FEDERAL COURT OF AUSTRALIA TRADE PRACTICES - whether conduct was misleading or deceptive or likely to mislead or deceive. TORT - Deceit - whether misrepresentations made with fraudulent intent. Trade Practices Act 1974 (Cth) - s 52, s 75B Fair Trading Act 1987 (NSW) - s 42 Briginshaw v Briginshaw (1938) 60 CLR 336 Gould v Vaggelas (1958) 157 CLR 215 FARLWENT PTY LIMITED -v- COMSERV (NO. 2087) PTY LIMITED (Trading as Cooinda Caravan Park), PETER DAVID HARVEY AND LYNETTE KAY HARVEY, and VERTEX INVESTMENTS PTY LIMITED (Trading as Cooinda Caravan Village) No. NG 859 of 1995 JUDGE: FOSTER J PLACE: SYDNEY DATED: 10 SEPTEMBER 1997 IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 859 of 1995 ) GENERAL DIVISION ) BETWEEN: FARLWENT PTY LIMITED (ACN 002 560 956) Applicant AND: COMSERV (NO. 2087) PTY LIMITED (ACN 003 630 251) (Trading as Cooinda Caravan Park) First Respondent PETER DAVID HARVEY AND LYNETTE KAY HARVEY Second Respondents VERTEX INVESTMENTS PTY LIMITED (ACN 057 416 207) (Trading as Cooinda Caravan Village) Third Respondent JUDGE: FOSTER J PLACE: SYDNEY DATED: 10 SEPTEMBER 1997 MINUTES OF ORDER THE COURT ORDERS THAT: 1. Judgment be entered for the applicant against the respondents in the sum of $273,709.86. 2. The respondents pay the applicant's costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 859 of 1995 ) GENERAL DIVISION ) BETWEEN: FARLWENT PTY LIMITED (ACN 002 560 956) Applicant AND: COMSERV (NO. 2087) PTY LIMITED (ACN 003 630 251) (Trading as Cooinda Caravan Park) First Respondent PETER DAVID HARVEY AND LYNETTE KAY HARVEY Second Respondents VERTEX INVESTMENTS PTY LIMITED (ACN 057 416 207) (Trading as Cooinda Caravan Village) Third Respondent JUDGE: FOSTER J PLACE: SYDNEY DATED: 10 SEPTEMBER 1997 REASONS FOR JUDGMENT INTRODUCTION Mr Colin Ernest Beer ("Mr Beer") and his wife are the directors and shareholders of the applicant company Farlwent Pty Limited ("Farlwent") which, on 20 June 1994, purchased from the first respondent, Comserv Pty Limited ("Comserv"), and the second respondents a business known as "Cooinda Caravan Park" ("the Caravan Park"). At the same time Farlwent purchased from the second respondents the land in Bell Street, Mudgee, in the State of New South Wales upon which the business was conducted. The second respondents, Peter David Harvey ("Peter Harvey") and his wife Lynette Kay Harvey were the directors and shareholders of Comserv. The third respondent, Vertex Investments Pty Limited ("Vertex"), is a company owned and operated by Peter Harvey's son, John Michael Lawrence Harvey ("John Harvey") and his wife. From 1 October 1992 Vertex was the lessee from the first and second respondents of the Caravan Park, operated the business, which it renamed "Cooinda Caravan Village", and paid amounts by way of rent to Comserv. It is clear, however, that the Harveys, father and son, continued to regard the Caravan Park as being in the nature of a family business, with Peter Harvey exerting influence over its operation. After Farlwent entered into occupation of the Caravan Park and commenced the operation of the business there was a significant falling-off in its turnover. The takings for the first year of operation, ending 30 June 1995, were significantly less than Mr Beer had expected them to be. This expectation was based upon figures that had been supplied by Peter Harvey during the negotiations for the purchase and also, as alleged by Mr Beer, upon other representations as to the extent of takings, to which reference will be made later in these reasons. Mr Beer formed the view that the extent of the takings and the consequent profitability of the business had been misrepresented by Peter Harvey. Accordingly, he commenced these proceedings by application dated 15 November 1995. FINDINGS OF FACT Both the application and statement of claim in the proceedings have been the subject of amendment. I shall refer to them at a later stage in these reasons. It is convenient, at this stage, to consider the evidence and to make findings of fact arising from it. The evidence was given in the first instance by affidavit and has been considerably supplemented by oral testimony. A considerable number of documents have been tendered either by way of annexures to the affidavits or from the bar table in the usual way during the course of the hearing. On behalf of the applicant evidence was given in this fashion by Mr Beer, Mr Graham McDonald, a valuer, Mr Richard Rogers, the applicant's accountant, and Mr John Chow, an investigating accountant. Mr Colin Berry, who brokered the sale, had declined to provide affidavit evidence. He was called on behalf of the applicant, giving oral testimony which I have found to be of considerable assistance. I regard him as a credible witness. The respondents relied upon the evidence, affidavit and oral, of Peter Harvey and John Harvey. They also called Mr Dennis Yeo, the accountant for Comserv and Vertex. This was a case in which it was necessary to form a view as to the reliability of the witnesses, as there was considerable conflict in relation to significant events and conversations. Accordingly, I have had regard to the demeanour of the witnesses in the giving of their evidence and the manner in which they answered questions. I have formed the view that I should place far greater reliance upon the evidence of Mr Beer than upon that of Peter Harvey or John Harvey. Mr Beer was, in my view, a palpably honest witness whereas I had significant reservations about the testimony of Peter Harvey and, to a lesser extent, John Harvey. Where there is conflict with their evidence I have preferred the evidence of Mr Beer. The evidence establishes that Comserv acquired the Caravan Park in 1988 and ran it until October 1992 when its operation was taken over by Vertex, which operated the Caravan Park until the sale to the applicant was completed on 20 June 1994. No significant changes in the mode of operation were introduced after Vertex took over other than to the accounting system. John Harvey made use of a system which was partly computerised and to which reference will be made later. Otherwise he appears to have conducted the Caravan Park in the same way as his father and, to a significant extent, in consultation with him. Vertex leased both the land and the business. Although the land was owned by the second respondents it appears that Vertex's rental payments were made to Comserv. The Caravan Park is of medium size and situated in the town of Mudgee. It is a typical caravan park offering both tourist and permanent living accommodation. The town of Mudgee is attractive to tourists, being situated in a river valley with a pleasant climate and the centre of a significant wine growing area. Approximately nineteen wineries operate in the district and are open to visitors. Other attractions such as museums, historic sites, gold mining relics and horse studs exist in the area. Farm field days and music festivals are held on a regular basis. Furthermore, the geographical location of the town is such as to attract weekend visitors from major cities. The Caravan Park accordingly caters for tourists and also for "permanents", being persons who work in the area and require cheap accommodation on a long or medium term basis. It has competition from two other caravan parks and from lower-priced motels in the area. The evidence shows that competition in the field of "permanent" accommodation is also provided by a growing number of rental flats available in the town. The Caravan Park provides tourist accommodation in the form of thirteen ensuite cabins, three other cabins and nine caravans. There are other vans available for permanent residents. Although there is some evidence in the case suggesting that some of the vans were not in good condition at the time of the sale, I am satisfied that, generally speaking, the Caravan Park was of a normally acceptable standard suitable for both tourists and permanent residents who wished to have accommodation in the caravan park price range. For reasons which are not made clear to me in the evidence, Peter Harvey decided in 1991 to sell the Caravan Park. It was placed on the market at an asking price of $1,650,000. It did not sell at that price. Indeed, Peter Harvey said that he did not expect to achieve such a high price for it. It appears to have remained in the hands of various brokerages including that of Mr Colin Berry. Mr Berry gave evidence that the park remained listed with him but that Peter Harvey indicated, apparently in 1992, that his son was going to take over the running of the business. The listing for sale remained but, in the circumstances, no active marketing of the park was undertaken. Mr Berry specialised in the broking of caravan park businesses and was obviously a broker likely to be approached by anyone wishing to buy or sell such a business. It was because of this that Mr Beer made contact with him in January 1994. Mr Beer had disposed of an interest in a caravan park at Halliday's Point, New South Wales, and was interested in acquiring another caravan park. Mr Berry made inquiries of Peter Harvey and was informed that the Caravan Park was still for sale. It appears that by this time Peter Harvey was prepared to accept a figure in the order of $1,300,000. Mr Beer was interested in pursuing the matter. An appointment was made through Mr Berry for an inspection of the Caravan Park to take place on 16 February 1994. On that date Mr Beer and Mr Berry attended at the Caravan Park and were taken by Peter Harvey on a tour of inspection, lasting approximately one-and-a-half hours. This was followed by a tour of Mudgee after which Peter Harvey took the two men to his home. Mr Beer gave evidence to the effect that whilst they were there Peter Harvey produced "a detailed analysis on A3 size paper of the Caravan Park's income for the period 1989 through to December 1993". He asserted that Peter Harvey said of these figures that "you can see from the totals, the income has over the last six months been improving". Peter Harvey originally swore in his affidavit that to the best of his recollection no such document existed. He denied saying that the income over the previous six months had been improving. On the contrary, he asserted that he told Mr Beer that there had been a slight decline between July and December 1993 as against the previous July to December, remarking that this was because of the drought and a general economic decline. He further stated that while they were at the Caravan Park he was asked by Mr Beer to give him "figures up to the end of the year". He immediately arranged for John Harvey to print these figures out of his computer, whereupon he gave them to Mr Beer. John Harvey says that he recalls printing out "statements of income and expenses for the period July to December 1993" and that these were on a document consisting of four pages of A4 size computer paper. He gave these to his father. He does not suggest that he observed this document being handed to Mr Beer. Mr Beer denies having received it on 16 February or at any other time. Moreover, Mr Beer says that on the occasion of the visit on 16 February he was interested to obtain up-to-date revenue figures for the Caravan Park. He made this request but was advised that it would not be possible, without some difficulty, to obtain them from the computer that day. This conversation is denied by Peter and John Harvey. I am satisfied that it occurred. The evidence makes two things clear. Firstly, it was possible for John Harvey quite readily to produce from his computer a printout showing up-to-date revenue figures. These were fed into the computer on a daily basis and could easily be recovered. John Harvey, in his evidence, makes it plain that a request to provide figures, which would have covered the period at least up to the end of January, could have been complied with on 16 February 1994. Secondly, Mr Beer was correct in asserting that he was shown a document detailing trading figures of the Caravan Park covering an extensive period, probably from 1989 to December 1993. Despite his earlier denial in an affidavit, Peter Harvey later, in his oral testimony, agreed that such a document had been shown to Mr Beer on 16 February. He gave this evidence after hearing the evidence of Mr Berry, who affirmed that such a document had been shown to Mr Beer and himself at Peter Harvey's residence in Mudgee on that day. Having heard this evidence Peter Harvey averred that his recollection had been stimulated and that he now remembered such a document. He said that it had been prepared for presentation to another potential purchaser who had not shown any continued interest in the property. The document was now unavailable as it had been destroyed when that purchaser lost interest. I do not accept this evidence. It had all the appearance of a facile fabrication brought into existence for the purpose of overcoming a difficulty which had emerged in the case. Whatever the original purpose of the document it had clearly been produced to Mr Beer and Mr Berry for inspection in order to demonstrate the financial strength of the Caravan Park. It was an important document. I was not impressed by Peter Harvey's attempt to dismiss it as insignificant. I am satisfied that it was shown to Mr Beer and that its contents were used to bolster a representation that the trading figures were improving. I am also satisfied that Peter Harvey did not tell Mr Beer that there had been a slight decline in the income because of the drought and general economic decline. I consider that Peter Harvey was in fact anxious to cover up the fact of a decline in revenue in that period and that when Mr Beer asked for a printout of up-to-date figures he was fobbed-off on the basis that to obtain them from the computer at that time would interfere with its production of receipts for the day. I accept that John Harvey provided Peter Harvey with such a printout. It was easy to do. But he did not do it on that day for the purpose of its being given to Mr Beer. I am satisfied, however, that either before or after that day he provided the information to his father. Indeed, in his affidavit, he does not assert that it was provided on the occasion that Mr Beer inspected the Caravan Park for the first time. The document that was shown to Mr Beer and Mr Berry by Peter Harvey on 16 February 1994 is not in evidence. As already indicated, Peter Harvey testified that it had been destroyed. However, Mr Berry, whose evidence I accept, gave a fairly detailed description of it. He said that it appeared to be some loose pages out of a book with large money columns similar to a large cash book, maybe sixteen inches to eighteen inches wide. It showed comparable years with monthly income broken down into different categories. He said "substantially it was broken into tourist income, on-site van income, powered site income, permanent income, there was income derived from laundromat. It was fairly detailed, it was very detailed." It showed at least the preceding three years. The figures "completed the financial year '93". Mr Berry also indicated that he thought that the figures continued beyond 30 June 1993 but did not cover the full period up to the time of inspection. Mr Berry's recollection was that the figures showed a very marginal increase in the ensuing months but nothing outstanding. He said that "the tone" of Peter Harvey's remarks about the figures was to similar effect and that in his recollection Mr Harvey "was very satisfied with the business. There were no serious increases nor serious decreases of any note that would make you look substantially at them with a question mark." I am satisfied that after this meeting both Mr Beer and Mr Berry were anxious to obtain the trading figures for the Caravan Park, including those in the handwritten document which had been shown to them by Peter Harvey. Mr Berry, by reference to his diary entries, testified that he had rung Peter Harvey on the morning of 18 February requesting "a copy of those handwritten figures and a copy of the last tax return." He said that he, thereafter, received certain documents together with a covering letter from Peter Harvey dated 25 February 1994. The documents consisted of statements prepared by Peter Harvey's accountant for taxation purposes for the year ending 30 June 1993. Mr Berry regarded the accountant's figures as being of primary importance as they were required by lending institutions and valuers. There was another document in his file which he was satisfied came from Peter Harvey although he was hesitant as to whether it came with the letter of 25 February, as he was more concerned to receive the formal "tax figures". I am satisfied, however, in light of the whole of the evidence, particularly that relating to requests to Peter Harvey to furnish the handwritten document which had been viewed on 16 February 1994, that this document was also forwarded with the letter of 25 February. I regard it as a significant document. It is Exhibit C in these proceedings. It is a photocopy of the handwritten document in the nature of a spreadsheet. Mr Berry regarded it as a copy of the document that had been seen at the inspection but he believed that there were more figures on the previous document. Mr Berry was not able clearly to recall whether the figures on the previous document had gone beyond 30 June 1993. However, in light of the fact that both he and Mr Beer recollect that both the document and Peter Harvey's comments about it indicated a continuing pattern of increases, I am satisfied that the document shown on 16 February did in fact go beyond that date. The document forwarded with the letter of 25 February is, I am satisfied, a truncated version of the document shown on 16 February. It covers the period commencing October 1989 and finishing at the end of September 1992. This would appear to be the period during which Comserv operated the Caravan Park. It, therefore, provides no information as to the period during which Vertex was the operator. This period, of course, would have been of far greater interest to any person seeking to analyse the performance of the Caravan Park and predict its future profitability. However, it is quite clear that the document was brought into existence by the photocopying of an original larger document which, I am satisfied, was the document produced to Messrs Beer and Berry on 16 February. In the photocopying process a shortened version of that document was produced by the folding down of the upper portion appearing above the figures for 1991/92 so that the names of the months at the head of the appropriate columns appeared at the top of those figures, whereas in the original document the figures for other annual periods had intervened. That this is so is obvious from an inspection of what appears below the horizontal line running beneath the names of the months. There are clearly to be seen fragments of figures which have not been totally obscured by the folding-over process. Peter Harvey was quite unable to explain why figures for later years had thus been obscured and effectively removed from the document which he forwarded to Mr Berry. I am satisfied that he must have produced the photocopy in this form for the purpose of sending it to Mr Berry with the later figures excluded. His inability to offer any explanation for this gives rise to the inference that he intended to keep back those figures and accordingly altered the document, albeit imperfectly, to achieve this purpose. It must be noted, however, that the other financial statements forwarded to Mr Berry at the same time covered the position up to 30 June 1993. There was, however, no material in relation to trading after that date. Mr Berry forwarded the material thus received to Mr Beer who used it to prepare some cashflow forecasts in relation to the business. He was aware, however, that there were no figures for the 1993/94 year. Accordingly, on or about 8 April 1994, he rang Mr Berry and told him that he did not have the figures for that year which Peter Harvey had produced at the meeting of 16 February. Mr Berry advised him that he would make contact with Peter Harvey and obtain the figures. There was also discussion about obtaining a valuation for an intended financier. Mr Berry, accordingly, made contact with Peter Harvey by telephone and requested to be supplied with "the breakup of the income month by month since June 30 to date". The mails were slow at that point of time. The information was supplied to Mr Berry by Peter Harvey by telephone on 12 April. It is clear that Peter Harvey had prepared the figures in the form of a monthly schedule of income and expenses. The document that he prepared is in evidence (Exhibit G). It is not unlike Exhibit C in form. It sets out income in the categories of "tourist", "permanent", "electricity", "shop" and "miscellaneous" and provides the figures for each, in columns, for the months July to March. However, the document purports to supply these figures for the period July 1994 to March 1995, not July 1993 to March 1994, and describes them as being "projected cashflow estimates". Expenses are dealt with in a similar way. It is Peter Harvey's case that the figures in this document were never intended to be anything other than estimates or forecasts of the income and expenses of the business for the first nine months of the income year 1994/95. Indeed, it was conceded by his counsel in opening address that the income figures in the document were greater than the actual figures realised for the same months in the income year 1993/94. Peter Harvey indicated, in cross-examination, that he had arrived at the figures, in an arbitrary way, by adding to the actual figures for many of those months increased amounts, allegedly to counteract the effects of drought and bushfire which had been experienced in the 1993/94 year. The figures thus produced, when averaged over a twelve month period, show a 10 per cent increase over the 1992/93 average monthly turnover. However, I am quite certain that Mr Berry had made it perfectly clear that he wanted only "updated figures" for the 1993/94 year, that is, actual income figures which would bring the situation up-to-date. This is what Mr Beer had asked for and this is what Mr Berry asked Peter Harvey to provide. I am quite satisfied that Mr Berry did not in any way ask Peter Harvey to provide a forecast for the following year. I am equally satisfied that when the figures were provided by Peter Harvey to Mr Berry he said nothing to indicate that they were other than figures bringing the situation up-to-date, that is, the actual income figures since 30 June 1993. I am also satisfied that this was the impression he intended to convey. I do not accept that he made any reference, as he alleges, to adjustments for fire and drought. Nor do I accept that he thought he had already provided the "actual" figures to Mr Beer. I am satisfied that he knew that he had not. He certainly did not suggest to Mr Berry that they had already been supplied. In the conversation between the two men on 12 April, Peter Harvey requested Mr Berry to draw up a tabulated document, with columns for each month of income and rows for each category of income, into which he could place the figures which were to be read out to him over the telephone. Mr Berry indicated that he only wanted the income figures as the expense figures were not required. I have no problem in accepting this as it is clear that the turnover was what Mr Beer was interested in. When the income figures were provided to Mr Berry he took a rough handwritten note of them but promptly entered them into his computer. He then obtained a printout from the computer showing the figures in tabular form under a heading describing them as a "cashflow". I am satisfied by Mr Berry's evidence that he attached no meaning to this term other than that it indicated that the document provided updated takings figures for the months July 1993 to March 1994 for the categories of income set out in the document. As the document, which is Exhibit E in these proceedings, is of importance, I attach it to these reasons as Annexure A. Although the document does not explicitly refer to the period July 1993 to March 1994, I am quite satisfied that Mr Berry understood it to refer to that time period. When the figures were given to him over the telephone he was told by Peter Harvey that they were the figures that he had wanted, being, of course, updated figures bringing the information as to the takings in their various categories up-to-date. The document thus produced by the computer was sent by Mr Berry to Mr Graham McDonald, the valuer who was providing a valuation of the Caravan Park for Mr Beer and his intended financier. Mr McDonald had previously been provided with the earlier material that Peter Harvey had forwarded to Mr Berry on 25 February 1994. This had been provided to Mr McDonald by facsimile on 1 March 1994. The "cashflow" document was provided by facsimile on 13 April 1994. The accompanying message described the material as "$UPDATE". In his evidence, affidavit and oral, Mr McDonald speaks of a visit made by him on 20 April 1994 to the Caravan Park for the purpose of inspecting it before making a valuation. He was accompanied on the inspection by Peter Harvey. After the inspection he had a conversation with him about the trading figures of both Comserv and Vertex. He indicated that he had received, inter alia, "monthly turnover figures for the years 1989 to '90, '91, '92 and '93". He said that he had noticed that the average monthly turnover for 1992/93 was lower than 1991/92. Peter Harvey said that that had occurred during the period when his son took over and was due "to the possible reduction in the workforce in the area". Mr McDonald says that he then showed Peter Harvey a copy of the "cashflow" facsimile of 13 April 1994 and asked whether the turnover figures in that document could be verified by banking records or otherwise. Peter Harvey told him that the figures were his son's figures and that they were in his son's computer. Mr McDonald said that he would have "much preferred to be able to obtain current figures up-to-date" but that he felt it wasn't prudent to pursue the matter. He obtained the impression from Peter Harvey that he was not to seek the figures from his son and that he "certainly gave the impression that they were not available for verification." He included the figures from the "cashflow" facsimile document in his report but noted that they were unverified. He did not have recourse to them in calculating the value of the Caravan Park, although this does not appear specifically in his report. Mr Beer received a copy of the report before contracts were exchanged. It is clear that he was influenced by the "cashflow" figures, regarding them as being up-to-date "actual" records of the receipts of the business in the months July 1993 to March 1994. They indicated to him that the business was improving, as had been represented to him by Peter Harvey. The figures previously provided to him, which took the position up to 30 June 1993, had appeared to him to provide a satisfactory cashflow forecast. I am satisfied that the subsequent figures confirmed him in this view. In this regard Mr Berry also gave evidence of a telephone conversation with Mr Beer on 11 November 1994 of which he had taken a brief note. Mr Beer was angry. He said that "the projection $270,000 is wrong. It looks like about $5,000 down". Mr Beer said he was responsible for half of the reduction in "the permanents". He spoke of seeking retribution against Peter Harvey in exaggerated terms to which I attribute no significance other than as indicating that he considered that he had been cheated. Mr Berry also stated that there had been earlier conversations with Mr Beer in which he had indicated "that the turnover was not as purported in the sale". It is submitted on behalf of the respondents that Mr Beer's use of the term "projection" indicated that he knew that the "cashflow" figures were estimates only. I do not accept this. The figures had never been so described to him and his previous complaints about "turnover" suggest strongly that his use of the word "projection" was no more than an imprecision in expression to which no significance should be attributed. It is to be noted, also, that Mr McDonald gave evidence that had he been shown figures for that period which indicated a downturn in the receipts of the business of a significant nature, he would either have advised Mr Beer to make further inquiries into the question of the takings of the business or altered his own valuation in a downward direction. To this extent, the figures in the "cashflow" document had an influence upon Mr McDonald's valuation. As they stood, the figures made him feel "comfortable" because they showed an increase over the previous year. I am satisfied that the provision by Peter Harvey of the figures that found their way into the "cashflow" document was misleading and deceptive conduct on his part. He himself conceded in evidence that he had increased the actual figures by some 10 per cent in arriving at the figures he provided. As already indicated, I do not accept that they were supplied to Mr Berry as a forecast for the next year. The fact that they were taken from a document that Peter Harvey had prepared which showed in its heading that the figures were intended to apply to the 1994/95 year does not impress me. The document has all the appearance of a self-serving document. I am satisfied that nothing was said to Mr Berry by Peter Harvey to indicate that the figures were not other than "actual" figures for the 1993/94 year. Mr Berry accepted them as such and passed them on as such with the result that Mr Beer was also misled. There can be no doubt that the provision of these figures was objectively misleading. It is conceded on the pleadings that the sale and purchase of the Caravan Park was an event in trade and commerce within the meaning of the Trade Practices Act 1974 (Cth) ("the TP Act"). Accordingly, a breach of s 52 of that Act is established. The pleadings between the parties, however, raise the issue whether Peter Harvey's conduct amounted to the commission by him of the tort of deceit for which Comserv would be vicariously liable. I have, therefore, to consider whether the conduct which I have been describing was not merely objectively misleading but was deliberately so on the part of Peter Harvey. With regret I must say that I have come to the conclusion that it was. I do not accept that he was genuinely attempting to make a forecast of earnings for the next financial year. I consider that he was deliberately inflating the earnings for the current year and passing them on as being the actual earnings. Moreover, as already indicated, I do not accept, contrary to his evidence, that he, at any stage, furnished to Mr Beer the computer printout of the actual earnings provided to him by his son. The concealment by the folding of the spreadsheet document, as already discussed, evinces, in my view, an attempt to conceal later figures in that document. The conversation with Mr McDonald is a significant indication of deceit on his part. The figures in the "cashflow" document were not his son's figures. They were the inflated figures which he himself had produced, apparently on the basis of his son's figures. Those figures were not in his son's computer as he would have well known in the circumstances. His statement that they were so and his general indication that they would not be made available from the computer were, in my opinion, all part of a deliberate attempt to prevent the valuer having access to figures that he knew would be significantly lower. I should add that Peter Harvey's attempt to explain away this conversation in his own evidence was, in my opinion, quite unconvincing. I am therefore of the opinion and so find that Peter Harvey deliberately misled Mr Beer into believing that the trading receipts for the Caravan Park showed a pattern of improvement in the 1993/94 year as evidenced by the figures supplied in the "cashflow" document. I should add that I am fortified in this view by the fact that Peter Harvey was himself an experienced business man who, prior to operating the Caravan Park, had occupied a senior executive position in the marketing section of the Caltex organisation. He would have been well aware of the significance that a purchaser would attribute to these figures. FINDINGS ON LIABILITY As will have appeared from the foregoing analysis, I am satisfied that in providing the turnover figures to Mr Berry on 12 April 1994, Peter Harvey caused Comserv to be guilty of a breach of s 52 of the TP Act and that he himself, by procuring that contravention, became liable under that Act. I am also satisfied that that conduct was fraudulent in that it was intended to deceive the applicant, through operation on the mind of Mr Beer, into believing that the turnover figures of Vertex had improved, as shown by those figures, for the period July 1993 to March 1994. In reaching this latter finding I have not overlooked the standard of proof enjoined by Briginshaw v Briginshaw (1938) 60 CLR 336. I am also satisfied that statements made by Peter Harvey on 16 February 1994 to the effect that the trading figures showed improvement in the 1993/94 period were also relevantly breaches of the TP Act and deceptive in purpose. The applicant's statement of claim further asserts that the figures provided for the trading of the Caravan Park up to 30 June 1993 were also relevantly misleading and deceptive. In light of the findings I have made I do not find it necessary to reach a conclusion on this aspect of the claim. I do not find it necessary to make reference in detail to the pleadings in the case. They are not models of clarity. Although Vertex is a party and John Harvey was an important witness in the case, no claim has been made against him or, indeed, against his wife and co-director, personally. There was not any separate representation of Vertex nor were separate submissions made on its behalf. The situation was the same in respect of the second-named second respondent, Lynette Kay Harvey, the wife of Peter Harvey. No submissions were made to me as to the forms of order that might be appropriate in respect of individual respondents should I find that the applicant's case was established. Obtaining what guidance I can from the pleadings and from the way in which the case was conducted on each side, I have come to the view that the issues in relation to liability may be stated broadly as follows. The first respondent, Comserv, is alleged to have committed breaches of s 52 of the TP Act because of the misrepresentations made by its director, Peter Harvey. It is also alleged to be vicariously liable for fraudulent misrepresentations made by Peter Harvey. Peter Harvey, insofar as his misrepresentations procured Comserv's contravention of s 52, is allegedly involved in that contravention in accordance with s 75B of the TP Act. The same representations were allegedly fraudulent and intended to deceive the applicant. They were also alleged to constitute contraventions of s 42 of the Fair Trading Act 1987 (NSW). It is not alleged that Lynette Kay Harvey was guilty of any fraudulent misrepresentations but it is alleged and not denied by her that the misrepresentations made by Peter Harvey were made on her behalf as well as his. She was therefore alleged to be guilty of breaching s 42 of the Fair Trading Act. Insofar as it is alleged and not denied that Peter Harvey's representations were made on behalf of Vertex, that company is also charged with contravening s 52 of the TP Act. I am satisfied, on the basis of the findings of fact that I have made, that these breaches by the respective respondents have all been established. I turn, then, to the remaining questions, namely, whether the applicant company has suffered loss or damage by reason of the contraventions referred to. It is submitted on behalf of the respondents that the applicant has failed to prove that it relied upon the impugned representations or that, if it did, it has suffered any damage. It is necessary to deal with the issues of reliance and damage separately. RELIANCE It is the contention of the respondents that the applicant did not relevantly rely upon the figures supplied by Peter Harvey to Mr Berry and which were incorporated in the "cashflow" document. These figures were not actually seen by Mr Beer until he read the valuation prepared by Mr McDonald, where they were set out but referred to as being unverified. Prior to receiving that document, Mr Beer had received the earlier material forwarded by Peter Harvey to Mr Berry. This material included the accounts for the year ending 30 June 1993 of both Comserv and Vertex, these being accountant's figures. It is clear that Mr Beer used these figures for the purpose of preparing a cashflow in order that he might consider the financial viability of the Caravan Park should he purchase it. At that stage he had no other figures before him but he had his recollection of what Peter Harvey had shown him on the occasion of the visit on 16 February coupled with his assertion that the figures from July to December 1993 showed improvement. Mr Beer's recollection was that the degree of improvement was in the order of 10 to 11 per cent. He said in his evidence, which I accept, that he treated his exercise based upon the 1992/93 figures as being one which would produce a conservative cashflow figure in the context that the figures for the six months up to December 1993 showed improvement. I am satisfied that when Mr Beer saw the "cashflow" figures for 1993/94 in Mr McDonald's report, they were regarded by him as significant. In the first place he had been seeking that up-to-date figures be supplied. He was, in my view, not prepared to proceed simply on the basis of figures which terminated at the end of June 1993. He said, in evidence, when being cross-examined on the question of reliance, "[i]t could be that the business is showing a sharp downturn and that is one reason I certainly wouldn't look at anything with figures that were missing for the last nine months of trading". His evidence makes it clear that he was aware that Mr Berry had received the figures and of their having been provided to Mr McDonald. It was upon receipt of this information that he had instructed Mr McDonald to conduct the valuation of the Caravan Park. It is clear that when he obtained his copy of the valuation, the portion of it which dealt with these figures was of importance to him. He says, in his affidavit, in relation to his reading of the report: "On reaching page 24 of the trading details I observed that for the years 1989, 1990, 1991 and 1992 there had been a gradual increase in the turnover average per month. Further, I observed for the year 1992 to 1993 a decrease of $3,700 in the average monthly turnover, however, from the 1993 to 1994 turnover figures there appeared to be a recovery in trading. On observing the improvement in 1993-1994 turnover the previous years, it confirmed to me the conversation I had with Peter Harvey and later John Harvey that there had been an improvement in the turnover for the six month period prior to April 1994." The reference in this passage to a later conversation with John Harvey refers to another portion of Mr Beer's evidence where he states that he had a conversation with John Harvey in which the latter said that he regretted that his father was selling the Caravan Park, that there had been improvement in the figures for the last eleven months, and that they had even put on new "permanents". John Harvey denies a conversation in this form and, in fact, asserts that he would not have made such a statement as he wished to get out of the Caravan Park business and start anew. Indeed, shortly after the sale, he entered a hotel business. I am quite satisfied, however, that the conversation took place as deposed to by Mr Beer. Although Mr Beer's actual arithmetical computations were based upon the earlier figures ending at 30 June 1993, I am quite satisfied that the view he thereby formed as to the financial viability of the Caravan Park, having regard to the expenditures that he would necessarily have to make, was confirmed by the provision of the figures for the later period. After this confirmation had been received, he went ahead with the purchase at the price of $1,250,000 which was the figure at which the business and land were valued by Mr McDonald. Although he does not give direct evidence to this effect, I am quite prepared to infer that had he been made aware that the "cashflow" figures were inaccurate and inflated he would not have been prepared to purchase at that price. Although Peter Harvey's "cashflow" representations may not have been the sole inducement leading to the applicant's purchase of the Caravan Park for the price paid, I am satisfied that it played a significant part in contributing to the decision to purchase at that price. This is sufficient to satisfy the requirement of reliance (Gould v Vaggelas (1958) 157 CLR 215 at 236). I should add that I am not deflected from this view by the fact that in an earlier statement of claim Mr Beer did not assert reliance upon the "cashflow" figures. I am satisfied that he had provided this information to his then legal adviser but that it had been omitted from the pleading without his being relevantly aware of the fact. I come, then, to the question of damages. DAMAGES It is contended on behalf of the respondents that the applicant, even if the victim of misrepresentation, has nevertheless suffered no damage. It is submitted that the price of $1,250,000 paid by the applicant was a fair and proper price in that this represented a correct valuation of the Caravan Park. The applicant's case is based upon the customary measure of damages used in relation to breaches of s 52 of the TP Act and the tort of deceit. It claims the difference between what it paid and the value of what it received. It relies upon the valuation of Mr McDonald to establish the difference. In arriving at the original valuation of $1,250,000 Mr McDonald used the accepted method of capitalising the net operating profit of the business. To do so he used the 1992/93 trading figures already referred to. These produced an adjusted net operating profit of $195,923. Capitalised at 16 per cent this yielded a figure of $1,222,175 whilst if a capitalisation rate of 15.5 per cent was used the resulting figure was $1,264,019. The suggested price for the business, in respect of which he was advising, was $1,250,000. This figure represented an approximately 15.67 per cent capitalisation on the adjusted net operating profit and was considered to represent a fair market value. When Mr McDonald applied the same approach to the trading figures achieved by the applicant for the twelve months ending 30 June 1995, the resulting valuation was $900,000. It is the applicant's contention that the trading figures for this period should properly be regarded as representing the true trading figures for the year ending 30 June 1994, with the result that the correct value of the business at the time of purchase was only $900,000. Consequently, the applicant had paid $350,000 more than the true value of the business. It seeks this amount plus interest by way of damages against those parties liable in respect of misleading conduct pursuant to s 52 of the TP Act and s 42 of the Fair Trading Act and against Peter Harvey and Comserv as being liable for the tort of deceit. The respondents submit that it is inappropriate to use the applicant's 1994/95 trading figures as a basis for this calculation. Firstly, they say that the downturn is explicable on other grounds and does not require that the 1992/93 figures be regarded as an inappropriate basis for the calculation of the value of the business at the time of sale. They assert that Mr Beer, as he indicated to Mr Berry, had disposed of a number of the permanent tenants and would have suffered a corresponding decline in turnover in the first year of operation. This was a matter not explored in the evidence in any detail. It is clear that some of the permanent tenants were bad payers and that Mr Beer wished to get rid of them. It also seems that, at least by the time of trial, they had been replaced to his satisfaction. Another suggestion was that a change of ownership ordinarily provokes a downturn in custom, at least in the short term. Again, this was a topic which was not examined in any depth. Secondly, it was asserted that the actual figures achieved by Vertex for the year of income up to the time of sale on 20 June 1994 sufficiently approximated the 1992/93 figures so as to result in Mr McDonald's first valuation remaining correct. Of course, the alleged monthly trading figures for this period were never supplied to Mr Beer, Mr Berry or Mr McDonald. They were supplied, in fact, only during the course of the hearing of the case, when they were obtained from John Harvey's computer in a manner to which I shall make reference later. Before doing so, it is necessary that I refer to some other matters. The applicant has provided evidence of its actual turnover figures for each month from July 1994 to June 1995. These were verified by affidavit from its accountant. Although some suggestion was made in address on behalf of the respondents to the effect that they may have been understated by Mr Beer, no such attack was made in cross-examination. I do not accept this suggestion. I accept the figures as a correct record of the applicant's turnover. These figures are attached as Annexure B to these reasons. A comparison of the totals for the period July to March shows that the takings referred to in Annexure A exceed the actual takings from July 1994 to March 1995 by the amount of $79,897. This represents a very considerable drop, in the order of 42 per cent. The total takings for the whole of the year ending 30 June 1995 were $255,607. The total takings for the year ending 30 June 1996 showed a further decline, amounting to $245,390. It should be noted also that the total takings for Comserv and Vertex in the year ending 30 June 1993 were $327,567. It is thus apparent that a significant drop in takings occurred after the applicant took over the running of the Caravan Park. It was not until the case was well advanced in the hearing that figures purporting to be the actual monthly figures for the period of Vertex's operation were produced by the respondents and tendered in the case. Before that occurred there had been reference in the evidence of Peter Harvey to his having "actual" figures for Vertex's trading before him at the time he gave the falsified figures to Mr Berry over the telephone. It appears that these figures, clearly enough in documentary form, had never been produced on discovery although they were readily available. Peter Harvey conceded that the figures provided over the telephone were about 10 per cent higher than the "actual" figures. He also said, in relation to the "actual" figures for the six month period from 1 July 1993 to 31 December 1993, that they showed a decline of approximately 10 per cent as against the corresponding figures for the previous financial year. It is clear, also, as already indicated, that the figures for the period of Vertex's operation, although provided in some form, whether accurate or not, in the spreadsheets shown to Messrs Beer and Berry on 16 February 1994, were not conveyed to Mr Berry shortly thereafter together with the information relating to the year ending 30 June 1993. They had been obscured by the folding over of the document prior to its being photocopied. In my opinion, it is quite obvious that prior to sale there was a reluctance on the part of Peter Harvey and, I infer, because of the close association between father and son, also on the part of John Harvey, to disclose the monthly takings and other relevant trading figures to Mr Beer, Mr Berry, or the proposed valuer. I have already referred to other facts in the case which support this view. Certain material was, however, supplied, apparently by way of informal discovery, to the legal representatives of the applicant prior to the hearing. This material consisted of copies of the receipts issued for rent received by Vertex from persons allegedly using the Caravan Park facilities during the period of Vertex's operation of the Caravan Park. These receipts were provided to Mr Chow, the investigating accountant, who provided a report in respect of them. Mr Chow made an examination of these receipts. He assumed, as is confirmed by other evidence in the case, that they were computer-generated. The receipts that he had for consideration were exact copies of the receipts said to be handed out to the customers of the Caravan Park upon their payment of rental for the occupation of one of the available types of accommodation in the Caravan Park. From the receipts it was possible to distinguish between permanent and tourist occupation as well as the types of accommodation, for example, on-site vans, ensuite vans, and powered sites etc. The method of computer generation of these documents resulted in the receipts having sequential numbers. Mr Chow performed a reconciliation of the receipts and was satisfied that they could be satisfactorily accounted for. Mr Chow had available to him the detailed profit and loss statements of Vertex for the year ending 30 June 1993 in the form that they had been supplied to Mr Berry and thence to Mr McDonald. He also had the "cashflow" document containing the details supplied by Peter Harvey to Mr Berry, for the period 1 July 1993 to March 1994. It appears that he had no other material to work from. The evidence of John Harvey shows that further procedures were involved in relation to the recording of the Caravan Park's financial transactions. I shall refer to these later. For present purposes, however, it may be noted that it was asserted that the money received was regularly banked and was the subject of regular bank reconciliation procedures undertaken by John Harvey. Mr Chow did not have available to him the bank records or any documents indicating reconciliation of amounts banked with amounts received as shown by the receipting system. The result of Mr Chow's investigation of these documents, may be summarised as follows. The total of the receipts for the period 1 October 1992 to 30 June 1993 was $215,340.05, whereas the total for the same period as shown from the profit and loss statement was only $210,821, a discrepancy of $4,519.05. The profit and loss statement was a document prepared by Mr Yeo, Vertex's accountant, who, in his affidavit, stated that, in relation to Vertex: "Mr John Harvey provided us with a computer generated summary of transactions which we used as a basis for preparing financial statements and income tax returns. The records supplied were reconciled to bank statements by Mr John Harvey." Although the material supplied to Mr McDonald apparently showed a figure for receipts less than that arrived at by totalling the actual receipts, so that, arguably, the figure used by Mr McDonald for his valuation was unnecessarily conservative, there is, nevertheless, a clear demonstration that the material supplied by Vertex to its accountant was not necessarily reliable. The recording and reconciliation processes did not produce a watertight result. They could be subject to human error or deliberate manipulation. It may be noted, at this point, that John Harvey in his evidence could provide no satisfactory explanation for this discrepancy in the figures for the year ending 30 June 1993. Mr Chow compared the amounts received, as shown by the copy receipts for the period July 1993 to March 1994, with the "cashflow" document. This comparison showed that the latter document overstated the income position by an amount of $28,991, an increase of approximately 10 per cent. This is broadly consistent with what Peter Harvey had said as to his using the "actual" monthly figures supplied to him by his son and making additions to them which resulted in an overall increase of about that percentage. Mr Chow did not have available to him these "actual" figures, as they had not been discovered. Mr Chow also made comments as to trends shown by the figures. He demonstrated these trends by graphs attached to his report which was exhibited to his affidavit. One such trend was a decline in income received from permanent occupants during the years 1993 and 1994. This was consistent with a similar decline which had been disclosed in the financial accounts for another caravan park in the district, the Riverside Caravan Park. Although the operations of that caravan park could not be said to be comparable in every respect with those of Cooinda Caravan Park, they, nevertheless, provide, in my view, as in Mr Chow's, some indication of trends in the Mudgee area for that type of accommodation in caravan parks. As opposed to this, however, there was in the years 1993 and 1994 an increase in income from tourist occupation in the Caravan Park. This was contrary to the trend experienced in the Riverside Caravan Park. The percentage revenue from tourist occupation in the Caravan Park was higher for the 1992/93 and 1993/94 financial years than in previous years. This may, of course, only reflect the diminution in permanent occupants as opposed to tourist occupants. However, it indicates a steady if not improving revenue position as regards tourists, in years in which it was alleged by the Harveys that bushfire and drought had had a detrimental effect upon this income source. Additionally to these matters, Mr Chow made comments as to the content of individual receipts. The computer receipt system required that the operator, when receiving rental money from an occupant of one of the types of accommodation, bring a receipt into existence by the operation of the keyboard of the computer which would print out the relevant receipt in duplicate, the original being handed to the customer and the copy retained. The receipt so printed contained a number of items of information, including the type of accommodation involved and also the record of the motor vehicle registration number of the occupant. It appears that the recording of the registration number was required for compliance with provisions of Ordinance 71 under the Local Government Act 1919 (NSW). Moreover, it provided the proprietor of the Caravan Park with a means of tracking down any occupant who had damaged the accommodation or unlawfully removed something from it. The recording of the registration number, although, perhaps, not something regarded as being absolutely critical, would nevertheless not lightly be ignored in an efficiently run caravan park. However, there were a significant number of receipts in the years 1993 and 1994 in which there had been a failure to record motor vehicle registration numbers. Such receipts amounted to $22,077 for the 1993 year and $20,927 for the 1994 year. Mr Chow made the comment that: "The size in value of receipts failing to record vehicle registration numbers raises concerns as to whether those receipts have been drawn for actual occupiers. This may explain the increase in tourist revenue as a percentage for the 1993 and 1994 financial years..." The applicant's case of damages was, therefore, based upon the highly significant drop in turnover occurring immediately upon its taking over of the Caravan Park and persisting thereafter in a downward trend, in circumstances where no significant alteration in the management of the Caravan Park could reasonably account for it. This was coupled with the matters of suspicion raised by Mr Chow's investigation of the copy receipts issued by Vertex during the period that it managed the Caravan Park. The proposition was put that it was only the actual figures realised by the applicant that could be taken as a reliable indication of earnings for the purpose of the valuation of the Caravan Park at the time of acquisition. The respondents' case on damages amounted to an assertion that although no reliance could be placed for valuation purposes upon Peter Harvey's "cashflow" figures, nevertheless, the actual turnover achieved by Vertex was such as to produce a valuation figure equivalent to that arrived at by Mr McDonald. In the result, it was submitted, whatever the position as to misrepresentation, the applicant had in fact suffered no damage and must, accordingly, fail. The respondents' case did not depend upon the evidence of an expert valuer. They relied upon the evidence of the accountant Mr Yeo, who took the methodology used by Mr McDonald and applied it to "the actual income of the business in accordance with its financial statements" from 1 July 1993 to 20 June 1994. This figure was then annualised by dividing by 355 days and multiplying by 365 days, the resultant amount being an adjusted net operating profit of $195,939. He then applied the same capitalisation rate as had been used by Mr McDonald, namely 15.67 per cent, and arrived at a valuation for the business of $1,250,408. This figure was almost identical with the valuation arrived at by Mr McDonald who, it will be remembered, based his valuation upon the trading figures for the year ending 30 June 1993. This area of the case was very far from being fully explored in the evidence. As it would appear that Mr Yeo adopted the same approach as Mr McDonald in relation to making adjustments for business expenditure which excluded payments that could be regarded as merely personal or discretionary, the similarity between the two results would appear to depend upon the accuracy of the figure shown in Exhibit A to Mr Yeo's affidavit of 22 May 1997 described as "gross profit per financial statements (interest income excluded)". It is not suggested that this figure came from any source other than John Harvey who provided the necessary financial material to Mr Yeo for the production of Vertex's annual accounts. As already indicated, it was John Harvey's contention that the trading receipts of Vertex from the operation of the Caravan Park were regularly reconciled with the company's banking records. It was agreed by the applicant that the bank records plus reconciliation documents had been discovered and were available. Mr Chow had not seen them. It does not appear that Mr Yeo had regard to them as he accepted John Harvey's annual summary of takings and expenses. He was not required to perform an audit and did not do so. Some reference to parts of them were made during John Harvey's evidence. I found this part of his evidence of no assistance. I accept that, so far as the revenue position of Vertex for the relevant financial year was concerned, Mr Yeo received a computer generated summary from John Harvey together with a handwritten year end bank reconciliation. He was not required to and did not take any steps to check the correctness of these figures. It follows that if the revenue summary supplied to him was not correct then the figure that he arrived at for the purpose of providing a valuation figure in accordance with Mr McDonald's methodology would likewise be incorrect. It is necessary now to make some reference to John Harvey's accounting procedures instituted after Vertex became the lessee of the Caravan Park business. Peter Harvey had operated a manual accounting system which was not continued by his son, who introduced a partly computerised system. That system generated receipts and copies in the manner I have already described. It was not, however, integrated with another computerised procedure used in the business. This latter procedure enabled the storage of financial information and its retrieval in the form of itemised spreadsheets. The details from the receipts were not transferred automatically. It was necessary for this material to be entered into the computer by John Harvey's operation of a keyboard. I accept that at the end of a day or early on the following day he would, using accounting software, enter into the computer the information available from the copies of the receipts issued that day. Information in relation to expenditure was similarly placed in the computer. He was able to use the computer to provide this information on a screen or by way of hard copy. He said that he used the computer screen for the purpose of providing a visual reconciliation of amounts received against amounts banked. In addition to the computer, he also operated a cash register. After obtaining money from a customer and issuing an appropriate receipt, he would place the money in the till and, by operation of its keyboard, register the receipt of the money on the till's roll. The roll was used as an additional check of monies received. Once it had been used for this purpose it was destroyed. Consequently, it was not available as evidence in the case. John Harvey obtained from the computer, at the end of each month, by way of hard copy, a printout of the month's trading results showing income received from the various types of accommodation and also from other sources. Similarly the month's expenses were set out and the month's trading result was provided by the subtraction by the computer of the expenses from the revenue. It is clear that there were regular discussions between Peter Harvey and his son as to the trading fortunes of the Caravan Park. It is not clear to me whether there was any written lease entered into between the father and son. The document was called for and not produced. There is no clear evidence as to why the lease was entered into, although some reference was made to Peter Harvey's health as having some bearing upon it. It is obvious that the lease was entered into in the context that the Caravan Park had been unsuccessfully marketed up to the time when John Harvey became the lessee and that it would remain on the market notwithstanding the lease arrangement. Quite clearly the lease was not an arm's length transaction. Peter Harvey continued to exercise a high degree of control in relation to the operation of the Caravan Park. The monthly lease payment to be paid to Comserv was $12,500. It appears that this amount was paid for the first two months, namely October and November of 1992, but thereafter the amounts paid by way of rent to Comserv were subject to considerable variation. John Harvey said that the amounts were originally paid by a standing bank authority. However, it appears that this was abandoned after the first two months. It is not clear how the payments were made thereafter. However, lease payments appeared regularly as an expense in the monthly trading figures obtained from the computer. Peter Harvey had given his evidence before the copies of the monthly statements were produced and tendered in evidence as Exhibit 2. He was not recalled by either side and, accordingly, he gave no evidence in relation to fluctuations in the monthly lease payments which were quite bizarre. John Harvey gave evidence in relation to these fluctuations which I found unconvincing. He said, in effect, that his father would have his own reasons for varying the amount of rent that he wished to receive each month and that he, John, did not question him about them. His father would, on occasions when the rent was considerably reduced, indicate that it was reasonable that his son and daughter-in-law should have the benefit of the money as they had worked long hours or done significant repair work in the Caravan Park or the like. There seemed little support in the documents for the assertion of significant repair work, there being no indication of expenditure upon materials that would have been used. On at least one occasion an amount considerably in excess of $12,500 was paid by way of rent. The rental payments in each month had a significant effect upon the trading results of Vertex. In many months they produced the situation that it traded at a significant loss. The Comserv accounts for the year ending June 1993, which had been provided to Mr Berry, showed that Comserv had received rental payments of approximately $98,000 but had paid out, as a "management fee", an amount of nearly $120,000. These payments were not explored in the evidence. However, I was asked to infer, by the applicant, that the "management fee" was probably paid to Peter Harvey by his company Comserv. This does seem to be a most likely explanation of this payment. I am satisfied that the rental payments to Comserv were the subject of discussion each month between the father and son. The discussion must necessarily have occurred before the hard copy trading statement was brought into existence as the amount of the lease payment would necessarily have been the subject of prior agreement. These payments quite obviously could have been used to manipulate the trading results of Vertex. I felt quite distinctly that I was not being given the full facts in relation to them. They remain a strange feature of this case. The monthly takings figures for Vertex from July 1993 to June 1994, as taken from the monthly trading statements in Exhibit 2, are set out in Annexure C to these reasons. They are considerably lower than the falsified figures provided in the "cashflow" document, Annexure A. There is a correspondence between the monthly figures in the two documents which is consistent with the suggestion that Peter Harvey had these figures before him at the time he brought the "cashflow" figures into existence. They support his evidence that he added round figure amounts to certain of the months to produce the inflated trading position. Moreover, the figures from Exhibit 2 clearly show that the 1993/94 turnover for the Caravan Park was not an improvement on the 1992/93 position. As already indicated I am satisfied that both Peter Harvey and John Harvey on separate occasions had represented to Mr Beer that the figures for the period after June 1993 had been improving. They had not been. There was, in fact, an indication of a continuing, though not striking, decline in the takings. What is clearly demonstrated, however, is that it was represented to Mr Beer that he was buying a business whose financial position was improving while the true position was the reverse. The applicant has made an attack upon these figures, asserting that they should not be accepted as a true indication of Vertex's takings. Reliance was placed, in this regard, upon the receipts referred to in Mr Chow's report in which motor vehicle registration numbers had not been noted. It was submitted that some or all of these receipts should be regarded as fictitious in the sense that they did not relate to actual occupants but were merely brought into existence in order to inflate the apparent takings of the business. Reliance was also placed upon the fact that some 20 per cent of the receipts showed payments having been made in arrears. Such a receipt, it was submitted, could have been raised to cover the fictitious letting of a caravan in circumstances where it had been vacant for one or two days before the receipt was created. Such a fictitious receipt could be issued without creating problems that would otherwise have arisen from the sequential numbering of the receipts. It was strenuously denied by John Harvey that he had produced false receipts in this way. He provided explanations as to why there would be an absence of motor vehicle registration numbers on a number of receipts instancing occasions when a customer could not remember the motor vehicle number or had come to the Caravan Park without one. Also on occasion persons came as passengers in organised minibus tours, in which case there would be no registration number to be noted. He also gave explanations as to some of the receipts in respect of which money had been taken in arrears. He said that, in general, if an apparently honest person arrived seeking accommodation after hours, he would not trouble to take the money for van rental on arrival but would be quite prepared to take it on departure. The obvious argument that Vertex, by artificially inflating its receipts, would put itself at a disadvantage in relation to taxation, may be met by the way in which the overall results of Vertex's trading could be manipulated through the lease payments that were being made in a clearly non-arm's length situation. The respondent asserted that if the receipting system had been manipulated as suggested this would have been a most elaborate fraud, most unlikely to have been undertaken, having regard to the difficulties of performing it through the computer system. As against this the applicant submits that the inference can properly be made that the Harveys were anxious to dispose of the Caravan Park. It was in decline. John Harvey, as he said, was keen to quit his role in it and undertake other work. In these circumstances it would not be unreasonable to find an attempt to inflate the trading figures over a short period of time in order to attract a purchaser. In the result, I do not find it necessary finally to resolve these questions of fact in relation to the Vertex figures. It is sufficient that the evidence points to the possibility of manipulation. In my view, the trading figures achieved by the applicant indicate that, despite what was represented to Mr Beer as to the business being an improving one, it was in fact in decline. Indeed, it has declined steadily ever since the applicant purchased it. The takings figures for the year ending June 1995 provide, in my view, a more substantial basis for valuing the business at time of purchase than do the figures shown by Annexure C. Even without the criticisms that have been made of them as set out above, the deceitful representations that were made in relation to Vertex's 1993/94 trading position inevitably cast a shadow upon them. In the result I consider that I should place far more reliance upon Farlwent's trading figures. This is not a case where precision in the calculation of damages is possible. Mr McDonald made it clear that had the figures for the nine months period that were denied to him shown a decline in business he would have reduced his valuation. What the Court has to do is to arrive at a fair figure for the purchase of a business that was in fact, contrary to representations made to the purchaser, a declining business. I do not think it appropriate merely to accept Mr McDonald's second valuation figure as representing the correct valuation at time of purchase. It is probable that changes made by Mr Beer in relation to permanent tenants could have had some effect upon the figures for the applicant's first year of trading. Also increased competition from other forms of accommodation may reasonably be regarded as having had an effect. Mr McDonald did not have available to him any figures other than those referred to in his two valuations. In these circumstances I can only use his valuations as a guide. I approach the question by asking myself what a reasonable purchaser would have been prepared to pay for this business in June 1994 in the knowledge that under its then management it was deteriorating, but, obviously, in the expectation that he would be able to improve its performance. Doing the best I can, I have come to the conclusion that such a purchaser would not have been prepared to pay more than $1,050,000. Accordingly, I find that the applicant has suffered damage to the extent of $200,000. The interest payable on this amount from the date of purchase, calculated in accordance with the appropriate commercial rates (vide Schedule J of the Rules of the Supreme Court of New South Wales), is $73,709.86. There should be judgment for the applicant against the respondents in the total of these amounts, namely $273,709.86. The respondents must pay the applicant's costs. I certify that this and the preceding twenty-eight (28) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster. Associate: Dated: 10 SEPTEMBER 1997 Counsel for the Applicant: C. Hockey Solicitor for the Applicant: A.C. Knibb Kaine & Associates Counsel for the Respondent: I. Wales Solicitor for the Respondent: Hannaford Cox Connellan & McFarland Dates of Hearing: 14, 15, 16, 18 July; 8 August 1997 Date of Judgment: 10 September 1997 ANNEXURE A CASH FLOW COOINDA CARAVAN PARK, MUDGEE JUL AUG SEP OCT NOV DEC JAN FEB MAR TOURIST 13,197 11,601 18,126 21,304 15,173 10,992 13,212 12,034 15,555 PERM 12,430 11,039 11,153 9,674 9,205 11,561 10,397 9,235 11,568 ELECT 1,881 1,934 1,681 1,537 1,133 1,552 1,218 1,530 1,326 SHOP 2,374 1,960 3,157 2,174 1,924 2,069 2,070 1,458 2,034 MISC 1,071 1,075 1,545 1,628 657 463 471 366 497 TOTAL 30,953 27,609 35,662 36,317 28,112 26,637 27,368 24,623 30,980 ANNEXURE B July 1994 $24,332.00 August 1994 $20,013.00 September 1994 $26,309.00 October 1994 $24,519.00 November 1994 $18,172.00 December 1994 $21,615.00 January 1995 $18,437.00 February 1995 $16,359.00 March 1995 $18,618.00 April 1995 $25,133.00 May 1995 $20,506.00 June 1995 $20,345.00 ANNEXURE C July 1993 $28,552.00 August 1993 $23,709.00 September 1993 $33,261.00 October 1993 $36,318.00 November 1993 $28,112.00 December 1993 $24,637.00 January 1994 $21,168.00 February 1994 $18,423.00 March 1994 $28,780.00 April 1994 $31,814.00 May 1994 $23,611.00 June 1994 $16,091.00