Page 1 / 12

IN THE MOOT COURT OF QUEENSLAND AT NATHAN

Proceedings: No. 213/2015

Complainant Susan Vega

AND

Defendant Elder Constructions

PLAINTIFF’S OUTLINE OF SUBMISSIONS

Summary of the facts

The complainant was planning to start a business with a 2015 New Year’s Eve Masquerade

Party. To do so, the complainant required a boat license, so she attended the course, where

she met Jeff Elder, who owned a construction business called Elder Constructions, and they

became acquainted with each other. The complainant told the defendant about her dream

business, and the defendant was keen to renovate the boat. The complainant visited the

defendant’s website and was impressed by the statements that referenced to the quality of

the work provided. The complainant signed a contract on 11 May, 2014. However, the

defendant failed to complete the renovation on the stipulated date, which was 31

December, 2014.

Issue for court's determination

1. Can the complainant terminate the contract due to the defendant's breach of clause 19?

2. If the complainant can terminate the contract, is she entitled to recover the contract

damages in relation to the breach of clauses 19 and 20?

Page 2 / 12

3. In the alternative, is the complainant entitled to rescind the contract for

misrepresentation?

4. Is the complainant engaged in unconscionable conduct?

Plaintiff's submission

1. The complainant is entitled to terminate the contract due to the defendant's breach of

clause 19.

2. The complainant can cover all damages by the defendant's breach of clauses 19 and 20.

3. The complainant relied on the statements on the website, therefore the complainant

can rescind the contract for misrepresentation.

4. The complainant did not engage in unconscionable conduct.

Page 3 / 12

1. Termination of the contract

1.1. Clause 19 is an essential term

1.1.1 The complainant can terminate the contract if clause 19 is either an essential term:

Associated Newspapers v Banks,1or an inessential term capable of a variety of breaches,

which is an intermediate term that has been breached in a serious way: Koompathoo Local

Aboriginal Land Council v Sanpine Pty Ltd.2

1.1.2 The test of essentiality is stated by Jordan CJ in Tramways Advertising Pty Ltd v Luna

Park (NSW) Ltd 3 as follows:

'The test for essentiality is that the promisee would not have entered into the

contract unless assured of strict or substantial performance of the promise and that

ought to have been apparent to the promisor.'

1.1.3 The court applied the test of essentiality in Tramways Advertising Pty Ltd v Luna Park

(NSW) Ltd 4 to the Associated Newspapers v Banks.5

'The High Court held that it was a condition and stated that the innocent party would

not have entered into the contract unless assured of a strict and literal performance

of the promise.'

1.1.4 In the first week of March, 2014, the complainant told Elder Constructions that the

restoration of the boat had to be completed in time for the New Year's Eve Masquerade

Party. It would appear that Sarah Vega would not have entered into the contract with Elder

Constructions unless she was assured that he would complete the renovation of the boat by

30 December, 2014. Accordingly, clause 19 was an essential term.

1.1.5 In Caprice Property Holdings Pty Ltd v McLeay,6 Fraser JA, Boddice J and Jackson J

stated that the buyer was in breach of contract by failing to settle and that the breach was a

1 [1951] 83 CLR 322.

2 (2007) 233 CLR 115.

3 (1938) 38 SR (NSW) 632, 641-2.

4 (1938) 38 SR (NSW) 632, 641-2.

5 [1951] 83 CLR 322.

Page 4 / 12

breach of an essential term because time was of the essence under clause 6.1. The sellers

were ready and willing to complete the contract in accordance with its terms.

2.1. Clause 19 is an intermediate term that has been breached in a serious way

2.1.1 Even if clause 19 is not an essential term, the contract can be still terminated. If that

were the correct interpretation, then clause 19 is more properly construed as an

intermediate term rather than a warranty. It is an inessential term capable of a variety of

breaches, which is an intermediate term that has been breached in a serious way:

Koompathoo Local Aboriginal Land Council v Sanpine Pty Ltd.7

2.1.2 In this case, there may be circumstances in which completion of renovation of the

boat by 31 December, 2014, was very important. It might be therefore that the completion

of renovation of the boat on time was more in the nature of an inessential term which is

capable of being breached in a variety of ways, some trifling, some serious.

2.1.3 Also, whether Elder Construction's breach, by failing to complete the restoration of the

boat by the stipulated date would, prima facie, give the complainant a right to terminate the

contract would depend upon the effect of that breach on the facts, and whether it was such

as to substantially deprive the innocent party of the whole benefit of the contract: Hong

Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd.8

2.1.4 It is clear that the restoration of the P.S. Marion was not completed on the stipulated

date, which is mentioned in clause 19 of the contract. As a result the party was ruined and

important guests, the Tongs, left in the middle of the party and left a negative impression of

the complainant’s new business. Therefore, the complainant is entitled to terminate the

contract with Elder Constructions.

6 [2015] 1 Qd R 206 .

7 (2007) 233 CLR 115.

8 [1962] 2 QB 26.

Page 5 / 12

2. Damages in relation to the breach of clause 19 and 20

2.1. Causation

2.1.1 To establish a casual connection between a breach of contract and the damage which

the plaintiff has suffered, he needs only to show that the breach was a cause of the loss. In

general, the application of the "but for" test will be sufficient to prove the necessary casual

connection: Alexander v Cambridge Credit Corp Ltd.9

2.1.2 The complainant would not have incurred the expense and lost the potential

opportunities from the possible recommendations from the Tongs, if Elder Constructions did

not breach the contract.

2.2. Remoteness

2.2.1 Where two parties have made a contract which one of them has broken, the damages

the other party ought to receive in respect of such a breach of contract should be such that

may fairly and reasonably be considered as arising naturally: Hadley v Baxendale.10 Damage

will not be too remote if it can be reasonably considered to:

Arise naturally according to the usual course of things from the breach; or

Be such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as a probable result of the breach.

2.2.2 The second limb concerns 'special damages', which are only recoverable when there is

special knowledge that when the contract was entered, a particular loss will follow a breach:

MacRae v Commonwealth Disposals Commission.11

2.2.2.1 The knowledge of the defendants, they should have contemplated that

failure to deliver on time could result in a decrease in value of good and, therefore, a

loss of profit: Koufos v Czarnikow Ltd.12

9 (1987) 9 NSWLR 310 (McHugh J).

10 (1854) 156 ER 145.

11 (1951) 84 CLR 377.

Page 6 / 12

2.2.3 This case fell within the second limb, because Elder Constructions had actual

knowledge of the complainant's new business, which is significantly important to her if it

failed. However, they failed to complete the renovations by the stipulated date and caused

the loss.

2.2.4 In Mullins v Kelly-Corbett,13 Muir, Fraser JJA, and Boddice J gave judgment in favour of

respondent, in the sum of $160,265.47, being $130,398.90 less deposit moneys of $15,000,

plus the interest. QDC awarded the respondent indemnity costs. Evidence supported

findings that the respondent was ready, willing, and able to complete the contract on 13

January, and the appellant failed to establish that the respondent was not entitled to

terminate the contract for the appellant's failure to settle on that date.

2.3. Cost of rectification of defective work

2.3.1 Where a party sustains loss by reason of breach of contract, he or she is, so far as

money can do it, to be placed in the same situation with respect to damages as if the

contract had been performed: Robinson v Harman.14 In general, the object will be reflected

by awarding for the lost expectancy created by the promise.

2.3.2 According to the principles in Hadely v Baxendale:15

The measure of the damages recoverable by the building owner for the breach of a

building contract is the difference between the contract price of the work or building

contracted for and the cost of making the work or building conform to the contact.

The qualification, however, to which this rule is subject is that, not only must the

work undertaken be necessary to produce conformity, but that also, it must be a

reasonable course to adopt.

2.3.3 Elder Constructions repaired the beams with a different type of wood, which was not

river red gum. One of the main reasons the complainant decided to contract with Elder

Construction was because she was impressed with the quality of materials provided by Elder

12

[1969] 1 AC 350. 13

[2010] QCA 354. 14

(1848) 1 Ex Rep 850. 15

(1854) 9 Exch 341.

Page 7 / 12

Construction. Elder Construction failed to deliver the quality of work as stated on the

website: Director of War Services Hones v Harris.16 Therefore, the complainant needed to

take out the new beams and restore them with original red river gum timber, which cost

$500,000.

2.4. Damages for loss of chance

2.4.1 The plaintiff was entitled to recover for loss of a strong chance that its contract would

be renewed, because renewal was reasonably in the contemplation of the parties:

Commonwealth v Amann Aviation.17 For quantifying the loss of a chance the plaintiff must

prove, on the balance of probabilities, that it lost a chance of something of value.

2.4.2 The complainant invited Mr and Mrs Tong to the Masquerade Party, who were the

number one Brisbane wedding planners and had many clients. If she impressed the Tongs,

her place would be recommended by the Tongs as a great venue for small and medium

sized weddings. However, the Tongs were very disappointed at the lack of decorations and

poor facilities, so the Tongs left in the middle of the party. Therefore, the complainant can

claim the loss of potential opportunities from the possible recommendations from the

Tongs.

2.4.3 The loss would be damage, which was sufficiently likely to result from the

incompletion of the work and the loss of the opportunity. Such loss would therefore be

caught by the second limb. The $500,000 cost of taking out the new beams and restoring

them with original red river gum timber, and the loss of potential opportunities from the

possible recommendation from the Tongs is $1.2 million. Therefore, determining the total

amount of damages at $1.7 million is not too remote.

16

[1968] QdR 275. 17

(1991) 174 CLR 64.

Page 8 / 12

3. Misrepresentation

3.1. The statement is misrepresentation

3.1.1 Courts have exercised jurisdiction to set aside contracts and other dealings on a

variety of equitable grounds including fraud, misrepresentation, breach of fiduciary duty,

undue influence and unconscionable conduct: Commercial Bank of Australia Ltd v Amadio.18

Mason J referred to with approval by the court in Vadasz v Pioneer Concrete (SA) Pty Ltd.19

3.1.2 The complainant is entitled to rescind the contract for misrepresentation by Elder

Constructions. The complainant successfully establishes the elements of misrepresentation

that:

A false statement of past or existing fact:

Addressed by one to another:

Before or when the contract was made:

Intend to induce and in fact inducing the contract:

3.1.2.1 A misrepresentation is founded upon the existence of a false statement of

past or present fact. A representation need not be the sole or decisive inducement

and it suffices if it was a real inducement: Edgington v Fitzmaurice.20

'The object of the issue of the debentures were those which were stated in

the prospectus the Defendants were stating a fact which was not true. If they

knew that it was not true, or made it recklessly not caring whether it was true

or not, they would be liable.'21

3.1.2.2 The statement made by the representor must actually be false in fact.

Whether a representation is false will be determined objectively: John McGrath

Motors (Canberra) Pty Ltd v Applebee.22

18

(1983) 151 CLR 447, 461. 19

(1995) 184 CLR 102, 111. 20

(1885) 29 Ch D 459. 21

(1885) 29 Ch D 459, 479-480. 22

(1964) 110 CLR 656.

Page 9 / 12

3.1.2.3 On 3 February, 2014, the complainant had a look at Elder Construction's

business website (Elderconstructions.com.au). On the site it is stated, 'At Elder

Constructions we build the way you want. We really listen and only ever use the

best, and most appropriate materials for every job!' The statement was a false

representation of past and existing fact, respectively. The statement was in the

advertisement, which was published before the contract was made.

3.1.2.4 The statement on the website was directed to anyone who needed

construction services. The complainant would therefore argue that the statement

was addressed to anyone reading it, who may act on the faith of it.

3.1.2.5 Elder Constructions promoted and sold the service from the website and

made the statement with the intention of inducing a contract. The complainant was

impressed by the statement that referred to the quality of the materials, and this

was the main reason for her entering into a contract with Elder Constructions.

According to Wilson J in Gould v Vaggelas,23 the rules of inducement are:

If the representee does not rely on the representation, he or she has no case;

If a representation is made to induce the representee to enter into a contract

and that person in fact enters into a contract, it can be inferred that the

representation induced the contract;

The inference may be rebutted, for instance, by showing that the representee,

before he or she entered into the contract, either:

a) Actually knew the rule facts; or

b) Regardless of his or her knowledge, made it plain that he or she did not

rely on the representation.

3.2. Entitle to rescind the contract

3.2.1 A misrepresentation allows the representee to elect to rescind the contract. At

common law, rescission of a contract could only be ordered where there was evidence of

fraud and precise restitution of the status quo was possible: Alati v Kruger.24

23

(1985) 157 CLR 215. 24

(1955) 94 CLR 216.

Page 10 / 12

3.2.2 Accordingly, the complainant can prove all the elements necessary to establish

misrepresentation, which directed her to rely on the statement by Elder Constructions.

There are no issues of limits of recession, therefore the complainant has the right to rescind

the contract by misrepresentation and can claim damages.

4. Unconscionable conduct

4.1 Unconscionability

4.1.1 The fundamental principle according to which equity acts, namely that a party having a

legal right shall not be permitted to exercise it in such a way that the exercise amounts to

unconscionable conduct: Garcia v National Australia Bank Ltd.25

4.1.2 The submission on behalf of the complainant is that she did not engage in

unconscionable conduct against Elder Constructions.

4.1.3 Elder Constructions failed to show the following elements:

He or she is in a position of special disadvantage; and

The other party knows or ought to know of that special disadvantage and takes

unfair advantage of his or her position: Commercial Bank of Australia Ltd v

Amadio.26

4.1.4 Fullagar J stated in Blomley v Ryan27 that 'special disadvantage' refers to circumstances

including poverty of any kind, sickness, age, infirmity of body or mind, drunkenness,

illiteracy or lack of education, and lack of assistance or explanation where assistance or

explanation is necessary.

25

(1998) 194 CLR 395 [32]. 26

(1983) 151 CLR 447, 462 per Mason J. 27

(1956) 99 CLR 362.

Page 11 / 12

4.1.5 Although the complainant was aware that Mr Elder had fallen in love with her, she did

not take any advantage of his position or unconscientiously exploit it. She also rejected all

the gifts offered by him, which were a diamond necklace worth $15,000, a state of the art

home entertainment system worth $45,000, and a brand new Waverider 2000 XLX twin hull

speed boat worth $555,000. These facts differ from Louth v Diprose.28

4.1.5.1 In Macintosh v Johnson,29 the court of appeal upheld that acting deceitfully

by concealing the true nature of her feelings, would not on its own be sufficient to

amount to exploitation of the kind required to establish a case based on

unconscionable conduct.30

4.1.5.2 In this case, the complainant rejected all the gifts offered by Jeff Elder, so

there is nothing to retain.

4.1.6 When Jeff Elder quoted $1,000,000 for the renovation of the boat, the complainant

was desperate and was not able to pay such an amount of money to run a profitable

business. She pleaded with tears, but it was only an expression of her feelings for her

circumstance that she could not make her great-grandfather's life dream come true. By the

second week of April, 2014, the complainant and defendant finally settled on a price of

$450,000, after some more discussion. She did not act unconscionably or use special ability

for her own sake or that of the business.

4.1.7 The majority justified that the equity to set aside the deed due to the passive

acceptance of that benefit; however, the statement by Gleeson CJ and Callian J in

Bridgewater v Leahy,31 Bill was not suffering from any 'special disability' at the time the

transaction was entered into and, that being so, there could not be any exploitation on the

part of Neil.

28

(1992) 175 CLR 621. 29

(2013) 37 VR 301. 30

(2013) 37 VR 301. 31

(1998) 194 CLR 457.

Page 12 / 12

4.2 Statutory Unconscionability

4.2.1 Section 21 (1) in Australian Consumer Law states that:

A person must not, in trade or commerce, in connection with:

(a) the supply or possible supply of goods or services to a person (other than

a public listed company); or

(b) the acquisition or possible acquisition of goods or services from a person

(other than a public listed company);

engage in conduct that is , in all the circumstances, unconscionable.

4.2.2 In ACC v Berbatis Holdings,32 the majority of the judges of the High Court focused particularly on the difference between 'special disability' and 'hard bargain'. The appeal is dismissed because parties are not going to be always equal in power and the appellants had no special disadvantage or disability. In this case, it is more likely an issue of 'hard bargain', rather than 'special disability'.

4.2.3 Despite that the complainant knew that Mr Elder was in a position of special

disadvantage, she did not take unfair advantage or exploit this disadvantage. Mr Elder

entered into a contract on his own free will, and there is no evidence that can prove that the

low price of the renovation is determined by her unconscionable conduct.

If it pleases the court, those are the submissions for the plaintiff.

DATED this 28th day of October 2015

32

(1939) 63 CLR 649, 683.