CATCHWORDS TRADE PRACTICES - investment by applicants in property development - alleged statements in contravention of $.52 Trade Practices Act - inducement to enter into the Deed - statements accurately reflected the then intention of those by whom or on whose behalf they were made - failure to inform applicants of new arrangements "sufficiently, accurately, or at all" - whether loss or damage claimed was suffered by the contravention. CONTRACT ~ damages for breach of the Deed - whether "interest foregone" recoverable as damages ~- jurisdiction of Federal Court - notices pursuant to s.78B Judiciary Act. Trade Practices Act, ss. 52, 82 Judiciary Act, s.78B F.& A. CAPELVENERE v. OMEGA DEVELOPMENTS CORPORATION PTY LTD AND ORS FITZGERALD J. BRISBANE 16 AUGUST 1983 IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) No. G119 of 1982 GENERAL DIVISION ) BETWEEN: FERDINANDO CAPELVENERE AND ANNELIS CAPELVENERE Applicants AND: OMEGA DEVELOPMENT CORPORATION PTY LTD First Respondent AND: GRACEVIEW INVESTMENTS PTY LTD Second Respondent AND: LEONARD DUDLEY COWPER Third Respondent ORDER JUDGE MAKING ORDER: FITZGERALD J. DATE OF ORDER: 16 AUGUST 1983 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. Judgment for the applicants against the first respondent for - a. $277,758.00; and b. the costs of the action including reserved costs, 1f any, to be taxed. 2. The applicants' claim against the second and third respondents is dismissed with no order as to costs. L IN THE FEDERAL COURT OF AUSTRALIA) QUEENSLAND DISTRICT REGISTRY ) NO. G119 OF 1982 GENERAL DIVISTON ) BETWEEN : FERDINANDO CAPELVENERE AND ANNELIS CAPELVENERE Applicants OMEGA DEVELOPMENT CORPORATION Pry LTD First Respondent AND: GRACEVIEW INVESTMENTS PTY LTD Second Respondent AND: LEONARD DUDLEY COWPER Third Respondent PITZGERALD J. 16 AUGUST 1983 REASONS FOR JUDGMENT On 3. June 1981, a Deed was entered into in Hong Kong between the applicants, Ferdinando Capelvenere_ _and Annelis Capelivenere, and the first respondent, Omega Development Corporation Pty Ltd ("Omega"), a corporation within the meaning of the Trade Practices Act 1974 ("the Act"). The terms of the Deed are brief and may conveniently be set out in full. The Deed provided: WHEREAS : (a) The Developer is proceeding to develop a certain property more particularly devcribed in the Schedule hereto; and (b) The Investor has approached the Developer with the view to investing in that development; and at be (c) The Developer and the Investor have agreed on the terms of the Investor's investment in the said development. 1. The Investor shall forthwith pay to the Developer the sum of TWO HUNDRED THOUSAND AUST DOLLARS which said sum shall be utilised by the Developer solely towards the completion of the said development. 2(a) In the event that the said development is not proceeded with then the Developer will realize on the development site and repay the sum hereby advanced together with interest calculated at the rate of 6% per calendar month of the sum invested, to the Investor without deduction. 2(b) Or in the event that the Developer proceeds with the construction of the said development to completion and the realization of the units or strata title lots forming part of the said development then the Developer shall in lieu of Clause 2(a) hereof - (i} Repay on finalization of the development or within a period of TWELVE months whichever shall first occur the sum of TNO HUNDRED THOUSAND AUST. DOLLARS to the Investor; (1i) Transfer to the Investor free from any encumbrances liens and interests a strata title unit in the said development which the parties hereto agree shall be unit No. ONE on the GROUND floor of-the said development. 3. The Investor hereby acknowledges that the Developer shall have free and unfettered discretion in respect of the said development and that the Developer shall report to the Investor on a regular Calendar monthly basis on the progress being made on the said development. 4, This agreement shall not be deemed to be construed as a partnership between the Developer and the Invesor but rather the terms of an agreement for a loan and the terms of repayment of the said loan and a transfer of a unit in consideration for the said loan. "qe THE SCHEDULE HEREINBEFORE REFERRED TO 371-375 Golden Four Drive, Tugun, being more specifically Lots 6,7, & 11 of Section 17 in the County of Ward, Parish of Tallebudgera, City of Gold Coast, Queensland, Australia." As its terms indicate, the Deed related to a project involving the construction of a block of residential units ("the building") on land at Golden Four Drive, Tugun on the Gold Coast ("the land"). It is not in contest that the applicants made a loan of $200,000 to Omega in accordance with the Deed. Sixty five thousand dollars was provided by the applicants from their own funds and $135,000, which the applicants have since repaid, was borrowed by the applicants from a finance company in Hong Kong. The building was completed some months ago and the Building Units Plan has been sealed by the Local Authority and could he registered in the office of the Registrar of Titles at any time. Evidence was given that the plan has not been" lodged for registration simply because, once it is registered, there will be a considerable increase in the local authority rates payable. Omega no longer has any interest in the land or building and cannot perform its obligations under the Deed. Attempts are being made to sell the entire building, not the individual units, ata price considerably less than the cost of acquisition of the land and the construction of the building. The applicants have not received and will not receive anything under the Deed. It is not 'in dispute that Omega has repudiated the Deed and that the applicants have now accepted that repudiation and have terminated the future operation of the Deed. eo oe The opplicants allege that they have suffered locc und damage, which they particularize as follows: "200,000 The value of the said unit. Interest outlayed by the applicants. Interest foregone by the applicants." The applicants' first claim in these proceedings is made under s.82 of the Act. The applicants allege that they were induced to enter into the Deed by statements that constituted conduct in contravention of Part V of the Act. Relief is sought against Omega, the third respondent, Leonard Dudley Cowper, who is the Chairman of Directors of Omega, and the second respondent, Graceview Investments Pty Ltd (""Graceview"), another corporation within the meaning of the Act. of which Mr Cowper is also a director. It is alleged by the applicants that the statements were made prior to the execution of the Deed by Mr Cowper and that similar statements were also made at that time by Dennis Alan Crossley, the other director of Omega and Graceview. No submission was made by the respondents in respect of this or any other element of the applicants' case that the Act did not apply, for example because conduct alleged to contravene the Act occurred outside Australia. This part of the applicants' case may be disposed of briefly. I have no hesitation in finding that statements were made prior to the execution of the Deed that Omega proposed to ncquire the land for the purpose of erecting the building thereon, that it was expected that construction of the building would be completed within a period of 12 months, and that the applicants would receive the benefits provided for in the Deed in return for their investment of $200,000. However, it is equally clear that those statements accurately reflected the then intention of those by whom or on whose behalf they were made, and did not constitute any contravention of the Act. The significance of those statements for these proceedings arises in relation to later conduct involving the respondents. At the time when the Deed was entered into, Omega had contracted toa purchase the land for $1.1M by three séparete contracts, each dated 22 May 1981. According to the contracts, deposits totalling $30,000 had been paid and further deposits totalling $80,000 were about to fall due. By late July 1981, the contracts became unconditional and it may be concluded that, by then, all sums payable by way of deposit had been paid. By that time, the applicants' $200,000 had been paid into Omega's bank account. Completion of the contracts was due on 1 October 1981. Omega's balance sheet as at 30 June 1981 showed that its assets included cash in bank accounts totalling approximately $160,000 and deposits on a number of properties, including $30,000 deposit on the land. The balance sheet aiso contained references to development costs, plant and equipment, and preliminary expenses, but the amounts shown in respect of these are not presently significant. Omega's liabilities included its indebtedness to the applicants (although the balance sheet does not reflect that fact with entire accuracy), anda debt of not quite $50,000 which it owed to Mr Cotyper. Omega plainly could not complete the purchases of the land from its own assets. Nor had ee ep that ever been intended. The initial proposal, which was disclosed to the applicants, was that Omega would borrow $1M towards the purchase of the land. There were to be five lenders, one of whom was the applicants, from each of whom Omega was to borrow $200,000. As the applicants were made aware, only one other lender was found by Omega. He was, like Mr Cowper, an airline p2rlot resident in Hong Kong. By mid-September 1981, Onega needed extensive additional funds to complete the purchase of the land and it also needed money to pay for the construction of the building which was expected to cost $3-S$4M. It was arranged that the Costain Australia Limited Group would participate in a joint venture to develop the land. On the advice of Mr Cowper's accountants, Omega was not a party to the joint venture. Graceview was interposed into the transaction with the idea of avoiding or reducing income tax on the share of the huge profits which it was anticipated would arise from the joint venture. Me Cowper and Mr Crossley viewed the formation of a relationship with the Costain Group with a great deal of satisfaction. They were buoyed with optimism and had great plans for the future. They did not tell Costain of the applicants or, I suspect, of the other investor who had lent funds to Omega. Presumably, they did not wish to jeopardise their position by disclosing to Costain that funds borrowed by Omega other than from Mr Cowper or sources associated with him had been used by Omega in connection with the deposits on the land or would be used in connection with future payments required of Graceview under the ce joint venture. I think that it may be assumed that an appearance of prosperity and liquidity was considered important. Indeed, although his financial affairs generally seem to have been somewhat tangled, and his ambitions may well have exceeded realistic expectations, it does seem that at about the time of the joint venture negotiations Mr Cowper was pressing for payment of a large debt, of the order of $400,000, and that he did receive that money at about the end of 1981 or the beginning of 1982. However, by then, visions of an expanded empire had led Mr Cotwper and Mr Crossley to contract to purchase other land adjoining the land, and most of that money was used in respect of that purchase which involved still another trustee, again to avoid or reduce tax on the anticipated profits. Completion of the purchase of the adjoining land took place early in 1982. Meanwhile a Joint Venture Deed had been executed on 8 December 1981. No attempt was made to recognize or protect the pasition of thore who had lent money to Omega. 3 zupplement. ry Deed was executed on 18 August 1982 "to amend and cor. ect the Lueed to show the true intent at all times of the parties in relation to the joint venture". It is convenient to describe the initial terms of the joint venture by reference to the corrected version of the original Deed. The Joint Venture Deed recited that Graceview held contracts to purchase the land and had obtained plans and specifications and all necessary approvals for construction of the building and that Graceview and Costain Developments Pty Ltd had agreed to join in ina joint venture to purchase the land and develop it and to sell the units comprised in the building for the purpose of profit making. It was agreed that the land would be acquired by a trustee company, originally called Koongamia Nominees Pty Ltd but subsequently called Costega Pty Ltd. Graceview was to contribute $45 by way of capital to the joint venture and was ta receive 45% of the profits and bear 45% of the losses. Costain Developments was to contribute $55 by way of capital and was to receive 55% of the profits and bear 55% of the losses. In broad terms, Costain Developments was responsible for the raising of finance for the construction of the building and Graceview was responsible for the advertisement and marketing of the units when the building was erected. A management committee consisting of representatives of each of Graceview and Costain Developments was responsible for the overall management, control, and supervision of the joint venture. Representation on the Management committee was equal. More funds were, of course, needed than the capital contributions. Costain Developments was required to advance a further $1M and to "contribute by way of outside borrowings an anount of THREE MILLION FOUR HUNDRED THOUSAND DOLLARS ($3,400,000.00) which said sum has been secured by way of a first Bill of Mortgage". The mortaage, which is reqictered, Loe entitles Costain Developments to interest from 10 Februars i4Pf2?, at the rate of 1.75 per centum per annum "over the Australian Merchant Bankers' Association prime rate ... for prime commercial bills...". Costain Developments' rights under the Bill of a Mortgage were to take precedence over the respective rights and ifabilities of the parties under the joint venture. Graceview was t required to advance $250,000 plus a further $250,000 after the initial advances of $1,250,000 and outside borrowings of $3M had been expended. Thereafter, each of Graceview and Costain Developments was to advance further loan funds, as and when required, in equal shares. All advances were to be debts due by the joint venture to the party advancing the funds and were to bear interest at the rate of 20% per annum calculated and adjusted on monthly rests during the continuance of the loan. Provision was made for the distribution of the proceeds of sale of the units, subject of course to the Bill of Mortgage in favour of Costain Developments. The proceeds were to be applied first in payment of expenses incurred in setting up and carrying out the joint venture, secondly in pro-rata repayment to Castain Developments and Omega of the loans which they had made to the joint venture, thirdly in pro-rata payment of interest in respect of those loans, fourthliy ina payment of $275,000 to Costain Developments, fifthly ina payment of $225,000 to Graceview, and the balance then remaining was to be distributed as profits in accordance with the agreed proportions of 55% to Costain Developments and 45% to Graceview. Specific provision was made entitling Graceview to nominate any other party to receive any monies payable to it. ' The plan of Mr Cowper and Mr Crossley was that Graceview would make profits under the joint venture and that part of the profits would be used to acquire for the applicants the unit which er oe ee Se ee eee weep ctr Hee Sr ay ae ce 10 Omega had promised to transfer to them and to pay the applicants the amount payable under the Deed of 3 June 1981. In the latter part of 1981, Omega's contracts to purchase the land were informally rescinded and fresh contracts were executed by the respective vendors with Costega and were immediately settled. Credit was given by the vendors to Costega for the moneys which Omega had paid under its previous 'contracts and, presumably, no doubt, credit was given to Graceview in the joint venture accounts for those moneys and other moneys which had been expended by Omega in connection with the land and the project for its development. Omega's financial position and its liquidity at that time are extremely vague and little real attempt was made to explore them in the evidence. I will come back to this. It is sufficient for the moment to observe that even though Omega was a shareholder in and creditor of Graceview, and a creditor and perhaps a shareholder of the other trustee company which held the adjoining land ("the Chesslake Property Trust"), it had no interest under either trust and no interest in either the land or the adjoining land. The applicants advanced an alternative case based on s.82 of the Act which alleged that they were not informed of what had' occurred between September 1981 and the end of that vear or of the consequences on oF in relation to" their rights "sufficiently, accurately, or at all", although, as will appear, some information was given to them during that period. Such conduct was alleged to be misleading or deceptive or likely to mislead or deceive within the meaning of s.52 of the Act and each — o li of Mr Cowper and Graceview was alleged to have been direclty or indirectly knowingly concerned in or party to Omega's contravention or to have aided or abetted that contravention: see 8.75B of the Act. In Graceview''s case, what was relied on by the applicants was its participation in the transaction which was not disclosed. Knowledge was sought to be imputed to Gracevier because its sole directors, Messrs Cowper and Crossley, had knowledge. For reasons which will appear, no occasion arises to consider separately the applicants' case against Graceview. Reliance was also faintly placed by the applicants unon s.534 of the Act about which I propose to say nothing save that I cannot see that it has any present application and certainly no application which, on the evidence, assists the applicants if s.52 of the Act does not do so. It is necessary to go back to the events of late 1981. In or about October 1981 the applicants received information from Mr Crossley and a further conversation took place with Mr Cowper in November 1981. The applicants were informed that Omega had been able to find only one other lender willing to advance $200,000 but that Costain was willing to become involved in the development. It was said that Costain's involvement would remove the need for the other investors but that without Costain the project could not succeed. Costain was described as a builder and flattering reference was made to its size. The applicants were also told that Costain was to have a share in the project and that the land was to be purchased in the name of a trustee company but that Omega's continued interest would result in a substantial meee eee ee a eerie = a At ieeneeiemeeenememte' tt we although reduced profit and the applicants would still receive what was promised to them under the Deed. No reference was made to the fact that Omega would not have any interest in the land or in the joint venture or its profits. No reference was made to the way in which Omega's money, including that borrowed from the applicants and the other lender, was to be utilized. Reference was made to the manner in which it was proposed to use profits which it was anticipated would be received to make the payment and to purchase the unit for transfer to the applicants to satisfy their entitlements under their Deed with Omega. No reference was made to Graceview or to the fact that it would be Graceview, not Omega, which would be entitled to a share of any profits made by the joint venture. I have left out of account entirely both the mortgage in favour of Costain Developments and detailed aspects of the joint venture such as the respective proportions in which Graceview and Costain Developments participated. The applicants were aware of the need to borrow funds to construct the building and that security would be required, even if they did not turn their minds to matters of detail. Purther, they were not, or if such matters had been raised would not have been, interested in the details of the joint venture arrangements. In my view, the conduct of both Omega and Mr Cowper in October/November 1981 was misleading or deceptive or likely to mislead or deceive within the meaning of sub-s. 52(1) of the Act. s7ithout need to resort to paras. 4(2)(a) and (cc) of the act, ra particularly when what was then said is taken in the context of -_ Fe RE SRE OT TS the earlier statements which had been made to the applicants a few months earlier, prior to the execution of the Deed of 3 June 1981. Messrs Cowper and Crossley treated Omega as involved in the joint venture where it suited their purposes to do so. A similarly loose approach is apparent, for example, in a telex from Mr Crossley to the applicants dated 24 December 1981 in which an attempt was made to sell to the applicants 24% of the shares in Omega. Messrs. Crossley and Cowper may not have fully appreciated the legal consequences of the altered arrangements or the consequence of the joint venture, including the substitution of Graceview, but nor were they entirely naive. They were aware that Graceview, not Omega, was to earn the anticipated profit and, for tax reasons, they quite deliberately intended that Omega should make no profit at all. The applicants were led to believe that their arrangement with Omega was unaffected and that the new arrangements made no difference to them, and, in a legal sense at least, that was quite incorrect. It would have been a simple matter to provide the applicants with the joint venture documents and such a step would have been more consistent with at least the spirit of Omega's promise under clause 3 of its deed with the applicants to report regularly to the applicants. What was told to the applicants was not sufficient for a proper appreciation of the position and how it had changed from what had been agreed. The picture, as presented to the applicants in October/November 1981, was inaccurate and incomplete. Despite a submission to the contrary on behalf of the respondents, I have no doubt but that the applicants would have been entitled at that point to the return of their $200,000. The Deed between the applicants and Omega seems to me quite clearly to have related to the development of the land by Omega. Further, that was how the project had been represented te the applicants prior to their execution of the Deed. The joint venture meant that the development by Omega was not being proceeded t7ith within the meaning of clause 2(a) of that Deed. Indeed, it seems to me that there would be force in an argument that, if Omega was not in breach of its Deed with the applicants, the situation was rendered so radically different by the joint venture that the Deed was frustrated. Nor am I able to accept the submission for the respondents that the applicants could not then have got their money back because Omega would have been unable to repay the amounts which it had borrowed, even though there is a statement to that effect by Mr Crossley which was not directly challenged in cross-examination although his credibility was in issue. There is other evidence, albeit of a somewhat unsatisfactory character, which leads me to a contrary conclusion. Firstly, it is clear enough that, at the time when the applicants were told of the joint venture, Omega had not had an opportunity to turn its attention to the land adjoining 373 Golden Four Drive; until Costain's involvement it had been searching for funds for 373 Golden Four Drive itself and would not have been concerned with other projects. Secondly, if regard is had to Omega's balance sheet at 30 June 1981, it then had $160,000 approximately in cash by October and it had received a further $200,000 from the other lender, Mr Sexton. Although it may have paid out an additional $80,000 as further deposits and expended other sums, it seems ' 15 probable that it would have retained quite a substantial amount in October 1981. Thirdly, the purchase of the 373 Golden Four Drive land had been settled and Graceview, which owed money to Omega, had a substantial interest in that land and the joint venture. Further, Mr Cowper was owed about $400,000 which he hoped to receive and did receive within a few months. I do not doubt that he was anxious to preserve the joint venture and to avoid any unpleasantness which might lead to disruption of the Costain relationship, particularly since Costain did not even know of the applicants and their role in Omega''s apparent prosperity. I consider that he tzould have preferred to abandon the purchase of the adjoining land than to lose or risk the jicint vent ue. Finally, f have had regard to Omega's later Balance Sheet as at 30 June 1982 which shows it with various assets, including monies owed to it by associated entities far in excess of what it owed. All in all, I am comfortably satisfied that, had the applicants insisted on their money back in late 1981, their demands would have been accommodated even if it meant that the land adjoining 373 Golden Four Drive could not have heen purchased. The more difficult question in relation to this element of this part of the applicant's claim concerns what the applicants would have done had they been in full possession of all information in late 1981. There is no doubt whatever that the applicants trusted Mr Cowper and had total confidence in him and his capacity to make a success of the project. Clause 3 of the Deed between Omega and the applicants and Mr Capelvenere's evidence support the view that Mr Cowper had a free hand, at least if what was done was consistent with the Deed. Nonetheless, the =x t Ne a a re eee. eee wwrnmece - een at transaction in fact embarked upon, with Omega not a party and with quite different and legally more complex steps necessary to give the applicants what they bargained for, and with potentially conflicting rights of a number of strangers to the transaction between Omega and the applicants intervening, was fundamentally different, legally at least, from the development contemplated by the Deed. On the other hand, the new arrangements made little practical difference to the applicants. Had Omega borrowed from other investors to purchase the land and borrowed on mortgage to construct the building, the applicants would now still be in precisely the same position. Their investment was intrinsically unsound. On any view, whatever scheme was implemented for the development, everything depended on the success of the project and it has proved a dismal failure. The applicants did not give a thought to the possibility of failure in 1981. Their faith was in the success of the project and in Mr Cowper, who they believed would ensure that it did succeed. Despite isolated passages to the contrary, the general tenor of the male applicant's evidence supports the finding which I now make that the applicants vould not have acted any differently in 1981 if fully and accurately informed of all aspects of the matter, including the legal differences so far as they were concerned. The applicants' sole concern was with the promises to repay them and to transfer a unit to them. Those promises were renewed in the period from September 1981 and reflected views then honestly and reasonably held by Messrs Cowper and Crossley. el ee. a Tee ITs oat aaa Nr En eee ET vos 17 The authorities sought to be relied on by the applicants, which included Holmes v. Jones (1907) 4 C.L.R. 1692 and Nicholas v. Thompson £1924] V.L.R. 554, do not, in my opinion, assist them. I think that it may be accepted that s.82 of the Act is not confined in its operation to loss or damage for which a contravention of Part IV or V of the Act was the only cause: see Smolonogov v. Q''Brien £19821 A.T.P.R. 40-312, where Fllicott dg. drew a comparison with the common law position in actions for deceit, citing Barton v. Armstrong £19732 2 N.S.W.L.R. 598 and Ausralian Steel and Mining Corporation Pty Ltd v. Corben £19741 2N.S.W.L.R. 202. It may also be that, where it is established that a contravention consisted of a deliberate attempt to mislead or deceive, or consisted of a "material" mis-statement in the sense once thought by some to be necessary in actions for deceit, i.e. was such that its natural and probable result would be to influence in the manner alleged the mind of any person to whom it was made, an inference could and if no more emerges should be drawm that persons seeking relief under s.82 did act as they were intended to or as was natural and probable. However, even then a claim under 3.82 would fail if the evidence showed that the contravention was not a factor which caused or contributed to the loss or damage. Further, although it may be that the evidentiary onus may shift once a proper basis exists for such an inference, the ultimate onus of establishing that the loss or damage claimed was suffered by the contravention remains throughout on the applicant. wae og SS OT Ay 12 Meme erem fT er In the present proceedings, no question of onus arises. Although I would have been readily persuaded to the contrary, for the reasons which I have given I am satisfied by the evidence as a whole, including Mr Capelvenere's own statements, that although the applicants were misled they would not have acted any differently had the joint venture and the new arrangements been fully explained to them in the latter part of 1981. No purpose would be served by dealing in detail with events after the end of 1981. Early in 1982, the purchase of the adjoining land was completed. Mr Cowper and Mr Crossley continued in their optimism. However, by about April 1982, difficulties were emerging. The property market was falling and interest rates were rising. The applicants were informed of expected difficulties ain raising the further $250,000 which it was anticipated would be required ++) be advanced to the joint venture in September or October that year. The male applicant volunteered to attempt to assist and unsuccessfully approached a financier with whom he was acquainted. In May, Mr Crossley told the applicants that he did not accept the correctness of Mr Cowper's continuing promises to the applicants that the money would be repaid on time, hut wrote: "Things are not good for Omega. You have had a brief outline of why, although there are \ many other reasons also. But your investment is protected and I shali attempt to recommend that any time past June it takes to repay you your investment, that Omega should pay your interest bili." caine PO ETE EE I IE ETT Em RT en BBG IE AT A NY By that time, dissension existed between Mr Cowper and Mr Crossley and each was blaming the other for the ills which had befallen their scheme. In June 1982, Omega defaulted in its obligation to make payment to the applicants under the Deed of 3 June 1981. In about July 1982, the applicants consulted solicitors whose inquiries resulted in a disclosure of additional details, including that it was Graceview not Omega which was party to the joint venture. Graceview defaulted in due course in its obligation to make a further advance to the joint venture. These proceedings were commenced in November 1982. In December 1982, a Deed of Variation was entered into between the paties to the Joint Venture whereby Graceview was relieved of its obligation to make any further advance to the joint venure and its interest was reduced from 45% to 20% with a corresponding increase in the interest of Costain Developments. The applicants' pleading also alleges non-disclosure or insufficient or inaccurate disclosure of the supplemental Deed of 18 August 1982 and the further Deed of Variation of the Joint Venture Deed dated 1 December 1982 and of the consequences of those further Deeds "on or in relation to the rights of the applicants". This aspect of the applicants' case was not separately developed in argument. Although there is nothing to indicate that the Deeds executed in 1982 were disclosed, there was no evidence of what the applicants would or could have done by that time which would have avoided or reduced their loss or damage. one fw ee peer erent be 20 Mr Cowper and Mr Crossley each gave evidence that he continued into 1983, and indeed up to the trial, to believe that Omega would be able to fulfil its obligations to the applicants. No reasonable person could have persevered in such a view for so long. Not one single unit was sold during attempts which were made to sell the units from late 1981 to early 1982. For most of this year there has been an attempt to sell the building asa single item which has fared no better. The price at which the building is listed, which Costain Developments does not expect to realize, will not result in any return at all to Graceview or, therefore, to Omega. Nonetheless, I think that it is likely that as late as dune 1982, and perhaps a little later, all involved, the applicants and Messrs Cowper and Crossley, continued to have faith or at least hope in a successful outcome. Iam also satisfied that by then, and indeed from considerably earlier, Omega had no better prospects than it has now of complying with the Deed of 3 June 1981. Whether, when any claims which it may have against Mr Cowper or associated companies or trusts have been pursued, Omega ultimately has any assets for distribution to its creditors will depend on the outcome of the liquidation which will presumably follow from these proceedings. No suggestion was made in these proceedings that the applicants may have, or may have had, any enforceable interest in the land or any unit and neither Costain Developments nor Costega is a party to this litigation. a sor see a eee one Se NN Oe ER EE I CR The applicants made one final claim, against Omega for damages for breach of the Deed of 3 June 1981. Save for one matter to Which I will come, the respondents made no attempt to deny this claim, although it was not until the final day of the trial that the applicants by their counsel announced acceptance of Omega's repudiation of the Deed. However, the breach had occurred long before, and I am satisfied that, prior to the institution of these proceedings, Omega had not only failed to make payment to the applicants in accordance with the Deed but had no prospect of doing so or of providing them with a unit in accordance trith the Deed. Omega might have acted under clause 2(a) of the Deed in late 1981 and repaid the applicants' money with interest. It did not. It elected to proceed on the basis that it would retain the money and, upon the completion of the development for the joint venture, perform its obligations under clause 2(a). It cannot now that it has failed to perform those obligaions seek to have its liability assessed on some different basis. | | In orthodox terminology it is estopped from doing so. One obvious ingredient of the applicants' damages for breach of contract is the loss of the unit. The uncontroverted evidence is that its present value is $77,000 and no suggestion was made that that is not an aprropriate figure to adopt. The other element concerns the $200,000 which should have been repaid to the applicants at the beginning of June 1982. Had that occurred, the applicants would have been able to repay the balance remaining of the $135,000 which they had borrowed from the Hong Kong finance company and there is nothing to indicate that they wa Sr eres ee be 22 would not have avoided the further interest payments which they made after that date. I estimate that the interest which they paid thereafter to the finance company was $758.00. The applicants also claimed for the loss of the income which sould have been earned by the $65,000 from their ovm funds which formed part of their loan to Omega, claiming interest at the rate of ten per centum. The respondents accepted that rate of interest but disputed the claim. In my opinion, "interest foregone", as it is described by the applicants in their pleading, is not recoverable as damages for breach of contract: see Simonius Vischer and Co v. Holt and Thompson £19791 2 N.S.W.L.R. 322. Accordingly, I assess the applicants' damages as $277,758.00. The respondents' only real attempt to deny this aspect of the applicants' claim was to assert that 1t lay beyond this Court's 'durisdiction if the applicants failed in their claims under the Act. That is so patently incorrect (see Fencott v. Muller (€19833 57 A.L.J-R. p.317) that Ida not propose to elaborate beyond observing that every single factual elemenr of the applicants' common law claim also formed part of cheir cla we under the Act. The respondents did not raise this canteat lor until the trial and indeed, although there was a hint at an earlier stage of the hearing that it might be raised, it was not in fact raised until Points of Defence were provided by the respondents at the close cf the evidence. I directed that notice be given pursuant to s.78B if the Judiciary Act 1903, in proceeding as I did to continue with the trial and to hear addresses, it is doubtful whether I acted in strict compliance with s.78B. Hovever, both the Commonwealth and Queensland Attorneys-General have since indicated that they do not wish to intervene. oy There is need for s5.78B of the Judiciary Act to be reconsidered. It creates an impediment to the orderly disposition of the business of the Courts which is disproportionate to any benefits which it provides. It is not obvious why at least this Court and the Supreme Courts should not generally decide all questions of law which are raised in proceedings before them, particularly questions concerning the ambit of their respective jurisdictions. It is necessary for the legislature to recognize that matters which fall within s.78B of the Judiciary Act may arise at any time inthe course of proceedings. Often such matters are raised, but, if the litigation could be concluded, would not have co be decided. Further, often such matters are raised which are patently without substance. Many jurisdictional questions afford good examples. Even if the High Court has recently decided the precise point in indistinguishable circumstances, a party can raise it again and hait proceedings. It is impractical to require that proceedings always be stopped whenever such a matter is raised to enable the Attorneys-General to consider whether they tvish to become involved or to have the proceedings removed to the High Court which is already over~burdened. When an action has to be stopped it causes great inconvenience to the Court, the parties, their witnesses and indeed other litigants whose cases could have been set down for hearing during the days wasted because allotted to the matter which cannot go forward. Further, the already burdensome cost of litigation is increased, and judicial resources are used inefficiently, at a considerable cost to the public purse. It would not require an excess of confidence in the judges of the = meee ee ———n en superior courts to permit them a discretion as to when notice should be given to the Attorneys-General. No doubt it would be necessary to take into account circumstances such as the possibility that an order, e.g an acquittal, might not be able to be challenged on appeal, as well as the efficient operation of the judicial system. It remains to consider shat order should be made as to costs. The applicants have succeeded against Omega but failed against Mr Cowper and Graceview. However, all the respondents shared the same representation. The applicants must have their costs against Omega but such an order may well prove to be worthless. If the applicants are ordered to pay the costs of the other respondents, even accompanied by an order that they be reimbursed by Omega, the practical result will be to make the applicants responsible for the entire costs of the litigation. That would, in my opinion, be an extremely unjust result. The applicants are the innocent parties. They trusted Mr Cowper and he abused that trust. Tt was not for him ta garhle sth tess ywoney, hoveyer optimistic he was. Legally anioe es all, ne applicants were entitled to be fully and accurately intormea, They have only failed against Omega and Mr Cowper, at least, because on the evidence I cannot be satisfied that they would have acted differently even if they had been dealt with honestly and indeed the evidence has convinced me to the contrary. It as not unreasonable to speculate that the applicants have been encouraged to persevere swith this litigation by assertions which have been made which suggested that (Omega would have the necessary funds to meet its obligations. As late as April this year, Mr Cowper sore an affidavit in which he said inter alia: "33. The First Respondent always intended and still intends to meet its obligations to the Applicants, but until the project is completed and the units are sold, the First Respondent will have no monies." There was then no basis whatever on which it could have been believed that Omega might meet its obligations to the applicants. The appropriate order as to costs seems to me to order that the applicants have their costs against Omega but that otherwise there be no order as to costs even though the practical effect of this may well be to leave each party to pay its om costs of the proceedings. I certify that thisanuds LR pres! pages are a true cops cd ti acslons tor judgment herein of ft iize ur Mr. Justice Fitzgerald fete. L-Decerow Asscciat Dated /s~ Regus, 198?