- _ ~ CATCHWORDS Trade Practices - misleading and deceptive conduct - sale of business ~ claim by guarantor - whether able to prove loss by giving guarantee - whether loss separate and distinct from that suffered by contracting party -~ representations not misleading - reliance on own investigations - representations in form of agreements not included in written contract. Trade Practices Act 1974 ss.52, 82, 87 Gould v. Vaggelas (1984) 56 A.L.R. 31 Bill Acceptance Corporation Ltd. v. GWA Ltd. (1983) 50 A.L.R. 242. GEORGE TRINGAS and STAVROULA TRINGAS Applicants and ANSETT TRANSPORT INDUSTRIES (OPERATIONS) PTY. LTD. and ANSETT TRANSPORT INDUSTRIES LIMITED Respondents and ANSETT TRANSPORT INDUSTRIES (OPERATIONS) PTY. LTD. Cross~Applicant and GEORGE TRINGAS and STAVROULA TRINGAS Cross-Respondents V. No. G 99 of 1982 NORTHROP J. 8 AUGUST 1986 MELBOURNE * Not considered appropriate for further distribution. - , LiaetTen Di STRiRUT ION ware ge ne ya pepe w IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V. No. G 99 of 1982 wee eww GENERAL DIVISION GEORGE TRINGAS and STAVROULA TRINGAS Applicants and ANSETT TRANSPORT INDUSTRIES (OPERATIONS) PTY. LTD. and ANSETT TRANSPORT INDUSTRIES LIMITED Respondents and ANSETT TRANSPORT INDUSTRIES (QPERATIONS) PTY. LTD. Cross-Applicant and GEORGE TRINGAS and STAVROULA TRINGAS Cross—-Respondents COURT: NORTHROP J. DATE: 8 AUGUST 1986 PLACE: MELBOURNE REASONS FOR JUDGMENT A number of unusual features affect these proceedings and it will be helpful to set out in broad outline the background facts. At all material times Ansett Transport Industries (Operations) Pty. Ltd. ("Ansett Operations") was a corporation under the Trade Practices Act 1974 ("the Act"). Among other activities Ansett Operations conducted the business of providing road passenger services under the business mame of Ansett Pioneer. Those services included tourist coach travel packages, tours and express services. In addition to providing those services, Ansett Operations carried on the business of travel agents from retail outlets in the capital cities of Australia. Among those were retail outlets situate at 147 King Street, Sydney, 59 Swanston Street, Melbourne and 37 St. Georges Terrace, Perth. At each of these retail outlets Ansett Operations carried on travel agency businesses from which they sold to members of the public travel services both international and domestic including the coach services provided under the name Ansett Pioneer. In conducting those travel agency businesses, Ansett Operations were in competition with other travel agency businesses, some of which also sold to members of the public coach services provided under the name Ansett Pioneer. By a deed made on 20 November 1981, Ansett Operations sold to Magpie Wild Pty. Ltd. the three businesses then being carried on by it at Sydney, Melbourne and Perth respectively. Magpie Wild Pty. Ltd. had been incorporated on 22 June 1981. On 4 December 1981, its name was changed to Coles Travel Pty. Ltd. On 17 December 1981, its name was changed to Coles Travel Services Pty. Ltd. On 28 May 1982, its name was changed to Newtons Travel Services Pty. Ltd. Hereinafter, this company will be called "Newtons". At all material times, the applicants, Mr. and Mrs. Tringas, who are husband and wife, were the directors of and controlled Newtons. aor ~ < 1s Under the deed, Newtons took possession of the businesses on 20 November 1981. Newtons was to pay $330,000 for the goodwill of the businesses together with the sum of $25,420 being the value of the fixtures and fittings. Pursuant to the terms of the deed, on 20 November 1981, Newtons paid $135,420 to Ansett Operations. The balance of the goodwill, namely $220,000 was to be paid later. Under the deed, Mr. and Mrs. Tringas jointly and severally unconditionally guaranteed unto Ansett Operations the due and punctual performance by Newtons of all its obligations contained in the deed. Newtons conducted the three businesses until July 1982. By letter dated 12 July 1982, the then solicitors for Newtons wrote to Ansett Operations alleging that Newtons had been induced to enter into the deed by representations made by officers of Ansett Operations which representations were false and misleading and that accordingly, Newtons rescinded the deed. By the letter, Newtons demanded repayment of the moneys paid by it and sought damages to compensate it for the losses suffered by the misrepresentations. The letter stated that Newtons would continue to operate the businesses for a period of ten days to enable Ansett Operations to retake possession of the premises. Ansett Operations did not take possession of the businesses which then closed down. a On 21 July 1982, an application was issued in the Federal Court in which Newtons and Mr. and Mrs. Tringas were named as applicants and Ansett Operations and Ansett Transport Industries Limited were named as respondents. By the application, the then applicants sought a declaration that the respondents, in trade or commerce, had engaged in conduct that was misleading or deceptive or was likely to mislead or deceive in contravention of s.52 of the Act, damages pursuant to 5.82 of the Act, orders declaring the deed including the guarantee void and to have been void ab initio and an order directing the refund of the sum of $135,420 to Newtons. Later in the year 1982, Ansett Operations commenced proceedings against Newtons in the Supreme Court of Victoria claiming moneys due under the deed. On 30 March 1983, the Supreme Court granted leave to Ansett Operations to enter final judgment against Newtons in the sum of $406,042.90, but granted leave to Newtons to defend the proceedings for the balance of the claim by Ansett Operations. On 18 April 1983, Ansett Operations entered judgment against Newtons in the sum of $406,042.90. No part of that sum has been paid. On 30 June 1983, the Supreme Court of Victoria, in separate proceedings, ordered that Newtons be wound up pursuant to the provisions of the Companies Code (Vic.). re Seer oe v —- — er Also in the year 1982, Ansett Operations commenced proceedings against Mr. and Mrs. Tringas in the Supreme Court of the Australian Capital Territory claiming the sum of $585,639.37 being the amount alleged to be owing under the guarantee contained in the deed. In the Federal Court proceedings, and following orders made directing Newtons to give security of the costs of Ansett Operations, the Court, on 17 February 1984, ordered by consent that the proceedings in the Federal Court, insofar as they were brought by Newtons, be dismissed with costs. Thereafter, the applicants in these proceedings have been Mr. and Mrs. Tringas, although Ansett Transport Industries Limited has remained a respondent. On 26 April 1984, the Court, by consent of the parties, ordered that until the hearing and determination of the application by Mr. and Mrs. Tringas or further order, Ansett Operations refrain from proceeding further in the existing proceedings in the Supreme Court of the Australian Capital Territory and gave directions that Mr. and Mrs. Tringas deliver an amended application and amended statement of claim, that Ansett Operations deliver a defence to that amended statement of claim and any cross-claim against Mr. and Mrs. Tringas and consequential directions. These directions were complied with and the cross-claim made by Ansett Operations was, in substance, the same claim as that pending in the Supreme Court of the Australian Capital Territory. ore SUNT SD arene eo, a ee er er -- ewer ene oe 5 fai nis . t Lt ee eee Pa Sar Thus when the matter came on for hearing, Mr. and Mrs. Tringas were claiming, in substance, damages against Ansett Operations under s.82 of the Act and an order' under s.87 of the Act declaring the guarantee contained in the deed to be void and Ansett Operations was claiming to enforce the guarantee against Mr. and Mrs. Tringas. At the close of the case for the applicants, which extended over ten days, the Court permitted counsel to make a submission that there was no case to answer reserving the question of whether they should be put to their election to call evidence or not. After full and helpful submissions by counsel for the applicants and for the respondents, which extended over four days, the Court announced that it would not put the respondents to their election to call evidence or not and that the Court had formed the view that on the facts and the law, the respondents had no case to answer and that the application should be dismissed. The Court announced ailiso that it would reserve its reasons for judgment and would extend the time in which the applicants could appeal from the judgment until twenty-one days after the reasons for judgment were published. The Court then proceeded to hear the cross-claim and gave judgment for Ansett Operations against Mr. and Mrs. Tringas in the sum of $974,800.66. The Court stayed that judgment until twenty-one days after publication of its reasons for judgment on the application and extended the time in which the applicants could appeal from the judgment on the cross-claim until the same time. The applicants were ordered to pay the costs of Ansett Operations Arte oy jae nw) cae aaane be Sg ae cree on troy yee ETT roay A YM re Beta fy ent ae ' tee fas and Ansett Transport Industries Limited of the application and the cross-claim. This outline has been given to assist in the understanding of the evidence before the Court. Toa great extent, the presentation of the case for the applicants was made confusing by the fact that the case appeared to be the applicant and was seeking presented as if Newtons was rescission of the deed and damages although there was no evidence led to establish what was the real value of the clear from what was said in Gould v. businesses. It is Vaggelas (1984) 56 A.L.R. 31 that Mr. and Mrs. Tringas cannot recover damages merely because Newtons has suffered damage which are merely a reflection of and cannot recover damages the loss suffered by Newtons. Nevertheless, they may have a remedy for what they have suffered and that remedy is separate and distinct from the loss suffered hy Newtons; see See also Wilson J. at pp.53-54 and Gibbs C.J. at pp.33-34. Brennan J. at pp.59-61. The two main witnesses called on behalf of the applicants were Mr. Tringas and Mr. Dennis Pappas. Each was of Greek origin and had some difficulty with the English language. Each gave lengthy evidence in chief and each was cross-examined vigorously and at tIlength. Fach was an unsatisfactory witness, being evasive in answering questions and giving many unresponsive answers which suggested that the learnt by heart to be given at every answers had been opportunity. This matter has been decided on a no-case basis —— - ew Pn an VAT ea eee Wore - Pe ey Sac haepans Dee bos WS Sy mat TROT ry ene meg and for that purpose, I must accept the evidence of those two witnesses. Nevertheless, where that evidence conflicts with contemporaneous documentation, I have accepted the written word appearing in those documents. Mrs. Tringas gave evidence through an interpreter. She had no direct dealings with any officers of Ansett Operations. She relied upon what her husband told her. By their statement of claim, the applicants referred to the three retail outlets at Sydney, Melbourne and Perth and alleged that Ansett Operations at these outlets:- "sold by retail to the public, inter alia - (a) various tourist coach travel packages, tours, charters, accommodation and other services marketed by the Ansett~-Pioneer Division of the firstnamed respondent under the Logo 'Ansett-Pioneer' (hereinafter referred to as 'the Ansett-Pioneer products'); (b) domestic and international travel tickets; (c) Pioneer Touring Club travel tickets; (d) group and charter travel; (e) accommodation associated with travel." The respondents admit that allegation. ern) sragpr anne aye re +, veces xe apie — cn or, . ke we ae adaiee "te The applicants alleged that between about August 1981 and November 1981 (note those dates), the respondents entered into negotiations with Newtons and the applicants for the purpose of selling those businesses to Newtons and procuring the applicants to guarantee the performance by Newtons under its agreement to purchase the businesses. The respondents admit those allegations. The applicants alleged that between about August 1981 and November 1981, the respondents represented and made statements to the applicants. Twenty-four representations and statements are then set out in paragraph form. These can be summarised. Two paragraphs, 9(a) and 9(b), were to the effect that the overall retail sales originating from the businesses amounted to $6,852,543 per annum. It is accepted by the parties that that sum relates to the financial year ending 30 June 1981 and was infact the actual amount involved. Two paragraphs, 9(c) and 9(d), were to the effect that the gross retail sales of Ansett-Pioneer products originating from the businesses amounted to $2,784,232 per annum. It is accepted by the parties that that sum relates to the financial year ending 30 June 1981 and was in fact the actual amount involved. One paragraph, 9(e), was to the effect that the gross overall income derived from the sales referred to in 9(a) and 9(b), amounted to $575,613 per annum. It is accepted by the parties that that sum relates to the financial year ending 30 June 1981, that it refers to the gross commission received on sales and was in fact the actual amount involved. One paragraph, 9(f), was to the effect that weet ee eee +0 agen ee ee "at a - 10 - the gross income derived from the sales referred to in 9(c) and 9(d) amounted to $278,423 per annum. It is accepted by the parties that that sum relates to the financial year ending 30 June 1981, that it refers to the gross commission received on sales and was in fact the actual amount involved. Tt should be noted that the commission was 10% of the total sales of the Ansett-Pioneer products. Six paragraphs, S3(aa), 9(bb), 9(cc), 9(dd), Jee), and 9(ff), are in similar form and alleged representations to the effect that there was no reason why the amounts mentioned in paragraphs 9(a), 9(b), S(c), 9(d), 9(e) and 9(f) respectively, would not continue at the rate mentioned in each of those six last mentioned paragraphs. Each of those allegations is in dispute. One paragraph, 9(g)}, was to the effect that the total net income or profit derived from the businesses for the financial year ending 30 June 1981 amounted to $85,673. The parties accept that figure but little relevance can be placed upon it since the items of expense taken into account in deriving net income can vary from proprietor to proprietor. The same paragraph alleged that the weekly average sales for the Sydney, Melbourne and Perth outlets were $21,067, $62,810 and $40,173 respectively. It is accepted by the parties that those sums relate to the financial year ending 30 June 1981 and is the break up of the sum of $6,852,543 referred to in paragraphs 9{a) and 9(b). Paragraph 9(g) then alleges that in the period June 1981 to November 1981, the businesses had continued to trade in the Manner and at the level indicated by those figures. That et nee - 11l- last allegation is in dispute. Paragraphs 9(h) and 9(i) alleged that the businesses were trading profitably and that in the four months from August to November 1981, they were trading profitably. Paragraphs 9(j) and 9(k) alleged that the net income or profit was running at a rate of about $86,000 'to $90,000 per annum as it was also for the four months from August to November 1981 and there was no reason why that net income or profit should not continue to be made. Paragraph $9(1) alleged that in the four months from August to November 1981, the gross sales figures for the businesses and for the Ansett-Pioneer figures respectively each gave a true and accurate indication of the goodwill of the businesses. Paragraph 9(m) alleged that the respondents desired to sell the businesses because they wanted to withdraw from the business of retailing Ansett-Pioneer products and the business of retail travel agencies. The remaining parts of paragraph 9 of the statement of claim alleged statements of opinion or statements as to the future conduct by the respondents. Paragraph 9({n) alleged that upon the sale of the businesses, the respondents would cease operating retail travel agencies at which Ansett-Pioneer products were sold and would not open any such retail outlets or other retail travel agencies. Paragraph 9(o) alleged that upon the sale of the businesses, the respondents would continue to refer persons who made enquiries to them about the possible purchase of 1s - te ee -12- Ansett-Pioneer products to each of the three businesses respectively, as had been done previously. Paragraph 3(p) alleged that upon the sale of the businesses, the respondents would use their best endeavours to ensure that the gross sales of the said businesses were maintained and increased, While paragraph 9(q) alleged that upon the sale, the anything which would affect respondents would not do businesses. Paragraph 9{r} adversely the sales from the alleged that upon the sale of the businesses, the respondents would, for twelve months, advertise Ansett-Pioneer in the press and otherwise publicise the services provided by Ansett Operations under the name of Ansett-Pioneer. By paragraph 10 of the statement of claim, the applicants alleged that they relied upon the representations and statements referred to in paragraph 9 and as a result, Newtons purchased the businesses and the applicants gave By paragraph 11, the applicants allege their guarantees. allegations was misleading or deceptive or that each of the likely to mislead or deceive. Particulars were given of the allegations and were based on each of the twenty-four separate representations alleged in paragraph 9. Insofar as the allegations contained in paragraph 9 related to statements of opinion or statements as to the future conduct by the respondents, the particulars to paragraph 10 alleged that at the time the representations were made, the respondents did not have the opinion expressed and did not intend to carry out the future conduct as stated. a iH - 13- By paragraph 12 of the statement of claim, the applicants alleged that they were mislead or deceived by the representations referred to in paragraph 9 and as a result, Newtons entered into the deed dated 20 November 1981 to purchase the businesses upon the terms and conditions contained in the deed, paid the sum of $135,420 in accordance with the terms of the deed and the applicants gave the guarantee contained in clause 15 of the deed. By paragraph 13 of the statement of claim, the applicants alleged the yespondents engaged in conduct in contravention of s.52 of the Act. By paragraph 14 of the statement of claim, the applicants alleged that as a result, the applicants suffered loss and damage "for which the respondents are liable to them pursuant to section 82 and 487(d) of the Trade Practices Act 1974". The reference to s.87(d) of the Act must be a reference to s.87(2)(d) of the Act. In particulars given as to the loss claimed, the applicants alleged that the applicants gave a guarantee to Cornelius Properties Pty. Ltd. with respect to the performance of obligations by Newtons under a lease from that company for the premises at King Street, Sydney, from which the Sydney business was being conducted, that Newtons defaulted in the payment of rent under that lease and as a result, the applicants paid to that company the amount of rent owing by Newtons, $32,000 and costs $1,685.27 amounting in all to $33,685.27. By paragraph 15 of the statement of claim, the applicants alleged that Newtons validly rescinded the deed, the guarantee contained in clause 15 of the deed is not ap ee - 14 - enforceable and that the applicants are entitled to an order declaring the guarantee void. The last allegation is based presumably upon s.87(2)(a) of the Act, although no specific reference is made to that paragraph. It should be noted that the statement of claim is in a form similar to that which applied when Newtons was an applicant in the proceedings. The form of the statement of claim, by making all the specific references to Newtons, was instrumental in leading to the confusion which arose at the hearing resulting in much of the evidence being directed to an issue of whether Newtons was entitled to relief under the provisions of the Act. It should be noted further, that although the High Court gave judgment in Gould v. Vaggelas, above, in November 1984, the parties did not give consideration to its application to the present case until at least the hearing of the action. Certainly no reference was made to that case in February 1986 when the Court, as presently constituted, refused leave to the applicants to amend their pleadings in conformity to a principle that the applicants could set off against the respondents cross-claim, any amount they were liable to the respondents by reason of their guarantee; see reasons for judgment given on 12 February 1986, unreported. No reference was made to Gould v. Vaqgelas in the course of submissions on that motion or in the reasons for judgment given immediately after the conclusion of those submissions. A copy of those reasons is annexed to these reasons for judgment. rye ee oe stay fay Seote te pwee o- we en ete ey - 15 - Mr. Tringas and Mr. Pappas are each experienced businessmen, although before 1981, neither had had business experience in the travel industry. Early in the year 1981, Mr. Tringas invested $200,000 in Parthenon Travel Services Pty. Ltd. ("Parthenon"), a company which carried on extensive businesses in the travel industry throughout Australia. As a yesult of the investment of that money, Mr. Tringas was supposed to become a director of Parthenon with a 25% shareholding upon payment of a further $500,000, but apparently this did not eventuate although the money remained invested in Parthenon until sometime in the year 1982. After the investment of the $200,000, Mr. Tringas became involved in the management of Parthenon, but mainly in the real estate and import/export aspects of the Parthenon business. In that aspect of his management, he was helped by Mr. Pappas. Mr. Tringas had known Mr. Pappas previously as a friend only. Mr. Pappas had commenced working for Parthenon in September 1980 as a public relations officer. As a result of discussions held in March 1981 between Mr. Pappas and Mr. L.S. Keith, the manager of the Ansett-Pioneer outlet in Swanston Street, Melbourne, Mr. Pappas discovered that Ansett Operations would sell the travel agency business being conducted by Ansett Operations at Swanston Street and that Parthenon might be interested in purchasing that business. During that month, Mr. Keith told Mr. Pappas that the Swanston Street business was a profitable outlet selling international and domestic packages. Mr. Pappas inspected financial records kept by Mr. Keith with = - 16 - respect to that outlet for the year to 30 June 1980 and to the end of December 1980. He inspected also the weekly takings sheets up to March 1981. Mr. Pappas believed that the outlet was making a net profit of about $10,000 a year and that the turnover was about $2,000,000 domestic and about $1,500,00 international. Mr. Pappas was told that the asking price was about $110,000 to $150,000. As a result of those discussions with Mr. Keith, Mr. Pappas prepared a report for his "boss" at Parthenon, a Mr. Alexandratos, the managing director of Parthenon. Mr. Alexandratos told Mr. Pappas to make an offer which he did, namely $60,000. It is interesting to note that this offer was six times the estimated net profit of the business. Mr. Keith told Mr. Pappas that he had no authority and that Mr. Pappas should speak toa manager with Ansett Operations. Nothing further happened until about July, but in the meantime, Mr. Tringas told Mr. Pappas that he was interested in getting into the travel industry. In July 1981, Mr. Keith rang Mr. Pappas and told him the Swanston Street business was still for sale and gave him the name of a person to contact to discuss a possible purchase. After the phone calls, Mr Pappas was directed to speak to a Mr. R. Thornton. A conference was arranged to be held at Mr. Thornton's office at 501 Swanston Street, the head office of the respondents. That conference was held on 29 July and was attended by Mr. Tringas, Mr. Pappas, a Mr. Kalliakoudis, a director of Parthenon, Mr. Thornton on behalf By ay . nT re ee wet ee ferent ye eee a an pe i ct eer oer wT ae ren > Le woe or + te oe - 17 - of Ansett Operations and possibly other officers of the respondents. At the conference, Mr. Thornton said Ansett Operations did not want to conduct retail travel outlets under the name Ansett-Pioneer and that Ansett Operations wanted to concentrate on providing the wholesale product of tours and other coach services. He said they had outlets in Perth, Sydney, Canberra, Adelaide, Townsville and Cairns, as well as in Melbourne and were wanting to sell them. He said Parthenon was big enough to buy other outlets as well as Melbourne. Mr. Thornton said that the outlets were conducted under the name "Ansett-Pioneer" and were typical travel agency businesses. As Mr. Pappas said in evidence, the Ansett-Pioneer travel agencies were the same as any other travel agency, "they have computers, all the accreditations, P&0QO, airline tickets, domestic, international, Greyhound overseas, buses, packages, accomodation, just any other product which every other travel agency 1s dealing with." Mr. Thornton told the conference that the Ansett-Pioneer outlets concentrated on selling their own products, those produced by Ansett Operations, both through Ansett-Pioneer and Ansett Airlines, which were sold through other agencies as well. A general discussion took place as to the size of Parthenon, the number of outlets it had, the proportion of takings by Ansett-Pioneer outlets between international and domestic products, how Parthenon and Ansett Operations would benefit if Parthenon concentrated on the Ansett-Pioneer products, Parthenon by its commission on sales and Ansett Operations by extra use of its services. Figures relating to turnover were mentioned, including Ansett-Pioneer products sep oe ae . - 18 - which essentially were the tours and coach services provided by Ansett Operations but did not include Ansett Airlines, as well as international figures. Te is not necessary to mention those figures since subsequently they were reduced to writing and are not in dispute. Mr. Tringas said that Mr. Thornton said that the gross takings of the business was about 8.4% of turnover. The commission on sales varied, but on Ansett-Pioneer products was 10%. After the conference with Mr. Thornton, the officers of Parthenon discussed the proposal and figures supplied, decided that the possible purchase of the three outlets looked good and decided to recommend to the other directors that Parthenon should purchase the three outlets in Sydney, Melbourne and Perth. Thereafter, Mr. Pappas inspected the Perth outlet and Mr. Pappas and Mr. Tringas inspected the Sydney office. Mr. Pappas prepared a report dated 8 August 1981 relating to the three businesses. The report set out the current position with respect to each of them and projected revenue and profits. The projected figures showed great increases in turnover, particularly in the international field. The projected figures were based on increasing the sales of international travel. It was a very optimistic report. For instance, it describes the King Street Sydney site as being in a "Rolls Royce" position. It describes the Swanston Street Melbourne site as being "Ideal for Retail shop for Expertours", apparently part of the Parthenon business. It describes the St. Georges Terrace Perth site as "The office is magnificent and it is capable of Spry tT ee > T coe coe OT ~ 4 4°: - 19 - increasing the International Business". A further conference was held on 12 August at the head office of the respondents, attended by Mr. Thornton, Mr. Tringas, Mr. Pappas and Mr. Kalliakoudis as well as other officers of the respondents including a Mr. Madden. At this conference, Mr. Thornton produced a draft of a letter on the letterhead of Ansett Transport Industries Limited. It is dated 11 August. It is addressed to Mr. Pappas and formed the basis for the discussions on the proposed sale. It was not signed. The contents of the letter are of vital importance and are set out in full:- "Dear Dennis, Attached is a rough proposal and a starting point for our discussions relative to your Company taking over our three retail operations (in Sydney, Melbourne and Perth). The basis of the plan revolves around your company owned and agency travel outlets, relative to the future sale of Ansett Pioneer products. It is our understanding that your are able to influence the selling policy of 129 Travel Agents in Victoria, 75 in N.S.W., 6 in the A.C.T. and 32 in Western Australia. Our enquiries and sales results show the following Ansett Pioneer Revenue results of these Parthenon agents during the financial year 1980/81: Parthenon Traded Retail Mathematical Outlets With Revenue Projection Available Ansett Result of Revenue Vic. 129 13 $ 92,000 912,923 N.S.W. 75 10 § 39,961 299,700 A.C.T. 6 4 $ 53,635 80,452 W.A. 32 7 $ 26,000 118,857 TOTAL 242 34 $211,596 1,411,932. _ eee oe -f peepernpees oe pA + i ee . poo veces PA py ve ape et aa ae mayer See - 20 - Further we know the retail sales of Ansett Pioneer products through the three retail outlets in question produce as follows: Melbourne $ 847,619 Sydney $ 668,104 Perth $1,268,509 $2,784,232. Dennis, you will appreciate the earnings potential if you combine the commission earnings of Ansett Pioneer sales at 10%, $278,423 plus the latent potential of your 242 other outlets of conservatively $141,193 to provide a gross income total of $419,616. Combined with your other sales activities this proposition looks promising to both Parthenon and Ansett Pioneer. Yours sincerely, R._ THORNTON Att. A. PROPOSED PLAN OF ACQUISITION OF THREE ANSETT PIONEER RETAIL BUSINESSES LOCATED SYDNEY, MELBOURNE AND PERTH BY PARTHENON TRAVEL Ansett Pioneer agree to: 1. Assign where possible the existing leases on the properties. (Annexure 'A'). 2. Release the Ansett Pioneer employees to Parthenon along with their accrued holiday, long service and other entitlements. 3. Allow Parthenon Travel to sell Ansett Pioneer products at usual commission rates. 4. Rent to Parthenon the Visual Display Units in association with *Ansamatic' computer facilities on a year to year basis. - 21- Parthenon Travel agree to: 1. Assume control of the businesses at the locations referred to and promote travel sales in a manner which is of the high standard and image of Ansett Pioneer. Assume responsibility of the leases of the properties. Pay the employees a remuneration equal to their current basis and review the salary levels from time to time, in accordance with award conditions as a minimum requirement. Provide a superannuation scheme to those eligible employees similar in context to the current Ansett Transport Industries package. Abide by the terms of the lease providing insurance, public risk and other requirements as stated. To promote Ansett products in the first instance, only selling competitive services as a last resort. There is to be no direct advertising of competitive services. Ensure that operators of the V.D.U. Ansamatic facilities are fully trained and approved by Ansett Pioneer (A fee of $800 per person is currently charged to train employees on this system). To purchase all fixtures and fittings in the locations at book value. (Annexure 'C'). To operate the business as Parthenon Travel. Ansett Pioneer and Ansett products being part of the range carried by Parthenon Travel. METHOD OF ACQUISITION OF THE GOODWILL The price of the goodwill associated with the three retail outlets is $330,000 cash. Through its Parthenon owned retail outlets and associates, encourage and promote Ansett Pioneer product sales. - 22 - Providing that Parthenon Travel (including 3 Ansett Pioneer shops) and its outlets produce the following annual sales results of Ansett Pioneer products, then the price in paragraph 1. becomes void: Year 1 : $4.2 million Year 2 : $4.8 million Year 3 : $5.3 million. Commission at the rate of 10% would be paid on these revenue achievements, to Parthenon. Shortfall of sales contingency. For reasons unexplained, should Parthenon and its agents retail sales of Ansett Pioneer products not achieve the annual sales outlined in Clause B. Paragraph 3. then the following table would apply, requiring cash payment in full of the balance due at the end of each year: Year 1 : $415,000 less 10% of Ansett Pioneer retail sales thru Parthenon outlets for that financial year (for example see Annexure 'B'). Year 2 : $477,000 less 10% of Ansett Pioneer retail sales thru Parthenon outlets for that financial year. Year 3 : $548,000 less 10% of Ansett Pioneer retail sales thru Parthenon outlets for that financial year. ANNEXURE A. THE PROPERTIES ARE KNOWN AS: a) b) c) 59 Swanston Street, Melbourne 147 King Street, Sydney 37 St. Georges Terrace, Perth. TT - 23 - ANNEXURE B. FOR EXAMPLE: Retail sales achieved were less than $4.2 million target. Actual by Parthenon Group $ 211,596 Sales by 3 Ansett Pioneer Stores § 2,784,232 Installment Year 1 $ 415,000 Less 10% of sales achieved $ 299,583 Cash Payment due ......... ween eee 115,417". Some comments should be made about that letter. Parthenon was a large organisation but only a small number of its outlets sold Ansett-Pioneer products. If Parthenon promoted Ansett-Pioneer products through all its agencies, the potential turnover of those products was projected as $1,411,932 per annum. At 10 per cent, that would produce a gross income of $141,193 per annum. When added to the income from the three sites the subject of the negotiations, a gross income of $419,616 could be received. The increased sales of Ansett-Pioneer products would benefit Ansett Operations by increasing sales of the services provided by it. The purchase price was to be $330,000 but if sales increased as projected, no purchase price was to be paid, the benefit to Ansett-Pioneer resulting from the increased sales of its services. If sales did not increase as projected, the purchase price was to be increased. The employees in the three businesses were to become employees of Parthenon, which was to have the benefit of the "Ansamatic" computer ope meee { Slits dae ieiientan aemenatarse ada A, te ee Nan, mere wpe ~ 24 - facilities to enable it to have instant access to reservations of Ansett Pioneer products as well as Ansett Airlines reservations. Parthenon was to promote Ansett products in favour of its competitors. Ansett-Pioneer was not selling the name "Ansett-Pioneer"" as part of the goodwill of the businesses. It is not necessary to refer in detail to the evidence as to the conversations that occurred at this conference. After the conference, Parthenon remained interested in the prospective purchase. Draft agreements were prepared. Discussions took place concerning terms to be included in the agreement. Discussions took place within Parthenon concerning the desirability of having a term in the agreement relating to Ansett-Pioneer not opening new retail outlets and escape clauses in case of strikes or of Ansett-Pioneer or a purchaser from it reducing the supply of services being Ansett-Pioneer products, or the services becoming too dear or if the projected turnover was not achieved. Mr. Pappas knew of these discussions. Copies of the accounts for each of the three business for the financial year 1980/81 were supplied to the accountants of Parthenon. By this stage, Mr. Pappas knew that the Sydney office was being conducted at a loss but the turnover figures set out in the letter of 11 August 1981 were taken from those accounts. Those figures are not being disputed. - 25 - In mid September 1981, Parthenon decided not to proceed with the purchase. Mr. Tringas and Mr. Pappas each say they do not know why Parthenon so decided. Mr. Pappas said that Mr. Thornton told him that Parthenon's accountants said that the profit of the three businesses was only about $37,000, but Mr. Thornton said that figure was wrong. In any event, the purchase did not eventuate. Late in September, Mr. Tringas told Mr. Pappas he wanted to look at the possibility of buying the three businesses, even though he did not know the reason why Parthenon had not proceeded with the purchase. As a result, negotiations opened between Mr. Tringas, his solicitor, Mr. Webb, and Mr. Pappas on the one hand and Mr. Thornton and the solicitors for Ansett-Pioneer on the other. A number of meetings occurred during October and November. Mr. Thornton told Mr. Pappas another person was interested in buying the business, which was a very good one. At other meetings, discussions took place relating to the "Ansamatic"" equipment and also telephones, but it is not clear whether these were discussed before or after Parthenon decided not to proceed. The telephones were of importance since they came through the Ansett rented telephone exchange but by dialling the correct numbers they went direct to the outiet sites. These direct numbers were set out on business cards issued to employees at the sites. Customers and prospective customers were given these cards. In addition, enquiries to the central switchboard could be connected to the appropriate extension ° - at the site. The retention of this facility was of aod oe + Ty . ye re a sy a. [i aicateniae: bibeliel sienna eal De - 26 - importance. It was discussed between Mr. Tringas and Mr. Thornton. Possibly it was discussed before Parthenon ceased negotiating. The question of advertising was discussed and Mr. Thornton said Ansett-Pioneer would continue to advertise its services. Mr. Tringas knew that the Sydney business had made a loss, but overall a profit had been made from the three businesses. He had participated in the earlier negotiations involving Parthenon. He knew that Ansett—Pioneer had an IATA Licence which enabled Ansett-Pioneer to collect money for fares on international travel and subsequently to pay those fares, less commission, on receipt of accounts, to a collecting agency for payment to the provider of that service. It ais important that any travel agency conducting international travel arrangements should have such a licence. The IATA licence was with respect to the Melbourne office. Mr. Tringas was to be able to use the Ansett licence with the result that Ansett would be charged for all amounts entered on that account. Mr. Tringas was also concerned to ensure that the sales were continuing at the same level as for the year 1980/81 and would so continue into the future. Mr. Tringas said that he made up his mind to buy the businesses in October 1981. Thereafter figures were discussed further and in particular the figures for the year 1980/81. These were well known to Mr. Tringas. They were given to his accountant. During that period also, negotiations took place with respect to the terms of the contract. At this stage, reference need be made to two me nen -f - 27 - aspects of those negotiations. They continued on the basis of the draft letter dated 11 August 1981 even though Mr. Tringas did not conduct a large travel agency business Similar to that being conducted by Parthenon. The other aspect relates to the takings of the businesses after 1 duly 1981. Draft agreements, based on the Parthenon drafts, were being proposed. On 21 October 1981 Mr. Pappas wrote to Mr. Webb concerning the importance of obtaining a written guarantee from Ansett~Pioneer in relation to the sales of Ansett-Pioneer products. Ansett-Pioneer refused to give any such undertaking, but arranged for copies of the weekly and cumulative statements kept by each of the businesses showing the budget, actual and variation from budget of receipts, revenue and expenses for the period 1 July 1981 to November 1982. These accounts were given to Mr. Pappas to he delivered to Mr. Tringas' accountant. Among other items, those accounts showed the weekly and cumulative takings from sales of Ansett~-Pioneer products for that period and the inference is clear that Mr. Tringas knew of those figures. His accountant, Mr. Rockman, told him that the figures were alright and that it was alright for Mr. Tringas to proceed with the agreement. There may be doubt as to whether Mr. Rockman gave that advice before or after he received the accounts for the period July to November 19951, but on the evidence I draw the inference that the advice was given by Mr. Rockman to Mr. Tringas after Mr. Rockman had examined both sets of accounts. That inference is supported by a letter dated 12 November 1981 from the solicitors of Ansett-Pioneer to Mr. Webb, the solicitor for Mr. Tringas. oo poe ont, . ot a wee ee ta woman roe a he — ° Under cover of that letter, a further draft of the agreement was forwarded to Mr. Webb with alterations from the previous draft being identified. The letter contained the following paragraph: - "We are instructed that your client no longer requires a warranty as to sales achieved by the businesses as it has now inspected the books and records maintained by our client." That reference is to the copies of the accounts given by Ansett-Pioneer to Mr. Pappas for the period after 1 July 1981. Mr. Webb, apparently, accepted that assertion since nothing further was said or done in relation to this matter. By 17 November 1981, the terms of the agreement were acceptable and under cover of a letter of that date, Mr. Webb forwarded the original agreement to Mr. Tringas for execution. The letter stated that Mr. and Mrs. Tringas were to guarantee the contract. At all relevant times Mr. Tringas understood that guarantee. The letter contains the Pparagraph:- "The contract is in accordance with the draft which we discussed with you on the 10th inst. In our letter of the 10th inst., it sets out the terms. A copy of the letter is enclosed and is to be read with this letter." be tye eee pe ees ee = v anes et aaa elie tala da "1, - 29 - The letter of 10 November 1981 is not in evidence. The letter of 17 November contains a number of observations, including the following:- "The deed states that it constitutes the entirety of your agreement, therefore all warranties and representations do not carry any effect once the agreement is executed and exchanged." It is realised that clause and that sentence cannot exclude the remedies conferred by the Act, but in the way the present case is put, that clause and that paragraph of the letter do have some effect. It should be noted further that neither Mr. Webb nor Mr. Rockman gave evidence in these proceedings. The deed made on 20 November 1981, referred to at the beginning of these reasons, contains the terms of the agreement reached between Newtons as purchaser, Ansett-Pioneer as vendor and Mr. and Mrs. MTringas as guarantors. Under the deed, 20 November 1981 was the completion date. The recitals state that Ansett-Pioneer for sometime has "been carrying on the business of a travel agency selling Ansett Pioneer products" at the three locations. It should be noted that many other services were sold in addition to Ansett-Pioneer products. There are recitals referring to the sale, the employees at the three locations, and the leases of the three outlets. Clause 1 of the deed provides that Newtons purchases the goodwill of the three businesses for the price "calculated in accordance with - 30 - the provisions of clause 2", and the fixtures and fittings valued at $25,420.00. Under clause 2, the price for the goodwill is $330,000, the same as the price discussed in the Parthenon negotiations. The purchase price was to be paid by $110,000 on 20 November 1981, $110,000 on 20 November 1982 and $110,000 on 20 November 1983, with a provision that the last two amounts were to be reduced in accordance with the formula specified in the deed if the gross sales of Ansett-Pioneer products exceeded $2,800,000 in the year to 20 November 1982 and exceeded $3,000,000 in the year to 20 November 1983. It should be noted that this proviso is similar to that contained in the letter of 11 August 1981 but the amounts were based on the sales by Ansett-Pioneer at the three locations for the year 1980/81 only and not on the projected sales from the other Parthenon agencies. The formula was different also. Clause 2 defines Ansett-Pioneer products. Under clause 3, the henefits of the businesses vested in Newtons on 20 November 1981. There are a large number of lengthy clauses contained in the deed and it is not necessary to summarise each of them. On 20 November 1981, Newtons was to pay Ansett-Pioneer the instalment of $110,000 and the cost of the fixtures and fittings, $25,420, less an amount of some $22,000 being the existing entitlement to annual leave and long service leave of the employees being taken over by Newtons. Newtons was to take an assignment of the existing leases of the businesses. Under clause 8, Ansett-Pioneer gave a lease of its Ansamatic Visual Display Units at each of ree ors fat - 31 - the businesses at monthly rentals and undertakings were given by Newtons in relation to personnel using those Units and strict conditions were imposed on the use of the Units. Breach of those undertakings and conditions entitled Ansett-Pioneer to terminate the leases immediately. Clause 9 is set out in full:- "9. The Vendor agrees to make available to the Purchaser the use of telephone switchboard facilities in the Businesses (comprising 6 lines in Sydney, 5 lines in Melbourne and 5 lines in Perth) at a monthly rental of $100 for each line used. The Purchaser acknowledges that these telephone lines will be barred to prevent dialling outside the Businesses and the Purchaser covenants that it will not take any action to remove such barring and further that it will not use the telephone numbers of Ansett Pioneer in any of its promotional or advertising literature." Clause 10 is a long clause containing covenants given by Newtons. It covenants to "conduct the Businesses in a manner consistent with the maintenance and enhancement of the reputation of Ansett Pioneer and in accordance with the procedures and conditions prescribed for travel agents accredited to Ansett Pioneer". This accreditation is of importance since it enables the accredited agency direct access to the Ansamatic system, to receive payment of fares from the public and to pay over those fares, less commission, on receipt of statements from Ansett-Pioneer. Newtons was required at all times to "vigorously promote Ansett Pioneer products and ... refrain from selling any products or services competitive with those offered by Ansett Pioneer". Ansett-Pioneer was given the right to approve "all wm - coor vost oe es, rc Say ome oe $ - : i i" \ Ma Mere Sgn ee ae woe > i ' . aN te coe bn - 32 - advertising and display material used in the marketing and promotion of Ansett Pioneer products and that such material shall not be used without the prior approval of" Ansett-Pioneer. Failure to obtain the prior approval gave the right to Ansett-Pioneer immediately to "terminate the right of the Purchaser to sell Ansett Pioneer products and to use the 'Ansamatic' vVDU's". Under clause 10(2) Ansett-Pioneer undertakes to continue to sell Ansett-Pioneer products at commission rates not being less than ten per cent. Clause 11 provided for the termination of the deed and in any event the liability of Newtons to pay goodwill to Ansett-Pioneer shall cease if Ansett-Pioneer should cease to Carry on business under that name. Under clause 12(b) Ansett-Pioneer warranted that it would use its best endeavours to transfer IATA Licence No. 02-3-1541-2 to Newtons. In the meantime, Newtons was able to use that licence for international travel and charge the amounts to Ansett-Pioneer. The licence was not transferred to Newtons until July 1982, just before Newtons purported to rescind the agreement. Under clause 13, Ansett-Pioneer warranted that it would retain the New South Wales Travel Agents Licence then held by it. That licence was necessary to enable a person to carry on a travel agency business in New South Wales. Under clause 14(1), Newtons agreed that it would not conduct the businesses "under any name or logo which includes words or er ve ee pI Te Se ot toot - 33 - letters visually or phonetically similar to 'Ansett Pioneer'". Clause 15 contained the guarantee given by Mr. and Mrs. Tringas. Clause 17 contained the provision excluding to the extent possible by law all warranties and representations except those contained in the deed. The schedule and the appendices to the deed need not be summarised. It becomes necessary to consider the evidence in support of each of the representations alleged in paragraph 9 of the statement of claim. The representations alleged in paragraphs 9(a), (b), (c), (d), (@) and (f) were each made by Ansett-Pioneer. They are contained in the records provided by Ansett-Pioneer to Mr. Tringas as well as to Mr. Pappas. They relate to the year 1980/81. Mr. Tringas knew of them. The actual figures were not alleged to be incorrect. The representations alleged in paragraphs 9({aa), (bb), (cc), (dd), (ee) and (ff) each relate to the continuation of the sales referred to in paragraphs 9(a), (b), (c), (d), (e) and (f) yvespectively. There is no evidence of express statements being made to that effect. There is evidence that Mr. Thornton said that the businesses were profitable, would be a good buy and matters of that kind, but the evidence does not support a claim that they constitute conduct within 5.52 of the Act. Those statements are in the nature of puffing. Newtons wanted a warranty about future takings to be included in the deed. Ansett-Pioneer refused to give any such warranty. They supplied to Newtons the financial records r - 34 - setting out the takings subsequent to 1 July 1981 and up to early November 1981. These were given to the accountants for Newtons and Mr. Tringas. The evidence cannot support a finding that these representations were made. If in fact they were made, the evidence shows that they were not relied upon by Mr. and Mrs. Tringas. The examination of the actual records replaces any statement of opinion. Likewise with respect to the allegations contained in the six paragraphs (g) to (1) inclusive. They are based on the actual figures for the year 1980/81. Insofar as they are based on the period July to November 1981, the actual figures were contained in the records supplied to Newtons and Mr. Tringas. Ansett-Pioneer refused to give any warranty in this regard. Newtons and Mr. Tringas relied upon the records supplied to them. Ansett-Pioneer did desire to withdraw altogether from the business of retailing Ansett-Pioneer products and the business of retail travel agencies as alleged in paragraph 9{m). There is no evidence to show that at the time that desire was expressed to Newtons and Mr. Tringas, Ansett-Pioneer did not have that desire. Both Mr. Tringas and Mr. Pappas knew other travel agencies sold Ansett-Pioneer products. Each knew that Ansett Operations sold airline tickets through agencies conducted by Ansett Operations. Mr. Pappas knew that Ansett Operations, through Ansett Airlines, sold Ansett Pioneer products including the existing Ansett Airlines agencies in Melbourne. There was no suggestion that Woy cores ee Sree ere Lt ae - Ae et we - 35 - Ansett Operations would cease those activities. Similar conclusions are reached with respect to the allegation contained in paragraph 9(n), which, essentially, 1s the same allegation as that contained in paragraph 9(m). There is no evidence to support the allegation contained in paragraph 93(0). In September 1981, during negotiations relating to the possible purchase by Parthenon, reference was made to referral of enquiries received at the Ansett switchboard but the only matter specifically agreed to was that contained in clause 9 of the deed. The deed makes no reference to referral generally. In fact, during negotiations on the draft deed on 7 October 1981, Mr. Webb, the solicitor for Mr. Tringas, wrote to Ansett-Pioneer on this matter. The relevant part of the letter is:- "With respect to the telephone switchboard facilities it is suggested that a clause be added to the effect that the Vendor refers all enquiries with respect to Ansett Pioneer products to the Purchaser. A proposed clause is attached." The proposed clause is not in evidence. The deed does not contain a clause to that effect. There is no evidence of any statement to that effect made to Mr. Pappas or Mr. Tringas. There is no evidence to support the allegations made. The direct lines through the swithchboard to the businesses remained. - 36 - The allegation contained in paragraph 9(p) is nebulous. There is no evidence that the representation was made in the form alleged. The allegation is consistent with the basic principle behind the negotiations, namely that increased sales of Ansett-Pioneer products would result in a reduction of the purchase price, that Newtons would promote and give preference to Ansett-Pioneer products and that as a result, Ansett-Pioneer would receive the benefit of greater sales of its services. That, added to inflation increases, would be to the benefit of Newtons. Mr. Pappas understood this. In the context, these discussions could not and did not constitute conduct by Ansett Operations under s.52 of the Act. At the most, statements made on behalf of Ansett Operations were mere puffing. Likewise, there is no evidence to support the allegation contained in paragraph 9(q). In any event, any such statement would amount to mere puffing. Further, each of these allegations in reality amounts to allegations of agreements. In view of the detailed negotiations concerning the draft deeds, it is most unlikely that if agreements were reached, they were not included in the terms of the deed which was executed. Except in clear cases, and this is not one of those cases, negotiations resulting in agreements cannot amount to conduct within s.52 of the Act when the terms of the agreement are reduced to writing, signed by the parties, and the relevant alleged agreements are not included in the written agreement. This is so particularly, as in this case, when the parties have retained solicitors to prepare, discuss and amend the terms of the written agreement to ensure all agreed terms are wn - 37 - included in the agreement. The allegation alleged in paragraph 9(r) is a clear example of an alleged agreement not constituting conduct. The paragraph alleges conduct being an agreement by Ansett-Pioneer to advertise its products for a period of twelve months. Clause 10 of the deed relates to advertising by Newtons. If there had been an agreement by Ansett-Pioneer to advertise, it would be expected to be included in the deed. It is not in the deed. Further, none of the evidence supports the allegation contained in this paragraph. The allegations contained in paragraphs 9(m) to (r) inclusive relate to representations as to future events or conduct. They raise issues as to the state of mind of the officers of the respondents. In an appropriate case, representations of this type may form the basis of a valid claim for contravention of s.52 of the Act but only in the event that it is established that the belief of the officers of the respondent was, at the time the representations were made, different from what was stated, or that the officers did not believe what was stated or were recklessly indifferent as to what was stated. The mere fact that the representations as to future conduct or events do not come to pass does not make them misleading or deceptive. Generally see Bill Acceptance Corporation Ltd. v. GWA Ltd. (1983) 50 A.L.R. 242. These allegations all come within this type of Case - representations as to future events or conduct. Although the statement of claim alleged that at the time the 7 Oe ey rr Fe eebuniescaiat ia eal tetrmacatilitemn scans talento serps ee Pa a steer uo —— - 38 - representations were made, the respondents did not have the opinion expressed and did not intend to carry out the future conduct as stated, there is just no evidence to support that allegation. Apart from what has already been said with respect to these allegations, in my opinion, there was no evidence to support the allegation that the officers of the respondents did not intend to carry out the future conduct or made the representations recklessly, indifferent as to what was stated. Further, I was not satisfied on the evidence that the representations as to future conduct as contained in these allegations did not come to pass, but having regard to the other findings made, I do not consider it necessary to examine the evidence in these reasons to show how I came to that view. In their submissions, counsel for the applicants contended, quite correctly in my opinion, that in considering the evidence, the Court should have regard to the impression conveyed to Mr. Tringas and Mr. Pappas by officers of the respondents during the whole of the negotiations from July to November 1981. The particulars of the conduct are limited to representations but nevertheless, each representation should not, it was contended, be considered separately but as forming part of continuing conduct over the lengthy period. There is force in these contentions, but the impression I have formed from the whole of the evidence is that Mr. Tringas was determined to purchase the business when he first learned that Parthenon was not proceeding with its proposed purchase. He said he did not know the reason why Parthenon . soot - 39 - did not proceed. He was determined to proceed irrespective of what officers of the respondents did. This impression is supported by the evidence that although he sought to have additional terms included in the deed, he proceeded with the purchase even when his requests for those additional terms were refused. He was concerned about the takings of the businesses from 1 July 1981, but when he could not get a clause inserted in the agreement about those matters, he accepted and must be taken to have acted upon the weekly statements of the three businesses for that period. Those records showed that commencing in about September 1981, there was a sharp decline in takings, not only in fact but also against budget being the projected figures. Mr. Tringas decided to proceed with the purchase. Further in 1982, Newtons purchased another travel agency business in Oakleigh, a suburb of Melbourne, for $20,000 even though Mr. Tringas knew that that business was operating at a loss. The reason given for the purchase of that business was that it would assist in the sale of international travel. The evidence suggests that Mr. Tringas and Mr. Pappas planned to concentrate on and to increase the international travel area of the businesses, but it is not necessary for the Court to speculate why Mr. Tringas wanted Newtons to purchase the three businesses. They were purchased and the Court, on the no case submission, must accept the evidence given by Mr. Tringas and Mr. Pappas except where that evidence is contradicted by contemporaneous documentary evidence. The evidence shows that Mr. Tringas did not rely upon any of the representations made to him. He had all the documents we ery ~>- - 40 - relating to the receipts of the businesses supplied to his accountant. He attempted unsuccessfully to have some matters relating to future takings included in the terms of the agreement. He had received the warning from his solicitor about the terms of the deed and about representations. In all these circumstances, there is no evidence to support a finding, even by inference, that he relied upon the representations. He made his own investigations. The figures given to him were not challenged. He wanted the businesses at any cost. On the whole of the evidence before the Court at the close of the applicants' case, and making ali reasonable inferences in favour of the applicants which were open on that evidence, I was not satisfied, on the balance of probabilities, that the applicants had established their claim against the respondents or either of them. The respondents had made full disclosure of all relevant financial material. I was not satisfied that either Ansett Operations or Ansett Transport Industries Limited had, in trade or commerce, engaged in conduct that was misleading or deceptive or was likely to mislead or deceive with respect to the sale to Newtons of the three businesses being conducted by Ansett Operations at Sydney, Melbourne and Perth. I was not satisfied that either Ansett Operations or Ansett Transport Industries Limited had, in trade or commerce, engaged in conduct that was misleading or deceptive or was likely to mislead or deceive with respect to the guarantee given by the applicants and as contained in clause 15 of the seit SLaunariaT useeneneenentaeiial a - 41 - deed. It follows that the applicants had failed to prove, on the balance of probabilities, that they or either of them, had suffered loss or damage by conduct of the respondents or either of them that was done in contravention of s.52 of the Act; see 5.82 of the Act. Accordingly, the Court dismissed the application. Further, even if the applicants had proved that the respondents or either of them had engaged in conduct in contravention of 5.52 of the Act, the applicants had not proved that they had suffered loss or damage as a result of that conduct. There can be no doubt that the businesses purchased by Newtons under the deed were of some value. There was no evidence before the Court that the value of the goodwill of the businesses was less than $330,000. There was no evidence before the Court that the value of the fixtures and fittings of the businesses was less than $25,420. In fact, there was no evidence at all directed to showing what was the true value of the businesses. The applicants did not purchase the businesses. They guaranteed the due and punctual performance by Newtons of its obligations under the deed. In these proceedings the applicants are claiming damages under s.82 of the Act. The claim by Newtons for an order declaring the deed void and to have been void ab initio was dismissed and the applicants cannot pursue that claim on behalf of Newtons. Nevertheless, the applicants are entitled to recover the amount of loss or damage they personally have suffered. They may be entitled to an order under s.87(2)(a) of the Act if they have suffered loss or damage. Those see ween ee 4, -. onerous damages are separate and distinct from the loss suffered by Newtons; see Gould v. Vaggelas, above, per Gibbs C.J. at p.33. Ina claim for damages for deceit where the plaintiffs are not the purchasers under a contract of sale, "the measure of damages is the sum which represents the loss which the plaintiffs have suffered because they altered their position in reliance on the fraudulent misrepresentation"; see per Gibbs C.J. at p.36. See also Brennan J. at pp.59-60. Similar principles apply with respect to claims based upon contravention of s.52 of the Act. In an action for deceit by a plaintiff who has been induced to guarantee a third party's liabilities, prima facie the plaintiff must prove "that he has paid or is liable to pay more under the guarantee than the value of anything he acquired by giving the guarantee and by meeting his liability under it" - per Brennan J. at p.60. Similar principles apply with respect to a claim based on a contravention of 5.52 of the Act where a guarantor is claiming damages under s.82 of the Act. The applicants are claiming damages in the sum of $33,685.27 being the amount paid by the applicants to Cornelius Properties Pty. Ltd. under a guarantee given by the applicants to that company with respect toa lease for the Sydney site of the businesses purchased by Newtons. There is no sufficient evidence to prove the facts of that payment, but in any event, the payment was made pursuant to a different guarantee entered into after the deed of 20 a on TO rn ee ns eg nn a - 43 - November 1981. There is no evidence to show that the applicants suffered loss or damage by giving the guarantee contained in clause 15 of the deed. There is no evidence to show that the true worth of the businesses purchased by Newtons was less than the amount Newtons agreed to pay for them under the deed. The applicants have not proved they have suffered any loss or damage under s.82 of the Act. Having held that the applicants have not proved that they have suffered loss or damage by the conduct of the respondents or either of them that was engaged in in contravention of s.52 of the Act, the Court is not empowered to make orders under s.87 of the Act. This is made clear from the wording of sub-section 87(1) namely:~ +... Where, in a proceeding instituted under ».. this Part, the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in ... in contravention of a provision of ... Part V, the Court may .-.. make such order or orders as it thinks appropriate ... (including all or any of the orders mentioned in sub-section (2) of this section) ...". For present purposes, the relevant order sought by the applicants is an order declaring the guarantee contained in clause 15 of the deed to have been void ab initio; see paragraph 87(2)(a). Here, that order cannot be made because the applicants have not brought themselves within sub-section B7(1). ory eee aa ye eet ge eee - 44 - It should be noted that since this application was dismissed, the High Court, on 26 June 1986, gave judgment in Sent v. det Corporation of Australia Pty. Ltd., in which the nature of s.87 of the Act was considered. In making the findings set out above, I have been conscious of the fact that in the cross claim, Ansett Operations is suing the applicants on the guarantee contained in clause 15 of the deed. Judgment for Ansett Operations has been given on that claim. That judgment was given on the basis that the applicants could not succeed in establishing a case that the guarantee should be treated as being void ab initio. It is possible that the applicants could have submitted that they suffered loss or damage under 5.52 of the Act, the loss or damage being their liability under the Guarantee. In my opinion, any such submission would fail because of the findings made in relation to the alleged conduct by the respondents and in relation to the absence of evidence proving that the value of the businesses purchased was less than that agreed to he paid by Newtons under the deed. For all these reasons, the application Was dismissed with costs. r RS ICE AS OP ar ae: ra an eit, et this and the fark Vhwee (4-8) GAs VCS ace a true copy of the On Fu7Suent herein of the 4 onoa.abls Me Gestics Lorthresye | - wire Weredle iH Asseciate Dated: 8(3/BG6 | > nalaheneneenePncaaamnmeneamen wR eee reese ee ee en te. IN THE FEDERAL COURT OF AUSTRALIA } ) VICTORIA DISTRICT REGISTRY ) V. No. G 99 of 1982 ) ) GENERAL DIVISION BETWEEN : GEORGE TRINGAS and STAVROULA TRINGAS Applicants and ANSETT TRANSPORT INDUSTRIES (OPERATIONS) PTY. LTD. and ANSETT TRANSPORT INDUSTRIES LIMITED Respondents COURT: NORTHROP J. DATE: 12 FEBRUARY 1986 PLACE: MELBOURNE EX TEMPORE REASONS FOR JUDGMENT By deed of agreement dated 20 November 1981 Ansett Transport Industries (Operations) Pty. Ltd. agreed to sell a business to Newtons Travel Services Pty. Ltd. At all material times the applicants, George Tringas and Stavroula Tringas, were the directors and two of the principal shareholders of Newtons. The applicants were parties to the deed of agreement dated 20 November 1981 and under that agreement jointly and severally guaranteed to Operations the due and punctual performance by Newtons of all its obligations contained in that deed. Under the deed of agreement the laws of the Australian Capital Territory were ——— vt mm pee ere ee ee to apply to the rights and obligations of Lhe parties to the deed. In July 1982, Newtons and the applicants commenced these proceedings in the Federal Court. The then three applicants sought damages against Operations and its parent company Ansett Transport Industries Limited, pursuant to 5.32 of the Trade Practices Act 1974 based in substance on breaches of s.52 of the Trade Practices Act and in addition, sought orders declaring the deed of agreement including the guarantee void ab anitio pursuant to s.87 of the Trade Practices Act and an order directing the repayment of the moneys paid by Newtons to Operations. It should also be noted that it was claimed that Newtons had validly rescinded that deed of agreement. Operations commenced proceedings in the Supreme Court of the Australian Capital Territory against the two applicants, Mr. and Mrs. Tringas, on their guarantee. The amount claimed was for $585,639.37 being the amount alleged to be owing by Newtons to Operations under the deed of agreement. By order made on 29 October 1982, the Federal Court ordered that Newtons provide security for the costs of Operations and ordered further that until security was given, the action by Newtons be stayed. See 0.28 r.5 sub-rule (1) paragraph (a) of the Federal Court Rules. 2 parr aes axed On 30 Tune 1983, the Supreme Court of Victoria ordered that Newtons be wound up and Mr. OD.P. Tonkin was appointed liquidator of Newtons. By notice dated 15 December 1983, Operations gave notice that it would move the Court for orders that unless Newtons provided security for coasts pursuant to the order of 29 October 1982, the application of Newtons be dismissed with costs. On 17 February 1984, the Court ordered by consent that the proceedings, insofar as they were brought by Newtons, be dismissed with costs. That order was made by consent and on the face of the record must have been made with the consent of Mr. Tonkin, the liquidator of Newtons, and the order must have been made pursuant to 0.28 r.5 sub-rule (1) paragraph (b) of the Federal Court Rules. This is so, @ven though the wording of paragraph (b) is as follows:- "5. (1) Where the Court orders that the applicant provide security for costs, it may order- (b) that if the applicant fails to comply with the order to provide security within the time limited in the order, the proceeding be thereafter stayed or dismissed." Counsel for Operations and Ansett in the present case has argued that this is an inference which cannot be drawn because on the face of it the record merely says, by consent the proceedings be dismissed. But having regard to the motion which was before the Court and to the existence of the earlier order for the giving of security for costs and the staying of the action, 1t is apparent, in my opinion, that in dismissing the proceedings, by consent, the Court was exercising the power conferred by 0.28 ¢.5 sub-rule (1) Paragraph (b). In the meantime, Operations had commenced proceedings in the Supreme Court of the Australian Capital Territory against the applicants based on the guarantee given by them. Apparently with the consent cf the parties, the claim by Operations was to be brought by way of cross-claim in the present proceedings in lieu of continuing with the proceedings in the Supreme Court of the Australian Capital Territory. Pursuant to directions made in this application, the following is a summary of the pleadings as hetween the two applicants and the respondents, Operations and Ansett, immediately prior to the present motions before the Court:- 1. Further Amended statement cf claim in which the two applicants are George Tringas and Stavroula Tringas. rt is dated 1 May 1984. This statement of claim is similar to the original statement of claim and in substance the applicants are seeking orders that the deed of agreement is rescinded; they are claiming damages and are seeking an order that the guarantee is not enforceable against them, and an order declaring the guarantee void ab initio. The last order being apparently under s.87 of the Trade Practices Act. 2. A defence to that statement of claim. The defence is dated 10 May 1984 and is in substance a denial of the facts upon which the applicants' claims are brought and are based. 3. A cross-claim dated 10 May 1984 by which Operations is seeking $585,639.37 under the guarantee given by the applicants and is contained in the deed of agreement. In substance, the cross-claim is the statement of claim that had been used in the Supreme Court of the Australian Capital Territory proceedings. 4. Defence to the cross-claim dated 19 May 1984. In this defence the applicants rely upon an allegation that the guarantee was rescinded by notice dated 12 July 1982, given by Newtons with respect to the deed of agreement. In addition, the applicants say that by reason of the matters raised in the statement of claim, they are not liable to Operations. wo By notice of motion dated 25 November 1985, th applicants sought the following orders:- "1. That the Cross-Applicants he granted leave to deliver and file an Amended Defence to Cross-Claim and Cross-Claim in the form of the exhibit marked 'SEG 10' to the affidavit of Sean Elwin Grant sworn the 25th day of November 1985 and filed herein. 2. That the self-executing order of Mr. Justice Northrop made the 17th day of February 1985 herein be set aside. ett see ss Pyle 3. Alternatively, that the self-executing order of Mr. Justice Northrop made the 17th day of February 1985 be varied so as to enable the Cross-Applicants to raise in thelr Cross-Claim against Ansett Transport Industries (Operations) Pty. Ltd. the Cross-Respondant herein the former claim of Newtons Travel Services Pty. Ltd. (in liquidation) for damages for contraventions of Section 52(1) of the Trade Practices Act 1974 (Cth.). 4. For such further orders as the Court considers appropriate." It is difficult to understand the reference to the self-executing order referred to in each of orders 2 and 3 as sought by the applicants. The order made on the 17th day of February 1984 was an order by consent dismissing the claim by Newtons. It was in its terms final and absolute and was not and could not be described as a self-executing order to operate in the future. By notice of motion dated 29 November 1985, Operations and Ansett are seeking orders that the proceedings be set down for trial. The two motions came on for hearing on 6 February 1986. In support of order 2 the applicants we relied upon 0.28 r.5 sub-rules (2) and (3). The whole of r.5 should be read:- "S. (1) Where the Court orders that the applicant provide security for costs, it may order~ (a) that the proceeding on any claims by the applicant for relief be stayed until security is provided; or (b) that if the applicant fails to comply with the order to provide security within the time limited in the order, the proceeding be thereafter stayed or dismissed. {2) Subject to sub-rule (1), the Court may set aside or vary any order made under this Order. (3) Where a proceeding stands dismissed pursuant to an order under this Order, that order shall not be set aside or vayied except in special circumstances." It should be noted further that under 0.28 r.1 a reference in that Order to an applicant extends to any person who makes a claim for relief in any proceeding and accordingly would apply to a respondent who is seeking by way of cross-claim, relief against a respondent. The motion to set aside the order of 17 February 1984 is refused. Newtons is in liquidation, the motion is not made on behalf of Newtons. The Liquidator presumably does not desire to proceed with the proceedings. There is no basis for the motion to obtain an order that Newtons be made an applicant. To do so would make a mockery of the order for security for costs. Newtons would become an applicant. Newtons is insolvent. The liquidator who controls Newtons should not be compelled to continue with proceedings which it Cain? v4 i Vem SOD TO ya tere me te owe SITET RE er oF a) . . ut ste Sr gp errr a does not want to take and accordingly, there 1s no basis for the order seeking to set aside the judgment. The substance of the submissions made on behalf of the applicants in relation to the other matters can he summarised. In the present case I do not express any final or concluded views on the questions of law raised, and any views I so express are on the basis that they are in the nature of interlocutory matters before the Court, and would not in any way prevent the Judge hearing the action from expressing views contrary to them. The cross-claim brought by Operations is based on a guarantee. Counsel for the applicants concedes, quite correctly, that in answer toa claim on the guarantee, a guarantor cannot avail himself of remedies the principal debtor may have against the creditor to whom the guarantee is given. Counsel does contend that there is an exception to that rule, namely the existence of an equity arising from the insolvency of the principal debtor which allows the guarantor to raise as a defence to an action based on the guarantee, a claim which the principal debtor may have had against the guarantee and arising out of the transaction in which the guarantee was given. Counsel relied upon a number of authorities including Cellulose Products Pty. Ltd. v. Truda (1970) 92 W.N.(N.S.W.) 561, and authorities referred toa therein and to authorities in the United States of America. There is much to be said for that contention. To some extent, the applicants have relied upon that principle in the + PERE meee Om re Woe year y existing statement of claim and in their defence to the cross-claim. The existence of the exception arises from the insolvency of the principal debtor and is based on the equity that if a guarantor is required to pay a debt of the principal debtor, normally he can claim that amount so paid from the principal debtor. But if the principal debtor is insolvent, his only remedy would be to sue or to claim in the insolvency, and in those circumstances, it would be inequitable for the guarantor not to be able to rely upon any defence or claim that the principal debtor may have against the creditor if the creditor was to sue the principal debtor. The existence of the equity attempts to work out what is fair and just as between the guarantor and the creditor. However, the form of the order sought in order 3 of the motion by the applicants is not appropriate, and reference is made to Aurel Forras Pty, Ltd. v. Graham Karp Developments Pty. Ltd. £19753 V.R. 202 at p.220 where Menhennitt J. said, and I quote:- "It follows from the foregoing that, if a plaintiff, in reply to a defendant's counter-claim, seeks to rely upon a claim which arose before the issue of the writ, he should, in general, apply for leave to amend his statement of claim, but that, if he seeks to rely upon a claim which arose after the issue of the writ, the only way in which he can doa so, in the absence of consent by the defendant, is in a counter-claim by the plaintiff and it was decided in Toke v. Andrews (1882) 8 9.B.D. 428 that he was entitled to raise it in a plaintiff's counter-claim,." See also Bate v. International Computers (Aust.) Pty. Ltd. (1984) 2 F.C.R. 526 per Woodward J. at p.532Z. wee - 10 - Accordingly, the further hearing of the motion was adjourned to today to enable the legal advisers of the applicants to consider the position of the applicants. On the resumption of the hearing of the motion today, the applicants sought leave to amend the application, the statement of claim and the defence to the cross-claim. In substance, what was sought by the applicants was the inclusion of certain claims contained in paragraphs 15 to 22 of the document handed to the Court this morning. By paragraph 15, the applicants sought to allege an agreement between Newtons and Operations containing a number of terms being the terms of the representations constituting the conduct alleged which was entered into by Operations in breach of s.52 of the Trade Practices Act. Paragraph 16 alleges breaches of those terms. Paragraph 17 alleges a collateral agreement between Newtons and Operations; the terms of the agreement being the representations which constitute the conduct, the basis of the 5.52 Trade Practices Act claims. - fF In ne mn are eet ee oe pAte—et ete we meee = a ue tome < va', oA Sp en yac ee tout eg rig tee Soci ae were Tas nity Paragraph 18 alleges breaches of those collateral warranties. Paragraph 19 alleges damages - and [I will read that paragraph: - "19. In the premises Newtons has suffered loss and damage. PARTICULARS OF LOSS AND DAMAGE Full particulars of loss and damage will he provided prior to trial." Interrupting the examination of the proposed amendments, it should be noted that paragraph 19 includes the claim for damages based on s.52 of the Trade Practices Act which was a claim made by Newtons in the original statement of claim when Newtons was an applicant. That claim has been dismissed by consent. Paragraph 19 also claims damages based upon the terms of the agreement referred to in paragraph 15 of the proposed amendment and also damages for breach of the collateral warranties alleged in paragraph 17 of the proposed amendment. Neither of those causes of action were pleaded by Newtons in its original statement of claim. Coming back to the proposed amendments, paragraph 20 alleges that Newtons was wound up on 30 June 1983. Paragraph 21 raises fairly and squarely the equity which has been discussed earlier in these reasons. It reads as follows:- "21. In the premises the applicants are entitled to set-off against the cross-claim of the respondents so much of the claim of Newtons for loss and damage arising by reason of the Matters contained herein as will be sufficient to satisfy or extinguish the said cross-claim." a me ag eee " ' See tte mee te ein eee nT en re eri ae ao Were Stay a ave vee b Ee ee en en 7 . my rr oe By way Gf comment it is noted that this is stated in the form of a cross-claim but is expressed as a set-off to a cross-claim by Operations. It is based fairly and squarely on the equity. It is limited to the amount of the claim by Operations against the two applicants and even though Newtons is not a party to the proceedings, that is not a fatal defect having regard to the fact that Newtons is in Liquidation. Paragraph 22 although marked to be a new paragraph is, on the face of it, almost identical to paragraph 15 of the statement of claim presently before the Court. It reads as follows:- "22. Further, by reason of the matters aforesaid:- (a) Newtons became entitled to, and did, rescind the agreement embodied in the deed referred to in paragraph 12(a) hereof;". There is now inserted the word "hereof" which did not appear in the current statement of clain. "{b) the guarantee is not enforceable against the applicants or either of them; and (c) the applicants are entitled to an order declaring the guarantee void ab initio." So in reality, the amendments now sought ta the statement of claim are in relation to the terms of the agreement between Newtons and Operations; the collateral warranties, the terms of which are the same as those terms, damages suffered by Newtons for breach of those collateral oa ee ee mre ot ' yee "4 ae ' QO op rye a er ! H ay) ' warranties as well as for contravention of s.52 of the Trade Practices Act and a set-off of the amount up to the amount of damages suffered by Newtons. Problems do arise in relation to a claim based on 5.52 of the Trade Practices Act by incorporating the same facts as being terms of an agreement, particularly when, from what appears from the pleadings, the agreement was reduced to writing and became a deed of agreement, and these terms are not those contained in the deed of agreement, as well as alleging collateral warranties. But nevertheless, on the face of it, if the applicant desires to amend and there is no other reason why the leave should not be given to so amend, leave would be given to raise those additional matters. Likewise, from what has been said earlier, leave would normally be given to raise the set-off based on the equity discussed earlier in these reasons. The proposed amended defence to cross-claim is complementary to the amendments to the statement of claim, and what is sought is the addition of a further paragraph as follows:- "20. Further and in the alternative the cross-respondents will seek to set-off so much of their claim herein, including the claim of Newtons' raised by them, as will be sufficient to satisfy or extinguish the claim of the cross-applicants herein." That is a defence based fairly and squarely on the equity. - 14 - The proposed amendments to the application are to insert new paragraphs (d), (@) and (f), and I will read:- "(d) an order pursuant to sub-section 87(2)(d) of the Trade Practices Act 1974 (Cth.) directing the respondents and each of them to pay to the applicants the amount of any loss or damage suffered by the applicants as a result of the contraventions referred to in the Further Amended Statement of Claim;". This claim is brought under s.87(2) of the Trade Practices Act because of problems that might arise in relation to limitations of actions arising from the provisions of that Act. At the moment the question as to whether the limitation period is six years or three is pending in the High Court. "(e) an order setting off against any amount found to be due upon the respondents' cross-claim so much of the loss and damage suffered by Newtons by reason of the matters referred to in the Further Amended Statement of Claim as will be sufficient to satisfy or extinguish such cross-claim; (f) interest pursuant to Statute;". Counsel for Operations and Newtons has opposed the granting of leave on two principal grounds. The first: that of futility. This is based on the principle that where a claim is being made or sought to be made, which cannot possibly succeed, the Court should refuse to give leave to so amend a statement of claim as to raise that particular claim. In elaboration of that submission, counsel argued that the applicants cannot have any greater right than the right Newtons had, and even though Newtons is not a party to the proceedings and need not be a party, the applicants per < , ' "2 wegen HT No sorry at Bs Ma Mets at t - 15 - cannot raise any cross-claim by way of defence or set-off because Newtons claim for those very matters has been dismissed by consent. He relies upon the principle that a dismissal or judgment in an action, as this is, merges the cause of action in the judgment, and that cause of action cannot then be relied upon by the party to those proceedings. And of necessity, other persons cannot raise that same issue in other proceedings. Counsel relied upon a series of authorities: Port of Melbourne Authority v. Anshun Pty. Ltd. ain the Supreme Court of Victoria, McGarvie J., reported £1980] V.R. 321; an appeal to the Full Court in £19813 V.R. 81, and in the High Court, (1981) 147 C.L.R. 589, A number of general propositions arise from those authorities. The first one, which 1s stated at p.324 of the judgment of McGarvie J. is as follows:- "1. Where a cause of action is claimed upon or put in suit ina proceeding and judgment is obtained, the cause of action merges in the judgment or is negated by the judgment and has no later existence as a cause of action. Accordingly, no proceeding can later be brought upon the cause of action." Accordingly, no proceeding can later be brought upon the cause of action. In Anshun's Case, there had been a judgment of the Court after trial. In the present case, there is interlocutory judgment; there has been no judgment on the merits as opposed to an interlocutory judgment even though final. In my opinion, that makes no difference to the qwrt ceo ce see eee 2 Ny + . TET tre ny ewer ee, general principle, although problems do arise in the present case because of equities which I will explain in a moment. It is submitted by counsel for Operations that the judgment obtained by Operations against Newtons is a bar to any subsequent action brought by Newtons and, of necessity, is a bar to any claim brought by the applicants, the Tringas', based upon a cause of action which has been barred by Newtons agreeing to judgment being entered against it. He contends that to enable the Tringas' to bring such a cause of action would, in substance, placa the respondents in a position of being able to bring an action on Newtons behalf when Newtons cannot bring that action where the Court has made an order for security for costs against Newtons, and, on a motion to have the claim by Newtons dismissed, Newtons has consented to the claim being dismissed; in other words, judgment against it; that it would be unfair to allow Tringas to bring that claim based on 5.52 of the Prade Practices Act, and equally unfair to allow the applicants to bring a related claim arising from the same facts based upon terms of an agreement, and collateral warranties. As opposed to that, it must be remembered that Operations is claiming under a guarantee. The guarantors, if they are liable under guarantee, are paying a debt of the principal debtor, the debtor is in Liquidation, the guarantors have no way to ensure that the principal debtor takes all steps to raise by way of defence or counter claim, Claims it might have against the creditor. That here, the mp or wre soe eee re cm: armies -17- liquidator can do what he likes and this could well amount to an unfair basis in which the applicants are unable to raise defences which equity they are entitled to raise. It must be remembered however, that the need for the guarantee was to secure payment where, for any reason, the principal debtor did not or could not pay the debt. In fact, in the material in support of their motion, the applicants alleged facts which suggested that Operations was in some way active in obtaining the winding up order against Newtons as a step in defeating Newtons' claim against Operations. During the course of submissions, on that issue, I expressed a view that there was no basis whatsoever for any such suggestion. The whole purpose of the security for costs being awarded against a corporate body was because of the unique provision relating to corporations; special provisions being made that if a corporation is unable to pay its debts or pay the costs or give security, it should not be allowed to pursue proceedings in the Court. Nevertheless, one is faced with the problem of the applicants, under normal circumstances, having a claim based in equity to raise by way of defence, a claim that Newtons may have against Operations being bound by actions over which they have no control. Nevertheless, applying the principles ef law which are discussed in Anshun's Case, in my opinion, the existence of the judgment or order against Newtons does constitute a bar to the applicants in relying upon any clain that Newtons may have against Operations. t t {- - 18 - Likewise, in my opinion, to allow the applicants to bring a related claim based on breach of terms of an agreement between Newtons and Operations or collateral warranties between Newtons and Operations, would be a way to avoid those principles of law which is not permissable, and accordingly, in my opinion, the existence of the judgment is a bar to the proposed claim of proposed amendment sought by the applicants. This does not of necessity mean that the applicants cannot rely upon the matters already raised by them in relation to the recission of the deed of agreement, including the terms relating to the guarantee. The other main matter raised by way of opposition to the order sought was on discretionary grounds, namely that because of the delay in the matter, the matter having been ready for trial, because of the problems associated with the fact that Newtons having been ordered to give security for costs did not give them, and then subsequently had their claim dismissed, as a matter of discretion the Court should not allow the applicants to raise those same issues, as it were, on behalf of Newtons, since to do so would be to defeat the orders already made. Again, this raises a nice balancing exercise between the equities of the applicants and the existence in law of the judgment, andas a matter of discretion, if otherwise there is power to do so, I would refuse to grant an ee een a - e. - 19 - leave sought to amend the statement of claim, the defence to cross-claim and the application. brought by Tn all the circumstances, the applicants and dated refused, with costs to be taxed. FOO RE ra Foe er a ' therefore, the motion 25 November 1985, is cow 18 | cer ev cSat this and the ey Wheen is) © Lamy pages are a tine copy of the 4 Geasons ror Tid judg nent herein of the Honourable Mr. Justicao KOO sscociate Dated:!2.12 1 BE Wertdbe foaa, ae ee a qe ae mana: oe rea Y Wo ee. 1. es > te ae rt et ey 2 eer y -c -f wn Ser ve Dates of hearing Judgment delivered Counsel for ""Tringas Solicitors for "Tringas'" Counsel for "Ansett" Solicitors for "Ansett" o oe 21 April 1986 - 9 May 1986 8 August 1986 Mr. P. Tribe and Mr. D. Salek Messrs. J.B. Murphy, Boyd & Robb 13 Stanley Street, WODONGA. VIC. 3690 Mr. P. Hayes and Mr. N. Lucarelli Messrs, Dawson Waldron 60 Martin Place, SYDNEY. N.S.W. 2000 os Te or yee te oe ya " "Y