«S0DGMENT No. ssp 8 IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QLD. No.G32 of 1985 ~ere vw BETWEEN : NEVILLE JOHN OLIVE and JOHANNA CATHERINA OLIVE Applicants WESTPAC BANKING CORPORATION First Respondent KEVIN 0' LEARY Second Respondent AND: SALVATORE SCIACCA and VINCENZA SCIACCA Third Respondents SPENDER J. BRISBANE 16 OCTOBER 1987. REASONS FOR JUDGMENT This is an application, principally under the provisions of the Trade Practices Act 1974, ('the Act') in respect of the sale and purchase of the leasehold of the Sportsman Hotel at Charleville. The third respondents, Salvatore and Vincenza Sciacca, ('the Sciaccas') were at all material times the owners of that hotel. In approximately early July 1983, the Sciaccas and the applicants, Mr. and Mrs. Olive, entered into a leasehold contract that the Sciaccas would lease the premises to the Olives for a period of ten years. The price for the leasehold was $75,000, and the weekly rent $550 initially. The contract was subject to the execution of a satisfactory lease. The Sciaccas had placed the hotel with Earl Meredith & Co. Pty. Ltd., a hotel broker. The Sciaccas admit that that company introduced the Olives to the Sciaccas, and was the agent of the Sctaccas for the purpose of that introduction and for the purpose of receiving the deposit pursuant to the leasehold contract but deny that it was their agent for any other purpose, in particular in respect of representing the trading capacity of the hotel. The evidence establishes Meredith & Co. Pty. Ltd. was a trading corporation, and it, on behalf of the Sciaccas, made representations concerning the trading performance of the Sportsman Hotel to the applicants, through one of 1ts employees, a Robert Cowan. This information had been provided to it by the third respondents. On about 27 July 1983, the Olives and Sciaccas executed a lease in writing, whereby the Sciaccas demised the premises and the business of the hotel to the Olives for a period of ten years from 15 August 1983 for a rental of $2,393.33 per calendar month, payable monthly in advance on the fifteenth day of each month, and subject to increases provided in the lease. va Westpac Banking Corporation (Westpac) is a trading and a financial corporation and was the banker for the Olives, and also for the Sciaccas. Mr. O'Leary, the second respondent, who was the Manager of the Sunnybank Hills Branch of Westpac, was a servant of the first respondent. In connection with the purchase of the leasehold, there were discussions between, in particular, Mr. Olive and Mr. O'Leary concerning some of the financial aspects of the operation of the hotel business conducted by the Sclaccas. The pleadings have undergone many amendments. In particular, the dates of various events in the applicants' case have undergone significant changes. The final amendments to the Statement of Claim, which dealt with these aspects, were made after the case for the applicants and the case for the first and second respondents had closed. Even in their final form, the pleadings do not reveal the precision one would expect. The substance of the application 1s that the conduct by Mr. O'Leary (and therefore by Westpac) constituted contraventions of ss.52(1), 53(e) and (g), and 59(2) of the Act or, alternatively amounted to negligent mis-statement. The applicants further say that the conduct concerning the making of representations by the employee of Earl Meredith & Co. Pty. Ltd. and the representations by Mr. Sciacca amounted to s.52 conduct. While it is by no means clear from the pleadings (as will appear), the case proceeded on the basis that the representations by the corporate agent constituted conduct by a corporation in trade or commerce in contravention of s.52 and that the third respondents were, pursuant to s.75B of the Act, parties to that contravention. The defence of the third respondents filed on 19 December 1985 pleaded: "Neither of Salvatore Sciacca and Vincenza Sciacca (hereinafter called 'the third respondents') is a corporation and the third respondents object to the Plaintiffs' amended Statement of Claim on the ground that it raises no claim against them or either of them which is within the jurisdiction of this Honourable Court to hear and determine." However, in the defence to the further amended statement of claim, filed on 13 March 1986, that paragraph is omitted. There is a further alternative pleading of fraud against both Mr. O'Leary and Mr. Sciacca and it is further pleaded that the hotel broker made fraudulent representations. The applicants went into possession of the hotel pursuant to the lease in August 1983 and abandoned the hotel on 29 April 1984. The applicants claim damages. If liable to pay damages to the applicants, the Sciaccas seek to set-off damage to the goodwill of the hotel, their expenses in retaking possession of the hotel, the expenses of the manager until such time as they were able to find a further tenant for the hotel (which did not occur until 10 September 1984 and then only at a reduced rental), and further a liquidated set-off for the amount unpaid for stock and freight pursuant to the lease, and the amount of three months unpaid rental. Westpac cross-claims against the Olives for amounts of principal and accumulated interest under the loan agreement entered into on 5 August 1983, in respect of a loan agreement dated 2 November 1983, and in respect of a personal loan of 83,000 advanced to the applicants pursuant to an application dated 11 August 1983. It will be convenient to deal first with the various causes of action alleged by the Olives against Westpac and Mr. O'Leary and then with the various causes of action alleged by the Olives against the Sciaccas, but before turning in detail to those matters, there are some general observations concerning the evidence in this protracted hearing which should be made. On a detailed analysis of the evidence of Mr. Olive, by reference to his evidence as opened, his evidence in chief, his cross-examination and a statement which was tendered 1n evidence (exhibit 32), there are a number of significant inconsistencies in those various versions. Many aspects of his evidence are inherently improbable, and in general in my view his version of events is unreliable. Moreover, his present complaints are quite at odds with earlier documents he brought into existence, including letters he wrote concerning his lease of the Sportsman Hotel, also with an advertisement he lodged concerning a proposed sale by him of the lease and the various material he supplied to a number of agents in respect of the gale of the business. There are significant issues which involves chronology. In the resolution of those issues I place considerable reliance 6. on documents which are sworn to be contemporaneous. Those documents suggest a timetable inherently more likely than that contended for by the Olives. In particular, I have had regard to the diary notes sworn by Mr. O'Leary as having been made by him on the 19 July 1983, and the report in this case prepared by Mr. Hawkins dated 15 July 1983. I think it significant that in the letter of 1 March 1984 (exhibit 23) the complaints contained in 1t are directed solely against Mr. Sciacca. There is no suggestion in that letter that at that time he had any aggrievance concerning his treatment by Westpac or Mr. O'Leary, save for that the then manager reported that the business could be a sound, viable business. So far as Mrs. Olive was concerned, in my opinion she also was unreliable. The confident and precise recollection of a telephone conversation she says she had with Mr. O'Leary is to be contrasted quite markedly with the fragility of her recollection concerning other material aspects of the cage. So far as the evidence of Mr. Sciacca 1s concerned, he also struck me as unreliable and in his case also [I much prefer to rely on what documentary matertal is pertinent to his evidence. Mr. Cowan, who was opened as a witness for the applicants but was not called in their case, was called by counsel for the third respondents and gave evidence in their case. Mr. Cowan, while garrulous, impressed me as aman of patent honesty and I am prepared to rely on his evidence. In particular, I am satisfied that, the information contained in a listing document (exhibit 981) having details as to performance of the Sportsman Hotel was information obtained by him from Mr. Sciacca in response to the possible purchase by the Olives of the leasehold of that hotel, and that that material was either orally communicated to Mr. Olive or the document itself containing that information shown to him, prior to his speaking to Mr. Sciacca on the first occasion. Cowan impressed me as candid, perceptive and honest. By way of example, he said: "T was not overimpressed with Mr. Sciacca as a publican, I think mainly because of his age, and he and his wife were not young people. I thought a younger person, a more dynamic person such as Olive could have done a lot to improve the place, especially if they had late night trading for about six nights a week and Sciacca was only operating the disco for one or two nights a week and at that time there were no other discos in Charleville." I similarly accept Mr. O'Leary as an honest and reliable witness. IT accept that his diary notes truthfully record when they were made and the substance of the conversations, and prefer his account of the timing of events to that suggested by Mr. and Mrs. Olive. Mr. O'Leary properly qualified his evidence when his recollection did not permit him to make a positive statement. He did not overstate the position and in my opinion, his account 185 to be preferred in matters of conflict to the account of either Mr. Olive or the account of Mrs. Olive. The overview I have of the time of the Olives' lease of the Sportsman Hotel is that Mr. Olive was, for quite some time in the earlier part of his occupancy, content with how things were going. He implemented changes from the way the hotel had previously been operated; competition emerged in respect of the 8. disco clientele which had an effect on takings, and the disco was eventually discontinued; staff were employed which previously had not been the case; importantly, an aircraft which was incurring fixed costs of the order of $§400 per week and was not earning anything like the amount it was costing, was significantly effecting the cash flow position. The overall financial position of the Olives deteriorated, leading ultimately to their abandonment of the hotel in April 1984. Consequent upon that, it was only after demand was made by the bank in respect of the Olives' indebtedness to it, that blame was attempted to he placed on others leading to these present proceedings. The Applicant's Case Against Westpac and Mr. O'Leary The last Amended Statement of Claim puts the case against Westpac and O'Leary in this way (the numerous typographical errors are not reproduced): "ll. On either the 18th or 19th July 1983 the Second Respondent represented to the female Applicant that, with respect to the said hotel:- (a) he had received a good report from the First Respondent's Branch Manager at Charleville; and (bd) in the First Respondent's opinion, it was a good business if both Applicants are prepared to work hard. 12. On or about the 19th July, 1983 the Second Respondent represents to the male Applicant at the first Respondent's Branch at Sunnybank Hills, Brisbane in the State of Queensland, that with respect to the said hotel:- (a) the First Respondent's Branch Manager at (b) (c) 9. Charleville had stated that if both the Applicants were prepared to work, it would be 'a sound viable business'; the First Respondent had assessed that the Applicants could meet their financial commitments if they borrowed from the First Respondent to purchase the lease and business of the said hotel; the Applicants should nett $600.00 to $700.00 per week from the said business after living off the business and meeting all commitments." It is alleged that the applicants were induced by those representations to proceed with the leasehold contract and enter into loan arrangements with Westpac and enter into the lease. Those representations were alleged to be false in that: "(i) (3) (k) (1) It alleges the said hotel did not constitute a good business; the said hotel was not a 'sound viable business'; the Applicants could not meet their financial commitments by undertaking the business of the said Hotel; the Applicants did not nett $600.90 to $700.00 per week after meeting all commitments." that those representations were material. It alleged they were made fraudulently: "(a) It further alleges: in that the Second Respondent made the representations ... well knowing that they were false or, further or alternatively, made them recklessly, not caring whether they were true or false". 1S vata 10. "19. The Second Respondent knew that the representations, ... were false, or was reckless as to their accuracy, as: (a) he was in possession of information which referred to a sum of $3,650.00 per week as 'proceeds hotel'; (b) he included false and inaccurate information in the applicants' personal loan application form with the Second Respondent; (c) he provided the First Respondent's assessment of viability of the said hotel's business which assessment was based upon the First Respondent's Charleville Branch's records." It further alleges: "20. The Second Respondent's conduct in making those representations:-— (a) was misleading or deceptive within the meaning of Section 52 of the Trade Practices Act; (bD) was misleading or deceptive within the meaning of Sections 53 (e) and (g) of the Trade Practices Act; (c) was misleading or deceptive within the meaning of Section S59 (2) of the Trade Practices Act; (d) constituted false and misleading statements concerning the profitability and viability of the said hotel business and false and misleading statements concerning the Applicants' financial situation and prospects, and were made in connections with promotion and negotiation of a loan by the First Respondent to the Applicants. 21. Further or alternatively, at all material times prior to the 27th July, 1983:- (a) the Applicants were clients of the First Respondent; (b) the Applicants were negotiating with the First Respondent a loan for the purpose of purchasing the lease and business of the said hotel; (c) in the premises,' the First Respondent was under a duty of care not to make any negligent representations or mis-statements to the ll. Applicants with respect to the said loan." The applicants allege: "22. In breach of the duty referred to in paragraph 21 (c) hereof, the First Respondent by and through the Second Respondent made the false representations and statements set forth in paragraphs 11 and 12 hereof." It further alleges that: "As a result of the Second Respondent' s misrepresentations, breaches of statutory duty and negligence ... the Applicants have suffered loss and damage, in that:- (a) they became the lessees of a Hotel business which was substantially less valuable than it would have been if 1t were as represented; (b) they have incurred more substantial debts to the First Respondent than they would have if the business were as represented." The applicants claim an order directing the respondents to pay the amount of the loss or damage suffered by the applicants because of their conduct, and further or alternatively damages for fraud, breach of statutory duty and negligence as particularized in the statement of claim dated 1 May 1985. It is unnecessary to set those particulars of damage out in full, but they total approximately $1.25 million including more than half a million dollars for damages to credit and reputation, injury to the earning capacity of Mr. Olive of some $300,000 as well as other amounts. 12. For present purposes, I put to one side the solicisms in the pleading and in particular, will take the reference to the second respondent's conduct as constituting misleading or deceptive conduct within the meaning of 3.52 as properly to be regarded as allegations of conduct by Westpac, a corporation, in trade or commerce; similarly in respect of the other trade practices contraventions alleged. Dealing with the allegation of negligence, the duty of care in a banker customer relationship would seem properly to be characterised as contractual rather than tortious: see Tai Hing Cotton Mill Ltd. v. Liu Chong Hing Bank Ltd. £19853 2 All E.R. 947 at 957 per Lord Scarman. The duty is alleged to be a duty not to make negligent misrepresentations or misstatements to the applicants "with respect to the said loan". The representations specified in para.ll and 12 of the Statement of Claim, while having a connexion with the grant of a loan by Westpac to the Olives are not representations "with respect to the said loan". The gravamen of the Olives' complaint concerns the trading performance and likely profitability of the hotel. The representation pleaded is that after living off the business and meeting all commitments, there would be available to the applicants $600 to $700 per week. A representation to this effect was deposed to by Mr. Olive in his evidence, but a quite different representation, namely that there would be from the operation of the hotel a surplus of some $600 to $700 with which to meet their financial commitments, was the evidence as opened, and which was echoed in an earlier statement of Mr. Olive. Mr. 13. Olive, in giving his evidence in chief, has said that O'Leary, discussing the report received from Charleville, said: "It is no gold mine, but if you both work - and you are going to have to work hard there is between $600.00 - $700.00 nett after you meet your commitments and live off the business". Mr. Olive's evidence, as opened, was that O'Leary said to him: "There 1s no fortune in it but if you both work probably 100 hours a week you will nett in the vicinity of $600.00 to $700.00 after living off the business and that was adequate to meet your commitments." In Mr. Olive's statement, exhibit 32, O'Leary is recorded as having said: "That if both worked probably 100 hours per week they would nett $600.00 to $700.00 per week after living off the business which was adequate to meet all their financial commitments". The statements or representations alleged, in my opinion, were not made. I accept the account of O'Leary as to what occurred ina discussion between Mr. Olive and O'Leary on receipt of the report (exhibit 1) dated 15 July 1983 from Mr. Hawkins of the Charleville Branch of Westpac. I accept that O'Leary made hand written notes. There was no motive for Mr. O'Leary to be otherwise than frank and truthful to these customers. Mr. Olive, in his evidence, says that on the first meeting with O'Leary he told him that the takings were $4,000 to $4,500 per week. This is inconsistent with the allegations of takings now relied on by Mr. Olive, but it fits in with the report from Mr. Hawkins of the 15 July and with O'Leary's notes. The general account of O'Leary 14, is also supported, in my opinion, by the other letters relevant to this matter, the letter of the 3 August 1983 from the Regional Office, and the letter of the 2 August 1983 from Mr. Olive (exhibit 21) and even his further letter of the 1 March 1984 (exhibit 23). The report by Mr. Hawkins, then the Westpac Manager at Charleville, included this passage: "Initially we would be very pleased to see sale of the lease go through if only to see the responsibility for the debt transferred to people who would be more reliable and with better business sense than our existing customers." The statement inthe report, "We have had no cause to obtain trading figures for the hotel 1n recent years because the only advances we provided were self-clearing from sale of property" concealed that Westpac had been seeking trading figures from Mr. Sciacca without success for some considerable time. The report contains this statement: "Weekly bankings are now back toa level between $3,400 and $4,200 and we have no doubt that an enterprising publican using better credit control could lift the takings. License fee of $6,242 for year ending 30.6.82 proves sales in excess of $210,000 and as this result seems to be being achieved now, and until they can supply you with 30.6.83 figures this will appear to be a wise figure on which to base ability to service." The report, importantly, states: ar "Our own opinion is that if Mr. and Mrs. Olive will work the hotel and be resident therein, thus 15. keeping wages to a minimum and malpractice being avoided, then it is quite a viable proposition with a debt load of around $40,000." The opinion expressed that the business is quite a viable proposition was subject to qualifications as to being worked by Mr. and Mrs. Olive and also that the debt load would be around $40,000. That was the opinion conveyed to Mr. Olive. It has not been shown that this opinion was not honestly entertained or that it was, in any way or sense, false. In fact the Olives paid wages to other staff as well as to relatives, and also paid outgoings of about $400 per week in respect of the aircraft from the proceeds of the business, without deriving any significant return by way of use of the aircraft. The business of the hotel had in fact been "merged" with the business of the aircraft. The conclusion that the representations alleged were not made is also fatal to the claims under the Act. So far as the liability of Westpac and O'Leary pursuant to the various sections of the Trade Practices Act 1974 relied upon, so far as s.52 15 concerned, I proceed on the correctness of the following propositions: (a) A corporation may be in contravention of Section 52 whatever its intention or the state of mind of those controlling it may be: Hornsby Building Information Centre Pty Ltd v. Sydney Building Information Centre Ltd (1977) 140 C.L.R. 216; Parkdale Custom Built Furniture Pty Ltd,v. Puxu Pty Ltd (1981) 149 C.L.R. 191; the question is whether the statement in fact contains or conveys a meaning which is false, that is to say, 16. whether the statement contains or conveys a misrepresentation: Global Sportsman Pty Ltd & Anor v. Mirror Newspapers Ltd & Anor (1984) 55 A.L.R. 25 at p.30. (b) A prediction or statement of opinion does . involve the state of mind of the maker at the time the statement is made: Lyons v. Kern Konstructions (Townsville) Pty Ltd (1983) 47 A.L.R. 114; Global Sportsman v. Mirror, supra, at p.31, in that such a statement ordinarily conveys the meaning that the maker of the statement has a particular state of mind and that there is a basis for that state of mind. (c) That a prediction proves inaccurate or that an opinion is proved to be incorrect does not of itself establish that the maker did not hold the particular view or that it lacked adequate foundation: Global Sportsman v. Mirror supra, at p.30; Australian Ocean Line Pty Ltd v. West Australian Newspapers Ltd & Anor (1984-85) 58 A.L.R. 549 at p.581; or was recklessly indifferent as to what was stated: Bill Acceptance Corporation v. G.W.A. Ltd (1983) 50 A.L.R. 242 at p.247. (d) An expression of opinion identifiable as such conveys no more than that the opinion expressed is held and that there 1s a basis for that opinion: however erroneous, such an expression of opinion misrepresents nothing: Global Sportsman v. Mirror, supra, p.3l. Assuming, contrary to the observations earlier made, that the applicants are relying on the statement in the report by Mr. Hawkins dated 15 July 1983 that, if the Olives will work the hotel and be resident therein, the hotel "13 quite a viable proposition with a debtload of around $40,000" the matter is clearly one of opinion and is not to be regarded, in my view, as a guarantee ora warranty. In my opinion, it has not heen established that either Mr. Hawkins, who was the author of the opinion, but against whom it was not alleged that he did not believe it to be true, nor Mr. O'Leary, did not believe the opinion to be true. Iam far from satisfied that the evidence 17. shows that there was no adequate basis for that view. The evidence, in my view, suggests quite the contrary. In January 1984, Mr. Olive advertised the business for sale and placing the leasehold of the hotel with a number of agents. The advertisement, inter alia, stated "This business will show in excess of $1,000 per week for genuine hard effort". For the 20 week period from 15 August to 31 December 1983, the material supplied by Mr. Olive showed an income in excess of $83,000, a gross profit of $44,000 and a nett weekly profit in excess of $1,000. The other sections of the Trade Practices Act relied upon in my opinion are not applicable. The evidence does not make out a case concerning the price of the relevant services, that is to say the cost of the loan; similarly, in my view, there was no invitation by Westpac to the Olives to engage in a business activity requiring the performance by the Olives of work or the investment of moneys. Any invitation to any "business activity" was effected by others. In my opinion, none of the causes of action alleged against Westpac or O'Leary has been made out. The Applicants' Case against the Third Respondents The case of the applicants, as ultimately pleaded, against the third respondents appears from the last Amended 18. Statement of Claim: "7. On or about the 30th June, 1983 the Third Respondents by their said agent the said EARL MEREDITH AND CO. PTY LTD., by its servant or agent, one ROBERT COWAN, represented to the Applicants that, with respect to the said hotel:- (a) the weekly turnover was $5,000.00; (b) the annual licence fee was $6,600.00; {c) as a 'rule of thumb' the gross profit margin was 50 per cent to 55 per cent of takings; (d) there was no outstanding requisitions in relation to the premises; (e) an average of eight 18 gallon kegs of beer were used in the business per week; (f) freight costs were $200.00 per month; (g) 150 cartons of beer were sold per week. 8. Further, on or about the 30th June, 1983, the male Third Respondent represented inter-alia, by way of telephone communications to the applicants that, with respect to the said hotel:- (a) the current turnover was being maintained at $5,000.00 per week; (b) because of its increased trade the licence fee for the year ending 30th June, 1983 could be expected to rise to between $8,000.00 and $9,000.00; (c) a 'Trading Statement' produced to them accurately represented the sale and profits of it for the year ended 30th June, 1982. 9. The Applicants were induced by the representations set forth in paragraphs 7 and 8 hereof to enter into the "Leasehold Contract" referred to in paragraph 5 hereof. 10. On or about the 7th July, 1983 the male Third Respondent represented to the male Applicant at the said hotel premises that, with respect to the said hotel:- (a) he had no notion or reason to expect any requisitions in relation to it; (b) Friday and Saturday night "Discos" were 19. conducted with door takings, over and above the weekly turnover, of $400.00 to $500.00." Paragraph 14 provides, in part: "The representations set forth in paragraphs 7, 8, 10, ... hereof were false in that:- (a) the weeky turnover of the said hotel prior to 7th July, 1983 had been not more than $3,600.00; {b) the weekly turnover of the said hotel did not exceed $3,600.00 after the Applicants had entered into possession of it: (c) many repairs were required to be effected to the hotel premises, plant and equipment; (d) the gross profit margin was not 50 per cent to 55 percent of takings; (e) sales of alcohol were not to the extend (CsicJ represented: (f) freight costs exceeded $200.00 per month; (g) the 'Trading Statement' did not accurately represent the sales and profits of the said hotel for the year ended 30th June, 1982: (h) Friday and Saturday night 'Discos' were not regular nor did they achieve door takings of $400.00 to $500.00". Paragraph 15, inter alia, alleges the materiality of those representations. Paragraph 16 alleges they were made fraudulently: "(b) in that the said EARL MEREDITH AND CO. PTY. LTD., made the representations referred to in paragraph 7 hereof well knowing that they were false or, further or alternatively, made them recklessly, not caring whether they were true or false; t (c) in that the male Third Respondent made the representations referred to in paragraphs 8 20. and 10 well knowing that they were false or, further or alternatively, made then recklessly, not caring whether they were true or false." Paragraph 17 is in these terms: "At all material times the male Third Respondent:- (a) (b) (c) (d) "18. was at all material times prior to the i5th August, 1983 one of the co-proprietors and one of the lessees of the said hotel; was at all material times prior to the 15th August, 1983 the licencee of the said hotel; in the premises, aided and further or alternatively abetted the said EARL MEREDITH AND CO. PTY. LTD. in the making of the representations referred to in paragraph 7 hereof; further or alternatively, in the premises, was directly or indirectly knowingly concerned in the making of the representations referred to in paragraph 7 hereof." In the premises, the male Third Respondent's conduct in making the representations set forth in paragraphs 8 and 10 hereof, and the Third Respondent's conduct, by their said agent, EARL MEREDITH & co. PTY. LTD. in making the representations set forth in paragraph 7 hereof:- (a) (b) (c) "23. was misleading or deceptive within the meaning of Section 52 of the Trade Practices Act ; , was misleading or deceptive within the meaning of Section 59 (2) of the Trade Practices Act; constituted false and misleading statements concerning the profitability, viability, plant and equipment of the said hotel business and premises, and were made in connection with the promotion and sale of the said hotel lease and business." Further or alternatively, the said EARL MEREDITH AND CO. PTY. LTD. in acting as the Third Respondents' agent in relation to the sale of the said hotel's lease and business, was under a duty:- (a) not to make to the applicants any statement or representations that was false or misleading 21. concerning the said Hotel (Auctioneers and Agents Act - Section 65); (b) to carry out the transaction without exaggeration, concealment, or any form of deception or misleading representations (Code of Professional Conduct of Auctioneers and Real estate Agents) made under the provisions of the 'Auctioneers and Agents Act'." Probably by omission, paragraph 24 of the further amended statement of claim filed 3 April 1986 (which alleges that the third respondents agent made the representations in paragraph 7 of the statement of claim 1m breach of the duties referred to in paragraph 23) is omitted from the last Further Amended Statement of Claim. The last Statement of Claim does claim: "... aS aresult of the male Third Respondent's misrepresentations and breaches of statutory duty and as a result of the Third Respondents' misrepresentations and breaches of duty... Cby] their said agent, EARL MEREDITH AND CO. PTY. LTD. the Applicants have suffered loss and damage, in that:- (a) they became the lessees of a Hotel business which was substantially less valuable than 1t would have been if it were as represented; {b) they have incurred more substantial debts to the First Respondent than they would have if the business were as represented." The case as pleaded has serious difficulties. In terms, paragraph 18 does not allege any contravention of the Trade Practices Act so as to found an action for damages under 5.82. Paragraph 8 speaks of communication by "way of telephone communications", yet 8(c) refers to the production of a "Trading Statement" for the year ended 30 June 1982. It is the third respondents' case that whatever | was represented by Mr. Sciacca, it was mot done over the telephone. This much, at least, I 22. accept of Mr. Sciacca's evidence. As earlier indicated, I find that the representations that Cowan made to Mr. Olive concerning the Sportsman Hotel at Charleville are contained in the listing sheet which became exhibit 81. In particular, the representation as to takings represented as averaging $4,000 per week plus $400 cover charges, the beer sales were represented as 5 x 18 per week, with one pallet of quart bottles and one pallet of stubbies being sold per week. Freight was shown at $200 per month. A letter from the Licensing Commission dated 22 July 1983 indicates that "there are no outstanding requisitions", the license fee for the last financial year was $6,242 and Mrs. Sciacca was the licensee. The only representation alleged in paragraph 7 which I find made by Mr. Cowan, was that concerning freight costs of $200 per month. It is said that this representation was false in that "freight costs exceeded $200 per month". In my opinion, the evidence is insufficient to establish the falsity of this representation. First, the evidence of falsity seems to be based on the fact that after the Olives became lessees of the hotel, the freight costs were greater than $200 per month. Such experience, if it was the case, does not necessarily or of itself, establish the falsity of the representation relied upon. Moreover, Mr. Olive on 2 August 1983 wrote to Mr. OQ'Leary on the question of freight rates. Mr. Olive said in part, 23. "TI am enclosing photocopies of profit and loss statements for two other western Queensland hotels which are more remote from Brisbane and are purchasing more supplies from the breweries. The statement for Scott at Blackall realistically shows freight at $1,740.00. The Simpson Hotel at Longreach shows freight at $1,216.00 ..." Each of these figures, of course, 1s under $2,400 per annun. It has not been established that this representation as to freight was false. In addition this representation, in my view, was not a substantial and operative factor in inducing the Olives to enter into the lease of the Sportsman Hotel. As to the representations said to have been made by Mr. Sciacca, it 1s a curious feature, and one directly relevant to the reliability of Mr. Sciacca's evidence that Mr. Sciacca denied in the witness box that he ever represented the takings as $4,500 to $5,000 per week, yet the defence of the third respondents says that: ",.. prior to 7th July 1983, the male third respondent represented to the applicants that, with respect to the Hotel: (a) the takings of the Hotel were in the order of $4,500.00 to $5,000.00 per week; (b) the license fee would probably increase in the following year and that it might increase up to about $7,000.00; (c) a daily takings book produced to the applicants for their perusal accurately represented the takings of the hotel." Concerning the conversation with Mr. Sciacca, it was put to Mr. Olive: "You are not disputing with me that what he said 24. was $4,500 to $5,000 per week was the range of takings?" and Mr. Olive replied: "Yes, I will accept that." This, of course, is to be contrasted with the representations pleaded. I am satisfied that there was no representations made over the telephone such as are alleged in paragraph 8, and as to what is alleged to have been said at Charleville by Mr. Sciacca, as appears in paragraph 10 of the final Statement of Claim, those statements have not been shown to be misrepresentations. There is, however, a more fundamental obstacle to recovery by the Olives of damages against the Sciaccas. The sequence of events was that in late June Mr. Olive had discussions with Mr. Cowan and then spoke with Mr. Sciacca, and either on that day, or the day following, signed a written contract, unconditional but subject to the execution of a satisfactory lease. It 1s dated 7 July 1983, but 1t was probably executed by the Olives on the 30 June 1983. Subsequent to that, Mr. Olive inspected the hotel and was happy with it, but on Saturday, 9 July that contract came to an end asa result of a disagreement between the proposed lessors and lessees as to the obligation in respect of external painting. Mr. Olive, in his evidence, said that he considered that at that time he was "out". He says that he later "re-activated the matter". On the general question . of inducement of any representations by Mr. Cowan, or Mr. Sciacca, inducing the entry into the lease by the Olives, it is necessary to set out some 25. part of the evidence of Mr. Olive. In the course of cross-examination by Mr. Keane, counsel for Westpac, Mr. Olive said that: ".,.the reason I was in that thing is as a result of the bank's representations regarding the nature of the business, that it was sound and viable, and that there was $700 a week net in it for me. That is the reason I was there." Mr. Keane asked, "No other reason?" "No other reason in the world was I there, only that reason." "You had forgotten about what the Sciaccas had told you?" "Yes." "You did not rely at all om what the Sciaccas had said?" "When I made my decision to proceed with the contract and endeavour (sic) to renegotiate it, I was not relying upon anything the Sciaccas had said." ',..if the position be that (if) you are to have any form of relief at all against the Sciaccas you have to say that you relied on something the Sciaccas said, or their agents told you. If that be the position, then is it your clear, unequivocal, deliberate evidence that you relied not a wit on anything the Sciaccas told you?" "To proceed with the contract, that is correct. I relied completely upon what Mr. O'Leary told me and nothing else." "And do you say that what the Sciaccas earlier told you was entirely irrelevant to your decision to go on?" "At that point in time, exactly." Mr. Crowley Q.C. attempted to retrieve the situation somewhat in re-examination. He asked, "Would you be kind enough, 26. please, to tell the court of all the matters, of all the things which were in your mind, and which prompted you to reach a decision, after you had seen O'Leary, to try to have the contract reinstated?" Mr. Olive said: "I considered his remarks that it was a sound and viable business, and [ had in mind at that time that my understanding of the turnover was $5,000 per week, with additional sums, and that we were looking at a licence fee of $8,000 to $9,000 per week. This thing that was in my mind was that I was going to be able to overcome my financial difficulty and I would have $600 to $700 a week as an income." "You talked about a licence fee of $8,000 to §9,000. JI think you used the term a week, did you not. What did you mean by that?" "The yearly licence fee was going to be $8,000 to $9,000 per year." In my opinion, it is impossible in the light of the answers given by Mr. Olive to be satisfied on the balance of probabilities that any representations by Mr. Cowan or by Mr. Sciacca were operative factors in his decision to reactivate the matter. The applicants' claims against the respondents are dismissed with costs to be taxed. As to the cross-claim of the first respondent, the making of the loans was not in issue. Westpac made demand by letter dated 22 June 1984 for $57,745.54, made up of $46,459.31 under the fully drawn loan account, $7,982.75 under an ordinary account and $3,303.48 under a personal loan. $32,466.63 was 27. later received pursuant to the realisation of securities by the bank. I accept the schedule (exhibit 74) prepared by Mr. McDonnell of Westpac as correctly showing the indebtedness of the applicants to Westpac as at 4 November 1986. I give judgment on the cross claim in the sum of $44,013.40, plus an amount for interest calculated in the following way: (i) $14.29 per day from 4 November 1986 until today, being the interest on the fully drawn advance. (ii) $6.40 per day from 4 November 1986 until today, being the interest on the working account, with costs to be taxed. The third respondents pleaded a set-off constituted by the loss and damage to the goodwill of the hotel and the extra costs and expense of having to employ a manager until such time as a lessee could be found, and then only at a reduced rental. In addition, they claim a liquidated set-off constituted by the amount due pursuant to the lease agreement for stock and freight, and unpaid rental for three months, totalling $10,697.72. There is no cross-claim for damages. Since, in my view, the applicants id 28. are not entitled to anything against the third respondents, it is unnecessary to set-off any amounts pursuant to those claims. | certify that this and theQ] preceding pages are a true copy of the reasons for judgment herein of His ue Mr Justice Spender Vale. ibfrefert "Associate Dated