CTATCHMORDS Trade practices - misleading and deceptive conduct - damages by way of interest under s. 82. Trade Practices Act 1974: ss. 52, 82 BRYAN JOHN MILNEF AND ORS. v. DELITA PTY. LIMITED, ROGER McMILLAN sLASSON and MORFIS WALTER LEWIN U ve) H mn Pa ip) fol "Dp bd wi m ut oO hy H 'pD am 13) LOCKHART J. 17 DECEMBER 1985 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTPICT REGISTRY GENERAL DIVISION BETWEEN : AND: AND: AND: BETWEEN : AND: No. G164 of 1982 IN_THE MATTER of the TRADE PRACTICES ACT, 1974 BRYAN JOHN MILNER AND ORS. Applicants DELITA PTY. LIMITED ROGER McMILLAN GLASSON and MORPIS WALTER LEWIN Respondents and First Cross-Claimants ROBERT CHARLES GOOCH MORRISON JOHN CHRISTOPHER BENNETT. First Cross-Respondents and Second Cross-Claimants ROGER McMILLAN GLASSON and MORRIS WALTER LEWIN Second Cross-Respondents No. G&@5 of 1983 ALLAN JAMES GILL & ORS. Applicants DELITA PTY. LIMITED ROGER McMILLAN GLASSON MORRIS WALTER LEWIN Respondents and First Cross-Claimants and Ww AND: ROBERT CHARLES GOOCH MORRISON and JOHN CHRISTOPHER BENNETT First Cross-Respondents and Second Cross-Claimants AND: ROGER McMILLAN GLASSON and MORRIS WALTER LEWIN Second Cross-Respondents JUDGE MAKING ORDER: LOCKHART J. DATE OF ORDER: 17 DECEMBER 1985 WHERE ORDER MADE: SYDNEY MINUTE OF ORDER In the matter G85 of 1983 the Court orders that: Declarations be made in terms of paragraphs 1, 2, 3, 4, 5, 6 and 7 of the short minutes of order initialled by Lockhart J. and placed with the papers. Orders be made in terms of paragraphs 8 and 93 of the said short minutes. Judgment be entered for the applicants in terms of paragraphs 10 to 61 inclusive of the said short minutes. uw The respondents pay the costs of the applicants of the proceedings up to and including 19 September 1985, including any reserved costs and including costs of the Commission for the taking of evidence in Hawaii. The respondents pay one half of the costs of the applicants of the proceedings, including reserved costs, incurred after 19 September 1985. Any party 15 at liberty to apply. In the matter of G164 of 1982 the Court orders that: Ww Nod . Declarations be made in terms of paragraphs 1, 2, 3, 4, 5, 6 and 7 of the short minutes initialled by Lockhart J. and placed with the papers. Orders be made in terms of paragraphs 9 and 10 of the said short minutes. Judgment be entered for the applicant, Bryan John Milner, in the sum of $54,196. The respondents pay the costs of the applicants of the proceedings up to and including 19 September 1985, including any reserved costs and including costs of the Commission for the taking of evidence in Hawaii. a Rene ee ee et ee te ee ee re eine emer ee eee OV mn The respondents pay one half of the of the proceedings, including reserved costs, 19 September 1985. Any party is at liberty to apply. Settlement and entry of orders is dealt with the Federal Court Rules. costs of the applicants incurred after in Order 36 of IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY ) GENERAL DIVISION BETWEEN : BETWEEN : me ers ee en et ee eee w ) No. G164 of 1982 ) ) IN THE MATTER of the TRADE PRACTICES ACT, 1974 BRYAN JOHN MILNER AND ORS. Applicants DELITA PTY. LIMITED ROGER McMILLAN GLASSON and MORRIS WALTER LEWIN Respondents and First Cross-Claimants ROBERT CHARLES GOOCH MORRISON JOHN CHRISTOPHER BENNETT Firat Croas-Respondents and Second Cross-Claimants POGER McMILLAN GLASSON and MORRIS WALTER LEWIN Second Cross-Respondents No. G85 of 1983 ALLAN JAMES GILL & ORS. Applicants DELITA PTY. LIMITED ROGER McMILLAN GLASSON MORRIS WALTER LEWIN Respondents and First Cross-Claimants _ a and i) . AND: ROBERT CHARLES GOOCH MORRISON and COHN CHRISTGPHER BENNETT First Cross-Respondents and Second Cross-Claimants AND: ROGER McMILLAN GLASSON and MORRIS WALTER LEWIN Second Cross-Respondents REASONS FOR JUDGMENT LOCKHART J. On 19 September 1985 I delivered my reasons for judgment in these matters. I found that the respondent, Delita Pty. Limited, had engaged in misleading or deceptive conduct within the meaning of s. 52 of the Trade Practices Act 1974 ("the Act"), and had therefore contravened that section. I found that the respondents, Roger McMillan Glasson and Morris Walter Lewin were persons involved in those contraventions. I also found that the applicants were entitled to recover damages from the respondents under s. 82 of the Act and were entitled to relief under s. 87. In the course of my reasons for judgment I said that the language of ss. 82 and 87 of the Act is apt to authorise an award of damages by way of interest, not to recoup loss due entirely to delay in the payment of money ultimately held to be due, but to recoup loss suffered as 'a direct consequence of the conduct which contravened s. 52 including the cost of borrowing the money lost or the cost of terminating an earlier investment. I said that the entitlement of each successful applicant to recover damages under this head must depend on the circumstances of the particular case. On 16 October 1985 I dealt with certain further submissions put by counsel on the question of damages by way of interest. Counsel for the respondents objected to any damages in the nature of interest being awarded on the ground that there was no evidence of any applicant having sustained loss under that head and I accepted the correctness of that submission. But in the circumstances I allowed the applicants to reopen their case to lead evidence on this question and I later gave them directions to enable them to formulate their claim for damages by way of interest, including directions as to the filing of affidavits. This aspect of the case was heard by me today. Many affidavits have been filed bearing on this question of damages by way of ainterest including, in the main, affidavits by applicants who invested in the guava property trusts and partnerships. The deponents were not cross-examined. I see no useful purpose in summarising the contents of the affidavits. They speak for themselves. But I have read them carefully and taken them into account. I pause to observe that the affidavits have been carefully prepared and generally give clear and detailed information as to relevant matters including: (1) details of the investments made by the applicants in the guava projects; (ii) the sources of the moneys so invested; 4. (iii) the coasts of borrowing funds where applicable in order to make the investments; and (iv) the likely avenues of investing the funds which were in fact applied to the guava projects if they had not been so applied. I am satisfied that the sources of funds used by the applicants to invest in the guava projects may conveniently he summarised as coming in whole or in part from any of the following sources or combinations of them: (a) moneys borrowed for the specific purpose of investment in the guava projects and (b) payments from cash resources that probably would have been used for some business or income earning or investment activity or purpose if not used for the guava projects, including the reduction of borrowings for business or investment purposes and investments by way of moneys on deposit or in mortgage trusts, banks, merchant banks and superannuation schemes. Counsel for the respondents opposed any award of damages by way of interest on three grounds. First, it was submitted that the investments in the guava projects were speculative so that no investor could say that aif he had not invested in the guava projects he would have invested in a venture that would have been likely to provide him with a fairly certain and reasonably secure return on funds invested. I dealt in my earlier reasons for judgment with the relevance of any speculative element in the investment by the applicants in the guava projects and I seriously doubt if the consideration forming the basis of counsel's submission today has any relevance for present purposes. re en nn ee ee eee - we —- weep ome wee ew Pen re eens 5. But assuming that it dces, I am not persuaded that the speculative element inherent in this particular investment operates to prevent an applicant from recovering damages in the nature of interest. Second, counsel for the respondents divided the applicants broadly into three groups for presently relevant purposes: (a) those who invested in the guava projects by using moneys specifically borrowed for that purpose and no other moneys; (b) those who invested in the guava projects by using both moneys specifically borrowed for that purpose and moneys derived from other sources; and (c) those who did not borrow at all for the purpose of investing in the quava projects. As to the applicants who fall within category (c) or those within category (b) so far as non-borrowed moneys are concerned, counsel for the respondents submitted that it could not be said that there is any nexus between the conduct of the respondents contravening s. 52 and the alleged claim for damages by way of interest. I reject that submission. I am satisfied that the loss claimed under this head 1s the direct or immediate result of the offending conduct of the respondents whether moneys were borrowed in whole or in part for the specific purpose of investment in the guava projects or were derived from other sources including moneys previously employed in business or other income earning activities. The requisite nexus between the offending conduct and the loss has, in my view, been established. Third, counsel for the respondents argued that income tax would be payable on the moneys claimed under this head of damage to the extent that those moneys would have been invested in other income producing activities. It was submitted that in those circumstances 1t would be unjust for the applicants to be entitled to recover from the respondents more than the net gain which would have been derived by them. The submission was put in genéral terms and I was not referred to the specific case of any particular investor, save in reply to one for a limited purpose. To make the deduction sought would, I think, inadequately compensate the applicants. I see no relevant nexus between the losses claimed under this head and any tax savings that might accrue to the benefit of the applicants. Also Iam not satisfied on the evidence that tax would be likely to have been payable by the applicants in respect to any alternative use to which they may have put the moneys they in fact used for investment in the guava ventures. These are matters of fact that have not been explored and merely to say that an applicant would have used the moneys that he or she put into the guava ventures in some other income producing activity if they had not been used in those ventures, does not mean that there would have been any relevant tax liability. Still less would it be possible to quantify that liability other, in my opinion, than by sheer guesswork. Iam mindful of and accept the proposition that where there is difficulty in calculating either the extent of loss or damage suffered by a party or calculating a matter going in diminution of such loss or damage, the courts may nevertheless in appropriate cases make an assessment doing the best they can on the evidence before them; see Chaplin v. Hicks £1911] 2 K.B. 786 and other cases mentioned by me in my reasons for judgment of 16 Octéber 1985. No separate argument was advanced by counsel for the respondents with respect to any particular applicant to suggest that there was no entitlement to damages under this head. The respondents, sensibly if I may say so, were content to conduct the case on the basis that the applicants could be divided into the three broadly defined categories to which I have referred, and submissions were put on that basis. I find that the applicants have established their case to damages by way of interest. The parties are agreed that in that event the assessment and calculation of damages should be made on the basis of an interest rate of 40 per cent on the agreed sums representing the losses sustained by the applicants in respect of their investment in the property trusts and the partnerships. The 40 per cent has been calculated on the basis of an interest rate of 10 per cent spread over a four year period, representing the period of loss. I should say that since delivering my reasons for judgment on 19 September 1985 the parties agreed on the amount of loss sustained by each applicant in respect of investments in partnerships and property trusts which for convenience was referred to in argument as the loss of principal. The 40 per cent factor was applied to those losses of principal. The respondents have not, of course, agreed to the award cf damages against them. Their agreement has been as to matters of approach and detail on the assumption that there will be an award of damages against them. On the question of costs, counsel for the respondents has submitted that the costs incurred by the respondents after 19 September 1985 echculd be paid by the applicants. It was submitted that the applicants could and should have placed the evidence, now embodied in many affidavits sworn after 19 September 1985, before the Court at the principal hearinda. The applicants' claim for damages by way of interest was part of their claim at all material times and should, so it was submitted, have been presented at the earlier hearing. Counsel for the applicants submitted that the extra costs, if any, occasioned by a separate trial on this issue being heard today is minimal and that in all the circumstances of the case and for other reasons which counsel advanced, and which I have considered, no special order for costs is called for. I accept that the evidence relating to damages by way of interest could and probably should have been adduced at the earlier hearing. However, much of the cost relating to that issue would have been incurred in any event. Also it would have been necessary for the matter to be listed after 19 September 1985 for the purpose of the making of orders consequent upon my reasons for judgment. Having considered all the submissions and the matters which appear to me to be relevant on this question I think the proper order for casts in relation to events after 19 September 1985 is that the respondents pay one half of the applicant's costs of the proceedings since that date. The applicants have brought in short minutes of order and there has been discussion about them. There is no longer any outstanding dispute about the form of these orders and accordingly th oO following orders are made. In the matter G85 of 1983: 1. Declarations are made in terms of paras. 1, 2, 3, 4, 5, 6 and 7 of the short minutes of order initialled by me and placed with the papers. ae Ordere are made in terms of paras. 8 and 9 of those short minutes. 3. Judgment is entered for the applicants in terms of paras. 10 to 61 inclusive of those short minutes. 4, The respondents are ordered to pay the applicant's costs of the proceedings up to and including 19 September 1985, including any reserved costs and including costs of the Commission for the taking of evidence in Hawaii. 5. The respondents are ordered to pay one half cf the applicant's costs of the proceedings, including reserved costs, incurred after 19 September 1985. 6. Liberty to apply is reserved to all parties. we ep te eo en i en re en ete ne rte Se ee ne ee ee ee ee 10, In the matter G164 of 1982: 1. Declarations are made in terms of paras. 1, 2, 3, 4, 5, 6 and 7 of the short minutes initialled by me and placed with the papers. 2. Orders are made in terms of paras. 9 and 10 of those short Minutes. 3. Judgment is entered for the applicant, Bryan John Milner, in the sum of $54,196. 4, The respondents are ordered to pay the applicant's costs of the proceedings up to and including 19 September 1985, including any reserved costs and including costs of the Commission for the taking of evidence in Hawall. 5. The respondents are ordered to pay one half of the applicant's costs of the proceedings, including reserved costs, incurred after 15 September 1985. 6. Liberty to apply is reserved to all parties. { certify that this and the hine (9) preceding pages are a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Lockhart. Keun Darke Associate awe, (74, December. (995.