JUDGMENT No. .nc2cl.closen oct oosee CATCHWORDS TRADE PRACTICES - whether conduct misleading or deceptive - whether the making of a bet may constitute such conduct - whether loss suffered "by" that conduct - principles of causation discussed. APPEAL - general principles - review of Judge's findings of fact - when findings based upon credibility of witnesses. Trade Practices Act 1974 (Cth) - ss.52, 82 Misrepresentation Act 1971-72 (SA) Wardley Australia Lid v. State of Western Australia (1992) 175 CLR 514 Ricochet Pty Ltd v. (1993) ATPR 41-236 Uranerz (Aust) Pry Lid v. Hale (1980) 30 ALR 193 Brunskill v. Sovereign Marine & General Insurance Co Limited (1985) 62 ALR 53 Devries v. Australian National Railways Commission (1993) 177 CLR 472 TOMLINEX PTY LTD v. JOHN CLIVE COLLINS No. SG 20 of 1994 Black C.J., Davies & Beazley JJ. 20 September 1994 Sydney -4 OCT 1994 FEDERAL COURT OF AUSTRALIA PRINCIPAL INTHE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY No SG 20 of 1994 GENERAL DIVISION Qn appeal from a single judge of the Federal Court of Australia BETWEEN: TOMLINEX PTY LTD Appellant AND: JOHN CLIVE COLLINS Respondent Coram: Black C.J., Davies & Beazley JJ. Date: 20 September 1994 Place: Sydney MINUTES OF ORDER THE COURT ORDERS THAT: The appeal be dismissed with costs. Nothe: Ye wert * Settlement and entry of orders is dealt with in Order 36 of the Federal hy) Court Rules. G3V! ~ nt peer Ty s : OOD 284g. rete ' Ss eth See utlae eee s fot - . . * aa ' ) + adsPenaiien fetes weaagg Leb witty SOUTH AUSTRALIA DISTRICT REGISTRY ) No SG 20 of 199: ) GENERAL DIVISION ) ) Qn appeal from a single judge of the Federal Court of Australia BETWEEN: TOMLINEX PTY LTD Appellant AND: JOHN CLIVE COLLINS Respondent Coram: Black C.J., Davies & Beazley JJ. Date: 20 September 1994 Place: Sydney REASONS FOR JUDGMENT Ihe Court: This is an appeal from the judgment of a judge of the Court, O'Loughlin J., in which His Honour dismissed an application which sought damages for breach of 8.52 of the Trade Practices Act 1974 (Cth) and s.7 of the Misrepresentation Act 1971- 1972 (SA). In the proceedings before the learned trial Judge, Tomlinex Pty Limited ("Tomlinex") was the applicant and Candoura Pty Ltd ("Candoura"), Bullock Mountain Mining Pty Limited ("Bullock"), Mr John Clive Collins, his wife Iris May Collins, and his daughter Margaret Irene Howell were respondents. Default judgments had been entered against Candoura and Bullock. Accordingly, his Honour was not asked to consider their position. His Honour did not draw any inference from the default judgments against Candoura and Bullock, it being assumed no doubt that they were impecunious and had no practical interest in the litigation. His Honour found that no allegation against Mrs Collins or Mrs Howell had been established and dismissed the claims against them. His Honour also dismissed the claim against Mr Collins that he was in breach of s.7 the Misrepresentation Act and involved in a contravention by Candoura and Bullock of s.52 of the Trade Practices Act. It is against this latter decision that the appeal is brought. The relevant conduct was that of Mr Collins at a meeting held on 18 June 1988. The trial Judge held that there had been no breach of the Trade Practices Act or of the Misrepresentation Act but that, even had there been a breach, Tomlinex and its officers were not influenced or damaged by Mr Collins' remarks. The Guy Fawkes River area of New South Wales had potential for gold mining. A Professor Wilson had reported inter alia:- "The Guy Fawkes River area undoubtedly has great gold potential. However, much exploratory work and systematic testing needs to be done before an accurate assessment of likely profits can be made. In the meantime, it 1s possible (at present gold prices) that the in-site gold content for the Guy Fawkes River alluvial prospect may be as much of one billion dollars Australian." Mrs Howell was the proprietor of Mining Leases 1063 and 1045 in that area. Mrs Howell had four Mining Lease applications including Nos. 473 and 474; Candoura had four Mining Lease applications and Bullock had three prospecting licence applications in the area. Another company, Barkuna Pty Limited ("Barkuna'), which was an experienced mining and exploration company, was impressed with the area and had an exploration licence application over one portion of it. On 9 March 1988, Mr Collins entered into an agreement with Barkuna. It was a short two page handwritten document, together with an annexed schedule in which Mr Collins for himself, Mrs Collins, Mrs Howell and Candoura purported to grant to Barkuna, in return for a payment of $20,000, an option to acquire a 90% interest in mining tenements which were described, inadequately, in the schedule. The agreement also provided that, for a fee of $250,000, the option could be extended, at any time before midnight on 18 June 1988, for a further 6 months from that date. The agreement provided that, in the event that Barkuna exercised its option, the purchase price payable for the mining tenements would be $4,500,000. After the execution of the agreement, Barkuna, whose principal officers were Mr G. Robertson and Mr R. Grasso, sought to attract other investors into the transaction. Mr Robertson and Mr Grasso contacted Mr R.G. Di Maggio who was interested in undertaking a mining venture. Mr Di Maggio contacted Mr Tim Hopwood, who was a well respected geologist with whom Mr Di Maggio had previously had contact. Mr Hopwood and a company, Sedimentary Holdings Ltd ("Sedimentary"), became involved in the project. Mr Di Maggio also contacted a .. number of investors including Mr Tony Zappia and encouraged them to form a company to take part in the venture. On about 16 June 1988, Tomlinex was incorporated as the company which would represent the interests of Mr Di Maggio and his fellow investors. The proposal which came to be considered was that an agreement would be entered into with the Collins' interests whereby the option would be extended for six months. Tomlinex was to put forward the $250,000 required to obtain the extension of the option. Sedimentary was to provide $250,000 to fund the testing during the six months period. If the tests proved as positive as was hoped, Tomlinex and Sedimentary were jointly to pay the $4,500,000 required for the exercise of the option. Over a number of weeks, there was considerable discussion as to the proportions in which the venture would be split. The Collins' interests wished to retain 10% and there was no disagreement with that. Barkuna wished to retain 50- 60%. Sedimentary and Tomlinex were to have equal interests. The point of debate was the interest which Barkuna would retain. There was discussion as to whether the division should be calculated on a sliding scale depending upon the results of the testing carried out during the period of the option. Ultimately, this was rejected. By about 16 June 1988, the proposal being considered was that the Collins group would take 10%, Barkuna 40% and Sedimentary and Tomlinex 25% each. A draft agreement, incorporating provisions for the extension of the option and for the joint venture to carry out testing and to acquire the tenements should the tests prove rea successful, had been circulated for consideration at a meeting to be held_in the offices .. of Baker O'Loughlin Solicitors on 18 June 1988, the last day of the existing option. By 18 June 1988, the Collins' interests had authorised Barkuna to act for them in relation to the applications for the mining leases and the prospecting licences. Barkuna had been formally nominated to carry forward those applications. The meeting in Baker O'Loughlin's office was attended by Mr Grasso, Mr Robertson, Mr Vickery and Ms Addison on behalf of Barkuna, by Mr Hopwood and Mr Byrnes on behalf of Sedimentary and, in the first instance, by Mr Di Maggio and Mr Zappia on behalf of Tomlinex. They were later joined by Mr P. Scragg, the secretary of Tomlinex and Mr Tony Pollina. Mr Collins was also present. The meeting went for several hours. During the early part of the meeting, the principal discussion was between Barkuna's representatives and Sedimentary's representatives. Mr Hopwood and Mr Byrnes thought that the 25% share which was being offered was too small for the obligations Sedimentary was being asked to undertake, namely to provide $250,000 for testing the viability of the project and the one-half of the $4,500,000 payable on the exercise of the option. At one stage, the meeting broke off for approximately 1 1/2 hours while Mr Hopwood and Mr Byrnes went elsewhere for discussions. On their return, Mr Hopwood said that there was too much risk in the project, particularly as it would be some time before the mining leases would be granted. Mr Collins disputed «ot OBS this point and, according to Mr Di Maggio's affidavit, pointed on a map to applications 473 and 474 and said that these would be available within 30 days. The difference of view ended up with a wager between Mr Collins and Mr Hopwood in the sum of $100 as to what would occur. Mr Di Maggio's evidence in cross-examination as to the incident was as follows:- "Yes, I have given you an opportunity to tell his Honour what the conversation was?-- -Okay. Yes, that's what happened, then John Collins said that it definitely would be within 30 days. Tim Hopwood says, 'I bet it won't be.' That ensued. A handshake ensued, Tim Hopwood saying that it definitely would not be for six months or at least until after Christmas. John Collins saying definitely within 30 days and then at that point then John Collins actually addressed me and actually showed me on the map the LJ The trial Judge held: *.. first, I am satisfied that Mr Hopwood sought, but failed to achieve a greater interest for his company in the joint venture; secondly, I find that he gave as his reasons for the greater interest the high risk of the project and the fact that the scope of the exploration would be restricted to areas within the boundaries of mining leases; thirdly, I am satisfied that Mr Collins reacted to Mr Hopwood's commentary by making a statement with respect to the grant of two mining leases; fourthly, I find that this statement led to a heated exchange between Mr Collins and Mr Hopwood which, in turn, led to some bet being made between the two men about the period of time within which approval for the grant of the mining leases would be given." Shortly after the bet, Mr Hopwood and Mr Byrnes left the meeting and, according to Mr Di Maggio's evidence, though the trial Judge did not express this as a finding of fact, Mr Collins repeated that the applications would be converted to mining leases within 30 days. There was very little evidence as to what occurred thereafter. Apparently, Sedimentary withdrew its proposed involvement in the project and Barkuna offered to take up the interest which had been offered to Sedimentary, with the result that Barkuna expressed its preparedness to put forward the $250,000 needed for the tests and one-half of the $4,500,000 payable on the exercise of the option on the footing that it would then hold 65% of the venture, with Tomlinex holding 25% and the Collins' interests holding 10%. There was a break in the meeting while Mr Di Maggio and Mr Zappia conferred with Mr Scragg and Mr Pollina who had not been present up to that time. After discussion, these four persons returned to the meeting and agreed in substance to Barkuna's proposal. Final details were worked out on 20 June 1988 and an agreement was drawn up and was executed on 22 June 1988, being backdated to 18 June. Tomlinex paid over its cheque for $250,000 on 22 June. The case put for Tomlinex was that Mr Di Maggio and Mr Zappia were influenced by Mr Collins' conduct at the meeting of 18 June 1988 to enter the transaction, which subsequently turned out to be unprofitable. The trial Judge held that Mr Collins' conduct at the meeting, which we have described above, amounted to no more than the expression of a difference of view as between himself and Mr Hopwood, both of whom knew a great deal about the circumstances of the particular applications and the technicalities involved in the granting of a mining lease. His Honour made this finding after having examined in a considerable detail the whole context in which the conduct took place. His Honour further held that Tomlinex was not influenced by what Mr Collins had to say and that Mr Di Maggio and Mr Zappia had formed the opinion, before they went to the meeting, that they were prepared to put forward $250,000 on the terms which had been proposed. His Honour considered that it was not Mr Collins' statements which persuaded them to enter into the transaction but rather that the withdrawal of Sedimentary, Mr Hopwood and Mr Byrnes from the transaction failed to dissuade Tomlinex from the course which Tomlinex had earlier decided to take. The expression of an opinion as to a matter such as the period within which mining leases will be granted and the laying of a bet as an expression of support for the strength of that opinion may constitute conduct which is misleading or deceptive or likely to be so. But whether or not it does so will depend upon the facts of the matter. We need not discuss this point any further as the trial judge made a positive finding that Tomlinex was not influenced by Mr Collins' conduct. This finding stands, as it was expressed to do, irrespective of the correctness or otherwise of his Honour's conclusion that the conduct was not misleading. On 18 June, and for that matter on 20 June or 22 June, no person appears to have expressed doubt on behalf of Tomlinex about the project or the terms which had been proposed. In his oral evidence, Mr Di Maggio conceded that, in the first part of the meeting of 18 June, the debate was between Mr Hopwood and the officers representing Barkuna. Mr Collins, Mr Di Maggio and Mr Zappia said very little and, in putting their point of view that Sedimentary should have a greater interest, Mr Hopwood and Mr Byrnes spoke on behalf of that company. After Mr Hopwood had expressed his concern about the risk in the transaction and his concern that the applications for the mining leases were merely applications, neither Mr Di Maggio nor Mr Zappia asked any question of Mr Collins, Mr Robertson, Mr Grasso or the solicitors with respect to that matter. Before the meeting of 18 June, Mr Di Maggio had made no enquiry as to the state of the mining leases. He made no enquiry of them on 20 June and appears to have made no enquiry after 20 June. Mr Di Maggio was presumably satisfied that Barkuna had been nominated to handle the applications. Another factor indicating that Mr Di Maggio was not influenced by Mr Collins is that Mr Di Maggio and Mr Zappia relied, in addition to the report of Professor Wilson, on the expertise of Mr Grasso, Mr Robertson and Mr Hopwood. Mr Di Maggio gave this evidence when he was asked why he was not disturbed when Mr Hopwood expressed concern about the risks of the transaction:- "Why not?-—OK - glad you asked - because there were other persons there - Ross Grasso, there was Graham Robertson who [ also respected as people that were involved in mining - OK? They also did not question that fact when he [Mr Collins] made the statements." Mr Zappia gave this evidence:- "I unfortunately relied on Mr Hopwood, Mr Grasso and Mr Robertson's views and understandings." It should be kept in mind that it was Mr Grasso and Mr Robertson who first introduced Mr Di Maggio to the transaction. They were experienced miners. Their company, Barkuna, was the agent handling the applications and it was proposed and subsequently arranged that Barkuna should be the first manager of the project. Perhaps most significant of all is the point that the principal testing which was discussed at the meeting and earlier was to take place on Mrs Howell's mining lease 1063. Mr Di Maggio gave this evidence:- "Well, is what you are saying that ML1063 and its cubic content were discussed but you could not be specific about the figure?--- Yes, I would go along with that, yes. And there was discussion on that occasion about how they were going to test or bulk test ML1063, was there not?---Yes. They discussed, for example, that they were proposing to use a dozer and a back hoe to take out the material for bulk testing?---That I do not recall, but I can agree with that. I see, but you would not deny that the bulk testing was referred to in the context of ML1063, your memory does not go that far?---That's correct." Mining Lease 1063 was the area in which it was proposed that the bulk testing would be done and the area in which it was carried out. Another factor is that officers of Tomlinex subsequently expressed enthusiasm for the project, notwithstanding that applications 473 and 474 had not been granted. On 25 July 1988, outside the 30 day period, Mr Scragg wrote to Mr Zappia a letter which stated inter alia:- "When we exercise the option in December of 1988 it will be necessary for us to obtain further capital. The amount that we have to pay is $2.115 million. We are hoping that the finds will prove the mining tenements to be of such value that we will not need to call upon shareholders to inject further capital sums. We are hoping to obtain those funds by way of a gold loan. There is expertise within Barkuna Pty Lid which will assist in obtaining such a loan. The other capital partner, as well as option holder, is now Barkuna Pty Ltd. Barkuna Pty Ltd has been committed to spend up to $250,000.00, between now and December 1988, on proving the mining tenements in question. If they spend less than that, then half the difference is refundable, to us or stands in our credit with respect to any other capital payment that we may have to make in the joint venture. If we do not exercise the option in December 1988, we will receive 45% of all gold won in proving between now and then. At present an initial survey of the site has been made, to work out the areas where the proving will take place. The results are very encouraging indeed." The trial Judge considered that that letter was not consistent with the fact for which Tomlinex contended in the proceedings, namely that Tomlinex had been influenced to enter into the agreement of 18 June by the representation that mining leases would be granted on applications 473 and 474 within 30 days. Those mining leases had not been granted by 25 July 1988 and neither Mr Di Maggio nor it seems Mr Scragg had made any enquiries about them. Even in early October 1988, Tomlinex appears to have had confidence in the project. About this time, there was a proposal that Tomlinex should advance further moneys. Mr Di Maggio gave this evidence as to the contents of his diary of 1 October 1988:- "And there was a proposal at this stage for $300,000 to be advanced to Mr Collins, was there not?---Yes. And does your diary not recall that this was tentatively OK'ed on Tomlinex's behalf by Mr Scragg?--- Yes." The bulk testing on ML 1063 progressed but the returns appear to have been few. Barkuna, which apparently had encountered financial difficulties, was slow in paying the contractor who was carrying out the work. Mr Di Maggio gave this evidence as to the end of the project:- "Greg Hockey [the contractor] was saying, Look, it's $160,000 and 'm not doing very much more work unless I'm paid that $160,000?---Yes. Mr Grasso informed you that Barkuna didn't want the project to go beyond that $160,000?---Yes. And, in effect - and I am concertinaing things a little bit just to keep the matter short - what happened over the next week or so was that Hockey was instructed just to finish up as quickly as possible when the test holes on ML1063 were dug?- --I'm not clear on that. My only understanding was he was told not to go beyond $170,000, as I recall. I see. But his work was exclusively on ML1063, wasn't it?---Yes." Having regard to the conflicts of evidence between the witnesses in the trial at first instance and to the deficiencies in the evidence, it would be wrong for this appellate court not to accept his Honour's finding of fact that Mr Di Maggio, Mr Zappia and Tomlinex were not influenced by Mr Collins's conduct at the meeting of 18 June. The matters which point against such an influence are strong. Mr R.W. Evans, counsel for Tomlinex, submitted that Mr Collins made his Statements at a critical time in the negotiations deliberately with a view to induce Tomlinex and its representatives not to withdraw from the project. There are matters which can be put in support of that contention. However, the trial Judge did not accept it. Having heard the oral evidence of the witnesses, his Honour was in a much better position than is this Full Court to determine that issue. 1B The trial Judge had the benefit which this appellate Court does not have of seeing the witnesses as they gave their evidence and of listening to, considering and weighing their evidence over many days. Once primary facts have been found or are not in dispute, an appellate court may be, and usually is, in as good a position as a trial judge to draw inferences of fact, though in deciding what is a proper inference to be drawn, the appellate court should give respect and weight to the conclusion of the trial Judge. Warren v. Coombes (1979) 142 CLR 531 at 551. However, in respect of issues of disputed primary fact, an appellate court which hears an appeal on documents must generally defer to the conclusion on the question of credibility formed by the Judge below who saw and heard the witnesses. See Uranerz (Aust) Pty Ltd v. Hale (1980) 30 ALR 193 at 197-8. In that case at 199, Gibbs J., with whom Stephen, Mason and Wilson JJ. agreed, said that a finding based on a view of the credibility of the witnesses may not be reversed unless it was seen clearly to be wrong on grounds which did not depend merely on credibility, e.g. on the ground that the evidence which was accepted was inconsistent with established facts, or was so improbable that no reasonable person could accept it, or that the judgment disclosed that its conclusion was affected by some error of law or fact. This difference between drawing inferences from facts which are established by the findings of the trial Judge or are not in dispute, on the one hand, and reviewing issues of fact which depend upon a view taken of conflicting evidence in which the trial Judge's view of the credibility of the witnesses has played a part, on the other, was emphasised by Gibbs C.J., Wilson, Brennan, Deane & Dawson JJ. in Brunskil] v. Sovereign Marine & General Insurance Co Limited (1985) 62 ALR 53 at 56-7. More recently, in Devries v. Australian National Railways Commission (1993) 177 CLR 472 at 479, Brennan, Gaudron and McHugh JJ. said:- "More than once in recent years, this Court has pointed out that a finding of fact by a trial judge, based on the credibility of a witness, is not to be set aside because an appellate court thinks that the probabilities of the case are against - even strongly against - that finding of fact. If the trial judge's finding depends to any substantial degree on the credibility of the witness, the finding must stand uniess it can be shown that the trial judge 'has failed to use or has palpably misused his advantage' or has acted on evidence which was 'inconsistent with facts incontrovertibly established by the evidence' or which was 'glaringly impossible." We see no error of principle in the approach adopted by the trial Judge in the present case. His Honour referred to the words of Wilson J. in Gould v. Vaggelas (1985) 157 CLR 215 at 236:- "The representation need not be the sole inducement. It is sufficient so long as it plays some part even if only a minor part in contributing to the formation of the contract." In the context of the present case, that was a sufficient description of the test to be applied. Mr Evans submitted that the adoption by Wilson J. of the term "material" in Gould v. Vaggelas at 236 and 238, was wrong and that it was sufficient that a false representation was made which formed part of the context in which a decision or action was taken. But more is required than that. Section 82 of the Trade Practices Act and s.7 of the Misrepresentation Act require that the contravention of the Act be a cause of the loss or damage in respect of which relief is sought. In Wardley Australia Ltd v. The State of Western Australia (1992) 175 CLR 514, Mason CJ, Dawson, Gaudron and McHugh JJ, when speaking of s.82, said at 525:- "The statutory cause of action arises when the plaintiff suffers loss or damage 'by' contravening conduct of another person. 'By' is a curious word to use. One might have expected 'by means of, 'by reason of', 'in consequence of or 'as a result of. But the word clearly expresses the notion of causation without defining or elucidating it. In this situation, s.82(1) should be understood as taking up the common law practical or common-sense concept of causation recently discussed by this Court in March v. Stramere (E. & M.H.) Pty Lid, except in so far as that concept is modified or supplemented expressly or impliedly by the provisions of the Act." At 526, their Honours said:- "In a case such as the present, it may safely be assumed that the plaintiff is entitled to recover 'a sum representing the prejudice or disadvantage [the plaintiff] has suffered in consequence of his altering his position under the inducement' Toteff v. Antonas (1952), 87 CLR 647, at p.650; see also Potts v. Miller (1940), 64 CLR 282, at p.297; Gould v. Vaggelas (1984), 157 CLR 215, at p.220; Gates v. City Mutual Life Assurance Soctety Lid (1986), 160 CLR 1, at p.12 of the misleading conduct or 'the actual damage directly flowing from' that conduct to take up and adapt well-known statements of the measure of damage applicable in an action of deceit." See also Ricochet Pty Ltd v. Equity Trustees Executor and Agency Company Ltd (1993) ATPR 941-236 at 41,226 to 41,227 per Lockhart, Gummow and French JJ. Mr Evans submitted that, in National Australia Bank Ltd v. Cunningham (1990) ATPR 441-047, Jenkinson J., with whom Ryan J. agreed, expressed at 51,623 a lower test. But reading his Honour's words in the context of his judgment as a whole, it is clear that his Honour did not do so. His Honour expressed the view that the representation must be a contributing factor to the loss or damage, and he referred to "inducement" and "reliance". In our opinion, the points of challenge made by Mr Evans fail. The appeal should be dismissed with costs. I certify that this and the 15 preceding of the reasons for judgment herein of Date: 20 September 1994 Counsel for the appellant: Solicitors for the appellant: Counsel for the respondent: Solicitors for the respondent: Date of hearing: Date of judgment: Place of judgment: Peter Scragg Richard R. Evans Malooim D. Young Finlaysons 10, 11 May 1994 20 September 1994 Sydney