AKRON SECURITIES LTD v CHARLES SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL GLEESON CJ, COLE and BEAZLEY JJA 17 September 1997 [1997] NSWCA 9 Trade practices — Remedies — Appropriate remedy — contract declared void ab initio — whether damages a more appropriate remedy — Trade Practices Act 1974 (Cth) s87. Akron Securities Ltd v Iliffe (1997) 41 NSWLR 353 Beazley JA The facts of this matter can be stated shortly. The respondent was a participant with others in a horse breeding venture known as the Bernborough 1987 Breeding Venture, details of which were set out in a thoroughbred investors' agreement which each participant signed, and in a brochure for the venture. The respondent's particular agreement was signed on his behalf pursuant to a power of attorney. The entry into the venture involved the acquisition of a number of contractual rights. In particular, each participant entered into an agreement to purchase from Bernborough 15 weanlings in common with other participants and to be in agreement to lease from the first appellant a proprietary interest as tenant in common in a herd of mares for a term of four years. Finance was made available by the first appellant to prospective participants. The present respondent entered into an interest-only agreement. The amount held was equal to the total purchase price of the weanlings with lease and rent payable for the first year and other wages and proceeds prepaid so as to absorb a tax deduction as at 30 June 1987. In the proceedings the first appellant as plaintiff sought to recover from the respondent and other participants the balance of the moneys lent to the beginning of the venture together with shares of rent and a sum payable under the lease. The respondent defendant in the proceedings alleged that he had been induced to enter into the venture by a misrepresentation made by an employee or officer of NZL in circumstances where the trial judge found that NZI was the agent of the first appellant. The trial judge was satisfied that the respondent did enter into the venture in reliance upon a representation made by the officer of NZI, that the funding for taking up the unit would be provided by NZI through a loan account that the respondent had with NZI and that NZI would offer insurance to cover any shortfall in the event of the investment failing and the respondent being liable in consequence thereof. His Honour held that the respondent was induced by what he was told and that acting in reliance upon what he was told he was under an obligation for one unit in the venture and the power of attorney which was subsequently acted upon for the purpose of signing the agreements to which I have referred. None of those findings of the trial judge are challenged on appeal. The sole proposition which was argued on the appeal was that given his Honour's findings of fact and accepting the correctness of the decision of this Court in Akron Securities Ltd v Iliffe (1997) 41 NSWLR 353 the appropriate 2 UNREPORTED JUDGMENTS remedy was not to declare the venture documents void ab initio as his Honour did but to leave the contracts on foot and to find that the appropriate remedy was damages. It was further submitted that this being so the respondent had in this case failed to prove his damages so that the appeal should be allowed and that the judgment ought to be ordered in favour of the first appellant as against the respondent. In this regard it should be noted that the first appellant had sued the respondent for a sum in the order of $300,000. Counsel for the respondent submitted that the judgment of the trial Judge disclosed two errors; first that his Honour failed to review the various remedies which are available under s87 of the Trade Practices Act 1974 (Cth) and secondly even if his Honour did review the remedies, his Honour's consideration of the remedy of damages was flawed so as, in effect, to amount to a failure to review those remedies or at least not to be a proper review of the remedies. It was conceded by counsel for the appellant during the course of argument that the remedy which the respondent had sought and which was granted by his Honour, namely that the venture contract documents be declared void ab initio was a remedy which was available to be made. In making that submission counsel agreed that there had been no affirmation of the contract and also informed the Court that the respondent had received no benefits from the operation of the scheme other than certain tax benefits which were an integral part of the scheme. In my opinion the appeal should fail. There are two reasons for this; first at trial the matter was argued on the basis that the misrepresentation having been proved, the appropriate remedy was either an order declaring the contracts void ab initio by way of relief under s87 of the Trade Practices Act 1974 (Cth) or damages. That being the case it is not obvious that his Honour committed the error alleged. That is, it is not obvious that his Honour failed to review the various remedies which are available for a claim of this nature. This is so because of the way the matter was conducted at trial, namely, that the appropriate relief was that there be an order declaring the contract void or there be damages. His Honour having first stated that he considered the appropriate remedy in this course was that the contract be declared void then entered into a detailed examination of the claim for damages. Even if it could be said that the trial Judge had erred by not reviewing the raft of remedies available under s87 that was an error in respect of a matter never raised at trial. In such circumstances I do not consider that the applicant should be permitted to raise the issue now. I should note that the ground of appeal which was relied upon is not, in any event, obviously raised by the Notice of Appeal. The second reason why the appeal should fail is that it appears to me in all of the circumstances that the relief granted by his Honour was appropriate and ought not to be disturbed. The facts of this case are to be distinguished from those in Akron Securities Ltd v Iliffe. In this case the effect of the representation which was made was that this particular venture which of its nature was speculative was to be made risk-free. The effect of it being made risk-free ought in the normal circumstances be that the appellant had no right to sue the respondent. Put another way, that being the nature of the representation made the respondent needs to be protected from being sued on the contracts otherwise the respondent would be required to bear the risk which the appellant, on the findings of the trial judge, had URJ AKRON SECURITIES LTD v CHARLES (Gleeson Cu) 3 represented to him he would not bear. An appropriate way to do that, and it may be the only appropriate way to do that in the circumstances of this case, is by declaring the contracts to be void ab initio. In my opinion therefore the remedy was appropriate and the appeal should be dismissed with costs. Gleeson CJ I agree with the orders proposed by Beazley JA and with her Honour's reasons for those orders. I would add only the following brief observations. It is true that in many cases it is important to distinguish between compelling a representor to make good a representation and compensating a representee for the loss suffered as a result of entering into a contract on the faith of an untrue representation. In the area of damages the difference is sometimes expressed as the difference between expectation damages and reliance damages. In the present case, however, the particular nature of the relevant representations and the circumstances in which they were made are of critical importance. The respondent was induced by his employer, acting as agent for the appellant, to enter into a self-evidently risky venture, by a representation that contractual arrangements would be made which would render the venture risk-free as far as he was concerned, and which would cover him against the prospect of any liability to the appellant. This was done in circumstances of haste, and without legal advice. The unchallenged evidence as to the respondent's financial circumstances shows that he could not have afforded to enter into the transaction if he had not been given the assurances mentioned. When in due course the respondent was sued by the appellant for amounts owing under the contractual arrangements to which I have referred it transpired that no insurance arrangements of the kind represented had been entered into. The trial judge gave careful consideration to an argument that in the circumstances damages were an adequate and an appropriate remedy. He rejected that argument and concluded that justice required that the contractual arrangements sued on by the appellant should be treated as void. The principles relating to the discretionary exercise involved in applying s82 and s87 of the Trade Practices Act have been considered in cases such as Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83 at 102 and Munchies Management Pty Ltd v Belperio (1988) 84 ALR 700 at 712 and 713. No error has been shown in the manner in which those principles were applied in the present case. This is not a case in which the appellant can successfully submit that the trial judge fell into an error of the kind attributed to him by the majority in this Court in Akron Securities Ltd v Iliffe (1997) 143 ALR 457. On the contrary, his Honour's careful reasons for judgment record that it was submitted to him by counsel for the appellant that he must consider the alternative remedies of treating the contractual arrangements as void and make an award of damages. In his reasons, his Honour gave detailed consideration to those alternatives, ultimately coming to the conclusion that the former was the more appropriate. Because of the particular nature of the representation made in the present case and the circumstances in which it was made I consider that his Honour was correct in coming to that conclusion. It should be mentioned in relation to the case of Akron Securities Ltd v Iliffe that, if his Honour had taken the approach towards the matter of remedy adopted in that case by the majority, then the practical consequence would have been no different from that which was achieved in the present case. The position would 4 UNREPORTED JUDGMENTS have been a fortiori if his Honour had taken the approach adopted by Meagher JA, who was in the minority in that case. I agree with the orders proposed by Beazley JA. Cole JA I agree with the orders proposed by Beazley JA and with her Honour's reasons. I also agree with the additional comments addressed by the Chief Justice. I would add this, on this appeal it was contended that the trial judge had erred in not going through a review process of considering what was described as a "smorgasbord" of remedies available pursuant to s87 of the Trade Practices Act. Additionally it was said that if his Honour was found to have undertaken that process then the process he undertook was a flawed review. Support for the view that it is necessary for a trial judge to go through a review process of the smorgasbord of remedies set forth in s87 was said to come from the decision of the majority in Akron Securities Ltd v Iliffe (1997) 41 NSWLR 353, in particular at 363 and 366, 367. In the former passage the learned President set forth the trial judge's findings in that case concerning two persons who had been sued. Having found a relevant breach of s52 concerning those persons his Honour in one case said that one should be relieved from contractual liabilities for that reason and in another his Honour said: "As Mr Gundry was misled or deceived he is entitled to be exculpated from his obligations under the agreements." The learned President interpreted those remarks by the trial judge as suggesting that the remedies under s87 about relief from the agreements flowed automatically or inevitably. To my mind that is not a readily discernible interpretation of the passages that the learned President quotes. Particularly is that so if, as we are informed from the Bar table by counsel for the appellant in this case who was also counsel for Akron in that case, that his recollection was that in each instance the two persons sued had sought the relief which his Honour granted, namely setting aside the agreements ab initio. Be that as it may, the learned President then set forth his view of the manner in which a judge was obliged to exercise his function when faced with the possibility of relief being granted under s87. His Honour said: "Alternatively if I were wrong in my interpretation of his Honour's reasoning process, I would still feel entitled to set aside the orders below if other relief was appropriate. This is because there is no indication that the trial judge considered himself both permitted and obliged to scan s87 in seeking to make the appropriate order. I shall explain below what he considered to be the correct approach for a court faced with the remedial smorgasbord offered by s87." With the greatest respect I am unable to agree with that process of reasoning. There is nothing in s87 which I can find which obliges the Court itself to scan the available remedies in s87(2) and to determine what it regards as the "more appropriate". The manner in which litigation is conducted in this state is that persons seeking relief in their pleadings indicate what the relief is that they seek. So far as I am aware it has not been the function of judges in the past to consider whether they of their own determination would grant different relief to that which is being sought. Usually in a trial a judge is assisted by the pleadings which indicate the relief sought, assuming grounds for it are made out, and assisted by submissions of counsel regarding the relief which their clients seek. URJ AKRON SECURITIES LTD v CHARLES (Cole JA) 5 In the past, in my experience, it has been the practice of judges to confine themselves to a consideration of the relief which is sought and to determine whether or not it is appropriate relief once the grounds for relief have been made out. Thus, as it seems to me, where the party has been able to establish the triggering mechanism of a contravention of s52 of the Trade Practices Act and seeks a particular form of relief under s87 the obligation on the trial judge as s87(1) provides is to make "such order or orders as it thinks appropriate". That does not impose, in my view, the obligation to scan the panoply of remedies and decide which the court thinks is the most appropriate if a party entitled to relief seeks particular relief within the provisions of s87, if the court determines that the relief so sought is, in its view, appropriate and, in my view, it is entitled to order that relief without considering any alternative forms of relief. I would add this, if the position be otherwise than I have indicated, if a trial judge intended to grant some form of relief which had neither been sought in the pleadings nor which had been addressed by counsel then it would seem to me that before the trial judge could do that he would be obliged to reconstitute a second hearing in order that the parties would have the opportunity to address him on the appropriateness of the relief not sought by either party which he intended to grant. I see nothing in the provisions of s87 which indicate that that is a necessary course. Plainly, to my mind, it is undesirable. I agree with the orders proposed. The order of the Court will be that the appeal is dismissed with costs. Counsel for the Appellant: M Cashion Solicitors for the Appellant: Kemp Strang & Chippindall Counsel for the Respondent: In Person Solicitor for the Respondent: In Person