CLUB MARINA APARTMENTS LTD V MCHUGH HC HAM CIV-2007-419-1863

CLUB MARINA APARTMENTS LTD V MCHUGH HC HAM CIV-2007-419-1863 27 June 2008IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY CIV-2007-419-1863UNDER the Districts Court Act 1947 IN THE MATTER OF an appeal against the decision of the District Court at Hamilton BETWEEN CLUB MARINA APARTMENTS LIMITED Appellant AND COLLEEN JUNE MCHUGH Respondent Hearing: 26 June 2008 Appearances: Mr M D Branch and Mr K I Bond for Appellant Mr D M O'Neill for Respondent Judgment: 27 June 2008 at 3.30 pmJUDGMENT OF LANG JThis judgment was delivered by me on 27 June 2008 at 3.30 pm, pursuant to Rule 540(4) of the High Court Rules.Registrar/Deputy Registrar DateSolicitors: Harkness Henry & Co, Hamilton Olphert & Associates, Rotorua[1] Club Marina Apartments Limited is the developer of an apartment complex situated near the Whitianga Marina. Club Marina has built the complex in two stages. Stage One, which was fully completed towards the end of December 2004, consists of 44 separate two or three bedroom units. Stage Two, which was built later, consists solely of one-bedroom apartments. [2] The respondent, Ms McHugh, became interested in purchasing a unit in Stage Two during the summer of 2002-2003. She dealt at that time, and subsequently, with Mr Ross Innes, a real estate agent that Club Marina had engaged to assist in marketing the development. [3] Ms McHugh subsequently decided to buy Unit 2G, which was located on the second floor of the Stage Two development. The terms upon which she agreed to purchase the unit were set out, albeit in the barest of terms, in a document called an "Acknowledgment of Receipt" that had been prepared by the real estate agent. Mr Innes signed that document on behalf of Club Marina, and Ms McHugh instructed her solicitor to sign the document on her behalf in May 2003. In June 2003 she paid the required deposit of $3000, and proceeded thereafter on the basis that she had secured the ability to purchase the unit for the sum of $175,000. [4] Ms McHugh was aware when she agreed to buy the unit that Club Marina had not yet obtained the necessary resource consent to enable it to commence construction of Stage Two. The Acknowledgment of Receipt provided that she was required to pay a further deposit of ten per cent of the purchase price once Club Marina had obtained the resource consent. [5] When she entered into the arrangement Ms McHugh believed that the apartment would be ready for her to occupy the following summer. During 2003, however, it became clear that that would not be the case. Further delays occurred during 2004. Then, on 24 December 2004, a real estate agent acting on behalf of Club Marina advised her that Club Marina was not proceeding with Stage Two in its original form. Instead, it proposed to build larger one-bedroom apartments that were priced from $340,000 to $400,000. Club Marina said that it would give MsMcHugh the first opportunity to acquire one of the new units. If she did not wish to do so, she could obtain a refund of her deposit together with interest. [6] Ms McHugh took the view that she had a binding agreement to purchase Unit 2G in accordance with the original arrangement. She therefore declined to buy one of the new units at the increased price. She then issued proceedings in the District Court, in which she sought an order requiring Club Marina to specifically perform the arrangement recorded in the Acknowledgment of Receipt. She sought that relief under the provisions of the Fair Trading Act 1986 and the Contractual Remedies Act 1979. [7] Club Marina defended Ms McHugh's claim, but after a defended hearing His Honour Judge Spear issued a decision on 12 November 2007 upholding Ms McHugh's claim under the Fair Trading Act 1986. He dismissed the claim under the Contractual Remedies Act 1979. [8] The Judge declined, however, to grant Ms McHugh the relief that she sought. The statement of claim described that relief as "an order directing [Club Marina] to enter into an Agreement for Sale and Purchase whereby the Plaintiff purchases a one bedroom serviced unit in Stage 2 Marina Park, Albert Street, Whitianga for the agreed purchase price of $175,000". [9] Instead, the Judge took the view that Club Marina's conduct had effectively kept Ms McHugh out of the Whitianga apartment market as a potential purchaser from at least May 2003 to December 2004. As a result, the Judge determined that Ms McHugh should receive compensation "based on the amount of any increase in the cost of apartments of this quality at Whitianga over the period May 2003 to July 2005". In fixing this period the Judge accepted that Ms McHugh needed some time to seek legal advice after Club Marina told her in December 2004 that it did not intend to proceed with its original proposal. In addition, the Judge concluded that the award of compensation should attract interest from May 2005 at 7.5% pursuant to s 62B of the District Courts Act 1947.[10] The Judge then adjourned the proceeding for further evidence to be adduced in relation to the issue of quantum. [11] Club Marina now appeals to this Court against the Judge's decision. It contends that the Judge erred in the way in which he determined Ms McHugh's claim, and that this Court should set aside his conclusions.Grounds of appeal[12] Club Marina's primary argument on appeal is that the Judge decided the case on a basis other than that pleaded by Ms McHugh. It also says that, when her pleaded claims are considered, they are either untenable in law or are not established on the evidence.Did the Judge decide the case on the basis of the allegations contained in the statement of claim?[13] It is axiomatic that the Court must decide a case in accordance with the pleadings. Counsel for Club Marina referred me to the following statement of principle from Otaki Tyre Service Centre Ltd v Whittaker & Ors HC WN CIV-2001- 485-978 11 December 2007 where McGechan J said:[24] As a matter of established practice, cases must be decided as pleaded. A court cannot decide a case upon evidence or arguments falling outside pleadings. Where there is a difference between pleadings and evidence, amendment of pleadings is required.[14] In order to determine this issue, it is obviously necessary to compare the pleadings in the statement of claim against the basis upon which the Judge reached his conclusion that Ms McHugh had established her claim under the Fair Trading Act 1986.The statement of claim[15] The statement of claim is economical in the extreme. The relevant paragraphs for present purposes are as follows:8. The Defendant represented that it would apply for and seek to obtain Resource Consent for the original development timeously or expeditiously, but although it applied for Resource Consent for the original development, it failed to prosecute such Application as it should have done. 9. The Plaintiff relied upon the representation that the Defendant would seek Resource Consent for the original development in entering into the Contract with the Defendant to purchase Unit 2G in the original development, and in the circumstances the reliance by the Plaintiff upon such representation was reasonable. 10. The Defendant (being in trade) engaged in misleading or deceptive conduct by failing to proceed with all due speed to obtain Resource Consent and the Plaintiff was mislead by such conduct. 11. Additionally, the failure of the Defendant to notify or advise the Plaintiff, for a period of 12 months, that it proposed not to proceed with the original development but t proceed with a very different development at a substantially greater purchase price amounts to conduct that was misleading or deceptive.[16] Paragraphs 8 and 9 of the statement of claim allege that Club Marina represented that it would apply for and obtain the resource consent expeditiously and it did not do so. Ms McHugh does not aver, however, that that representation (and Ms McHugh's alleged reliance on it) amounted to deceptive or misleading conduct. For that reason I put those pleadings to one side when considering the essential elements of Ms McHugh's case. [17] The claim under the Fair Trading Act 1986, as pleaded in paragraphs 10 and 11 of the statement of claim, contained the following essential allegations: (i) Club Marina, being in trade, engaged in misleading or deceptive conduct by failing to proceed with all due speed to obtain the resource consent and Ms McHugh was misled by that conduct; or alternatively (ii) In failing to notify or advise Ms McHugh for a period of 12 months that it did not intend to proceed with the original development, and intended instead to proceed with a very different development, Club Marina engaged in conduct that was misleading or deceptive.The Judge's decision[18] The Judge summarised the events that occurred in 2003 and 2004 in the following passage:2002/2003 First meeting between the plaintiff and Mr Ross Innes – Mr Innes stated that an application for planning consent in respect of Stage Two was under way and that she would be in the apartment (apartment 2G) within 12 months 16 May 2003 The "Acknowledgement of receipt" was signed and the $3,000 deposit was paid shortly thereafter 19 May 2003 Email from Mr Ross Innes to the plaintiff. "Everything is on track to secure apartment 2G for you. The initial deposit of $3,000 is payable now with a further 10% on resource consent being granted, approximately three months." 28 May 2003 Bayley's Real Estate wrote to the plaintiff's solicitor advising that the $3,000 was required to be paid as soon as possible with a further deposit of 10% being required on the granting of resource consent "which is approximately two months away."Again, Mr Ross Innes was the author of that communication. About that same time, the plaintiff wrote to Mr Ross Innes seeking clarification about the deposit and received a response on 29 May 2003 by email in which he referred to the further 10% being required on resource consent being granted and stated that this was "approximately 2-3 months away". Mr Innes also advised at that time that sales had been going well with only 7 of the 24 apartments remaining unsold. 4 July 2003 Email from Mr Ross Innes to the plaintiff that Stage Two would be finished probably around mid year 2004. That was met by an email reply from the plaintiff expressing her surprise that Stage Two would not be completed in time for her next visit to New Zealand in February 2004. 4 September 2003 Mr Innes responded by email to an enquiry from the plaintiff saying that everything was going to plan and that "resource consent for Stage Two is very close."16 June 2004 Email from Mr Neil Bailey (real estate agent formerly with Bayley's Real Estate and now with Mr Ross Innes working for A J Innes Real Estate) tothe plaintiff. This email indicated to the plaintiff that the plaintiff had been considering not proceeding with the "original proposal" but that the defendant had now made that decision to proceed and that her "resource consents" "should be available within two weeks."Mr Bailey further stated:The earliest indication they (defendant) can give for commencement of development is 2-3 months and anticipated completion is nine months at which time you will asked to settle.24 December 2004 Email from Mr Neil Bailey of A J Innes Real Estate stating that the defendant had changed the nature of Stage Two development so that it would be all one- bedroom apartments and priced from $340,000 - $400,000 with the plaintiff given the first opportunity at the new pricing.[19] He then expressed his conclusion in respect of the claim under the Fair Trading Act 1986 in the following terms:[45] In my view, there is no doubt but that the plaintiff was misled and deceived by the defendant (through its agent or agents) about the progress with the Stage Two development in particular as it related to resource consent. That has to be the effect of the various misrepresentations made to the plaintiff as detailed above in this decision. The plaintiff had no cause to be alarmed except as to the time that the development was taking to be completed. Indeed, I consider that every effort was made on behalf of the defendant to maintain the plaintiff's confidence that the development was proceeding as she would [have] understood it. What the plaintiff was told on occasions was simply untrue at worst and misleading and deceptive at best. [46] The plaintiff was led to believe that the development (as she was led to understand it) remained on track throughout the period May 2003 to December 2004 and she was given no reason at all by the defendant to consider otherwise. Any reasonable person in the position of the plaintiff would be perfectly justified at [sic] believing that the Stage Two development was proceeding, albeit slowly, and that eventually she would be able to take possession of apartment 2G in the Stage Two development for that price of $175,000. [47] It is surely not insignificant that the marketing brochure listed two of the apartments on the second floor of Stage Two as having already beenSOLD.[48] I am in no doubt that the conduct of the defendant, through its agents, has been both misleading and deceptive in so far as the plaintiff is concerned. It kept her completely in the dark about quite significant difficulties that the defendant was experiencing with the development. Itkept her believing that her interest as purchaser of apartment 2G in the development was protected and at the price fixed in May 2003 of $175,000. Any reasonable person in her position would be of a similar mind. That first claim is established.Conclusion[20] The paragraphs set out above make it clear that the Judge based his decision upon the representations that Mr Innes, a real estate agent engaged to market the complex on behalf of Club Marina, had made to Ms McHugh during the course of 2003. [21] I accept that, to the extent that those representations suggested that the granting of resource consent was imminent, they were misleading at best. His statements on 19 May, 28 May, 4 July and 4 September 2003 need to be viewed in light of the fact that Club Marina did not lodge its application for resource consent until October 2003. In stating repeatedly that the resource consent was "very close", in circumstances where the application had not even been lodged, Mr Innes may well have misled Ms McHugh and also deceived her. [22] Had Ms McHugh pleaded her case on the basis that those comments gave rise to a claim under the Fair Trading Act 1986, Club Marina might have been in a difficult position. The fact of the matter, however, is that she did not. The statement of claim does not make any reference at all to statements made by Club Marina's agents between May 2003 and June 2004. As a result, such statements do not form part of the pleaded case against Club Marina. [23] The fact that Ms McHugh did not rely on those statements as forming the basis of her claim is confirmed by the opening remarks of her counsel at the beginning of the trial. These included the following paragraph:6. It is the Plaintiff's case that the Defendant being in trade engaged in misleading or deceptive conduct by failing to proceed with all due speed to obtain resource consent and that she was misled by such conduct. Further, the Defendant's failure [for a period of 12 months to notify the Plaintiff that it proposed] to proceed with a very different development at a substantially greater purchase price amounted to conduct that was misleading or deceptive.[24] Consistent with his opening submissions, Counsel for Ms McHugh did not rely upon the agent's statements as giving rise to any cause of action when he made his closing submissions. At that time he said:4. The case hinges on the allegation by the Plaintiff that the Defendant represented that it would be seeking resource consent (and would do so timeously or expeditiously), but failed to do so. The Plaintiff's case is that in May 2003 she wanted to purchase a one bedroom apartment in Stage 2 of the Marina Park Development for $175,000 Club, and signed the acknowledgement of receipt. (Doc. 2BD).5. Instead, it is clear that the Defendant did not lodge its Application for resource consent expeditiously, and when it had done so, it failed to prosecute the Application with any speed, even to the extent of telling the Council to put it on hold, then re-activating it, then submitting a completely different and revised Application many months later. 6. In December 2004, the Plaintiff was notified (for the first time) of the changes to the proposed apartment development via an email from the agent which referred to delays with obtaining resource consent and also the viability of the project 7. At no stage, until December 2004, did the Defendant inform the Plaintiff (whether directly or indirectly) that there was any likelihood of the project not proceeding for the reasons given by the witness Mr SHACKLETON in his evidence. In fact, there seemed to have been a series of excuses about delays until finally, in December 2004, the Plaintiff was told that the project would not be proceeding "in the proposed form, [the] project was not viable, nor able to be financed".First Cause of Action – Fair Trading Act 19868. As will be well known, Section 9 of the Fair Trading Act provides that:"No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive."9. It is submitted that the conduct of the Defendant was capable of being misleading, that the Plaintiff was misled by that conduct, and that it was reasonable for the Plaintiff to have been misled by that conduct (thus meeting the three step criteria in AMP Finance New Zealand Ltd v Heaven (1997) 8 TCLR 144,152.) (Emphasis added)[25] These passages make it abundantly clear that, in advancing her claim under the Fair Trading Act 1986, counsel for Ms McHugh relied upon Club Marina's conduct in two respects only. These were its failure to progress the application for resource consent in a timely manner and its failure to notify her of the proposedchange in the form of the Stage Two development. Ms McHugh did not rely upon the statements made by Club Marina's agent as giving rise to a cause of action under this head. I agree with counsel for Club Marina when he submitted that the closing submissions demonstrate that Ms McHugh viewed the statements as being no more culpable than "a series of excuses". [26] Counsel's submissions at trial, both in opening and in closing the case for Ms McHugh, were therefore consistent with the pleadings in the statement of claim. The case for Ms McHugh was therefore run at trial entirely in accordance with those pleadings. As a result, it was not open to the Judge to decide the case on a different basis. In deciding the case on the basis of the agent's statements, the Judge went beyond the pleadings and the basis upon which the case for Ms McHugh had been run at trial. In doing so, I consider that he fell into error. [27] Lest it be considered that this amounts to an overly technical approach to the issue, it needs to be remembered that Club Marina did not know of the statements that Mr Innes had allegedly made to Ms McHugh until very late in the piece. It was not until Ms McHugh served her witness statements just prior to the trial that it became aware of the allegations in relation to Mr Innes for the first time. Moreover, Club Marina did not know in advance what Mr Innes would say at trial, because he gave his evidence under subpoena. Club Marina did not have the benefit of a witness brief for him. [28] The interlocutory process had not given rise to any hint that the statements by Mr Innes would have any real significance either. During that process Ms McHugh's solicitors appear to have focussed upon the Acknowledgment of Receipt as providing the basis for the alleged representation that Club Marina would proceed to obtain the resource consent expeditiously. They did not purport to rely upon any statements that Mr Innes may have made to Ms McHugh . [29] Club Marina was therefore effectively deprived of the opportunity to join Mr Innes and his company as third parties to the proceeding. Although counsel for Ms McHugh submitted that it remained open to Club Marina to seek an adjournment of the trial to enable that to be done, I can understand why counsel for Club Marina didnot take that step. He was entitled to rely upon the pleadings, which did not refer to any statements that Mr Innes may have made. The opening submissions of counsel for Ms McHugh would also have confirmed that such statements did not form an essential part of the plaintiff's case. [30] That is not, however, the end of the matter. This is an appeal by way of re- hearing and this Court is entitled to reach its own conclusions based on the evidence:Austin Nichols & Co Limited v Stichting Lodestar [2008] 2 NZLR 141 at 147. It is therefore open to me to decide whether, on the case as it was pleaded, Ms McHugh was able to establish her claim under the Fair Trading Act 1986. In doing so, however, I propose to defer to the conclusions of the Judge in relation to all matters in respect of which he was required to make findings in relation to credibility. He enjoyed the advantage, which I do not have, of seeing and hearing the witnesses.Did Club Marina engage in misleading or deceptive conduct by failing to proceed with all due speed to obtain the resource consent?[31] It is certainly arguable that, in one respect at least, Club Marina did not proceed expeditiously with its application for resource consent. It probably cannot be criticised for the fact that it did not lodge the application with the Council until October 2003. Then, between October and December 2003, the Council was processing the application. On 14 December 2003, however, Club Marina asked the Council to place the application on hold. It did so because it was investigating the feasibility of other options. [32] Progress then stalled until 13 May 2004, when Club Marina asked the Council to begin processing the application again. The responsibility for the delay between 14 December 2003 and 13 May 2004 must lie solely with Club Marina. Thereafter the application was once again in the hands of the Council. There is no evidence as to how far the Council had got in processing the application by December 2004, when Club Marina elected to proceed with the revised proposal in relation to Stage Two.[33] I therefore accept that it can be argued that, between 14 December 2003 and 13 May 2004, Club Marina could have proceeded with the application in a much more timely manner. [34] It is conceptually difficult, however, to see how, of itself, a failure to proceed to obtain a resource consent in a timely manner could ever amount to misleading or deceptive conduct. Usually something more, such as misleading statements made to the plaintiff, would be required to convert mere inaction into misleading or deceptive conduct. The fact that Mr Innes made potentially misleading statements during 1993 may well have been sufficient to convert the delay in the present case into actionable conduct under the Act, but the pleadings did not extend to those statements. [35] When considering whether Club Marina might be liable to Ms McHugh in respect of the delay, it is also important to bear in mind the context in which that delay occurred. [36] First, I do not consider that there was any contractual obligation on Club Marina to proceed with any degree of expedition in advancing the application for resource consent. I reach that conclusion notwithstanding the fact that the Judge determined that a contract was in force, albeit subject to the development proceeding in accordance with the original proposal. [37] Although nothing material turns on the point, I respectfully disagree with the Judge's conclusion in relation to it. The Acknowledgment of Receipt itself provided that it was "subject to" the execution of a formal agreement for sale and purchase. This suggests that, in accordance with standard New Zealand conveyancing practice and authorities such as Smada Group Limited v Ltd v Miro Farms Ltd (2008) 6 NZ ConvC 194,588 at 194,590, neither party intended to be bound until such time as a formal agreement had been prepared and signed. [38] It is also clear that Ms McHugh did not consider herself bound by the terms of the Acknowledgment of Receipt. Her evidence was to the effect that she needed to secure finance, and that she could not proceed with the transaction until that wasin place. When she sought legal advice, her solicitors also suggested that she should also ensure that the agreement contained a "sunset clause" in order to protect her position in the event that the development was unreasonably delayed. These factors, too, persuade me that neither party intended the Acknowledgment of Receipt to bind them to the transaction. I accept the submission by counsel for Club Marina that the Acknowledgment of Receipt was no more than an expression of interest, with the deposit being required to ensure that the purchaser held a genuine interest in proceeding further. [39] The absence of a contract will not, of course, prevent a claim arising under the Fair Trading Act 1986. It means, however, that it is much more difficult for a plaintiff in Ms McHugh's position to establish that Club Marina was subject to some form of duty to act expeditiously in obtaining the resource consent. [40] In the present case that duty is said to arise because the Judge found that Club Marina, through its agent Mr Innes, made a representation to Ms McHugh at the outset to the effect that she would be in her apartment within 12 months. Even assuming that that representation was made, however, it is difficult to see how Ms McHugh could establish that it caused any subsequent loss to her. This is because the Judge found that the representation did not induce her into signing the Acknowledgment of Receipt. Rather, she was induced to enter into the arrangement because of the price of the apartment and its location within Stage Two. [41] Moreover, I consider that the issue of causation is also compromised by an e- mail message that Ms McHugh received on 16 June 2004 from Mr Neil Bailey, a real estate agent working with Mr Innes. That e-mail was in the following terms:Hi Colleen, Apologies for the delay in responding to the above we have been awaiting final decisions and direction from the developer. Yesterday they had their meeting to agree to proceed with the original proposal, therefore, Resource Consents should be available within 2 weeks. The earliest indication they can give for commencement of development is 2-3 months and anticipated completion is 9 months at which time you would be asked to settle.I have just spoken to Shane who has informed us you have been given some misleading information from Bayleys! Please ignore as the above is correct. Shane is out of contact for a week and will be in touch with you upon his return. Please feel free to email me if you need more information on the apartments. Kind regards Neil[42] The e-mail was sent just over one month after Club Marina had asked the Council to re-commence processing the application for resource consent. I consider that the e-mail advised Ms McHugh of the true position as at June 2004, although it may have been somewhat optimistic regarding the likely time frame for the approval of the resource consent. It certainly advised Ms McHugh that the resource consent was not yet available, and also that construction of the apartment would not be completed until approximately March the following year. [43] There is no suggestion that Ms McHugh considered that the delay that had occurred up until June 2004 was of particular concern to her. By that stage, too, the 12 month period referred to by Mr Innes had well and truly passed. In addition, the Council was again processing the application for resource consent. These factors suggest that, as at June 2004, Ms McHugh was content to allow matters to take their course. Thereafter Club Marina was not guilty of any further delay between June 2004 and December 2004, when it elected to proceed with the new proposal. [44] These factors persuade me that Ms McHugh cannot establish her cause of action based on any failure by Club Marina to proceed with its application for resource consent in a more timely manner. I do not consider that that act, of itself, was capable of amounting to deceptive or misleading conduct. If it was, the conduct was not causative of any loss that Ms McHugh might have suffered.Did any failure by Club Marina to notify Ms McHugh of the altered proposal amount to misleading or deceptive conduct?[45] The statement of claim alleged that Club Marina failed to notify Ms McHugh of the altered proposal for a period of 12 months.[46] The evidence makes it clear, however, that Club Marina still intended to proceed with the original proposal as at 13 May 2004, when it asked the Council to continue processing the application for resource consent. It also presumably still intended to proceed with the original proposal as at 16 June 2004, when Mr Bailey sent Ms McHugh the e-mail referred to at [41]. [47] For these reasons counsel for Ms McHugh accepted during argument that any failure to notify Ms McHugh of the new proposal could only have occurred between June and December 2004. [48] It was argued for Club Marina that it was under no legal obligation to notify Ms McHugh of any change in its plans. As a result, Club Marina could not be guilty of misleading or deceptive conduct merely by remaining silent about its plans. Counsel referred me to the following passage from the judgement of Stevens J inKrtolica v Westpac Banking Corporation HC AK CIV-2006-404-3999 9 January 2008:[159] The alleged misrepresentation is by silence – a failure to disclose information. To this end, it has been established that for the conduct to amount to misrepresentation, there must first be a legal obligation to divulge it. In Mills v United Building Society [1988] 2 NZLR 392 at 406, Sinclair J in the High Court noted: It is also sufficient to establish a branch of our s9 to prove that the conduct complained of may result in confusion. Normally it will only amount to conduct which is misleading or deceptive if it conveys, in all the circumstances of the case, a misrepresentation. Mere silence will depend upon the circumstances as to whether that silence will constitute conduct which is misleading or deceptive. In[Rhone Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd(1986) 68 ALR 77], Bowen CJ at p84 adopted a statement from a case back in 1878 namely Ward v Hobbs (1978) 4 App Cas 13: The general rule, both of law and equity, in respect of concealment, is that mere silence with regard to a material fact, which there is no legal obligation to divulge, will not avoid a contract.[49] In considering this issue it is important to bear in mind the factors that caused Club Marina to abandon its original proposal in respect of the apartments in Stage Two. That did not occur because Club Marina was determined to thwart Ms McHugh's plan to purchase Unit 2G. Instead, the alteration was rendered necessaryby the fact that Club Marina had discovered that the original plan for Stage Two could not be carried out on an economically viable basis. [50] Club Marina had based its costings for Stage Two on the costings that it had used for Stage One. Stage One had not been completed when apartments were sold off the plans to purchasers in Stage Two. Once Stage One came to be completed in the latter part of 2004, Club Marina realised that its costings for both Stage One and Stage Two were hopelessly inadequate. It could not complete the apartments in Stage Two based on the costings that it had originally used. It was for this reason that Club Marina elected to proceed with the revised proposal under which it proposed to build bigger but more expensive apartments. [51] In those circumstances I consider that it would have been reasonable, and would not have amounted to misleading or deceptive conduct, for Club Marina to have refrained from telling purchasers of its altered plans for a short period whilst it finalised the new plans. It could then advise purchasers of the fact that it had been forced to abandon the original proposal, and it could offer them, as it did, the first opportunity to acquire an apartment under the new proposal. [52] Once the plans were in final form, however, Club Marina ran the risk of engaging in misleading or deceptive conduct if it did not advise purchasers promptly of the proposed alterations. In particular, it would probably be guilty of such conduct if it dealt with them in any way without disclosing that it had decided to proceed with the new proposal. [53] In the present case it is difficult to tell precisely when Club Marina actually decided to abandon the original plan and to proceed with the new proposal. It obviously made that decision at some stage between 13 June and 24 December 2004. The closest that the evidence comes to dealing with that issue is during the cross- examination of Ms Shackleton, the witness called on behalf of Club Marina. She said:A. Well, we hadn't completed Stage 1 when Ms McHugh signed that acknowledgement of receipt. Q. It was in the process of construction.A. May 2003, no, it was, no it wasn't. We didn't start Stage 1 until September 2003. But we'd had our costings in for Stage 1. Q. So what you're suggesting to His Honour is that these were just indicative prices? A. No, we had all our costings in for Stage 1, and so we went off the square metre rate for Stage 1 to get us the prices for Stage 2. Q. And so you would have us accept that in the space of some about 18 months or so, prices had changed considerably and so $175,000.00 for 2G was no longer economic? A. Absolutely. It's (interrupted). Q. When was that told to the respective purchasers before December 2004? A. We still, we had just completed Stage 1 in 2004, December of 2004. It wasn't till approximately two or three months after that, we were still getting our, the bills were still coming in and we were, we were millions over from our, our costings from when we did them before we started Stage 1.[54] This passage suggests that Stage One was completed in or about December 2004. It also suggests that Club Marina realised that it could not complete Stage Two using the costings from Stage One at approximately the same time. That realisation must have come earlier than two or three months after December 2004, because Club Marina had already made the decision the abandon the original proposal by 24 December 2004. I therefore conclude that Club Marina made the final decision to abandon the original proposal very shortly before it communicated that fact to Ms McHugh on 24 December 2004. [55] That being the case, I do not consider that Club Marina was guilty of any undue delay in notifying Ms McHugh of the fact that it no longer intended to proceed with the original proposal. There is certainly no evidence to suggest that it dealt with her on any occasion after it had made its final decision without disclosing its true intentions to her. It follows that Ms McHugh cannot establish her claim under this head on the evidence.Result[56] The appeal is allowed. The findings made in the District Court are set aside. I enter judgment in favour of Club Marina.Costs[57] There is no reason why costs should not follow the event. Club Marina is accordingly entitled to costs on a category 2B basis together with disbursements as fixed by the Registrar. Lang J