New South Wales Supreme Court CITATION : Central West Equipment Hire Pty Limited v Gardem Investments Pty Limited & Ors [2003] NSWSC 577 HEARING DATE(S) : 2-6 September 2002; 18 October 2002 JUDGMENT DATE : 27 June 2003 JURISDICTION: Common Law JUDGMENT OF : Smart AJ at 1 DECISION : Judgment for plaintiff as shown in para 201. This is subject to the finalisation of the calculation for interest. CATCHWORDS : Misrepresentations - Questions of fact only - No question of principle LEGISLATION CITED : Trade Practices Act 1974 (Cwlth) Fair Trading Act 1987 (NSW) CASES CITED : Nil PARTIES : Central West Equipment Hire Pty Limited v Gardem Investments Pty Limited, Kirbailia Pty Limited and Graham Gardem FILE NUMBER(S) : SC 20372/98 COUNSEL : (P) A Spencer (D) R Marshall SOLICITORS : (P) Wilson Fardell & Moore (D) Gibson Owen Lawyer Inc IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION SMART AJ Friday, 27 June 2003 20372/98 CENTRAL WEST EQUIPMENT HIRE PTY LIMITED v GARDEM INVESTMENTS PTY LIMITED, KIRBAILIA PTY LIMITED and GRAHAM GARDEM JUDGMENT 1 Central West Equipment Hire Pty Limited sues the defendants for damages for conversion and damages pursuant to s82 of the Trade Practices Act 1974 (Cwlth) and/or s.68 of the Fair Trading Act 1987 (NSW) arising out of false representations made in connection with the sale of a plant hire business. The plaintiff alleges that the defendants in trade or commerce engaged in conduct that was misleading or deceptive or was likely to mislead or deceive and thereby contravened s.42 of the Fair Trading Act and s.52 of the Trade Practices Act. It is further alleged, in the alternative, that Mr Gardem aided, abetted, counselled or procured the contraventions of the Trade Practices Act and/or the Fair Trading Act and so was a person involved in the contraventions within s.75B of the Trade Practices Act or the Fair Trading Act. 2 By contract made on 8 May 1995 Gardem Investments Pty Limited, (Gardem Investments) then called Allaids Regional Plant Hire Pty Limited, (Allaids) agreed to sell to the plaintiff for $220,000 a plant hire business located at 13-15 Peisley Street, Orange, including certain plant, fittings and chattels as set out in the contract and those as agreed orally between the parties as forming part of the chattels sold with the business. There was a dispute as to the extent of the chattels so agreed orally. Settlement took place on 15 May 1995, the purchase money being paid and the plaintiff entering into possession. 3 In its written submissions the plaintiff conceded that, in the face of the express terms of the agreement of 8 May 1995, the Court will not find that the representations created oral terms which became incorporated into the agreement of 8 May 1995. The plaintiff did not press the claim in contract as to the missing chattels. Similarly, the plaintiff conceded that there was insufficient evidence upon which the Court can calculate damages for conversion. The non-availability of a claim in contract does not affect claims based on either s.52 of the Trade Practices Act or s.42 of the Fair Trading Act. 4 There is no evidence to suggest that at any time prior to entering into the agreement Mr Miller of the plaintiff became aware of the fact that the contract contained an inventory which specified different plant and equipment from that which he had seen at the premises 13-15 Peisley Street. His evidence was that he did not see the list (or Inventory) when he signed the contract. That assertion was not challenged in cross-examination. The plaintiff contended that there is nothing to suggest to Mr Miller prior to entering into the agreement that the contract contained anything other than an agreement to transfer all of the items of plant and equipment that he had seen. 5 In late May 1995 Kirbailia Pty Ltd (Kirbailia) entered into a commercial lease with the plaintiff of premises being part of 13-15 Peisley Street, Orange. The lease provided for rent to be payable at $1517 per month commencing on 29 May 1995 for a term ending on 31 December 1995. 6 The plaintiff alleges that Gardem Investments Pty Limited failed to deliver to it the plant and equipment it had promised and been paid for despite requests from the plaintiff to do so and that Gardem Investments thereby detained and converted the goods to its own use thereby wrongfully depriving the plaintiff of them. 7 The plaintiff further alleges that subsequent to the completion of the contract Gardem Investments and Mr Gardem removed certain items of property from the premises without the consent (and sometimes without the knowledge) of the plaintiff. Despite requests from the plaintiff to Gardem Investments, it has refused or neglected to return certain items thereby detaining and converting those items to its own use and wrongfully depriving the plaintiff of them. 8 Four of the false representations were made prior to entry into the contract of sale. The fifth was made on the day of completion of the sale. The representations and details of their alleged falsity are: (a) About 8 and 28 March 1995 Gardem Investments by its agent for sale, Ronald Savage, represented to the plaintiff that the business of Allaids being sold achieved sales, gross profit, expenses, operating profit and revised profit as set out in a document entitled "Allaids Regional Plant Hire Pty Limited Profit Comparison for years 1989-1993 inclusive" The figures set out in that document were not figures applicable to the business which was sold to the plaintiff but included figures applicable to additional businesses in the nature of sandblasting, bituminising and supplying labour in the course of a business conducted by Gardem Investments not being part of the business sold to the plaintiff. (b) About 8 April 1995 Gardem Investments by its agent Ronald Savage represented to the plaintiff that the business being sold achieved sales, gross profit, expenses, operating profit and revised profit for 1994 as set out in the document entitled "Allaids Regional Plant Hire Pty Limited Profit Comparison". The figures supplied by Gardem Investments for sales, gross profit, expenses, operating profit and revised profit for 1994 were not figures for those items applicable to the business being sold, but included figures applicable to other businesses conducted by Gardem Investments in the nature of sandblasting, bituminising and supplying labour. (c) About 12 April 1995 Mr Gardem represented to Mr J Miller on behalf of the plaintiff that the business being sold would achieve sales of at least $300,000 per annum. At no time did the business sold by Gardem Investments to the plaintiff achieve sales at a rate which would lead to sales for a full year of at least $300,000. (d) About 19 April 1995 Mr Gardem represented to Mr Miller on behalf of the plaintiff that Kirbailia would commence construction of a new building upon the site of the leased premises in which the plaintiff could continue to conduct the business purchased from Gardem Investments and that construction of the new building would proceed immediately after the sale of the business. Mr Gardem further represented that upon construction of the new building the premises would be leased to the plaintiff at a rental of $26,000 per annum. Kirbailia took no steps to commence construction of the proposed new building upon the site of the leased premises immediately following the sale of the business (I would add "or subsequently"). (e) About 15 May 1995 Mr Gardem on behalf of Gardem Investments represented to the plaintiff that Gardem Investments would compensate the plaintiff for the value of all items of equipment and tools removed from the premises by or on behalf of Gardem Investments following the stocktake at the business. Gardem Investments did not compensate the plaintiff for the value of any items of equipment and tools removed from the premises following the stocktake of the business. 9 The plaintiff alleges that the representations in March-April 1995 were made in order to induce the plaintiff to purchase the business and to lease the premises. It was the plaintiff's case that the Court should see the conduct particularised in subparagraphs (a)-(d) of the preceding paragraph as cumulatively comprising conduct calculated to induce the plaintiff to enter into the agreement of 8 May 1995 and having that effect. 10 The plaintiff alleges that the defendants owed to it a duty to exercise all reasonable skill, care and diligence in making each of the representations and in breach of that duty failed to do so and made them negligently in that they had no reasonable basis for making them and failed to take any adequate or reasonable steps to ensure that the representations were true. See p.51A of the Trade Practices Act and s.41 of the Fair Trading Act. 11 The plaintiff also alleges that the defendants made the representations knowing that each representation was false at the time it was made or was recklessly indifferent as to whether each such representation was true or false at the time it was made and accordingly, did so fraudulently. 12 The plaintiff alleges that the lease entered into between it and Kirbailia included terms that Kirbailia would allow the plaintiff to use and occupy the premises without unreasonable interference by Kirbailia or its agent, that Kirbailia would carry out without delay all the reasonable repairs necessary for the plaintiff's ordinary use and occupation of the premises having regard to the condition of the premises at the start of the lease, that Kirbailia would respect the plaintiff's right to privacy, that Kirbailia would give the plaintiff reasonable notice of the time and date for having access to the premises which, as far as possible was to be convenient to both parties and the plaintiff was to have quiet enjoyment of the premises. 13 The plaintiff alleges that in breach of those terms and conditions Mr Gardem on behalf of Kirbailia returned to the premises from time to time without notice to the plaintiff and removed items of equipment which had been sold to the plaintiff pursuant to the contract of sale; Kirbailia by its agent Mr Gardem Jnr, removed items of equipment from the premises without notice to or the consent of the plaintiff; about 16 or 17 December 1995 Kirbailia caused the premises to be locked, thereby preventing the plaintiff having access to and use of the premises and took possession of the premises and occupied them by storing equipment and vehicles there; and Kirbailia failed to carry out necessary repairs to the premises with the consequence that they were susceptible to substantial water penetration at times of storms. The plaintiff alleges that as a result it was forced to remove its business to other premises. 14 Gardem Investments and Mr Gardem admitted the contract of sale of 8 May 1995, its completion and the plaintiff's entry into possession. They denied any oral agreements. Gardem Investments also pleaded that any oral agreement to transfer chattels (which was denied) was not supported by any consideration. As to any alleged representations Gardem Investments relied on clauses 1 and 20 of the Conditions of Sale. Gardem Investments either did not admit or denied the remainder of the allegations in the amended statement of claim. Mr Gardem admitted the entry into the lease earlier particularised as did Kirbailia. It also admitted the terms and conditions of the lease mentioned earlier. It either did not admit or denied the remaining parts of the statement of claim. 15 As earlier appears the plaintiff relied on representations made by Mr R Savage of L J Hooker, Orange, the agent for sale of the hire business of Gardem Investments. The plaintiff contended correctly that Mr Savage had actual or ostensible authority to make statements about what was involved in the sale. Any conduct within the scope of his actual or ostensible authority is deemed to be conduct by Gardem Investments (s.84(2) of the Trade Practices Act). The defence of Gardem Investments that Mr Savage lacked authority to make the representations which he did to the plaintiff lacked substance. 16 Events to 8 May 1995 In March 1995 Mr John Miller was looking for a business to purchase. He noticed this advertisement in the Business for Sale column of the Central Western Daily Newspaper of 25 March 1995: "Plant and Equipment Hire established 25 years: Health reasons for sale, $250,000. LJHooker Orange (063) 62-2966" 17 About 28 March 1995 Mr Miller drove from his home at Boorowa to Orange. He called into the office of L J Hooker, Orange and spoke to Mr Ron Savage who said, "This business has a reliable and steady income as can be seen by the figures." Mr Savage handed Mr Miller two sheets of paper entitled Allaids Regional Plant Hire Pty Ltd – Profit Comparison. They covered the years 1989-1993. They showed sales ranging from $516,341 in 1989 to $314,281 in 1993, gross profit, expenses, operating profit and revised profit. There was a noticeable decline in the operating profit and revised profit figures from 1989 to 1993. 18 Mr Miller asked to see recent trading figures. Mr Savage stated that he did not have them but would obtain them from the vendor. He then handed to Mr Miller a list of the equipment belonging to the Allaids business. The typed lists extended over four pages. On Mr Miller commenting that there did not appear to be a lot of equipment Mr Savage handed him a second equipment list containing handwritten notations and the approximate value attributed to the individual items by the vendor. 19 Mr Savage told Mr Miller that the great benefit of owning Allaids was that there would be no further outlays necessary to generate the income shown and that the figures showed excellent returns. Mr Miller asked why the figures showed a decline after 1992. Mr Savage replied: "The Vendor did road works using the heavy road rollers but was unable to maintain this due to his health. If you get out and about you'd be able to lift these figures again. Look at the Profit Comparison. When the vendor was fit and well in 1991 and 1992 the average income was $450,000 per year." Mr Savage was pointing to the figures on the lists and referring to the gross income or sales. 20 Mr Miller asked if the current earnings and those of 1993 were derived from the equipment on the equipment lists (the clean typewritten version). Mr Savage replied "Yes. The vendor pops in every now and again to check all's OK with his two workers and to tidy up the paper work." Mr Miller again sought the current trading figures. Mr Savage replied: "I'll arrange to get these from the vendor … The vendor is about to build new premises on his block which would accommodate a hire business. He will be looking for a rental of $26,000 per annum … Peisley Street compares very well with other rental sites in Orange." 21 On the journey from Mr Savage's office to the All Aids premises, Mr Savage stated that Mr Gardem genuinely wanted to develop the property and retire and look after his health and that he needed the money from the business to do this. 22 In his affidavit Mr Miller described the three sheds on the premises of All Aids in Peisley Street and the equipment, plant, machinery and consumables he saw in the sheds and on the land along with the approximate position of everything. The list is long and detailed. I will not rehearse the details. Messrs Miller and Savage went to the office in the main shed and met Mr Gardem. 23 Mr Miller said that as Mr Gardem stood up he appeared to experience pain and as he moved towards Mr Miller used a walking stick. Messrs Miller and Savage walked through the main shed and all its sections, probably the smaller sheds and around the perimeter of the yard and through the yard, inspecting the heavier equipment displayed in the yard. Mr Miller has given a detailed account of all that he saw. There was a considerable amount of plant, equipment, machinery and miscellaneous items seen and noted. Mr Miller has provided a detailed list in his affidavit. Mr Miller noticed that many items inspected did not appear on the list which Mr Savage handed to him. During the initial inspection Mr Miller said words to this effect to Mr Savage. "Not all the equipment that is specified on the equipment list is here. For example, there's a Roller missing. Then there's equipment here in the yard which does not appear on the list. There's those two tippers, the SAME tractor and there's many more trailers including that large one over there, which are all major pieces of equipment. They're not on the list … what does generate the income shown on the Profit Comparison? Is it what we are looking at or is it what's on this equipment list you gave me?" 24 Mr Savage replied, "My understanding is that everything you see here is included. We'll revise it with Graham." After completing the inspection Messrs Miller and Savage met with Mr Gardem. Mr Miller said a conversation to the following effect took place: "Savage: John has concerns that there is equipment not on the list. Just what equipment does generate the income I gave him? Gardem: Everything you see and whatever is presently on hire is included in the sale. I'm selling the Allaids business on a walk-in walk-out basis and you'll need all of this. What you don't see but which is included on he equipment list will be included. That's the spirit of the deal. Savage: All the consumables and other items are too numerous to list but they're all included in the sale aren't they Graham? Gardem: Yes.You can't run an equipment business without spares." 25 Mr Miller said that Mr Gardem handed him a green folder entitled "Allaids Hire" on the front cover with Mr Gardem's business card attached. Although dated 1990 it contained a list of equipment and, according to Mr Gardem the current hire rates. Mr Miller said that a conversation to the following effect occurred: "Miller: There is a significant amount of spares and consumables in various parts of the shed and around the yard. Is this all included, as I don't see any reference to them on the list? Gardem: This is a price list of the equipment, not an inventory list. … Look you can't run this business without the spares and consumables. I just want to retire, build my shed and live off the rental from that … Everything's here to run the business and everything on the site remains.It's walk-in walk-out. You just have to walk in and take over." 26 Mr Miller said that Mr Gardem showed him a plan of the proposed commercial building he intended to build on the adjoining block and that they then had a conversation to the following effect "Gardem: If you decide to purchase the business you can have input into the floor plan and choose your own colour scheme … You can have the front shop facing onto Peisley Street. This would give you good exposure as Peisley Street is a main thoroughfare. Miller: Why are you selling? The income looks good. Gardem: I've been in it long enough. I've got a bad back which limits what I can do. I'm unable to develop the business any further because of my back. The sale of the business will enable me to build the new premises and I can live off the rental from that." 27 Mr Miller said that as a result of what Mr Gardem had said he believed: (a) the list in Mr Gardem's green folder accurately set out the equipment intended to pass to him upon completion of the purchase, together with all the other sundry items which Mr Savage had shown him on site, and (b) the green folder detailed the equipment currently being hired out and generated the income of the business. 28 Mr Miller said that he relied upon the figures appearing on the Profit Comparison sheets handed to him by Mr Savage as a bona fide indication of the business income. 29 About the first week of April 1995 Mr Miller telephoned Mr Gardem about some of the items on the price list which Mr Miller believed had not been made available for inspection. They went through those items seriatim. Mr Gardem insisted that each item was there. According to Mr Miller, Mr Gardem described some of the individual pieces of equipment and in some cases gave the location of some of the individual pieces of equipment in the shed or yard. Mr Miller said that at the end of the conversation words to the following effect were used. "Gardem: One of the Rollers is in Parkes. Some of the items on the price list have been doubled up. For example the water washer and pressure cleaner are one and the same. Miller: We've gone through and identified all the main hire equipment on your list, but there is a significant amount of spares, consumables and sundry equipment that I saw in the shed and yard. These spares and consumables are not listed. Are they to be included? Gardem: You've got the equipment list in your hands. You will need all these spares and consumables to run this business so of course they're included. Its walk-in walk-out." 30 On 3 April 1999 Mr Miller spoke to Mr Savage and told him of the substance of his conversation with Mr Gardem, namely that all the spares, sundry equipment and consumables which they had inspected were included in the sale. Mr Miller said that he still wanted a stocktake of all these items and pressed for the current trading figures. 31 Mr Miller said that a few days later Mr Savage handed him a copy of a handwritten letter dated 5 April 1995 from Allaids containing these details: Revenues Banked 1994-95 July $ 61,354.76 Hold back tax reasons Aug $ 25,551.69 September $ 21,930.53 Oct $ 20,836.89 Nov $ 22,338.11 December $ 26,438.90 $181,450.78 January 1995 $21,858.11 February $17,497.13 March $36,533.14 $75,988.30 $ 181,450.78 $ 75,980.38 $257,459.16 for nine months end March 1995 – this annualised $257,459 x 12 9 = $343,278 32 On 7 April 1995 Mr Miller enquired of Mr Savage whether the stocktake had been completed. Mr Savage replied that the sundry items were too numerous to list, that it was not an issue and that a copy of the stocktake was available for Mr. Miller to collect. 33 On 10 April 1995 at the Allaids' site Mr Miller again met Mr Gardem who was walking upright and not using a walking stick. Mr Miller said that on that occasion Mr Gardem handed him a document entitled Allaids Regional Plant Hire Pty Limited – Profit Comparison, upon which appeared a column of handwritten entries for the 1994 year. Mr Gardem did not recognize that document as one provided by him. The handwritten figures were not his. Amongst other conversation a conversation to this effect occurred: "Miller: What rent would you be asking for these premises before the new building's completed, and when do you expect that the new building will be ready to be occupied. Gardem: You'll have to see Ron as he worked out the rental which is very economical. I will commence work on the new building immediately when I have received the proceeds of sale. I've all the permits ready Miller: How long should it take to build? Gardem: About nine months, depending upon the weather. As you can see some of the major steel works are here already. [While saying this Gardem indicated the quantity of steel beams Mr Miller had previously observed stacked against the wooden fence on the southern side of the yard. Gardem then produced a professionally prepared site and floor plan for the proposed development and showed it to him.] Gardem: You'll have to decide on colour and office plan layout. The shed will have several other lessees but the front section facing Peisley Street will be reserved for you should you go ahead and purchase the business. There is a real advantage in passing traffic along Peisley Street." 34 Mr Miller asked Mr Gardem to explain some of the expenses shown on Allaids Profit Comparison. Mr Gardem explained that the management fee was money he paid himself and that the motor vehicle expenses of $23,738 were so high because he "ran all the families motor vehicles through the company's books." He also "showed visits to family as a business expense and noted them as a business trip. You know how it works … as far as expenses are concerned you'll only have a couple of hundred dollars for the phone and electricity each month There are simply no other outgoings with hire equipment outside of wages…". Mr Gardem continued: "Everything on site will pass to you on a walk-in walk-out basis. I'll assist you for a week or so and take you around and introduce you to some of the main customers, including the Councils. I've made a lot of money from this equipment. You can too. With no experience $300,000.00 is easily sustainable. … You could increase the hire output by getting around to builders and contractors and the like which is something I've not bothered to do over the past couple of years. I've neglected the business since my back injury." 35 On 19 April 1995 Mr Miller again met with Messrs Savage and Gardem. Amongst a considerable amount of conversation the following occurred "Gardem: Income is … about $25,000 per month. Miller: Is all the income generated from Allaids Hire and no other company or activities? Gardem: Yes. Absolutely. You'll make $300,000 per year easily with the equipment you're purchasing." 36 Messrs Gardem and Miller then discussed various sources of income and Mr Gardem instructed Mr Miller how to conduct the hire business with Councils. Mr Gardem confirmed that the time frame for the new building was "three to four months till occupation." Mr Gardem also stated that all the equipment on the price list was included, ending with the remark, "It's basically walk-in walk-out". During the conversation Mr Gardem pointed to one piece of redundant equipment (an old square metal frame on wheels with a motor attached) and his personal tools on a shadow board on the northern wall of the workshop above the bench as the items which he wished to retain. Mr Miller agreed. 37 Mr Miller formed the view that the business had "tremendous potential" based on the documents he had been given and what he had been told. A purchase price of $220,000 was agreed later that day. On that day and subsequently Mr Savage confirmed that the business purchased had a minimum income of $300,000 per annum. 38 On 28 April 1995 Messrs Gardem and Miller met at the site. Mr Gardem promised to introduce Mr Miller to some of the Allaids major customers and the Councils. Mr Gardem stated that $300,000 was easily achievable and could be increased by expanding the mining and major project areas. On Mr Miller mentioning that he had a possible hire for a dismantled Ford Bobcat Mr Gardem stated that he was taking it. That led to an argument in which Mr Miller asserted that Mr Gardem had said that whatever was on site, apart from his personal tools on the shadow board and the old motor in the yard passed with the business and that Savage could confirm this. Mr Gardem replied, "Savage has nothing to do with this." Mr Miller left the site with the issue unresolved and took the matter up with Mr Savage. He said, "I hadn't realised it was a Bobcat. But yes, everything stays which you have inspected and its not an issue." Mr Miller said that he accepted this and assumed that Mr Savage would take it up with Mr Gardem. Mr Miller paid a part deposit of $2000 with the balance of $18,000 being paid a little later. As earlier noted the contract for the sale of the business was entered into on 8 May 1995. 39 Post Contract Events About 15 May 1995 Messrs Miller, Gardem and Savage met on site for the purpose of a final stocktake. Mr Miller noticed that there was a lot of equipment missing from the yard. He has set out the missing items in his affidavit. A conversation to this effect occurred: "Miller: This is just not on. I'll have to re-think this. Gardem: I will compensate you for all the missing equipment. That's the spirit of the deal." 40 Mr Savage took Mr Gardem to one side out of Mr Miller's hearing. Upon their return a conversation to this effect ensued: "Savage: I'll talk to Graham and get back to you about compensation. Gardem: I'll repair the Kohler motor and the wacker packer. I'll replace the 9" grinder, sander and stand pipe with a test metre which is a requirement of this business but I'm keeping all the welding equipment, tools for the lathe, drill bits and sundry tools. I'll compensate you for their removal. That's the spirit of our deal. Miller: I don't want to go ahead with the deal. Savage: We'll sort this out John. You'll be compensated for the whole lot. … Gardem: We'll meet on 17th to discuss re-imbursement and compensation." 41 As Mr Miller believed he was going to receive compensation for the missing equipment he authorised his solicitor to settle and pay the balance of the contract price of $200,000. 42 On 16 May 1995 Mr Gardem arrived at the site but despite being pressed by Mr Miller declined to discuss the question of compensation, eventually stating that they would do it on 17 May. Mr Miller asked Mr Gardem when he anticipated commencing the building of the new shed and received a "brush off". 43 On 17 May 1995 Mr Garden drove to the site and said words to this effect to Mr Miller: "… I've reconsidered my position. I'm relying upon the original equipment sheet. All other expressions are withdrawn and that includes the question of compensation." 44 At that point Mr Gardem wrote out and signed an invoice on Allaids Hire letterhead in these terms: "The following are sold for the total price of $5.00 plus the value of 1x9" grinder, 1x sander, 1x stand pipe, 1 x electrical test unit, 1 only concrete trowel, 1only wallpaper stripper, 1 only box trailer, 1 only BOKVA generator and switchbox, 2 only vibrators, 1 x diamond blade to suit a brick saw, general insurances, 1 only high pressure water washer, 1 only road roller to suit a Mustang loader." Mr Miller said that Mr Gardem placed a nominal $5 as the value of this equipment. 45 Mr Miller directed John and Dario Siret to return the rollover frame from the dismantled Bobcat to the workshop. Mr Miller then approached Mr Gardem and had a conversation to this effect: "Miller What the hell are you doing. I want the Bobcat returned. Gardem: Have you got proof of ownership. It's on my property. You really should take a lesson in the law. I'm not happy about you attempting to keep property which doesn't belong to you." 46 Mr Miller sought legal advice and on 19 May 1995 his solicitors wrote a letter demanding the return of the items which had been taken. 47 Some days after 16 May 1995 on returning to the site Mr Miller found the Bobcat had gone and two or three men moving items from the area his company had leased to a shed owned by Mr Gardem on an adjoining block. When Mr Miller remonstrated with him, Mr Gardem replied,"You should take a lesson in law." 48 On 1 June 1995 Mr Gardem again attended at the site. He was very aggressive and intimidating. As he left the site he loaded some further items into his utility. Between 3 June 1995 and 30 July 1995 Mr Gardem and his son continued to remove equipment from the site. 49 Between May/June 1995 and February 1996 the total income achieved from items of equipment purchased with the business was $70,793. Because of the poor performance of the business it was necessary to inject a further $45,500 into the business from the assets and reserves of Mr Miller to meet outgoings such as loan payments, wages and consumables. 50 In about October 1995 the plaintiff decided that it would have to cease trading as the business had liabilities of about $185,000 with loan repayments of about $3030 per month. In December 1995 the plaintiff resolved to transfer its business to 17 Peisley Street and not to renew the lease of 13-15 Peisley Street expiring on 31 December 1995. 51 According to the plaintiff about 16/17 December 1995 Kirbailia entered into possession of the demised lands and excluded the plaintiff. 52 In cross-examination counsel for the defendants attacked Mr Miller on a number of fronts including his recollection of a number of conversations, his assertion that a significant number of items on and around 13-15 Peisley Street and not listed in the contract were to pass to the plaintiff on the sale and his business competence. The cross-examination extended over 90 pages. 53 Mr Miller agreed that his contemporary records and his draft statement did not contain any of the conversations of 28 March 1995 set out at length in his affidavit of 15 March 2001 and earlier summarised in part. He agreed that he had not written down the extensive conversation reproduced in his affidavit (para 8) but he said that in the years prior to his affidavit he had had many discussions with his solicitor about what had occurred. Mr Miller stated that he remembered the conversations clearly. 54 Mr Miller said that there were several items of equipment on site which Mr Gardem wanted which he (Miller) accepted. Mr Miller also accepted that the mini moke on the site belonged to Mr Gardem's son and was not included. Mr Miller stated that a lot of the equipment on the site had been dismantled. It would be useful for spare parts. Mr Gardem had told Mr Miller that he could have the equipment on the south side of the yard. The sale was on a walk-in walk-out basis. Mr Miller relied on Mr Gardem's FAX to the effect that the buyer was welcome to "whatever there is" on the site. 55 Mr Miller stated that he asked Mr Savage for a stocktake of the whole business. However, that stocktake was never completed. The only stocktake sheets which Mr Miller saw came from the stocktake of 15 May 1995. Mr Miller agreed that he had exchanged contracts on 8 May 1995 without having been satisfied by a stocktake. Mr Miller said that he never received the stocktake which Mr Savage said was available for collection. 56 Mr Miller said that Mr Gardem stated that he had no long-term contracts for the road rollers except for one at Parkes, but it was not a written contract. Mr Miller said that shortly after he took over the business Parkes Council telephoned and said that they no longer needed the roller, that is after June 1995. Thus a major source of income for the hire of rollers dried up at the end of June 1995. Mr Miller said that the Council was doing a stretch of road and had found themselves short of one roller and that is why that Council used one of Allaids rollers. The roadwork started prior to the plaintiff purchasing the business and ended shortly after the plaintiff took over. Mr Miller stated that this was explained to him by Mr Gardem before the purchase was settled. 57 Mr Miller stated that Mr Gardem had said that rollers, when rented, generated a good source of income. Mr Gardem had advised Mr Miller that he should become familiar with the right people at the Council at Parkes, other Councils, the Roads and Traffic Authority and the Mines. 58 Mr Miller confirmed that he thought that with the equipment he was buying the business had a tremendous potential and that he could make it run more effectively. The business was run down. Mr Miller believed he could approach customers and arrange for them to hire equipment. That was based on discussions he had with Mr Gardem. He had explained that the income of the business was higher in 1992 when he was able to get out and about. 59 Mr Gardem's advice was to concentrate on supplying large industrial and government clients with the road rollers. 60 Mr Miller agreed that he also believed that he could expand the business in other ways, such as by approaching local builders and sending them flyers and advertising. 61 Mr Miller said that Mr Gardem told him that about $8000 was generated through minor equipment. Mr Miller denied that Mr Gardem told him that he could not expect work to come and that he would have to find it. Mr Miller denied that Mr Gardem had told him that he obtained revenue from trading all over country New South Wales. Mr Miller said that he only found out that Allaids traded all over country New South Wales when he had the RTA schedule returned. In all the discussions with Mr Gardem, Mr Miller was given to understand that Mr Gardem operated only in the local district. 62 Mr Miller denied that Mr Gardem stated that much of the plant and equipment on the site belonged to other people. However "he pointed out a container on the eastern side of the block and some large black coils of reels and pallets on the western side of the block that he was storing for some company." 63 Mr Miller repelled the suggestion that he was not interested in knowing what Mr Gardem could pass on to him about the clients and equipment. Mr Miller agreed that in the period between exchange of contracts to completion he hardly attended the premises as most of the days he was transacting other business. Mr Miller said that he had been shown how aspects of the business operated prior to signing the contract. 64 Mr Miller agreed that the inventory attached to the contract ended with items beginning with the letter "T". That was the inventory which they had at the site. Mr Miller said that this was noticed while they (Miller, Gardem and Savage) were walking around and found that the remainder of the items under the letter "T" and items commencing with the letters after T down to the end of the alphabet had been omitted from the inventory. It was at this point that Mr Gardem grabbed the price list which included such items. Mr Miller said that he gave Mr Savage a comprehensive list which he had made which included those items (remainder of "T" and down to "Z") which he had expected to be attached to the contract. Mr Miller said that he never saw that list again. Mr Miller was reluctantly compelled to agree that he was prepared to exchange contracts without those items being in the contract. 65 It emerged during Mr Miller's cross-examination that all the documents which the plaintiff held or had been in his possession were not discovered when it filed its List of Documents. The documents not discovered were of some importance. Mr Miller's explanations were not satisfactory. The defendant suggested that Mr Miller was being less than frank and honest in what he did and that he was trying to prevent a proper defence being made to the plaintiff's claim. I was inclined to think that Mr Miller was somewhat of a "muddle head" rather than deliberately dishonest. He may have been less than frank. The effect of not discovering the documents at the correct time cannot be overlooked. 66 Counsel for the defendants cross-examined Mr Miller as to the items the plaintiff claimed should have been delivered but were not. I will not rehearse the details. 67 In the course of being cross-examined to the effect that the conversation alleged by him on 16 May 1995 as to the start of the building of the shed did not occur, Mr Miller replied that the building of the industrial complex was a key to the success of the business and he was quite keen to have that started. Mr Miller acknowledged that when the new building was completed the plaintiff would have to pay more rent. Mr Miler stated that he was shown a plan and advised by both Messrs Gardem and Savage that the plaintiff would be the number one unit facing Peisley Street and also be entitled to part of the southern side for the storage of equipment when it was built. In his affidavit Mr Miller stated that he was shown plans and asked to choose colours. The remaining part of the statement did not appear in the affidavit. Mr Miller's explanation was that he included the important parts, namely that he was shown the plans of the shed and the fact that it was going to be built. I would have regarded Mr Miller being told that the plaintiff's unit was to face (and be visible from Peisley Street) as important, as did Mr Miller in one of his answers. While I have some doubts about Mr Miller's explanation for the omission from his affidavit, I think that Mr Miller was probably told what he alleges. Both Messrs Gardem and Savage were very anxious to secure a sale and to do so built up what the plaintiff was going to achieve. Mr Gardem left me with the impression that he was prepared to say anything to obtain a sale. 68 Mr Miller said that on taking over the business he visited all the major Councils within about a radius of 100 kms from Orange. He was also on the telephone weekly to all the major Councils who used road rollers. He visited Cadia Mine. The plaintiff provided services as far afield as Lithgow. The plaintiff carried out sandblasting on the smaller jobs, obtained work from a builder who was erecting a block of flats and at the new K-mart complex. 69 The plaintiff purchased a mini-loader and obtained work for it from Orange City Council, a lot of private builders and Mini-Quick in Orange. By about September/October 1995 the plaintiff was averaging receipts of about $9000 per month. At that time the road rollers were not being hired. Many of the customers only required and hired smaller items, that is items costing less than $200 per day. Indeed, a large percentage of the income came from the hire of the smaller items. 70 Mr Miller said that the plaintiff had no contacts other than those obtained by using the diary or the phone book left in the business by Mr Gardem. 71 Mr Miller said that because the required amount of money was not coming in he decided to cease trading in October 1995. He claimed that he had done as much as he could to promote the business between May and October 1995. In the time available it had not been possible to pursue all intended avenues. 72 Mr Miller agreed that he had concentrated on the gross amount which had been received by the business in the period prior to purchase. He regarded a satisfactory cash flow as necessary. When he studied the expenses and spoke to Mr Gardem about them it was obvious that some of the expenses had been inflated and could be reduced. He had prepared three plans, one based on a gross income of $347,000 and one on a gross income of $186,000 which he assessed to be the break even point. 73 Mr Miller stated that the income figures supplied were not generated from the equipment which he bought. The vendor's income included that received from larger sandblasting jobs, for example, rail carriages and large vessels at industrial sites. The equipment which the plaintiff had purchased from Gardem Investments did not have an industrial capacity. Mr Miller said that he also subsequently discovered that Gardem Investments had done some industrial painting and established car parks at restaurants. He had not expected to operate in these fields. 74 The lengthy cross-examination of Mr Miller did not make any significant inroads upon his credit or upon the conversations he had with Messrs Gardem and Savage. It did emerge that Mr Miller had received much less than he had bargained for and that he had been active in promoting the business and use of the equipment purchased after he took over. 75 I turn now to the evidence of Mr Graham Gardem. Mr Gardem confirmed that he appointed Mr R Savage of L J Hooker, Orange, to act as agent on the sale of the plant and equipment hire business known as "Allaids Regional Plant Hire" and that he instructed Mr Savage with a document entitled "Allaids Regional Plant Hire Pty Limited Profit Comparison" and a four page inventory list. On the following page is a sketch plan prepared by Mr Gardem "of the land at 13-15 Peisley Street, Orange with the structures located upon it as at May 1995." He added, "Further I have had drawn on that plan the boundaries of the two separate lots that comprise the parcel." 76 After correcting Mr Miller's description of a number of items Mr Gardem continued that a considerable amount of obsolete or "junked" equipment was lying around on the property and was not included in the sale. Mr Gardem maintained that a large amount of that machinery was owned by other people. Many of those items were on the land when Kirbailia acquired it and had remained there rusting and overgrown. 77 Mr Gardem stated that the conversation asserted by Mr Miller to have occurred after his initial inspection on 28 March 1995 as to what was included in the sale did not take place and that at no time in dealing with Mr Miller did he (Gardem) say that the business was being sold on a walk-in walk-out basis. Mr Gardem said that the conversation held was as follows: "Savage: Why is equipment on this list missing from the yard and why is some equipment outside not on this list? Gardem: Everything on that list (the 4 page Inventory) is going with the business. Anything not on that list which is an important item of plant for the conduct of the hire business will be included in the written contract for sale if I have missed it. Savage: Are any consumables included? Gardem: No, I am not supplying petrol or any consumables for this sale." 78 The four page inventory was incomplete, stopping with items commencing with the letter "T". The version of the conversation given by Mr Miller is probably the correct one. Mr Miller was worried about the inadequacies of the inventory and wanted to ensure that the plaintiff was obtaining everything of use. Mr Gardem, who was anxious to secure a sale, was expansive. 79 Mr Gardem denied that on 28 March 1995 when he handed Mr Miller a price list he (Gardem) said that it was the equipment and price list of Allaids (although dated 1990) and that everything on site remains as it was walk-in walk-out. Mr Gardem said that the conversation which took place was as follows: "Gardem: Here is a price list. It gives you an idea of what price we rent items of equipment for and what each item of equipment can earn. It is only a price list and records some items twice. It does not record quantities and you should not rely upon it as an inventory. You should rely on the Inventory of plant that you used when you went around the shop." 80 The version given by Mr Gardem is incorrect. It was the sort of business that could not be run adequately without spare parts and consumables. The inventory was admittedly incomplete. I think that Mr Gardem did say "it's walk-in walk-out." 81 Mr Gardem insisted that the copy inventory handed to Mr Miller was the inventory to be attached to the contract for sale. While a copy of that inventory was attached to the contract I do not accept that the parties intended that the inventory attached to the contract would be incomplete. Mr Gardem accepted that items of plant such as trailers were missing from the inventory. The price list was used as a supplement to the inventory generally and particularly as to items commencing from "Trailers" to "Z". As to the telephone conversation with Mr Miller about early April 1995 Mr Gardem said that in that conversation he explained to Mr Miller that some items of plant were always out on hire jobs and that he should not rely upon the price list as an inventory because some items were duplicated for the sake of the client identifying the plant they wanted and that the price list did not record quantities. Mr Gardem denied that in that conversation he said that it was a "walk-in walk-out" sale. He did say that spare parts would be transferred with the business. Mr Gardem asserted he said to Mr Miller: "You will get what is on the Inventory of Plant aside from spare parts, the rest is not included." 82 Mr Gardem did use the phrase "walk-in walk-out" to describe the nature of the sale. He did not say the words just quoted which he asserted he used. 83 Mr Gardem denied that on the initial inspection on 28 March 1995 he showed Mr Miller any plans (relating to the buildings proposed to be constructed on 13-15 Peisley Street and the new proposed layout). I think that Mr Gardem probably did and that he probably advanced the new development as a significant feature enhancing the value of the business. 84 As to the letter written by Mr Gardem on 5 April 1995 setting out the revenues banked in 1994-95 he stated that the words "Hold Back Tax Reasons" appearing opposite the revenue banked for July of $61,354 were not part of that letter, were not in his handwriting or put there with his authority. 85 In answer to Mr Miller's account of the second inspection of 10 April 1995 Mr Gardem denied that as to the income of $61,354 for July 1994 he said that he said he held over moneys from the previous year to limit the tax liability. The income for July 1994 is very much higher than the income for any other months in the period July 1994-March 1995, which range from $20,836 to $36,533 in March 1995. All the other months in that period were under $26,500. There was no satisfactory explanation from Mr Gardem as to why the income for July 1994 was so much higher than that for the other months. The statement that this was due to holding back for tax reasons may well have been made. That is a credible explanation. 86 Mr Gardem denied that during that inspection he referred to the layout of the intended new building or that he referred to office plan layout or colours. He asserted that no such planning had been carried out for that new building at that time. Mr Gardem denied that non-related business items were included in insurance premiums and that he said that they were run through the company. 87 Mr Gardem denied that he neglected the business and insisted that he attended to work related matters on almost every day except when he took a holiday. He denied saying that he showed the costs of family visits as an expense. He denied saying, in effect, that the overheads of the business were low. 88 Mr Gardem said that he told Mr Miller of the following projects and sources of income, namely, Cadia Mine construction, Coles' renovations, Gold Mining firms, Orange Meatworks and Blayney Meatworks and that it was important to concentrate on supplying large industrial clients and government jobs. Mr Gardem said that he told Mr Miller that the business was capable of earning sustainable and satisfying levels of income, that the business was a competitive one and that they rarely had people walking into the yard asking them to carry out work. Mr Gardem stated that he continued to Mr Miller "I have had to ferret out potential work. That includes preparing submissions and following up contacts to win the work. The business has been revenued by trading all over country NSW." 89 Mr Gardem denied the conversation alleged by Mr Miller on 19 April 1995 (third inspection) to the effect that income was about $25,000 per month, that bad debts were minimal and not an issue, that the July 1994 income was so high for tax reasons, that all the income was generated from Allaids Hire and that the plaintiff would make $300,000 per year easily with the equipment he was purchasing. Mr Gardem said that he did say: "I expect the business should turn over $300,000 in the next financial year because of its sales history over the past 5 years and because of the construction projects already commenced and those which have been publicised to commence next financial year." 90 Mr Gardem also appears from his affidavit of 2 July 2002 to be denying that he said that Allaids Hire had a regular source of income from Parkes Council. Mr Gardem denied that he told Mr Miller that he needed to tender hire prices to all Councils around September, that the expected time frame for the new building was 3 to 4 months till occupation, that all the equipment on the price list was included, that it was basically walk-in walk-out. Mr Gardem said that as to discounts he recalled saying: "Discounts of up to 10% are allowed where a particular client has provided a good turnover. However, those occasions are rare because our prices are usually less than charged by Wreckair or Coates. They are our dominant competitors in relation to our major clients." 91 Mr Gardem denied that a conversation occurred as to him retaining one piece of redundant equipment (square metal frame on wheels with motor attached). Mr Gardem said that he produced the local yellow pages telephone book to Mr Miller and showed him the advertisement of Allaids. As to his personal tools and equipment generally Mr Gardem stated that he said: "Those are my personal tools. The bench, saw and frame belong to somebody else and aren't for sale. Much of the equipment on this site belongs to other people or is otherwise unserviceable and has nothing to do with the business you are buying." 92 In dealing with his meeting with Mr Miller on 28 April 1995 when Mr Gardem showed him how some pieces of equipment operated Mr Gardem denied saying that $300,000 per year was easily achievable and could be increased by expanding into the mining and major project areas and that $17,000 was the lowest he had ever earned in a single month and that only happened on one occasion. Mr Gardem said that he recalled telling Mr Miller that if he wished he (Gardem) could be available after Mr Miller signed the contract to take him to each of the Councils and other major clients. As to the "Ford Bobcat" Mr Gardem believed that Mr Miller was referring to a Ford skid steer loader which had been dismantled and was in the process of being sandblasted. It did not have an engine and needed repainting. Other critical parts were missing and parts may not have been able to be obtained. It was about 30 years old and did not have essential safety devices. It could not have been used legally by a customer or employee. Mr Gardem scrapped the equipment and bought a new Mustang which passed to the plaintiff on the sale. Mr Gardem said that the skid steel loader was of interest to the mechanically minded who had a private use for it or for parts. Mr Gardem agreed that he told Mr Miller it was not included in the sale. It was not in the inventory. 93 As to the final stocktake Mr Gardem recalled that some of the items listed in the inventory were not present on the site that day. As to each absent item Mr Gardem said that he was able to explain its absence on hire by reference to hiring documentation or by showing Mr Miller the item. Mr Gardem said that he was not aware that Mr Miller was using the price list for stocktake purposes. He said that most of the items Mr Miller had listed as missing were not made available for his inspection because they were contained in a locked shed elsewhere on the land. 94 Mr Gardem denied Mr Miller's account of the conversation as to the equipment said to be missing. Mr Gardem said that there was no conversation about compensation for missing equipment and that he had satisfied Mr Miller as to each item of equipment in the inventory which was absent at the time of the stocktake and in relation to other questions he had. Mr Gardem denied he promised to compensate the plaintiff for any equipment. 95 As to the meeting on 16 May 1995 at the site with Mr Miller Mr Gardem denied that he said that the average income was $25,000 to $27,000 per month depending upon the Rollers which generated over 90 per cent of the income. Mr Gardem denied that there was any conversation about settling compensation or the commencement and completion of the intended new building. 96 Mr Gardem denied Mr Miller's version of the conversation and events which took place at their site meeting on 17 May 1995 as to compensation for the allegedly missing equipment. Mr Gardem said that instead he said: "Several items which I intended to include in the sale have not been included in the Inventory of Plant in the contract. You can have those items for the nominal cost of $5. In my limited understanding of the law I think I need to charge you a small amount if such a transfer is to be binding on us. It's documented here in this invoice." 97 Mr Gardem said that he then handed Mr Miller the invoice 13240 (the contents of which are earlier mentioned) and that the following further conversation ensued: "Gardem: With that $5.00 Contract you now have all of the plant that you need to run the business and I trust you are now satisfied. Miller: I still think there are items of plant owed to me. Gardem: I disagree. No item of plant in the Contract or in the $5.00 Contract is missing. You have all that you have contracted to buy. Other items not included in the Contract are in my possession and will remain in my possession." 98 Mr Gardem confirmed having the Ford loader moved off the portion of the land leased to the plaintiff and that he had arranged to have the welders and gas bottles removed from the leased area. He returned the gas bottles to BOC, their owner. 99 Mr Gardem did not dispute that he had removed a weed spray unit, but maintained that it was not part of the sale as it was damaged beyond economical repair and had been replaced in the Inventory in the Contract by a new unit. 100 Mr Gardem stated that he was born on 25 October 1944. In about 1972 he moved to Orange. In about 1975 he was appointed Manager for Western New South Wales of Boral Limited with responsibility for two manufacturing plants and its team of construction labourers. The business manufactured roadmaking materials and made roads of all descriptions and other black-top flat pavements. Mr Gardem travelled throughout western New South Wales frequently. He met many of the people in that region who placed orders for roadmaking equipment and/or processes, shire clerks, engineers and other government officers concerned with the construction of private roads. 101 In 1984 he and his wife purchased a business called Allaids Regional Plant Hire which had been established in Orange for 15 years. At purchase, the business had gross receipts of $80,000 annually. In 1985 the business was transferred to Gardem Investments. Mr Gardem stated that he spent long hours in managing and expanding the business. He has detailed an impressive list of useful activities including extensive sales and promotion efforts and the provision of superior service. 13 Peisley Street was acquired and later 15 Peisley Street was acquired. Mr Gardem utilised his wide web of contacts. As a result of his industry and endeavours the business flourished. 102 Mr Gardem said that the typewritten figures in document entitled "Profit Comparison" were to the best of his knowledge accurate. The document was prepared by his company's accountants. The comparison was supported by the tender of the company's accounts for the years ended 30 June 1992, 1993, 1994. Mr Gardem said that Mr Miller did not seek his assistance for the two weeks following 8 May 1995 (exchange of contracts) or to be introduced to any customer or shire clerk. The picture painted by Mr Gardem was that poor management and a poor marketing performance on Mr Miller's part were responsible for the business doing so badly under the plaintiff's control. Mr Gardem placed much weight on his contacts, his knowledge of the equipment and the business, his ability to provide a superior service and his extensive web of contacts. These aspects did not receive so much prominence when Mr Gardem was trying to sell the business. 103 In his affidavit of 3 July 2002 Mr Gardem stated that the income of Gardem Investments for the years ended 30 June 1992, 1993, 1994 and for the part of the year period up to 16 May 1995 was predominantly derived from the business sold to the plaintiff. Aside from hiring equipment income was earned from consulting (less than $1000 gross in total for the whole periods covered), construction and civil engineering work (about $5000 gross in a good year), industrial painting (about $1000 gross in an average year), sandblasting (about $30,000 gross in an average year), external mechanical repairs (about $10,000 gross in an average year) and marketing a range of concrete drainage products and cast iron gates (about $1000 gross in total for the whole of the periods covered). These sundry sources of income totalled about $46,000 annually during the periods mentioned. Attached to Mr Gardem's affidavit of 3 September 2002 was a schedule dealing in detail with each of the items Mr Miller claimed was missing and setting out what Mr Gardem regarded as the true position. 104 Mr Gardem's cross-examination extended over 157 pages of transcript. In May 1993 he was injured in a car accident and hurt his back badly. Proceedings were brought in which he claimed loss by reason of his incapacity caused by the accident. The business had been on the market for sale since at least July 1994. It may have been longer. He had placed advertisements in the newspapers prior to Mr Savage's retainer. Mr Gardem said that he had prepared the four page inventory examining the equipment which Gardem Investments had in terms of its serviceability and income earning capacity. The original list (inventory) which was prepared had entries on it after "Tractor Same brand". 105 Mr Gardem conceded that some part of the private expenses of the cars listed in the depreciation schedule were met by the company. He also conceded that in supplying particulars of his claim he had instructed his solicitors that the activities of Allaids at the time of his accident included: (a) hiring a wide range of equipment including small tools and handyman equipment and machinery (b) hiring a large range of equipment, principally roadmaking equipment – either on a long term or short term basis (c) Small, lucrative consultancy practice for the Public Works Department including writing specifications (d) Construction – (i) subdivisional constructions, (ii) small roadmaking tasks such as construction of playgrounds and high standing areas, and (iii) recreation services, remaking tennis, netball and basketball courts. (e) Industrial painting; carrying out major works in the mining industry and with local government owned municipal and still water reservoirs. (f) abrasive blast cleaning (g) external mechanical repairs – mechanical repairs off-site using the service machines with fitters (h) marketing a range of concrete drainage products and cast iron products throughout the western area of the State, pavements, grates and drain covers 106 Mr Gardem agreed that he also claimed that after the accident his average working weekly hours were 30 hours per week. Prior to the accident he had worked 60 hours per week. His working capacity had been halved. He was unable to work a full day. From time to time he was kept away from the business for some days, flat on his back. His back limited his active participation in the business. He wanted to get out of the business because of his back injury among other factors. 107 Mr Gardem said that he showed Mr Miller a site plan and discussed whether it would be better for him to use the rear of the building as the hire business did not need a view from the front (the street) and would avoid having to pay a premium for a shopfront. The plan was sufficient to show the external layout of the building, but was deficient in showing the internal layout. When Mr Gardem was shown the plan attached to the development approval given to the valuer on 11 August 1993 he agreed that the plans of the new building on the land were sufficiently advanced to permit a discussion about where in the new premises Mr Miller's business might be located. 108 Mr Gardem said that by his FAX of 5 April 1995 he was referring to the unserviceable machinery in the yard. Whatever was there the buyer could have, apart from one engine he had earlier identified. 109 Mr Gardem accepted that in March 1992 five pages of plans were prepared in relation to the proposed development at 13-15 Peisley Street, Orange. 110 After criticising the use of the term "Bobcat" by Mr Miller and others, Mr Gardem used that term in an advertisement he prepared. Mr Gardem's criticisms of the terminology used by Mr Miller which were designed to highlight Mr Miller's lack of technical knowledge and technical competence were a little precious. 111 Mr Gardem agreed that the RTA was told about many more pieces of equipment that Allaids had for hire than passed to the plaintiff pursuant to the sale documents. This was because price schedules had to be submitted many months in advance and regard was had to list equipment which might be obtained. 112 Mr Gardem said that he did not notice the inventory was incomplete until during these proceedings, that is, during the hearing, with the exception that he had earlier noticed that the water washer was missing from the inventory. Mr Gardem did not agree that the last page of the inventory was missing. I interpolate that it is obvious that it was missing on 28 March 1995 and subsequently. Mr Gardem claimed that while being cross-examined he noticed a road roller may not be clearly described. 113 Mr Gardem agreed that there were quite a lot of items on the price list which were not on the inventory. This was because the price list included items that it was hoped would become available for hire because of repair or refurbishment. 114 Mr Gardem said that the purpose of the transfer of the equipment listed on Invoice 13240 was to put right what he thought was wrong. This was to give Mr Miller full value for the business that he purchased. The items listed should have passed as part of the sale. Mr Gardem conceded that he promised Mr Miller that he would provide to him (Miller) all of the equipment necessary to conduct the business in the way he had conducted it. 115 Mr Gardem said that to the extent that there was equipment not mentioned in the contract but which he had used to conduct the business he intended that to pass to Mr Miller and he (Gardem) said that to him. Mr Gardem thought that he said this to Mr Miller on 17 May 1995 when he wrote out the invoice. Mr Gardem stressed that no-one should think that because an item of equipment was on a price list it was available for hire. 116 Mr Gardem said that the Profit comparison handed to Mr Miller had been generated by Mr Gardem's accountant for the purpose of demonstrating in the various proceedings based on the injury to his back the accounts of the business over the years 1992 to 1994. Mr Gardem did not accept that the comparison was intended to show that the business had fallen away after his accident. That is what they did show. Mr Gardem was again being precious in his answers. Those proceedings were eventually settled after Mr Gardem had given some evidence. 117 There was extensive cross-examination about the manner in which Gardem Investments ordered some of its accounts and the refusal of the Deputy Commissioner of Taxation to accept what had been done. It is not necessary to rehearse the details. They appear at T184 et seq. 118 In a document which Mr Gardem handed to Mr Savage to assist him in selling the business Mr Gardem stated that he retired from full time employment on 27 August 1993. 119 Mr Gardem confirmed as correct that since the accident he had not been able to travel extensively or fulfil the roles he had previously been able to do. 120 Mr Gardem said that if Mr Miller believed that the entirety of the sales revenue shown in the document entitled "Profit Comparison:" was derived from the hire of plant and equipment, he would be wrong. 121 During the portion of his cross-examination which dealt with the items on the premises and what was included in the sale and what a purchaser of a hire equipment business would reasonably take to be included in the sale, Mr Gardem was evasive and unsatisfactory. Some of his answers were unresponsive to the question and some were designed to denigrate Mr Miller. 122 Mr Gardem agreed that he told Mr Miller that the income of the business was generated by the equipment he could see (T223). Later, on the same page of the transcript, Mr Gardem denied such a statement, claiming he misunderstood the question. Mr Gardem insisted that nothing he took away contributed to the income earning capacity within the months the business operated prior to Mr Miller taking it over. 123 Mr Gardem agreed that he said that if an item was on the equipment list but not visible in the yard he (Mr Miller) would nevertheless get it. 124 Mr Gardem rejected the exaggerated proposition put by counsel for the plaintiff that Gardem Investments had a vast quantity of consumables on site. He did however agree that Gardem Investments had on hand a handy supply of all the parts it needed and all the consumables it needed to operate the business. 125 Mr Gardem thought that he gave the letter of 5 April 1995 addressed to Mr Savage direct to Mr Miller. Mr Gardem agreed that he intended by furnishing that document to set out for Mr Miller the amount of money which had been banked by Allaids in the nine months listed in that letter, namely, $257,431.16. He then extrapolated from nine months to twelve months suggesting that the income for the year ended 30 June 1995 was going to be $343,279. Mr Gardem was unable to explain why the accounts of Gardem Investments (Allaids) showed its gross income for the year ended 30 June 1995 as $246,670.90, nearly $11,000 less than the amount banked by Allaids to 31 March 1995 but felt there would be a reason for it. No reason was advanced in either cross-examination or re-examination. Mr Gardem agreed that to the extent that his letter of 5 April 1995 purported to reflect the income of Allaids for the nine months up to March 1995 it was wrong and that any person relying on that document to determine the income from Allaids for that nine months would be misled. 126 Mr Gardem's statement that he did not understand that Mr Miller was annoyed about Mr Gardem and his son coming onto the property and removing items from the portions of the land leased to Mr Miller was not credible. 127 Mr Gardem stated that he did not say to Mr Miller that you could not run the business without spares and consumables or make a statement in general terms to that effect. However, it was true that you could not run the business without spares and consumables. 128 Mr Gardem said that he had not investigated why the income for July 1994 ($61,354) was so high, especially when compared to the figures for other times. In broad terms it was nearly, or about, three times the usual monthly income. Mr Gardem regarded that matter as being of no consequence. 129 Mr Gardem stated that as he and Mr Miller walked around the premises he (Gardem) specified many different items which would not pass with the sale. Mostly they were junk and some of the items belonged to other people, Mr Gardem endeavoured to limit the general words in his letter of 5 April 1995, namely, "and the buyer is welcome to what is there, apart from the engine that I already mentioned I had wanted to keep." Mr Gardem said that the remark related to one [particular location in the yard. There had been a discussion about what these items were. That limitation did not appear in his letter. It referred generally to the availability of US yard machinery. Mr Gardem's answer was unconvincing and amounted to specious special pleading. 130 Mr Gardem said that the items on Invoice 13240 of 17 May 1995, which he transferred to Mr Miller for $5, and which were worth much more than that, belonged legally to him (Gardem Investments) but ought to have belonged to the plaintiff. 131 Mr Gardem agreed that prior to the stocktake on 15 May 1995 he had removed many items from the area to be taken over by Mr Miller and placed them in a shed on the part of the land which Kirbailia retained. Mr Gardem denied that on 15 May 1995 he agreed to compensate the plaintiff for the missing equipment. He did agree to supply the parts needed for the roller motor. This was done and they were fitted by Mr John Siret. Mr Gardem also denied that he agreed to meet Mr Miller on 17 May 1995 to discuss questions of reimbursement and compensation. He did say that by 17 May 1995 he no longer felt bound to his expressions of goodwill. 132 Mr Gardem denied that on a number of occasions he told Mr Miller that he ought to take lessons in law. Instead Mr Gardem stated that he told Mr Miller to refer his questions to a solicitor if he had trouble with what Mr Gardem was doing. 133 Mr Gardem agreed that in 1995 he conducted with Allaids a rather large sandblasting business. 134 Mr Gardem agreed that he had written a number of letters to Mr Miller and his solicitors attempting to persuade them to discontinue these proceedings because he (Gardem) had no assets. This was despite having received $80,000 in his hand by way of settlement of his court case. Mr Gardem claimed that he lived off these moneys. He agreed that each of Kirbailia and Gardem Investments had no assets. Mr Gardem agreed that Kirbailia had sold 13-15 Peisley Street in 1996. He claimed not to be sure how much it received. He asked if it was $310,000. That was his recollection. He claimed that he could not recall how much was required to discharge the mortgage over that property. When asked for his best estimate of the net amount received by Kirbailia as a result of the sale of the property Mr Gardem replied: "I can't guess that, it may have been the totality of it, it may have been that we used some of the money from the sale to pay it out which would have released the whole of it at that time, I really can't be certain." That was an unsatisfactory and evasive answer. Mr Gardem was being neither truthful nor frank. He came across as "street" smart and familiar with his finances except when that did not suit him. He determined to be as obscure as possible 135 Mr Gardem stated that when he and his wife sold their jointly owned home in Orange they received, he thought, about $210,000. Mrs Gardem now owns the house (in Queensland) in which they live but, according to Mr Gardem, it has "a mighty mortgage on it." 136 This passage appears at T.262: "Q. Are you able to say in succinct terms what happened to all of the money you received? A. Without being fully definitive a significant amount was expended first of all paying back debts of the two companies, Gardem Investments and Kirbailia and I don't say that they were fully discharged, all the debts were fully discharged that remained, and in addition to which there were some share tradings, in particular with MIM and Pasminco, neither of which were helpful." 137 Mr Gardem was pressed as to the debts Gardem Investments had. It emerged that the company's accounts for the year ended 30 June 1995 revealed debts of $121,000, of which $101,000 was owed to Mr Gardem and $12,360 to Mrs Gardem. Mr Gardem said that there was a liability under a hire purchase agreement for a Mustang loader. Mr Gardem said that that liability could be $23,000; he did not have the figures. When pressed as to what had happened to all the money received by Gardem Investments, Kirbailia and himself between May 1995 and about the end of 1996, Mr Gardem replied :"All the money that was received at that period paid out debts and supported me and my family." When pressed for details Mr Gardem responded "I guess mortgage over all the properties." 138 These passages appear in Mr Gardem's evidence (T263-4): "Q. And you have written on a number of occasions, haven't you, to the solicitors for Mr Miller and indeed to Mr Miller himself, saying that you have no assets and that you had no funds to run the proceedings? A. That is absolutely true. Q. And indeed you wrote to Mr Miller and his solicitors on several occasions before July of this year indicating that you proposed to continue the proceedings yourself? A. Yes Q. And that they would take a very long time? A. Yes. Q. And you intended to appeal the decision and every decision that was made? A. To the extent appeals were available I would take advice. Q. And yet you turn up today with counsel and solicitors? A. Yes Q. And all of the legal representation that you sought to persuade Mr Miller and his solicitor you could not afford? A. I think if you spoke to the NAB at Redcliffe and asked for the loans manager, you would find that members of my family have mortgaged themselves further to pay for this portion of the proceedings … Q. You had a house in Orange which you owned jointly with your wife which you sold whilst these proceedings were on foot and you now live in a house only owned by your wife? A. Yes." 139 In re-examination Mr Gardem endeavoured to explain why the sequential numbering of invoices was not complete. He did not have an explanation why some of the invoices bore the same numbers. 140 Mrs R E Gardem gave evidence that she attended to the company's accounts by putting invoices and payments into the computer system. Sometimes an invoice was raised after payment was received. The object was to have an invoice for every transaction and to enter the details in the computer system. Mrs Gardem said that at various stages each of her son and two daughters worked in the business. 141 Mr Gardem relied on the affidavit of Bruce Tremain-Hill of 30 June 2002. This was critical of the way in which Mr Miller conducted the business. The new owner was described as aloof. Previously Mr Tremain-Hill had routinely hired machinery from Allaids because the service was excellent and the proprietors friendly and efficient and gave him extensive technical advice. Mr Tremain-Hill said that he did not continue to use the plaintiff. In his affidavit Mr Alan Grant said that he had routinely hired machinery from Allaids. When the business was sold in 1995 he started to hire the equipment he needed from Bassman's Hire (a competitor). Mr Grant said that the new owner of Allaids did not contact him to encourage him to again deal with that business. He has remained with Bassman's. Both Messrs Tremain-Hill and Grant probably would have been regular customers, but on a relatively small scale. 142 As Messrs Gardem and Miller gave evidence it was apparent that there were noticeable differences between them and their styles. Mr Gardem impressed as being knowledgeable about the equipment and capable of and freely giving useful technical advice. He came across as a forceful and "knock-about" man with gifts of self promotion and marketing. He insisted that he was intent on providing a high level of service. Mr Miller had a management background and was keen to cut costs. While I doubted if he had as much ability as Mr Gardem to chase and secure work, Mr Miller did have some ability in these areas. His personality was quite attractive. Mr Miller did not have the same level of knowledge of the capabilities of the equipment and how to tackle and solve problems likely to be confronted on the job. I would attach limited significance to these differences. Mr Miller stated that most of the customers seemed to know what equipment they needed and wanted to hire. That would certainly apply to those customers who were experienced in the fields in which they were operating as most of them would be. 143 I would have expected there to be some drop in business on Mr Miller taking over but nothing approaching the order of what apparently occurred. Mr Gardem overplayed his positive attributes. The financial figures supplied by Mr Gardem for Gardem Investments for the nine month period from 1 July 1994 to 30 March 1995 were inflated as the subsequent figures for the year ended 30 June 1995 show. The income of $246,670.90 shown in the company accounts for the year ended 30 June 1995 includes $21,640 from other sources, that is non-hire contracting income. Even taking the figure of $246,670 and spreading it evenly across the year, the income for nine months would be about $185,000. Allowing for the business being sold on 16 May 1995 it is improbable that the income of Gardem Investments to 31 March 1995 exceeded $200,000. The income for July 1994 of $61,354 was dubious, so that the figure of $200,000 is probably excessive It would also be excessive if the non-hire contracting income was deducted. Throughout the latter half of 1994 and the early months of 1995 the business of Gardem Investments was declining. Mr Gardem was seeking to sell a declining business which had been on the market for some time. 144 When Mr Gardem was asked in cross-examination about the handwritten figures for 1994 on the Profit Comparison he said that he had never checked them. Those figures corresponded with those for 1994 provided by the accountant for Gardem Investments. Mr Gardem was unable to say whether this was so. (T203) 145 Mt Miller had been pressing for the current trading figures since 28 March 1995 when he raised the matter with Mr Savage. On 5 April 1995 those from July 1994 to March 1995 were made available by Mr Gardem in his letter of that day. It is highly probable that on 10 April 1995 those for the year ended 30 June 1994 were also made available by Mr Gardem to Mr Miler in the manner described by the latter on 10 April 1995. Mr Gardem adopted the handwritten figures for 1994 appearing in the Profit Comparison. 146 The trading figures for the year ended 30 June 1994 were unaudited. They revealed a gross income of $415,478 but in the absence of source records and all of Allaids' invoice records the investigating accountants retained by the plaintiff questioned the reliability of the 1994 figures. I share those doubts. It is not known what percentage of the income related to the hiring business. 147 In the report of the investigating accountants (prepared by Mr C Katehos and Mr A Crestani) these views were expressed: "c) In the year ended 30 June 1995 (which was the year of sale of the Business), income declined from $415,478 in the year ended 30 June 1994 to $248,295. This represents a decline of $167,183 or 40.24%, as compared to the year ended 30 June 1994. Whilst the year ended 30 June 1995 may have been affected by the fact that the business was sold in mid May 1995 we do not consider that one and a half (1½) months worth of trading represents or explains the large decline in the business turnover. We have been asked to assume that the information made available to the purchaser was that turnover for the nine months ended 31 March 1995 was $257,431. This is more than the reported sales for the full year of $248,295, and d) The Director's Report for the year ended 30 June 1996 of the vendor company indicates that the principal activities of the company have remained unchanged as 'Hirer of Plant and Equipment'. This is in spite of the vendor selling the plant hire business in May 1995. Notwithstanding the above, the vendor company achieved sales of $155,319 in the year ended 30 June 1996, being the full year post sale of the plant hire business operated by the vendor. This represents 62.55% of the turnover achieved in the year ended 30 June 1995. Further, in the absence of other information, and assuming all things are equal, this would suggest that the business sold by the vendor to the purchaser achieved sales of only $92,976 in the year ended 30 June 1995 (ie. $248,295; less $155,319)." There is no satisfactory explanation available as to the gross income and the income from hiring. What is clear is that the business sold by Gardem Investments and purchased by the plaintiff was not capable of generating gross receipts of $300,000. 148 The Representations The defendants submitted that there had been no dispute as to the accuracy of the gross income figures reported in the accounts of Gardem Investments and shown in the Profit Comparison, that is, for the years ended 30 June 1989, 1990, 1991, 1992 and 1993. The plaintiff neither accepted them nor disputed them. Its case was that those were the figures given to it and that they did not relate solely to the business being sold, but included income derived from other sources. Mr Gardem was not prepared to accept the figures in handwriting for the year ended 30 June 1994 contained in a copy of the Profit Comparison. The investigating accountants for the plaintiff challenged the reliability of the figures for 1994. There was a dispute over the figures for the nine months ended 31 March 1995. 149 The defendants submitted that the first representation alleged (see para 8(a) above) that the sales (or gross income) of the business being sold, its expenses, operating profit and revised operating profit and revised profit for the years 1989-1993 were as set out in the Profit Comparison, had not been proven to be incorrect to any material extent. The amended statement of claim alleges that the representation was made on or about 8 and 28 March 1995 by Mr Savage. No representation was made on or about 8 March 1995 but one was made about 28 March 1995 in the terms alleged. That appears from the evidence of Mr Miller, which I accept. 150 The letter of Mr Gardem's solicitors of 22 March 1996 written for the purpose of his personal injury proceedings and the action of Kirbailia indicates significant other businesses being conducted in addition to the hiring of equipment and the hiring of a range of large equipment. The sandblasting appears to have been on a reasonably large scale and reasonably significant. 151 The report of the investigating accountants, while identifying various businesses conducted by Gardem Investments and Mr Gardem, states that they had not been provided with a breakdown of income derived from each of the different businesses or sources (p.10 of report). At p.17, the report comments: "As indicated earlier we do not have sufficient information to analyse the trading performance of the plant hire equipment business sold to the plaintiff. We are concerned with various key indicators of the vendor's trading performance and, in particular, declining trend in income of the vendor prior to the sale of the business and relatively large sales levels achieved by the vendor in the first full financial year post sale of the business. This suggests that sales of the business sold to the plaintiff were significantly lower than the sales levels that we have been asked to assume were represented to Mr Miller by Mr Gardem." 152 At p.19 of their report after pointing out that Gardem Investments was involved at least nine different business activities, the accountants continue: "It appears that only two (2) of the business activities comprised the business which was sold to the purchaser. However, the purchaser was provided with information concerning all nine (9) businesses in formulating his opinion as to the ultimate sale of the business." 153 I have earlier referred to Mr Gardem's figures in his affidavit of 3 July 2002 to the effect that about $46,000 of his annual income came from sources other than the hire of equipment. I am far from satisfied that that is an adequate figure. As Mr Gardem gave his evidence he did not impress me as being a truthful witness on many of the matters in dispute. However, about $46,000 represents a significant part of the income of the business for the years ended 30 June 1993, 1994 and 1995. The quotes for sandblasting attached to the report of the investigating accountants suggest that sandblasting was capable of generating substantial income. The evidence reveals that Gardem Investments had a substantial sandblasting contract in Bathurst. The investigating accountants explained that if Gardem Investments had a one-off sand blasting job for a substantial amount that would tend to distort the figures. 154 The plaintiff has established that the first representation was made and that it was false. 155 As to the second alleged representation (see para 8(b) above) that about 8 April 1995 Gardem Investments represented that the business being sold achieved sales, gross profits, expenses, operating profit and revised profit for 1994 as set out in the Profit Comparison, that representation was made and it was false. The amended statement of claim alleges that it was made by Mr Savage but the evidence establishes that it was made by Mr Gardem on 10 April 1995. These discrepancies are not of consequence. 156 The materials to which I have referred when dealing with the first representation are relied upon in reaching the conclusion which I have expressed on this ground. I have accepted Mr Miller's evidence that this representation was made. 157 The third representation alleged (see para 8(c) above) was that on or about 12 April 1995, Mr Gardem represented that the business would achieve sales of at least $300,000 per year. The evidence which I accept establishes that this representation was made on or about 10 April 1995. This discrepancy does not matter. The accounts of Gardem Investments appear to have been prepared on a "cash (or payments) received basis". 158 The figures for the nine months ending 31 March 1995 were of moneys banked. Moneys banked in the present instance are likely broadly to tally with income received. If not the figures supplied, which were supposed to reflect the current trading position, were misleading. 159 It was pointed out that this representation related to a future matter. Reliance was placed by the plaintiff on s.51A of the Trade Practices Act and s.41 of the Fair Trading Act. There were no reasonable grounds for making the representation. On 10 April 1995 Mr Gardem said, "With no experience $300,000 is easily sustainable." On 19 April 1995 Mr Gardem said, "You'll make $300,000 per year easily with the equipment you're purchasing." On 19 April 1995 Mr Savage said, "As Graham has said you can easily generate $300,000 per year from the equipment you are purchasing." Mr Savage also said "… you now have a great little business earning a minimum of $300,000 per year." Mr Gardem repeated on 28 April 1995, "$300,000 per year is easily achievable." The Profit Comparison handed to Mr Miller supported a figure of $300,000. 160 Mr Gardem may well be correct when he says that he did refer to the Profit Comparison. However, his version of the conversation, namely: "I expect the business should turn over $300,000 in the next financial year because of the sales history over the past 5 years and because of the construction projects already commenced and those which have been publicised to commence next financial year" is wrong. 161 Mr Gardem did not put the matter in the guarded way which he suggests. It was not just a matter of expectation. Mr Gardem made the representation alleged by Mr Miller. It is no answer as submitted by the defendants that Mr Miller acknowledged the concept of "potential". 162 The defendants submitted that on the basis of past performance, even taking into account some small discount for the absence of consulting and concrete drainage pipe agency income, a representation of future income of $300,000 was reasonable. Such a representation was on the basis that the plaintiff, through Mr Miller, conducted the business purchased properly. I agree that it was implicit in the representation that the plaintiff conducted the business "properly". By "properly" is meant efficiently, that is, seeking out hiring opportunities at competitive prices, giving good service and helpful advice and being friendly and pleasant. The critical factors would have been the price, the hired equipment working well, good service and the need of the hirer for the equipment. Mr Gardem did not tell Mr Miller that he would have to cover country New South Wales, but left him with the impression that the business was a local one, that is, one where the customers or hirers came from the Central West of New South Wales. In the letter of 22 March 1996 from the defendants solicitors it is written, "The company was successful in promoting this range [wide range of hire equipment] to customers within about a 50 kilometre radius of Orange but did have some equipment placed further west in the State". 163 While Mr Miller may not have had all the skills possessed by Mr Gardem, Mr Miller did not fail to conduct the business "properly" in the sense that that word has been previously explained. The greatest problem seems to have been that the various Councils did not wish or need to hire its rollers which attracted the major income. There was no suggestion that the hiring charges of the plaintiff were too high or that the hired equipment was not adequately maintained. Mr Gardem told Mr Miller that the business was not seasonal and that it averaged a gross income of $25,000 to $27,000 per month, with the lowest return being $17,000 in one month. 164 In making his representation that the business would achieve sales of at least $300,000 per year, Mr Gardem took into account, as appears from his statements, the lack of experience and knowledge of Mr Miller and that the business had previously had the benefit of Mr Gardem's knowledge, experience and web of contacts, although his health had restricted his activities since the accident. The accountants for the defendants in their report of 18 September 1999 wrote, "The business was sold on 8 May 1995 because the services of Gardem were not available." 165 The defendants submitted that as the plaintiff had carried out sandblasting after acquiring the business it could not now complain that the business transferred did not include sandblasting. The sandblasting carried out by the plaintiff was in respect of relatively minor jobs whereas Gardem Investments had carried out major sandblasting work. More importantly, the plaintiff was led to believe it was purchasing a business which hired equipment and that business would achieve sales of $300,000 annually. 166 The defendants also submitted that John and Dario Siret, two employees transferred to the plaintiff by Gardem Investments were skilled and semi-skilled labour with construction and civil engineering experience. Work of that kind could have been performed under Mr Miller's management. That was not the kind of business which the plaintiff was led to believe that it was purchasing. 167 The actual income received by the plaintiff from 16 May 1995 onwards was small and a long way below a rate of $300,000 per annum. 168 The representation made was false and false at the time it was made. Mr Gardem did not believe that the business was capable of achieving gross sales of $300,000 in the ensuing year or years and especially not without him. 169 The fourth representation alleged (see para 8(d) above) is that about 19 April 1995 Mr Gardem represented to Mr Miller on behalf of the plaintiff that Kirbailia would commence construction on a new building immediately after the sale of the business and that such building upon completion would be let to the plaintiff at a yearly rental of $26,000. Such a representation is substantiated by Mr Miller's affidavit of 2 July 2002. According to Mr Miller Mr Savage referred to the rental on the new building in a discussion later that day. There had been earlier discussions about the new building. Mr Gardem denied that the conversation with himself alleged by Mr Miller took place. Mr Gardem is incorrect. 170 The erection of the new building was an important part of the sale. The length of the lease of the existing sheds, that is that it expired on 31 December 1995, demonstrates that the early completion of the new building was anticipated. Clause 2 of the Special Conditions of the agreement of 8 May 1995 contained an acknowledgment by the plaintiff that either Gardem Investments or Kirbailia will redevelop the property at 13-15 Peisley Street, Orange. The plaintiff agreed to make hire plant and equipment available free of charge to assist in the redevelopment of the site, the value of that free hire to be limited to $10,000. The plans of the new building on the land shown to Mr Miller were sufficiently advanced to permit a discussion about where in the new premises the plaintiff's business might be located. Mr Gardem's evidence as to the site plans and his discussions with Mr Miller about the new building was evasive. As Mr Gardem gave his evidence about these matters I thought that he was being less than frank and somewhat untruthful. 171 The representation alleged was made and there was no attempt to comply with it. Neither Gardem Investments nor Kirbailia took any steps to commence construction promptly. Indeed, they did not intend to do so in April/May 1995. 172 The fifth alleged representation is that about 15 May 1995 Mr Gardem for Gardem Investments represented to the plaintiff that Gardem Investments would compensate the plaintiff for the value of all items of equipment and tools removed by or on behalf of Gardem Investments. 173 During the stocktake on 15 May 1995 when Mr Miller complained that a lot of items were missing and that he would have to rethink whether he wished to proceed, Mr Miller alleged that Mr Gardem promised to compensate him for all the missing equipment. Mr Gardem denied that there was any conversation about compensation for missing equipment. 174 Mr Miller was acutely aware of all the equipment which was missing and he was not prepared to proceed to completion. Mr Gardem realised that a serious situation was developing. Settlement had not yet taken place and he was keen to obtain a cheque for about $198,000, the balance of the purchase money. Mr Gardem had been trying to dispose of the business since at least July 1994. He knew that the business he was selling was facing a difficult future. I find that Mr Gardem made the representation alleged by Mr Miller on 15 May 1995 to ensure that settlement occurred. Mr Gardem then resiled from his promise on 17 May 1995. Realising the difficulty he faced he then devised the transfer of items listed in Invoice 13249, signed on 17 May 1995, 175 Mr Gardem's evidence on this point was untruthful. He was inclined, when dealing with Mr Miller, to bully and adopt bullying tactics. In evidence. he was inclined to say what suited the case of the defendants irrespective of its truth. This also applied in his dealings with Mr Miller. 176 The compensation promised in mid May 1995 was never assessed or paid. Mr Gardem never intended to pay any compensation. 177 Counsel for the defendants submitted: (a) The first question is what business did the plaintiff purchase. The answer is that it bought the business of "Plant Hire", (Contract cl G) or "Plant and Equipment Hire" (newspaper advertisement). The sale included certain items of plant, the goodwill, the name "Allaids", a telephone number, the right to occupy premises and a restrictive covenant. Part of the goodwill included the advertisement in the yellow pages that ran for the rest of 1995. That listed a number of items including compressors, sand blasting, mechanical repairs, building equipment, cast iron grates, lids etc. (b) the business being sold and purchased did not include the defendant company's sandblasting and other businesses (c) the projected gross sales or gross income were to come from the equipment the plaintiff was purchasing. (d) the plaintiff had failed to carry out mechanical repairs using the services of Mr Siret. While it was true that Mr Gardem had taken the tools with him because he regarded them as his personal tools, the plaintiff could have bought any tools which were required. (e) care should be taken to allow for the fact that there was a one-off contract for sandblasting work carried out at the SRA Workshops at Bathurst. Premises leased for that purpose were occupied from January to December 1994. It was submitted that if the value of sandblasting per annum was deducted from the total of the gross income that would be reduced at most by $25,000 per year and that Mr Miller was prepared to proceed if the gross income was $30,000 per year less than that stated by the defendants. 178 The defendants submitted that in relation to representations (a) and (b) technically there may have been misleading conduct. However, no relief could be granted under s,82 because there was no damage caused by that conduct because the plaintiff would have proceeded in any event. 179 As to representation (c) the defendants submitted that the plaintiff was not induced to enter into the contract by the representation.. It was submitted that there was no evidence that the plaintiff relied on the representation in entering into the contract. Nor was it reasonable for the plaintiff to do so. 180 The defendants submitted that paragraph 68 of Mr Miller's affidavit did not establish causation and reliance and went to a slightly different point. Paragraph 68 reads: "If I had been provided with trading figures similar to those traded by [the plaintiff] during the time I conducted the business, I would not have inspected the property/equipment but would have continued to seek other opportunities in the Orange area. It would have been obvious to me that such income and cash flow would not sustain growth and would not allow strategic replacement of equipment without further capital injection." 181 That paragraph deals indirectly with the issues of causation and reliance. So far as the paragraph goes what is stated is self-evident. 182 In my opinion the plaintiff has established both reliance and causation. The defendants' submissions to the contrary must be rejected. Mr Miller attached much importance to the figures with which he, on behalf of the plaintiff was provided and pressed for those for 1994 and was ultimately provided with them. Mr Gardem was aware of the importance Mr Miller attached to all the figures. He sought and received confirmation from Mr Gardem that all the income was generated from Allaids Hire and no other company or activities. He was assured by Mr Gardem that a gross annual income of $300,000 or $25,000 per month was easily sustainable. Mr Miller's approach was based on what could be done with gross sales of the order stated. Correctly, he looked at areas of expenditure of flexibility such as motor vehicle expenses, moneys paid to family members and for salaries, claims for depreciation and rent. These are matters that can be adjusted so as to cater for family expenses and to ensure that, for tax purposes, a profit is not made. The income may be split. Mr Miller was alive to the need for a good cash flow and hence good gross sales and a good gross income. Mr Gardem appreciated this. The decision by the plaintiff (and Mr Miller) to proceed was based on the truth and accuracy of the representations. The plaintiff relied on them and their falsity was the cause of the plaintiff's loss. 183 The defendants contended that Mr Miller had set his mind on acquiring the business of Gardem Investments. He was very interested but that interest was based on what he was told and the four representations made on behalf of Gardem Investments prior to 8 May 1995 were of critical importance in inducing him to buy the business. Without them he would not have bought the business. 184 The defendants placed reliance on Mr Miller estimating that his break-even point was $186,000 and his concession that he would still have considered purchasing the business if the gross takings had been overstated by $30,000 a year. Of course that would still have left a gross income of $284,000 for the year ended 30 June 1993 and on the annualised income for the year ended 30 June 1995 a gross income of $227,000. Both figures much exceed the rate of gross income achieved by the plaintiff when it took over. The defendants also contended that Mr Miller placed great faith in his own abilities and his wish to institute his own regime for the business including a different name and the introduction of cost efficiencies. They emphasised that he planned an advertising and promotional campaign and the purchase of new items of plant and equipment to expand the range of the business. Mr Miller intended to proceed gradually to expand the business. He tried to ensure starting from a solid base, relying amongst other things, strongly on the truth of the representations. Mr Miller was investing a large amount of money in the purchase of the business. It is no defence that Mr Miller wanted to use his abilities and expand the business. 185 The defendants pointed out that Mr Miller did not consider the net profit figures of Gardem Investments as a reason not to buy the business. That point does not advance the case of the defendants. The plaintiff was looking for a business with good gross sales which it could manage effectively and improve. 186 The defendants emphasised that the plaintiff had its own solicitor and could have obtained legal advice on the problems which arose. The representations could have been made warranties and they and other suitable provisions could have been placed in the agreement. That would have been prudent. However, it is mutually agreed that a figure of $300,000 was mentioned as the amount of the gross sales or gross income. The difference is as to the context in which it was mentioned. Unfortunately, Mr Miller believed most of what Mr Gardem told him. 187 The defendants pointed out that the rent under the lease entered into in conjunction with the agreement for sale was about $7,000 or $8,000 a year less than the rent Mr Miller said he would have to pay in the new building. This does not help the defendants. The plaintiff correctly attached importance to having good premises in a highly visible position, particularly for the business it intended to conduct, 188 I do not accept the submission of the defendants that Mr Miller was always going to commit his company to the purchase of the business. He was after a good business with good gross sales. These usually do not have cash-flow problems. He made a number of inquiries which were prudent. He did not take other steps which would have been advisable, for example, having his accountants inspect and analyse the accounts and invoices of Gardem Investments . 189 On the compensation issue the defendants contended that Mr Miller had given no evidence of the amount of compensation he expected, beyond "market value" of the items missing and that at the hearing he was still unsure about what that meant in respect of the items he alleged were missing. They further contended that his evidence in respect of the missing items was extremely unsatisfactory, that the long list of items set out in paragraph 37 of his affidavit was misleading in itself and that his evidence of recalling a serial number of a motor some weeks after sighting it was incredible. They submitted that Mr Miller could not know what was missing with anything like precision and that his evidence in this respect should be rejected. The recall of the serial number was surprising but I am unable to say that Mr Miller was being untruthful on this point. I did not regard his evidence as to the equipment which was missing as unsatisfactory. From the time of his first inspection he had taken a special interest in the equipment which was available and what was missing. 190 The defendants submitted that it was Mr Miller's inability to conduct the business properly and also bad fortune (e.g. Parkes Council not continuing to hire rollers) that led to the loss of income. They further submitted that the business purchased was immediately affected by the change of name. The Yellow pages of the telephone directories still carried the name Allaids for the balance of 1995. It was a large advertisement. The defendants stressed that Mr Miller's apparent lack of expertise would not be lost on customers and that he made only a superficial attempt to obtain ongoing business from the Councils and did not ferret out the business required for his fleet to be fully or substantially utilized by hirers. The defendants contended that Mr Miller did not carry out his own plans for promotion but instead wasted money on new equipment. 191 I accept that there was a measure of bad fortune as, for example, with Parkes Council, but I do not accept that Mr Miller failed to conduct the business properly. That is different from suggestions that he probably would not have conducted the business as well as Mr Gardem at least for the first six months and perhaps twelve months. I do not accept that Mr Miller made only superficial attempts to obtain ongoing business from Councils. There was no lack of effort on his part. The essence of the problems was that the business did not have the solid base and gross income and sales represented by Mr Gardem. The business was declining and could be described as a fading flower. In their letter of 22 March 1996 (arising out of his personal injury claims) the solicitors for Mr Gardem and Kirbailia wrote, "when the performance of All Aids began to fall away in the absence of Mr Gardem's day to day management he made enquiries with a view to attempting to recruit a replacement manager." It seems that he was unsuccessful. Perhaps the business could not afford to pay the salary of such a manager. In that letter it was also written, "The performance of the company prior to Mr Gardem's injury in this area [radius of 50 km of Orange] was highly successful in an otherwise competitive market." 192 The letter of 14 February 1996 of Mr Ron Savage established that on 3 February 1996 a clearance auction was held of the items purchased by the plaintiff from Allaids (and some other items). 193 The contract for the sale of the business between Allaids (now Gardem Investments) and the plaintiff apportioned the consideration of $220,000 as follows: (i) Goodwill $ 95,000 (ii) Plant Fittings & Chattels ) (iii) Fixtures ) $125.000 194 The plaintiff claimed that there was no goodwill left to sell and that the business was worth nothing. I agree. The plaintiff is entitled to recover $95,000 paid on behalf of goodwill. 195 Schedule I to the report of Furzer Crestani Services, the investigating accountants (principally Mr C Katehos) sets out the loss as to plant, equipment and chattels suffered by the plaintiff: "Plant, Fittings & Chattels $125,000 Less: Net proceeds from disposal at auction $56,077 Less: Net proceeds from disposal at auction t hat relate to items purchased by John Miller $ 5,000 $ 51,077 $73,923 Less: residual value of spare parts and other items garaged in Orange $ 3,500 Net loss of plant, fittings & chattels $70.423" 196 The plaintiff claims for the trading losses it incurred during the period from 8 May 1995 to 28 February 1996. Schedule J summarises these. The correct starting date is 15 May 1995. Schedule C2 to the report of the investigating accountants sets out the income received by the plaintiff during the period 15 May 1995 to 30 June 1995 and its operating expenses in detail. The trading loss for that period was $45,245. 197 Schedule C2 sets out the income received by the plaintiff from 1 July 1995 to 28 February 1996 and its detailed operating expenses for that period. There was an operating loss of $65,693. With adjustments the total net trading losses were $68,611 calculated in Schedule J as follows: 15/5/95 1/7/95 to to 30/6/95 28/2/96 Trading Losses $45,245 $65,693 Add back depreciation $13,110 $ 0 $32,115 $65,693 Add back Remuneration paid to Mr Miller $ 2,156 $10,192 Mrs Miller $ 2.156 $ 7,035 Legal fees ____ $ 7,678 $ 4,312 $24,905 Net trading losses $27,823 $40,788 Total net trading losses $68,611 This does not take into account the profits which the plaintiff lost by reason of the business trading at a loss. 198 The defendants submitted that they should not be liable for the trading losses as under s.82 of the Trade Practices Act the successful plaintiff must be put in the position he would have been had there been no misrepresentation. In my opinion the plaintiff must be put in the position he would have been had there been no misrepresentations. In my opinion the plaintiff would not have purchased the business if the misrepresentations alleged had not been made. 199 The defendants submitted that when considering the trading losses it was important to consider what the plaintiff (Mr Miller) had done with the business. The defendant contended that the plaintiff had not done much with the business which it had purchased and relied on these submissions. The plaintiff failed to pursue actively the obtaining of business. It did not follow up all the leads which it had been given. It changed the well known name of Allaids Regional Plant Hire, which was well known in Orange and country areas. This must have had an adverse effect. Further, it was not the defendants' fault that the plaintiff encountered a time when business was slow. 200 The change of name was likely to make little difference. There does not seem to have been much demand to hire the equipment. The plaintiff had acquired a dwindling business which was not remotely capable of meeting the representations which had been made. That was the effective cause of the trading losses. If the plaintiff had known that the representations were untrue it would not have purchased the business. The plaintiff is entitled to recover the trading loses which it incurred. 201 The plaintiff also sought interest on its past loss at the interest rate in Schedule J of the Supreme Court Rules. In summary the plaintiff's claim comprises: (a) Cost of Goodwill, the plaintiff having received nothing of value on that account $95,000 (b) Difference between value for plant, fittings & chattels and amount received on disposal of such items $70,423 (c) Trading losses incurred by plaintiff $68,611 (d) Interest on past loss $ (The parties will need to do this calculation based on the date on which judgment is entered) 202 Conversion I have earlier accepted Mr Miller's evidence as to the items which were to pass to the plaintiff. They extended beyond those set out in the annexure to the agreement of sale and included anything in the yard at 13-15 Peisley Street other than an engine which Mr Gardem said that he wanted to keep. The plaintiff pointed out that it had never been compensated for the equipment listed in Invoice 13240 signed by Mr Garden on 17 May 1995. 203 The plaintiff has prepared a schedule (a copy of which is attached to its written submissions) detailing the particular items which were present on site during Mr Miller's inspections, but not there at stocktake on 15 May 1995 or removed later. The plaintiff has never been compensated for these items (or any of them). 204 In its written submissions of 26 September 2002 the plaintiff conceded that, in view of the express terms of the agreement made on 8 May 1999, the Court would not find that the representations created oral terms which became incorporated into the agreement made on 8 May 1995. The plaintiff did not press its claim in contract as to the missing chattels. The plaintiff also conceded that there was insufficient evidence upon which the Court could calculate damages for conversion. 205 In their written submissions of 18 October 2002 the defendants contended: "The submissions made in writing for the Plaintiff dated 26 September 2002 appear to concede that the claim in conversion is not pressed in respect of chattels which are not described in the written agreement made on 8 May 1995, see paragraph 11 of those submissions. That would mean the Plaintiff is restricted to claiming conversion in respect of the chattels set out at pages 79 to 84 of Mr Miller's affidavit. These account for items numbered 1 to 189 in the 57 page schedule provided with the Plaintiff's submissions ("the Plaintiff's schedule"). The purpose of the direction made by his Honour on 6 September 2002 was to give the Plaintiff the opportunity of specifying which chattels were proven converted. The Plaintiff's schedule demonstrates that the Plaintiff proved virtually nothing in this respect. The reference to transcript is limited to page 21 lines 49-57 and page 19 line 39 and lines 46-49. None of those references assist the Plaintiff's cause. The Plaintiff must prove on balance that the exact items in the contract were converted. This simply has not been done." 206 During the addresses of counsel on the final day of the hearing (6 September 2002) I discussed with counsel the position which had arisen as to the claim for the missing chattels. There were a number of problems. There were a large number of items, some apparently of no great value. There was no broad approach available which was satisfactory. The cost of the Court and counsel examining each item one by one and the evidence as to it in open court was prohibitive. Such an exercise would have taken some days. Counsel were correctly concerned to conclude the five day hearing as there was a relatively small amount in issue and costs had to be kept under control. The costs of the hearing had strained the resources of the parties. Family members had taken out mortgages on their homes to obtain money for costs. 207 The transcript records [T297] "Mr Spencer [for the plaintiff] in relation to the issue of conversion, undertakes that he and Mr Marshall [for the defendants] will provide the Court with written submissions. 208 At the conclusion of addresses [T313] I directed that the plaintiff deliver written submissions as to the chattels within seven days and the defendants deliver their written submissions in reply within a further seven days. It took somewhat longer for the submissions to be delivered. 209 Having studied the submissions of the parties as to the chattels in the light of the evidence it does not seem that the Court can do other than dismiss the claim for conversion. There is no satisfactory way of assessing damages. 210 In view of the way I have earlier assessed damages this will not lead to any injustice. The plaintiff's case was that this was a "walk-in-walk-out" sale. In effect, but not technically, he paid $220,000 for the business and all the items. The plaintiff was, as I have earlier found, seriously misled. Having regard to the damages I have earlier awarded, the plaintiff is not entitled in the circumstances of the present case to further damages. In any event, the evidence does not enable me to assess the damages payable for the missing or converted chattels. 211 I therefore award the plaintiff the damages specified in paragraph 201. This is subject to the finalisation of the calculation for interest. 212 I propose to list this matter at 9.30 am on 8 July 2003 for the purpose of finalising the interest calculation and entering judgment. ********** Last Modified: 07/28/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.