Dyluc Pty Limited v Mally Group Pty Limited & Ors [2013] NSWDC 57

District Court New South Wales

Medium Neutral Citation: Dyluc Pty Limited v Mally Group Pty Limited & Ors [2013] NSWDC 57 Hearing dates: 25 - 27 March 2013 Decision date: 01 May 2013 Jurisdiction: Civil Before: Mahony SC DCJ Decision: Verdict for the First, Second and Third Defendants. For orders see para 107. Catchwords: Sale of business, misleading and deceptive conduct, tort of deceit, negligent misrepresentation Legislation Cited: The Estate Agents Act 1980 (Vic) Trade Practices Act 1974 Fair Trading Act 1987 Competition and Consumer Act (Cth) 2010 Evidence Act 1995 (NSW) Cases Cited: Gould v Vaggelas (1985) 157 CLR 215 Nella & Ors v Kingia Pty Limited & Ors 1989 ATPR (Digest) 46-046 Category: Principal judgment Parties: Dyluc Pty Limited - Plaintiff Mally Group Pty limited - First Defendant Terry-Ann McNuff - Second Defendant Martin Egon Holgye - Third Defendant Representation: K Balendra - Plaintiff M Vincent - First & Second Defendants P Horvath - Third Defendant Slater & Gordon in association with Adams Leyland Derek Norquay, Solicitor DLA Piper Australia File Number(s): 10/241090 Publication restriction: Nil

Judgment

The Plaintiff's Claim 1The plaintiff claims damages arising from the purchase by it of a hairdressing business known as Temple Hair Design ("the business") in Albury on 21 January 2009. The first defendant was the vendor of the business and the second defendant was a director of the first defendant corporation. The third defendant was an accountant who was employed by the first defendant to prepare, during the negotiations for the sale of the business, what was known as a "Vendor Statement" which is a statutory requirement for such transactions in the state of Victoria pursuant to s 52 of The Estate Agents Act 1980 (Vic). The transaction in fact took place in New South Wales. 2On 27 November 2008 the plaintiff and first defendant entered into a contract for sale of the business. The purchase price of the business was $120,000 made up as follows: (i)$32,000 for goodwill (ii)$50,000 for equipment (iii)$38,000 for stock 3The contract for sale of business was the 2004 edition pro-forma contract together with special conditions annexed to it. 4In or about September 2008 the plaintiff, through its director, Ms Fiona McDonald, responded to an advertisement for sale of the business placed by the second defendant. There were a number of discussions between the two directors, and Ms McDonald was provided with financial information in relation to the operation of the business. She requested a Vendor Statement which was prepared by the third defendant on 15 October 2008. That document contained financial information for the years ending 30 June 2007 and 30 June 2008, and further information in respect of the three month period between 1 July 2008 and 30 September 2008. The information contained in the document which related to both income and expenses relating to the business, was derived from the financial records kept by the first defendant on a MYOB accounting software system and accurately reflected the content of the tax returns submitted in respect of the business for the relevant accounting periods. 5Ms McDonald, on behalf of the first defendant, passed the Vendor Statement onto her accountant, executed the contract for sale and entered into possession of the business on 27 November 2008. The sale was completed on 21 January 2009. 6The plaintiff's claim is pleaded by a Second Further Amended Statement of Claim filed on 31 July 2012. The plaintiff's claim against the first and second defendants is brought on the basis of misleading and deceptive conduct pursuant to s 52 of the Trade Practices Act 1974 ("TPA") and/or alternatively s 42 of the Fair Trading Act 1987 ("FTA"). The plaintiff's claim against the 3rd defendant is brought on the basis of alleged misleading and deceptive conduct, and negligent misstatement in relation to his preparation of the Vendor's Statement. The pleading is inelegantly drafted, and one of the prayers for relief claims damages against all three defendants "in tort for misleading and deceptive conduct". 7The TPA has been repealed by the Competition and Consumer Act (Cth) 2010, and the Australian Consumer Law found in schedule 2 of that Act. That legislation commenced on 1 January 2011 and I am satisfied that the TPA and FTA apply here.