A, " ™ YUDGMENT No. 734/37, CATCHWORDS TRADE PRACTICES - Sale and purchase of motel business - awards of damages by trial judge for overpayment of goodwill and excessive rent - whether awards made pursuant to s.82 or s.87 - order pursuant to s.87(2)(c) to "refund" overpayments of rent - such overpayments to be refunded by person who received those moneys. Trade Practices Act 1974 s.6(3)(a), 52, 82, 87 Federal Court of Australia Act 1976 s.51A ROGER HAYDON and OXFORD ESTATES PTY. LTD. Appellants - and - GREGORY JOHN JACKSON, BARBARA JACKSON, PETER JOHN JACKSON, TRACEY ELLEN JACKSON, PHILIP GREGORY JACKSON and JOSEPHINE JACKSON First Respondents - and - MARTIN ANTON MISCHKULNIG Second Respondents - and - MYOORA NOMINEES PTY. LTD Third Respondent Coram: Fisher, Lockhart & Pincus JJ. Adelaide 23 December 1987 VWs ¥ IN THE FEDERAL COURT OF AUSTRALIA ) ) SOUTH AUSTRALIA DISTRICT REGISTRY ) No. G56 of 1987 ) GENERAL DIVISION ) ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: ROGER HAYDON and OXFORD ESTATES PTY. LTD. Appellants - and - GREGORY JOHN JACKSON, BARBARA JACKSON, PETER JOHN JACKSON, TRACEY ELLEN JACKSON, PHILIP GREGORY JACKSON and JOSEPHINE JACKSON —— First Respondents - and - MARTIN ANTON MISCHKULNIG Second Respondent - and - MYOORA NOMINEES PTY. LTD. Third Respondent MINUTES OF ORDER JUDGES MAKING ORDER WHERE MADE DATE OF ORDER FISHER, LOCKHART & PINCUS JJ. ADELAIDE 23 DECEMBER 1987 THE COURT ORDERS THAT: 1. The appeal be allowed for the purpose of deleting from the order of 3 April 1987 - (a) that part thereof which provided that judgment be entered for the applicants against the second and third respondents in the sum of $43,000. 2. proposing to vary the orders of the trial judge I should state my own reasons in this regard. I am however not required to restate the basic facts in the matter but can adopt the statement of Pincus J. in this regard. I agree with what Pincus J. says on the question of the liability of Roger Haydon and Oxford Estates Pty. Ltd. (the appellants) except that I would be prepared to accept the trial judge's finding that Roger Haydon ("Mr. Haydon") contravened s.52 of the Trade Practices Act 1974 ("the Act") by virtue of the provisions of sub.s.6(3)(a) of that Act. I acknowledge that a contention to this effect was not made clear by the pleadings. However counsel for the first respondents ("the Jacksons") raised the matter ona number of occasions during the hearing. The trial judge indicated that he thought that the pleadings should be amended. However, notwithstanding the fact that they were not amended, counsel for the Jacksons presented thereafter argument and evidence, as well as submissions in his final address, without any objection being raised by opposing counsel. In my opinion if such objection had been taken it would have been open to the trial judge, even as late as the time he delivered his reasons, to permit, subject to questions of costs, the Jacksons to amend to plead reliance upon sub.s.6(3)(a} of the Act consequent upon the conduct of Mr. Haydon involving the use of telephonic services. I refer to the like approach of Toohey J. in Hogarth Galleries Pty. Limited v. City Automobile Holdings Pty. Limited an unreported judgment delivered in Perth on 27 March 1986. 3. It follows that in my opinion Myoora Nominees Pty. Ltd. ("Myoora"), Mr. Haydon and Oxford Estates Pty. Ltd. ("Oxford Estates") each contravened s.52 of the Act and each was potentially liable to be ordered to compensate the Jacksons for their losses. The more difficult aspect relates to the consequences in the complex circumstances of the matter, including complexities which arose during the trial, of these findings on liability. Furthermore the extent of the losses claimed by the Jacksons fluctuated during the hearing. Difficulties arose both in assessing the quantum of the losses and the most appropriate manner in which to compensate the Jacksons. It was only after these two matters were resolved that the equally difficult question arose of determining the extent to which each contravenor should bear the burden of compensating the Jacksons. The trial judge in his reasons, delivered on 3 April 1987, indicated a desire that justice should be done by his orders. He thereby indicated that he did not contemplate adopting the standard approach of assessing loss only under 5.82. The applicants also had pleaded reliance upon s.87. Subsequent to the delivery of his reasons he said he would hear further from counsel as to the most appropriate orders to be made. Final orders were made on19 May 1987. These latter orders were expressly made pursuant to the provisions of s.87(2) of the Act and in accordance with the wide powers and discretions in that section. There is of course a complete absence of like powers and discretions in s.82. Many of the difficulties in the matter 4. arose out of the inter-relationship of these two sections, in circumstances where the trial judge found that the Jacksons were obliged, on purchasing the Motel business, to pay excessive amounts for both goodwill and rent under a lease. Instalments of such excessive amounts had in fact been paid for some time and required adjustment in the light of the trial judge's expressed desire to make appropriate orders. As previously stated the terms of the purchase of the Motel business by the Jacksons were complex and were made more confused by happenings during the trial. It is necessary to relate these circumstances to the extent they are in this regard significant as they have a bearing upon the orders made by the trial judge. Myoora was the registered proprietor of the motel land at the time when the business was purchased by the Jacksons. The property was subject to 4 mortgages to Beneficial Finance Corporation Limited ("Beneficial") and a further mortgage to A. & J. Musolino Pty. Ltd. ("Musolino"). The Jacksons agreed to buy from Myoora the motel business for $160,000. In the agreement for sale and purchase this figure was made up of $38,000 for fixtures, fittings and furniture and $122,000 for what was called goodwill. The trial judge found however that the proper value of the fixtures, fittings and furniture was $35,000 and he thereafter proceeded on the basis that the Jacksons had paid $125,000 for goodwill. Myoora was obliged to grant the Jacksons a lease of the motel for 5 years, renewable for a further term of 5 years at an annual rent of $78,000 (or $6,500 per month) 5. reviewable every two years. On settlement the Jacksons paid $100,000 in cash and secured payment of the balance, namely $60,000 by a second bill of sale over the plant, fittings and fixtures. This balance it appears was also secured by a_ second mortgage on a motel at Wudinna owned by the Jacksons. Under the second bill of sale the Jacksons were obliged to pay $2,000 per month in reduction of the sum of $60,000 and interest thereon. For their part the Jacksons borrowed $250,000 from Beneficial out of which they paid $100,000 on settlement to Myoora and refinanced their borrowings on the Wudinna motel. The agreement for sale and purchase of the Myoora motel noted that the Jacksons were to provide the following security for this borrowing, namely a second mortgage on the Wudinna motel, a bill of sale over its stock and plant, a mortgage over the Jacksons' lease of the Myoora motel and a first bill of sale over its stock, plant, equipment and goodwill. On 18 September 1985, shortly after the Jacksons commenced proceedings in this Court, Myoora was restrained from exercising its rights on default under the Jacksons' lease and second bill of sale on their undertaking to pay rent at the rate of $3,300, in lieu of $6,500, per month. This reduced rent was increased to $4,000 per month on 24 December 1985. The trial of the proceedings commenced on 24 March 1986 but was adjourned sine die on 24 April on an intimation that they had been settled and the parties wished to carry out the agreed terms. 6. At the end of August or early September 1986 Beneficial transferred its four registered mortgages (wherein Myoora was mortgagor) on the Myoora motel to the fifth mortgagee Musolino. On 4 September 1986 Musolino gave to Myoora notice of its intention to exercise its power of sale. It advised the Jacksons of this fact in a notice requiring payment of rent and other monies under their lease and shortly thereafter gave notice that it claimed to be a mortgagee in possession. On 8 October 1986 the trial judge was advised that the terms of settlement had not been observed and the hearing resumed in February 1987. In the interim Musolino was joined as an additional respondent to the proceedings and restrained on similar terms to the injunction against Myoora. Shortly prior to the conclusion of the resumed hearing the trial judge was advised that the issues between the Jacksons and Musolino had been resolved on the basis that Musolino was prepared to accept the reduced rent of $4,000 as the rent payable under the lease. The Jacksons sought no further orders against Musolino. Musolino was dismissed from the proceedings in which at that stage both Myoora and Mischkulnig were unrepresented. Having in his reasons determined the matter of liability of Myoora, Mr. Haydon and Oxford Estates, the trial judge was required to determine the nature and quantum of relief to which the Jacksons were entitled in this tangled web of circumstances. He approached the matter in the first instance by referring to the standard entitlement under s.82, namely the difference 7. between the value of the property acquired by the Jacksons and what they were obliged to pay for it. He was of opinion that in this regard he must consider both what they were obliged to pay for the goodwill and the rent payable under the lease. On the matter of goodwill his finding was that the amount payable, namely $125,000 was excessive. $65,000 had been paid on settlement in cash for the goodwill, and the balance of $60,000 was payable with interest by instalments over a period of 4 years. Amounts totalling $16,000 had been paid on account of these instalments, and he accepted that the balance owing was $44,000. It appears that the Jacksons did not in this regard seek judgment against the respondents under s.82 for the amount of their loss, which approach would have required the fair value of the goodwill to have been established by expert evidence. Such evidence was not available, a circumstance which might have had adverse consequences for the Jacksons, upon whom lay the burden of establishing this fair value (See per Dixon J. as he then was in Potts v Muller (1940) 64 CLR 282 at 299 and cited in Pappas v Soulac (1983) 50 ALR 231 at 240). In lieu of a judgment under s.82 against the respondents for the amount of their loss, the Jacksons indicated that they were prepared to accept an order releasing them from the obligation to make any further payments for goodwill. Such an order could properly be made under s.87 of the Act, reducing the purchase price of the goodwill to the amount paid and discharging the security for the balance thereof. Such an order was made by Fitzgerald J. in Frith and Anor v. Gold Coast Mineral Springs Pty. Ltd. and Anor. (1983) 47 ALR 547. The trial judge accepted this as the appropriate manner to compensate 8. the Jacksons when he said "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 or declaration to be made on this aspect of the matter". No order was made at the time reasons were delivered on 3 April 1987. However on 19 May, doubtless after hearing counsel, appropriate orders were made which discharged both the second bill of sale and the mortgage given by the Jacksons to Myoora on Wudinna. These orders were as follows: "1. That pursuant to Section 87(2) of the Trade Practices Act the Bill of Sale dated 23rd June, 1983 between the applicants and the first named respondent, Myoora Nominees Pty Ltd, be varied so as to release the applicants from any further liability or obligation under the said Bill of Sale whether accrued or yet to accrue and, further, that upon the applicants preparing a discharge for the said Bill of Sale and delivering the same to Myoora Nominees Pty Ltd, that the respondent Myoora Nominees Pty Ltd do execute the said discharge for the said Bill of Sale. 2. That pursuant to Section 87(2) of the Trade Practices Act the Memorandum of Mortgage dated the 23rd day of June, 1983 No. 5066203 between the applicants and the respondent Myoora Nominees Pty Ltd be varied so as to release the applicants from any liability or obligation under the said Memorandum of Mortgage whether accrued or yet to accrue and, further, that upon the applicants preparing a discharge of the said Memorandum of Mortgage and delivering the same to the respondent Myoora Nominees Pty Ltd, the said Myoora Nominees Pty Ltd do execute the same." a The consequence of this approach was that the compensation for the loss to the Jacksons arising out of the excessive payment for goodwill was borne exclusively by Myoora. Neither Oxford Estates nor Mr. Haydon were required to carry any of this burden even though they also had contravened s.52. Furthermore their claims against each other, as well as the claim of Myoora, for indemnity and contribution were dismissed. The trial judge was also of the opinion that in the circumstances of the case the rent payable under the lease was excessive and that the Jacksons "should be treated as if they had agreed to pay a proper rent and not the rent provided for in the lease and paid for some months". The trial judge thus had in mind that a proper order would provide that the rent under the lease would be varied both prospectively and retrospectively. However he went on to say that he was relieved of the obligation to assess a proper rent because Myoora was in effect no longer the lessor and the Jacksons had reached an agreement with Musolino, the mortgagee in possession, as to the rent to be paid in future, namely the sum of $4,375 subject to agreed reviews. He said that he was spared the necesity of making an order under s.87 of the 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 commercial rent should be". At the conclusion of his reasons he said, as already related, that he would hear counsel as to any other order that should be made. The order subsequently made on 19 May 1987 did contain variations to the terms of the lease which could properly be made pursuant to s.87(1). See Mr. Figgins Pty. Ltd v. Centrepoint Freeholds Pty. Ltd. (1981) 36 ALR 23. That particular order of the trial judge made no specific reference to s.87(1) but provided certain variations to the terms of the lease including inter alia that rent from 27 February 1987 was reduced to $52,500 per annum. Such an order could only have been made under s.87 of the Act. 10. The trial judge in his reasons then proceeded to consider what further loss the Jacksons had suffered for the purpose of calculating, as he said at that stage, "damages". He doubtless had in mind in particular the fact that he had already found there had been an overpayment of rent for a period. He said he was of opinion that justice would be done if he treated the proper rent as being $4,375 from the commencement of the lease until Musolino became effectively the lessor. After reviewing the rent in fact paid, both in respect of underpayments as well as overpayments, he came to the ultimate conclusion that the net amount of overpayments was $36,050. He said that the Jacksons were entitled "to an award of damages based on this overpayment of rent". He specifically refused an order based on any consequential losses. However when he came to characterise thereafter the nature of this award of damages he stated it as "compensation for overpayment of rent", as in fact it was. There was also a claim by the Jacksons for interest on this overpayment which, if the overpayment comprised damages awarded pursuant to 5.82, would not in the ordinary course have been granted. Such a claim could not have been successfully made , under s.51A of the Federal Court of Australia Act 1976 as this section had not been enacted at the time when the cause of action arose. Nor could it have been' so granted under the provisions of sub.s.30C(1) of the Supreme Court Act 1976 South Australia (See A.J. Thompson Pty. Ltd. v. K.L.K. Manufacturing Pty Ltd. & Ors (1986) 8 ATPR 47-875 at p.47-893). But if in fact the award of $36,050 as damages or compensation had been made as a refund of money paid under s.87(1A) or 11. 87(2)(d) of the Act there is authority in this Court for the award of interest. I refer to Fenech and Fenech v. Sterling (1985) 61 ALR 465 where Beaumont J. said on p.469 "The alternative claim, based on the terms of sec.87(1A) and (2)(d), raises different considerations. The general position for present purposes was described by Fitzgerald J. in Sanrod Pty. Ltd. v. Dainford Ltd. (1984) 54 A.L.R. 179 at I91: "However, whatever may be the position otherwise in respect of damages under' the Act, I can myself perceive no difficulty in accepting that, when money is paid in consequence of misleading conduct, the loss suffered by that conduct includes not only the money paid but also the cost of borrowing that money or the loss from its investment, as the caSe may be: c&. Frith v. Gold Coast Mineral Springs Pty. Ltd. (1983) ATPR 40-339; affirmed (1983) ATPR T0557; q7 A.L.R. 547. Interest awarded as a component of damages in such circumstances is not for loss of the use of the money awarded as damages, but for loss of the use of the money paid over in consequence of the misleading conduct and is directly related to the misleading conduct' (emphasis added). This reasoning was followed and applied by Burchett J. in Geale v. Glenhoun Holdings Pty. Ltd. (in liq.) - unreported, 23 August 1985", CCLSSSy ATPR 10-615) Without specifically stating whether he was assessing the amount of $36,050 as damages under s.82 or s.87(2)(d) the trial judge awarded interest and fixed the damages at the figure $43,000. Again he did not expressly state whether this total amount was based upon his power under s.87(2}(c), namely to order a person engaged or involved in contravening conduct to refund money to the person who has suffered the loss. The next question was "the vexed question of who was' to pay these damages". If in fact he had made the award under s.82, the answer would have been reasonably straightforward. The person or persons liable to pay would be those who had contravened the Act, or alternatively those parties together with 12. those "involved" in the contravention. If however the award was made under s.87 the trial judge had a wide discretion as to the remedies he considered appropriate. After dismissing the claim against the fourth respondent Mischkulnig that he was a person involved under s.75B the trial judge turned to the three remaining respondents. He said: "The misleading and deceptive conduct was that of the second respondent (Oxford Estates) and Haydon and the first respondent (Myoora) is 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." He then considered the cross-claims and, having dismissed them, gave judgment against Myoora, Oxford Estates and Mr. Haydon for the sum of $43,000. He ordered these three respondents to pay the costs of Jackson. It is in this regard that I consider that the order of the trial judge should be varied. I reach this conclusion because the tenor of his reasoning and the true character of the damages, confirmed by the manner in which they were assessed, is in accord with the exercise of his discretion under s.87. this award is more correctly stated, as in fact the trial judge stated it, as compensation for overpayment of rent. It is less happily characterised as an award of general damages to compensate the Jacksons in accordance with s.82 for the loss they have suffered consequent upon the contravention. Furthermore the award is consequential upon a variation pursuant to s.87(1) of the rent payable under the lease. Having made the appropriate order for variation it is proper to order the person who received the earlier overpayments to return the same. Sub-section 87(2) 13. identifies the orders which are generally referred to in sub-sections (1) and (1A) and in particular empowers the making of - "(c) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to refund money or return property to the person who suffered the loss or damage". Such an order was made in Smolonogov & Anor v. O'Brien and Anor (1982) 4 ATPR 43,835 at p.43,849 and also in the Hogarth Galleries case supra. Although on the face of it there is a discretion in the provision as to who is to be ordered to refund, there is little doubt that that person should be the person who has received the money which is ordered to be refunded. Any other person would be more appropriately ordered to make payment in accordance with sub.s.(d) which follows: "(d) an order directing the person engaged in the conduct or a person who was involved in the contravention by the conduct to pay to the person who suffered the loss or damage the amount of the loss or damage." For all of these reasons I am of opinion that the order of the trial judge should be varied to provide that the overpayment of rent and interest thereon be "refunded" to the Jacksons by Myoora. I therefore concur in the orders proposed by Pincus J. This variation does not in my opinion necessitate any departure from the order for costs made on 3 April 1987 against those three respondents all of whom, in my view, contravened s.52 or alternatively were involved in such contraventions. It is to 14. the good fortune of Mr. Haydon and Oxford Estates that the manner in which the trial judge considered it appropriate to "compensate" the Jacksons, as varied by the order on appeal, relieves them from any financial obligation to make payment to the Jacksons other than in respect of costs. I certify that this and the \3 preceding pages are a true copy of the Reasons for Judgment of Mr Justice Fisher. Associate et Te. Dated: 2S Daca-+tar ART. Counsel for the Appellant Mr. B. Beazley Solicitors Poveys Counsel for the First Respondents Mr. M. Hoile Solicitors John Goldberg & Co. Dates of Hearing 28, 29, 30 September 1987 Ca IN_ THE FEDERAL COURT OF AUSTRALIA ) ) SQUTH AUSTRALIA DISTRICT REGISTRY ) No. G56 of 1987 } ) GENERAL DIVISION ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: ROGER HAYDON and OXFORD ESTATES PTY. LTD. Appellants AND: GREGORY JOHN JACKSON, BARHARA JACKSON, PETER JOR JOHN JACKSON, TRACEY ELLEN JACKSON, PHILIP GREGORY JACKSON and JOSEPHINE JACKSON — First Respondents AND: MARTIN ANTON MISCHKULNIG Second Respondent AND: MYOORA NOMINEES PTY. LTD. Third Respondent CORAM: FISHER, LOCKHART and PINCUS JJ. DATE: 23 DECEMBER 1987 REASONS FOR JUDGMENT LOCKHART J. ? I have had the advantage of reading the reasons for judgment of Fisher J. and of Pincus J. in this matter. I agree with the orders which Pincus J. proposes and, subject to the observations of Fisher J. in his reasons, generally with the reasons of Pincus J. 1 agree with those observations of Fisher J. I certify that this page 1s a true copy of the reasons for judgment herein of the Honourable Mr. Justice Lockhart. Associate R/S Date; 23-12.87 IN THE FEDERAL COURT OF AUSTRALIA ) SOUTH AUSTRALIAN DISTRICT REGISTRY ) G56 of 1987 GENERAL DIVISION ) ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN o ROGER HAYDON and OXFORD ESTATES PTY. LTD. Appellants AND: GREGORY JOHN JACKSON, BARBARA JACKSON, PETER JOHN JACKSON, TRACEY ELLEN JACKSON, PHILIP GREGORY JACKSON AND JOSEPHINE JACKSON First Respondents AND: MARTIN ANTON MISCHKULNIG Second Respondent AND: MYOORA NOMINEES PTY. LTD. Third Respondent CORAM: FISHER, LOCKHART & PINCUS JJ. DATE 23 DECEMBER 1987 REASONS FOR JUDGMENT Prncas F. This is an appeal by two of the four respondents to an application brought under s.52 of the frade Practices Act 1974. The respondents to the appeal include, as well as the applicants in the proceedings below, two parties who were respondents below. Those two parties have not been served with the notice of appeal, a circumstance which, in view of the issues in and outcome of the appeal, creates no practical difficulty, but is referred to further below. The case concerns the sale of a leasehold interest in a motel at Port Augusta, effected pursuant to a contract made on 17 May 1983. The purchasers were members of a family named Jackson and the vendor a company, Myoora Nominees Pty. Ltd. Of the two appellants, one (Oxford Estates Pty. Ltd.) effected the sale as agent for the vendor, and the other, Roger Haydon, is the person who transacted the business on behalf of the agent, Oxford Estates Pty. Ltd. The application made by the Jacksons succeeded against Haydon and Oxford Estates as well as against the vendor, Myoora Nominees Pty. Ltd. The appellants are Haydon and Oxford Estates and it is said on their behalf that they should not have been held liable at all and, alternatively, that certain of the relief granted against the vendor, Myoora Nominees Pty. Ltd., should have been regarded as enough, so that no relief should have been granted against Haydon and Oxford Estates Pty. Ltd. It is convenient to deal with these issues separately. ? Liability The Jacksons brought their claim, as has been mentioned, under s.52 of the Trade Practices Act; they also claimed damages for misrepresentation for negligence, relief under the Misrepresentation Act 1972 (S.A.) and damages for breach of contract and conversion. None of these additional five heads of claim was persisted in before the learned trial judge. At the hearing in this Court, counsel for the Jacksons made some reference to the claim under the Misrepresentation Act 1972, but did not in the end pursue that matter. The Jacksons succeeded before the learned trial judge on the basis of findings of misleading statements as to the takings of the motel and as to its occupancy rate. His Honour held that Haydon made misleading statements to Gregory John Jackson and Barbara Jackson in an interview face to face, and rather similar statements to Philip Gregory Jackson on the telephone, all such statements having been made in May 1983. There were findings that Haydon told Gregory and Barbara, in effect, that the takings of the motel were $311,000 in the 1981/82 year and would be about $340,000 in the 1982/83 year, which was then drawing to a close. His Honour made no finding as to the true takings in the former year, but found that when Haydon made the statement complained of it should have been known that there was some chance that the takings would not reach $300,000 in that year, and in fact, his Honour said, they were "probably around about $290,000". In discussions on the telephone with Philip Jackson, Haydon said that Philip could work on the basis of the takings for the 1982/83 year being about $340,000; that was, of course, consistent with what Gregory and Barbara Jackson had been told. Haydon also told Philip on the telephone, from time to time, that up-to-date figures were not available. His Honour held that that was false, since they were readily available; they would have shown that the takings for the 1982/83 year showed a decrease, as compared with the 1981/82 year. Further, his Honour held that Haydon told Philip on the telephone that Philip could add 10% to the 1982/83 takings figure of $340,000 when projecting takings of the 1983/84 year. It was held that such forecast was "wildly inaccurate and could not reasonably have been made by anyone with any knowledge of the facts". As to the occupancy rate, it was suggested by counsel for the appellants that there was some inconsistency in the learned judge's findings. His Honour held - and indeed it was scarcely disputed before him - that Haydon asserted that the occupancy rate was about 81%, whereas in fact it had been in recent years about 71-72%. The Jacksons' case was that Haydon also claimed that the occupancy rate was 88-92%, but his Honour was not prepared to find that statement to have been made. However, he found that Haydon agreed with Philip that 18 rooms out of the 21 in the motel were occupied throughout the year. His Honour pointed out that that was a rate of 85.71% and "this too was misleading and deceptive". There is a difficulty about the finding as to 18 rooms out of 21, namely that the estimate, made during the course of a conversation between Haydon and Philip, was said to have been derived from a claimed occupancy rate of 88-92%. Since his Honour was not prepared to find that Haydon ever made or assented to the statement that the rate was 88-92%, it is not easy, with respect, to understand the finding that Haydon agreed that 18 rooms out of 21 were occupied throughout the year. However, even if that finding be rejected, the other misleading conduct found by his Honour forms a solid basis for his conclusion that misleading statements led to the Jacksons having entered into the contract to purchase the business. The principal attack made on behalf of the appellants, on the conclusions of the learned trial judge as to liability related to the application of s.75B of the Trade Practices Act which reads as follows: "A reference in this Part to a person involved in a contravention of a provision of Part IV or V_ shall be read as a reference to a person who - {a) has aided, abetted, counselled or procured the contravention; (b) has induced, whether by threats or promises or otherwise, the contravention; (c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or (d) has conspired with others to effect the contravention." The significance of finding that a person is "involved in a contravention" within the meaning of s.75B is that s.82 empowers this Court to make awards of damages against persons involved in contraventions of s.52 and s.87 gives rather wider power to make orders against such persons. A simple answer to the contention made on behalf of the appellants in respect of Haydon is that there is no need for the Jacksons to rely upon s.75B to uphold his Honour's orders against Haydon, because the misleading statements complained of were made on the telephone. Section 6(3)(a) of the Act, the terms of which it is unnecessary to set out, has the effect, among other things, of making s.52 applicable to conduct involving the use of telephonic services, whether or not engaged in by a corporation. It was argued further on behalf of the Jacksons that, although some of the misleading statements found to have been made were initially made in a face-to-face interview, they were in substance repeated in conversations on the telephone between Haydon and Philip. It appears to me that the point just mentioned is not a wholly satisfactory answer to the appellant's contention that the facts found against Haydon do not fall within any of the descriptions in s.75B of the Act. The Jacksons' pleading, fairly read, does not appear to cover the making of a case under s.6(3) of the Act; it seems to rely, as against Haydon, solely upon s.75B. It is necessary, therefore, to consider whether a sufficient case under s.75B was made out on the assumption, which seems to be justified by the content of the statement of claim, that the learned trial judge must have so based his finding against Haydon. Counsel for the Jacksons relied heavily upon the lack of any specific finding that Haydon, in making the statements complained of, acted with knowledge of their falsity or otherwise in such a way as to attract the operation of s.75B. Counsel also pointed to the learned trial judge's confessed inability "to say either that Haydon was, so to speak, an innocent conduit for information passed to the applicants by the first respondent or that he engaged ina 'frolic of his own' when passing information to the Jacksons and to Philip". The first respondent below was Myoora Nominees Pty. Ltd. The remark just quoted was not made by the learned trial judge in the course of discussing Haydon''s liability to the Jacksons. It was made as areason for rejecting cross-claims between Oxford Estates and Haydon on the one hand, and Myoora Nominees Pty. Ltd. and one Mischkulnig, a director of that company, on the other. Nevertheless, the remark gives rise to some uncertainty as to whether Haydon's knowledge and state of mind generally were such as to justify a finding against him under s.75B. It is, at first sight, puzzling that the learned trial judge was unable to find that Haydon engaged ina "frolic of his own" and yet, as I apprehend, accepted that he was liable as pleaded - i.e. under s.75B of the Act. But it has to be kept in mind that it was not necessary for his Honour to go so far as_ to hold that Haydon acted entirely without authority. Reading his Honour's reasons as a whole, in the light of the pleading and the evidence, it seems probable that his view was that Haydon had substantial knowledge of the business of the motel in question, as conducted by Myoora Nominees Pty. Ltd., and that, whether or not specifically authorised to make the misleading statements in question, Haydon must have been well aware that their veracity was at best doubtful. If Haydon obtained the information held to have been misleading from the vendor, Myoora Nominees Pty. Ltd., he got it either from Mischkulnig, referred to above, who was a director of Myoora Nominees, or from one Connolly, also a director of that company. Before Haydon gave evidence, a controversy arose at the trial concerning the order in which the parties' cases should be presented, and that was resolved on the basis of a statement hy Haydon's counsel to the effect that it was Connolly who had given Haydon the instructions on the basis of which he had discussed the motel with the Jacksons. However, when Haydon gave evidence, he did not attribute to Connolly statements of sucha kind as to justify those held to have been made by him to the Jacksons. In particular, he did not claim that Connolly (or anyone else) on behalf of Myoora Nominees told him that the takings in the financial year which was then drawing to a close were 10% higher than they had been in the immediately preceding year. When asked whether Connolly told him that the takings for the latter year would be $340,000 Haydon replied: "No, he did not tell me that. How would he know?" Haydon also gave evidence from which his Honour was entitled to infer that Haydon had considerable personal knowledge of the motel's affairs. He had an interest in two other motels in the area and so, as his counsel said, was aware of the general circumstances of the trade in Port Augusta. He admitted having claimed to the Jacksons that the occupancy rate at the motel was about 81% and said: "And I knew, because having been up there quite a lot, that there were always cars there." Another example of evidence along the same lines was that Haydon admitted that he knew that there existed, at the time of an inspection of the motel by the Jacksons, a motel book containing accurate information as to the takings of the motel and the occupancy rates right up to that date. Yet, as his Honour held, Haydon then told Philip that up-to-date figures were not available. Speaking more generally, there was evidence that Haydon had a long-standing connection with the motel business in question. It was, one must assume, not possible for the learned trial judge to make a precise finding as to the degree of knowledge Haydon had of matters dealt with in the misleading statements; but it is safe to infer that his Honour was satisfied that Haydon had enough knowledge to satisfy one or more of the tests in s.75B of the Act, in confirmity with the construction of that section laid down by the High Court in Yorke v. Lucas (1985) 61 A.L.R. 307. In short, the finding against Haydon personally, although its precise basis was not expounded in his Honour's reasons, appears to have been sound. Some other points were made on the question of liability, but none requires elaborate discussion. It was argued that Oxford Estates Pty. Ltd. was not liable because a company which incurs vicarious responsibility may not properly be described as an accessory to its contravention of the Act. That contention requires no refutation, for Oxford Estates, on the 10. findings made by his Honour, was directly liable under s.52 of the Act and no reliance on s.75B was necessary to make it so. It was also argued that the projection made by Haydon as to the likely takings for the 1982/83 year was merely a statement of opinion and it could not make the appellants liable merely because it turned out to be incorrect. That submission must be rejected; his Honour found that the figures which were available at the time Haydon spoke to the Jacksons would have revealed that the 1982/83 takings were down compared with those of the previous year. Lastly, it should be mentioned that it was submitted on behalf of the appellants that Haydon had simply passed on information given to him by the vendor, Myoora Nominees. That argument must fail for the reasons' set out above, the principal one being that Haydon''s evidence included no specific assertion that the information found by his Honour to have been transmitted by him to the Jacksons came from Myoora Nominees. In the result, the attack on his Honour's findings that both Haydon and Oxford Estates were liable in respect of the misleading statements found must fail. ' Damages and Other Orders The appellants also complained of the orders made by the learned trial judge under this heading. To explain their effect, it is necessary to recount the facts in some detail. The agreement for sale was made on 17 May 1983 and ll. provided for payment of the purchase price of $160,000 plus' the value of stock in trade (as to which no dispute arose). The sum of $160,000 was apportioned by the contract as to $38,000 to fixtures, plant, furniture, trade utensils and other chattels, and as to the balance ($122,000) to the lease, licence and goodwill. His Honour held that the former figure was slightly excessive and should have been $35,000, as aresult of which he attributed $125,000 to what will here be called for short "goodwill". The agreement contemplated payment of a deposit of $1,000 and the whole of the balance in cash. In fact, on settlement a sum of $60,000 of the purchase price was left owing and was secured, by a bill of sale and otherwise; interest was to be paid on the sum of $60,000 left owing. In fact, the Jacksons paid only $16,000 under the bill of sale, some part of which must be attributed to interest. The agreement for sale also provided that it was subject to the grant of a new lease for a term of five years, with a right of renewal for a further five year term; there was to be a rent review every two years. The agreement said that the initial rental should be "$1,500 per week or $6,500 per calendar month". The vendor was the owner of the freehold and it gave a lease at settlement complying with the contract, providing for a first year's rental of $78,000 per annum payable monthly in advance. The rent review provision tied increases in the rental to the Consumer Price Index. It might be said that ina commercial sense what was being sold was the right to use the premises and business for a 12. period, depending on exercise of the option to renew, of up to 10 years, for a lump sum payment of $125,000 and an initial rental of $78,000 tied to the Consumer Price Index. On the basis that the whole transaction was induced by misleading statements, the Jacksons might have sought to attack the initial price of $125,000, or seek a reduction in rental. As opened, their case did not include any challenge of the former kind, but eventually their counsel argued for and obtained both varieties of alleviation. One complication which emerged at the trial was that a mortgagee of the land (A. & M. J. Musolino Pty. Ltd.), after various transactions which need not be set out in detail, entered into possession of the motel as mortgagee and was joined as a party to the proceedings. The issues between the Jacksons and that mortgagee were subsequently settled and, as from September 1986, rent was paid by the Jacksons to Musolini, at a_ reduced rate, which was, as it happened, a rate held to be fair. It appears to me that the circumstances just mentioned necessarily redounded to the benefit of those held to be liable under the Trade Practices Act; that is, from September 1986 on, the higher rent agreed to be paid to Myoora Nominees was no longer payable and the Jacksons' complaint with respect to that period disappeared. It was not made clear to us whether that situation will necessarily continue throughout the whole 10 year period available under the lease from Myoora Nominees, but the point appears academic, as the rent payable to Musolino was the same as that fixed, as will be explained, by the learned trial judge. 13. It was contended by counsel for the appellants that the learned trial judge over-compensated the Jacksons. What he did was to relieve them of any obligation to make further payments under the bill of sale and to reduce the rental payable under the lease from the agreed figure ($6,500 per month) to what he considered was a fair rental, namely $4,375 per month. The former order bore not at all upon the present appellants, but the fact that it was made was relied on by their counsel on the appeal as relevant to the question whether the total "package" of compensation was excessive. Until August 1986, the month before the rent become payable to Musolino, the total amount due at the agreed rate for rental was $253,500. The amount which would have been paid at the rate the learned trial judge regarded as fair was $166,050, a difference of $87,450; but the Jacksons had in fact paid $202,100, so that the "overpayment" was $36,050. To that his Honour added interest of $7,000; he rounded the total off to $43,000 and awarded that sum against the present appellants as well as against Myoora Nominees Pty. Ltd. Counsel for the appellants submitted that there would have been no order for repayment of the "excess" rent, so far as the appellants were concerned. The measure of damages in a case of this sort is, prima facie, the difference between the value of what has been acquired and its price: Gates v. City Mutual Life Assurance Society Ltd. (1986) 63 A.L.R. 600 at pp.607, 609. Here, as has been pointed out, the consideration consisted of two elements, a lump sum and a periodical payment. The learned trial judge considered each 14. element separately, that is, the scheme of his award, as explained above, was to give the successful parties the difference between the value of the goodwill and the amount paid therefor, and the difference between the market rental and the agreed rental. A difficulty in carrying that out was that there appears to have been no satisfactory evidence as to the value of the goodwill. It appears from the decision of the High Court in Ted Brown Quarries Pty. Ltd. v. General Quarries (Gilston) Pty. Ltd. (1977) 16 A.L.R. 23 at pp.33, 37, 38 that ordinarily, in cases of this sort, evidence must be called of an acceptable kind as to the value of what has been purchased. Here, as to the goodwill, the only evidence to which his Honour made reference was to the effect that the goodwill had no value, a proposition which was apparently not pressed upon him. It could hardly have been, as the Jacksons' counsel opened that the price of $160,000 was a "reasonable sum", based on their evidence. The contention which he accepted was that, whatever value the goodwill had, it did not exceed the sum actually paid in respect of it. There was no finding as to value, but his Honour put an upper limit on it; there does not appear to have been any specific evidence to justify that. The learned trial judge pointed out that the sum of $16,000, which had been paid under the bill of sale, included an amount of interest, but presumably he did not find it necessary to determine that amount. According to the evidence at p.1346, $10,000 was the amount of principal paid. There might be said to be a presumption, as a matter of common sense, that a business having the earning potential of that 15. sold (as opposed to one having the earning potential represented) could not have been worth as much as the price and rent agreed to be paid. It is another matter, however, to proceed to the point at which his Honour arrived, namely that it could not have had in the marketplace a goodwill value exceeding that portion of the price which had been paid. The projected figure for earnings in the 1982/83 year was, as is stated above, $340,000. The sum actually achieved by the purchasers in the ensuing year, according to the evidence, was $314,000. Counsel for the appellants pressed on us the view that a reasonable prima facie measure of the loss was some $26,000 per year, by comparison between the figure represented and that attained. That contention does not appear to be sound in principle, but it is worthy of note that the difference between the two figures is only about 8%. A more relevant comparison is the difference between the figure projected for the 1982/83 year, namely $340,000, and his Honour''s estimate of the actual earnings, namely $290,000. The lower figure is reached by reducing the higher by about 15%. As to each of the components mentioned, namely the price for goodwill and the rental, the judgment involves a reduction of considerably more than that percentage: 40% off the goodwill and 33% off the rent. It may be objected that the ordinary method of assessment of damages in accordance with Gates' Case (above) does not require, or indeed permit, a simple proportionate reduction of the price, to match the shortfall in takings. As against that, two particular factors in the present case suggest that such a reduction may have given a result closer to the true loss than the method adopted by the learned trial judge. 16. Firstly, there was, as has been pointed out, a lack of evidence as to what sums are paid for the goodwill of properties of the kind sold. Secondly, as to the rental component of the consideration, the valuer his Honour accepted was a Mr. Pickett, who said that the fair rental is simply a percentage of turnover - 17.5%, according to him. Counsel for the appellants made what seems a powerful point, mamely that the purchasers agreed to pay a rental which was 22.9% of the represented turnover; if it was the case, as Pickett said, that that was substantially in excess of the proper proportion, the difference could not be accounted for by any misleading statement, but must have been due to imprudence. Accepting Pickett's evidence, the order made by his Honour as to rental compensates the purchaser for having agreed to pay a rent disproportionate to the represented turnover. If, adopting a contrary assumpton, one calculates on the basis that the purchasers' assessment of the fair rental (as a proportion of what they believed the turnover to be) was right, rather than that of Mr. Pickett, the consequence is much the same: on either view, the order made below would compensate the purchasers to an extent incommensurate with the overstatement of takings. , Another, and broader, approach to the problem is to reason from the fundamental principle of assessment of damages in misrepresentation cases under the general law, that the injured party is entitled to be placed in that financial position he would have enjoyed but for the misrepresentation. Here, it may well be that had the purchasers been told the true takings figure of $290,000, as opposed to the projection of $340,000, they would not 17. have bought at all; but it seems just as rational to assume that they might have bought, but at a lower price and on the basis of a lower rental. On the latter hypothesis, it seems improbable that the parties would have reached a bargain at figures as low as those on which the learned trial judge's order was based. Counsel for the appellants put forward another approach pointing towards the same result. He suggested that, in the particular circumstances of the case, the prima facie rule that the successful applicant should receive the difference between price paid and value received did not reach a fair or moderate result; he said it should give place to the secondary rule based on the law of contract, namely that the applicants should be placed in as good a position as they would have been in if, the contract being completed, the representations had turned to be true. But it appears unnecessary precisely to resolve the question of the mode of calculation of damages as a matter of legal principle, for I am satisfied on the whole that the appellant's basic submission has been made out and that the purchasers were indeed over-compensated by the order. If the learned trial judge''s order for repayment of part of the rent were to be set aside, then the outcome for the Jacksons would be a reduction of $50,000 in the price of goodwill and of $21,325 in the amount of rent payable in the first three years and two months, i.e. until the reduced rent began to be payable to Musolino. Alternatively, if one regards the Jacksons as being entitled to a reduction of 15% in the agreed rental, the judgment would involve cutting the price of goodwill by 26%. On 18. either analysis, an order along those lines seems adequate to compensate for the wrong done. It should be added that there was considerable discussion before us as to the propriety of making an order for compensation against one party held liable under s.52 of the Trade Practices Act, different from that made against another party so held liable, there being but one loss. Although it is not necessary to reach a final conclusion on the point, I see no reason to read the broad terms of s.87 of the Act down so as to restrict the Court's power to making the same order for compensation against each respondent in respect of a single loss. Here, there is no appeal by the vendor and no occasion to determine what the result of such an appeal would have been. In attempting to arrive at a just and not extravagant result as against Haydon and Oxford Estates, it is relevant to note that the sum of $35,000 rent they were ordered to pay (with $7,000 interest) was not a sum they ever received; it was of course paid to the landlord, the vendor. That may be regarded as material, at least where there is uncertainty as to the extent to which the agent's own fault contributed to the Jacksons' misfortunes. , It is my view that in the only respect in which (apart from costs) the learned trial judge's order affected Haydon and Oxford Estates, it was overly generous to the Jacksons and should be set aside. Two points remain to be considered. The first is the position of the absent respondents Mischkulnig and Myoora Nominees 19. Pty. Ltd. who, as mentioned above, have not been served. Mischkulnig appears to have no interest in the result of the appeal. Myoora Nominees might have had an interest in resisting the making of such an order as is proposed in favour of Haydon and Oxford Estates; that interest might have arisen as a result of its losing the right of contribution in respect of the excess' rent which (it not having appealed) will now become its sole liability. However, that potential interest appears to have gone because the learned primary judge dismissed the cross-claims of Haydon and Oxford Estates, on the one hand, and Myoora Nominees, on the other, made against each other. It follows that neither of the unserved parties has any such interest as to make it necessary to keep the appeal alive, and as against them the appeal will simply be struck out. The second remaining question is that of costs. Since the trial was a long one, that is no doubt a serious issue. The learned trial judge made a "Bullock order" in favour of the Jacksons as to the costs they were ordered to pay to the successful party Mischkulnig; he also, subject to a reservation as to the costs of a certain adjournment, required the appellants to pay the Jacksons' costs of the proceedings before him. In the result, the Jacksons are to recover nothing against the appellants, but that is so because their loss is able to be met by reducing their obligations to Myoora Nominees - not because the Jacksons suffered no loss as a result of the breach of s.52 of the Trade Practices Act committed by the appellants and Myoora Nominees. Further, it is evident that at the trial (but not before us) the issue which occupied the bulk of the time was that Prise 20. of liability, not quantum. In the unusuai circumstances, it appears to me that justice would be done by requiring the first respondents (the Jacksons) to pay two-thirds of the appellants' costs of the appeal, to be taxed, by setting aside the order made below against the appellants in respect of the costs the Jacksons were ordered to pay to Mischkulnig and by otherwise leaving undisturbed the orders for costs made below. Dated 23.12.87