New South Wales Supreme Court CITATION : Connex Group Australia Pty Limited v Butt [2004] NSWSC 673 HEARING DATE(S) : 03/05/04-07/05/04 JUDGMENT DATE : 30 July 2004 JUDGMENT OF : White J DECISION : 1. Judgment be entered for the plaintiff against the defendant in the sum of $10; 2. Otherwise dismiss the further amended statement of claim; 3. The plaintiff is to pay 90% of the defendant's costs of the proceedings; 4. Grant liberty to either party to apply within 14 days to vary order 3; 5. Exhibits may be returned after 28 days unless a notice of appeal is filed. CATCHWORDS : Trade Practices - Alleged misleading and deceptive conduct by non-disclosure leading to failure of negotiations - interpretation of preliminary contract - no issue of principle - nominal damages for only breach found to exist. Trade Practices Act 1974 (Cth) LEGISLATION CITED : Passenger Transport Act 1990 (NSW) Supreme Court Act 1970 (NSW) Fair Trading Act 1987 (NSW) Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 Illawong Village Pty Ltd v State Bank of NSW [2004] NSWSC 18 Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211 Semrani v Manoun [2001] NSWCA 337 Kimberley NZI Finance Ltd v Torero Pty Ltd [1989] ATPR (Digests) 46-054 CASES CITED : Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97 Warner v Elders Rural Finance Ltd (1993) 41 FCR 399 Commonwealth v Amann Aviation Pty ltd (1991) 174 CLR 64 Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 Connex Group Australia Pty Limited PARTIES : v Kenneth Alfred Butt FILE NUMBER(S) : SC 2872/02 COUNSEL : Plaintiff: C Harris Defendant: N Manousaridis SOLICITORS : Plaintiff: Piper Alderman Defendant: KPMG Legal IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION WHITE J Friday, 30 July 2004 002872/02 CONNEX GROUP AUSTRALIA PTY LIMITED v KENNETH ALFRED BUTT JUDGMENT Introduction 1 HIS HONOUR: These proceedings arise from the failure of negotiations for the purchase by the plaintiff from Butt Investments Pty Limited ("Butt Investments") of the shares in a bus company called North & Western Coaches Pty Limited ("North & Western"). 2 On 26 November 1999 those negotiations came to nothing as the defendant and Butt Investments entered into an agreement with the State Transit Authority of NSW ("the STA") for the latter to buy the shares in North & Western. The STA paid over $2,000,000 more than the price the plaintiff and defendant had agreed on. The plaintiff claims that through a combination of factors it lost the opportunity to buy shares in North & Western which were worth at least $2,000,000 more than it would have had to pay. 3 It says that the defendant dealt with the STA in breach of a Heads of Agreement between it, the defendant and Butt Investments dated 8 September 1999. The Heads of Agreement did not create a binding obligation on the defendant or Butt Investments to sell the shares to the plaintiff, but did require that they negotiate exclusively with the plaintiff for a stipulated period. 4 The plaintiff says that had the defendant and Butt Investments not breached the Heads of Agreement by negotiating with the STA before the exclusivity period had expired, it would have concluded an agreement with them, even though they were not obliged to sell the shares to it. 5 The plaintiff claims that during the negotiations and due diligence investigations, the defendant engaged or was knowingly involved in misleading and deceptive conduct by not disclosing a dispute between North & Western and the Department of Transport which related to the subsidies North & Western was entitled to receive from the Department under a School Students Transport Scheme ("SSTS"). The plaintiff says it found out about the problem only on 17 November. Because it did not know of the financial ramifications of the dispute, it decided that it could not enter into and complete its proposed agreement with the defendant and Butt Investments which it otherwise intended to do on 22 November. Had the issue been disclosed in the course of the earlier due diligence investigation, the plaintiff says that the issue would have been resolved and it would have contracted with the defendant and Butt Investments before they sold the shares to the STA. 6 The plaintiff also claims that in breach of the Heads of Agreement the defendant disclosed information to the STA about its negotiations with the plaintiff which he was required to keep confidential. It also says that on 19 November the defendant engaged in misleading and deceptive conduct by concealing his negotiations with the STA whilst encouraging the plaintiff to believe that the negotiations with it were on track. 7 The plaintiff makes an alternative claim for damages to reimburse it for the costs incurred in the negotiations and due diligence investigation which were ultimately wasted. Background 8 The plaintiff is a holding company of a group of companies in Australia whose businesses include providing transport services to the public. In 1999 it wished to expand the group's transport operations in Australia. 9 The defendant was a director of North & Western . He was also a director of Butt Investments which was the holder of all of the issued shares in North & Western. Those shares were held on trust for the beneficiaries of the Butt Family Trust of which the defendant was the primary beneficiary. 10 In February 1999 the defendant and his accountant, Mr Titley of Bedford Titley, had negotiations with the STA for the acquisition of shares in North & Western or its business and assets, and the acquisition of the assets of another company, Riverside Bus and Coach Service Pty Limited. The proposal, so far as it concerned North & Western, covered, amongst other things, the acquisition of its fleet of buses and plant and equipment at a consideration to be determined by independent valuation; the payment of $5,000,000.00 for the goodwill of the company; and the purchase of a bus depot used by North & Western at Higginbotham Road Gladesville from Butt Investments for a consideration of $5,300,000.00. 11 Although the terms of the proposal required further negotiation, the defendant was prepared to entertain the offer. However negotiations with the STA stopped in late February 1999. The defendant was told by the chief executive of the STA that the STA could not proceed because of a pending election and a decision on the purchase would take some time. 12 Discussions with the plaintiff commenced in late June 1999. A preliminary agreement called a Confidentiality and Pre-Agreement was signed by the defendant on behalf of North & Western on 23 June 1999. It was made between the plaintiff (then called CGEA Transport Asia Pacific Holdings Pty Limited) and North & Western. The defendant was not a party to it. The agreement recited that the plaintiff (in the agreement called "CGEAT") wished to purchase all of the shares in North & Western and had requested North & Western to provide the "Information" to allow CGEAT to conduct a Due Diligence Exercise. It recited that CGEAT and North & Western would agree on a purchase price at the end of the Due Diligence Exercise. The Due Diligence Exercise was described in Clause 5. It was to be a detailed review by CGEAT of the activities and documentation associated with North & Western including a detailed review of the legal and operational aspects and associated documentation. It also included CGEAT having discussions with the regulating authorities. 13 Clause 5.2 provided that North & Western should provide all Information to CGEAT. "Information" was defined as follows: "'Information' means the information, whether written or verbal, concerning the financial, technical and operational matters of the coach business owned and operated by North & Western together with any other information that the parties agree is necessary for the proper evaluation of the Acquisition and the conduct of the Due Diligence Exercise. Additionally, this includes any Information provided prior to the date of this Agreement." 14 Clause 2 described the contemplated outcome of the Due Diligence. Clause 2.1 provided for the purchase price to be agreed upon at the end of the Due Diligence Exercise. Clause 2.1 also provided that the parties would agree upon arrangements for CGEAT to assume all of North & Western's liabilities under either lease or hire purchase arrangements in respect of the buses used by it. 15 On 15 July 1999 a meeting took place between representatives of the plaintiff, the defendant and Mr Titley. At that meeting a letter was handed to the defendant from the plaintiff requesting the provision of documents and information. The information and documents sought included the following: "2.5 List the licences and permits required to operate Target Group businesses, indicating whether or not those licences/permits are current and their renewal dates (and attach copies of those which are current); …………... 10.1 Details or copies of: (a) Bus Service Contracts (Department of Transport and Others); …………. 14.1 List of current, pending or threatened litigation, nature, amount (if quantifiable) and whether or not judgment in favour of the Target Group is likely. 14.3 Details of Complaints in last year from: (a) Department of Transport and other authorities." 16 On 21 July 1999 North & Western responded to the plaintiff's letter of 15 July 1999. North & Western's response was signed by the defendant. In answer to the particular questions North & Western responded as follows: "2.5 Bus Proprietors in NSW operate on a five (5) year contract, we believe our contract will be renewed within seven (7) days from the Department of Transport. Following negotiations between ourselves and the Department, the contract will be issued without changes from our previous contract. …………. 10.1 (a) See item 2.5 above …………. 14.1 Nil 14.3 (a) Full records available at our office." 17 The plaintiff alleges that North & Western's response of 21 July 1999 is misleading or deceptive. In particular, the response to paragraph 2.5 was said to be misleading or deceptive because, it was alleged: (a) the contracts would only be renewed if changes were made to North & Western's existing sectionalised maps; (b) North & Western was seeking that changes be made to the DoT contract and had engaged the assistance of the Bus and Coach Industrial Association to obtain those changes; (c) in 1997 North & Western had been informed that the Standard Section Principles with respect to the SSTS had been revised and the current sectionalised maps for its contracts may need to be updated or reviewed and the Department had asked that new section maps be lodged for its consideration and approval, which had not been done; and (d) the requirements of the Department of Transport for the lodgement of new section maps for consideration and approval had been reiterated on 3 November 1998 and again on 18 May 1999 and had still not been complied with. 18 The plaintiff submits that the defendant was knowingly involved in a contravention of s 52 of the Trade Practices Act by North & Western. Possible Adjustments to Maps and Subsidies 19 I turn then to the renewal of North & Western's commercial service contracts with the Department of Transport and the communications from the Department of Transport regarding the SSTS and its requirements or requests for new sectionalised maps. 20 On 30 June 1993 two contracts known as "RO82" and "RO83" were entered into between North & Western and the Director General of the New South Wales Department of Transport. They were each for a period of 5 years from 30 June 1993. Under the agreements North & Western was given an exclusive right to operate certain Regular Passenger Services and School Services in their Regional Service Areas specified in the agreements. Maps were appended to each of the contracts. They delineated the regions in which North & Western was authorised to conduct bus routes and also depicted routes which proceeded beyond the regional boundaries and on which there was a restriction upon carrying passengers who travelled wholly outside the boundary of the region. They also depicted routes in which a third party was authorised to operate within the region without travelling restrictions being imposed by the Department. The agreements provided for the fares which could be charged and levels of service that were required to be provided by North & Western. The agreements specified the school services which North & Western was to provide. They did not deal with the subsidies payable by the Department to North & Western under the SSTS. 21 On 12 August 1998 the Department offered to renew contracts RO82 and RO83 for a further period of 5 years. The main amendments to the existing contract reflected amendments made to the Passenger Transport Act 1990 whereby a new regime was established for the assessment of the performance of holders of commercial contracts. 22 The contracts were renewed on 26 August 1999 for a further period of 5 years. There were no material differences between the contracts made on 30 June 1993 and the new contracts made in August 1999. The answer to the plaintiff's query in paragraph 2.5 was substantially accurate. 23 For many years the Department of Transport has subsidised bus transport for school children under the scheme known as the SSTS. Subsidies are paid by the Department of Transport to a bus operator. The subsidy is calculated by reference to the number of sections each child has to travel on each journey to and from school. In the case of North & Western, the sections were measured by reference to maps that North & Western submitted to the Department and which were approved by it. These were not the maps in the commercial service contracts RO82 and RO83. Nor do the commercial service contracts provide for the payment of subsidies. So far as the evidence in this case revealed, the calculation of the amount of subsidy depended on administrative arrangements made between North & Western and the Department. The subsidies payable by the Department to North & Western under the scheme were substantial, amounting to about $3,200,000.00 per annum or 33% of North & Western's revenue in 1999. 24 In 1991 the Department required North & Western to provide the Department with a map of its routes divided into 1.6 kilometre section lengths. On 26 March 1997 the Department received new section maps from North & Western. At a meeting on 4 September 1997 it appears that the Department and North & Western agreed on those maps. According to the records of the Department, in October 1997 a letter was forwarded to all bus operators in the Central Sydney region including North & Western. The letter stated that the Department's position in relation to what was called "Standard Section Principles" had been recently clarified and as a result the current sectionalised maps held for commercial service, SSTS Contract No. C1907, might need to be updated or reviewed. That contract was not in evidence before me. 25 The letter had attached to it what was said to be a revised statement of "Standard Section Principles" dated July 1997. The attachment stated that the policy proposed by the Department was: "For route services that meet minimum service level requirements the fare charged shall be in accordance with the number of sections travelled on the route service unless there are alternative service bus routes or school bus routes that represent a lesser number of sections." 26 It recorded that both the Department and the Bus and Coach Association supported the principle that bus operators would be paid on the basis of the most direct route. However neither the Department nor the Association supported the "fabrication" of a route, meaning the calculation of sections along a route which no bus used. The Association represented the interests of bus operators. 27 The letter from the Department said that as a result of the clarification of the Department's position in relation to Standard Section Principles, the current sectionalised maps might need to be updated or reviewed and that it would be necessary for North & Western to (a) lodge two new sectionalised maps of the trunk routes of its regular passenger services including a summary sheet nominating each section in length and the resultant average section length for consideration and approval; and (b) prepare and submit two maps indicating all school special routes operated within the contract region for approval. 28 The letter went on to say that the most direct route would determine the fare to be charged which might not be the actual route taken by the bus, and that reimbursements for moneys under the SSTS would be in accordance with the new amended maps as from first semester 1998. 29 The Department continued to pay North & Western subsidies under the School Student Transport Scheme, but these payments were liable to subsequent adjustment. 30 North & Western did not lodge new maps and summary sheets with the Department. The Department did not press its request until December 1999. The defendant denied seeing the letter of October 1997 from the Department and denied that North & Western received it. I think it probable that North & Western received the letter as it was properly addressed. Subsequent correspondence from the Department referred to the letter, and no query was raised by North & Western with the Department about what it was referring to. I accept that the defendant did not see the letter of October 1997. Nevertheless he was aware of the issue which the Department had raised. 31 On 3 November 1998 the Department of Transport wrote to the defendant as managing director of North & Western. It referred to the letter of October 1997 setting out Standard Section Principles. It referred to the payment made under the SSTS for semester one 1998 and said that no adjustment had been made in respect of subsidies for school students. It identified two students in respect of whom an adjustment might be required to conform with the Department's interpretation of Standard Section Principles. The writer warned that the issue might need to be readdressed when a final determination on Standard Section Principles was forthcoming. He foreshadowed receiving instructions on those principles in the near future. 32 More than six months later, the Department again wrote to the defendant. It advised that it had completed a sample audit based on the Standard Section Principles outlined in the Department's letter of October 1997. This audit indicated an adjustment should be made for the payments under the SSTS in respect of one student. However no such adjustment was made to the subsidy payable for that semester. The Department said that the issue might need to be readdressed when a final determination on standard section principles was forthcoming. If an adjustment were required it would be made for semesters one and two in 1998. 33 There was nothing in this correspondence to suggest that the issue, so far as it affected North & Western, would be significant. The defendant's son, Mr Anthony Butt, was employed as the general manager of North & Western. He was responsible for dealing with the Department of Transport in relation to the SSTS. In 1998 and 1999 he understood that the Department was maintaining a position on the calculation of subsidies for students involving what he described as the "fabrication of a route". As he used that expression he meant the calculation of fares on the basis of the shortest bus route measured from the map covered by services provided by the bus operator, even though the particular bus did not travel by that route. (This is not what the Department meant by the expression.) He understood that it was the Department's position that if it was possible for a student to travel a fewer number of sections by changing buses, whatever the delay in the connection time between buses, the subsidy would be payable based on the fewer sections rather than the route actually travelled. This is how I understand the Department's position as expressed in the statement of Standard Section Principles from which I have quoted in paragraph 25. Mr Anthony Butt did not understand that the Department's views were likely to lead to any change to the section maps. He did believe however that if the Department finally decided to adhere to its position, there would have to be an adjustment to the calculation of subsidies which had been paid. He did not know what the financial implications for North & Western would be if the Department's position, as he understood it, were finally adopted. 34 In 1998 and 1999 the defendant understood that the Department required section maps to be reviewed and he also understood that once the review had taken place and new maps, if appropriate or if required, were settled, then refunds of subsidies already paid might also be required. However it was his evidence, which I accept, that he thought that any required reimbursement of monies would be minor. That was a reasonable view in light of the fact that since October 1997 the Department had only raised the possible adjustment of subsidies for three students even after it had conducted a "sample audit" applying the Standard Section Principles which it had outlined in October 1997 and were apparently still to be finally adopted. 35 The defendant said that when he was providing information to the plaintiff for its due diligence he did not think about the issue of whether there would be any adjustment to the subsidies which had been paid or would become payable to North & Western. Under cross-examination he said: "Q. Shouldn't you have said to them there is a possibility that the method by which the subsidy we receive is calculated might change? A. As far as a reimbursement of money was concerned I don't think it was going to be of great significance; a minor matter. Q. But shouldn't you have told them about it anyway? A. I didn't think it was necessary. Q. The letter is misleading when notifying them of these things so they can make their own enquiries? A. I am sorry I did that, that is something I didn't think of then." 36 I accept this evidence. 37 The defendant conceded that the letter of 21 July 1999 was misleading for not revealing the information, but that is ultimately a question for me. 38 As will be apparent from the extract from the cross-examination set out above, it was common ground that the defendant did not specifically raise with the persons representing the plaintiff in the negotiations the issue of the Department's interpretation of Standard Section Principles, nor the potential for adjustments to section maps, nor the potential for an adjustment to the level of subsidies payable in the future or the possible repayment of subsidies which had been paid for 1998 and 1999. 39 There was no evidence as to what documents were provided for inspection by the plaintiff in a data room which was established during the due diligence process. It was not established that the correspondence from the Department was not included in the documents about North & Western's business which were made available for the plaintiff's inspection. 40 On 30 July 1999 the defendant wrote to the Department of Transport to authorise Mr Kevin Warrell, who represented the plaintiff, to make any enquiries of the Department about North & Western's business. Mr Warrell was the general manager of CGEA Transport Management Sydney Pty Limited and the principal negotiator for the plaintiff on the transaction. Mr Warrell met with the representatives of the Department on 5 August 1999. He asked them if they had any problems with North & Western as the plaintiff was considering acquiring the company. He said that he would like to know how things had gone to date with the Department and what he could expect. He was shown a file which the Department kept of complaints about North & Western. He was also shown records kept by the Department of the payments made under the SSTS to North & Western. He was not told that there was any problem concerning those payments. 41 On 6 August 1999 Mr Warrell made a written request to the Department for information relevant to the proposed acquisition. Amongst the documents which he sought from the Department were details of the administrative arrangements for the SSTS. His purpose in obtaining records from the Department with respect to the SSTS payments was to check that the figures given to him by North & Western accorded with the Department's figures. 42 It was not until early November 1999 that Mr Warrell asked Mr Kidd, (a senior manager responsible for another Connex bus operation), to review and audit the SSTS system used by North & Western. I shall return to the outcome of Mr Kidd's enquiry later in these reasons. The Heads of Agreement 43 On 25 August 1999 the plaintiff wrote to the defendant and made a proposal for the acquisition of North & Western's assets and business or the acquisition of shares in it. The proposal included acquiring the bus fleet and plant and equipment at valuation, the purchase of goodwill for $3,200,000, and the purchase of the bus depot by an unnamed third party investor for $5,500,000 with a lease back to the plaintiff. The plaintiff advised that it would like to reach agreement on these matters by 3 September 1999 and to complete due diligence on the acquisition and finalise a sale agreement by 31 October 1999. It required "exclusivity" from 3 September 1999 until the date of finalisation of the sale agreement. This proposal was generally acceptable to the defendant. 44 On 8 September 1999 a document called "Heads of Agreement" was executed on behalf of Butt Investments (described as "Seller"), the defendant (described as "Covenantor"), and the plaintiff (described as "Buyer"). The plaintiff sues the defendant for breach of the exclusivity and confidentiality provisions in the agreement. The promises upon which it sues were joint promises made by the defendant and Butt Investments. Butt Investments was not joined as a party to the proceedings. No point was taken about the failure to join Butt Investments. Its non-joinder is not fatal to the application. (Supreme Court Act 1970 (NSW) s 97 and SCR Part 8 Rule 5). 45 The Heads of Agreement described the scope of the transactions as being the proposed acquisition by the plaintiff of the shares in North & Western from Butt Investments and the acquisition and leaseback of the property at 43A Higginbotham Road Gladesville owned by Butt Investments. Recital F said: "F. Buyer is discussing with a third party the acquisition by the third party of the Property, with a view to the Property being leased back to the Company (or Buyer's other nominee) following acquisition of the Company by Buyer (or its nominee)." This was not the fact. The position was that the plaintiff had engaged an agent in Brisbane called Infrastructure Property Group ("IPG") to act as its adviser on the sale and as agent for the sale. The plaintiff was discussing the sale with IPG who had told it that they were discussing the possible sale of the property with a number of property investors. The plaintiff was not discussing with a third party the acquisition of the property by that third party. 46 Clause 1.1 provided in part that: "1.1… It is understood the acquisition of the Company and the acquisition and leaseback of the Property are to be inter-dependent. Seller and Covenantor recognise their co-operation may be required to effect a transfer and leaseback of the Property at the same time as the transfer of the Company." 47 Clause 1.4 recorded that the parties understood that the proposed transaction documents would include the usual provisions contained in business and property sale and purchase agreements including (in clause 1.4.2): "appropriate provisions for release of securities for the Company's obligations given by Seller, Covenantor or related persons or entities". 48 By cl 3.1.1 all parties agreed to keep the terms of the Heads of Agreement and the fact that the parties were in negotiation strictly confidential. By cl 3.1.2 they agreed that any information exchanged between the parties in relation to the proposed transaction which was not otherwise in the public domain was strictly confidential. Clause 3.2 provided that such information could only be used for the purposed of furthering the intentions of the parties as set out in the agreement. This was subject to certain exceptions which are not presently relevant. 49 Clause 4 provided as follows: "4. EXCLUSIVITY In consideration of the time effort and money expended by Buyer in undertaking due diligence inquires (sic) and working towards implementation of the proposal, Seller and Covenantor undertake to the Seller as follows: 4.1 Buyer has an exclusive period during which to negotiate definitive agreements on the basis contemplated by clause 1, which exclusivity expires on the Transaction Date ("exclusivity period"); and 4.2 they will not, and will procure that related persons and entities do not, directly or indirectly enter into formal or informal negotiations with any other person for the sale, transfer or other disposition of the Company, the business or assets of the Company, or the Property." 50 The expression "Transaction Date" was defined in clause 2 as follows: "2. TRANSACTION PROCESS Buyer and Seller agree their intent is to work towards signing of definitive agreements on or about 8 October 1999 or later agreed date (" Transaction Date "). 51 Clause 6 provided that for the avoidance of doubt nothing in the agreement was to be read or construed as a binding obligation to sell or transfer any property, but that the obligations of the parties in the clauses dealing with confidentiality, exclusivity and the bearing of costs and expenses, were binding obligations on the parties. 52 Critical to the outcome of these proceedings is a finding of when the exclusivity period expired. It was common ground that the period was extended from 8 October 1999 to 8 November 1999. 53 Various steps were undertaken by advisers retained by the plaintiff to carry out due diligence on the acquisition after 8 September 1999. It is not necessary, because it is not legally relevant, to make any assessment of how diligently the investigation proceeded. Extension of heads of Agreement to 8 November 1999 54 On 5 October a meeting was held attended by the defendant, his accountant Mr Titley, and his solicitor, Mr Murrell. Representing the plaintiff were Mr Warrell, Mr Parker (an accountant employed by Connex Management Australia Pty Limited), Mr Postema and Ms Selth, solicitors from Piper Alderman. It was agreed at that meeting that the Heads of Agreement would be varied and it was also agreed that there would be a simultaneous signing of the agreements and completion of the transaction on 8 November 1999. 55 On the following day Mr Warrell wrote to the defendant referring to the discussions and confirming that the plaintiff was now working towards signing and completion on 8 November 1999. The letter continued: "As a consequence, we have agreed to vary clause 2 of the Agreement so that 8th October 1999 now reads 8th November 1999. Please confirm your agreement to this change by return fax." 56 On 7 October the defendant replied that the additional time for the Heads of Agreement as set out in the plaintiff's fax was agreed to. He also sought the payment of a non-refundable deposit of $250,000 but this request was declined. It is clear that as a result of the discussion at the meeting on 5 October and the correspondence of 6 and 7 October, that 8 November was a "later agreed date" within the meaning of clause 2 of the Heads of Agreement and was the new "Transaction Date" under the Heads of Agreement. Progress of Negotiations 57 By this time there had already been a proposed variation to the structure of the transaction in that there had been discussion that a put and call option in respect of the bus depot be entered into between the plaintiff and Butt Investments. However on 12 October 1999 Mr Parker was advised by Mr Tassone, a director of the plaintiff, that it was the plaintiff's policy not to purchase any property and that therefore it would not want to grant a put option. Mr Tassone said that the plaintiff would consider entering into a long-term lease. 58 On 25 October Piper Alderman wrote to Messrs Gadens who were acting for Butt Investments on the property sale. Piper Alderman advised that the put and call option would not be required and that they expected that the land transaction would be signed and settled on the same day as the signing and completion of the business sale purchase, namely on 8 November 1999. The letter was copied to Mr Parker. In his cross-examination Mr Parker acknowledged that there was no person who had been identified to buy the land. On 26 October 1999 IPG advised Mr Parker that on the basis of the rent which the plaintiff had indicated it was prepared to pay, ($500,000 per annum), it would not be possible in the timeframe which had been set to find a buyer for the property at $5,500,000. 59 In the meantime, drafts of the proposed share sale agreement were being considered by the parties' solicitors. Clause 8.1 of the draft dealt with the release of securities or guarantees provided by the defendant (amongst others) to support North & Western's obligations under leases of equipment. One version of the draft agreement provided that the parties would co-operate to cause the vendors and any guarantor to be released from those obligations, but that insofar as such releases had not been obtained at completion, the vendors and the purchasers would continue to co-operate to effect those releases as soon as practicable thereafter with an indemnity to be provided by the purchaser. However this was not acceptable to the defendant. On 1 November 1999 Mr Murrell of Kevin Munroe & Associates advised Piper Alderman that the defendant expected that the guarantees given to Esanda and to the Commonwealth Bank of Australia should be released at completion and requested an amended draft clause 8.1. 60 On 4 November 1999 a meeting was held between the defendant and Mr Titley with Mr Warrell, Mr Parker, and two solicitors from Piper Alderman. A number of matters was outstanding. At this meeting Mr Warrell for the first time advised the defendant that the plaintiff would not be purchasing the property and that it had not secured a third party to do so. He said that the plaintiff was willing to enter into a lease agreement of the depot on commercial terms so that Butt Investments could sell the depot to a third party with a lease in place. The defendant did not reject the idea of a lease to the plaintiff instead of a sale of the depot. Some very general terms involving the term of the lease and an option of renewal, annual rent and contributions to outgoings were discussed. Mr Titley's response to the proposed lease was to say that they had no idea whether the terms proposed were reasonable or not. He advised that the defendant would have to obtain advice as to what was an acceptable lease to enable the property to be sold at the price of $5,500,000. The plaintiff's proposal was for rental payments of $500,000 per annum plus a contribution of $50,000 towards outgoings. 61 Ultimately the proposal for a lease and its terms was not a stumbling block to completion. However the proposal that the property be leased to the plaintiff rather than be sold to a third party was raised with the defendant for the first time at this meeting. The terms of the lease had still to be considered and negotiated. 62 Mr Warrell proposed that settlement, meaning instantaneous exchange and settlement, would occur within two weeks. The discussion about an extension of time for settlement was informal. Mr Warrell told the defendant that two weeks would definitely be OK for completion. The only contemporaneous note of the meeting, being a note made by a solicitor of Piper Alderman, says: "settlement proposal – two weeks. Why? Discussion of clause 8.1 ….. Will talk about it all on Monday." 63 Mr Warrell acknowledged that he did not specifically ask for the term of the Heads of Agreement to be extended. There was no discussion at the meeting about the Heads of Agreement. Mr Warrell did not give any consideration at the time to whether the Transaction Date in the Heads of Agreement had been extended. 64 The defendant acknowledged that at this meeting he had agreed with Mr Warrell that the plaintiff should have until 22 November to complete. He also said in his evidence that it was his understanding that "they were out of contractual arrangement" on 8 November. On the other hand Mr Warrell said that he believed that after 8 November they were still operating under an exclusivity agreement. 65 Of course the question is not what either Mr Warrell or the defendant thought, but whether by reason of the agreement to extend the time for completion until 22 November, there was a further oral extension of the Transaction Date in the Heads of Agreement to 22 November 1999. If the Transaction Date was extended, so was the exclusivity period, and Butt Investments and the defendant were contractually bound to the plaintiff not to enter into negotiations with any third party prior to that date. For reasons which I give at paras 116-122 below, I have held that the exclusivity period was not extended beyond 8 November, 1999. 66 The draft lease was prepared by the solicitors for the plaintiff and submitted to the solicitors for the defendant on 5 November 1999. Further drafts of the share sale agreement were also prepared and circulated. 67 On 9 November the Commonwealth Bank wrote to Mr Parker and advised that the Bank was prepared to refinance the existing loan arrangements for North & Western on certain conditions. One of the conditions was that the plaintiff provide what was described as a "letter of comfort" in a form acceptable to the bank. 68 On 9 November Mr Titley received a telephone call from Mr Dunn from the STA. Mr Titley had not been expecting a call. He had not dealt with the STA since February. Mr Dunn asked Mr Titley whether North & Western had been sold and whether there was an opportunity for the Authority to purchase the business. Mr Titley said that he would have to speak to the defendant, which he did. The defendant sent Mr Titley a fax setting out his position. After noting that the STA had carried out due diligence earlier in the year and that he did not want to spend months on negotiations, he suggested that Mr Titley seek an undertaking from the STA setting out the timetable for the proposed sale. He also said that a sale of Riverside would have to be considered. The STA had previously suggested indicative terms for the purchase of that business. He concluded his message to Mr Titley by saying that he was in full agreement in proceeding with the STA provided it was quick. 69 On 10 November 1999 Mr Titley sent to Mr Dunn of the STA the financial statements for North & Western as at 30 September 1999 and a certificate (called a "completion payment certificate") setting out a price of $14,177,024 which he contended would be the price payable for the shares on the basis of the financial statements and otherwise in accordance with the offer for the assets and business which the STA had previously made in February. The letter continued that absolute confidentiality of negotiations would be required and that if the confidentiality were broken the defendant would move immediately to extend the exclusivity agreement with another party rather than risk a sale to that party. The letter was the start of negotiations between Butt Investments and the STA for the sale of the shares in North & Western and the bus depot to the STA. The defendant and Mr Titley believed at this time that the exclusivity period in the Heads of Agreement had expired on 8 November. 70 On 11 November 1999 the Commonwealth Bank sent to Mr Parker documents which it required to be signed and returned to it, if it were to agree to the refinancing of North & Western's facility and the release of the existing securities. The "letter of comfort" which it enclosed included what would arguably have been a guarantee by the plaintiff of North & Western's obligations to the bank. 71 The defendant continued to negotiate the terms of the share sale agreement and the lease with the plaintiff. On 12 November Mr Titley said that on the advice which the defendant had received the offered terms of lease would result in a sale price of the property of $4,800,000 at most. Mr Titley however said that Butt Investments was prepared to accept a lease on certain terms which were then set out. 72 It will be recalled that in early November 1999 Mr Warrell had asked Mr Kidd to review and audit the SSTS system used by North & Western. In the week commencing 15 November Mr Kidd told Mr Warrell that he had spoken to the officers of the Department of Transport and had been told that there might be a problem with the maps on which North & Western were calculating their claims for subsidies and there might be a problem with the calculations. Probably as a result of the enquiries which Mr Kidd had made, the Department sent a fax to North & Western on 15 November 1999. The letter stated that an examination of the current sectionalised maps had established that they needed to be updated or reviewed. The Department required North & Western to lodge two new sectionalised maps of the trunk routes of their regular passages services for each of their two commercial service contracts including a summary sheet nominating each section length for consideration and approval by the Department. It was also required to lodge two maps of every other commercial route operated within each of the contracted regions and, following approval of both of those maps, it was required to provide two maps indicating all school special routes operated within each of the contract regions for the Department's approval. 73 On 15 November 1999 there was further correspondence and meetings between the solicitors for Butt Investments and the plaintiff in relation to the terms of the proposed lease. By the end of the meeting the parties had agreed on the terms that should be included in the lease. 74 On 16 November the defendant and Mr Titley met with representatives of the STA. The STA increased its offer for the shares in North & Western to $13,200,000. The defendant accepted the offer conditional upon there being an exchange of contracts and payment of a 10% deposit by 19 November 1999. The parties agreed to meet on Thursday 18 November 1999 to settle the terms of the contracts. It seems that the meeting on 18 November did not take place. The defendant waited until after 22 November to progress matters with the STA. The plaintiff did not have any knowledge of these negotiations, except what was disclosed by Mr Titley on 18 November to which I refer below. 75 At the meeting on 16 November with the STA, Mr Titley and the defendant said that they had an offer on foot but would be prepared to proceed at around $14,000,000 for the sale of the shares. Mr Stott increased his offer to $13,200,000. The defendant and Mr Titley said that although this was in excess of the offer in hand, it would be too difficult to change purchasers at that late stage. Mr Stott then offered a quick exchange and payment of a 10% deposit. The plaintiff alleges that by this discussion the defendant breached the confidentiality provisions in cl 3 of the Heads of Agreement, as well as cl 4. 76 As a result of what Mr Kidd had told him, Mr Warrell telephoned the Department of Transport on 16 November and arranged a meeting with the officers of the Department on the following day. He told Mr Postema on the same day that he had spoken with Department at Parramatta and had been told that the maps used by North & Western had not been approved by the Department and that the last three payments of subsidies had been paid subject to a caveat that they were subject to an adjustment. Mr Postema made a note of his telephone conversation with Mr Warrell in which he recorded that Mr Warrell said that they could be talking about $500,000 adjustment to the subsidies. It is not clear where Mr Warrell received this information. 77 Mr Warrell met with officers of the Department on 17 November. He was told that the Department had been engaged in discussions with the defendant for at least three years regarding the approval of the subsidies and had reserved its position in respect of the subsidies to be paid. He was told that the Department had informed North & Western on a number of occasions that the Standard Section Principles had been revised and that North & Western needed to review and update its maps. 78 Mr Warrell was told that when new sectionalised maps were submitted the payments already made would need to be readdressed. He was told that the Department had not made up its mind about claiming back any past overpayments but that it looked like the payments would be less in the future. 79 Mr Warrell was told that a meeting had been arranged with Mr Anthony Butt for Tuesday 16 November 1999 but had been cancelled because the defendant was unable to attend. 80 This advice from the Department caused Mr Warrell to decide that the plaintiff should put the purchase on hold until the issue was sorted out. 81 On 17 November 1999 the STA formally confirmed that it wished to purchase the shares in North & Western and the real estate on which the bus depot was situated. It was prepared to exchange contracts for a total price of $18,935,000 of which $13,635,000 represented the price of the shares. It advised that it was prepared to exchange contracts immediately and to settle by 14 December 1999. 82 On Thursday 18 November 1999 Mr Warrell received a telephone call from Mr Titley. In the course of that call Mr Warrell told Mr Titley that the Department of Transport had advised that the section maps were not up to date and that as a result the calculation of subsidies was incorrect and that they were unaware of the magnitude of the incorrect calculations. He told Mr Titley that the Department had advised that North & Western had not submitted new maps despite having been requested to supply them. He told him that it would be difficult for the plaintiff to close the deal on Monday (i.e. 22 November) with that issue outstanding. He told Mr Titley that if the problem could be sorted out then the plaintiff would proceed to settlement. 83 Mr Titley said to Mr Warrell that the defendant had received another offer for the company but as long as everything was completed on Monday 22 November he would not consider it. Mr Warrell's response was that as long as the SSTS issue was cleared up, Monday would not be a problem. Mr Warrell was told that the offer which the defendant had received was higher than the price which the plaintiff had offered. 84 In the meantime Mr Parker had asked Piper Alderman to review the documents received from the Commonwealth Bank and advise if they were in order to sign. On 19 November Piper Alderman wrote to the Commonwealth Bank expressing concern about the documents including the so-called "letter of comfort". They advised the Commonwealth Bank that the plaintiff would not agree to clauses in the letter which would have the effect that it was giving a guarantee. They also proposed other adjustments to the letter. On the following Monday, 22 November the Commonwealth Bank rejected the request to change the terms of the letter. Thus as at 22 November the plaintiff was not able to provide the releases which the proposed share sale agreement contemplated. 85 On Friday 19 November Mr Warrell had a telephone conference on speakerphone with the defendant. Present in Mr Warrell's offices were Mr Parker and Mr Postema although the defendant was not aware they were there. Mr Postema kept a detailed file note of the conversation. The plaintiff relied upon the conversation as constituting a further extension of the Transaction Date under the Heads of Agreement. The highest the evidence went in this direction was in the evidence of Mr Parker. He swore that in the conversation Mr Warrell told the defendant that the plaintiff could not agree to a settlement until such time as the SSTS payment scheme problem was resolved with the Department of Transport. According to him, the defendant said that he did not know when the Department would decide what was happening with the subsidies and that he couldn't do anything until next Friday, that is, Friday 26 November. He then said that the following words were exchanged: "Warrell: Then we are agreed that we will carry on as though completion will be achieved and wait for the DoT decision. Butt: I will let my lawyers know. Warrell: There are still details that we need to pursue and we will wait for the DoT view. Butt: OK". 86 This version of the conversation was denied by the defendant. I do not accept it. In a note which he made on 30 November 1999 Mr Parker summarised this part of the conversation in the following terms: "KW in informing KB and PT advised that we would proceed on the basis of purchase and that we would settle as soon as a position was advised by DoT. We were made aware that DoT had put dedicated personnel to the N&W problem. KB advised that the DoT were to meet with the BCA for a second opinion." Absent from this note was any suggestion that the defendant acquiesced in a statement by Mr Warrell that the parties agreed to carry on as though settlement would be achieved. 87 Mr Postema's file note included the following: "KW: Understand what you are saying, but the DoT say it may be an issue. Until know whether it's big or little, can't go ahead. KB: Don't know when DoT will decide. Meet[ing][next] Friday. Surprised DoT has to rely on Barry. [DoT] want Gary involved and that's it. KW: Waiting on DoT. Suggest carry on as though we'll complete but wait until DoT decision. KB: Convey to lawyer and take it from there. KW: Still details, will still pursue and wait for DoT view. KB: OK." 88 Mr Postema's note of this conversation which I admitted over objection for reasons which I have given previously, included the following: "Note: The gist of the conversation was that the parties would await the outcome of the meeting with the DOT. While my handwritten notes were not able to capture every word of the conversation, Ken Butt clearly left the impression he would sort the matter out and that it was not a big deal. Conversely, Kevin Warrell made it clear that CGEA wanted to proceed subject to the DOT issue being sorted out. Ken Butt did not say anything that suggested that he would not deal with CGEA or that the matter would not settle. While Ken Butt did not say much, I was left with the impression that at the least everyone would await the outcome of the meeting on the following Friday with completion to be postponed until at least that time or shortly thereafter." 89 Mr Warrell's evidence was simply that he told the defendant that the plaintiff could not agree to a settlement until the SSTS payment scheme problem was resolved with the Department and that the defendant replied to the effect that he did not know when the Department would decide what was happening with the subsidies, but was going to meet with them next Friday to sort it out. 90 Both Mr Warrell's evidence and Mr Postema's file note confirmed that there was no agreement to extend the time for completion to any particular date. I do not accept Mr Parker's version of the conversation that Mr Warrell said that "then we are agreed that we will carry on as though completion will be achieved and wait for the DoT decision." I accept that Mr Warrell suggested that the parties should carry on as though they would complete but wait until there was a Departmental decision on the issue. However I do not accept that the matter was put to the defendant on the basis that it was an agreed position, nor that the defendant agreed that the parties should carry on as though completion would be achieved. Knowing his position with the STA I am satisfied that the defendant was treading carefully. Notwithstanding the defendant's denial, I think that Mr Postema's file note in which he records the defendant as saying that he would convey to his lawyer what Mr Warrell said and take it from there, accurately expresses the defendant's response to Mr Warrell's statement. Mr Postema's summary of the conversation does not suggest that the defendant agreed with Mr Warrell's statement. Rather the defendant did not say anything to suggest that he would not deal with the plaintiff. Nor did he say anything to the effect that the matter would not settle. 91 The defendant's position at this time was that he had a higher offer from the STA, but did not wish to lose both buyers. He was careful not to commit himself to the plaintiff if the matter did not settle by 22 November, but at the same time he was careful not to say anything which might make the plaintiff withdraw. 92 Monday 22 November came and went without any arrangements for settlement being made. 93 The defendant gave evidence that he had no intention of entering into any agreement with the STA unless by the end of 22 November 1999, the plaintiff were to not enter into and complete the share sale agreement in relation to North & Western and enter into the lease in relation to the land. The position of both parties in relation to this evidence was curious. The plaintiff said that the defendant's evidence was knowingly false having regard to the earlier negotiations with the STA in which the defendant accepted the STA's higher offer on condition that contracts were exchanged and a deposit paid by 19 November. On the other hand the plaintiff relied upon the evidence to support its case that it lost the opportunity to acquire the shares in North & Western as a result of the combination of the defendant's breach of the exclusivity provision in the Heads of Agreement and his knowing involvement in North & Western's alleged misleading and deceptive conduct in not making prior disclosure of the issues regarding the SSTS. Had that issue been raised with the plaintiff months earlier, it could have been resolved before 22 November. The plaintiff said that had the issue been resolved before 22 November, it would have completed the acquisition by 22 November. It accepted that under the Heads of Agreement Butt Investments was not obliged to sell. But it relied upon the defendant's evidence that he would not have accepted the STA's offer if the plaintiff had entered into and completed the agreements by 22 November, whilst, paradoxically, saying that the defendant's evidence in that regard should not be accepted as it was contrary to his conduct up to that time. 94 For his part counsel for the defendant, whilst maintaining his client's credibility, invited me not to accept the defendant's evidence that he would have sold to the plaintiff if it had been in a position to exchange and complete by 22 November. 95 The defendant was not obliged to sell to the plaintiff just as the plaintiff was not obliged to purchase. The natural inference would be that once the STA had indicated on 9 November that it wished to purchase the shares in North & Western and the land for a price which was substantially more than which the plaintiff had offered, the defendant would not have exchanged an agreement for sale to the plaintiff, but would have allowed the exclusivity period, whatever it was, to lapse and then sell to the highest bidder. Counsel for the plaintiff submitted that this would be contrary to an implied term of the Heads of Agreement that the defendant act in good faith. However such a term, assuming it could be implied, could not operate in a way contrary to the express term that Butt Investments was not obliged to sell. 96 However that may be, the defendant wanted a quick sale. Price was not his major consideration. I accept his evidence, which was given against his interest in the litigation, that he would have sold the shares in North & Western and entered into the proposed lease with the plaintiff if the plaintiff had been ready to settle by 22 November. 97 I am not satisfied that the only reason that the plaintiff did not settle by 22 November was the issue raised by the Department of Transport concerning the SSTS. By 22 November the plaintiff had not secured the Commonwealth Bank's agreement for the release of the defendant's guarantee. Irrespective of the resolution of the SSTS issue the plaintiff was not in a position to settle on 22 November. Hence the plaintiff relied upon an alleged extension of the Transaction Date beyond 22 November arising from the conversation between the defendant and Mr Warrell on 19 November. 98 On the evening of 25 November 1999 a meeting was held between representatives of the STA and its legal advisers with the defendant, Mr Titley and the defendant's solicitor. The meeting continued until around 3.30am on 26 November 1999 by which time an agreement with the STA was finalised and signed. Under the agreement with the STA the Authority paid $13,630,943 for the shares in North & Western. Under the proposed agreement with the plaintiff, the plaintiff would have paid $11,621,998 for the shares. 99 The plaintiff says that the agreement made with the STA shows that the value for the shares at the time was more than $2,000,000 in excess of the price for which it could have purchased the shares. It claims that sum as the damages suffered by it as a result of the alleged breach of the Heads of Agreement by the defendant and his alleged knowing involvement in North & Western's alleged misleading and deceptive conduct in not disclosing the issues between North & Western and the Department of Transport about the subsidies payable under the SSTS. 100 To complete the narrative, a meeting was held on 26 November 1999 between Mr Anthony Butt and representatives of the Department and the Bus and Coach Association, as a result of which Mr Anthony Butt prepared new section maps. 101 On 11 January 2000 the Department claimed that the sum of $42,605.34 was owed to it as adjustments to subsidies paid in 1998 and 1999 to reflect the Standard Section Principles. The amount identified as owing in respect of the three students referred to in its 1998 and 1999 correspondence, (both referring to 1998 subsidies), was $10,125.45. After extensive debate the issue was finalised by North & Western paying the Department $37,185.64 on 17 August, 2001. Additional Causes of Action 102 Two further claims were made by the plaintiff. It alleged that the defendant breached clauses 3.1.1 and 3.1.2 of the Heads of Agreement by telling the STA of the negotiations with the plaintiff and by telling STA that its offer exceeded the offer that had been made by the plaintiff. This claim was mentioned but not developed in submissions. It arose on the pleadings. No cross-examination was directed to the question of what confidential information was disclosed, except that the defendant and Mr Titley accepted the accuracy of a file note made by a representative of the STA which I have summarised at para 75. 103 The second additional claim was that the defendant engaged in misleading and deceptive conduct in his negotiations with Mr Warrell particularly in his conversation on 19 November. During the telephone call the defendant told Mr Warrell that he had arranged a meeting with Mr MacDonald of the Bus and Coach Association of Friday 26 November at which officers of the Department would be present. He said he would discuss the matter then. 104 The plaintiff alleged that the defendant led Mr Warrell to believe that he would be meeting the Department of Transport on 26 November to resolve the SSTS issue so that the negotiations with the plaintiff could be concluded. In those circumstances it was contended that not to disclose the state of negotiations with the STA rendered the statement misleading and deceptive. In its further amended statement of claim the plaintiff pleaded that it relied on the statement made on 19 November 1999 that the defendant would be meeting the Department of Transport on 26 November to resolve the SSTS issue, by refraining itself from taking any action after 19 November to resolve the SSTS issue. However there is no evidence that the plaintiff could have resolved the SSTS issue within a week of 19 November. 105 It was submitted for the plaintiff that had the true facts been disclosed it would have instituted proceedings to restrain the defendant and Butt Investments from entering into an agreement for sale of the shares in North & Western to the STA. Two issues arise from that contention. First, whether as a matter of fact the plaintiff would have taken that step when it did not react to the news that the defendant had received a higher offer from a third party. I am not satisfied that it would have done so. Secondly, the plaintiff must establish that if it had instituted such proceedings it would have been entitled to relief. Even if the defendant did engage in misleading and deceptive conduct by not disclosing the negotiations with the STA, a contravention of s 42 of the Fair Trading Act would not give rise to a claim for damages for loss of the opportunity to acquire the shares in North & Western unless the plaintiff could show that had the misleading and deceptive conduct not been engaged in, on the balance of probabilities, it would have entered into a contract of purchase. (Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 355). If its contract with Butt Investments and the defendant did not give it the right to restrain a sale to the STA there was no evidence to establish that but for the alleged non-disclosure it would have been the successful buyer. 106 I will deal with the additional causes of action after considering the plaintiff's principal claims. Claim for misleading and deceptive conduct for non-disclosure of SSTS issue 107 The evidence in relation to the non-disclosure of the issue between North & Western and the Department of Transport in relation to the standard section principles was understandably confused. In paragraph 17 I have set out the grounds upon which the plaintiff contended that North & Western's letter of 21 July 1999 in response to its letter of 15 July 1999 was misleading and deceptive. None of the grounds for the allegation of misleading and deceptive conduct is made out. It was not the fact that the contracts would only be renewed if changes were made to North & Western's existing sectionalised maps. The section maps were not the maps annexed to the relevant contracts. The contracts were renewed without changes to those maps. The only changes which were made to the previous contracts with the Department were not material. The plaintiff did not rely on those changes as showing that there was not a reasonable basis for the expression of belief set out in cl 2.5 of North & Western's letter of 21 July 1999. 108 The allegation referred to in paragraph 17(b) in this judgment was not made good. It confused changes to the contracts RO82 and RO83 and changes to the section maps on the basis of which subsidies were payable. The Bus and Coach Association was not involved with the former. It is true that in dealing with the requirements of the Department of Transport in relation to the issues which the Department raised about the payment of subsidies, North & Western relied upon the Bus and Coach Association. However the plaintiff's letter of 15 July 1999 did not raise the issue of the Department's position in relation to the assessment of subsidies having regard to its interpretation of Standard Section Principles. For this reason the remaining allegations that the 15 July letter was misleading and deceptive which are referred to in paragraph 17 above, are not established. It could not fairly be said that the Department's position constituted current, pending or threatened litigation, nor a complaint. In the end the plaintiff did not maintain such a contention. 109 The second ground on which the plaintiff alleged that the defendant was involved in a contravention by North & Western of s 52 was that: (a) in its letter of 15 July 1999 the plaintiff asked the defendant to furnish details of complaints received in the previous year from the Department of Transport; (b) by its letter of 21 July 1999 North & Western said that full records would be available; (c) in purported compliance with the Confidentiality and Pre-Agreement between North & Western and the plaintiff made on 23 June 1999 North & Western placed documents into the data room for the purpose of the due diligence investigation to be carried out by the plaintiff; and (d) information which was provided did not include the correspondence from the Department of Transport in relation to the calculation of subsidies under the SSTS, in particular its letters of October 1997, 3 November 1998 and 18 May 1999. 110 Thus the allegation of a breach by North & Western of s 52 in which the defendant was allegedly knowingly involved was based on: (a) the undertaking to provide records of complaints received in the previous year from the Department; (b) the contractual obligation to provide Information; and (c) breach of the undertaking or contractual obligation by not including information in the records and the data room. 111 The initial difficulty in this allegation is that there was no evidence that the correspondence was not included in the documents provided in the data room. The plaintiff did not adduce evidence of who inspected documents in the room or what was made available for inspection. On the other hand there was no evidence from the defendant that documents were included amongst those provided in the data room. 112 The proceedings were not commenced until 24 May 2002, about two and a half years after the negotiations collapsed. Without an inventory of documents produced in the data room it is likely that neither party could swear to what was or was not produced. There was no evidence that any such inventory was kept. This was an issue on which the onus to prove a negative lay on the plaintiff. (Illawong Village Pty Ltd v State Bank of NSW [2004] NSWSC 18 at para 208 and cases there cited.) It did not discharge that onus. 113 In any event, I do not think that the correspondence from the Department can fairly be characterised as complaint. If the correspondence was not included in the data room, that was not misleading or deceptive conduct. 114 The next question is whether the correspondence from the Department to North & Western in relation to the SSTS payments fell within the description of "Information" in the Confidentiality and Pre-Agreement. The definition of "Information" is set out in paragraph 13. It was submitted on behalf of the defendant that the definition had to be read down to avoid absurdity. It was submitted that there was an implied limitation that the obligation was to provide only such information in relation to the business of North & Western as the plaintiff requested. 115 Although I think some limitation has to be implied into the definition to avoid absurdity, I am not satisfied that the limitation suggested by the defendant is the appropriate one. I think rather that the limitation is in terms of what information could reasonably be regarded by North & Western as being material to the plaintiff's consideration as to whether or not to proceed with the purchase. I have accepted the defendant's evidence that he did not think that the issue which the Department had raised was significant. He thought it was minor. I have also held that this view was reasonable. I therefore do not think that it is established that the plaintiff was entitled by the terms of its Confidentiality and Pre-Agreement with North & Western to expect that the information in question would be disclosed if it existed. 116 Even if this conclusion is wrong, so that North & Western was in breach of the Confidentiality and Pre-Agreement in not disclosing the information, it does not follow that by not disclosing the information North & Western engaged in misleading and deceptive conduct, let alone that the defendant was knowingly involved in the breach. The alleged contravention of s 52 was the engaging in misleading and deceptive conduct by omission. Subsection 4(2) of the Trade Practices Act defines the term "conduct" as, relevantly, the doing or refusing to do an act. The reference to refusing to do an act includes a reference to refraining (otherwise than inadvertently) from doing that act. An inadvertent omission does not constitute engaging in conduct within the meaning of s 52. (Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211 at [58]; Semrani v Manoun [2001] NSWCA 337 at [57], [62]). In this case the alleged omission does not make any positive statement of North & Western misleading. The inadvertent omission to disclose information which the plaintiff says should have been disclosed does not constitute engaging in conduct within s 52. 117 For these reasons I am not satisfied that North & Western engaged in misleading or deceptive conduct by not disclosing the SSTS issue to the plaintiff even if its non-disclosure was a breach of its Confidentiality and Pre-Agreement. Therefore the defendant cannot be liable as an accessory. Claimed Extension of the Transaction Date to 22 November 118 In my view the Transaction Date on which the exclusivity period expired applied to both sub-clauses 4.1 and 4.2. Sub-clause 4.2 provided further detail of what was encompassed by the exclusive period for negotiation provided for in clause 4.1. It was not an open-ended additional restraint upon Butt Investments and the defendant which applied beyond the exclusivity period. The plaintiff did not contend to the contrary. 119 The exclusivity period had a definite expiry time. However by clause 2 the parties agreed that their intent was to work towards signing definitive agreements "on or about" 8 October 1999 or later agreed date. In my view the "Transaction Date" meant 8 October 1999 or a later agreed date. The exclusivity period expired on 8 October 1999, or a later agreed date, even though the parties contemplated that the definitive agreements might be signed only on or about that date. 120 In my view an agreement to defer the date for signing definitive agreements was not ipso facto an agreement to defer the Transaction Date and hence extend the exclusivity period. A mere agreement to settle on a particular day would not automatically extend the Transaction Date, because the Transaction Date was not necessarily the date of signing and completing definitive agreements. The words "or about" show that there was no necessary correspondence between the intended date of signing definitive agreements and the Transaction Date. 121 In my view the expression "later agreed date" in clause 2 meant a later date which was agreed to be a later Transaction Date. The extension of the Transaction Date from 8 October to 8 November was an express variation of clause 2 of the agreement. In my view such an express agreement was required. On 4 November the parties did not specifically address the question of whether the term of the Heads of Agreement should be extended. The term was not extended by the parties' agreement that the plaintiff should have until 22 November to complete. 122 The transaction for which the Heads of Agreement provided was substantially departed from at the meeting on 4 November. There, for the first time, the plaintiff said that it would not procure a purchaser for the depot but would instead itself take a lease of the depot on terms which were still to be agreed. That was a substantial change from the transaction contemplated by the Heads of Agreement. 123 The expression "definitive agreements" in clause 2 was not defined. It meant agreements which defined the parties' rights, powers and obligations with respect to the transaction outlined in the recitals to the Heads of Agreement and in annexure A. Even if, contrary to my view, the expression "Transaction Date" meant the agreed date on or about which definitive agreements should be signed, the agreements in contemplation from 4 November were not agreements which defined the rights and obligations of the parties contemplated by the recitals to the Heads of Agreement or in annexure A thereto. Therefore the agreement that the plaintiff should have until 22 November to complete was not an agreement that "definitive agreements", as that expression was used in the Heads of Agreement, should be signed on or about that day. It was an agreement that the plaintiff should have until 22 November to complete what was a substantially different transaction. 124 For these reasons the exclusivity period provided for by the Heads of Agreement was not extended beyond 8 November. It follows that the negotiations which the defendant conducted with the STA from 10 November were not a breach of clause 4 of the Heads of Agreement. 125 For the sake of completeness I should repeat that even if the Transaction Date was extended to 22 November, the plaintiff was not able to complete by that date irrespective of the SSTS issue. Nor was the Transaction Date extended beyond 22 November for the reasons given in paragraphs 85 to 91. 126 There remain to be considered the two causes of action referred to in paragraphs 102 to 105 above. Claim for Misleading and Deceptive Conduct on 19 November 1999 127 I have already concluded that even if the defendant engaged in misleading and deceptive conduct in the course of his telephone conversation with Mr Warrell, that conduct did not cause the plaintiff any of the loss which it claims unless it could have successfully taken steps to restrain the defendant from entering into an agreement with the STA and would have done so. My conclusion that the exclusivity period expired on 8 November means that I am not satisfied that even if the defendant had instituted such proceedings it would have been entitled to the relief which it claimed. 128 Accordingly even if the defendant engaged in misleading or deceptive conduct by not disclosing the fact of negotiations with the STA or the state of those negotiations in the course of his telephone call with Mr Warrell on 19 November, that conduct did not cause the plaintiff the loss which it claims. No claim was made that there were some identified expenses incurred after 19 November which would not have been incurred had the alleged misleading conduct not been engaged in. 129 In any event, in my view the non-disclosure of the state of negotiations with the STA on 19 November was not conduct which was misleading or deceptive. The parties did not keep all their cards face up on the table during their negotiations. The plaintiff itself at earlier stages of the negotiations had represented to the defendant that it was in discussions with a third party for the purchase of the bus depot when it was not. It knew from what Mr Titley told Mr Warrell that the defendant had received a higher offer from a third party. It made no enquiry about how the defendant was dealing with that offer. Having regard to my findings as to the proper construction of the Heads of Agreement it was not entitled to assume that the defendant would not be negotiating with that party and might not complete an agreement with that party. As a general proposition, unless circumstances are such as to give rise to a reasonable expectation that if some relevant fact exists it will be disclosed, mere silence does not support the inference that the fact does not exist. (Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) ATPR (Digest) 46-054; Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32; Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97 at 114; Warner v Elders Rural Finance Ltd (1993) 41 FCR 399 at 405). 130 The parties were still in a commercial negotiation which had been repeatedly extended. They had entered into an agreement which provided a period for exclusive negotiation which had expired. The plaintiff knew that the defendant had received a higher offer. The plaintiff could have had no reasonable expectation that the defendant might not seek to close with that third party. The defendant's advice that he would have a meeting with the Department of Transport on 26 November when Mr MacDonald from the Bus and Coach Association was available to discuss the issue involving the SSTS, could not in those circumstances convey an implied representation that in the meantime the defendant might not close an agreement with the third party. For these reasons in my view the defendant did not contravene s 42 of the Fair Trading Act in his telephone conversations with Mr Warrell on 19 November 1999. If he did, his conduct was not causative of any loss which is being claimed in the proceedings. For these reasons that claim fails. Breach of Clause 3 of Heads of Agreement 131 The remaining claim is therefore the claim that in the conversation with representatives of the STA on 16 November 1999 the defendant breached cl 3 of the Heads of Agreement by telling the STA that: "They had an offer on foot and would be prepared to proceed at around $14,000,000.", and later saying that the STA's revised offer of $13,200,000 was "in excess of the offer in hand". 132 As I have mentioned there was very little cross-examination directed to this subject. Evidence about the discussions with the STA was contained mainly in file notes prepared by Mr Chivers of the STA. That evidence was adduced by the plaintiff. The defendant and Mr Titley acknowledged the correctness of Mr Chivers' file note. The plaintiff did not seek to lead any further evidence from Mr Chivers as to what was discussed. Nor did it lead any evidence as to the effect of the statements alleged to breach cl 3 upon the course of negotiations with the STA. The evidence does not show that the STA was told of the identity of the purchaser. 133 Clause 3 of the Heads of Agreement is not expressed to apply only up to the Transaction Date. Clause 3.3 provided that if definitive agreements were not entered into, the parties must at the end of the exclusivity period return the other party's Confidential Information if demand were made by the other party. In my view cl 3 is not limited in time to the exclusivity period. 134 The defendant did not disclose to the STA the terms of its Heads of Agreement with the plaintiff nor the fact that it was in negotiation with the plaintiff. Therefore he did not contravene cl 3.1.1. However the price offered by the plaintiff was information exchanged between the parties in relation to the proposed transaction within the meaning of cl 3.1.2. I do not consider that the statement that the defendant had an offer on foot was a disclosure which contravened cl 3.1.1 or 3.1.2. Nor was the statement that the defendant would be prepared to proceed at around $14,000,000 a contravention of those sub-clauses. But the statement that the offer of $13,200,000 was "in excess of the offer in hand" was a partial disclosure of information exchanged between the plaintiff and the defendant in relation to the proposed transaction involving the purchase of shares in North & Western. Assuming as I must on the evidence that the identity of the offeror was not disclosed to the STA, nonetheless I think the disclosure that the offer received was less than $13,200,000 was a breach of the defendant's obligation to keep the information exchanged between the parties in relation to the proposed transaction for the purchase of shares strictly confidential. 135 Little attention was paid to this claim in the course of final submissions, but the claim was not abandoned. The plaintiff submitted that there was an extension of the Heads of Agreement to at least 22 November and on that basis the defendant was in breach of both clauses 3.1.1 and cl 4. However the case pleaded did not limit the claim to a breach of cl 3.1.1. Nor did it limit the claim for breach of cl 3.1.1 and 3.1.2 to a breach within the exclusivity period. Paragraph 59C of the further amended statement of claim alleged that the defendant breached cl 3.1.2 of the Heads of Agreement by telling the STA that its offer of $13,200,000 exceeded the offer that had been made by the plaintiff. 136 I have not found that a statement was made to that precise effect because the evidence does not establish that the STA was told that an offer had been made by the plaintiff. Nonetheless I am of the view that the defendant told the STA that its offer of $13,200,000 exceeded the offer which the defendant had received and that this was a breach of cl 3.1.2 of the Heads of Agreement. 137 In my view that claim is within the case which was fought at trial, albeit that little attention was paid to it. 138 The reason that little attention was paid to this claim is that standing alone it does not give rise to any substantive damage. The plaintiff did not lose the opportunity to buy because of the statement. Nor were any of the expenses incurred by the plaintiff in the negotiation incurred or wasted by reason of that statement having been made to the STA. 139 In support of its alternative claim for damages for recovery of its wasted expenditure the plaintiff referred to the joint judgment of Mason CJ and Dawson J in the Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 85. There their Honours emphasised that a claim for damages for loss of profits, or for expenditure reasonably incurred, are two manifestations of the general principle that an award of damages for breach of contract is designed to place the plaintiff in the position in which he or she would have been had the contract been performed. Their Honours said (at 85): "The manner in which a plaintiff frames his or her claim for damages will be dictated not so much by a choice of alternatives giving rise to an election but simply according to whether the contract, if fully performed, would have been and could be shown to have been profitable (even if the actual amount of profit is not readily ascertainable). If this can be demonstrated, a plaintiff's expectation of a profit, objectively made out, will be protected by the award of damages. Otherwise, subject to it being demonstrated that a plaintiff would not even have recovered any or all of his or her reasonable expenses, a plaintiff's objectively determined expectation of recoupment of expenses incurred will be protected by the award of damages." 140 Their Honours continued (at 86): "… in a case where it is not possible to predict what position a plaintiff would have been in had the contract been fully performed … the law considers the just result ….is to allow a plaintiff to recover such expenditure as is reasonably incurred in reliance on the defendant's promise. In this case, the law assumes that a plaintiff would at least have recovered his or her expenditure had the contract been fully performed. It would still be open to a defendant, however, to argue, notwithstanding the fact that it is impossible to assess what profits, if any, the plaintiff would have made had the contract been fully performed, the expenditure claimed by a plaintiff would nevertheless not have been recovered … ". 141 In the present case if the defendant had not told the STA that its offer of $13,200,000 was more than the offer which it had already received, the progress of the negotiation with the STA would probably have been the same. The STA had proposed its higher offer in February 1999. That offer was not prompted by anything said by the defendant which was in breach of the Heads of Agreement. The real thrust of the point made by the defendant to the STA was that it was going to be difficult to change purchasers at a late stage. That was the inducement to the STA to move quickly. The defendant would have been in no different position in dealing with the STA had he not made the disclosure that the STA's offer was higher than that already received. No questions were directed to the defendant and no evidence was led from Mr Chivers, whose affidavit the plaintiff read, to suggest that the information disclosed had any impact on the course of negotiations. In my view it did not. The plaintiff has not suffered any damage as a result of the breach. 142 In those circumstances there should be an award of nominal damages of $10 for the breach of cl 3.1.2 by reason of the statement made in the negotiations with the STA on 16 November. 143 The result is that all of the plaintiff's claims fail except for the claim that the defendant breached cl 3.1.2 of the Heads of Agreement. In relation to that claim the plaintiff is entitled to nominal damages only. 144 As the defendant has succeeded on almost all the substantial issues I think that the appropriate order is that the plaintiff pay 90% of the defendant's costs. (Compare Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873). I will grant liberty to either party to apply for a variation of the costs order. Any such application should be made within 14 days by giving notice to my associate of the intention to make the application. 145 I make the following orders: 1. Judgment be entered for the plaintiff against the defendant in the sum of $10; 2. Otherwise dismiss the further amended statement of claim; 3. The plaintiff is to pay 90% of the defendant's costs of the proceedings; 4. Grant liberty to either party to apply within 14 days to vary order 3; 5. 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