Tribunal of New South Wales. The appellants and other tenants paid the increased charge but the underlying dispute continued to simmer.

14 In May 1996, the respondent produced its 1997 budget giving its estimate of likely outgoings for that year. In November 1996, it told tenants that it would thereafter charge all that it incurred in operating the village. This was later to be said to be the first unequivocal statement of this intention.

15 1996 saw the start of what was soon to prove to be an avalanche of litigation between the respondent and its tenants. It is necessary only to sketch an outline of that litigation.

Litigation in the Residential Tenancies Tribunal, the Local Court and the Supreme Court

16 In 1996, the respondent commenced proceedings in the Residential Tenancies Tribunal seeking orders that tenants agree to the financial budgets that the respondent had produced for its expenditure in connection with the village. The Tribunal dismissed this claim, holding that it had no jurisdiction to make the orders sought. The respondent appealed to the Supreme Court of New South Wales against the Tribunal's dismissal of its claim. In addition, it commenced proceedings against tenants in the Local Court, seeking to recover amounts which it claimed were due for outgoings it had incurred in past periods. The tenants' riposte was to commence proceedings in the Supreme Court seeking (among other things) declarations that the Retirement Village Industry Code of Practice 1989, and the 1995 Code, overrode those provisions of the leases which permitted the respondent, without the tenants' consent, to increase levels of contributions to be made by tenants.

17 A flurry of interlocutory applications followed in the Supreme Court: some dealing with the Local Court proceedings, some dealing with proceedings that had been brought by the Director-General of the Department of Fair Trading against the respondent in the Commercial Tribunal of New South Wales alleging contraventions of the Retirement Village Industry Codes of Practice. The respondent was restrained from prosecuting its Local Court proceedings. It then claimed, in the Supreme Court proceedings, the amounts it alleged were due for outgoings incurred since 1993.

18 It is necessary to give no more than a general outline of the further progress of the proceedings in the Supreme Court. The tenants' contentions that...