CATCHWORDS Trade Practices - misleading and deceptive conduct - misrepresentation - damages - no binding contract business. Trade Practices Act 1974 s. 52. Eccles v. Bryant [£19481] Ch. 93 Neill v. Hewens (1953) 89 C.L.R. 1. G.A. NOMINEES PTY. LTD. v. BARDEN MOTORS PTY. LTD. GRAY J. 21ST DECEMBER 1984 MELBOURNE. fraudulent for sale of IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY No. VG 6 of 1984 GENERAL DIVISION BETWEEN: G.A. NOMINEES PTY. LTD. Applicant AND BARDEN MOTORS PITY. LTD. and BRUCE HOCHKINS Respondents ORDER JUDGE MAKING ORDER: GRAY J. DATE OF ORDER: 21ST DECEMBER 1984 WHERE MADE: MELBOURNE THE COURT ORDERS THAT there be judgment for the Applicant against both Respondents for damages in the sum of $13,000.00. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY No. VG 6 of 1984 GENERAL DIVISION BETWEEN: G.A. NOMINEES PTY. LTD. Applicant AND BARDEN MOTORS PIrY. LTD. and BRUCE HOCHKINS Respondents JUDGE: GRAY J. DATE: 21ST DECEMBER 1984 REASONS FOR JUDGMENT The Applicant in these proceedings, G.A. Nominees Pty. Ltd., 18 a company which acts as trustee for the Aussems Family Trust. Its sole source of income is through the labours of Mr. Gillis Pierre Francois Aussems, a person who has had considerable experience in selling new cars and in buying and selling used cars. At various times, Mr. Aussems has conducted a dealership for Daihatsu vehicles, operated a used car business, and acted as buyer of used cars for major dealers. The first Respondent, Barden Motors Pty. Ltd. 15 also a -2- family company. Its prime mover 1s the second Respondent, Bruce Hochkins. The subject of the proceeding is a business formerly conducted by the first Respondent at 482 Warrandyte Road, South Warrandyte. At all relevant times, that business has consisted partly of a retail petrol filling station, together with the sale of oils and other goods typically sold in conjunction with such a business, and partly of a workshop for the carrying out of mechanical repairs to motor vehicles. From 1974 until the events which brouqht about this litigation, the business was conducted by the second Respondent and his wife, or by the first Respondent. It seems that, for some years, there has also been carried on as part of the same business, the business of selling used vehicles. In the early days of the association of the Respondents with the business, occasional sales of used vehicles occurred. In 1978, the first Respondent entered into a dealership agreement with M.W. Motors Pty. Ltd., the Victorian agent for the distribution of Suzuki motor vehicles and Skoda motor vehicles. At that time, the only Suzuki motor vehicles which were sold in Victoria were four wheel drive motor vehicles. The Skoda vehicles sold were two wheel drive cars. In 1979, Suzuki commercial vehicles and cars, not being four wheel drive vehicles, were imported into Victoria. These became part of the first Respondent's dealership, and were sold through the business at the South Warrandyte premises. At about this time, there was added to the existing building on the premises a new show room to -3- accommodate vehicles for display. From 1978, when new vehicles were first sold, there' existed a floor plan arrangement between the first Respondent and Australian Guarantee Corporation Limited ("A.G.C."), a finance company. Under this arrangement, vehicles could be displayed at the premises without being purchased by the first Respondent; they were owned by A.G.C. until such time as they were sold, at which stage it was the first Respondent's obligation to account to A.G.C. for the proceeds of the sale. The premises were in an area subject to the Melbourne Metropolitan Planning Scheme ordinance, made pursuant to the Town and Country Planning Act 1958 (Vic.). During the mid-1970's, the premises were in an area zoned as "Rural" under the planning scheme. Provided that a permit was obtained, 1t was permissible for the business of selling vehicles to be carried on at the premises. From time to time, various permits were obtained. On 22nd April 1970 a permit was obtained for the sale and repair of motor mowers and chain saws on the premises. In 1975, application was made by the first Respondent for a permit for the conduct of heavy mechanical repairs, spray painting, panel beating and sales of new and used cars. This application was refused by the Melbourne and Metropolitan Board of Works, the responsible authority, on 3rd June 1975. On 21st January 1977, a permit was obtained for the sale of new and second hand tractors on the premises. Subsequently, on 6th December 1977, a permit was obtained for the sale of new and used four wheel drive vehicles. This permit was no doubt obtained in anticipation of the Suzuki dealership, at atime when the only Suzuki vehicles available were four wheel drives. Condition 9 of this permit was in the following terms: "9, No vehicles other than tractors and four-wheel drive vehicles shall be displayed or sold on the site." In 1978, the Melbourne and Metropolitan Board of Works changed the zoning applicable to the premises. Thereafter they fell into a zone described as "Landscape Interest A". It then became impossible to obtain a permit for the sale of motor vehicles at all. It was only an accordance with its previously granted permit with respect to four wheel drive vehicles that the first Respondent could lawfully sell any vehicles on the premises. The second Respondent became aware of | this change of zoning in or about 1980. In mid-1982, Mr. Aussems was working as used car buyer for the Garry and Warren Smith group of companies, a large car dealer concern. His function was to purchase used cars, and then to sell them to one or other of the companies which operated the Garry and Warren Smith retail outlets. The Applicant was paid a fee and commission on such resales. If Mr. Aussems purchased a particular vehicle which none of the Garry and Warren Smith companies wished to buy, he was at liberty to dispose of it within the used car trade as best he could. It was in this context that Mr. Aussems first called at the South Warrandyte premises and spoke to the second Respondent. He offered to sell used cars for resale at the premises. In fact, in early June 1982, two such cars were purchased by the first Respondent. Over the succeeding months, Mr. Aussems - 5 - continued to call frequently, and to converse with the second Respondent, although no more cars were purchased from him. In time, some discussion arose between them as to the suitability of the premises for the sale of vehicles. Mr. Aussems was of the view that the premises offered an ideal outlet; they were on the main road between Ringwood and Warrandyte, at a five way intersection, and a considerable distance from other motor car dealers. The second Respondent conceded that he was not well equipped to sell cars to the full potential of the business. In October 1982, the suggestion was made that Mr. Aussems should take over the car sales side of the business. There was a conflict of evidence as to whether this suggestion first came from the second Respondent, or from Mr. Aussems. Whatever the true situation was, there 1s no doubt that Mr. Aussems was extremely keen to assume the running of that side of the business. He immediately typed out and gave to the second Respondent a document containing the terms on which Mr. Aussems proposed that the Applicant should assume responsibility for the conduct of the business. Although this document was never signed, the second Respondent went through it and ticked each of the paragraphs in it, except the last, which proposed that the arrangement should be for twelve months. He wanted the arrangment only to last for six months. In substance, the arrangement was for the Applicant to pay to the first Respondent $100.00 per week by way of "rent", to be entirely responsible for the conduct of car sales, and to retain any profit from such sales. The Applicant was to assume the liabilities of the first Respondent to A.G.C. under the floor plan arrangement, and to pay the salary of the car salesman, Mr. Ritchie, who was already ~6- employed in that side of the business. It was originally agreed that this arrangement should come into operation on lst November 1982. In fact, 1t was delayed until lst December 1982. From then, Mr. Aussems was present at the premises on a daily basis, attending to the sales of new and used cars. In January 1983, the Applicant also took over the workshop side of the business. Again, the evidence is in conflict as to who first proposed this arrangement. The second Respondent claims that it was Mr. Aussems who suggested that the Applicant should have this aspect of the business, as it complemented the car sales aspect. Mr. Aussems claims that he was offered the workshop side of the business. At all events, the new arrangement arose shortly after the second Respondent returned from a short holiday in early January. It involved an increase in "rent" paid by the Applicant to $1,300.00 per month, and the Applicant assuming responsibility for the employment of the workshop manager, Mr. George Jones, and an apprentice. From January 1983 onwards, the second Respondent remained on the premises, looking after the sale of petrol and associated goods. Over the next few months, conversations arose as to the possibility of the Applicant taking over that side of the business as well. The second Respondent claims that these conversations arose as a result of suggestions by Mr. Aussems. He says that Mr. Aussems made suggestions to him along the lines of, "I would like to see you retired on the Gold Coast with me - 7- sending you a cheque every month". Again, Mr. Aussems does not agree that he was the prime mover with respect to these negotiations. At all events, in April 1983, the second Respondent made an offer that the Applicant lease the premises and take over the conduct of the entire business. The offer was expressed to be open only for twenty-four hours. In his own words, Mr. Aussems "jumped at" this offer. In the result, the Applicant became a tenant of the premises and gained control of the entire business from lst May 1983. The terms on which this take over of the business was to be effected were as follows. The Applicant was to pay $25,000.00, described as a payment for good will, and payable by a down payment of $5,000.00 and monthly instalments of $1,000.00. The rent was to be increased to $1,950. 00 per month. Instead of using the existing floor plan arrangement, the Applicant was to negotiate its own. Shortly after the offer was made and agreed to, Mr. Aussems and the second Respondent attended the office of the Respondents' solicitors. While Mr. Aussems sat and waited, the second Respondent consulted a solicitor as to whether 1t would be legally possible to carry the new arrangement into effect as proposed. At the conclusion of the appointment, the second Respondent informed Mr. Aussems that everything could proceed. On 30th April 1983, the Applicant paid to the first Respondent a cheque for the sum $11,274.00. This was intended to cover the initial payment for good will of $5,000.00 (as to which more will be said later) and rent for the month of May 1983 in the sum of $1,950.00; the balance was for stock on hand of petrol - B- and associated goods. Thereafter, the Applicant made payments of $1,000.00 each by way-of instalments towards the price of good will, and payments of rent of $1,950.00 on each of the following dates: 3lst May, 14th July, 9th August, 14th September and 10th October 1983. He also made a further payment of $1,950.00 for rent on 8th November 1983. It will be noted that most of these payments were made in the middle of calendar months. Because of arrangements for the receipt of monies for petrol, it was found to be easier for the Applicant to make each payment in the middle of the month, rather than at the beginning. By letter dated 4th May 1983, the Respondents' solicitors forwarded to the second Respondent a draft lease and a draft agreement for the sale of the business. The second Respondent passed these on to Mr. Aussems. Mr. Aussems consulted the Applicant's solicitor about the transaction. This solicitor made the usual enquiries of the Melbourne and Metropolitan Board of Works, and received a certificate stating that the premises were zoned "Landscape Interest A". This certificate was received by the Applicant's solicitor on or about 25th May 1983. Thereafter, the Applicant's solicitor made numerous requests to the Respondents' solicitors for information as to the use of the premises, and particularly as to any evidence that the conduct of the business at the premises constituted a non-conforming use. To establish a non-conforming use, it would have been necessary to find evidence that new and used vehicles had been sold at the premises from 1954 or thereabouts. The Respondents were unable to provide such evidence. The Applicant's solicitor also presented to the Respondents' solicitors requisitions on title. - 9 - The requisitions particularly relied upon by counsel for the Applicant were in the Following terms: "3. Have all the requirements of the Health Acts, Labour and Industry Act or of any other Acts relevant to the premises or the conduct of the business thereon been complied with to the date hereof. Particulars are required of any notices or orders received by or on behalf of the Vendor/s and the same must be complied with at the Vendor/s expense at or prior to settlement. 9. Have any notices, directions, orders or requisitions been given made or served or received in regard to the premises from any authority or person or pursuant to any Statutes regulations or by-laws." The answers to those requisitions were as follows: "3. Yes. Also in the course of correspondence, the Respondents' solicitors supplied to the Applicant's solicitors copies of all permits which had been granted under the Town and Country Planning Act 1958. These copies had been photocopied by the second Respondent's wife, on his instructions, with all of the conditions obscured; all that was revealed, therefore, was the nature of the activity permitted. More will be said about this unusual action later. Early in November 1983, a Mr. Lysaght, an inspector employed by the Melbourne and Metropolitan Board of Works, paida visit to the premises. He spoke to Mr. Aussems, and indicated - 10 - that the conduct of the business on the premises, so far as it aunvolved the sale of new and used vehicles other than four wheel drives, was an unlawful use of the premises. He indicated that the Applicant would shortly receive official notification from the Melbourne and Metropolitan Board of Works, giving it ninety days in which to cease that particular activity on the premises. Mr. Aussems immediately contacted the second Respondent, and confronted him with news of Mr. Lysaght's visit. Within a short time, each had made to the other an offer as to how the problem might be overcome. Neither offer was accepted. The promised ultimatum from the Melbourne and Metropolitan Board of Works arrived by letter dated 22nd November 1983. The Applicant was given ninety days in which to cease the sale of new and used vehicles, other than four wheel drive vehicles. After Mr. Lysaght's visit, enquiries by the Applicant's solicitor as to the possibility of a non-conforming use increased in intensity. When the letter from the Melbourne and Metropolitan Board of Works arrived, Mr. Aussems finally decided that the Applicant would not seek to retain the business any longer. In his view, the sale of new and used vehicles generally was a primary aspect of the business; it was certainly the one with which he had the most experience and in which he most desired to continue. He made arrangements for the sale of the cars that were held in stock and for the return of the balance of the business to the first Respondent. The first Respondent then negotiated with Mr. Jones, the workshop manager, to sell to him that part of the business which related to the sale of petrol and - 12 - cars from December 1982 until the negotiations for the take-over of the whole business in April 1983. The Respondents do not deny that all of these elements were present. It is, however, the Respondents' case that the Applicant was informed as to the limited use that could be made of the premises. This information is said to have come from two conversations. The first, it is said, took place in October 1982, during negotiations for the take-over by the Applicant of the car selling side of the business. The second Respondent claims to have told Mr. Aussems that the premises could only be used for the selling of four wheel drive vehicles. The second conversation is alleged by the second Respondent to have occurred in January 1983. According to the second Respondent, he was annoyed that the Applicant had broudght so many used cars onto the premises, and was displaying some of them on the nature strip outside the premises. An officer of the City of Doncaster and Templestowe had previously visited the premises, while the whole business was being conducted by the first Respondent, and had warned the second Respondent against displaying vehicles on the nature strip. According to the second Respondent, he spoke to Mr. Aussems in the second Respondent's office, telling him that he should not place vehicles on the nature strip, because this would attract the attention of the Council, and advising him that he should mix up the non-four wheel drive vehicles with more four wheel drive vehicles, so as to give the impression that the limitation to a four wheel drive business was being complied with. The Applicant denies that each of these conversations occurred. The only possible witness to them was Mr. Ritchie, the - 13 - car salesman, who might have been in earshot while sitting in his own office at the time of the alleged second conversation. Mr. Ritchie was brought to court during the trial of the proceeding, and apparently interviewed by counsel for the Respondents, but was not called to give evidence. I can only assume from this that his evidence would have been that he was unaware of any such conversation. Whether this was because the conversation did not occur, or because Mr. Ritchie did not hear it, is a matter which I cannot determine. There was some evidence that he was partially deaf. This issue falls to be resolved, therefore, by a choice between the evidence of Mr. Aussems and the second Respondent. For a number of reasons, I prefer the evidence of Mr. Aussems on this aspect. The first conversation was alleged in the particulars in the Statement of Claim to have occurred in August or September 1982. In cross-examination of Mr. Aussems, counsel for the Respondents) put to him the suggestion that the conversation occurred in August. By the time the second Respondent gave evidence, he had apparently decided that the conversation occurred in October; this was the evidence he gave. He was totally unable to recall any of the precise words used in either of the conversations, with one exception, although he claimed to be able to recall with some precision the circumstances in which the alleged conversation of January 1983 occurred. The words which the second Respondent claims he did recall were the phrase "restricted four wheel drive permit". Notwithstanding that he settled upon this as the form of words he used, the second Respondent did not always use that form of words - 14 - in recounting in the witness box the way in which the conversations had occurred. There are other aspects of the second Respondent's evidence which lead me to disbelieve him on this issue. In answering the requisitions on title, he failed to make any reference to town planning restrictions, notwithstanding that he was fully acquainted with the zoning of the premises, with the conditions of the permits which had been granted, and with the refusal of a permit for the sale of new and used motor vehicles in 1975. His deliberate choice to send to the Applicant's solicitor, via the Respondents' solicitors, copies of the permit with the conditions obscured, and his failure to send the 1975 refusal, all tend to suggest that he was determined to prevent the Applicant from knowing of these matters. The repeated failure of the Respondents' solicitors to reply to requests for evidence of non-conforming use _ supports this conclusion. The expressed 'attitude of the second Respondent in the witness box was that it was up to the Applicant to satisfy himself as to the details of any town planning problems. Even if the two conversations alleged by the second Respondent did occur, and I am satisfied that they did not, they would have been inadequate in my view to dispel the effect of the appearance of the premises, and the conversations as to the suitability of the premises for the sale of new and used motor vehicles generally. Mere reference to a restricted four wheel drive permit, in the context of the conversations would not be adequate to convey that it was totally illegal to sell any other type of vehicle on the premises. Indeed, the second Respondent accepted in the witness box that he had endeavoured to convey the - 15 - impression that, as long as a sufficient number of four wheel drive vehicles was mixed up with the other vehicles, no difficulty would be experienced. The alleged second conversation, even on the second Respondent.'s evidence, concentrated upon diffaculties with the Council arising cut of the displaying of vehicles on the nature strip. In context, it was unlikely to have brought home to Mr. Aussems the reality of the situation. Iam therefore satisfied that the Respondents have engaged in conduct that was misleading and deceptive. It was not argued that such conduct fell outside the area of trade or commerce. I am also satisfied that such conduct amounted to fraudulent misrepresentation. In the circumstances, having given the very strong impression that the premises constituted an excellent site for the conduct of a business selling new and used cars generally, the Respondents had a duty to disclose any impediment to the carrying on of such a business. Inno way did they seek to correct the impression which had been given. The question that arises 1s as to what flows from this conduct, by way of damages. It was common ground that the case should be treated as one in which no binding contract, either for a lease of the premises, or for the sale of the business, had been entered into. Notwithstanding that, at one stage the proposed lease and the proposed agreement for the sale of the business had been sealed with the common seal of the Applicant, and signed by Mr. Aussems and his wife, the position seems to be that the parties did not intend any binding contract to come into - 16 - existence until they had exchanged their respective parts of these documents. See Eccles v. Bryant [1948] Ch. 93, at page 99 per Lord Greene M.R., and Neill v. Hewens (1953) 89 C.L.R. 1. It follows that the case must be treated as one in- which, for whatever reason, a binding contract may never have come into existence; at any time, it was open to either party to terminate negotiations, for any reason, good or bad. The losses claimed by the Applicant as flowing from the Respondents' conduct fall within three broad areas. The first is the conduct by the Applicant of the car sales and workshop aspect of the business between December 1982 and the end of April 1983. The second is the conduct by the Applicant of the whole of the business from Ist May 1983 until 3lst December 1983, and includes any losses flowing from the fact that the Applicant, at fairly short notice, terminated its conduct of the business. The third area is that of the expectation of future profit which, it is said, would have arisen from the Applicant's conduct of the whole business after 31st December 1983, if it had been lawful to continue to conduct the business. It is convenient to deal first with the period prior to lst May 1983. During that period, the Appliant carried on parts of the business ona_e short term basis. It was inno sense a purchaser. Its commitment, and that of the first Respondent, did not extend beyond six months from lst December 1982. Despite the illegality involved in carrying on the car sales section of the business, the Applicant did carry it on. In doing so, it received precisely what it bargained for, namely the profits of - 17 - those aspects of the business. It paid out the agreed sums for the right to receive those profits. During that period, it suffered no loss flowing from the misleading and deceptive conduct of the Respondents. No damages can therefore be awarded in respect of that period. The question of expectation of profit after 31st December 1983 can also be deait with shortly. Upon becoming fully aware that it could not lawfully continue to conduct all aspects of the business, the Applicant elected to relinquish the business altogether, and not to continue to conduct the workshop and petrol sales parts of it, which could lawfully be carried on. By relinquishing the business altogether, the Applicant released itself, and the energies and talents of Mr. Aussems, to pursue other profit making activities. In those circumstances, in order to recover any amount for loss of opportunity to make future profits, the Applicant would have to show that, if it had been able to continue to conduct the whole business, that business would have been exceptionally profitable. In other words, the Applicant must show that it is more probable than not that the Applicant would have made more profit from continuing the business (if 1t had been lawful) than it can now make from any other activity 1n which it might reasonably be expected to engage. Having relinquished the business, the Applicant cannot cease profit making activity and claim from the Respondents all that it would have made if it had been able to continue the conduct of the business. Still less can the Applicant add to any profit it may make from activities in which it is now able to engage a notional profit from the relinquished business. Unless - 18 - the Applicant could reasonably have been expected to make more out of the business than it can out of other profit making activities, it cannot recover for loss of expectation of future profits. An attempt was made to give evidence of projected future profits of the business, amounting to almost $50,000.00 per annum. The figures relied on, however, were estimates, and are unconvincing in a number of respects. For instance, the expected profit is based on a substantial increase in turnover of vehicles above the turnover actually experienced. It 18 also based on a reduction in some expenses, e.g. advertising. I find it difficult to accept that substantially more vehicles could be sold with substantially less advertising expenses. In my view, the Applicant has failed to prove that, if it had been able to continue in the business, it would have made more profit than it is capable of making in other activities. The claim for loss of future expectation of profits also ignores the fact that no binding contract existed for the sale and purchase of the business. It was, as I have said, open to the Respondents to refuse to enter into such a contract at any time. If that had occurred, the Applicant would have been forced to look elsewhere for income producing activities. The extent to which the Applicant could have expected to make future profit is diminished when the case is compared with one in which a binding contract exists. The Applicant is, therefore, left with its claim for - 19 - losses arising during and associated with its carrying on of the business between lst May 1983 and 3lst December 1983. In respect of this period, the Applicant claims to be entitled to recover monies expended by it, including payments for good will, payments of rent, interest om monies borrowed, and other alleged wasted expenses, as well as notional profit which would have accrued to the Applicant if it had engaged in other income' producing activities, instead of having been induced to enter into the business. Two sets of accounts, prepared by two different accountants, were 1n evidence. The first set contained a profit and loss account for the period from lst July 1983 until 30th September 1983, anda balance sheet at the latter date. The second set contained a profit and loss account for the period from ist July 1983 until 29th February 1984, and a balance sheet at the latter date. The first set of accounts showed a gross profit for the three month period covered of $30,618.00, a trading profit of $21,600.00, and a nett operating profit for the company of $4,389.00. The second set of accounts showed a trading profit of $83,606.00 for the eight month period, an operating loss of $1,148.00, and a nett profit to the company of $2,799.00, which included what was described as "profit on sale of assets". These accounts are difficult to reconcile, having been prepared on different bases. As an example, the amount shown in the first set of accounts for casual labour exceeds' the figure shown in the second set of accounts under the same heading, although the period of the second set of accounts includes the period of the first set. - 20 - It is clear from the first set of accounts that the business was profitable for the three months from lst July 1983 to 30th September 1983. Furthermore, if the figure for salaries other than those associated with the actual conduct of the business, a figure of $3,900.00, is added to the nett profit, a total is achieved of $8,289.00 for the three month period. There was evidence that, if Mr. Aussems had continued to undertake work as a valuer of used cars for a large motor dealer, the company would have received between $2,500.00 and $4,000.00 per month, "with very little overhead". The figure of $8,289.00 for the three month period, including $3,900.00 salaries, which I assume must have been paid to Mr. Aussems or members of the Aussems family, falls within this range. From this calculation, it appears to me that I must assume that the business was as profitable to the Applicant as alternative income producing activity would have been. No ground exists, therefore, for allowing to the Applicant any damages for lost income during that period, or any expenses, so far as they are already taken into account in the calculation of profit. If the figures in the second set of accounts are accepted, the business became substantially less profitable after 30th September 1983, to the point where the company sustained a loss for the eight months ended 29th February 1984, which included a profitable first three months. It was the Applicant's case that the discovery in November 1983 that it was impossible legally to carry on the vehicle sales side of the business, and the consequent decision of the Applicant to give up the business altogether, caused a dramatic downturn in trading. This downturn -21- was clearly not in the petrol sales or the workshop areas of the business; they continued as before, and were ultimately sold to Mr. Jones, the workshop foreman, by the first Respondent. On the vehicle sales side, figures have been provided of the numbers of cars sold. New vehicles continued to be sold at the same rate as in the months preceding November 1983, or a better rate. It is in the used vehicle sales that a difference appears. It was the practice of the Applicant, in the conduct of the business, and is apparently a usual practice for certain used vehicles to be sold "retail", i.e. to members of the public, and for others to be sold "wholesale", i.e. within the used car trade. When a purchaser of a vehicle trades in a used vehicle, a decision is usually made whether the trade-in will be treated as a retail or a wholesale vehicle. If it is very old or in poor condition, it will often be treated as a wholesale vehicle. It is common for wholesale vehicles to be sold at a loss, especially where a high trade-in price has been offered in order to induce the sale of a new vehicle. Retail vehicles, however, when purchased as trade-ins or in some other way, are usually sold at a profit. In November 1983, the Applicant did not sell any used vehicles for the retail market. It sold fave wholesale. The evidence of Mr. Aussems was that these were vehicles which would normally have been sold as retail vehicles, and which were not old or in poor condition.- They were sold as wholesale vehicles, 50 Mr. Aussems said, because of the need to unload stocks of used vehicles in the course of winding up that side of the business. In December 1983, eleven vehicles were sold retail, and tws wholesale. These two wholesale vehicles were again sold at a - 22 - loss. After 3lst December 1983, when the Applicant ceased to occupy the premises, it sold nine further used vehicles to the retail market, making use of Mr. Aussems' residential premises for the purpose. In the light of these subsequent sales, it is hard to see the necessity to sell what would otherwise have been five retail cars to the wholesale market in November 1983. There was some suggestion in cross-examination that these five vehicles were sold because the Applicant had cash flow problems. To some extent, this was supported by evidence of difficulties which the Applicant had in meeting payments to its petrol supplier. Whatever the truth of the Applicant's cash flow position, I find it difficult to accept that the Applicant was required to dispose of five vehicles in this way in November 1983. Under the ultimatum from the Melbourne and Metropolitan Board of Works, the Applicant had ninety days from late November in which to cease its illegal activity. That it was able to sell used vehicles to the retail market after this date is evident. No reason is shown, other than lack of cash, to justify the sudden sale, at a loss, of five vehicles. The Applicant sought to prove its case as to losses from forced sales of vehicles by reliance on figures showing the average profit on each new and used -vehicle sold in various months in which the business was operated. If the average profit figures on new vehicles are looked at, they do not support the proposition that the Applicant suffered any loss by any forced sales. On the other hand, the averages for used vehicles, both - 23 - wholesale and retail, were down. In my view, this reliance on average figures is unreliable as an indicator of losses. The identity of each vehicle sold was known to' the Applicant; 1t would have been possible to bring forward evidence as to what each vehicle would normally have been expected to fetch, and thereby to indicate how much each vehicle was discounted. Because this evidence was not provided by the Applicant, it 15s impossible to quantify any loss on forced sales. Nevertheless, it is appropriate that some allowance for forced sales 1n closing down should be made. The Applicant also claimed that payments made by it in respect of good will represented loss for which 1t should be compensated. In the negotiations between the parties, good will was fixed at $25,000.00. On the evidence, however, $5,000.00 of this was antended to cover an amount which, in January 1983, the Applicant had agreed to pay to the first Respondent in respect of the stock of spare parts found in the workshop when the Applicant took over that side of the business. By May 1983, this amount had not been paid, so it was treated as a component of the gocd will. In fact, the Applicant had the benefit of the spare parts, and used them in the course of carrying on the business. In January 1984, when it relinquished the business and the remaining elements of it were sold by the first Respondent to Mr. Jones, the Applicant sold the stocks of spare parts which then existed directly to Mr. Jones. Accordingly, the Applicant has had the benefit of the spare parts purchased by this sum of $5,000.00, and no damages should be awarded in respect of 1t. - 24 - A further §5,000.00 was paid by the Applicant in instalments of $1,000.00 in respect of good will. The Applicant has received nothing for these payments. They represent monies spent by the Applicant in reliance upon -being able to carry on the business lawfully. In the absence of a binding contract between the parties, they would be recoverable as monies paid on a consideration which has wholly failed. Accordingly, I propose to award to the Applicant damages in the sum of $5,000.00 in respect of those payments. The Applicant also contended that payments of rent should be treated in the same way as payments for good will, or alternatively that there ought to be some damages in respect of the amount of rent. It was put that the rent of $1,950.00 per month was fixed on the basis that there would be a five year lease. Having regard to the possibility of inflation, it was said that the payment of rent in the earlier months must be regarded as high, in order to compensate for what would be a low rate towards the end of the five year period. As is the case with many other items of expenditure by the Applicant, it received that for which it bargained. The payment of rent entitled it to possession of the whole of the premises for the purpose of conducting every aspect of the business. Despite the illegality of part of the business, the Applicant did in fact have possession of the premises' and did infact conduct the business for some time. I donot accept that the Court can notionally adjust the rent on the basis that the contemplated lease was a long one, especially in a case when the rent 18 paid and accepted without any binding lease or agreement for a lease. - 25 - It would be impossible to say to what extent the rent should be adjusted; the amount agreed and paid is not extravagant when compared with the rental payments previously fixed, on a short term basis, to give the Applicant the right to conduct part only of the business. One further problem arises aif adjustment of rent 1s attempted. The Applicant paid no rent after November 1983. It remained in possession of the premises for the month of December 1983 without making any payment of rent. If adjustment were to be made, this would have to be taken into account, and would probably outweigh any discount which the Applicant might receive. In my view, the Applicant has suffered no loss by making payments of rent. Various claims were put forward for other items of expenditure. It was claimed that $5,283.00 of the amount' spent on advertising represented a loss to the Applicant, on the basis that it had been spent for the purpose of establishing the name of the Applicant generally, as distinct from the purpose of advertising specific vehicles for sale. In some cases, the evidence is as to expenditure on advertising, alleged to be of this long term nature, prior to May 1983. At that time, the Applicant had no prospect of any long term involvement with the business. In the case of other items, it seems to be impossible to say that the Applicant did not receive some benefit from the advertising during the time that it conducted the business. Whilst I accept that some allowance should be made for long term advertising costs thrown away, I do not accept that it is anything like the figure claimed. - 26 - A claim was also made for expenditure on uniforms and stationery, on the basis that these items were useful only in the particular business, and could not be transferred elsewhere. Apparently, these items were simply left for-Mr. Jones when he took over the business. It was not shown why they were not sold to Mr. Jones, or indeed whether any attempt to sell them had been made. I accept that some allowance for these items should be made, but not necessarily in the amount claimed. There was also a claim for loss on stock by reason of what amounted to a forced sale to Mr. Jones. The evidence indicated that spare parts, petrol and oils and other equipment were sold to Mr. Jones at a discount of $3,248.00 on their cost. I accept that the sale of these items to Mr. Jones was in the nature of a forced sale, and that the Applicant should be allowed something of the order of the amount claimed. The remaining claim with which I am required to deal 15 for legal costs occasioned by the correspondence and searches concerned with ascertaining the correct position as to town planning. Evidence was given by Mr. Sharpe, the solicitor who acted for the Applicant with respect to those matters, that these additional costs were estimated at §1,000.00. In my view, such costs flowed from the conduct of the Respondents. The fixing of a precise figure for damages in these circumstances is not an easy task. In many respects, I find that I cannot accept the figures put forward by the Applicant. It becomes necessary for the Court to engage in an estimate of some a - 27 - items. On this basis, it seems to me that the sum of $8,000.00 is appropriate to cover losses on forced sales of vehicles and other items, advertising thrown away, stationery and uniforms thrown away, and additional legal and associated costs. To this figure of $8,000.00, there must be added the figure of $5,000.00 in respect of good will. There will be judgment for the Applicant against both Respondents for damages in the sum of $13,000.00, pursuant to s. 82 of the Trade Practices Act 1974 and at common law. I shall hear the submissions of the parties on the question of costs.