- ™N JUDGMENT No, FAb/ S7 FOR DISTRIBUTION) IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY No. VG 40 of 1986 GENERAL DIVISION BETWEEN: MARLRAY PTY LTD Applicant and WILMINK CONSTRUCTIONS PTY LTD and W. THEUNISSEN Respondents MINUTES OF ORDER COURT: Woodward J. DATE: 18 December 1987 PLACE: Melbourne THE COURT ORDERS THAT: The applicant pay the respondents' costs. (NOTE: Settlement and entry of orders is dealt with in 0.36 of the Federal Court Rules.) IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY No. VG 40 of 1986 wee ww GENERAL DIVISION BETWEEN: MARLRAY PTY LTD Applicant and WILMINK CONSTRUCTIONS PTY LTD and W. THEUNISSEN Respondents COURT: Woodward J. DATE: 18 December 1987 PLACE: Melbourne REASONS FOR JUDGMENT This action arose from the sale of a sub-—newsagency business which included a Tattersalls agency. The applicant purchaser, which is still running the business, alleged that the respondent company, in May 1984, just before a contract was entered into on 1 June 1984, misrepresented its takings and profits. The principal of the applicant company went into occupation on 3 September 1984 after working in the business e with the second respondent for at least two weeks. He said in evidence that the takings seemed to be down at this time but, after speaking to his solicitor he decided to go ahead with the settlement of the contract. A solicitors' letter was sent on 9 October 1984, seeking accurate sales figures for Tattslotto and Soccer Pools for the financial year 1983/84. This was followed over a year later, on 13 November 1985, by a letter of demand, alleging misrepresentation and claiming $96,876 damages. An application was filed in this Court on 11 March 1986 and the matter finally came on for trial on 3 December 1987. On the morning of the fourth and final day of the hearing, after most of the evidence had been given, the applicant's counsel announced that it no longer wished to proceed with the application. However counsel submitted that the applicant should not be ordered to pay the costs of the hearing (and indeed should receive its costs) because an important document - the Respondents' Cash Payments Journal - had not been discovered before being tendered in evidence on the third day of the hearing. After hearing argument, I ordered that' the application be dismissed and I reserved the question of costs. Counsel for the applicant submitted that, had the Cash Payments Journal been produced before the trial, the applicant would have discontinued its action and paid costs re to that point. It therefore becomes necessary to consider whether the book does in fact contain any significant information which was not already available from other sources. In my view it does not. While it is true that it presents evidence of payments more conveniently than do the respondents' cheque butts, which were discovered and tendered, the information is the same for all practical purposes. There are records in the back of the book of amounts said to have been banked on particular days, and these may tend to confirm the general level of receipts of the business (apart from the Tattersalls agency) which were recorded as a weekly total in another book; but many of the bankings are of round sums and, given the primitive nature of the respondents' book-keeping, it would be difficult to reconcile them with takings in any useful way. It is significant that the respondents' counsel did not refer to these records at all in tendering the book. Indeed the respondents' counsel only sought to tender the document as some corroboration of other contemporary records. Analyses of the respondents' figures were prepared by expert accountant witnesses from other records. Counsel for the respondents informed me that the book only came to light, in the possession of a former accountant of the respondents, and was placed in the hands of his instructing solicitors, three days before the trial commenced. r This does not excuse the solicitors, or counsel, who should have made the document available to the applicant's solicitors or counsel promptly after it came to their notice. It may also be that the second-named respondent was not sufficiently careful in informing his solicitors of the books he kept and what might have happened to them. Be that as it may, the book should have been produced by the respondents' solicitors or counsel not later than the eve of the trial. However, in the light of the evidence tendered, I think it is clear that the result would have been the same whether the book was tendered or not. The applicant had failed to make out, in any convincing way, his quite separate case about the Tattslotto representations; and there was clear evidence that the nett profits of the shop business were as represented in the two months period before the representations of "current turnover" per week and gross profit per week were made. It was never alleged that the weekly expenses of the business had been misrepresented - indeed it was shown that in two cases they had actually been overstated by reason of mathematical errors. I think the position can be summarised as follows. The applicant began proceedings with a letter of demand over 14 months after going into occupation of the business. It based its challenge to the represented Tattslotto figures (which constituted just over one quarter of its revised claim for $77,000 as put to the Court) on an analysis of the figures which were available to both sides. On a proper examination it became apparent that the figures - which were expressed in rounded terms - could be justified. There were reasons beyond the control of the parties for a fall-off in the takings of the respondents (and thus, in time, the applicant) after the contract was entered into. So far as the shop takings were concerned, the applicant based its case largely on its own takings, some six months after the period about which representations were made. The application alleged, as one possibility, that the takings had been knowingly misrepresented. Indeed the applicant, to succeed, had to establish in effect that the respondents' weekly entries of total takings were false. These entries were recorded in a book which was discovered to the applicant's solicitors and which provided the basis for the analysis of takings carried out by the accountants called by the respondents. What counsel for the applicant has said to me, in effect, is that it would have pulled out of its action earlier if it had realised the strength of the respondents' defence. This strength became apparent in a number of ways on the second and third days of the trial. In the normal course, costs follow the event. Having considered the submissions on behalf of the applicant, e I find I am not persuaded that the applicant would have discontinued its action had it had access to the Cash Payments Journal before the case began. It may have done so, but I cannot be confident that it would have. The book in question is in no sense crucial to the applicant's case; indeed, I did not see its introduction as having any noticeable effect on the strength of that case. The most that can be said with confidence is that it was, to the applicant and its advisers, the final straw which broke the back of an already tottering camel. I am not persuaded that it would have had the same effect at the outset of the hearing. The applicant should therefore pay the respondents' costs. I certify that this and the five (5) preceding pages are a true and accurate copy of the Reasons for Judgment herein of The Hon Mr Justice Woodward (a Associate Dated: 18 December 1987 Counsel for the Applicant: Mr F Davey Solicitors for the Applicant: Messrs Abrahams, Meese & Co. Counsel for the Respondents: Mr G. Ritter & Mr A Zilinskas Solicitors for the Respondents: Messrs Doyle & Kerr