FEDERAL COURT OF AUSTRALIA Crystal Auburn Pty Ltd v I L Wöllermann Pty Ltd[2004] FCA 821 DAMAGES – misleading and deceptive conduct -entitlement todamages under the Trade Practices Act 1974 (Cth) - purchase of business - entry into lease - entry into hire purchase agreement - quantification of damages by measuring difference between the price paid for the business and its true value - expert valuations provided - effect of affirmation on entitlement to damages - subsequent conduct of plaintiffs - whether issue estoppel applies to the assessment - capital contributions - rental payments - whether plaintiff entitled to indemnity on cross‑claim for unpaid rental - unrewarded labour - relocation costs - compensation for anxiety stress and upset - opportunity cost of capital - valuation fee, conveyancing costs, lease preparation and stamp duty - interest on financing. Trade Practices Act 1974 (Cth): ss 52, 75B, 87(2)(a) Crystal Auburn Pty Ltd v IL Wöllerman Pty Ltd [2000] FCA 913 Crystal Auburn Pty Ltd v IL Wöllerman Pty Ltd [2001] FCA 735 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 discussed Henville v Walker (2001) 206 CLR 459 referred to I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 referred to Netaf Pty Ltd v Bikane Pty Ltd (1990) 26 FCR 305 considered Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 cited Gould v Vaggelas (1985) 157 CLR 215 discussed Potts v Miller (1940) 64 CLR 282 referred to Jaldiver Pty Ltd v Nelumbo Pty Ltd [1992] FCA 906 cited Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 2) (1989) 40 FCR 76 referredto McAllister v Richmond Brewing Co (NSW) Pty Ltd (1942) 42 SR (NSW) 187 considered Alati v Kruger (1955) 94 CLR 216 followed Thayananthan v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 1054 referred to Blair v Curran (1939) 62 CLR 464 discussed O'Neill v Medical Benefits Fund of Australia (2002) 122 FCR 455 cited JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237 cited Radferry Pty Ltd v Starborne Holdings Pty Ltd [1998] FCA 1689 cited Australian Competition and Consumer Commission v Top Snack Foods Pty Ltd (1999) 21 ATPR ¶41‑708 cited Maridakis v Kouvaris (1975) 5 ALR 197 at 199 referred to Karacominakis v Big Country Developments Pty Ltd [2001] ANZ Conv R 577; [2000] NSWCA 313 referred to Karedis Enterprises Ltd & Greenfriars Pty Ltd v Rita Antonious and Michael Antonious (1995) 17 ATPR ¶41‑427 applied Jacara Pty Ltd v Perpetual Trustees WA Ltd (2000) 185 ALR 463 cited Pine River Pty Ltd v Scorda [2001] WASC 105 considered AV & MS Adamson, Valuation of Company Shares and Businesses (7th edn), LBC, Sydney, 1986 Australian Property Institute, Professional Practice 2002, API, Canberra, 2001 W Lonergan, The Valuation of Businesses, Shares and Other Equity, Longman Professional, Melbourne, 1992 CRYSTAL AUBURN PTY LTD, MARK CHARLES SIBERAS and KINGSLEY WILLIAM DAVIES v I L WÖLLERMANN PTY LTD (t/as WÖLLERMANN & ASSOCIATES), VALESPRING INVESTMENTS PTY LTD, MACLEAY PTY LTD, ROBIN BRUCE LAURIE and BARBARA JOAN LAURIE VG 267 of 1998 GOLDBERG J 25 JUNE 2004 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG 267 of 1998 BETWEEN: CRYSTAL AUBURN PTY LTD (ACN 010 226 794) First Applicant/First Cross-Respondent MARK CHARLES SIBERAS Second Applicant/Second Cross-Respondent KINGSLEY WILLIAM DAVIES Third Applicant/Third Cross-Respondent AND: I L WÖLLERMANN PTY LTD (ACN 005 645 134) (t/as WÖLLERMANN & ASSOCIATES) First Respondent VALESPRING INVESTMENTS PTY LTD (ACN 005 015 421) Second Respondent MACLEAY PTY LTD (ACN 004 753 280) Third Respondent/Cross-claimant ROBIN BRUCE LAURIE Fourth Respondent BARBARA JOAN LAURIE Fifth Respondent JUDGE: GOLDBERG J DATE: 25 JUNE 2004 PLACE: MELBOURNE REASONS FOR JUDGMENT Introduction 1 These reasons and the judgment to be entered follow on from two earlier decisions of a judge of this Court and involve an assessment of a claim for damages made by the applicants as a result of the misleading and deceptive conduct of the respondents in contravention of s 52 of the Trade Practices Act 1974 (Cth) ("the Act"). The contravention occurred as a consequence of representations made as to the attendance figures for the theme park known as "Wobbies World" ("the business") which the second respondent, Valespring Investments Pty Ltd ("Valespring"), sold on 19 December 1997 for $550,000 to the first applicant, Crystal Auburn Pty Ltd ("Crystal Auburn"). The second and third applicants ("Mr Siberas" and "Mr Davies") guaranteed Crystal Auburn's obligations under the sale of business agreement ("the contract"). 2 There is also a cross‑claim brought by the third respondent, Macleay Pty Ltd ("Macleay") against Crystal Auburn, Mr Siberas and Mr Davies for rent due, outgoings and certain costs under the lease Macleay granted to Crystal Auburn in respect of the land on which the business was conducted. Mr Siberas and Mr Davies guaranteed Crystal Auburn's obligations under the lease. 3 The first respondent ("Wöllermann") is a business broker that acted as agent for Valespring in the sale of the business. The fourth and fifth respondents, Mr and Mrs Laurie, are the directors of Valespring and Macleay. 4 Crystal Auburn commenced operating the business in December 1997. The business was conducted on approximately seven acres of land in Springvale Road, Nunawading. It featured passive and mechanical attractions including a monorail, miniature trams and fire trucks (on rails), minigolf and trampolines. 5 In his first judgment, delivered on 6 July 2000, Sundberg J found that had the applicants known the attendance figures were false they would not have entered into the contract, the lease or the guarantee: see Crystal Auburn Pty Ltd v I L Wöllerman Pty Ltd [2000] FCA 913 ("the first judgment"). Sundberg J also found that the business Crystal Auburn acquired in reliance on the respondents' representations was worth less than the amount paid for it and that it may have suffered additional loss. His Honour said that Mr Siberas and Mr Davies had suffered loss in that their work for the business included work that was unremunerated by the drawing of wages, or receipt of profits. 6 In his second judgment, delivered on 18 June 2001, Sundberg J considered an application for a declaration that Crystal Auburn had rescinded the contract and the lease: Crystal Auburn Pty Ltd v I L Wöllerman Pty Ltd [2001] FCA 735 ("the second judgment"). His Honour found that restitutio in integrum was not possible because at the time of sale title to the plant and equipment of the business passed to Bendigo Finance Pty Ltd, a company connected with Bendigo Bank Limited, ("Bendigo Bank") with whom Crystal Auburn had entered into a hire purchase agreement. His Honour further found that putting the business on the market and leaving it on the market, after receiving legal advice on 28 April 1998 that the contract and the lease could be set aside, constituted conduct consistent only with a decision to treat the contract and lease as remaining on foot. His Honour held that Crystal Auburn had affirmed the contract. I note here that the respondents contended that the affirmation occurred on 24 March 1998, the date on which the applicants put the business on the market. However, a fair reading of Sundberg J's second judgment is that the election to affirm the contract did not occur until the applicants received legal advice. 7 The applicants seek damages generally, damages in the amounts of rent paid pursuant to the lease including any rent in respect of which judgment is given on the cross‑claim. The applicants also claim various consequential losses. The issues to be resolved in the assessment of the claim for damages and the cross‑claim are: · The true value of the business as at the date of purchase on 19 December 1997. (The parties agree generally that the relevant valuation methodology depends on whether the business was profitable as at that date.) · Whether the findings of Sundberg J in the first judgment estop the respondents from claiming that the value of the business exceeded the purchase price of $550,000. · Whether all the losses claimed by the applicants were suffered "by conduct of" the respondents in contravention of s 52 of the Act. (In issue is whether the conduct of the applicants was unreasonable – whether they failed to mitigate their losses.) · There are also a number of associated matters in dispute concerning the value of the plant and equipment of the business and its sale by auction on 8 July 1998, including the manner in which the auction was conducted. 8 On 26 June 2002 Sundberg J ordered that the evidence in the two earlier trials could be used as evidence for the purpose of the damages assessment. the earlier proceedings The section 52 trial 9 Crystal Auburn, Mr Siberas and Mr Davies commenced a proceeding in the Court against the respondents claiming that they were induced to enter into the contract, the lease and the guarantee of the lease as a result of misrepresentations which constituted misleading and deceptive conduct on the part of Wöllermann, Valespring and Macleay in contravention of s 52 the Act. They also claimed that Mr and Mrs Laurie were involved in the contravention within the meaning of s 75B of the Act. 10 The applicants claimed that all the respondents had made a number of representations as to the attendance figures of the business prior to 30 June 1997 and the gross income from the operation of the business. The applicants claimed that those representations were false in that the attendance figures and the gross income were much less than represented. 11 Sundberg J declared that Wöllermann, Valespring and Macleay had engaged in misleading and deceptive conduct in contravention of s 52 of the Act and that Mr and Mrs Laurie were involved in the contravention. His Honour ordered that the loss or damage suffered by the applicants as a result of the contravention be assessed by a Registrar in default of agreement and that the respondents pay the applicants' costs of the application including any assessment. 12 In addition to the primary finding set out above at [5] Sundberg J made a number of findings of fact relevant to the present proceeding which may be summarised as follows: · Mr Marlow of Wöllermann gave Mr Siberas a copy of a Business Profile containing financial information relating to the business, including the fact that the current schedule of entrance charges, which had not changed since at least November 1995, produced an average sale per visitor of $11.20: findings (a)‑(e). · Mr Marlow gave Mr Siberas attendance figures for the period 26 December to 30 June in the years 1993 to 1997, which showed the attendances on each day for which the business was open: finding (f). · In reliance on the Business Profile and the attendance sheets, in particular the attendances for 1997 and the average sale per visitor of $11.20, Mr Siberas and Mr Davies decided to purchase the business for $550,000: finding (g). · The attendance sheet for the 1996‑1997 period contained the note: "All advertising ceased, second week in January 1997". However, Valespring had in fact advertised the park throughout January to July and in September and October 1997, at a cost of at least $41,550: finding (i). · It became apparent by the end of February 1998 that the attendance figures were nowhere near those represented by the attendance sheets. Attendances during Crystal Auburn's operation of the business in the period from late December 1997 to April 1998 showed a drop of just under 60% when compared with the corresponding period in the previous year: finding (k). · The represented average sale per visitor of $11.20 was borne out by Crystal Auburn's actual sales: finding (l). · The attendance sheets and the records on which they were based were unreliable: finding (n). · Valespring's income tax returns for the years 1994 to 1997 were incorrect and did not accurately record gross income in cash taken out of daily takings to make unrecorded payments to workers and gardening and other contractors: finding (p). · The attendance figures from 1997 in the Business Profile and attendance sheets were false: finding (v). · The applicants suffered loss and damage as a result of their reliance on the information in the Business Profile and attendance sheets: finding (x). 13 On 9 August 2000 the respondents advanced the sum of $250,000 to the applicants on account of damages they might be ordered to pay thereafter. the RESCISSION trial 14 When the matter came before the Registrar for assessment of damages it became apparent that a further question needed to be determined by the Court. In the original proceeding the applicants had sought a declaration that the contract and the lease were validly rescinded on or about 17 June 1998 and a declaration that the guarantee of Crystal Auburn's obligations under the lease was void ab initio. Those issues were not canvassed or resolved in the first hearing and, as a result, the matter was brought on for a further hearing before Sundberg J. 15 On 18 June 2001 Sundberg J ordered that the declaratory relief sought by the applicants be refused, that the applicants pay the respondents' costs of and incidental to the determination of the rescission issue and that the matter be remitted to a Registrar for the assessment of damages. 16 The findings of Sundberg J in the second judgment relevant to the present proceeding as earlier referred to above at [6] may be summarised as follows: · On 17 June 1998 the applicants' solicitors purported to rescind the contract and lease: par [6]. · Bendigo Bank owned the plant and equipment of the business. The applicants could not make substantial restitution as they never owned the features that gave the business its very being: par [5]. · By the end of January 1998 Mr Siberas had formed the view that the applicants had been misled by the business attendance representations. In late March 1998 Mr Siberas sought his solicitors' advice and at about the same time he asked Mr Laurie if he would take the business back. Mr Laurie refused: par [6]. · On 24 March 1998 Mr Siberas instructed Mr Marlow to place the business on the market for $650,000. The business remained on the market until 18 June 1998: par [6]. · On 28 April 1998 the applicants' solicitors advised that, on the basis of their instructions, the applicants had "little option but to seek to set aside the contract and the lease": par [6]. · Putting the business on the market when the applicants were unable to persuade Mr Laurie to take it back, and leaving it on the market for some months after receiving their solicitors' advice that the contract and lease could be set aside, constituted conduct consistent only with a decision to treat the contract and lease as remaining on foot. It was a declaration of ownership of the business and a desire to pass that ownership to a buyer. In those circumstances Crystal Auburn should be taken to have affirmed the contract: par [7]. · While an elector must know of the facts that give rise to the right to rescind, he need not know of the right of election as between two inconsistent legal rights – the right to treat the contract as remaining on foot and the right to rescind. If the applicants did have to have that additional information, their solicitors' advice provided it: par [8]. · Sundberg J took into account the fact that restitution was not possible and that the applicants have affirmed the contract and in the exercise of his discretion made no order under s 87(2)(a) of the Act avoiding the contract and the lease: par [9]. 17 When the assessment of damages came on for hearing before a Registrar it was determined that having regard to the issues which would arise in the assessment (involving determinations of fact and the exercise of judgment) it was more appropriate for the damages to be assessed by a judge. THe present proceeding 18 The applicants' damages claims are set out in the Third Amended Particulars of Loss and Damage, dated 13 February 2003, as amended in the course of the hearing: 1. Initial Capital Loss $550,000.00 $511,658.50 Purchase price $65,000.00 Less true value of business $26,658.50 Plus value of items retained by fourth respondent 2 Additional Capital Loss: 22.12.97 $1,000.00 $51,000.00 2(a) Capital Contributions 23.12.97 $15,000.00 01.06.98 $15,000.00 12.06.98 $15,000.00 19.06.98 $5,000.00 2(b)(i) Rent paid to the third respondent $37,500.00 2(b)(ii) Reimbursement of any damages that may be found against the applicants on the third respondent's cross‑claim $264,752.00 2(c) Valuation fee to R & M Bent $1,850.00 2(d) Conveyancing costs $760.00 2(e) Lease preparation & Stamp duty $2,832.00 2(f) Payments to Bendigo Bank $230,774.21 19.12.97 to 13.02.03 2(f)(i) Interest $193,717.52 2(f)(ii) Stamp duty $2,512.91 2(f)(iii) Legal fees paid or payable $34,341.24 2(f)(iv) FID $202.54 3(i) Unrewarded labour for Mr Davies $47,201.00 $43,584.00 Wages and salary foregone $3,383.00 Superannuation $7,000.00 Less drawings 3(ii) Unrewarded labour for Mr Siberas $23,250.00 $16,250.00 Average weekly ordinary earnings 30 weeks at $775 per week $7,000.00 Less drawings 4 Further direct losses: 4(a) Relocation costs of Mr Davies $7,585.80 4(b) Anxiety, stress and upset $10,000.00 5(i) Opportunity cost of capital invested directly by Siberas and Davies: ($87,500.00 – Interest at 5.07% from Dec 97 to Feb 03) Siberas $23,290.31 5(ii) Davies $23,290.31 TOTAL DAMAGES $1,225,127.13 Interest amount on which interest payable 2(b)(ii) $264,752.00 $750,076.99 Amounts not claimed for items 2(f)(i) $193,717.52 5(i)‑(ii) $46,580.62 Total $505,050.14 19 The applicants claimed that their loss is represented by the difference between the true value of the business as at the date of purchase on 19 December 1997 and the price paid, the loss constituted by their liability to Bendigo Bank and the loss constituted by their liability for rent (paid and future). They contended that all these losses have their genesis in the respondents' misleading and deceptive conduct and that they occurred before there was any question of their subsequent conduct of the business. They made no claim for loss of profits in the conduct of the business, and instead they claimed additional losses consisting of capital contributions. 20 Recent decisions of the High Court have re-visited the principles applicable to the assessment of damages under the Act. The judgment of McHugh, Hayne and Callinan JJ in Marks v GIO Australia Holdings (1998) 196 CLR 494, is apposite in the present circumstances. Their Honours said at 509: "…s 82 provides, in effect, that the loss or damage that may be recovered by action is the amount of the loss or damage suffered 'by conduct of' another person that was done in contravention of Pt IV or V [of the Act]. It contains no stated limitation of the kinds of loss or damage that may be recovered and contains no express indication that some kinds of loss or damage are to be regarded as too remote to be recovered." Their Honours went on to state at 510: "It can be seen, therefore, that both ss 82 and 87 require examination of whether a person has suffered (or, in the case of s 87, is likely to suffer) loss or damage 'by conduct of another person' that was engaged in the contravention of one of the identified provisions of the Act. Thatinquiry is one that seeks to identify a causal connection between the loss or damage that it is alleged has been or is likely to be suffered and the contravening conduct. But once that causal connection is established there is nothing in s 82 or s 87 (or elsewhere in the Act) which suggests either that the amount that may be recovered under s 82(1), or that the orders that may be made under s 87, should be limited by drawing some analogy with the law of contract, tort or equitable remedies". See also: Marks at 503‑504 per Gaudron J, at 529 per Gummow J. Notions of remoteness of damage or reasonableness are not necessarily excluded and may provide "valuable insight and experience which may well be useful in applying the Act": see Henville v Walker (2001) 206 CLR 459 at 470 per Gleeson CJ, at 501‑502 per McHugh J; see also at 482 per Gaudron J. Their Honours also said in Marks at 512: "Very often, the amount of the loss or damage caused by a contravention of s 52 will coincide with what would have been allowed in an action for deceit. But that is because the inquiry in both cases is to find out what damage flowed from (in the sense of being caused by) the deceit or contravention…the damages for deceit will be the sum representing the loss suffered by the plaintiff because the plaintiff altered its position in reliance on the defendant's misrepresentation. But the analogy cannot be pressed too far so as to conclude that the only damages that may be allowed under s 82 are those that would be allowed in an action for deceit. The question presented by s 82 is not would be allowed in deceit, it is what loss the loss or damage that has been caused by the conduct contravening the Act". 21 An award of damages finds its focus in the purpose of the statutory rights and responsibilities arising under s 82. As Gleeson CJ said in I & L Securities Pty Ltd v HTW Valuers Pty Ltd (2002) 210 CLR 109 at 119: "…It is attributing legal responsibility; blame. This is not done in a conceptual vacuum. It is done in order to give effect to a statute with a discernible purpose; and that purpose provides a guide to the requirements of justice and equity in the case." 22 However, in order to recover losses subsequent to purchase it is not enough to show that the transaction or purchase was induced by the misrepresentation, and that the losses would not have occurred but for the transaction: Netaf Pty Ltd v Bikane Pty Ltd (1990) 26 FCR 305 at 308; Kenny & Good Pty Limited v MGICA (1992) Limited (1997) 77 FCR 307 at 328, 330; appeal dismissed (1999) 199 CLR 413. What has to be shown is that the loss flows directly from the inducement – the onus is on the applicants to establish this fact. Sundberg J determined the applicants' entitlement to damages in his first judgment: at [40]. The basic rule as to the measure of damages under s 82 was summed up in the following passage of Hill J in Argyv Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 at 143: "The normal measure of damages in a case brought under s 82(1) of [the Act] as a result of misleading and deceptive conduct constituted by a misrepresentation is, by analogy with the measure of damages applicable in deceit…Toteff v Antonas (1952) 87 CLR 647. In mathematical terms it is the difference between the real value of the property at the time of the purchase and what the plaintiff paid for it: Gould v Vaggelas (1985) 157 CLR 215." 23 The first task is to determine the difference between the real value of the business purchased by the applicants and what they paid for it. However, finding (x) of Sundberg J, in his first judgment, also refers to additional loss. His Honour relevantly said at [38]: "Only the question of the respondents' liability was before me. The quantum of their loss or damage will be assessed later. But in order to make out their cause of action for damages, the applicants must establish that they have suffered some loss or damage as a result of the contravening conduct. See s86 of the Act. There is no doubt that Crystal Auburn suffered such loss or damage. The business it acquired in reliance on the respondents' representations was worth less than the amount paid for it. Cf Gould v Vaggelas (1985) 157 CLR 215 at 220 and Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 512. It may have suffered additional loss. Mr Siberas and Mr Davies suffered loss in that their work for the business included work that was unremunerated by the drawing of wages or receipt of profits. See Cut Price Deli Pty Ltd v Jacques (1993) ATPR Digest 46‑102 at 53,444‑53,445; on appeal (1994) 49 FCR 397 at 404‑405. They too may have suffered additional loss." 24 The applicants submitted that they are entitled to "the whole amount lost" and that the onus was on the respondents to establish that a separate part of the loss was due to some supervening event or had no causal connection with the contravening conduct: Henville at 481, 483 per Gaudron J, at 510 per Hayne J. Gleeson CJ in Henville at 470 (citing Lord Hoffman in Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191 at 216) referred to the losses that result from factors other than the misrepresentation as being "losses attributable to causes which negative the causal effect of the misrepresentation". 25 The respondents contended that they should not have to bear responsibility for all of the loss alleged to have stemmed from their contravention of s 52. It was submitted that Crystal Auburn's decision to affirm the contract operated to break the chain of causation and the respondents should not be held liable for loss arising after that time. The respondents relied on the following passage of Gibbs CJ in Gould v Vaggelas (1985) 157 CLR 215 at 221‑222 cited by Gleeson CJ in Henville at 472: "There is no reason in principle why the defrauded purchaser should not recover damages for all the loss that flowed directly from the fraudulent inducement (unless, possibly, the loss was not foreseeable). If the purchaser, besides paying more for the business than it was worth, has suffered additional losses which resulted directly from the fraud he ought to be compensated for them. Of course, the court must be satisfied that the loss did result directly from the fraud and not from some supervening cause such as the folly, error or misfortune of the purchaser himself…" In Gould the Chief Justice was speaking with reference to the case of Potts v Miller (1940) 64 CLR 282, a fraudulent misrepresentation case, which discussed the authorities on the measure of damages in deceit. The statement of Gibbs CJ in Gould is authority for the proposition that there may be departure from the basic rule as to the measure of damages in deceit, that the rule is not quite so inflexible so as to limit the damages to capital loss represented in the difference between the true value and price paid for a business: see Netaf at 307 per Sheppard and Pincus JJ. 26 Gibbs CJ referred to the examples of damages for the losses of a purchaser who had continued to trade either because he had no real alternative or was not aware of the nature of the fraud, provided the losses flowed directly from the fraudulent inducement. Clearly, the right to damages, the difference between the price paid and the value received, survives affirmation: Jaldiver Pty Ltd v Nelumbo Pty Ltd [1992] FCA 906 at 96‑98; Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 2) (1989) 40 FCR 76 at 90‑91 per Lee J; Myers v Transpacific Pastoral Company Pty Ltd (1986) 8 ATPR ¶40‑673 at 47,423‑47,424. I note that in addition to the two situations in which damages beyond the usual measure may be awarded, may be added the circumstances of the present case as was contemplated by Jordan CJ in McAllister v Richmond Brewing Co (NSW) Pty Ltd (1942) 42 SR (NSW) 187 at 193: "Different considerations would arise when, as a result of deceit, the purchaser has been led to have dealings with a third party which made rescission impossible. In such a case, the circumstances might be such as to entitle the buyer to receive by way of damages any unavoidable loss which was fairly referable to the deceit." 27 The essence of the respondents' contention is that once the applicants affirmed the contract they were obliged to take reasonable steps to mitigate their loss and that their conduct was so unreasonable as break the chain of causation. Reliance was placed on Henjo Investments where Lee J said at 90‑91 (and the citations therein): "Under the general law, a person who affirmed the contract induced by deceit would lose the right to rescind but not the right to recover damages for the tort of deceit. The act of affirming the contract would make no difference in itself to the right to recover damages for the misrepresentation inducing the contract: S Gormley & Co Pty Ltd v Cubit [1964] NSWR 557. There would, however, be an obligation upon the party affirming the contract to take reasonable steps to mitigate the loss resulting from the deceit. The actual or imputed affirmation may be treated as the point at which it becomes unreasonable for consequential damages to continue to accrue if no steps to mitigate the loss are taken thereafter or if affirmation of the contract was not the reasonable course to have followed: see Mister Figgins Pty Ltd v Centrepoint Freeholds Pty Ltd (1981) 36 ALR 23 at 60; TN Lucas Pty Ltd v Centrepoint Freeholds Pty Ltd (1984) 1 FCR 110 at 118." 28 It is necessary to decide whether part of the loss claimed by the applicants, in the sense of a distinct and separate portion of the whole loss, was in fact caused by some unreasonable conduct on the part of the applicants rather than the contravening conduct of the respondents. In I & L Securities Gaudron, Gummow and McHugh JJ said at 130: "As was recognised in Henville v Walker, there may be cases where it will be possible to say that some of the damage suffered by a person following contravention of the Act was not caused by the contravention. But because the relevant question is whether the contravention was a cause of (in the sense materially contributed to) the loss, cause in which it will be necessary and appropriate to divide up the loss that has been suffered and attribute parts of the loss to particular causative events are likely to be rare." See also: I & L Securities at 120 per Gleeson CJ, at 137 per McHugh J, at 153‑154 per Kirby J. Although conduct of the respondents may be "the sine qua non of the loss claimed that there may come a point where the applicant[s'] own conduct was 'so dominant' in the causal chain as to constitute a novus actus interveniens": see I & L Securities at 136 per McHugh J making reference to French J in Pavich v Bobra Nominees Pty Ltd (1988) 10 ATPR ¶40‑822 cited with approval by the Full Court in Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274 at 286‑287. 29 The respondents contended that following the applicants' affirmation of the contract, their unreasonableness was disclosed in several respects: · Wrongly regarding Valespring as the true owner of the plant and equipment. · Taking no action to challenge the notice of default issued by Macleay in response to their breach of the rental covenant contained in the lease. · They did nothing to pursue the sale of the business as a going concern in the second half of 1998. · They acknowledged that the best way to mitigate their losses was to cooperate with the Bendigo Bank and the respondents. · They did not attempt to negotiate with Bendigo Bank in relation to the plant and equipment. · They did not want the respondents to re-open the business over the busy summer period commencing in December 1998. · They were aware of the respondents' offer to assist in the sale of the business as a going concern (which would mitigate their losses) but ignored such propositions. The conduct of the applicants after affirmation 30 Crystal Auburn affirmed the contract on 28 April 1998. Two months later, on 17 June 1998, the applicants' solicitors informed Valespring that Crystal Auburn was rescinding the contract and the lease. The following day Mr Marlow's selling authority was withdrawn and the business was taken off the market. Crystal Auburn continued to operate the business until 2 August 1998, and vacated it a few days later on 6 August 1998. The notice of default 31 About five weeks after the purported rescission, Macleay's solicitors served a notice of default on Crystal Auburn for failure to pay rent for the month of July 1998. In that notice Macleay informed Crystal Auburn that if payment was not satisfied within 14 days it would re‑enter the premises and end the lease. On 6 August 1998 Crystal Auburn's solicitors replied to Macleay advising that the premises would be vacated by 7.00 pm that night. Three weeks thereafter Macleay's solicitors sent a letter demanding payment of the outstanding rent and outgoings, with interest, on behalf of Mr Siberas and Mr Davies pursuant to their joint and several guarantee of Crystal Auburn's obligations under the lease. No payments were made by either of Crystal Auburn, Mr Siberas or Mr Davies. 32 In a witness statement tendered in the second trial, Mr Siberas said that, but for the notice of default, Crystal Auburn would have remained in occupation of the business and would have continued to maintain it. He also stated that Crystal Auburn had no realistic possibility of paying the $12,500 rental due per calendar month to Macleay under the lease together with payments to Bendigo Bank, and that the resources properly to promote the operation of the business were not available. There was insufficient evidence to ascertain the precise financial position of Crystal Auburn at the time it ceased to pay rental. 33 After vacation of the business, the applicants continued to meet their payment obligations to Bendigo Bank for almost nine months. (On 31 May 1999 monthly re‑payments were reduced from $7,971.88 to $2,800.) In the hearing before me Mr Davies confirmed that there were no outstanding payments due to staff at the time the premises was vacated. However, Mr Davies also said that there were insufficient funds for drawing his own salary. Payments made to other staff were in accordance with the schedule for remuneration used by Valespring. Mr Davies also confirmed that the payments were made from cash takings and that they had not been recorded in a wages book. He emphasised that in this respect he had followed the procedure that had been in place when Valespring operated the business. 34 The applicants took no legal action to challenge or set aside the notice to quit. The respondents submitted, in reliance on Alati v Kruger (1955) 94 CLR 216 at 228, that at common law or in equity even after there has been an election to rescind, the purchaser must still act conscientiously. The passage referred to is that of Fullagar J, wherein his Honour was speaking with respect to a purchaser who remained in possession of the property. Fullagar J also said that a defrauded purchaser was not bound to remain in possession of the property, provided he had given notice and had offered to restore possession to the vendor. He held that the vendor who declines the opportunity offered then acts at his own risk that the purchaser will vacate and is later found to be entitled to rescission: at 228. The respondents also submitted that unlike rescission at common law or in equity, rescission under s 87(2)(a) of the Act is operational rather than declaratory and the applicants had a greater responsibility to protect the assets of the business until the Court has made an order. Reliance was placed on Tenji v Henneberry & Associates Pty Ltd (2000) 98 FCR 324 at 332‑333 per French J. 35 However, as Sundberg J found that Crystal Auburn had affirmed the contract and lease, the relevant question is – did the applicants abandon the business and fail to mitigate their losses: see Mister Figgins Pty Ltd v Centrepoint Freeholds Pty Ltd (1981) 31 ALR 23. Remaining on‑site would have had two consequences: · The applicants could have kept the business on the market; · The applicants could have attended to any requirements for the maintenance of the plant and equipment. The conduct of the applicants in respect of these two issues, and the effect of that conduct on their loss, is now considered. Attempts to sell the business 36 The relevant question is whether achievement of a sale of the business was feasible. The applicants submitted that if the business was not profitable, it was inevitable that that fact would emerge during negotiations and no sale would result. It was apparent from Mr Siberas' evidence that when the business was put on the market in March 1998, as a going concern, there was a difficulty with the provision of financial information for prospective buyers. The Business Profile and attendance sheets were of no assistance and Crystal Auburn's own figures "varied greatly". This line of argument is persuasive and I accept that a sale of the business was not feasible at that time. Indeed, there were no offers made over the four months the business was on the market at the sale price of $650,000. 37 When the business was on the market in 1997 the respondents had sought to mislead a potential purchaser into believing not only that the false attendance figures showing good results were true, but also that a marketing campaign involving advertising would result in even better figures. Sundberg J found, in the first judgment, that although the Valespring attendance sheet for the 1996‑1997 period contained the note: "All advertising ceased, second week in January 1997", Valespring had in fact advertised the park throughout January to July and in September and October 1997 at a cost of at least $41,550. As to the reason for the note his Honour said at [31]: "It is difficult to see any explanation for the making of the note other than to provide an answer to any purchaser's potential complaint that attendances were not what they had been represented to be." Crystal Auburn spent $54,970.60 on television, radio and internet advertising between 19 December 1997 and May 1998: finding (j). Despite these endeavours to attract customers, attendances were far less than expected. Having purchased a business that was not as it had been represented to be, it was most unlikely the applicants would be able retrieve their position by offering it for sale at a price approximating that which Crystal Auburn had paid for it. 38 The respondents contended that the applicants were unreasonable in not responding to the respondents' proposals to assist with sale of the business thereafter. They relied on a letter from Sports Australia Pty Ltd to Mr Laurie, dated 30 October 1998, in which Sports Australia Pty Ltd made an offer of $250,000 for all the fixtures, fittings, plant and equipment on the condition that it could obtain an acceptable lease to enable it to continue to run the business. Mr Siberas did not see the letter and it is of no probative value on the issue of the reasonableness of the applicants' conduct or the value of the plant and equipment of the business. The offer assumed a continuation of the business using the plant and equipment, which is not the basis of the valuation relevant to this proceeding. 39 The applicants were under no obligation to render assistance to Mr Laurie in his attempts to sell the business as a going concern after his company had re‑entered the premises. During that re‑entry an advertisement was placed in The Age newspaper on 16 January 1999 for the sale of the business at $390,000, a figure substantially lower than both the amount for which Valespring had sold it to Crystal Auburn in 1997 and the sale price sought by the applicants in March 1998. I note that at the time Crystal Auburn, Mr Siberas and Mr Davies were indebted for a similar sum to Bendigo Bank in respect of the hire purchase agreement. The issue remains whether the applicants, after taking the business off the market, should have taken steps to sell the plant and equipment with the cooperation of Bendigo Bank. The auction of the plant and equipment 40 Macleay treated the plant and equipment as Crystal Auburn's fittings (as its tenant pursuant to the lease). About three weeks after Crystal Auburn vacated the premises Macleay's solicitors wrote to the applicants' solicitors seeking payment of $500 per week as storage charges for the plant and equipment. The letter concluded as follows: "In the event we do not hear from you within seven (7) days of the date of this letter then our clients will require your clients to remove the plant and equipment from the premises within a further fourteen (14) days, failing which our client will arrange for removal and claim the costs of such removal as damages against Crystal Auburn Pty Ltd and the guarantors". In reply, the applicants' solicitors stated that Crystal Auburn did not agree to pay the storage charges demanded by Macleay. However, they indicated a willingness on the part of the applicants, in principle, to "discuss the possibility of a sale of the plant and equipment to mitigate their loss". There is no evidence that any such discussion ensued. Mr Siberas said that after August 1998 until about May 1999 his negotiations with Bendigo Bank concerned the servicing of the hire purchase repayments. No endeavours were made to achieve a sale of the plant and equipment. Mr Davies agreed that this was the case. 41 On 14 May 1999 Macleay's solicitors advised Bendigo Bank's solicitors that on 3 June 1999 Macleay would auction the property and that settlement was proposed to take place 120 days after the auction. The letter sought confirmation that Bendigo Bank would undertake to remove all of its plant and equipment at least 30 days prior to settlement. On 28 May 1999, Macleay's solicitors then informed Bendigo Bank's solicitors that Macleay had sold the property and that the contract of sale provided for vacant possession at settlement. The correspondence relevantly stated: "In the circumstances, our client has now instructed us to require your client's proposal to be furnished to this office within seven (7) days with respect to the removal of the equipment and rectification of the site to be undertaken within a further thirty (30) days either by auction or other means. In the absence of receiving a satisfactory proposal within the required seven days our client will arrange for the sale of the equipment by public auction and utilise the proceeds received from the sale for the removal of any remaining equipment and rectification of the site. Our client will then look to your client for reimbursement of any shortfall between the proceeds of the sale and the cost of rectification." Notwithstanding the terms of the letter, settlement did not occur until 24 November 1999. 42 Despite Macleay's several assertions to either Crystal Auburn or Bendigo Bank that it would take steps to dispose of the plant and equipment, it did not do so. 43 Bendigo Bank caused the auction of the plant and equipment. On or about 16 June 1999 Taylor Lockwood Pty Ltd, Auctioneers and Valuers, (now Lockwood & Co Pty Ltd, "Taylor Lockwood") received telephone advice from the applicants' solicitors that the plant and equipment of the business was to be auctioned. The advice was that there was a degree of urgency associated with organising the auction as Macleay was intending to sell the property. On 8 July 1999, Mr Gollant of Taylor Lockwood conducted an on‑site auction of the plant and equipment. The auction grossed $60,705. 44 The respondents contended that the auction was conducted within a timeframe that did not allow for the maximum proceeds to be realised. It was submitted that there should have been a targeted advertising campaign directed to persons likely to have an interest in the particular type of plant and equipment of the business and that the plant and equipment should have been offered for private sale. The respondents also submitted that the auction was inherently incapable of achieving the highest and best use sales results as the plant and equipment had deteriorated because the applicants had not attended to maintenance requirements after Crystal Auburn vacated the premises. A further complaint was that there were some 53 items not offered for sale. These issues are considered in turn. · Was an orderly sale feasible? 45 The respondents contended that the price achieved at auction was not conclusive of the true value of the business and that an orderly sale of assets basis was the appropriate test. Reliance was placed on Jekyll v Commissioner of Stamp Duty (Qld) (1962) 106 CLR 353 at 365 and the opinion of their expert witness, Mr Henderson who was of the view that: "Selling the Wobbies World plant and equipment at an Auction was not the appropriate method of sale to obtain the optimum amount of money. In my opinion it should have been sold to people or companies in the same or related industries and been given sufficient time and advertising to do so". The respondents sought to characterise the conduct of the applicants in respect of the auction of the plant and equipment as unreasonable because it was actually a fire sale. 46 It is significant that Macleay sold the property and demanded the removal of the plant and equipment from the site of the business. This was the catalyst for the auction of 8 July 1999, even though this was not the first time that Macleay had pressed Bendigo Bank (and hence the applicants) to remove the plant and equipment from the premises. The letter to Bendigo Bank dated 28 May 1999 was to the point. Macleay required the "removal of the equipment and rectification of the site to be undertaken within a further thirty (30) days either by auction or by other means". While it makes no difference to the haste imposed by this timeframe, there should be added the seven days that Macleay had allocated to Bendigo Bank to furnish to Macleay its proposal as to how it would effect that removal process. 47 When cast in this light, the respondents' complaint as to the timeframe in which the auction was organised should be viewed as being the direct result of Macleay's own misleading conduct. It cannot be found, as the respondents urged, that it was the applicants' fault that the auctioneers did not have sufficient time to conduct a selling program geared to specific end users of the specialised assets. In any event, it was Bendigo Bank as the owners of the plant and equipment that arranged the auction. A private orderly sale was not an option. Before instructing Taylor Lockwood to arrange an auction, the applicants' solicitors sought to ascertain from the respondents the maximum period available for the promotion and sale of the plant and equipment. This is recorded in the applicants' solicitors letter to the respondents, dated 9 June 1999: "…we formally offer to your client the opportunity to place an offer to purchase the plant and equipment in the event that your client intends to lease the premises from the new owners. In the event that you client does not wish to seek to purchase the plant and equipment, then we confirm our client's intentions to seek to sell same at the best possible price on a realisation basis. In this content, we request that you advise the settlement period for the sale. We believe that it is in our respective clients' best interests to achieve the maximum possible price on sale. As you would appreciate, the sale of such plant and equipment will only be optimised if we are availed the opportunity to widely market same amongst the limited range of potential purchasers. Obviously, the longer the period we are provided in which to promote the plant and equipment for sale, the greater the chance of realising the best possible price." In reply, the respondents' solicitors wrote "any sale of the tenant's installations (plant and equipment) is to be conducted by your clients such sale must be finalised by not later than 15 July 1999". 48 The respondents submitted that it was the applicants' responsibility to deal with Bendigo Bank in respect of the disposal of the plant and equipment prior to Macleay's sale of the property. Mr Lockwood of Taylor Lockwood said that the applicants' solicitors first contacted him around the end of April 1999. This was some eleven months after the applicants took the business off the market. It appears that the applicants embarked on a course of conduct consistent with their purported rescission. So much is consistent with the respondents' submissions that contended that the applicants had mistakenly considered Valespring to be the owner of the plant and equipment. In any event, as Sundberg J found that Crystal Auburn had affirmed the contract, the relevant question is whether applicants thereafter failed to take reasonable steps to mitigate their loss. · Did the applicants' allow the plant and equipment to deteriorate? 49 The plant and equipment remained on site when Crystal Auburn vacated the business premises on 6 August 1998. The respondents contended that the condition of the plant and equipment thereafter deteriorated. It was submitted that the applicants' conduct was unreasonable and that they had failed to mitigate their loss. 50 Mr Siberas said that after Macleay took possession of the premises he was not allowed back on site so he had no opportunity to undertake any maintenance. Mr Laurie operated the business over the summer of 1998‑1999 and attempted to sell it as an ongoing business. There was unparticularised evidence that the resumption of the business involved an expenditure of "considerable time and money". Countering this, the applicants claimed that as they had improved the plant and equipment it was in a better condition when they vacated the premises. Mr Siberas said that two weeks after the date of sale there was a safety inspection and certain items of the plant and equipment were found to require repair. Compliance with Victorian WorkCover Authority approval requirements cost the applicants "a couple of thousand dollars". 51 Mr Laurie said that the abandonment of the business resulted in significant deterioration of the plant and equipment. The respondents contended that Mr Laurie's evidence was not challenged. 52 Some of the examples of deterioration given by Mr Laurie are: · The exterior of the "Denis Fire Truck" had a torn mudguard and dented roof, many scratches as well as an accumulation of mould and dirt. · A "wheels car" had been partly dismantled and placed under a tree. · Wheeled motorbikes had been allowed to deteriorate to a large degree and were inoperable and that Mr Laurie said he had arranged for them to be reconditioned and painted prior to the sale of the business to the applicants. · The emergency stop button on the boat ride appeared to be inoperative. · The safety gate on the fence around the Red Baron Ride had been jammed open. · A number of weatherproof boxes and covers, all of which had been designed to protect mechanical parts on the roads, had been removed. · The motorised carousel was inoperable - the cabinet had been vandalised and ripped from the wall adjacent to the ride. · The vintage electric car was inoperable – the master cylinder had been drained and the brakes did not work. Some of the batteries were missing. · The "Ball Pit" was unsafe – the floor had rotted and collapsed. · The "Denis Fire Engine" was inoperable – the tyres were flat, the distributor cap was broken and the high tension wiring from the distributor had been removed. · The locking bar fitted to the "Hand Cart Rail Ride" had been removed with force, causing two of the gear support casings to break. Exposure to the air had caused severe corrosion of the steel gears. 53 The description of rust and corrosion on several items is surprising as the plant and equipment was not in use for a relatively short period. Bearing in mind that Mr Laurie opened up the business in the summer of 1998‑1999, it does not seem plausible that there could have been deterioration of the plant and equipment to the extent urged by the respondents. For example, it is difficult to conceive that timber could rot and collapse in a few months, or to conceive the extent of rusting and corrosion urged by Mr Laurie. However, on or about 29 June 1999 the premises were vandalised and it is apparent that some of the abovementioned damage is attributable to this incident. 54 While it is appropriate to have regard to the expert evidence of the valuers on the issue of deterioration, the expert evidence does not assist. One of the applicants' expert witnesses, Mr Bent said that he based his second valuation on his recollection of the nature and condition of the equipment as inspected in November 1997 and that he had driven past the site nearly every day on his way to work. However, he did not make any further inspections of the plant and equipment. None of the other experts had inspected the plant and equipment prior to 1999. That leaves the competing views of Mr Laurie and the applicants, Mr Siberas in particular. Sundberg J said in his first judgment at [31]: "I formed a poor impression of Mr Laurie as a witness. This incident, along with others, led me to conclude that he would say anything in order to establish that the park went downhill solely through the incompetence of the applicants, and that its fate had nothing to do with any fault on his part. In the absence of documentary corroboration of Mr Laurie's evidence I have generally preferred the evidence of the applicants." 55 I prefer the evidence of Mr Siberas generally on this issue of deterioration of the plant and equipment. I do not see how there could have been deterioration of the plant and equipment to the extent urged by the respondents by reason of the failure of the applicants to maintain it. In my opinion, while the presentation of the plant and equipment may have suffered to some of the extent urged by the respondents, this was not so in respect of the overall condition of the plant and equipment. I do not accept that the various items of plant and equipment could have diminished in value to the significant degree pressed by the respondents. Much of the damage described by Mr Laurie is consistent with vandalism and to that extent the responsibility for the deterioration of the plant and equipment is reduced. 56 The theme park was outdoors. It was exposed to the natural elements. That was its nature as all parties would have been well aware. An assessment of this type, involving questions of fact and matters of degree, is not easily resolved when regard is had to the particular nature of the plant and equipment and the sequence of events which occurred. I do not consider that the applicants' course of conduct was unreasonable in the circumstances. They ceased operating the business on 2 August 1998 and vacated the premises on 6 August 1998. The owner, Macleay, re-entered and took possession shortly thereafter. I am not satisfied that there was deterioration that was contributed to by the inaction of the applicants during any period when they were under an obligation to any of the respondents to protect and preserve the plant and equipment. 57 The next issue is the question whether all the plant and equipment was offered for sale at the auction. · Was all of the plant and equipment offered for sale? 58 Mr Laurie said that a substantial number of items, fifty‑three in total, were not offered for sale at the auction. The respondents contended that ultimately, the issue of the scope of the items sold depends upon the construction of the contract as the additional items referred to by Mr Laurie fall within the definition of clause 1(e) of the contract. Clause 1 sets out definitions and interpretation and relevantly provides: "'Assets' – · the Goodwill, · the Plant & Equipment, · the Trade Mark and Business Name, · the Trade Secrets, and · all other assets, current or non‑current, tangible and intangible of the Vendor which form part of or are used in connection with the Business other than the Excluded Assets" The respondents' reference to cl 1(e) is a reference to that part of the definition which reads: "all other assets, current or non‑current, tangible and intangible of the Vendor which form part of or are used in connection with the Business." Clause 1 further provides: "'Plant and Equipment' – all plant and equipment, machinery, furniture, fixtures, fittings and other chattels owned by the Vendor and used in the Business as specified in Schedule 3." When regard is had to this definition, it is clear that the items referred to by Mr Laurie as forming part of the plant and equipment do not form such a part; they are not specified in Schedule 3. 59 All of the items of plant and equipment set out in the annexure to the hire purchase agreement between Bendigo Bank and Crystal Auburn were itemised in the auction catalogue prepared by Taylor Lockwood. These were as follows: Item 17 – Whirly Bird Ride; Item 27 – "Wob Cats" Ride; Item 29 – Hand Cart Rail Ride; Item 38 – "Wobbies Wheels" Amusement Ride; Item 51 – Mini Fire Brigade Full Automatic Ride; Item 46 – "Mini Tram Fully Automatic Ride"; Item 78 – "Helicopter Ride", Item 77 – "Red Baron Ride"; Item 99 – Fiat Diesel Powered Bull Dozer with Tilting Blade & Accessories; Item 61 – "The Splash Down Ride"; Item 3 – Kubota L245 Diesel Powered Farm Tractor with Front End Loader Attachment & Slasher; Item 1a – Fibreglass Battery Electric Vintage Car; Item 2 – Dennis Diesel Powered Fire Truck; Items 24 & 25 – 2 Melbourne Transport Trams Complete with Chasis (sic), Railing, Overhead Protective Canopy & Loading Platform; Item 59 – Melbourne Transport Tram. 60 A total of 104 items, sold in 102 lots, were included in the Taylor Lockwood catalogue. I make the following observations. 61 Several items listed in Schedule 3 were not listed in the auction catalogue, as follows: Skid Mounted Picnic Table Setting with Overhead Canopy; 6 Associated Picnic Tables & Shelters; Aluminium Extension Ladder; EMF Portable Arc Welding Plant & Accessories; Quell Squeeze Grip Fire Extinguisher; Timber 2 Wheel Farm Cart; Mini Golf 18 Hole Golf Course with Signage Concrete Footings, Spot Lighting, Colourbond Return Shed, Tunnels, Bridges, Fountain, Club Balls & Associated Fittings; Fibreglass Helicopter with Fibreglass Slide; Fiat Diesel Powered Bull Dozer with Tilting Blade & Accessories; 2 Fire Trucks, Delivery Van, Electric Cart, & Army Tank & Gerlinger Tractor. 62 Several items not listed in Schedule 3 to the agreement were listed in the auction catalogue, as follows: Item 2 – DENIS FIRE TRUCK, ROLLS ROYCE STRAIGHT ENGINE, 4 SPEED TRANSMISSION, 1,000 GALLONS/MIN PUMP, CHASSIS No:324F2, ENGINE No: B80X‑6E; Item 17a – Set of Fibreglass Helicopter Moulds; Item 21 – Steel Fabricated Glazed Window Ticketing Booth; Item 26 – Steel Fabricated 20m x 9m Open Sided Storage Shed; Item 30 – Meadows 75KA Generator Plant Powered By 6 Cylinder Diesel Engine; Item 39 – Wormald Squeeze Grip Fire Extinguisher; Item 40 – 2 Assorted Squeeze Grip Fire Extinguishers; Item 47 – Westinghouse 12 volt Power Supply For Track Control Circuits; Item 48 – Chargemaster 12 volt Power Supply For Track Control Circuits; Item 49 – Set of Moulds to Reproduce Mini Trams; Item 50 – 20m x 12m Steel Fabricated Loading Canopy/Open Sided Shed; Item 52 – Timber 4 Wheel Farm Cart; Item 56 – Kids Train Picnic Table; Item 63 – Australian Built Track Drive Bren Gun Carrier; Item 65 – 1 x Denis Fire Engine Austin 4 Cylinder Engine and Fire Tendering Pump; Item 66 – DENIS FIRE TRUCK, ROLLS ROYCE STRAIGHT ENGINE, 4 SPEED TRANSMISSION, 1,000 GALLONS/MIN PUMP, CHASSIS No:324F2, ENGINE No: B80X‑6E; Item 67 – Ford D Series Truck and Van Body; Item 72 – Steel Framed Double Sided Bus Shelter; Item 74 – Bell 47 Aluminium Helicopter; Item 75 – Fibreglass Slide and Adventure Tower; Item 99 – Fait (sic) 451c Diesel Powered Bull Dozer, 3 Cylinder with Angle Tilting Blade and Chisel Plough; Item 88 – Quantity of Gold Putting Cubs and Mini‑Golf Accessories; Item 100 – Gerlinger 6 Cylinder International Diesel Straddle Truck; Item 101 – McDonald 1.5m Diesel Powered Smooth Drum Roller; Item 102 – Crane. There was nothing listed for Item 98. 63 Although the evidence does not allow me to arrive at a complete conclusion, some of the differences may be accounted for by the limited descriptions contained in Schedule 3. For example, Items 17a & 75 could be the Fibreglass Helicopter with Fibreglass Slide in Schedule 3; Items 26 & 88 could possibly be part of the Mini‑Golf 18 Hole Golf Course with Signage Concrete Footings, Spot Lighting, Colourbond Return Shed, Tunnels, Bridges, Fountain, Club Balls & Associated Fittings in Schedule 3; Item 52 is probably a misdescription of the Timber 2 Wheel Farm Cart in Schedule 3; Items 2, 66 & 100 could be part of the items 2 Fire Trucks, Delivery Van, Electric Cart, & Army Tank & Gerlinger Tractor listed in Schedule 3. 64 What is to be emphasised is that not all of the plant and equipment listed in Schedule 3 was auctioned, and conversely there were many items auctioned that were not listed in Schedule 3. On balance I am not satisfied that there were such omissions of plant and equipment from the auction as should result in a deduction from, or reduction in, the damages to be awarded to the applicants. ISSUE ESTOPPEL 65 The applicants submitted that the findings of Sundberg J in the first judgment gave rise to an issue estoppel which precluded the respondents from contending that the business was in fact worth the $550,000 paid for it, or more. The finding referred to (finding (n)) is that "the business … was worth less than the amount paid for it": at [38]. Issue estoppel is concerned with preventing re‑litigation of decided issues. The function of issue estoppel was recently addressed by Merkel J in Thayananthan v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCA 1054 who said at [34]‑[35]: "In Trawl Industries of Australia Pty Limited (In liquidation) v Effem Foods Pty Limited (1992) 36 FCR 406 (affirmed (1993) 43 FCR 510) Gummow J stated at 418: 'It is said that for the estoppel to operate, the cause of action in each proceeding must be the same: see [Ramsay v Pigram (1968) 118 CLR 271] (at 280). But, as Brennan J pointed out in …[Port of Melbourne Authority v Anshun Proprietary Limited (1981) 147 CLR 589] (at 610‑613) the phrase 'cause of action' is used imprecisely and in several senses. These include: (i) the series of facts which the plaintiff must allege and prove to substantiate a right to judgment; (ii) the legal right which has been infringed; and (iii) the substance of the action as distinct from its form. … However, as indicated above, for the law of Australia it is most suitable to focus upon the substance of the two proceedings as distinct from their form.' Issue estoppel occurs where…[Somanader v Minister for Immigration and Multicultural Affairs (2000) 178 ALR 677] (at 692 [69]): 'a party is precluded from contending the contrary of any precise point which has once been distinctly put in issue and has been finally determined between the parties. Unlike res judicata, issue estoppel may arise when the cause of action in each proceedings is entirely different.'" 66 The respondents agreed that issue estoppel may operate to prevent the parties from disputing the existence of material facts found in previous trials between them. However, they submitted, in reliance on Dixon J's observations in Blair v Curran (1939) 62 CLR 464 at 532, that Sundberg J's finding did not produce or lead to a conclusion on which the rights or liabilities of the parties were founded or which formed an indispensable part of the decision. I do not consider that what Dixon J said in Blair is to be construed as authority supporting the respondents' argument. With respect to the distinction between the operation of res judicata and issue estoppel, Dixon J said at 532‑533: "The distinction between res judicata and issue‑estoppel is than in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgement, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order. Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded. In matters of fact the issue-estoppel is confined to those ultimate facts which form the ingredients in the cause of action, that is, the title to the right established. Where the conclusion is against the existence of a right or claim which in point of law depends upon a number of ingredients or ultimate facts the absence of any one of which would be enough to defeat the claim, the estoppel covers only the actual ground upon which the existence of the right was negatived. But in neither case is the estoppel confined to the final legal conclusion expressed in the judgment decree or order. In the phraseology of Coleridge J in R v Inhabitants of the Township of Hartington Middle Quarter, the judicial determination concludes, not merely as to the point actually decided, but as to a matter which it was necessary to decide and which was actually decided as the groundwork of the decision itself, though not then directly the point at issue. Matters cardinal to the latter claim or contention cannot be raised if to raise them is necessarily to assert that the former decision was erroneous." 67 The judgment of Dixon J raises for consideration the following questions. What were the issues of fact or law disposed of by the first judgment of Sundberg J? What were the matters necessarily established as the legal foundation or justification for the Court's conclusion? What was legally indispensable to the Court's conclusion? What were the ultimate facts, which formed the ingredients of the cause of action against the respondents? What were the matters cardinal to the court's decision or necessarily involved in it as its legal justification or foundation? See: Yates Property Corporation Pty Ltd v Boland (2001) 179 ALR 664 at 687‑688. Put another way, was Sundberg J's finding (n) a material finding of fact that is indispensable to the issue of liability that was before his Honour for determination in the first trial? 68 Relevantly, the findings of fact cardinal to the conclusion that the respondents had contravened s 52 of the Act were that the applicants were misled by the information in the Business Profile and the attendance figures and that they relied on the misleading and deceptive information. On this basis, his Honour found that the applicants purchased a business worth less than the amount they paid for it. The facts do not admit of another conclusion. A finding of loss and damage is essential to the legal foundation upon which his Honour's finding of a breach of s 52 lies – it is neither collateral nor subsidiary in its nature. In my opinion, the respondents are estopped from contending, or adducing evidence in support of the contention that the business was worth more than the $550,000 paid for it by Crystal Auburn. CLAIM FOR DIFFERENCE BETWEEN VALUE OF THE BUSINESS AND THE PRICE PAID 69 The applicants are entitled to recover the difference between the amount paid for the business and its true value at the purchase date: Gould at 266. Accordingly, I consider the evidence as to its true value as at 19 December 1997 and assess loss according to the established legal principles to which I have already referred. That is not to say that an assessment of valuation is not without difficulties. As referred to by AV & MS Adamson, Valuation of Company Shares and Businesses (7th edn), LBC, Sydney, 1986, p 10, valuation involves two inquiries: "What is called the theory of appraisal is a systematic treatment of two problems that arise in every valuation of property. The first problem is to secure a definition of value acceptable for the purpose of the particular enquiry. The second problem is to determine the method by which the quantum of this value shall be estimated. J C Bonbright, Valuation of Property (McGraw Hill, 1937) p 10." 70 It was common ground that the profitability of the business as at 19 December 1997 was critical to the choice of valuation methodology. Practice Standard 10 described in The Australian Property Institute, Professional Practice 2002, API, Canberra, 2001, pp 43‑47, ("Practice Standard 10") refers to valuation methodology to be specifically applied to plant, machinery and equipment assets. Some general principles of relevance are: · A profitable business with maintainable earnings for the foreseeable future, without any significant reduction in the scale of its operations, is valued on a "going concern" basis which incorporates the "value in use" or "market value for the existing use" of individual assets, including intellectual property, based on their contribution to the whole. · The valuation of individual assets depends on whether the asset is classified as operational or non‑operational. · Operational assets are those utilised in the operation of the entity for continued use or service potential for the foreseeable future. Assets with unique features and hence limited marketability are specialised operational assets. Rarely sold in the market, except as part of the business they lack market evidence and so require a "depreciated replacement cost" valuation methodology where "cost" includes installation cost. · Non‑operational assets are those assets which are not integral to the operation of the entity and, as such, are surplus. A non‑specialised operational asset is assessed by market comparison with reference to market evidence of assets considered suitable for the particular use. · A business that is not profitable is valued on the basis of the value of the assets of the business. Valuation in this context involves auction realisation and orderly or private sale. 71 The applicants submitted that the business was running at a loss and accordingly there were no future maintainable earnings, thus the business should not be assessed on a going concern basis. They submitted that the only worth received was the true value of the plant and equipment. On this basis, the applicants have claimed the difference between the price paid for the business ($550,000) and the value of the plant and equipment on an auction realisation basis ($65,000). The applicants also claimed $26,658.50 representing the amount that Mr Laurie did not pay in respect of the twenty-eight items that he bid for at the auction. 72 The applicants sought to rely on the expert opinions of an accountant, Mr Wight, and three valuers, Mr Bent, who prepared more than one valuation, Mr Lockwood and Mr Gollant, as well as the actual proceeds realised at the auction. 73 The respondents contended that applicants' submission as to the "true worth" of the business was not accurate and challenged on a number of bases the methodology of the applicants' experts. Foremost, they contended that the business was profitable. The respondents also complained that there was no consideration of, or inquiry directed to, examination of plans and specifications, removal, reinstallation, relocation or replacement costs of the plant and equipment. In support of their contentions the respondents relied on the expert opinions of an accountant, Mr Lom, and a valuer, Mr Henderson, who prepared three reports the third of which was ultimately relied upon. Mr Laurie also offered his own opinion. 74 Each of the experts satisfied me that he held qualifications and experience relevant to the opinion proffered. With respect to Mr Laurie's opinion, I ruled that it was relevant and admissible insofar as the opinion related to what was involved in the dismantling of the plant and equipment, and the costs involved. Evidence on the profitability of the business · Mr Wight's valuation 75 Mr Wight first considered which of the two conflicting sources of financial information to base his valuation upon – the Business Profile or the tax returns prepared by Valespring for the years ended 1994 to 1997. In his first judgment, Sundberg J found that the attendance figures in the Business Profile for the years 1994 to 1996 were unreliable and those for the ended 30 June 1997 were false. Sundberg J also found that the tax returns were incorrect as they did not accurately record the income and expenses of the business. 76 Shortly before the first hearing, in an unsuccessful attempt to defeat the applicants' attempt to establish the falsity of the attendance figures provided to them by reference to the low income recorded in Valespring's tax returns, Mr Laurie asserted that the business received large amounts of cash not reflected in its tax returns. Nevertheless, Sundberg J found that for 1996‑1997 the total gross income in Valespring's tax return was understated by $228,400: finding (q). The implication of finding (q) was that the expenses in the Valespring tax return for 1996‑1997 were understated by $228,400. Although Sundberg J made no findings regarding the expenses in the Business Profile, Mr Wight was of the opinion that it could not be relied on as the figures in it were less than the amounts recorded in the tax returns for corresponding years. Mr Wight decided that of the two sources it was appropriate to use the tax returns. 77 Mr Wight found that if it were assumed that the amount of unrecorded income for the year ended 1997 gave rise to an equivalent amount of unrecorded expenses, the understated expenses of $228,400 did not affect the value of net profit before tax. However, this was not the case if the unrecorded outgoings were of a capital nature of which Mr Laurie had given evidence in the second trial. The capital expenditure was said to have comprised $10,000 to $15,000 each year on shopping centre promotions involving "Mr Wobbie" plus $40,500 in 1994 on installation and maintenance of the Splash Down attraction, and in 1997 $16,000 on the relocation of an aeroplane and $14,000 on a new sewer line. On this evidence, Mr Wight determined it reasonable to estimate $40,000 in capital expenditure in each of the years 1994 to 1997. On this analysis, Mr Wight found that by adding back this sum for each of those years the net profit before tax resulted in profits. 78 However, Mr Wight's next step was to calculate maintainable earnings based on "earnings before depreciation, interest and tax" and by making deductions of $150,000 for rent and $30,000 (and 10% on‑costs) as annual full time salary each for Mr and Mrs Laurie. Once the maintainable earnings were determined Mr Wight concluded that there were losses for the period as follows: $154,406 loss for the year ended 30 June 1997; $143,682 loss for the year ended 30 June 1996; $125,138 loss for the year ended 30 June 1995; $87,744 loss for the year ended 30 June 1994. Mr Wight's opinion was that the business was not profitable in any of the financial years 1994‑1997. I note that on these calculations even if Mr Wight had used a rental figure of $75,000, as the respondents' contended, there would still have been a loss. 79 It was reasonable of Mr Wight to find that it was appropriate to rely on the financial information contained in the Valespring tax returns rather than the Business Profile as the basis upon which to approach his valuation of the earnings of the business. 80 I accept Mr Wight's opinion that the business was never profitable and sustained losses in each of the financial years ending 30 June 1994 to 30 June 1997. Mr Wight was also of the opinion that it was appropriate to adopt an asset based methodology, assuming an orderly realisation of assets to assess the value and goodwill of the business as at the date of sale on 19 December 1997. However, I attribute little weight to Mr Wight's opinion that the value of the business was $60,000 comprised of plant and equipment of this value and goodwill of nil, because that opinion was derived from Mr Bent's valuation which I do not accept. I consider that evaluation later in these reasons. · Mr Lom's valuations 81 In the opinion of Mr Lom, in contrast with that of Mr Wight, the business did have future maintainable earnings. Mr Lom used the valuation methodologies of "capitalised maintainable earnings before depreciation, interests and tax" and "value of the underlying net tangible assets". Mr Lom applied the earnings based valuation to two sets of data. In one, assumed attendances involved calculation of attendances (valuation between $200,000‑$225,000). In the second, Mr Lom adopted attendance figures contained in the Business Profile (valuation between $750,000‑$875,000). The latter valuation is not available to the respondents on the grounds of issue estoppel insofar as it concerns a valuation figure exceeding $550,000. 82 Nevertheless, I note that in his report Mr Lom stated: "Based on attendance levels as set out in the Business Profile I have concluded that the value of the Wobbies World Business as at 19 December 1997 was in the range of $750,000 to $875,000." I am unable to understand the respondents' purpose in relying on a valuation based on Business Profile attendances, data that Sundberg J found to be "unreliable" generally and, in respect of those for the year ended 30 June 1997, "false". There was no point in the respondents seeking to rely upon a report that adopted attendance figures which had been impugned by Sundberg J. Furthermore, the second valuation methodology, "value of the underlying net tangible assets", was based on a report prepared by Mr Henderson in April 2002. That report will be considered in the context of Mr Henderson's valuation evidence. This leaves for present consideration Mr Lom's earnings based valuation using assumed attendance figures. 83 In his analysis of financial information, Mr Lom noted at the outset that it was necessary to give detailed consideration to the discrepancy constituted by the significant differences between the levels of income recorded in the Valespring income tax returns and the Business Profile. For example, for the year ended 1997 these were recorded as $219,512 and $652,960 respectively. 84 It is noteworthy that Mr Lom rejected the income information in the Valespring income tax returns. He found that that the reported gross income of $219,512 for 1997, when divided by the $11.20 average sale per visitor figure represented in the Business Profile, represented an attendance figure of only 19,599, a figure that was only slightly more than the attendances recorded by Crystal Auburn for the four month period 1 January 1998 to 30 April 1998. In any event, Sundberg J found, as Mr Lom had noted, that Valespring's total gross income for 1997 was $447,912 and that this was equivalent to 40,000 visitors. 85 In his consideration of expenses, Mr Lom identified amounts to be attributed to fixed, variable and discretionary expenses and for this purpose Mr Lom generally relied on information derived from the Business Profile. Mr Lom adopted the relevant Business Profile figures because the values he sought had not been itemised in Valespring's tax returns. Nevertheless, this course of action casts doubt upon the reliability of Mr Lom's calculations and accordingly the weight to be attached to them. 86 Moreover, Mr Lom found that if he included cash payments (accepted by Sundberg J) in calculating Valespring's 1997 wages expenditure an inconsistency arose between the number of staff this represented as a reflection of the staffing ratio to number of attendances. He decided instead to use the figures contained in the Business Profile to calculate wages expenditure. In cross-examination Mr Lom said that had not included in his calculations all of the $150,000 of "other expenditure", found by Sundberg J to have been made in that year, because he was "unable to rationalise why such costs would be required to run the business". 87 Mr Lom relied on figures for expenses contained in the Business Profile to carry out his valuation of the business. This course of action casts doubt upon the reliability of Mr Lom's calculations and accordingly the weight to be attached to them. Moreover, Mr Lom failed adequately to consider finding (q) of Sundberg J. On this basis, I do not consider that the figures that Mr Lom has used to arrive at the conclusion that the business was valued at $200,000 and $225,000 to be reliable. Evidence of the value of the plant and equipment of the business 88 In relation to the applicants' valuation evidence the respondents submitted that the valuations of Mr Bent, Mr Lockwood and Mr Gollant should be accorded little weight because there was a failure to give any evidence about the reasoning process leading to their conclusion. Criticism was levelled by the applicants at the valuation evidence of Mr Henderson on the basis of his confusion as to the methodology he had adopted and his communications with Mr Laurie. · Mr Bent's valuations 89 The applicants submitted valuations of the plant and equipment prepared by Mr Bent, Director of Michael J Bent Auctioneers (formerly R & M Bent Auctioneers). The first valuation, dated 11 November 1997, was for an auction realisation value of $445,955 with the qualification that the value "…is dependent on all the items listed being offered for sale and may not be indicative of individual resale values". Mr Bent said that he had spent a couple of hours at the business on 11 November 1997, he inspected the premises, took notes and some photographs. He also explained that the first valuation was prepared upon the instructions given by Mr Spolding, in order to assist the applicants to obtain finance for the purchase of the business. Mr Bent emphasised that he had performed the valuation on an auction realisation basis subject to certain qualifications. These were that the plant and equipment was to be sold as one lot, that it was to remain on site for at least the duration of a 20‑year lease (about which he was informed on the day of the valuation), and on the basis that it was to continue to be used to operate the business. 90 In subsequent witness statements, Mr Bent sought to clarify the limited basis upon which the valuation was undertaken. In cross‑examination Mr Bent said the relevance to his valuation approach of the advice that the equipment was to remain on site for 20 years was that the business would be an "operating entity" and he did not need to consider "the situation…for removal, of packing it up and taking it away". He said that he worked on the basis that Macleay was selling the plant and equipment in one lot to the applicants, that it was going to remain on site for the period of the lease and that it would be used to operate the business on the site. Mr Bent distinguished between auction realisation and going concern valuations by referring to the latter as one that involved the taking over of all of the staff and that the business had a goodwill factor attached to it as well. 91 Mr Bent's revised valuation of the plant and equipment on an "unqualified or true valuation realisation basis" was between $50,000 and $80,000 as at November 1997. He said the valuation was "based on my professional experience in valuing and auctioneering plant and equipment over fifteen years". In a supplementary witness statement, Mr Bent added that he had relied on his recollection of the nature and condition of the equipment as inspected in November 1997. He also clarified that he had driven past the site nearly every day on his way to work and that he had referred to notes made at the time of the original inspection. Mr Bent stated that he had valued only the items of major value and had also adopted sums realised at the auction in his valuation. He did not believe the remaining items would have depreciated significantly between November 1997 and July 1999. In cross‑examination, Mr Bent confirmed that in February or March of 2002 he had added figures into the left hand margin of the notes that he had made in the first valuation. 92 In cross‑examination the respondents challenged Mr Bent's evidence that he had performed the first valuation on the basis of the qualifications that: (i) the items would be sold at auction, (ii) there was a 20‑year lease available on the property, and (iii) all the assets would remain on the property for that lease period. There was no evidence that Mr Spolding had given those particular instructions. Mr Spolding confirmed in cross‑examination that he had made it clear to Mr Bent that the purpose of the valuation was to support an application for finance at the Bendigo Bank and: "…that the plant and equipment would be needed to be valued as auction realisation value, given that they would remain used by the business to operate the business...I believed that was the entire plant and equipment." The respondents pressed the point in final submissions and sought to impugn Mr Bent's evidence that he had not been asked to value the assets on a going concern basis, and that his attempts to distinguish between existing use and going concern were unconvincing. 93 There is a significant difference between the two valuation figures provided by Mr Bent. Mr Bent's evidence makes it clear that the first valuation he undertook was for the purpose of a finance application by the applicants. The valuation was undertaken on the basis that most closely approximates existing use and on this basis is to be rejected as the business was not profitable. There is a major difficulty with Mr Bent's evidence in relation to the second valuation. He was only able to provide very general information as to the steps in the process by which he arrived at the valuation figure. Whilst I accept that Mr Bent has clearly emphasised that there were the three qualifications underlying the first valuation, there is no evidence before me as to how the second valuation figure was arrived at other than on the basis of professional experience. There was no evidence adduced as to what precisely was involved in quantifying the second valuation figure. For example, Mr Bent said that while he had taken into account relocation costs he did not complete any physical calculations. For the second valuation to be accorded any weight it is necessary that there be evidence as to the criteria involved in the allocation of the revised figures. In my opinion, Mr Bent has not adequately described the basis upon which his figures were drawn up. Little weight can be attributed to his second valuation. · Mr Lockwood's valuation 94 The applicants sought to rely on evidence of Mr Taylor Lockwood, the principal of Taylor Lockwood, in support of their claim that the true value of the assets was at most $65,000. 95 Mr Lockwood was instructed by facsimile, dated 20 May 1999, to undertake a valuation on two bases: (i) auction realisation and (ii) going concern. The applicants' solicitors advised "…there is some urgency associated with this matter due to legal proceedings and also because the Vendor of the business intends to auction the property upon which the business is located on 3 June, 1999". Mr Lockwood referred the matter to an associate, Mr Gollant. In his witness statement he said: "Following receipt of … written instructions I referred the matter to Jason Gollant, an associate of Taylor Lockwood, to undertake a valuation of the plant and equipment. Mr Gollant liaised directly with [the applicants' solicitor] in relation to the valuation." 96 It transpired in the course of the hearing that in forming a view as to the value of the plant and equipment, Mr Lockwood had regard to the figure arrived at in the valuation undertaken by Mr Gollant. He stated that he had taken "the basis for that valuation on face value, believing it to be a reasonable auction realisation value". Mr Lockwood made no personal investigations of the plant and equipment prior to the auction, which he arrived at an hour before its commencement. 97 The respondents submitted that Mr Lockwood's evidence should be accorded little weight because he failed to give any evidence about the reasoning process leading to his conclusion. Moreover, he had not brought any of his specialised knowledge or experience to bear upon his examination of the information supplied to him by Mr Gollant. It was contended that the evidence of Mr Lockwood was really "ipse dixit". Although Mr Lockwood was able to explain to the Court the basis upon which he formed his opinion as to the value of the plant and equipment, which was that he had relied upon the valuation of Mr Gollant, I am not satisfied that Mr Lockwood undertook any reasoning process independently of Mr Gollant in reaching his valuation. I do not attribute any weight to his valuation opinion. · Mr Gollant's valuation 98 Mr Gollant's valuation of 28 May 1999 advised that the total value of the assets at auction realisation was $41,670 gross and that market value for existing use was $859,915. It has been established that the business was not profitable at the time it was purchased and the market value for existing use valuation is to be disregarded. In any event, for the reasons earlier given, issue estoppel precludes reliance on evidence in support of a valuation figure that is greater than $550,000. 99 Mr Gollant attended the site on 27 May 1999. He confirmed that he had taken the "best part of a whole morning" to perform the valuation on site and the he also "had to subsequently make other [research] inquiries after leaving the premises". Mr Gollant agreed that he had not examined plans and specifications or drawings; neither had he assessed the actual or likely costs of removal or likely costs of reinstallation or replacement. However, he had been "able to glean information from Mr Laurie…as to the age of certain items". 100 The respondents various bases of complaint about Mr Gollant's valuation may be summarised as follows: (i) at the time that the valuation was conducted the condition of the assets was very poor; (ii) he did not consider the disadvantages of the valuation directed to auction realisation rather than a private orderly sale; (iii) he did not properly value the specialised operational assets; and (iv) he did not examine plans and specifications, or look into the actual or likely costs of removal, re‑installation or replacement of the assets or have regard to occupational health and safety ("OH&S") compliance standards, approval or certification for any of the assets. 101 Two of these contentions (i) and (iii) can be immediately dismissed. During cross‑examination, Mr Gollant clarified that while he did not make any direct inquiries external to the premises as to the age of any of the items, Mr Laurie had provided him with certain information during the course of his half‑day inspection. As I have already made findings as to the condition of the assets it is unnecessary to consider this contention further. As to the valuation of specialised operational assets, as the business was not profitable this valuation methodology was not applicable. 102 Turning to the respondents' complaint (ii), listed above, it is apparent from the evidence of both Mr Lockwood and Mr Gollant, who was delegated the task of performing the valuation and conducting the auction, that they were well aware of the difference in sales results which might be achieved if the plant and equipment was offered for private sale. However, it was the information in correspondence from the applicants' solicitors, in response to Macleay's conduct, that imposed the strict limitations in the time available for the auction to be conducted. Mr Gollant confirmed that he had four weeks to arrange the auction. He also said that for "an auction sale it's the normal period of time you'd be given". There is nothing in the evidence to suggest that Mr Gollant did not carry out his instructions other than in a professional manner. The issue of the applicants' conduct is a quite separate issue which has already been considered 103 With respect to complaint (iv), listed above, Mr Gollant conceded in cross‑examination that he had not undertaken an examination of plans and specifications or drawings for any of the items of plant or equipment, nor had he looked into the actual or likely cost of removal, reinstallation or replacement. However, in the valuation it was noted: "The Auction Realisation has been based on our conducting a hypothetical Auction Sale on the subject company's premises. If it is decided to remove the assets from these premises to our Auction Rooms for sale it is likely the anticipated realisation will decrease by a significant amount and in some cases it would be uneconomic to even consider such a relocation. We would recommend a revaluation of the assets if these circumstances arise. … We note the considerable amount of the cost to build these rides has gone into the fixed structural componentry including steel, concrete and concrete footing works. It is unlikely that any of these fixtures would be worth retrieving on a removal basis in an auction or even private treaty sale situation given the likely enormous cost of removal." It would appear that Mr Gollant was of the view that should such examination and consideration be undertaken it would only result in a decrease in the valuation amount. The other element of this complaint is the issue of occupational health and safety compliance requirements. Mr Gollant confirmed in cross‑examination that "We weren't aware when I was doing the valuation of whether certain of those assets which were deemed to require a report did or did not comply". So much was evident in Mr Gollant's valuation report. 104 In addition, the respondents also put to Mr Gollant, and he conceded, that he was not aware of the professional practice publications of the Australian Property Institute. This line of argument does not assist the respondents' case. However, when regard is had to Practice Standard 10, the relevant question concerning the appropriate methodology for valuation, and hence the steps required in performing that valuation, is whether or not the plant and equipment is part of a business that will continue in operational existence. On the evidence of Mr Wight, which I have accepted, the business was not profitable when it was sold to the applicants. In this context, the complaint evaporates. 105 I find Mr Gollant's valuation the most reliable of all the valuations having regard to his methodology and the information he had available to him which concluded information from Mr Laurie. While I cannot accept the applicants' submission that the actual auction proceeds are confirmatory of his valuation figure I note that it falls short of that quantum. However, I do not consider this is significant. The existence of a difference between valuation and the price obtained is not uncommon, and as was observed by W Lonergan, The Valuation of Businesses, Shares and Other Equity, Longman Professional, Melbourne, 1992, purchaser and vendor behaviour is a major influence on an actual sales price. Lonergan states at p 7: "The fact that the price finally obtained for an asset differs from its valuation does not necessarily indicate that the valuation was wrong. … In essence, differences occur between a valuation and the price finally obtained for an asset due to imperfections in the market and these differences do not necessarily reflect imperfections in the valuation process." · Mr Henderson's valuations 106 The respondents submitted valuations prepared by Mr Henderson of Edward Rushton Australia Pty Ltd. Mr Henderson's valuations comprised a valuation report titled "Plant Register Market Value September 2000" ("the September 2000 report") filed in April 2002, a further explanation regarding the method used in that valuation filed on 19 April 2002 ("the second report"), and a report titled "Market Value as at 19 December 1997" ("the final report") filed in November 2002. However, in the course of the hearing the respondents said that they did not wish to rely on either of the first and second reports. In final submissions the respondents confirmed that they ultimately relied on the opinions of Mr Henderson as set out in the final report. This report is not available to the respondents on the ground of the issue estoppel to which I have referred insofar as the report values the plant and equipment in excess of $550,000. However, it is salient to have regard to the report and the opinion evidence given by Mr Henderson in cross‑examination as it goes to the issue of weight attributed to his opinion. 107 The valuation methodology adopted by Mr Henderson was depreciated replacement cost applied to what he categorised as specialised operational assets to ascertain the highest and best use value of those assets. The specialised operational assets valuation made up 73% of the value of all equipment. Mr Henderson said that in accordance with the standard set out in Professional Practice 2002, he sought to establish the existence of a market for the specialised operational assets items the subject of the valuation. This was done through a combination of sources: (i) information about expressions of interest from potential purchasers as set out in Mr Laurie's Further Consolidated Witness Statement; (ii) internet sites (such as Factory Hub) that handle the second‑hand selling of amusement rides in general; (iii) his own experience at Seaworld and Luna Park; (iv) the Edward Rushton database (sales figures); (v) publications(eg"PlantandEquipment"February1997edn and "The Deals‑on‑Wheels" June 1998 edn); and (vi) personal communications with other dealers, auction houses or finance companies. 108 For the non‑specialised operational assets, rather than apply the depreciated replacement cost Mr Henderson said he had made his own estimates of market value based on his valuation experience. 109 In the first report, which was prepared on or about April 2002, Mr Henderson's advice was that "the Market Value of the plant, equipment and all other contents as at September 2000 is assessed at $367,400". In contrast, in the third report Mr Henderson stated that in his opinion "the total value that may have been realised as at 19 December 1997 of an orderly sale (Market Value) is $730,135". Mr Henderson sought to explain the difference in the valuations in the following exchange: "[515] MR MARTIN: The instruction about profitability, was it that the Wobbies World business was profitable – yes or no? --- No. You were to value it on the basis that the Wobbies Word business was not profitable? --- Correct. Is it startling to you that on the assumption that the Wobbies World business was profitable you came up with a figure of 367,400 and that on the assumption that it was not profitable you came up with a figure of $730,135? --- No, there was more – yes, there was more assets included into the report. We'll come to that, but be that as it may there wasn't an extra $400,000 worth of assets recorded into the report, was there? --- Part of the extra - - - Do you mind just answering that question first? --- Sorry. [516] There weren't an extra $400,000‑odd worth of assets put into the - - -? ‑‑‑ No, there wasn't, no. So it's not just explicable by the extra assets, is it? --- No. Now can I go back to my original question: is it startling to you that on the assumption that the Wobbies World business was profitable you came up with a figure of 367,400 and that on the assumption that it was not profitable you came up with a figure of $730,135? --- I was also given more clear – on the instruction more clear instruction on the dates of built, which was the manufacturer dates. That, when you're depreciating with replacement costs or depreciating replacement cost, has a very big impact on depreciating. … [525] HIS HONOUR: Just tell me again, what was the instruction you had? ‑‑‑ The extra information and the extra instruction I had is the fact that (a) it wasn't a profitable business, so therefore I couldn't value it in use and (b) that the dates of the equipment that were manufactured dates were different to what I used in the first report and that had a big impact." In cross‑examination, Mr Henderson confirmed that in his first report he did not remove engineering costs, costs of non‑removable assets, or removal, relocation or re‑erection costs: that is, the valuation was for market value existing use. However, with respect to the final report, Mr Henderson confirmed that he had subtracted such costs. 110 In cross‑examination Mr Henderson also stated that he had prepared the third report on the basis of "clearer instructions", which included that he was to undertake the valuation on the basis thatthe business was notprofitable. A letter from the respondents' solicitors, dated 21 February 2002, was produced. It referred to a requirement that Mr Henderson submit a draft of his report for review and approval. The letter also contained the statement "(that the auction of 8 July 1999) was a 'fire sale' auction conducted without any proper advertising or attempt to obtain appropriate buyers". Mr Henderson said that he had accepted the statement for the purposes of his valuation(s). It became apparent that the review and approval process had been applied by the respondents' solicitors to Mr Henderson's first report. 111 Secondly, Mr Henderson said that one reason for preparing his revised third report was that he had been able to include additional information in the report. It was apparent that Mr Henderson made no records detailing what this additional information comprised and how it was provided. Mr Henderson initially said that he had received instructions and information orally, either by telephone or at meetings. Subsequently, it was clarified that the additional information was derived from the consolidated witness statement of Mr Laurie dated 21 February 2002, along with various other documents. 112 Thirdly, between February and September 2002 Mr Henderson met a number of times with Mr Laurie when Mr Henderson had sought instructions and information. These meetings were in addition to those Mr Henderson had with the respondents' solicitors and barristers. Mr Henderson rejected the proposition that he had been pressured and stated: "…by no means have I been influenced…by either Robin Laurie or solicitors or barristers in the valuation. I want to be fairly firm on that because, I meant, that's my professionalism. In no way have they said to me at any point that, 'You should change these figures'." 113 Nevertheless, in cross‑examination Mr Henderson was unable to proffer an adequate explanation as to how a statement in his first report, filed April 2002, had been omitted from what appeared to be an identical copy in the court book. This statement is as follows: "The date of valuation is at September 2000. In our opinion, the maximum value that may have been realised at that date could also have been realised as at December 1997 on the basis of an orderly sale market value." 114 The scope of Mr Henderson's use of information prepared by Mr Laurie is further suggested by the message contained on the coversheet of a facsimile, dated 3 April 2002, which he had sent to Mr Henderson by the respondents' solicitors. The message relevantly reads: "We refer to the above matter and to our request that you provide us with a revised report based on an 'orderly sale' basis. We hereby enclose some further material prepared by our client in relation to various items for sale. The enclosed material may assist you in the preparation of your report." 115 The following exchange during cross‑examination of Mr Henderson illuminates other concerns that I have as to his credibility: [530] HIS HONOUR: I'm sorry, are you saying you had no knowledge of the details of the agreement? --- The details of the agreement. MR MARTIN: So you hadn't been given a copy of the agreement? --- Not to my recollection, but that's not to say I wasn't given it. Okay. You don't recall having it now? --- Yes, I don't recall having it, no. … [531] HIS HONOUR: Can I just ask you one question. Have you got page 778 open?---Yes. You see in paragraph 1, 'Initially I was instructed to prepare an expert valuer's report'? May I take it that that initially was back around September 2000? --- No, initially it was for this, the third report, as a - sorry, my apologies – 'As I was instructed to prepare the expert valuer's report in relation to tangible assets', is that – no, that was - - - Right at the start? --- Yes, right at the start. Sorry. You don't need to apologise. But as I read paragraph 1 it suggests to me that you were given or you had a copy of the agreement, the sale agreement. MR MARTIN: Paragraph 2 as well, your Honour. HIS HONOUR: And as Mr Martin correctly points out, that's picked up in paragraph 2? --- I could have done. [532] Could have done or must have done? --- I must have done if that's - - - I don't want to put words into your mouth but you say in 2, 'According to that agreement (see clause 1) assets means' and you then describe - - -? --- Yes, sorry, yes. Then three lines down, 'According to that definition all of that assets is listed in schedule 3 to the agreement'? --- Correct. Yes, sorry, I did have that. I did have that document, that agreement. Is your recollection you had that agreement right at the start? --- I did, yes." 116 Fourthly, when Mr Henderson was asked to explain the valuation methodologies that he had used in each of his reports he initially sought to emphasise that a different methodology was employed in his third report, as the following exchange shows: "[530] MR MARTIN: … But you obtained all this detailed evidence set out at page 801 to 806, did all this work to put values on this plant and equipment, but knowing that there had been a sale of the business in December 1997, which included the plant and equipment, didn't call for any more information about that sale? --- It was a completely different sale in that after the 1997 sale – was it 1997, the sale? It was December 1997, yes? --- 1997 sale – no, sorry, I've lost my train of thought there. If it helps you, you started off, 'It was a completely different sale,' and then you stopped? --- Yes, that's right. The 1997 sale was based on a going concern, and I valued it as market value. So two different terms there – a valuation for market value for existing use and a valuation for market value, two different things. The sales evidence I would have had was based on an ongoing use, or an in‑use valuation – sorry, a sale. HIS HONOUR: I'm sorry? --- The sale happened as though Wobbies World was a profitable – the way I understood it anyway – was a profitable business at the time, it was sold as a going concern, and that's not how I valued the equipment. In your third report? --- In my third, yes. MR MARTIN: Yes, we know that. But what we're asking you is why, when you did the valuation, didn't you make some adaptation, or any comment about even, the fact that the business at December 1997, including the relevant plant and equipment which you were valuing, had been sold at $550,000? --- To me, it had no relevance to what I was valuing at the – or the method I was valuing, I should say. It was market value." 117 However, the following day Mr Henderson changed his evidence, as is shown in following exchange: [565] MR MARTIN: I appreciate you had a lot of questions from me yesterday and you may have had time to reflect about them. Is there anything you want to change in your evidence from yesterday? --- There is. … --- Okay. All right. Yesterday when I was talking about reports 1, 2, and 3, dated, well, report 1 dated April, report 2 dated 19 April, and report 3 dated September 2002, I said yesterday that 1 and 2 were on the basis of market value for the existing use. They're not. They are on the basis of market value. And in the same – I've used the same method in 1, 2 and 3. … [569] MR MARTIN: Let's get this right. Today you want to say that your first, second and third reports - - -? --- Yes. - - - are on the basis of market value, and you used the same method in each of the three reports. Is that right? --- The same methodology, yes. The same methodology. If you'd go to page 787, please, paragraph 30? --- Yes. This repeats itself in all your statements when you come to each of the assets. 'I have estimated the market value using the DRC method'? --- Correct, yes. Is that consistent with what you're saying today? 'I have done my third report on the basis of market value using the same methodology'? --- Yes. So if I go to your first report, you're going to say to me in answer to that question, if I take you to any part of it, that, yes, that's market value using the same methodology. Is that right? --- Correct, yes. HIS HONOUR: That's using the DRC method? --- DRC method. In the first and second report? --- It was, yes. On the specialised operational assets only. 118 In view of the changes in Mr Henderson's reports, the inconsistencies in his evidence and the changes in his evidence and final valuation, I do not consider Mr Henderson's opinion to be reliable I therefore accord little weight to his valuation reports. Findings 119 At the time of its purchase by the applicants on 19 December 1997, the business was not profitable. 120 The correct valuation methodology to determine the true value of the business is the value of its underlying assets, being the plant and equipment described in Schedule 3 of the contract. 121 As to the valuations of the plant and equipment I find as follows: · It was common ground that an orderly sale of the plant and equipment would have been likely to achieve a better return than the auction. However, there was no evidence as to that quantum. · The first valuation Mr Bent undertook was for the purpose of a finance application by the applicants. The valuation was undertaken on the basis that most closely approximates existing use. As the business was not profitable, the valuation cannot form the basis upon which the true value of the plant and equipment can be ascertained. · The second valuation Mr Bent undertook does not adequately set out the criteria upon which the valuation figures were quantified and this renders it of little weight. · In arriving at his own valuation, Mr Lockwood took Mr Gollant's valuation on face value. Mr Lockwood did not attend that site at any time prior to his acceptance of Mr Gollant's valuation. Mr Lockwood's valuation is of little weight. · Mr Gollant's Market Value for Existing Use valuation cannot form the basis upon which the value of the plant and equipment can be ascertained because the business was not profitable as at 19 December 1997. · In performing his auction realisation valuation Mr Gollant: o Was aware that better results could be achieved if the items of plant and equipment were disposed of by an orderly sale, preceded by a targeted advertising campaign, however these were not his instructions. o Did not consider the plans or specifications and did not consider actual or likely removal, relocation or reinstallation costs. If they had been considered, the valuation figure would have been lesser. o Paid some consideration to the age of the equipment. However, the condition of the equipment as at the time of the purchase of the business on 19 December 1997 was not determined. o Acknowledged that any OH&S requirements were not considered. · The valuations undertaken by Mr Henderson cannot be relied upon for a number of reasons. Mr Henderson failed to convince me that he was a credible witness as there were inconsistencies in his evidence on some significant issues, most particularly as to the basis upon which his different valuations were undertaken and the information that was available to him in performing those valuations. Furthermore, I do not accept his increases for specialised operational assets, and that his valuations were not influenced by information provided to him by Mr Laurie and the respondents' solicitors more generally. 122 I am satisfied that Mr Gollant's auction realisation valuation is the most reliable valuation. On this view, the plant and equipment was, as at 19 December 1997, valued at $41,670. I find that Mr Gollant's valuation is the most reliable based on an assessment of the evidence and I do not consider that the difference between the figure estimated and the price obtained at auction brings to bear doubt upon the reliability of the figure. However, the figure that was obtained at the auction cannot be ignored. I find that the true value of the business is the amount realised at the auction of 8 July 1999 ‑ $60,705, less costs of $6,381. Accordingly, I propose to order that the applicants' be awarded the sum of $495,676 as the difference between the value of the business at the date of purchase and the price paid. 123 Mr Laurie attended the auction and successfully bid $26,658.50 for twenty‑four items of plant and equipment including the mini tram, mini fire brigade and splashdown rides. However, he subsequently refused to pay the amount of the successful bid for those items in accordance with the terms upon which the auction was conducted. The applicants claim tis amount as a head of damage arising out of the misleading and deceptive conduct. The respondents contended that as Bendigo Bank had title to the plant and equipment of business the applicants could not make any claim for such loss. I reject this proposition. The applicants have no claim on the sum of $26,658.50 being the amount Mr Laurie owes Bendigo Bank for the items bought at the auction. CONSEQUENTIAL LOSS CLAIM 124 Sundberg J ordered that the applicants were entitled to damages to be assessed by a Registrar, in default of agreement. However, while his Honour also said that "[I]t may have suffered additional loss" no reference was made as to what this loss constituted. With respect to Mr Siberas and Mr Davies, I also note that his Honour said that they "suffered loss in that their work for the business included work that was unremunerated by the drawings of wages or receipt of profits". These are findings of fact that I should adopt in the absence of any further evidence to the contrary. 125 The applicants have not claimed loss of profits but rather have claimed consequential losses. They submitted that they were unable to meet, from the takings of the business, all (if any) of their outgoings. The respondents argued that the applicants derived substantial undeclared income from the business. One example provided, based on Sundberg J's finding (k) that 9,664 people attended in January 1998, was that the applicants should have generated (on the average taking per person of $11.20) approximately $108,236.80 for the month, whereas the statements relating to Crystal Auburn's Bendigo Bank cheque account for January 1998 only showed $50,000 was deposited. The respondents pressed the point that because of unaccounted cash receipts, the applicants received profits from the business, which must be offset against any losses determined in their favour. It was contended that as the applicants make no claim for trading losses the business appeared to have generated sufficient income to enable payment, for example, of the rent in accordance with the lease. 126 Before considering each of the consequential losses claimed it is necessary to comment on the evidence of Crystal Auburn's income and expenses of the business. Crystal Auburn's tax return for the year ended 30 June 1998 records a loss of $47,856 in respect of a gross income of $197,160. The return lists deductions totalling $245,016 which include rental of $37,500. Sundberg J made no findings as to the accuracy of the return, as the trial focussed on matters relevant to the conduct of the respondents in relation to financial information and attendance figures during Valespring's operation of the business. However, I am not satisfied that the return is correct. 127 For the period covered by the tax return attendances recorded by Mr Siberas, as disclosed in the first trial, were 19,216. Sundberg J accepted these figures. Based on the $11.20 average sales per visitor this represents a gross income of $215,219.20. This contrasts with the reported gross income of $197,160. In cross‑examination during that trial, Mr Siberas explained that undeclared cash from takings was used to pay wages and some expenses. During the hearing before me, Mr Siberas agreed that a substantial proportion of cash that was taken in the business was not banked into any of the accounts of Crystal Auburn. Although Mr Siberas referred to "heaps of receipts we had to hand over" in respect of expenses paid out of the cash takings, they were not discovered. I am not able to determine the extent of such cash takings or their quantum. 128 As is apparent, the task of the Court has been made particularly difficult in the present case by the lack of evidence that would have assisted in assessing damages. The applicants did not claim trading losses and although a tax return was produced, there were unaccounted cash takings. There were no records of how the cash takings were applied. Mr Siberas sought to elaborate in cross‑examination as to the categories of expenses, in respect of which cash applied. These were wages, fuel, maintenance, guard dogs and supplies for the canteen. His explanation was that the unaccounted money was not banked as it had been used to meet these costs directly. Mr Davies agreed that when he had made payments to staff it had been from cash takings and that he did not think the payments had been recorded in a wages book. He emphasised that in this respect he had followed the procedure that had been in place when Valespring operated the business. 129 Such evidence as may have assisted the Court in determining the full extent and nature of loss arising from the misleading and deceptive conduct of the respondent was not forthcoming. It is not for the Court to embark upon speculation or indeed try to draw a conclusion from inadequate or deficient evidence. It is appropriate at this point to emphasise that while this assessment is a matter of judgment, as the Full Court said inO'Neill v Medical Benefits Fund of Australia (2002) 122 FCR 455 said at [33]: "The overriding principle is that while the amount of damage must be proved with certainty, this only means as much certainty as is reasonable in the circumstances: see Ratcliffe v Evans [1892] 2 QB 524 at 532‑533." In JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237 Brooking J undertook an extensive review of relevant authorities at 241‑246 and observed at 243: "There is no rigid dividing line between cases in which guesswork is permissible in assessing damages and cases in which it is not. The borderline between guesswork and rational assessment is in itself indistinct, as it the line between evidence that is 'precise' (the Permanite Case dictum) and evidence that is not." 130 Here, there is an absence of reliable evidence as to the quantum of the income and expenses during Crystal Auburn's period of operation of the business. Having regard to the findings of Sundberg J the alternative source of information in the Business Profile cannot be relied upon. Nor would it produce a reliable result by guesswork. What can be observed is that the applicants were, at least up to the end of the 1998 financial year, able to maintain their outgoings due to Macleay and to Bendigo Bank. It must be inferred that the business generated sufficient income for these purposes, at least, and as such were benefits derived from the business that must be taken into account in this assessment. Accordingly, the claim for rent of $37,500 paid up to the end of June 1998 must be rejected. It is either a component of a loss of profits claim which was not made or it is a claim in respect of which there must be taken into account income derived as a result of that expense. Additional capital contributions 131 The applicants claimed losses of $51,000 for capital contributions jointly made to the business by Mr Siberas and Mr Davies. They submitted that these additional contributions were made in consequence of the participation of Mr Siberas and Mr Davies in the business, which participation was brought about by the respondents' contravening conduct. As a matter of principle the applicants argued that just as trading losses are compensable, citing Carlton v Pix Print Pty Ltd [2000] FCA 337 at [103] and Radferry Pty Ltd v Starborne Holdings Pty Ltd [1998] FCA 1689 at 23, capital contributions should also be recoverable. The respondents agreed that where a business has no on‑going value, lost capital contributions are compensable and that income derived from the business must be offset against the funds injected into it and lost: see Australian Competition and Consumer Commission v Top Snack Foods Pty Ltd (1999) 21 ATPR ¶41‑708. 132 The capital contributions claimed to have been made by Mr Siberas and Mr Davies, and evidence in support, were as follows: · On 22 December 1997 – $1,000. A Bendigo Bank cheque account (used by the applicants as the operating account for the business) statement was produced which referred to a $1,000 cash credit on that date. · On 23 December 1997 – $15,000. Mr Siberas said he was that he paid a brokerage fee of $15,000 to Mr Ian Spolding and that Crystal Auburn then borrowed this sum from Mr Spolding. Mr Spolding confirmed that this occurred and referred to an invoice for his brokerage fee of $15,000. A letter from Bendigo Bank was produced confirming that it had traced a "cheque from Advance Finance Pty Ltd for the amount of $15,000…deposited to the account of Crystal Auburn Pty Ltd…on 23rd December 1997". · On 1 June 1998 – $15,000. It was shown that $15,000 was drawn from Mrs Davies' account in Bowen, Queensland and paid into the Crystal Auburn Bendigo Bank cheque account on 1 June 1998. · On 12 June 1998 – $15,000. It was shown that $15,000 was drawn from Mr and Mrs Siberas' joint cheque account in Ocean Grove and paid into the Crystal Auburn Bendigo Bank cheque account on 12 June 1998. · On 19 June 1998 – $5,000. It was shown that $5,000 was drawn from Mr and Mrs Siberas' joint cheque account and paid into the Crystal Auburn Bendigo Bank cheque account on 19 June 1998. 133 In respect of the claim for 22 December 1997, the respondents submitted that there was no evidence that Mr Siberas deposited the money out of his own funds into the Crystal Auburn Bendigo Bank cheque account. In cross‑examination Mr Siberas said that he had drawn a cash advance on his credit card. However, there was no record of this produced to the Court. In respect of the claim for 23 December 1997 the respondents contended that there was no evidence the Mr Siberas paid that brokerage fee on behalf of Crystal Auburn, nor was there any evidence of a loan recorded as a liability in Crystal Auburn's tax return for the year ended 30 June 1998. In respect of the claim for 1 June 1998, the respondents contended that the bank record suggested that it was Mrs Davies who made this contribution. I note that Mr Siberas and his wife were the directors of Crystal Auburn and had formed a partnership called Crystal Auburn. The respondents also contended that Mr Davies had left the business and returned to Queensland in June 1998. However, the business was open during this time as the attendance records show. 134 What is significant is that the respondents noted that at least eight cheques were drawn on Crystal Auburn's account after 12 June 1998 in favour of certain of its employees located in Queensland. Some cheques were drawn in favour of persons unconnected with the operation of the business. In 1998 the Crystal Auburn partnership had a contract with Thiess Pty Ltd, to provide security services at a mine in Collinsvale, Queensland and a contract with Transfield, to provide security services at a derelict powerhouse in Queensland. In cross‑examination, Mr Siberas agreed with the $220,000 estimate of the income from these contracts in the 1998 calendar year. The income from Transfield was paid into the Crystal Auburn account. Cheques received from Thiess were paid into the personal bank account of Mr and Mrs Siberas. Mr Siberas accepted that there had been an intermingling of funds of the separate businesses. 135 It also became apparent that Mr Siberas had on at least two occasions drawn on the Crystal Auburn Bendigo Bank cheque account to pay wages to staff in these security service businesses. Mr Siberas estimated that he had withdrawn approximately $15,000 from the Crystal Auburn Bendigo Bank cheque account for the purposes of paying wages to employees of the security businesses, which amount he said was later repaid into the account with a cheque from Transfield. 136 The evidence shows that there were drawings on the Crystal Auburn Bendigo Bank cheque account in connection with payment of wages of personnel unconnected with the Nunawading business as early as 16 January 1998. As the Full Court said in Radferry at 15: "Clearly, the court must do the best it can with the evidence available. This does not compel it to make good a total lack of evidence upon which any rational inferences can be based sufficient to permit the quantification of loss. If the applicant fails to adduce any relevant and acceptable evidence, then the court cannot fill the gap…. It is the party's own fault if it fails for lack of evidence, and is should not be heard to complain of that consequence." The intermingling of funds in the Crystal Auburn business account makes it impossible for me to determine with any certainty that the claimed capital contributions were in fact directed to the business. I am not satisfied that those contributions were made to the business. I do not propose to make an order in favour of the applicants' claims for capital contributions. Rent and the cross‑claim 137 Pursuant to the two‑year lease entered into by Crystal Auburn and Macleay on 19 December 1997, rental was to be paid at the following rates: · From 1 January 1998 to 30 June 1998, $6,250 per calendar month. · From 1 July 1998 to 30 June 1999, $12,500 per calendar month. · Thereafter, the monthly rental amount was to be reviewed pursuant to the lease. Under cl 5.1 of the lease, Crystal Auburn agreed to remove its installations and other property from the property and make good any damage caused in such removal at the end of the lease. By written guarantee incorporated into the lease Mr Siberas and Mr Davies had guaranteed the performance of Crystal Auburn's obligations under the lease. 138 The applicants claimed entitlement to $37,500 representing rent paid to Macleay under the lease for the six‑month period January to June 1998 in reliance upon finding (w) in the first judgment of Sundberg J, that the applicants would not have entered into the lease or the guarantee were it not for the respondents' contravening conduct. On the limited evidence available, it is apparent that the applicants were able to pay the rental from income derived from the business. Mr Siberas said that this was the case up to the end of June 1998. As it is necessary to offset the applicants' loss with any benefits derived from the business I reject this aspect of their claim. 139 It was agreed by the parties that Crystal Auburn had ceased to pay rent and outgoings since 1 July 1998. On or about 24 August 1998 Macleay demanded payment of rent, outgoings and interest pursuant to the lease from Mr Siberas and Mr Davies, which payments were not made. In its cross‑claim Macleay claimed that the term of the lease was ended by the non‑payment of rent by Crystal Auburn, alternatively by re‑entry, or alternatively by the issue and service of the cross‑claim. It claimed the outstanding rent and outgoings due under the lease, damages, interest pursuant to the lease or alternatively pursuant to statute and costs of site maintenance, security and site clearance. 140 The amounts claimed in the cross‑claim were: · For the period 1 July 1998 to 19 February 1999 rent of $95,982.14 at the rate of $12,500 per calendar month and $3,611 for outgoings. · For the period 19 February 1999 to 19 December 1999 at least $125,000 for rent and at least $2,480 for outgoings. · For the period 1 July 1998 to 19 February 1999, costs of $5,020 incurred in maintenance (gardening) and security of the property. The respondents claimed there was no longer a need to incur these costs after 19 February 1999 when Macleay decided to sell the property. · Costs $44,753 for clearing the site, which the respondents' claimed Crystal Auburn failed to do when it vacated the premises on 6 August 1998. 141 Crystal Auburn admitted to not paying rent and outgoings as of 1 July 1998. Pursuant to its lease with Macleay, the rental increased on 1 July 1998 by 100% – from $6,250 to $12,500 per calendar month. I note in passing there was no submission from the applicants contesting the quantum of rental increase, nor was there evidence adduced of attempts by the applicants to renegotiate the rental. 142 It was submitted by the respondents that the terms of the lease relevant to the proceeding are cll 2.1.1, 7.1.1, 7.2, 7.4, 10.2 and 15. In summary, cl 7.2 provides that in default that the landlord may re‑enter the premises and end the lease and in so doing, retains the right to sue the tenant for unpaid money or for damages for breaches of its obligations under the lease. Clause 15 of the lease provides that if there was a repudiation of the lease, then Mr Siberas and Mr Davies would be liable for any unpaid rent and damages, and cl 15.1.3 provides for Macleay to be indemnified by Mr Siberas and Mr Davies, as guarantors, for all losses under the lease. 143 The respondents submitted that failure Crystal Auburn's failure to pay rent was a breach of an essential term. They contended that upon exercise of Macleay's right as landlord to re‑enter and determine the lease, Macleay was entitled to damages for the loss of the future benefit of the covenant to pay rent. Reliance was placed on Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17. 144 It was further submitted, correctly in my view, in reliance on Maridakis v Kouvaris (1975) 5 ALR 197 at 199 and Karacominakis v Big Country Developments Pty Ltd [2001] ANZ Conv R 577; [2000] NSWCA 313 at [186]‑[188], that Macleay had no obligation to mitigate the damages flowing from Crystal Auburn's breach of the lease. Even so, the respondents made much of their own conduct following Crystal Auburn's vacation of the premises. 145 The applicants claimed in the alternative that if found liable for unpaid rent, outgoings and costs, they should be entitled to an equivalent amount of any such award in damages under their application. They contended that this was because these obligations would not have been incurred but for the contravening conduct: see Karedis Enterprises Ltd & Greenfriars Pty Ltd v Rita Antonious and Michael Antonious (1995) ATPR 41‑427 at 40,817. In Karedis the Full Court (Burchett and Hill JJ, with whom Sackville J agreed), considered an appeal by the appellant respondent against the quantum awarded by the primary judge on a cross‑claim for rent and other outgoings. The applicants had been awarded damages for loss arising from the appellant's breach of s 52 in respect of the financial information about a café business that they had leased from the appellant. The Full Court remitted for determination by the primary judge the question of the time at which the cause of action accrued. In respect of the cross‑claim for unpaid rent, the Full Court thought that if the applicants were found on remittal to be successful in an entitlement to damages, their damages would be increased by the additional rent, which under the cross‑claim would be payable to the appellants: at [48]. 146 The respondents argued that the applicants should not be entitled to any damages as a result of an award in Macleay's favour. They submitted, without particulars, that the applicants could not seek to be indemnified as Sundberg J determined this part of the dispute. If this is a reference to his Honour's finding that Crystal Auburn had affirmed the contract it must be rejected. It follows that the applicants are entitled to be indemnified for their obligations pursuant to the lease and guarantee after they closed down the business and vacated the premises. 147 The respondents also claimed legal costs, on a solicitor client basis: see Jacara Pty Ltd v Perpetual Trustees WA Ltd (2000) 185 ALR 463. The facts in Jacara differ from the present case and do not support the respondents' case. There Sundberg J found that the alleged misrepresentation had not been made out and costs were determined in favour of the respondent on a solicitor client basis as the clauses in the relevant lease and guarantee did not limit costs to "legal costs" in connection with the preparation of the lease: at 478. 148 I propose to order that under the cross‑claim the respondents be awarded $220,982.14 for unpaid rent for the balance of the two‑year term of the lease plus $6,091 for outgoings – a total amount of $227,073.14. However, the applicants' damages are to be increased by this amount as the rental was incurred, save for one‑month before they closed down the business and vacated the premises. This puts the rent referred to in the cross‑claim into a different category from the rent paid whilst income was being derived from the operation of the business. The rental payable by Crystal Auburn should be set‑off against the amount of damages awarded. 149 While the applicants were obliged to undertake maintenance (gardening) and security of the property as these were obligations under the lease (cl 3.3.14, an essential term, and cl 3.3.18) it does not follow that the respondents are necessarily entitled to make a claim for expenditure asserted to have been directed to this purpose. In the event, there was no documentary evidence as to how the money was paid, and to whom, and the claim must be rejected. 150 With respect to the respondents' claim for $44,753 for clearing the site on the basis that Crystal Auburn failed to remove its installations and other property when it vacated the premises on 6 August 1998, the applicants were not responsible for installation of the plant and equipment. Moreover, the property belonged to a third party. This claim must also be rejected. Unrewarded labour 151 Mr Siberas and Mr Davies claimed to have spent substantial periods working at the business for which they did not draw any earnings. As Sundberg J noted in the first judgment, Cut Price Deli Pty Ltd v Jacques (1993) 15 ATPR (Digest) ¶46‑102 at 53,444‑53,445; on appeal (1994) 49 FCR 397 at 404‑405 is authority for a claim for uncompensated labour. What is at issue here is the quantum to which the applicants are entitled. As Heerey J pointed out in Jaldiver at 105: "To work without reward is to suffer loss, because ordinarily work is done in exchange for reward". 152 Mr Siberas estimated that he would be entitled to $16,250 for unremunerated labour for the period 27 December 1997 to 6 August 1998. This figure was calculated on the basis of thirty working weeks for the February, May and August quarters in 1998 on an average weekly ordinary time earnings of $775, amounting to $23,250, less $7,000 which Mr Siberas had drawn for wages and salary between 27 December 1997 and 5 August 1998. The earnings figure is based on Australian Bureau of Statistics figures for average weekly earnings for males for the period of December 1997 to August 1998 as Mr Siberas was previously self‑employed. 153 Mr Davies estimated that he would be entitled to $43,584 for unremunerated labour for the period of 30 November 1997 to 1 July 1998. This figure was based on earnings as a coalmine supervisor for Thiess prior to entry into the business. He asserted that he would have earned $80,917 gross salary per annum plus $5,800 in superannuation and a company car had he stayed with his former employer. On that basis, Mr Davies claimed to be entitled to $47,201 in wages plus $3,383 in superannuation for that period, less $7,000 that he had drawn for wages between 27 December 1997 and July 1998. He submitted that a pro rata assessment of what he would have earned during that period had he stayed with his former employer was an appropriate basis for calculating unremunerated labour, citing Cut Price Deli on appealat 404‑405; Pix Print at [106]; Top Snack Foods at 43,102–43,103. 154 In relation to Mr Davies' estimated wages, the respondents led evidence that Mr Davies had indicated in late 1997 that he no longer wished to work as a mine supervisor, and therefore it was unlikely that he would have remained in that employment in any event. They also argued that because Sundberg J had not found that the applicants' validly rescinded the contract, future wages with a former employer were not, as a matter of principle, compensable. They also submitted that Mr Siberas and Mr Davies did not devote all of their time to the business and did not work on a full‑time basis. Therefore, they were not entitled to claim a full‑time weekly wage. They also argued that Mr Siberas and Mr Davies derived substantial undeclared income from the business and that drawings were not declared, hence the Court should not award any amount under this head of loss and damage, citing Yorke v Ross Lucas Pty Ltd (1982) 45 ALR 299. 155 The respondents contended that the drawings made by the applicants were not declared, as was evidenced by Crystal Auburn's income tax returns, and that the income the applicants derived from the business was not accurately shown. As earlier mentioned, in cross‑examination, Mr Siberas agreed that a substantial proportion of cash takings were not banked into any of the accounts of Crystal Auburn. The applicants' desk diary did not record any drawings by Mr Siberas, although it did record payments totalling $7,000 to Mr Siberas' wife. It did not record any drawings by Mr Davies, although it recorded payments totalling $9,840 to Mr Davies' wife, which figures contradicted the evidence given by Mr Davies. 156 The respondents led evidence to suggest that Mr Siberas and Mr Davies spent a significant part of their time working on other businesses (Thiess and Transfield) during the period for which unremunerated full‑time waged were claimed. Mr Laurie gave evidence that Mr Siberas and Mr Davies often left the business premises in the early afternoon, regularly left work before Mr Laurie. Mr Laurie said that the applicants were looking to get out of the business in February 1998 and as a result, Mr Siberas and Mr Davies did less work for the business from that time on. 157 Sundberg J's finding (x) was that "Mr Siberas and Mr Davies suffered loss in that their work for the business included work that was unremunerated by the drawing of wages or receipt of profits". However, the fact that both Mr Siberas and Mr Davies also worked on the Thiess and Transfield businesses and generated income must be considered. Having regard to finding (x) of Sundberg J I consider that it is not appropriate that the time they spent engaged in working on the business be unremunerated. 158 I consider that Mr Siberas and Mr Davies are each be entitled to an award, on a pro-rata basis, at the remuneration rate of $33,000 per annum. This amount is drawn from the expert evidence that this is a full-time wage that a person running this type of business would be entitled. However, the drawings of $7,000 by Mrs Siberas and of $9,840 by Mrs Davies must be deducted. This results in an award to Mr Siberas of $12,038.46 and $6,025.38 to Mr Davies. Relocation expenses 159 Mr Davies also sought to recover an amount of $7,585.80 he had expended in relocating himself and his family from Queensland to Melbourne on 30 November 1998 so that he could be actively involved in the business. Mr Davies contended that the respondents knew that the purchase of the business by the applicants would result in Mr Davies moving to Melbourne. It was submitted that there was no challenge to Mr Davies on these costs. 160 The respondents argued that Mr Davies was not entitled to relocation costs as this was not an item connected with the task of assessing the value of the business at the time of the acquisition: Netaf at 398; Carlton v Pix Print at [81], [85]. They argued that such a claim was inconsistent with Sundberg J's finding that the applicants had made a decision to affirm the transaction. As earlier referred to the affirmation of the contract does not disentitle the applicants' from damages. It is apparent from Sundberg J's finding (a) that Mr Davies was involved in the on‑site discussions at the business on 16 October 1997 during which Mr Marlow provided the Business Profile to Mr Siberas. 161 In cross‑examination, Mr Davies said that he had worked all of his life in the coalmining industry and that he had hoped that the entry into the business would offer an opportunity for a different lifestyle. While I accept Mr Davies' evidence that he moved his family to Melbourne for the purposes of entry into the contract, I do not consider that there is a sufficient connection between this decision and the contravening conduct of the applicants. Lifestyle choice is a matter which must be factored into the decision and I am of the opinion that his claim to an entitlement for relocation expenses must fail. See: Yorke at 321. Compensation for anxiety, stress and upset 162 The applicants claimed to be entitled to compensatory damages pursuant to s 87 of the Act, including a sum for the anxiety, stress and upset they had suffered as a result of the respondents' conduct in contravention of the Act. The applicants estimated this sum to be $10,000. The respondents submitted, correctly in my view, that compensation for anxiety, stress and upset was available in appropriate cases: see Argy at 145, 151. In Argy the applicants failed to show that they had suffered any special damage putting them in a different position from any other person participating in litigation of this nature, and were therefore not entitled to claim such damages. 163 Mr Siberas throughout 1997‑1999 received income from his other business interests, including after he vacated the Nunawading business. He was able to gain employment between March 1999 and December 1999 with Mr Spolding and received $17,600, which represents an average gross weekly earning of $4,888.88. At the hearing, Mr Siberas said that he has since found employment as a salesman earning approximately $750 per week net. Mr Davies claimed that he had sought a new start in life with the purchase of the business, having previously worked as a supervisor in coalmines in Far North Queensland. He has since returned to Queensland to resume that work. Moreover, neither of the applicants submitted medical evidence of any physical illness, nervous shock or mental distress in support of this head of damage. See: Steiner v Magic Carpet Tours Pty Ltd (1984) 6 ATPR ¶45,639 at 45,642; McGregor at ¶41‑035–41‑037. While there is case law supporting such an award, absent such evidence (eg Top Snack Foods at 43,104) having regard to all the circumstances I do not consider it would be appropriate to make an award. This claim fails. Opportunity costs 164 Mr Siberas and Mr Davies sought to be recompensed for the opportunity cost of the $87,500 each invested directly into the business and estimated such cost for each of them at $23,290.31 by calculating interest at a rate of 5.07% from December 1997 to February 2003. As the applicants have claimed interest on borrowings, I consider this involves a "double" claim of the nature referred to by Tamberlin J in Top Snack Foods at 43,103 citing Netaf. Accordingly, it is not appropriate for the applicants to claim interest foregone on the moneys which might have otherwise been invested. Costs incurred in arranging for the purchase of the business and the lease 165 The applicants submitted that in consequence of Sundberg J's finding (x) in the first judgment the respondents' contravening conduct had induced the applicants to enter into contract and hence costs incurred in preparation of those agreements were compensable. The costs claimed are: (i) a $1,850 valuation fee paid to R & M Bent Auctioneers Pty Ltd, (ii) $760 for conveyancing costs paid to Christine Topp and (iii) a $2,832 for lease preparation and stamp duty costs paid to Anderson Rice Lawyers. Reliance was placed on Pine River Pty Ltd v Scorda [2001] WASC 105. In that case Steytler J at [111] upheld a claim for a refund of the amount of stamp duty in the amount of the difference between purchase price and true value of a farm, using rates provided by counsel for the plaintiff. (His Honour cited the authority of Hill v Tooth & Co Ltd (1998) 20 ATPR ¶41‑649 and Yenald Nominees Pty Ltd v Como Investments Pty Ltd (in liq) (1996) 18 ATPR ¶41‑508 at 42,362‑42,364.) 166 In Argy Hill J noted at 150‑151 that the award of a claim for conveyancing costs, disbursements, finance and valuation fees will only be made where a contract is rescinded. I consider this to be the correct approach and reject the applicants' claims to this extent, and include the lease preparation costs claimed in this class. Nor do I propose to make orders that the applicants be entitled to an award in respect of stamp duty paid on the lease. I think that Pine River is to be distinguished from the present circumstances because it related to excess stamp duty paid on transfer of real property. Here no such analogy can be drawn with the lease. It is a cost that in my view goes to rescission. Costs incurred under the hire purchase agreement 167 The applicants paid various sums to the Bendigo Bank pursuant to the hire purchase agreement. They argued that entry into the hire purchase agreement clearly followed as part of the course of conduct of their entering into the contract, which actions the court had found were induced by the respondents' contravening conduct, and that Mr Laurie was aware that the applicants were entering into the hire purchase agreement. The applicants submitted that amounts of interest paid under the hire purchase agreement were compensable as the Court is to compensate for the actual loss incurred in embarking upon the course of conduct induced by the contravening conduct, Henville at 502 and 509‑510; Top Snack Foods at 43,103. They argued, and I accept the submission, that their affirmation of the contract could not be said to pose a bar to recovery of moneys paid under the hire purchase agreement, as the hire purchase agreement was entered into on 19 December 1997, well before the act of affirmation in April 1998. 168 The applicants therefore sought to claim the following amounts paid, or which they are liable to pay, to Bendigo Bank: (i) $2,512.91 stamp duty paid between 19 December 1997 and 26 July 2000, (ii) $34,341.24legal fees liability ($22,803.80 accrued between 19 December 1997 and 26 July 2000 and $9,537.44 accrued thereafter to 10 February 2002 and (iii) $202.54 financial institutions duty paid between 19 December 1997 and 26 July 2000. The applicants also sought to claim $193,717.52, representing the amount of interest paid between 19 December 1997 and 13 February 2002. At the outset I do not accept that the legal fees outlined at (ii) above are claimable as these are costs arising from the applicants commencement of these proceedings and do not form part of the loss arising from the respondents' breach of s 52 of the Act: see Argy at 151. 169 The respondents argued that they should not be responsible for the applicants acting unreasonably or failing to negotiate better terms with Bendigo Bank. They contended that even though the plant and equipment was owned by Bendigo Bank, after vacating the property the applicants did not immediately approach the Bendigo Bank to negotiate a sale of the equipment or the business, instead they left the plant and equipment on site until mid‑1999 when an auction of the assets was finally held. Mr Siberas agreed in cross‑examination that up until May 1999, the only action the applicants took in relation to negotiating with Bendigo Bank was to arrange for the monthly payments to be reduced from $7,971.88 to 2,800. These matters have previously been considered and do not require further consideration. 170 I am of the opinion that the applicants' entry into the hire purchase agreement with Bendigo Bank and liability to make those payments was caused by the misleading conduct of the respondents. See: Top Snack Foods at 42,102‑42,103. There is no reason to think that the applicants would have borrowed the money from Bendigo Bank if they had not purchased the business. The plant and equipment was an integral part of the business and had to be purchased. Thus, the applicants were obliged either to enter into the hire purchase agreement, or otherwise be in funds without a need to borrow the purchase price of the plant and equipment. As stated by the Full Court of the Supreme Court of NSW in Karacominakis at [325]‑[327] it is appropriate in some circumstances to make an order awarding the costs of borrowing money (or the loss of money invested). The cost of borrowings was considered by Wilcox J in Netaf at 311; (with whom Sheppard and Pincus JJ relevantly agreed at 306) as "in effect" trading losses. There,although the quantum of damages to be awarded was remitted to the trial judge, the defrauded applicant had provided company accounts from which trading loss was identifiable. 171 However, unlike their claim for loss in rental payments made during their occupancy of the business, which must be offset by the income (benefit) derived from the business, their claim for interest on borrowings is of a different class. In my opinion, entry into the hire purchase agreement was unavoidable, and the applicants' have suffered additional loss from interest on borrowings, stamp duty and bank fees and that this loss has not otherwise been accounted for in compensation for trading losses: see Pine River at [108]‑[109]. I propose to order the amount of $196,432.97 under this head of damage. Interest 172 The applicants are entitled to judgment for an amount calculated as follows: 1. VALUE OF BUSINESS $550,000.00 $495,676.00 LESS PRICE PAID $54,324.00 Price paid $60,705.00 Less true value of business: $6,381.00 True value calculated as: $54,324.00 Gross auction proceeds Deduct auction costs 2. OTHER LOSSES $193,717.52 $196,432.97 2(f) Payments to Bendigo Bank $2,512.91 2(f)(i) 19.12.97 to 13.02.03 $202.54 2(f)(ii) Interest $196,432.97 2(f)(iv) Stamp duty FID 3(i) Unrewarded labour for Mr Davies $15,865.38 $6,025.38 3(ii) Wages foregone – 25 weeks $9,840.00 $12,038.46 Less drawings $6,025.38 Unrewarded labour for Mr Siberas $19,038.46 Wages foregone – 30 weeks $7,000.00 Less drawings $12,038.46 2(b)(ii) Reimbursement of damages found against the applicants on the third respondent's cross‑claim $227,073.14 $214,057.28 Cross‑claim awarded $12,978.38 Less off‑set from income from business $214,094.76 Less one‑month rental $12,500.00 Less one‑month outgoings $478.38 $12,978.38 TOTAL DAMAGES $924,267.54 Less amount advanced by the respondents on 9 August 2000 $250,000.00 173 The cross‑applicants are entitled to judgment for the amount calculated as follows: MACLEAY'S CROSS‑CLAIM $227,073.14 Unpaid rent and outgoings to Macleay for the period 1 July 1998 to 19 December 1999 $227,073.14 174 The applicants seek an award of interest. Section 51A of the Federal Court of Australia Act 1976(Cth) requires an award of interest. Order 35 r 8 prescribes the interest rate at 10.5%. I will give the parties the opportunity to speak to the form of the order which should be made the assessment and calculation of the interest components of the principal claim and the cross‑claim. I certify that the preceding one hundred and seventy-four (174) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg. Associate: Dated: 25 June 2004 Counsel for the Applicants: W J Martin QC and R Moore Solicitor for the Applicants: McNab McNab and Starke Counsel for the Respondents: M Dreyfus QC and R Heath Solicitor for the Respondents: Schetzer Brott and Appel Date of Hearing: 13-14, 17-21, 24-25 February 2003 Date of Judgment: 25 June 2004