FEDERAL COURT OF AUSTRALIA oe Adsiiccde -.- District Registry » Menard... Division Date(s) of hearing 23/2, 7.27 th '15? pate judgment 3/4) 8t a/> - 3/3 ; 1978+ delivered Counsel and | rar errr is Lecce eens ( solicitors for ( eee c er ce ences eee cece ne cenee wi. Sass, Golleera 4 Co... . wk ek Counsel and ( ats 8, Beazley Sor 4 *3vR ( . adn solicitors for ( The N Henconzi 2 Pe. sR veees Re wo Neyeys. Sen a BITLe Pon icozze Coqnm ~ Cs yor s™ Rm. Vtunsel§ aud Ma vee sisnoa I/lorhard Sh. (Associate Date & Apt e.! 183. CATCHWORDS Trade Practices ~ Consumer protection - misleading or deceptive conduct - sale of lease of motel false representations made - assessment of damages. Trade Practices Act 1974 Misrepresentation Act 1972 Brown & Anor. v. Jam Factory Pty Ltd & Anor. (1981) 35 A.L.R. 79 Mister Figgins Pty Ltd v. Centrepoint Freeholds Pty Ltd (1981) 36 A.L.R. 23 Gould v. Vaggelas (1984) 56 A.L.R. 31 No. G55 of 1985 GREGORY JOHN JACKSON, BARBARA JACKSON, PETER JOHN JACKSON, TRACEY ELLEN JACKSON, PHILIP GREGORY JACKSON and JOSEPHINE JACKSON v. MYOORA NOMINEES PTY LTD, OXFORD ESTATES PTY LTD, ROGER HAYDON, MARTIN ANTON MISCHKULNIG and A. & M.J. MUSOLINO PTY LTD FORSTER, J. ADELAIDE 3 APRIL 1987 ~ 8 APR 1987 FEDERAL COURT OF AUSTRALIA PRINGJPAL RSGISTAY IN THE FEDERAL COURT OF AUSTRALIA SQUTH AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION ) ) ) No. G55 of 1985 ) ) BETWEEN: GREGORY JOHN JACKSON, BARBARA JACKSON, PETER JOHN JACKSON, TRACEY ELLEN JACKSON, PHILIP GREGORY JACKSON and JOSEPHINE JACKSON Applicants - and - MYQORA NOMINEES PTY LTD, OXFORD ESTATES PTY LTD, ROGER HAYDON MARTIN ANTON MISCHKULNIG and A. & M.J. MUSOLINO PTY LTD Respondents - and - BETWEEN: OXFORD ESTATES PTY LID and ROGER HAYDON Cross Claimants and Cross Respondents - and - MYOORA NOMINEES PTY LTD and MARTIN ANTON MISCHKULNIG Cross Claimants and Cross Respondents MINUTE _ OF ORDER JUDGE MAKING ORDER WHERE MADE DATE OF ORDER FORSTER J. ADELAIDE 3 APRIL 1987 THE COURT ORDERS THAT: 1. Judgment be entered for the applicants against the first, second and third respondents an the sum of $43,000. 2. The applicants receive their costs of their action to be taxed, 3. Judgment be entered in favour of the fourth respondent with costs. 4. The cross claims between the second and third respondents and the first and fourth respondent both be dismissed with no order as to costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA ) } SOUTH AUSTRALIA DISTRICT REGISTRY } No. G55 of 1985 ) ) GENERAL DIVISTON BETWEEN: GREGORY JOHN JACKSON, BARBARA JACKSON, PETER JOHN JACKSON, TRACEY ELLEN JACKSON, PHILIP GREGORY JACKSON and JOSEPHINE JACKSON Applicants - and - MYOOPA NOMINEES PTY LTD, OXFORD ESTATES PTY LTD, ROGER HAYDON MARTIN ANTON MISCHKULNIG and A. & M.J. MUSOLINO PTY LTD Respondents - and - BETWEEN : OXFORD ESTATES PTY LTD and ROGER HAYDON Cross Claimants and Cross Respondents - and - MYOORA NOMINEES PTY LTD and MARTIN ANTON MISCHKULNIG Cross Claimants and Cross Respondents REASONS FOR JUDGMENT CORAM: Forster, J. The applicants are members of a family partnership. Gregory John Jackson and Barbara Jackson are the parents of Peter John Jackson, Philip Gregory Jackson and Josephine Jackson and the parents-in-law of Tracey Ellen Jackson who 1s the wife of Pater. For some years the partnership had operated a small Z. motel at Wudinna on the west coast of South Australia. Towards the end of 1982 they began to look about for a larger motel in which they all could work and from which they ali could derive a living. Various motels in South Australia and elsewhere were unspected without any transaction being entered into. In early May 1983 Gregory ana Barbara Jackson went to Shepparton in Victoria to inspect a motel which was for sale. They liked this very much and on their return ta Adelaide on the way back to Wudinna they called at the offices of Beneficial Finance Corporation Limited ("Beneficial") where they saw a Mr Wilson, whom they already knew, in order to ask him if Beneficial would lend money to enable the family to go into the motel at Shepparton. Wilson told Mr and Mrs Jackson that he was not interested in lending money on a security outside South Australia and suggested that they look for a motel within South Australia. He told them that he knew of a few motels in the State which were probably available for leasing and that Roger Haydon, the third respondent of Oxford Estates the second respondent, was handling them. Wilson telephoned Haydon and arranged an appointment for Mr and Mrs Jackson to see him which they did forthwith. Following the conversation with Haydon, to which I will return in some detail as ait is of great importance, negotiations were started for the partnership to purchase a leasehold interest in the Myoora Motel at Port Augusta from the first respondent ("Myoora") a company of which the fourth respondent was a director. These negotiations were carried on by Philip Gregory Jackson ("Philip") on behalf of the applicants and by Haydon on behalf of the first respondent. After rapid negotiations conducted by Philip and Haydon A. REARS CRBS sm iS r 3. an agreement dated 17 May 1983 was entered into between Myoora of the first part, the applicants of the second part and Oxford of the third part whereby the applicants agreed to purchase Myoora's anterest as lessee of the motel for $160,000. This price was said to be as to $38,000 for fixtures, fittings and furniture and as to $122,00 for "lease/lacence and goodwill". The agreement Was expressed to be subject to the granting of a new lease of five years with a right of renewal for a further five years with a rent review every two years. The applicants borrowed $250,000 from Beneficial and $60,000 From Myoora on a bill of sale aver the plant, equipment, fixtures and fittings in the motel. Some of the money borrowed from Beneficial was used to re-finance the Wudinna Motel. Settlement took place on 27 June 1983. Although at the time of the agreement for sale and purchase being executed Myoora was the lessee of the motel which was owned by the Motel Myoora Unit Trust a lease was entered into dated 23 June 1983 between Myoora as lessor and the applicants as lessees. The previous arrangement whereby the first respondent was lessee from the trust was a domestic financial arrangement within the Myoora group with which I am not now concerned. The rent reserved by the lease was $78,000 per annum or $6,500 per month payable monthly in advance. In accordance with the agreement it was provided that the rent should be reviewed on 27 June 1985 and two yearly thereafter. At the settlement the applicants paid to the first respondent $100,000 on account of the purchase price of $160,000 and as mentioned above gave a bill of sale for $60,000. 4. The motel business in the hands of the applicants was quite successful for a few months but thereafter has not done well. On 9 September 1985 the applicants tock out an application in this Court against the first four respondents claiming a declaration that they had engaged in conduct contravening s.52 of the Trade Practices Act and further, or in the alternative, a declaration that the second, third and fourth respondents were persons involved in a contravention of 5.52 by the first respondent. Damages pursuant to s.82 of the Trade Practices Act were claimed and an order or declaration pursuant to 5.87 that the agreement for sale and purchase dated 17 May 1983, the memorandum of lease dated 23 June 1983 and the bill of sale dated 27 June 1983 each be varied from such date and in such Manner as the court deems fit. In addition an order was sought restraining the respondents from "exercising any alleged right under any agreement or security for the payment of any money or the performance of any obligation by the applicants". Damages were also sought for misrepresentation, for negligence, and relief was also sought umder the Misrepresentation Act 1972 and damages were sought for breach of contract and for conversion. These last five heads of claim were not persisted with. At the conclusion of the hearing damages were sought pursuant to alleged misleading and deceptive conduct and orders were sought that the agreement for sale and purchase, the memorandum of lease and the bili of sale be varied. On 18 September 1985 on the application of the applicants I made an interlocutory injunction preventing the first respondent from enforcing its rights under the bill of sale and under the lease on the applicants' undertaking to pay $3,300 5. per month on account of the rent of $6,500. On 24 December 1985 after a hearing lasting two days I varied this order so as_ to require the applicants to pay $4,000 per month in lieu of $3,300. In other respects the interlocutory injunction was continued. The trial of the matter began on 24 March 1986. On 24 April 1986 I was informed that the matter had been settled and I adjourned the hearing sine die with liberty to any party to apply to have it relisted on 48 hours notice. The settlement was not carried out and on § October 1986 I ordered that the matter he relisted and I later gave dates in February 1987 for a resumption of the hearing. Beneficial was the mortgagee with respect to four registered memoranda of mortgage over the land on which the Myoora Motel was erected and A. & M.J. Musolino Pty Ltd ("Musolino") was the registered mortgagee with respect to a fifth memorandum of mortgage. At the end of August or the beginning of September 1986 the interest of Beneficial pursuant to its four mortages was transferred to Musolino and on 4 September 1986 Musolino gave notice to the applicants of a transfer to it of the interest of Beneficial in the first four mortgages and that notice of intention to exercise power of sale under two of the mortgages had been served upon Myoora which had failed to comply with the provisions of the two notices. The notice also required payment by the applicants to Musolino of rent and other moneys due under the lease of the motel. Later notice was given by Musolino to the applicants that it claimed to be a mortgagee in possession of the land on which the motel was crecled. 6. On an application by the applicants I ordered that Musolino be joined as a fifth respondent in the proceedings as a "person involved in the contravention of 5.52" by the first four respondents. Darections were given and pleadings exchanged and Musolino was enjoined in similar terms to the injunction made against Myoora. When the resumed hearing was nearly completed I was informed by counsel that the assues between the applicants and Musolino had been settled, that they had agreed to the rent to be paid under the lease and the timing of the rent reviews and that no order was sought by either the applicants or Musolino against the other. The misleading and deceptive conduct alleged against the first four respondents consists of representations alleged to have been made by Haydon to Mr and Mrs Jackson and to Philip on behalf of all the applicants. A number of such representations said to be faise and therefore misleading and deceptive were pleaded but at the end of the day representations in three categories were relied upon. There were representations as to takings of the motel business in the hands of the first respondent, representations as to occupancy rates of the motel and representations as to an arrangement with the Electricity Trust of South Australia ("ETSA"). So far as these three matters are concerned all representations were alleged to be first made by Haydon to Mr and Mrs Jackson when they called in to see him on3 May 1983. Haydon told the Jacksons that he had some country leasehold motels belonging to Myoora Nominees on his books but he did not know 1f they were still available. He made two telephone calls 7. whilst the Jacksons were there and then told them that the Myoora Motel at Port Augusta was available but that the price ta go in was $160,000 instead of $150,000 which he had previously mentioned to them. Mr Jackson did not have his spectacles with him and Haydon handed the profit and loss statement for 1981-82 to Mrs Jackson. After the telephone call he told the Jacksons that the takings for 1982-83 were up 10%. Mrs Jackson said "They were $311,000 in '81-82 so that means they will be about $340,000 in '82-83". Haydon assented to this. In evidence Haydon did not deny Lhat he may have said this. Haydon also told the Jacksons so Mr Jackson suys Lhul the occupancy rate was 88-92%. I interpolate that the evidence from those who know about such things is unanimous that in the motel and hotel trade the term "occupancy rate" if unqualified by other words or phrases means the average rate of occupancy of rooms on every day of the year expressed as a percentage. Haydon denies that he said that the occupancy rate was as high as 88-92% which he says is higher than that of any other motei in his extensive experience. He concedes however that he told them that the occupancy rate was 81% because this was the rate mentioned in a valuation of 3 December 1981 (Exhibit 4) which he had and showed to the Jacksons. Haydon also told the Jacksons at this interview that the motel had an arrangement with ETSA whereby a number of rooms, probably nine, would be occupied by ETSA employees for a period of thirteen months of which two or three months had gone. When they returned to Wudinna the Jackson family had a a. conference and Philip was detailed to look into the whole matter of the possible lease of the Myoora Motel. During the next fortnight Philip had a number of telephone conversations with Haydon. In the course of ane of them he said that he was working out projections of figures and asked Haydon to confirm that he could work upon the basis of the takings for 1982-83 being $340,000 or thereabouts. Haydon agrecd that he could. Philip asked him for authentic Figures Cor Lhe Cittume tal year which was drawing to a close. Haydon produced figures for the Six months ending 31 December 1582 and passed them to Philip on the telephone. These figures showed takings of $164,000 for the six months' period. Philip complained that if this sum were doubled it produced only $328,000 and not $340,000. Philip said in evidence that Haydon said that he could expect the figures for the second hali of the financial year to be better than they had been for the first half. This assertion was not pleaded and cannot now be relied upon as being misleading or deceptive conduct. Philip asked Haydon from time to time for up-to-date figures but was told that they were not available. The fact is that a record book was kept in the motel which recorded daily figures and these figures were conveyed by telephone to Connolly, a director of Myoora every week. At any time it would have been a very simple matter with or without the use of an adding machine to ascertain up-to-date figures. Had this been done during the period prior to the signing of the contract it would have heen revealed that the figures for 1982-83 rather than showing an increase of 10% om '81-82 or indeed any increase, showed a decrease. I find the inference that these easily ascertainable figures were deliberately withheld from Philip by Haydon or Myoora or both to be established. I should add that I am also 9. satisfied on the evidence of Melody Watts that Mrs Mischkulnig, a director of the first respondent, told her not to show the current figures to Philip Jackson when he was up at the motel just prior to settlement. When Philip was in the process of preparing a budget with projected figures toa show Lo Beneficial in order that consideration could be given to lending money to finance the motel deal, Philip said to Haydon, "The figures don't work out". Haydon pointed out how the figures should be adjusted so as to take proper account of the leasing of the Wudinna Motel to one of Philip's brothers and then asked "What takings figure for '83-84 are you using?" Philip said, "$340,000" and Haydon then said "Well you can add another 10% to that because of inflation". This would have produced a projected income for '83-84 of $374,000. Philip declined to do this as Haydon suggested because of uncertainties in the motel trade but if this were said by Haydon and I am satisfied on the probabilities that it was, it indicates either a degree of irresponsibility on Haydon's part or that he had been instructed by Myoora to say such a thing if asked. Whatever the reason the forecast of $374,000 for ''83-84 was wildly inaccurate and could not reasonably have been made by anyone with any knowledge of the facts. Myoora, through Connolly, knew perfectly well in May that the takings for '82-83 could not possibly reach $340,000, 1mdeed should have known that there was some chance they would not reach $300,000. In fact the takings for that financial year were probably around about $290,000. The Jacksons did not have a very great deal of money and 16. their budget for running the Myoora Motel was a tight one. I accept that had it not been for the misleading and deceptive representations about, be it noted, the actual takings for 1982-1583 and the projected takings for subsequent financial years the applicants would not have signed the contract in the first place. I have reached this conclusion because I believe the evidence of Philip Jackson on this subject and also because the actual takings for ''82-83 and the reasonably to be expected takings for the future were absolutely vital for the financial survival of the applicants' operations at the Myoora Motel. As to the occupancy rate Haydon concedes that he told Mr and Mrs Jackson that the occupancy rate was 81% basing this statement on a statement in the valuation dated 3 November 1981 to which I refer above. He denies that he ever said that the occupancy rate was 88-92% and says that he is sure he could not have said such a thing because no mutel, even the busiest and most successful city motel has such a rate. I am inclined to doubt that Haydon did say that the erate wus 88-92% to the Jacksons. This was apparently only heard by Mr Jackson and reported to Mrs Jackson during the drive back to Wudinna. I think that Jackson probably made a mistake or misheard Haydon. However this may be whether or not Haydon ever agreed with Philip that the occupancy rate was 88% or 85% or had eighteen rooms out of twenty-one occupied throughout the year the fact is that an analysis of the first respondent's records carried out by the witness Raphael and not contradicted shows that for the calendar year 1981 the rate was 71.1%, for the calendar year 1982, 71.5% and for the twelve months ending on 30 April 1983, 72.15%. ii. I find that Haydon told Mr and Mrs Jackson that the rate was 81% which was misleading and deceptive. I find that he agreed with Philip that eighteen rooms out of twenty-one were eccupied throughout the year which amounts toa rate of 85.71% and this too was misleading and deceptive. So far as concerns the agreement with ETSA Haydon told Mr and Mrs Jackson and confirmed this to Philip that there was an arrangement with ETSA the precise details of which are now a matter of disagreement but the general effect of which was that eight or nine rooms would be occupied for six or ten months by men working on the new power station at Port Augusta. ETSA negotiated a rate for what is called a country fortnight, that is from Monday in one week straight through until the Friday morning of the following week. Mr and Mrs dackson were told about this and it seemed to them to be a bonus and to help to account for the high occupancy rate. This arrangement which never was a firm contract for a certain term and should not have been understood by the Jacksons to be so came to an end not long before settlement because it was said of the behaviour of the first respondent's manager. The first respondent did not tell the Jacksons of this until just before settlement when Mrs Mischkulnig the wife of the fourth respondent informed Philip of the fact but went on to say that there was no need to worry about the breakdown of the ETSA arrangements because "you'll be full anyway". I find that what Haydon told the Jacksons about the ETSA arrangement was substantially true and that although there was an element of deception about concealing the fact that the arrangement had broken down prior to settlement I do not' think that the Jacksons would have sought to withdraw from the 12. transaction even if they had been told of the breakdown immediately 1t occurred. I find therefore that there was no misleading and decepbive cormbortk im connection wath the ELSA arrangement which could have any practical consequence. T have said however that in my opinion there was misleading and deceptive conduct by Haydon, the servant of Oxford Estates, the agent of the first respondent as to the gross takings and as to the occupation rate of the Myoora Motel. In my view the deception as to the takings was the most important matter. It was upon the figures given that Philip made the calculations which enabled the applicant to make the decision to go ahead with the transaction. The occupancy rate taken alone did not have such a strong influence on the decision. The representation made as to this by Haydon simply confirmed that the motel was a good business and lent a degree of credibility to the figures given as to the takings. There were breaches of 5.52 of the Trade Practices Act and the applicants are therefore entitled to recover damages pursuant to s.82 if they are shown to have suffered any because of such breaches. The evidence of Philip satisfies me that the applicants would not have purchased the motel business and thus would not have entered into the lease and the bill of sale to the first respondent had it not been for the misleading and deceptive conduct which I have found to have occurred. As a result of this conduct the applicants paid $100,000 on account of goodwill and plant, fixtures and fittings and agreed to give security for a further $60,000 with respect to the same matters. In addition they agreed to pay rent for their occupation of the motel at the 13. rate of $6,500 per month. So far as the sum of $160,000 1s concerned the plant, fixtures and fittings were valued by Gaetjens a valuer at $35,000 which valuation I accept so that $125,000 may be taken as being assigned to goodwill. It remains to assess the damages and decide which of the respondents must pay them. It seems clear that damages for breaches of 5.52 of the Trade Practices Act should be assessed upon the basis that the respondent has been guilty of the tort of deceit (see Brown & Anor. v. Jam Factory Pty Ltd & Anor. (1981) 35 A.L.R. 79 and Mister Figgins Pty Ltd v. Centrepoint Freeholds Pty Ltd (1981) 36 A.L.R. 23). In Gould v. Vaqgelas (1984) 56 A.L.R. 31 Gibbs C.J. says at p.34 - "Tt is well established that in an action of deceit where the plaintiff has been induced by the fraudulent misrepresentation of the defendant to enter into a contract of purchase, the measure of damages usually applicable is the difference between the real value of the property at the time of the purchase and what the plaintiff paid for it: Holmes v. Jones (1907) 4C.L.R. 1692 at 1702-3; Potts v. Miller (1940) 64 C.L.R. 282 at 289, 297; Toteff v. Antomas (1952) 87 C.L.R. 647 at 650-1; Foster v. Public Trustee {1975} 1 N.Z.L.R. 26 at 28; Ted Brown Quarries Pty Ltd v. General uarries Gilston Pty Ltd (1977) 16 A.L.R. 23 at 31." There are two aspects of real value and price paid to be considered. The amount paid for goodwill and the rent. So far as goodwill is concerned $125,000 was agreed to be paid by the applicants. Of the original sum of $100,000 cash paid at settlement $65,000 should be assigned to goodwill since plant, fixtures and fittings were valued at $35,000. In 14, addition the applicants paid altogether another $16,000 pursuant to the bill of sale given to the first respondent as vendor so that $81,000 in all has been paid for goodwill. The applicants say that this is enough and they should not have to pay the balance of $44,000 owing for goodwill. They say that a strong argument can be put that $81,000 1s a good deal too much for goodwill but they do not wish to press this argument and will be content if they simply do not have to pay any more. The value to be placed on goodwill is a rather difficult Matter to assess. Raphael, a most experienced chartered accountant, says that a business which is operating at a loss has no goodwill. The first respondent's accounts reveal that it was operating at a loss immediately before settlement and therefore if Raphael is right the goodwill is valueless. It is pointed out however that for 1ts own purposes no doubt connected with company tax or income lux the first respondent was paying an artificially high rent and that if it had been paying a proper economic rent its books would have showed a profit so that to say that the goodwill is valueless 1s not in this case right. I think there is some force in this argument. In the books of the first respondent at 30 June 1982 a value of $30,000 is assigned to goodwill and at 30 June 1983 a value of $120,000 is assigned to goodwill without any reason being given or appearing from the figures or anything else in the books. Indeed Raphael points out the first respondent's financial position had deteriorated at the same time as the value assigned to goodwill was quadrupled. 15. It is also pointed out that the applicants made eight monthly payments of $2,000 pursuant to the bill of sale granted to the first respondent. They then stopped making such payments and the first respondent never took any steps at all to compel payment which it 1s said they almost certainly would have done had they felt they were entitled to do so. The weight of this consideration 15 uncertain but it is to be taken into account. In ali the circumstances the applicants have by any standards paid enough and probably too much for the goodwill. Some part of the $16,000 paid after settlement must be treated no doubt as interest on the sum secured by the bill of sale. Justice will I think be done if I find that the applicants have paid enough for goodwill and should not be compelled to pay any more. I will hear counsel as to the precise terms of the order oy declaration to be made on this aspect of the matter. Apart from the plant, fixtures, fittings and goodwill and the stock which was separately paid for the applicants bought an interest as lessees in the motel and they are I think to he treated as if they had paid for that interest what it was worth at relevant times. In other words they should be Lreuted as if they had agreed to pay a proper rent and not the rent provided for in the lease and paid for some months. This necessitates making an assessment of what the leasehold interest was really worth that is to say what a proper rent would have been. Because the fifth respondent has now become the lessor and because the applicants and the fifth respondent have reached agreement as to rent to be paid in the future Iam, I think, spared the necessity to make any order under s.87 of the Trade 16. Practices Act varying the terms of the lease so as to reduce the rent if I conclude as I do that the rent reserved of $78,000 per year is considerably above what a proper commercial rent should be. The evidence as to what an appropriate rent in mid 1983 would have been was that of Mr Pickett called by the applicants and Mr Ludlow called by the first and fourth respondents. I found Mr Pickett more convincing than Mr Ludlow and prefer his Opinion on the matter to Mr Ludliow's. In Pickett's opinion a fair market rental of the motel in May 1983 was $52,500 per annum or $4,375 per month. Both Pickett and Ludlow used the method of taking a percentage of maintainable annual turnover. Each selected $300,000 as the maintainable annual turnover for the motel business in 1983 but they differed as to the proper percentage to apply. Pickett applied 17.5% and Ludlow applied 20-22%. As I have said I accept Pickett's evidence rather than that of Ludlow and I propose to assess damages on the basis that the leasehold interest was worth a market rental of $4,375 per month. The lease provided for payments of $6,500 per month which the applicants paid for two years and three months. Pursuant to my order of 18 September 1985 rent was paid for two months at the rate of $3,300 per month and then pursuant to my order of 24 December 1985 rent was paid at $4,000 per month. During the period from May 1986 to and including August 1986 when settlement negotiations were in train no rent was paid. As from September 1986 such rent as was paid was due and paid to Musolino. The lease provided for there to be a rent review on 27 17. June 1985 and two yearly thereafter. In fact the rent never was reviewed pursuant to that term in the lease. What 15 more the annual turnover in 1984/85 was only approximately $275,000 and in 1985-1986 1t was approximately $256,000 although this last figure 1s conceded by Philip to be artificially low. I thank that justice will be done if for the purposes of calculating damages I treat the proper rent as being $4,375 per month throughout the period from the commencement of the lease until Musolino became the effective lessor. Regarding the proper rent as being $4,375 the amount overpaid by the applicants may be calculated as follows - rent paid rent due Year 1983-1984 $78,000 $52,500 Year 1984-1985 78,000 52,500 July August September 1985 19,500 13,125 175,500 118,125 The rent overpaid is thus $57,375. However an adjustment has to be made because of the underpaying and non paying of rent for a period. rent paid rent due October November 1985 $ 6,600 $ 8,750 December '85 ~ April '86 20,900 21,675 May-August 1986 __nil 17,500 26,600 47,925 Therefore the rent has been underpaid to the extent of $21,325. Taking this figure off the overpayment previously calculated gives a total overpaid of $36,050. The applicants are entitled 18. to an award of damages based upon this overpayment of rent. A claim was made but not vigorously for further consequential losses arising it 15 said because the applicants intended to draw for themselves $80 per week each in wages. They drew the wages until and including November 1983 but thereafter there was insufficient income to enable this to be done. The main effective reason why the applicants were unable to continue to draw wages was because the rent they were paying was too high and to a somewhat lesser extent they were paying too much for goodwill. Had the rent and the payment for goodwill been as I found they should have been it would have been possible at least in the first two years and three months for the wages to have been drawn. The award of damages I am about to make corrects this position and if I were to award further damages as Iam asked to dowith respect to the wages compelled to he forgone the applicants would be compensated twice for the same loss and I should not do this. The applicants ask for interest on any damages awarded and I think they are entitled to this but it is very difficult of calculation. In the first place the overpayments of rent for which they are to be compensated were periodical and to be Precise interest would have to be calculated with respecl Lo each relatively small overpayment making up a total for a different length of time. In the second place if the applicants are to be allowed interest for overpayments they should at least in a notional way pay interest on underpayments. These calculations would be complicated. I toid counsel during final addresses that 1f I came to assess damages I would take a broad axe 19. approach to the matter of interest and there was no dissent from this. I calculate damages on this basis. There was a net overpayment of rent of $36,050 paid with respect to a period from June 1983 to August 1986. Using the rate of 10% as a basis for calculation which seems to me to be appropriate and taking into account the two factors mentioned above, I calculate interest at $7,000. Adding this to $36,050 gives a result of $43,050 and I award damages to the applicants fixed at $43,000 and they must also have their costs of action to be taxed. There remains the somewhat vexed question of who is to pay these damages. The fourth respondent Mischkulnig claims not to be a person involved in any contravention of 5.52 by the first respondent or the second respondent either. In addition to this the first and fourth respondents as a group and the second and third respondents as a group have issued mutual cross claims each group claiming to be entitled to contribution or indemnity from the other. As to the first and fourth respondents their position has been complicated by the fact that towards the end of the trial they ceased to be represented by solicitors and counsel. For what it was worth I gave the fourth respondent leave pursuant to order 9 rule 1{3) to appear for the first respondent as well as for himself in person. The fourth respondent was at something of a disadvantage in this long and complicated matter. At the close of the case for the applicants a submission of no case to answer was made by counsel then appearing on behalf of 'op 20. the fourth respondent. With some difficulty I rejected this submission taking the view that there was evidence upon which a jury properly instructed could conclude that the fourth respondent was a person involved in the contravention of Part V of the Trade Practices Act. I do not withdraw from that decision but nevertheless now that ail the evidence 1s in particularly that of the third respondent and the fourth respondent himself I have reached the conclusion that I should not find the fourth respondent to be a person involved and thus liable to pay damages. In the first place counsel for the applicants almost anvited me to make such a finding and did not in address press his case aqainst the fourth respondent. Evidence in the applicants' case suggested that the fourth respondent might well have furnished information as to turnover and occupancy to Haydon who passed it on to Mr and Mrs Jackson and Philip. Having heard all the evidence I cannot be satisfied that this is so. It seems to me more likely that Connoliy, another director of the first respondent, was the source of such information as to turnover and occupancy as may have been conveyed to Haydon and by him to the applicants. The fourth respondent was a chef by trade and was the director who saw tu the day to day running of the first respondent's motels. Connolly was a former bank manager and was the man who looked after the figures and the bookkeeping. It was to him that the weekly figures were transmitted by the managers of the motels owned by the first respondent including the Myoora. This matier 15 nol [ree from doubt bul 1 cannot be satisfied that the fourth respondent was a person involved in the contraventions by the first and second 21. respondents. The worst that he may have done, and I am not satisfied of this, 1s told Haydon that the motel was doing well. Whereas it 1s true that at the time he may have said this the motel was not doing well during the last completed financial year it had done so. In any event Connolly was the figures' man and Haydon knew it. If Haydon wanted figures or an opinion as to how well the motel was doing Connolly was the one to ask and not the fourth respondent. There will be judgment in favour of the fourth respondent with costs. This leaves the two companies and Haydon. The misleading and deceptive conduct was that of the second respondent and Haydon and the first respondent 1s liable as the principal of the second respondent or put in another way as a person involved in the breach of s.52 by the second respondent. Although as I have said mutual cross claims were launched little evidence was directed to the issues raised by the cross claims and nor were they dealt with properly or almost at all in counsels' addresses and the fourth respondent's address. The recollection of Haydon and Connolly as to what passed between them 1s imperfect and I am quite unable to say either that Haydon was, 50 to speak, an innocent conduit for information passed to the applicants by the first respondent or that he engaged in a "frolic of his own" when passing information to the Jacksons and to Philip. In the circumstances I find myself unable to make any finding on either cross claim and both cross claims will be dismissed with no order as to costs. 22. There will be judgment for the applicants against the first, second and third respondents in the sum of $43,000 and their costs of action to be taxed. I will hear counsel as to any other order which should be made. I certify that this and the preceding pages are a true copy of the Reasons for Judgment of Mr ce Forster, Uf Dated: 3/4 [8% Counsel for the Applicants Mr M. Hoile Solicitors for the Applicants John Goldberg & Co. Counsel for the 2nd & 3rd Respon- Mr B. Beazley dents Solicitors for the 2nd & 3rd Poveys Respondents Counsel for the 5th Respondent Mr N. Minie¢ozzi Solicitorscfor the 5th Respondent Minicozzi Cogan & Co. Mr M.A. Mischkulnig appeared for himself and the lst Respondent