JUDGMENT No. 1.259. TE. IN-_THE FEDERAL COURT OF AUSTRALIA Ww. W. TRY ) NG 638 of 1992 ) GENERAL DIVISION ) MICHAEL TREVOR GREENHALGH First Applicant LEONIE ANNE GREENHALGH Second Applicant M & L GREENHALGH PTY LIMITED Third Applicant COMPOSITE BUYERS LIMITED First Respondent PAYLESS SUPERBARN (NSW) PTY LIMITED Second Respondent Coram: Whitlam J Place: Sydney Date: 23 November 1994 CORRIGENDUM Amendment to the reasons for judgment of Justice Whitlam. 1. Page 13, line 3, replace "Waters" with "Watson"; 2. Page 14, line 20, replace "Fowler" with "Hilton"; 3. Page 14, line 21, replace "Fowler" with "Hilton"; 4. Page 15, line 5, replace "Fowler" with "Hilton"; 5. Page 15, line 14, replace "Fowler" with "Hilton"; ORINCIP, SEGISTRY 3 on Far . "wat La ad —~ t 6. Page 15, line 17, replace "Fowler" with "Hilton'; 7. Page 16, line 9, replace "Fowler" with "Hilton"; 8. Page 16, line 10, replace "Fowler" with "Hilton"; 9. Page 16, line 14, replace "Fowler" with,/"Hilton". Associate to Justice Whitlam Date: 19 December 1994 JUDGMENT No. sano Sal 2. CATCHWORDS FRAUD - sale of business - whether vendor represented that past financial statements do not exist - alleged musrepresentation as to gross profit margins - no point of principle. TRADE PRACTICES - sale of business - representation as to projected gross profit margins - whether vendor had reasonable grounds tor making representation - no point of principle. Trade Practices Act 1974, ss 51A and 52 Michael Trevor Greenhalgh and Ors v. Composite Buyers Limited and Anor No. NG 638 of 1992 Coram: Whitlam J Place: Sydney Date: 23 November 1994 23 NOV 1994 FEDERAL COURT Or AUSTRALIA PRINCIPAL REGISTRY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY No. NG 638 of 1992 eee ee ee GENERAL DIVISIO. MICHAEL TREVOR GREENHALGH First Applicant LEONIE ANNE GREENHALGH Second Applicant M & L GREENHALGH PTY LIMITED Third Applicant COMPOSITE BUYERS LIMITED First Respondent PAYLESS SUPERBARN (NSW) PTY LIMITED Second Respondent Coram: Whitlam J Place: Sydney Date: 23 November 1994 MINUTES OF ORDER THE COURT ORDERS THAT: I The application be dismissed. 2. The applicants pay th = — pondents' costs. Note Settlement and entry of orders 1s dealt with m Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) NG 638 of 1992 ) ) GENER IVISION MICHAEL TREVOR GREENHALGH First Applicant LEONIE ANNE GREENHALGH Second Applicant M & L GREENHALGH PTY LIMITED Third Applicant COMPOSITE BUYERS LIMITED First Respondent PAYLESS SUPERBARN (NSW) PTY LIMITED Second Respondent Coram. Whitlam J Place: Sydney Date 23 November 1994 REASONS FOR JUDGMENT The first and second applicants, Michael Greenhalgh and Lee Greenhalgh, are husband and wite. On 20 November 1987 they acquired the two issued shares in the third applicant, which was a shelt company and to which I shall refer as the purchaser. On 30 November 1987 Mr and Mrs Greenhalgh entered into an agreement with the tirst respondent, Composite Buyers Limited ("CBL"). Pursuant to that agreement the 2. tollowing things took place that some day. The purchaser adopted new articles of association and executed a deed establishing the Payless Goulburn Unit Trust ("the unit trust"), of which it 1s trustee. Mr and Mrs Greenhalgh and CBL subscribed for shares in the purchaser and tor umits in the unit trust. The purchaser executed a contract of sale with the second respondent (which 1s a wholly-owned subsidiary of CBL and to which I shall reter as the vendor), whereby it purchased, as trustee of the unit trust, the supermarket business previously carned on by the vendor at Goulburn. In this proceeding the applicants claim that they were induced to enter into the arrangements described by representations, which were made fraudulently and negligently. The impugned representations are contained in a feasibility study provided by CBL to Mr Greenhalgh and in what was allegedly said by a Mr Jim Watson on behalf ot CBL to Mr Greenhalgh and his accountant. The alleged misrepresentations in the feasibility study relate to anticipated gross profit margins, and against Mr Watson it 1s alleged that he said, falsely or mcorrectly, that the respondents did not have "past financial statements" tor the supermarket business. The representations in the teasibility study are also said to be misleading by virtue of s 51A of the Trade Practices Act 1974. The Payless Acquisition and Onsell For the year ended 26 June 1987 the directors of CBL described its principal activities, in their report required by s 270(2) ot the Companies Code, as follows: ""Conzoste Buyers Limued is a Co-operative Company owned by independent food retailer members and employees of the Compuny The principal activities of the corporations in the group during the year were 3. wholesaluig and distribution of food and liquor, co-ordination of advertising and merchandising on behalf of members, - wholesaling and distnbution of catenng merchandise, - provision of finance, retail design, electronic information facilites, accounting and other services to members." They continued: "The following significant changes in the principal activities of the group occurred during the year e With the acquisition of the Payless Superbarn retail stores, the group commenced the activity of grocery chain retailing. e The group also commenced the activity of selling off the Payless retail stores to independent retailers. There were no other significant changes in the nature of the group's activities during the year." The acquisition referred to had taken place on 30 June 1986. A wholly-owned subsidiary of CBL had acquired from Permewan Wright Consolidated Pty Ltd the vendor together with 63 stores in Victoria and 65 stores in New South Wales. The Payless chain had been acquired for "onsell" to independent operators. CBL's objective was to increase the market share ot the independent sector of the retailing industry. Mr K.J. Ainsworth, CBL's company secretary, gave evidence on this topic. CBL put in place an onsell program, which provided first for the sale of Payless stores in Victoria. For this purpose CBL assembled a team, which included Mr Peter Sugden. Mr Sugden 1s an accountant by protession who was engaged on a consultancy basis. He joined the team in about September 1986 and after approximately six months 4, he became the head of the team The Victonan onsell team utilized a computer program tor preparing feasibility studies for each of the stores, the format of which was explained to Mr Sugden by Mr Arthur Fisher. Mr Fisher was an accountant employed by CBL as assistant to 1ts managing director In 1987 CBL extended its onsell program to New South Wales. The team there was headed by Mr Rod Saunders, CBL's deputy chairman, and included Mr Fisher and Mr Jim Watson. Mr Watson 1s a very experienced retailer, who had been CBL's general manager between 1976 and 1978. He was engaged as a consultant in March 1987 and assumed responsibility for selling certain stores, cluding Goulburn. The onsell team in New South Wales used the same program as had been used in Victoria to prepare its feasibility studies. Earlier Feasibility St fi oulbur A feasibility study for the Goulburn store had been prepared by early July 1987. It assumed a purchase price for the business in excess of $1 million, including stock valued at $340,000. This study was evidently prepared by Mr Fisher and sent on 8 July 1987 to a prospective purchaser, Mr David Glover. In a tax sent on 16 July 1987, dealing with queries raised on Mr Glover's behalf, Mr Fishe. wd: General - Past Financial History We do not provide past financial results for any store. While this may seem unreasonable, ut is our belief that the results of Payless would be quite missleading (sic) The Goulbum store is one of 67 in NSW and, while there are some useful figures available on a store by store basis, 5. there (sic) many costs that are not split by store. The feasibility study provided ts based on the past history of the Goulbum store, te. sales - labour costs - light & power -rent - gross margins etc. Other cost areas have been assessed on a typical independantly (sic) operated store." Mr Glover wrote to Mr Fisher on 14 September 1987 to inform him of his "decision not to proceed with the purchase of Payless Goulburn." That letter appears to have been seen by Mr Watson on 17 September 1987. The Negotiations with Mr Greenhalgh Mr Greenhalgh was a bank officer who had worked for the Commonwealth Bank since 1965. By 1987 he had risen to assistant manager at the Muswellbrook branch. Mr Greenhalgh had also decided to try and find an "alternate career." He saw an advertisement placed by Mr Watson offering for sale nineteen Payless supermarkets (including Goulburn) and telephoned Mr Watson. In their first telephone conversation Mr Greenhalgh asked about the stores at Goulburn and Corrimal. Mr Watson told him that the purchase price for the Goulburn store was $600,000 plus stock. Mr Watson then sent Mr Greenhalgh a handwritten note containing the two stores' turnover figures for the previous eight weeks. At the end ot Septemher 1987 Mr Greenhalgh again telephoned Mr Watson. He said that he was interested in seeing some detailed tigures on the Goulburn store and that he had about $200,000 that he could "put towards the purchase." In their evidence Mr Greenhalgh and Mr Watson disagreed about what was then said. 6. Mr Greenhalgh said that he asked whether Mr Watson could provide him with "financial statements tor the business for the last couple of years" and that Mr Watson replied: "They are not available The figures are all done as part of a chan and there ts nothing available for dividual stores. We can provide you with a feasibility showing likely income and expenduure detail based on trading experience " Mr Watson denied this account. He deposed that he was asked whether CBL had copies of past financial statements of the Goulburn store. However, he said that he did acknowledge that CBL had financial statements tor all the Payless stores, but that he had explained the policy of the onsell team not to provide copies to prospective purchasers. (I suppose that it ts possible that the version recollected above by Mr Greenhalgh simply reflected a misunderstanding of what Mr Watson asserts that he said. However, in a subsequent affidavit, Mr Greenhalgh deposed that Mr Watson baldly stated on that occasion: "Historical financial data are not available.") Mr Watson allowed that Mr Greenhalgh made such a request on two occasions, and it was implicit in his evidence that on each occasion he gave the same reply. On 30 September 1987 Mr Watson sent Mr Greenhalgh a handwritten note setting out certain "significant operating costs" for each of the Corrimal and Goulburn stores. being "the actuals to 30/6" expressed as a percentage of sales. This was accompanied by a teasibility study for the Goulburn store. (The "disclaimer" on the front of tms study was signed by Mr Sugden who had Jomed the New South Wales onsell team in September 1987 replacing Mr Fisher. However, as [ will explain later, Mr Sugden denied that he 7. prepared this document.) This feasibility study assumed a cash investment by the purchaser of $200,000. Mr Greenhalgh read this feasibility study and then sent it to his accountant, Mr Bill Bartlett. Mr Greenhalgh subsequently telephoned Mr Watson and asked whether a "second teasibility (could be) done based on our putting in $115,000 rather than $200,000." On 19 October 1987 Mr Watson sent a telex message to Mr Sugden, which he copied to Mr Saunders. After referring to Mr Greenhalgh's interest in the Goulburn store, it said: "Subject to your approval, I have agreed the following points with him. 1. CBL equity partcipation to be $60K 2. Price split. Goodwill $150K Plant $450K 3. Stock level for the purpose of the feasibility to be $400K Would you kindly prepare a new feasibility on the above basis. Michael is in Sydney all of this week attending a Commonwealth Bank management seminar, and will call you to arrange to pick up 2 copies." Mr Greenhalgh did subsequently telephone Mr Sugden and told him, in etfect, that the new feasibility should assume a cash investment of only $115,000 by the purchaser. Mr Sugden then prepared another feasibility study which was delivered to Mr Greenhalgh's motel in Sydney. On 26 October 1987 Mr Greenhalgh, Mr Bartlett and Mr Watson all met by arrangement in Goulburn. Mr Greenhalgh provided Mr Bartlett with a copy of the new 8. feasibility study, and they all inspected the store. On this occasion there was discussion about two topics which assume significance tor the purpose of the applicants' case. The tirst was the Goulburn store's historical trading figures. Mr Bartlett's and Mr Watson's versions of what was said were essentially the same. Mr Bartlett did ask to see "previous years trading results." That expression may be ambiguous. However, in cross-examination, Mr Bartlett accepted that "it may well have been the case" that Mr Watson replied that tinancial statements were not available for the Goulburn store because they had been prepared on a chain store basis. Mr Bartlett also asked whether there was "any verification of the gross profits in each category of goods" or he could get "a turnover tigure and gross profit on all lines.". Mr Watson suggested that he should speak to Mr Sugden who had "prepared the feasibility study and would have any information." Mr Bartlett recalled quite clearly being referred to Mr Sugden for such mtormation. However, Mr Greenhalgh (who was also present) said that he could not recall Mr Bartlett being reterred to Mr Sugden. The other topic discussed at Goulburn, which assumes a significance in the applicants' case, was rebates. Mr Greenhalgh deposed that he did not learn of rebates ottered by suppliers to CBL until February 1988. This 1s curious. Mr Bartlett deposed that Mr Greenhalgh himselt asked Mr Watson to explain the rebate system. Mr Watson said that he described the system of payments by CBL in respect ot manufacturers' rebates and, in cross-examination, Mr Bartlett agreed that Mr Watson had indeed done so. Mr Bartlett even apparently volunteered the observation to Mr Watson that he assumed any rebate was included in the gross margin shown 1n the feasibility study. 9. After the Goulburn meeting Mr Bartlett did not attempt to contact Mr Sugden. On 29 October 1987 Mr Greenhalgh went to see the National Australia Bank about finance for the purchase and gave that bank a copy otf the latest feasibility study. By letter dated 30 October 1987 the vendor's solicitors outlined to the solicitors for Mr and Mrs Greenhalgh the proposed sale arrangements. Over the next month the applicants executed the required documentation which was exchanged on 30 November 1987, on which date the purchaser took possession of the Goulburn store. The Feasibility Study The final teasibility study bore upon tts face (as had the other two such studies reterred to) the tollowing legend: "DISCLAIMER We have prepared the following feasibility study from data obtained from information provided by the staff of Composite Buyers Limited and Payless Superbam (Nsw.) Pty Ltd. This study has been prepared for the exclusive use of Composite Buyers Limited. We do not guarantee that sales estimates will be achieved and no warranty of accuracy or rehabulity is given. Neither Composite Buyers Limited nor any employee of Composite Buyers Limited undertakes responsibility in any way whatsoever to any person in respect of the feasibility study including any errors or omissions therein however caused For and on behalf of Composite Buyers Limited." The disclaimer was signed bv Mr Sugden. The study contamed a projected profit and loss statement for tive years and a projected cash flow tor the same period. The base data in the study assumed a current sales level, annual growth in sales and a projected sales mix across different departments 10. (dry grocery, truit and vegetables, delicatessen, meat and variety) each with a different gross profit margin. It also set out estimates of expenses for ditferent items of personnel, occupancy, communication, vehicle, leasing, finance, advertising, accountancy and legal costs. Counsel tor the applicants imitially single out for criticism two aspects of the study, the gross profit margins and the estimate for rubbish removal] mn the occupancy costs. Mr Sugden explained how he selected the relevant figures. Mr Sugden used CBL's profit and loss statements in respect of the Goulburn store tor the nine months period ended 27 March 1987. He supplemented this material with the subsequent weekly sales information tor the store up to the end of August 1987, which had been collated by a CBL employee, Miss Teresa Wood. The gross profit margins for the ditferent departments adopted by Mr Sugden were suggested to him by Mr Rod Saunders. They were 14% for dry grocery, 28% for fruit and vegetables, 30% for delicatessen, 28% tor meat and 35% for variety. Mr Sugden knew that Mr Saunders had "visited every store" and had "run his own stores t successtully." He respected Mr Saunders' judgment. Mr Sugden estimated the cost ot rubbish removal at $3,000 in Year 1 rising to $5.000 in Year 5 by $500 increments annually. He said that the estimate could be a pure guess and that he did not discuss it with anyone. 11. In cross-examination, counsel tor the applicants put certain propositions to Mr Sugden: first, that his "basic parameters" for producing a feasibility study included a gross profit margin of 16.6% on total sales; secondly, that he prepared the first feassbility that Mr Watson gave to Mr Greenhalgh; and thirdly, that, taced with the prospect of a negative cash flow in Years 1 and 2 as a result of finance and leasing costs which were greater than in the first feasibility, he deliberately increased the gross profit margin on dry grocery and decreased the rubbish removal cost in order to produce a positive cash flow in those years. Mr Sugden denied these suggestions. The tirst suggestion was based on a handwritten note of Mr Sugden in the following terms: " 450,000 Leased 300,000 Stock G.P. 16.6% CBL $60,000 " This document was obviously prepared after Mr Watson's telex of 19 October 1987, notitying the price of the plant (which was to be leased) as $450,000. It also reflected Mr Sugden's view (which was incorporated in the feasibility study) that the value of the stock would be $300,000. Mr Sugden denied that he "started off" with a figure of 16.6% in mind He said that he derived that tigure from a "perusal otf Permewan Wnghts", by which he made clear later that he meant the CBL results at Goulburn for the period after acquisition in June 1986. This 1s borne out by the contemporaneous note of his calculation, which 1s annexed to his attidavit. I accept Mr Sugden's denial. 12, So far as the second proposition is concerned, it 1s true that the disclaimer on the first of the feasibility studies furnished to Mr Greenhalgh was signed by Mr Sugden. But Mr Sugden said that he signed plenty of these disclaimers during the onsell exercise, and it would hardly be surprising, that after he joined the onsell team in New South Wales, disclaimers signed by him should be placed on any studies that may, in fact, have been prepared by Mr Fisher. (1 should mention that Mr Fisher has since died.) Mr Sugden not only denied that he prepared that first study, he said that he was not even aware that it existed I do not consider that Mr Watson's telexed request for a "new teasibility" must be taken to have alerted him to the existence of an earlier study. It may seem odd that, leaving aside the finance and leasing costs, the only difference between the two studies 1s the greater gross profit margin for dry grocery and the lower estimates for rubbish removal costs. However, even if Mr Sugden did unwittingly utilize information tn the first study furnished to Mr Greenhalgh, it would not, of course, follow that he prepared that document. After all, the sales mux and gross profit percentages for the different departments are the same in the final feasibility as m that sent to Mr Glover in July 1987, except that Mr Fisher there used a higher 14.5% gross profit margin on dry grocery. Again I accept Mr Sugden's demals, which strike me as entirely plausible. The applicants have tailed to establish any lack of genuiness or bona fides on the part of Mr Sugden 1n the exercise that he undertook. Mr Sugden's study produced a gross protit margin ot 16.42% on total sales or, atter deducting the cost of wrappings, a margin of 1602%. Whilst there were no historical trading tigures for the various departments at the Goulburn store (against which he could check Mr Saunders' 13. estimates), he did use the store's "overall performance" reflected in the post-June 1986 figures (including rebates) to check the margin on total sales which his study produced. The Alleged Representation by Mr Waters The closing address for the applicants on the alleged oral representation by Mr Watson was made by their semor counsel. It was a polished and well crafted attempt to dislodge the very favourable impression conveyed by Mr Watson in the witness box. It should be mentioned that Mr Watson was a quite disinterested witness. He had no affection for, or emotional attachment of any sort to, CBL. He had purchased four Payless stores trom CBL and had subsequently taken a leading role in coordinating litigation against CBL by purchasers of Payless stores. Mr Watson had been involved in the sale of several Payless stores for the CBL onsell team. He said that CBL's policy of not providing past financial statements had been an issue with many prospective purchasers and that he had always been very careful about what he said on the subject. Senior counsel for the applicants submitted, 1n effect, that, with the best will in the world, constant repetition may have led to corruption of the message that Mr Watson wished and intended to convey. (Mr Sugden had also confirmed, upon cross-examination, that there had been a policy of not giving past profit and loss statements to potential p»rchasers.) A theme, to which senior counsel returned several times in his address, was the alleged absence of any written record of the policy allegedly pronounced by Mr Sugden and Mr Watson. However, this submission overlooks Mr Fisher's tax of 16 July 1987 to Mr Glover, which quite explicitly articulated CBL's stance. 14. I do not propose to set out the evidence of Mr Watson, Mr Greenhalgh and Mr Bartlett in detail. As I have said, I think that by the end of his cross-examination Mr Bartlett had essentially accepted Mr Watson's version of what was said on 26 October 1987. Mr Greenhalgh certainly did not, and he adhered to his version of his telephone conversations with Mr Watson. I reyect his evidence to the extent that he says that Mr Watson said anything to the effect that past financial statements for the Goulburn store did not exist. (In fact, the profit and loss statement for the period ended 26 June 1987 had not been produced when Mr Sugden prepared his feasibility study.) Mr Watson impressed me as a very careful witness. It would have been absurd to suggest that financial data for the Goulburn store did not exist at all. CBL had been operating the store for 15 months when these conversations took place. Mr Bartlett, as an accountant, would have had to know such records existed. In the event, he took no steps to pursue any inquiries with Mr Sugden, as he was invited to do by Mr Watson. So far from being persuaded that Mr Watson said that past financial statements for the Goulburn store did not exist, I am quite convinced that Mr Watson said that such material did exist and that CBL had a policy not to furnish such data to prospective purchasers. The alleged representation 1s not made out. The Alleged Misrepresentation in the Feasibility Stud The applicants' attack upon the gross profit margin employed in the final feasibility study depends upon an analysis developed by Mr Norman Fowler, a chartered accountant engaged as an expert witness. Mr Fowler's exercise commenced with the profit and loss statements of the Goulburn store for the years ended respectively 28 June 1985, 30 June 1986 and 26 June 1987. He stripped out of each year's gross profit the 15. rebates received (which varied between 3.8% and 4% of total sales) and substituted an amount equivalent to 2% of sales. This percentage was said to represent the likely lower amount of rebates payable to the purchaser in respect of the Goulburn store. (In fact, such rebates appear to have averaged about 2.67% of sales since acquisition by the purchaser.) The depressed figures produced by Mr Fowler's methodology led to the submission that there was no historical basis for the gross profit margin in the feasibility Study, which was accordingly misleading. So far as the applicants' common law claims are concerned, the submission is somewhat tar-fetched. I have already explained my finding that Mr Watson did not tell Mr Greenhalgh that past financial statements for the Goulburn store did not exist. A contrary finding was sought by the applicants as being central to thei action in deceit. The feasibility study makes no reference to past or present gross profit margins and, on even the most strained construction, I am unable to discern any implied statement of such facts in the study. The very fact upon which Mr Fowler justified his approach, namely the changed rebate levels when the purchaser takes over, emphasizes the futurity of the projections. In any event, any statement of historical gross profit margins, which failed to be qualified by an approach matching the artifice of Mr Fowler, could not be regarded as made recklessly, simply because the maker overlooked such a way of altering the historical figures. The question ot negligence does not arise as the disclaimer on the front of the teasibility study (which Mr Greenhalgh said that he read and understood) expressly excludes the assumption of any responsibility tor any material it contains. Accordingly, the applicants have tailed to establish any actionable misrepresentation at common law. 16. The reliance by the applicants on s 51A of the Trade Practices Act poses different considerations. CBL must show that it had reasonable grounds for making the projection as to the gross profit margin on sales. Mr Sugden did turn his mind to rebates. He understood rebates to have been taken into account by Mr Saunders in proposing the gross profit margins for the different departments. That formation, together with the sales mix assumptions, was used by Mr Sugden to derive his projected gross profit margin on all sales. Mr Sugden only used historical figures to check that margin. The figures that he used were the post-June 1986 results. He did not use the statements analysed by Mr Fowler. Indeed, the June 1987 statement was not available to him. The failure of Mr Sugden to subject the material he used to the Fowler approach does not establish that he did not have reasonable grounds for making his projection. It was not suggested to Mr Sugden that he should not have relied upon what Mr Saunders told him. Nothing had been brought to Mr Sugden's attention which would call for the contrived approach of Mr Fowler to be applied to the materials he was using. The subject of rebates was not expressly dealt with in the feasibility study. Rebates were subsumed in the gross profit margins. There is no reason why any different levels of rebates contemplated after acquisition by a prospective purchaser had to be expressly dealt with in a study, which was very deliberately cast as a set of projected estimates of gross profit margins. In the context there was nothing misleading about the projected margin, nor was it a statement that otherwise contravened s 52 of the Trade Practices Act. The claim under that Act must also fail. 17. Conclusion Had I reached a different view, the applicants would still have faced formidable obstacles, including the issue of reliance. In addition, the action for damages under the Trade Practices Act would have been statute barred because this proceeding was only commenced on 1 September 1992. (Mr Greenhalgh was writing to CBL's Mr John Lowe as early as 19 July 1989 to complain that the gross profit margins projected in the feasibility study were not being achieved.) Quite apart from the fact that such margins have, in fact, been achieved or exceeded in subsequent years, there were very real questions of causation too. Mr Greenhalgh's stewardship of the Goulburn store has been criticized. There was extensive evidence to this effect from both former managerial staff and a retail counsellor employed by CBL on this topic. Of course, Mr Greenhalgh also gave a spirited defence both of his prerogatives as a proprietor and of the way in which he has intertwined many of his personal affairs with those of the business. Supermarket competition tn Goulburn also changed dramatically. However, it is not now necessary that I should make any finding about these matters. Almost as a postscript, the applicants have also pursued, though in a fairly desultory fashion, a "restraint of trade" case. The further amended statement of claim merely asserts baldly in paragraph 13 that the arrangements entered into on 30 November 1987 so operate. No other facts are alleged. Since no contravention of the Trade Practices Act has been established, the apphcants must rely on the common law. 18. Mr Greenhalgh complains that the purchaser only purchased stock from CBL "because of the trade tie." This may be taken as a reference to the right of CBL as the holder of the preference units under the unit trust to require the purchaser to acquire trom a nominated supplier not less than 90% of the merchandise acquired for the purpose of resale. However, there 1s no evidence that CBL has ever given such a notice, nor that the very existence of such a mght has led, in fact, to any restriction on the purchaser's ability to source its supply. Indeed, there 1s evidence of purchases from persons other than CBL. In any event, any such vertical restraint could be well justifiable. Mr John Berry, a very experienced retailer, gave cogent evidence of the advantages to independent operators of the centralized purchasing and rebate facility provided by CBL. The purchaser's ability to compete with chain stores, such as Coles and Woolworths, was also enhanced by the lease secured by the vendor and the "scanning" facility provided by CBL as "host" suppher. Division 9 of Part III of the Income Tax Assessment Act 1936 also provides for special tax treatment tor rebates received by the purchaser as a member of CBL, so long as CBL. does not less than 90% of its business with members. Of course, these considerations might not justify the duration of the tie that CBL has the nght to impose. The application will be dismissed with costs. 19, I certify that this and the preceding eighteen pages are a true copy of the reasons for judgment herein of the Hon. Mr Justice A.P. Whitlam Movarlg Associate Date: 23 November 1994 Counsel for the applicant: P.M. Donohoe QC (22 April), B.W. Walker SC and S.J. Gageler Instructed by Verekers Counsel for the respondent. RL. Hunter QC (until 20 Apni) and R.J. Weber instructed by Holman Webb Dates of hearing: 11-13, 18-22 April and 4-7 July 1994