Ramsey v Vogler [1999] NSWSC 690

Reported Decision : (1999) 44 IPR 153

New South Wales Supreme Court CITATION : Ramsey v Vogler [1999] NSWSC 690 CURRENT JURISDICTION : Equity Division FILE NUMBER(S) : 1747/96 HEARING DATE(S) : 6 July 1999 JUDGMENT DATE : 6 July 1999

Leicester Denis Ramsey (P1) Kim Sue-Ellen Ramsey (P2) Welcome Waggon of Australia (NSW) Limited (P3) Juanita Kay Vogler (D1) PARTIES : John Davies (D2) Juanita Kay Vogler (Cr-cl 1) John Davies (Cr-cl 2) Leceister Denis Ramsey (Cr-d 1) Kim Sue-Ellen Ramsey (Cr-d 2) Welcome Waggon of Australia (NSW) Pty Limited (Cr-d 3) JUDGMENT OF : Master McLaughlin

COUNSEL : Mr. P. King (P) Mr. P. Newton (D) SOLICITORS : Woodward Wickes & Co (P) Philip J. Beazley (D) CATCHWORDS : DECISION :

SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

MASTER McLAUGHLIN

Tuesday, 6 July 1999

1747/96 LEICESTER DENIS RAMSEY & ORS -v- JUANITA KAY VOGLER & ANOR JUDGMENT

1 MASTER: On 26 February 1999 Bryson J delivered his reserved judgment. The orders of his Honour included the following: 1. Give judgment for the first plaintiff, Leicester Denis Ramsey, against the second defendant, John Davies, for damages and interest to be assessed; 2. Order that an enquiry be held before a Master to ascertain and further assess the amount of damages and interest for which judgment be entered and direct that judgment be entered in accordance with the Master's certificate. 2 The matter has come before me consequent upon order 2 made by his Honour. The proceedings in which his Honour made those orders were proceedings in which his Honour found for the first plaintiff against the second defendant in an action in deceit. 3 His Honour expressly held that the charge of fraud asserted against the second defendant, in particular, paragraph 12(b) in the statement of claim, had been established. The action arose out of the first plaintiff being induced by the fraudulent assertions of the second defendant to acquire a business. The business was worthless. The first plaintiff not merely made no profit from it, but suffered a very considerable loss as a result of the transaction. 4 The measure of damages for an action in deceit arising out of fraudulent misrepresentation is referred to in McGregor on Damages (15 ed., 1998), chapter 39. That chapter clearly distinguishes between the measure of damages in the tort of deceit and the measure of damages based on principles of contract where there has been some form of fraudulent conduct on the part of the party held to be liable. 5 In the instant case there is no issue between the parties that the cause of action upon which his Honour found that the second defendant was liable to the first plaintiff was grounded upon the tort of deceit. The measure of damages in respect of such tort has been the subject of several decisions of the High Court of Australia. In Holmes v Jones (1907) 4 CLR 1692 the Chief Justice Sir Samuel Griffith referred to the submission which had been made before the court at the hearing of that case in reliance upon two American authorities in support of the submission that in an action for fraudulent misrepresentation the plaintiff was entitled to recover damages upon the same measure as in an action for breach of warranty. His Honour expressed the view that that was not the law and referred to the authorities of Broome v Speak [1903] 1 Ch 586 at 605 (which decision was affirmed by the House of Lords under the name Shepheard v Broome [1904] AC 342) and Waddell v Blockey 4 QBD 678. 6 The locus classicus of the law in Australia has been the judgment of Dixon J (as he then was) in Toteff v Antonas (1952) 87 CLR 647. His Honour said at 650: In an action of deceit a plaintiff is entitled to recover as damages a sum representing the prejudice or disadvantage he has suffered in consequence of his altering his position under the inducement of the fraudulent misrepresentations made by the defendant. When what he has been induced to do is to make a purchase from the defendant and part with his money to him in payment of the price, then, if the transaction stands and is not disaffirmed or rescinded, what is recoverable is "the difference between the real value of the property, and the sum which the plaintiff was induced to give for it" per Abbott LCJ Pearson v Wheeler (1825) 171 ER 1028 at 1029. As Sir James Hammond P in Peek v Derry (1887) 37 Ch D 541 at 594 pointed out, the question is how much worse off is the plaintiff than if he had not entered into the transaction. If he had not done so he would have had the purchase money in his pocket. To ascertain his loss you must deduct from the amount he paid the real value of the thing he got. 7 In the same case, Williams J said at 553: The contract was a contract for the sale of the business as a going concern. The representations related to takings and profits the plaintiff might reasonably expect to make out of the business if he purchased it on this basis. 8 The damages that the plaintiff would suffer if the representations were untrue was the difference between the real market value of the business as a going concern and the price the plaintiff paid for the business. 9 I have also been taken to the decision of the High Court of Australia in Gould v Vaggelas (1985) 157 CLR 215. Gibbs CJ said at 220: It is well established that in an action of deceit where the plaintiff has been induced by the fraudulent misrepresentation of the defendant to enter into a contract of purchase, the measure of damages usually applicable is the difference between the real value of the property at the time of the purchase and what the plaintiff paid for it. 10 His Honour referred to the decisions in Holmes v Jones and Toteff v Antonas from which I have already quoted. 11 The decision of the High Court of Australia in Gates v City Mutual Life Assurance Pty Ltd (1986) 160 CLR 1 related to the measure of damages and the Trade Practices Act, in particular section 52(1) of that Act. 12 In a joint judgment Mason, Wilson and Dawson JJ adverted to the fact that the Act does not prescribe the measure of damages recoverable by a plaintiff for contravention of the provisions of Parts 4 and 5. 13 Their Honours then contrasted the measure of damages in an action in deceit and the measure of damages for breach of warranty. At 12 their Honours said: The differences and the similarities between the two approaches are best illustrated by contrasting the damages recoverable for breach of contractual warranty on a purchase of goods with those recoverable for a fraudulent misrepresentation inducing entry into a contract for the purchase of goods on the assumption that the contracts are identical except that in one case the representation amounts to a warranty and in the other it is merely a non-contractual representation. For breach of warranty the plaintiff is prima facie entitled to recover the difference between the real value of the goods, and the value of the goods as warranted. In deceit the measure of damages is the difference at the time of purchase between the real value of the goods, and the price paid. 14 Their Honours referred to Potts v Miller (1940) 64 CLR 282 at 289-297 and to the decisions from which I have already quoted, Toteff v Antonas and Gould v Vaggelas. But this has been treated as a prima facie measure only, the true measure being reflected in the proposition stated by Dixon J in Toteff v Antonas in these terms: