1d9. IN THE FEDERAL COURT OF AUSTRALTA ) QUEENSLAND DISTRICT REGISTRY ) QLD G17 of} 1984 GENERAL DIVISTON ) BETWEEN: HALJURLA PTY. LTD. Applicant AND: ABLLAMANDA NOMINEES PTY. LTD. First Respondent AND: GARY JAMES CAMPBELL and LYNETTE LEE CAMPBELL Second Respondent DATE OF HEARING: 24, 25, 26 February 1986 DATE JUDGMENT DELIVERED: 8 April 1986 COUNSEL: for the applicant Mr. J.P. Rivett instructed by Munro, Colmon, Huston & Thompson for the respondent Mr. M. Grant-Taylor instructed by Shakespeare and Haney (on 24 and 25 February only) J. A. LYONS ASSOCIATE TO PINCUS J. 8 April 1986 . tN ow? ~Lf 7 KE 3 ~S oF RECEIVED ~] Ug APR 1986 anal, Gobel Gl ersten een apeenan we ys A re t . Dh > en ae qemu me wm ees ee a CATCHWORODS TRADE PRACTICES - claim for damages for misleading statements - whether representation merges in contract - methods of assessment - interest under statute - fixing rate of interest. Trade Practices Act, 1974 ss.52; 82 HALJURLA PTY. ETD. v. ALLAMANDA NOMINEES PTY. LTD. & ORS. QLD G17 OF 1984 PINCUS J. BRISBANE 8 April 1986 RN ee ee cre ee eet ee pe ee er yo woe lee we ne 3 . ane wt . we IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD G17 of 1984 GENERAL DIVISION ) BETWEEN: HALJURLA PTY. LTD. Applicant AND: ALLAMANDA NOMINEES PTY. LTD. First Respondent AND: GARY JAMES CAMPBELL and LYNETTE LEE CAMPBELL Second Respondent MINUTES OF ORDER JUDGE MAKING ORDER: PINCUS J. DATE OF ORDER: 8 April 1986 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. There be judgment for the applicant against the respondents in the sum of $79,000. 2. The respondents pay the applicant's costs of and incidental to this application to be taxed. of the Federal Court Rules. Settlement and entry of orders is dealt with in Order 36 meee Won tt mee esa Sr eapre sete ae pow ea ee am ' « ye oT ee ' somes . IN THE FEDERAL COURT OF AUSTRALIA } QUEENSLAND DISTRICT REGISTRY ) QLD G17 of 1984 GENERAL DIVISION ) BETWEEN: HALJURLA PTY. LTD. Applicant AND: ALLAMANDA NOMINEES PTY. LTD. First Respondent AND: GARY JAMES CAMPBELL and LYNETTE LEE CAMPBELL Second Respondent PINCUS J. 8 April 1986 REASONS FOR JUDGMENT This an application alleging breaches of s.52 of the Trade Practices Act 1974 1n respect of a purchase of property. The application is based on allegations that misleading statements were made as to takings and the like, and a claim for damages for deceit is added. The property in question isa leasehold motel. The issue of liability presents no difficulty. The applicant agreed to buy the motel, which 1s at Nerang, near the Gold Coast, by a contract dated 14 March 1983. It complains that a number of false statements were made to induce the purchase. It is unnecessary to deal with them all, for there can be no doubt that one which was made was that the gross receipts of the motel were $114,000 in the twelve month period ending on 14 Eg TS March 1983. That representation was later incorporated in the contract. Although there is some authority that under the general law such a representation merges in the contract (Pennsylvania Shipping Co. v. Compaqnie Nationale de Naviqation (1936) 2 All E.R. 1167), that doctrine does not appear to have been accepted by the High Court in Alati v. Kruger (1955) 94 C.L.R. 216. There, also, a representation as to takings was incorporated in the contract, yet the Court said at p.222, speaking of the choice of courses open to the purchaser, that he might sue for damages for breach of warranty, or might sue for damages for fraud. Apart from that, it does not appear possible to hold that the applicant is deprived of what would otherwise have been a statutory right to recover damages for a breach of s.52 on the ground that the statement complained of was incorporated in the contract. The assertion that the takings were $114,000 in the year un question was false. That may safely be deduced from at least three pieces of evidence. Firstly, Mr. R.E. Sponder who, with his wife, ran the motel in the year preceding that covered by the warranty, received takings at a rate equivalent to $63,323 for a full year. Secondly, the applicant took nearly the same amount from March 1983 to March 1984. It seems quite unlikely that, for no particular reason, the takings should have been about 80% higher in the intervening year. Both Mr. Sponder and Mr. Venardos, who with his wife managed the applicant's business, appeared to me likely to have run the motel quite well. Thirdly, by letter dated 3 February, 1983 from a firm of accountants engaged by the first respondent, its solicitors were told that the takings in the last six months of 1982 were $34,680. (That letter was not, of course, shown to the applicant at the time of the purchase, but was produced after discovery). Again, there is reasonable agreement with the rate at which the preceding and succeeding occupiers earned, and it is impossible to reconcile that six-month trading figure with the assertion that 6114,000 was taken ina full year. I am satisfied not only that the statement made on behalf of the first respondent as to the takings was false but also that it induced the purchase. I am also satisfied that the second respondents were knowingly concerned in, and party to, the contravention of s.52 of the Trade Practices Act constituted by the making of the statement in question. As I understood Mr. Rivett, who appeared for the applicant, on the assumption that ali the respondents were held liable under the Trade Practices Act, he was content to have damages assessed under s.82 of that Act rather than on the basis of a breach of contract. It is therefore unnecessary to deal with the question whether the applicant might, if it chose, have insisted upon damages for breach of contract rather than under the Act. My views as to the mode of assessment in this sort of case are set out in some detail in the reasons in Neilsen v. Hempston Holdings Pty. Ltd., judgment in which is to be delivered were y on the same day as the judgment in this case. I will not set out again all the general considerations discussed in the Neilsen case, but will express my reasons as to damages here in a more summary way. The task of assessing damages was made rather harder by the circumstance that counsel for the respondent, having no further instructions, withdrew from the hearing on the second day, as did his solicitor. There are three elements in the claim, firstly a loss on sale, secondly lost interest and the like and thirdly miscellaneous losses. 1. Loss on Sale In accordance with the reasons of Mason, Wilson and Dawson JJ. in Gates v. The City Mutual Life Assurance Soclety Limited (unreported 20 February, 1986) "in most, 1f not ail" such cases as this, the measure of damages which is appropriate is that used in tort. The question is "how much worse off the plaintiff 1s as a result of entering into the transaction which the representation induced him to enter than he would have been had the transaction not taken place". Ordinarily, the primacy measure is the difference between price and value and I think I should adopt that measure here. According to the evidence of the valuer who was called, Mr. Ian Brosnan, the value at the date of purchase was $30,000 and I adopt that figure, supported as it is by the subsequent transaction under which the leasehold interest was surrendered by the applicant at a price of $25,000; the amount under this heading, i.e. the primary loss, is therefore =f: tees see am sonny mene ee % Nee yay $50,000, being the difference between price and value. I have decided to use the value at the date of acquisition from the first respondent rather than the surrender price. That has been done for consistency, as the method of assessment of additional losses used fixes the loss at the date of settlement of the transaction complained of. 2. Additional Losses During the applicant's occupancy of the motel, it incurred expense for interest on moneys borrowed to purchase the motel, incurred trading losses and also had a loss in that funds invested in the purchase of the motel were not earning the interest which would otherwise have been derived from them. Although in the end I have decided simply to atard interest under s.72 of the Common Law Practice Act (Queensland}, it is necessary, by way of explanation for taking that course, to go into some detail as to the way in which the claims were advanced by the applicant. Firstly, it was said that the applicant is entitled to interest and other expenditure on money borrowed in the sum of $11,528.77. The evidence was that to acquire the business the applicant negotiated borrowings of "some $40,000", part of which was repaid when, as mentioned above, the lease was surrendered; that occurred on 4 May 1984. Iwas told that part of the loan was then repaid but a balance of $20,000 remained owing. Later, another business was bought and the loan was refinanced but a ores es peer Pra vege liability of $22,000 remained. There are, then, two components in this interest claim, of about equal size; one is the interest up to 10 May 1984 and the other the interest on the $22,000 advance which emerged from the refinancing; that is calculated, in the claim, up to the date of hearing. There are obvious difficulties in allowing this claim. It seems to be admitted that from 10 May 1984 on, the interest was in truth paid on a loan made to purchase another business, but presumably the contention is that the necessity to borrow that money was brought about, at least indirectly, by the purchase of the motel. The second element is a trading loss claimed, $22,926. Three elements of the claimed loss call for comment. One 1s a sum of $1,930 interest; I do not know to what it relates. It does not seem logical to allow an additional claim for interest under this head, as well as the interest mentioned above and below. Secondly, a sum of $17,000 is included, described as director's salaries. It has to be admitted that Mr. Venardos, who seems to be an enterprising man, would probably have spent at least part of the period during which he occupied the motel (about 14 months) in some other occupation, but for the purchase complained of. However, what he would have done and what, if anything, he would have earned in that other occupation seem to me entirely speculative. Thirdly, sums totalling $7,206 - over $100 per week - are claimed in respect of motor vehicle expenses. It is not possible for me to determine how much of those expenses are properly attributable to running the motel, but on the sai er ee Nr AM mee am So ovgrres Bry ve my ' rae . a me Eo, 2 wr ye pe gee ree pom Jef evidence of Mr. Venardos there was little necessity to use the vehicle in the business. In considering the claims just mentioned, I have derived assistance not only from Mr. Calabro, an accountant, but also from the valuer, Mr. Brosnan, who made some useful comments on the accounts. The third substantial element of additional losses claimed is "deemed loss of income on funds invested", $15,714.18. The rates of interest claimed are quite modest (as low as 9.5%) but the claim runs right through from settlement date to the date of hearing on a sum of $47,530.88. If one adds to that the sum said to have been borrowed ($20,000) the total on which interest is claimed comes to significantly more than the primary loss of $50,000. That 1s not in itself a fatal objection to allowing the claim, but 1t seems clear that nearly two years ago the applicant entered into some other venture altogether, the results of which have not been analysed, so that it would be rather artificial to allow notional interest for the period up to trial on a sum of capital which was, infact, relevantly invested for about 14 months. The difficulties and uncertainties attending compensating the applicant in accordance with the method just described seem to me such as to make it entirely impractical. Further, in my view, a reasonably fair outcome may be arrived at by awarding interest under the statute. That takes a broad axe to the problem, equating the applicant''s position to that it = wa et owe np eee would have had if it had got the amount of the primary loss at settlement. That is what I propose to do. In fixing an interest rate, viz 15%, I have not ignored what seems to me to be the justice of the case, as well as taking into account the evidence as to interest rates payable from time to time during the relevant period. Although Mrs. Venardos, who works with her husband, was not called, I had the opportunity to form an opinion of Mr. Venardos and it was that he is a capable and enterprising person. I think they suffered a considerable loss of money and time which they would not have incurred but for the breach by the respondent of the provisions of the Trade Practices Act. It should be added that interest is allowed under the State Act, rather than under the similar provisions in s.51iA of s the Federal Court Act, because the latter applies only to causes of action arising after 22 November 1984. 3. Miscellaneous Losses The only other items of damage are a loss on sale of fixed assets and certain legal expenses. These total $4,913.70 and in the particular circumstances seem to me allowable. A slight complication is introduced by the circumstance that the whole of that loss was not incurred as at the date of settlement. The legal expenses were met in 1984. | masa Summary of Damages Primary damages - difference between price and value $50,000 Legal expenses and loss on sale of fixed assets $s 4,913 Interest at 15% on $50,000 from 28 March 1983 to $22,726 8 April 1986 Interest at 15% on $4,913 from 8 May 1984 to 8 April $ 1,412 $79,051 There will be judgment for the applicant for $79,000 plus costs. 1 cer.ty thar this andthe & preceding Paes are a true copy of rhe reasons for Judgment herein of His Honsur Mr Justice Pincus pt rye Ayo c cm Aye Associate Dated 7-4-se eal wea Saanacemiemaediiometaes . ae iH er x. a a peep re - haat ve on t oar tr re per ee ao so Vane, 4 , wee wat a wey at os tee * os :