McCarthy, Ronald Ian & Ors v McIntyre, Neville & Ors [1998] FCA 560

FEDERAL COURT OF AUSTRALIA Trade Practices - misleading and deceptive conduct - overstatement of sales figures for hotel - whether parties "knowingly concerned" in conduct - whether overstatement for purpose of supplying to valuer - whether shares in company owning hotel acquired as a result of the valuations - whether damage suffered as a result of entering agreements to acquire shares - whether applicants relied on misleading conduct - whether loss of opportunity to negotiate. Trade Practices Act 1974 - ss 52, 75B, 82, 87. Fair Trading Act 1987 (NSW) - ss 42, 68.

RONALD IAN McCARTHY, MAXWELL McCARTHY AND EDLAN NO. 54 PTY LIMITED V NEVILLE McINTYRE, AURO ROMANO McINTYRE, NEVITORO INVESTMENTS PTY LIMITED, ITALA BELINDA McINTYRE AND CHERYL GAI McINTYRE

NG 672 OF 1996

JUDGE: BEAUMONT J.

PLACE: SYDNEY

DATE: 19 may 1998

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 672 of 1996

BETWEEN: RONALD IAN McCARTHY

First Applicant

MAXWELL McCARTHY

Second Applicant

EDLAN NO. 54 PTY LIMITED

Third Applicant

AND: NEVILLE McINTYRE

First Respondent

AURO ROMANO McINTYRE

Second Respondent

NEVITORO INVESTMENTS PTY LIMITED

Third Respondent

ITALA BELINDA McINTYRE

Fourth Respondent

CHERYL GAI McINTYRE

Fifth Respondent

JUDGE: BEAUMONT J.

DATE: 19 may 1998

PLACE: SYDNEY

REASONS FOR JUDGMENT BEAUMONT J: By their amended application filed on 12 December 1997, the applicants seek relief in several forms under the provisions of Part V of the Trade Practices Act 1974, s 68 of the Fair Trading Act 1987 (NSW) and s 1005 of the Corporations Law upon the grounds appearing in their amended statement of claim. The present litigation is complex and in the interests of its orderly management it was determined, with the consent of the parties, that of the three groups of causes of action sued upon in the statement of claim, the Court should deal in the first instance with those claims which are grouped under the title in the applicants' statement of facts, issues and contentions described as "Third Trial - 1993 Transaction". In the present group of claims, the respondents have made a cross-claim seeking to recover the sum of $360,000, being an amount claimed by Nevitoro Investments Pty Limited ("Nevitoro"), one of the respondents, to be owing to it on a transaction which will be described below. As I have said in argument, it is not appropriate that I deal with that cross-claim at the moment. I have also indicated to the parties during the course of argument that, given the interlocutory character of the present matter, it is not appropriate, in any event, that I enter any formal orders at this stage. What follows is, however, my reasons for judgment on the matters which have been fully contested and fully argued before me. By their amended application, Mr Ronald Ian McCarthy (the first applicant known as Jack McCarthy), his brother Mr Maxwell McCarthy (the second applicant), and Edlan No 54 Pty Limited ("Edlan") (the third applicant and a company controlled by the McCarthy family), sue Mr Neville McIntyre (the first respondent), his son Mr Auro Romano McIntyre (the second respondent), Nevitoro (the third respondent and a family company controlled by the McIntyre interest), Mrs Itala Belinda McIntyre (the fourth respondent) and Cheryl Gai McIntyre (the fifth respondent) (who are the wives of Messrs McIntyre). For present purposes, the applicants seek the following relief in their amended application: "1. A declaration that the respondents engaged in misleading and deceptive conduct in trade and commerce which conduct caused:- (a) the applicants and the second respondent to enter into a share sale agreement on 17 August 1993 whereby the second respondent sold certain shares in the third applicant to the second applicant (hereinafter referred to as "the Sale Agreement"); (b) the applicants and the respondents to enter into a deed of settlement on 17 August 1993 whereby the ownership of certain disputed shares was resolved by transfer to the first applicant and certain advances were agreed to be made by the third respondent to the third applicant (hereinafter referred to as "the Deed of Settlement"); and (c) the third applicant and the third respondent to enter into a Deed of Charge on 17 August 1993 wherein the third applicant charged to the third respondent all its assets and undertaking to secure the making of the advances described in the Deed of Settlement. 2. Damages for misleading and deceptive conduct under Section 82 of the Trade Practices Act 1974 and or Section 68 of the Fair Trading Act 1987. ... 4. Orders pursuant to Section 87 of the Trade Practices Act 1974 and or Section 72 of the Fair Trading Act 1987: (a) relieving the applicants from any continuing liability to the second respondent under the Share Sale Agreement; (b) (i) relieving the applicants from any liability to the third respondent associated with the making of the advance of $360,000 by the third respondent to the third applicants the subject of clause 6.2 of the Deed of Settlement; and (ii) avoiding clause 12.2 of the Deed of Settlement. (c) restraining the third respondent permanently from exercising against the third applicant any of its rights, privileges or powers as chargee under the Deed of Charge." By their further amended statement of claim, filed in Court on 6 April 1998, the applicants allege, so far as presently relevant, the following: