FEDERAL COURT OF AUSTRALIA
Dib Group Pty Ltd v Coolabah Tree Aust-Wide Pty Ltd [2011] FCAFC 57
FEDERAL COURT OF AUSTRALIA
Dib Group Pty Ltd v Coolabah Tree Aust-Wide Pty Ltd [2011] FCAFC 57
CORRIGENDUM
1. In paragraph 97 of the Reasons for Judgment, in the fourth sentence,
“after its repudiation of the head lease the new lessee paid Dib Group a lower amount in rent than it was receiving from Coolabah under the sublease”
should read
“after Dib Group’s repudiation of the head lease the new lessee paid Kevmark a lower amount in rent than Dib Group was receiving from Coolabah under the sublease”.
I certify that the preceding paragraph is a true copy of the Corrigendum to the Reasons for Judgment herein of the Honourable Justices Gray, Lander and Katzmann. |
Associate:
Dated: 30 May 2011
IN THE FEDERAL COURT OF AUSTRALIA | |
| Appellant | |
AND: | COOLABAH TREE AUST-WIDE PTY LTD Respondent |
DATE OF ORDER: | |
WHERE MADE: |
THE COURT ORDERS THAT:
1. The appeal be allowed in part.
2. The order made on 2 August 2010 be varied by substituting for the amount “$133,026.50”, the amount “$140,326.50”.
3. There be no order as to the costs of the appeal.
4. The cross-appeal be dismissed.
5. The cross-appellant pay the cross-respondent’s costs of the cross-appeal.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.
NEW SOUTH WALES DISTRICT REGISTRY | |
GENERAL DIVISION | NSD 1046 of 2010 |
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA |
BETWEEN: | DIB GROUP PTY LTD Appellant
|
AND: | COOLABAH TREE AUST-WIDE PTY LTD Respondent
|
JUDGES: | GRAY, LANDER AND KATZMANN JJ |
DATE: | 3 MAY 2011 |
PLACE: | SYDNEY |
REASONS FOR JUDGMENT
THE COURT
BACKGROUND
1 Kevmark Industries Pty Ltd (“Kevmark”) is the owner of premises located at 18-20 Bengal Street Coolongolook, on the Pacific Highway on the mid-north coast of New South Wales (“the site”). The site consists of a service station (including a fuel sales console with several pumps for dispensing fuel), a convenience store with a postal agency and bottle shop attached to it, and a café/restaurant.
2 On 18 September 2007, Kevmark entered into a lease with the appellant (“Dib Group”) in relation to the site (“the head lease”). Dib Group is a wholesaler and retailer of motor vehicle fuels marketed under the brand name “Metro”. The term of the head lease was an initial period of one year, beginning on 16 July 2007 and ending on 15 July 2008, with an option to renew for five years. On or about the same date as it entered into the head lease, Dib Group also entered into a sublease (“the sublease”) with the respondent (“Coolabah”). Coolabah is in the business of operating food outlets on the eastern seaboard servicing the travelling public and truck drivers. The initial term of the sublease was a period of ten months and nine days, ending on 15 July 2008. At about the same time as the sublease, Dib Group and Coolabah entered into an associated fuel reselling agreement (“the fuel reselling agreement”). Andrew Grant, a director of Coolabah, personally guaranteed Coolabah’s obligations under the fuel reselling agreement pursuant to a deed of guarantee and indemnity.
3 Coolabah started operating a service station at the site on 6 September 2007. On 25 October 2007, Dib Group exercised its option to renew under the head lease with Kevmark, which had the effect of extending the head lease until 15 July 2013. Under the terms of the sublease, which was effectively a “back-to-back” arrangement with the head lease, Dib Group (if it exercised its option to renew under the head lease) was able by notice to Coolabah to renew the sublease unilaterally for the same period as the head lease. Dib Group gave Coolabah notice of its exercise of this option to renew on 29 April 2008, with the effect that the sublease was unilaterally extended until 15 July 2013.
4 By mid-2008, it had become apparent to Coolabah that the business run at the site was unprofitable. On 1 July 2008, Coolabah abandoned the site.
5 On 17 July 2008, Dib Group served on Coolabah a notice of termination of the sublease. The notice stated that Coolabah had abandoned the site and by its conduct repudiated the sublease during its term, and that Dib Group accepted the repudiation and terminated the sublease, reserving its right to damages. The next day Dib Group wrote to Kevmark purporting to terminate the head lease. Kevmark did not accept that Dib Group was entitled to do so.
6 The site remained unoccupied until 1 October 2008, on which date a new lessee took up occupation pursuant to a lease agreement with Kevmark.
THE CLAIM
7 A week after it had abandoned the site, Coolabah filed an application in this Court seeking orders:
(a) declaring the sublease and the associated fuel reselling agreement void from 15 July 2008 or from such other date as the Court thinks fit pursuant to s 87(2)(a) of the Trade Practices Act 1974 (Cth) (“the TPA”);
(b) further or alternatively, rectifying the sublease by deleting clause 53, or varying it pursuant to an order under s 87(2)(b) of the TPA;
(c) further or alternatively, refusing to enforce clause 53 of the sublease; and
(d) awarding compensation pursuant to s 87(2)(d) of the TPA with interest.
8 Coolabah alleged that, before entering into the sublease and the fuel reselling agreement, Dib Group made certain representations as to the sales figures which would be generated by the main components of the site; the utilities available; and the potential for advertising signage to be erected there.
9 In particular Coolabah alleged that, at a meeting on 4 May 2007 (“the 4 May meeting”), Dib Group’s representatives orally represented that:
(a) the site would generate fuel sales conservatively estimated at 400,000 litres per month;
(b) the convenience store would generate sales of least $100,000 per month at a gross profit margin of 35%;
(c) water would be supplied to the site at no cost because the site would use bore water; and
(d) Coolabah would be able to place advertising signage on top of the canopy over the fuel dispensing area and on the windmill which was to be constructed.
10 Coolabah also alleged that, in May 2007, George Dib, the chief executive officer of Dib Group, said to Mr Grant words to the effect that Coolabah would be one of only a few suppliers of LPG AutoGas in the local area.
11 Coolabah alleged that Mr Dib made further representations in an email which was sent to Mike Roycroft, the managing director of Coolabah, on 8 May 2007 (“the George Dib email”). The alleged representations (contained in a spreadsheet attached to the email) are set out in full later in these reasons. They included representations that the bottle shop would achieve a turnover of $12,000 per week, resulting in $187,200 gross profit per annum, and the newsagency a turnover of $4,000 per week and $31,200 gross profit per annum.
12 Coolabah alleged that each of the oral and written representations was a representation as to a future matter within the meaning of s 51A of the TPA, and that Dib Group had engaged in misleading and deceptive conduct contrary to s 52 of the TPA because it had no reasonable basis in fact for making the representations. Coolabah relied on the presumption contained in s 51A(2) of the TPA in this regard. Coolabah argued that it had relied on these representations and that as a consequence it had suffered loss and damage.
13 Mr Grant contended that he was induced to enter into the guarantee and indemnity by the same misrepresentations, and sought to have the guarantee and indemnity declared void ab initio. He also claimed compensation (or damages).
14 In its amended defence, filed on 27 November 2008, Dib Group denied that it made the representations that Coolabah alleged, but admitted that the 4 May meeting had taken place and that Mr Dib had sent the George Dib email to Mr Roycroft on 8 May 2007. It also admitted that Mr Dib had said words to the effect that “in the event that Coolabah were to supply LPG AutoGas, it would be one of only a few suppliers… in the local area”, but denied that a representation was made in the terms alleged by Coolabah and claimed that, if it was, Dib Group had reasonable grounds for making it. In the alternative that the representations were found to have been made, Dib Group denied that Coolabah had relied on them.
15 Coolabah failed in its claim before the primary judge. His Honour did not accept that the pleaded representations were made. His Honour also rejected Coolabah’s case that it had relied on the alleged representations. In short, his Honour preferred the evidence of a Mr Louis Haddad, the only witness Dib Group called, over the evidence of three witnesses called by Coolabah. These aspects of the primary judge’s decision are discussed in more detail below.
the Cross-ClaimS
16 Dib Group brought cross-claims against Coolabah, Andrew Grant and Kevmark.
17 In its cross-claim against Coolabah, Dib Group sued Coolabah for unpaid rent and outgoings and other sums said to be due under the sublease, and for damages consisting of the amount it might have to pay Kevmark as a result of its termination of the head lease and its obligation to make good the site when Coolabah left. It also claimed the same amount from Mr Grant under the guarantee and indemnity. It alleged that by abandoning the site on or about 1 July 2008 Coolabah repudiated its obligations under the sublease. It also alleged that Coolabah’s actions entitled it to terminate the sublease and recover damages for the repudiation in respect of unpaid rent, unpaid outgoings, the costs of rectifying and repairing the site after it was abandoned, and other sums due under the sublease.
18 Dib Group cross-claimed against Kevmark for damages for breach of the head lease. The damages claimed comprised lost rent, unpaid outgoings, and the cost of restoring and rectifying the site after Coolabah left.
19 Dib Group failed in its cross-claim against Mr Grant on the ground that he was not a guarantor of Coolabah’s obligations under the sublease, only the fuel reselling agreement. No appeal was brought against this aspect of the primary judge’s decision and no more needs to be said about it.
20 Kevmark defended Dib Group’s cross-claim under the head lease and brought its own cross-claim against Dib Group. These cross-claims raised a variety of issues, but in the end the primary judge found that Dib Group had repudiated the head lease, which Kevmark had then validly terminated on 22 July 2008. He also found that Kevmark was entitled to damages as against Dib Group which he calculated as follows:
(a) | $15,000.00 | (being repair and reinstatement costs) |
(b) | $1,955.14 | (being interest at the prescribed rates on the amount of the repair and reinstatement costs for the period from 1 August 2008 to 30 July 2010) |
(c) | $54,448.75 | (being damages for lost rent for the period from 1 July 2008 to 30 September 2008) |
(d) | $9,709.79 | (being interest at the prescribed rates on $54,448.75 from 1 July 2008 to 30 July 2010) |
(e) | $170,000.00 | (being damages for lost rent in respect of the period from 1 October 2008 to 15 July 2010 [sic]) |
| $251,113.68 | TOTAL |
21 Neither Dib Group nor Kevmark complained about this part of the judgment, but some aspects of the assessment set out above are relevant to the appeal.
22 Dib Group succeeded in its cross-claim against Coolabah for repudiation of the sublease. In a judgment delivered on 30 July 2010, the primary judge awarded Dib Group $370,580.35 in damages. In a supplementary judgment delivered the next working day, 2 August 2010, his Honour varied the order for damages by substituting the lesser sum of $133,026.50. This matter is also discussed in more detail below.
23 On 13 August 2010, Dib Group appealed against the variation of the primary judge’s orders effected by the supplementary judgment. On 3 September 2010, Coolabah filed a notice of cross-appeal complaining of the factual findings made by the primary judge and his application of the law and seeking that the orders made consequent on those findings be set aside or, alternatively, seeking a reduction in the amount of the damages awarded under Dib Group’s cross-claim against Coolabah.
reasons OF THE PRIMARY JUDGE
Judgment on Coolabah’s claim
24 As noted above, the primary judge dismissed Coolabah’s application for relief based on a contravention of s 52 of the TPA.
The oral representations
25 The primary judge rejected Coolabah’s account of the 4 May meeting. He made a number of findings about what was probably said at the meeting. Relevantly, his Honour found (at [83] of the first reasons) that:
(a) The 4 May meeting was the first occasion when representatives of Coolabah had met representatives of Dib Group. It took place at a very early stage of the negotiations. It was, in the words of Counsel for Dib Group, “very preliminary”;
(b) There was some discussion about likely volumes of fuel that would be sold from the site once it was redeveloped. There was also some discussion about likely sales figures for the main components of the business (other than the café)—the convenience store, the postal agency, the newsagency and the bottle shop. Such statements as were made by Mr Haddad and George Dib were not made in the terms alleged by Coolabah;
(c) All persons who attended the meeting appreciated that historical figures, that is to say, figures which related to the performance of the businesses previously conducted at the site would be of little or no use in trying to assess the likely future performance of the businesses to be conducted at the revamped site;
(d) Mr Haddad was qualified to mention and did mention certain average or benchmark figures for fuel throughput and convenience store operations by referring to other sites operated by Dib Group. He did not mention any figures for the other parts of the business;
(e) Mr Haddad probably indicated that 400,000 litres of fuel per month was the level of sales being achieved from similar sites elsewhere in the business of Dib Group. I do not think that he said that the Coolongolook site would generate fuel volumes of 400,000 litres per month. He was doing no more than giving a broad indication of the trade at other comparable sites. This is why he focused on “capacity” when giving his account of what was said at the meeting. The Coolabah representatives appreciated the nature of the remark;
(f) Mr Haddad probably also mentioned a figure of $100,000 per month when discussing the gross sales of the convenience store. But he did so by reference to the gross sales of other convenience stores in the group. I do not think that he said that the convenience store at the premises would generate or was likely to generate gross sales of $100,000 per month resulting in a gross profit of 35%;
(g) In their thinking, the Coolabah representatives did not transform these guidelines or benchmark statements into firm promises or representations as to what would be achieved at the site. These were results that might be achieved if the site performed in a fashion similar to other comparable sites in the Dib Group. The Coolongolook site would have to be operated efficiently and productively by Coolabah and the Coolabah representatives understood this also.
(h) Either Mr Haddad or Mr George Dib did suggest that Coolabah could place a sign on the windmill and also on top of the canopy;
(i) Mr Haddad did say that Coolabah would have access to bore water at the site. This statement was true; and
(i) Mr Haddad did say words to the effect that Coolabah would be one of only a few suppliers of LPG AutoGas in the local area and that LPG AutoGas would be available at the site.
26 The primary judge then proceeded to set out his reasons for making these findings. His Honour said there was “no real dispute in the evidence” about the first three findings, or about the findings relating to the representations referred to in (h), (i) and (j). As no challenge is made in the cross-appeal to these parts of his Honour’s reasons, it is not necessary to say anything more about them. His Honour noted that Coolabah’s case depended on him accepting the evidence of Mr and Mrs Roycroft and Mr Grant “as reliable or, at the very least, accepting the core allegations made by Coolabah as having been established by the evidence of those three witnesses”. He said that Mrs Roycroft’s evidence was “unreliable” and, in effect, that Mr Roycroft’s was too. He made a number of observations adverse to Mr and Mrs Roycroft’s credit.
27 By contrast, the primary judge found that Mr Grant tried to give his evidence “honestly and to the best of his ability”, but that his recollection of the meeting was “patchy” and “obviously heavily influenced by the terms of his email of 8 May 2007 viewed through the prism of Coolabah’s case and coloured by hindsight.” Mr Grant’s email of 8 May 2007 purported to provide a number of Coolabah employees with a “snapshot” of the 4 May meeting, and included statements to the effect that the site would generate “anticipated conservative [fuel] sales of 400,000 litres per month” and convenience store sales “estimated at $100,000 pm at a 35% GP”. Coolabah claimed the email was evidence that Dib Group had made the alleged representations and Coolabah had relied upon them. The primary judge noted that the email had not been sent to Dib Group and that it was prepared using Mr Grant’s handwritten notes of the 4 May meeting, which his Honour described as not “a record of what was said” but rather “a summary of things that were said, interpretations, extrapolations or observations in relation to things that were said and Mr Grant’s own thoughts”. On the question of the fuel sales, his Honour said:
The comment in par 5 of the email “Anticipated conservative sales of 400,000 litres per month”, was most probably originally sourced to something Mr Haddad or Mr George Dib had said at the meeting. It is, however, just as consistent with the statement that was made about that topic being less firm than the Coolabah witnesses would now have me accept. The remark about the gross sales and gross profit of the convenience store may be similarly viewed.
28 On the other hand, the primary judge described Mr Haddad as “a straightforward witness who endeavoured to give his recollections without overreaching or reconstructing”. As a result of his preference for the evidence of Mr Haddad over that of Mr and Mrs Roycroft and Mr Grant, his Honour accepted (as set out above at [25]) that Mr Haddad made no firm statements at the 4 May meeting about projected fuel or convenience store sales at the site.
The written representations
29 The primary judge found that by sending the George Dib email and the attached spreadsheet, Mr Dib did not make any representations as to the likely sales figures in respect of the bottle shop, the post office agency or the newsagency. Rather, he was merely passing on historical figures relating to the turnover and gross profit of those additional components of the site.
Reliance
30 The primary judge held that Coolabah had not proved that it relied on any of the statements which he found Dib Group to have made. In relation to the fuel and convenience store sales figures mentioned at the 4 May meeting, and in relation to the historical sales figures provided in relation to the other components of the business in the George Dib email, his Honour noted that there was no evidence of the process by which Coolabah decided to enter into the sublease or fuel reselling agreement, or of the use by Coolabah, if any, of these figures in the decision to enter into the agreements. His Honour also considered that the statements made regarding fuel throughput would not have been “of any importance” to Mr Roycroft or Mr Grant, as the revenue generated by fuel sales was “not large” in comparison with that generated by the café or the convenience store. Furthermore, his Honour did not consider that a link had been established on the evidence between the fuel sales figures and Coolabah’s estimates of café or convenience store sales, as these estimates were instead “derived from [Coolabah’s] experience at other sites”.
31 His Honour also found that there had been no reliance by Coolabah on the representations made by Dib Group in relation to the erection of signage on the windmill or canopy. This was because, at the time of executing the sublease and the fuel reselling agreement, Mr Roycroft and Mr Grant knew that Coolabah may not have been able to erect a sign because the necessary council approval had not been obtained.
32 He also found that Coolabah had not relied on Dib Group’s representation that LPG AutoGas would be available at the site, because at the time of executing the sublease and the fuel reselling agreement Mr Roycroft and Mr Grant knew that there was no LPG AutoGas tank or associated equipment there; that there would be no such equipment at the site when Coolabah commenced trading; and that “the installation of these facilities [might] not take place for some considerable time”.
Judgment on Dib Group’s cross-claim
Repudiation of the sublease
33 As noted above, the primary judge found that Coolabah wrongfully repudiated the sublease when it abandoned the site on 1 July 2008 and refused thereafter to pay rent. He held that Coolabah’s repudiation entitled Dib Group to claim damages for the losses it incurred.
Damages (first reasons)
34 At trial, Dib Group submitted that the Court should simply award Dib Group any amount it was required to pay to Kevmark by way of damages for Dib Group’s repudiation of the head lease. The primary judge rejected that submission.
35 In his reasons for judgment published on 30 July 2010 (“the first reasons”), the primary judge said that the correct approach to the assessment of damages in a case of this kind was to give judgment for:
(a) such amounts as were payable under the sublease but remained unpaid as at the date of termination of the lease;
(b) the amount of lost rent for the period when the premises were vacant; and
(c) the quantum of damages for the lost rent thereafter (loss of bargain damages).
36 The primary judge found that the sublease was validly renewed on 29 April 2008 for a period from 16 July 2008 to 15 July 2013, and that the rent payable during this period was $250,000 per year plus GST and was subject to annual CPI increases. As noted above, he found that the site was abandoned on 1 July 2008 and were vacant until 30 September 2008, a period of exactly 3 months. The loss under paragraph (b) above was therefore calculated at $62,500.
37 The primary judge said that interest on that amount was payable from 1 July 2008. He calculated that interest at $11,145.55.
38 Under paragraph (a) above, the primary judge calculated the rent payable for the period from 1 October 2008 to 15 July 2013 (a period of four years and 288 days) at $1,197,260. His Honour then took account of the fact that the new lessee, who took up occupation of the site on 1 October 2008, would pay $900,325.47 to Dib Group in rent by 15 July 2013, leaving a loss of $296,934.80.
39 In general terms, the primary judge said that he did not apply a discounted cash flow analysis but took a “relatively broad view of the damages claim”. The damages were measured in part by what the new lessee would pay after taking up occupation on 1 October 2008. In sum, the primary judge set out his assessment of Dib Group’s damages as follows:
(a) | $62,500.00 | (being damages for the lost rent for the period from 1 July 2008 to 30 September 2008) |
(b) | $11,145.55 | (being interest on the amount in (a) at the prescribed rates from 1 July 2008 to 30 July 2010) |
(c) | $296,934.80 | (being damages for repudiation of the sublease) |
$370,580.35 |
40 At [123] of the first reasons, the primary judge said that Dib Group would have judgment for that amount against Coolabah.
Damages (second reasons)
41 On 2 August 2010, his Honour on his own initiative published supplementary reasons (“the second reasons”) in relation to the assessment of Dib Group’s damages. He made further orders the effect of which was to reduce the damages awarded to Dib Group under the cross-claim from $370,580.35 to $133,026.50.
42 In the second reasons, the approach adopted by the primary judge in calculating damages differed from that which his Honour had adopted in the first reasons. He said at [2]:
The correct approach to the assessment of damages on Dib Group’s Cross-Claim against Coolabah for repudiation of the sublease is as follows:
(a) Calculate the lost rent under the sublease for the period that the premises were vacant, ie for the period from 1 July 2008 to 30 September 2008. This figure is $62,500.00 exclusive of GST.
(b) Assess the lost rent under the sublease for the period from 1 October 2008 to 15 July 2013. This is a period of four years and 288 days. The base rent payable by Coolabah to Dib Group under the sublease was $250,000 per annum exclusive of GST. The quantum of the lost rent is therefore $1,197,260 exclusive of GST ($250,000 x four years and 288 days).
(c) Therefore, had the sublease run its course, Dib Group would have received the total amount of $1,259,760 from Coolabah exclusive of GST in the period from 1 July 2008 to 15 July 2013. The sublease provided for CPI increases in the rent payable thereunder but Dib Group did not prove what those increases would have been or were likely to have been.
(d) But, in order to be in a position to derive that rent, Dib Group would have had to maintain its lease from Kevmark. Thus, it would have had to pay rent to Kevmark under the head lease for the period in question at the rate payable under the head lease. I have calculated the amount which it would have had to pay to Kevmark at [188] and at [189(a)] in Coolabah Tree Aust-Wide Pty Ltd v Dib Group Pty Limited [2010] FCA 805. The amount is $1,126,733.50 exclusive of GST, being $54,448.75 plus $1,072,284.75.
(e) Thus, the rent which Dib Group lost for the period from 1 July 2008 to 15 July 2013 is $133,026.50 (being $1,259,760.00 − $1,126,733.50) exclusive of GST.
43 In the second reasons, therefore, Dib Group’s loss was measured by what it would have received from Coolabah under the sublease and by what it would have paid Kevmark to maintain the head lease.
44 The primary judge said that the only interest payable on the amount assessed was in relation to the difference between $62,500 and $54,448.75, being the rental payable for the period when the site was unoccupied between 1 July 2008 and 30 September 2008. His Honour refused to award interest on that amount, presumably because he thought the amount of the interest de minimis.
45 The primary judge therefore ordered that Dib Group recover as against Coolabah the sum of $133,026.50, rather than the amount assessed in the first reasons ($370,580.35).
the APPEAL proceedings
46 The appellant is Dib Group, which was successful in defending Coolabah’s claim under s 52 of the TPA and successful on its cross-claim against Coolabah, although its success was reduced as a result of the orders made on 2 August 2010 following publication of the second reasons.
47 The respondent and cross-appellant is Coolabah, which seeks in its cross-appeal to overturn the primary judge’s decision that its s 52 case failed and so to have the consequential decision in relation to Dib Group’s cross-claim reversed. In the event that the cross-appeal is dismissed, Coolabah as respondent seeks the dismissal of the appeal and the maintenance of the orders made on 2 August 2010.
48 Logically the cross-appeal should be considered in advance of the appeal, because if the cross-appeal is successful the sublease will, or at least may be, set aside, leaving Dib Group without any entitlement to damages on its cross-claim (which depended upon the enforceability of the sublease). However, this was not the way in which the parties conducted the proceedings; rather, the issues relating to the appeal were argued first. For this reason and, more importantly, because the Court is of the opinion that the cross-appeal must fail, no harm is done by addressing the appeal before turning to the cross-appeal.
the appeal
49 Dib Group’s notice of appeal contains eight grounds of appeal. Grounds 1 to 4 complain of the publication by the primary judge of the second reasons and of the variation of the orders of 30 July 2010. Grounds 6 to 8 complain of the failure of the primary judge to award it damages for Coolabah’s failure to repair and reinstate the site when his Honour had awarded Kevmark $15,000 (plus interest) in its claim against Dib Group for repair and reinstatement costs.
50 The variation of the orders had the effect of reducing Coolabah’s liability to Dib Group from $370,580.35 to $133,026.50. Dib Group argued that the primary judge erred in varying his original orders on two separate grounds.
51 First, Dib Group submitted that variation of the amount of damages on 2 August 2010 was not authorised by O 35 r 7(3) of the Federal Court Rules because the primary judge’s process of reasoning in calculating damages differed in the second reasons from that adopted in the first reasons.
52 Dib Group submitted that the variation was not a “slip” as contemplated by O 35 r 7(3) because his Honour had “sought to withdraw paragraphs of his reasons given in the First Judgment and introduced new reasons”.
53 Dib Group asserted in its grounds of appeal and written submissions that to the extent that his Honour was exercising power beyond the slip rule, the authorities make it clear that such power should only be exercised with caution: Australian Fisheries Management Authority v P W Adams Pty Ltd (No 2) (1996) 66 FCR 349 at 355; Wentworth v Rogers (No 9) (1987) 8 NSWLR 388 at 394.
54 Dib Group said that the primary judge should not have varied his judgment on policy grounds, arguing that it is in the interests of finality of litigation that a trial judge ought not be able to revisit a judgment once pronounced and reach a different outcome.
55 Secondly, Dib Group contended the primary judge erred in his calculation of damages in the second reasons by deducting from the total rent lost the amount Dib Group would have paid Kevmark under the head lease.
56 Dib Group argued that the primary judge was wrong to reduce the award of damages by starting from the premise that the original award would over-compensate it. Dib Group asserted that the primary judge reasoned that because Dib Group was not obliged to pay future rent under the head lease, it stood to receive a windfall gain in that it would receive more by way of damages from Coolabah than if the breach had not occurred.
57 Dib Group contended that the premise was wrong because it failed to take into account Dib Group’s liability to Kevmark (which arose under the head lease at the date of termination of the sublease) to pay rent for the remaining term of the head lease. Upon termination of the head lease, Dib Group became liable to pay damages to Kevmark in lieu of future rent.
58 Dib Group submitted that, as a result of his Honour’s variation, the amount of compensatory damages it was liable to pay to Kevmark for repudiation of the head lease ($251,113.68) was greater than the damages which Coolabah was liable to pay for repudiation of the sublease ($133,026.50). Dib Group submitted that the result was illogical because the rent payable by Coolabah under the sublease was greater than the rent Dib Group paid Kevmark under the head lease. Dib Group argued that the amount of damages awarded ought to have reflected the fact that it would have stood to receive a profit if the sublease and head lease had not been terminated.
59 Dib Group contended that his Honour’s approach in [121] of the first reasons was correct. Dib Group submitted that the correct approach was to deduct from the total lost rent ($1,197,260) the amount of $900,325.47, being the extent to which Dib Group’s liability to Kevmark under the head lease was reduced by the later termination of the head lease and the releasing of the site.
60 Coolabah contended that the variation was made within power because the primary judge was entitled to correct the judgment before it was entered: O 35 r 7(1).
61 Coolabah also submitted that his Honour would have been entitled to make that correction even after judgment had been entered in accordance with the slip rule: O 35 r 7(3). Coolabah asserted that the variation did not go beyond the correction of an error because the methodology for the calculation of damages was substantially the same in both the first reasons and the second reasons.
62 Coolabah contended that the primary judge correctly analysed Dib Group’s loss in the second reasons and that the appeal should therefore be dismissed.
63 As noted above, grounds 6 to 8 address Dib Group’s claim that the primary judge erred in failing to award damages in the amount of $15,000 for Coolabah’s failure to repair and reinstate the site at the termination of the sublease. Dib Group sought to recover that amount from Coolabah together with interest of $1,955.14 from the date of judgment.
64 Dib Group characterised this error as an oversight by the primary judge. Dib Group submitted that, having found that the sublease was in effect a back-to-back arrangement with the head lease and that Dib Group was liable to pay Kevmark $15,000 for the costs of repairs to the site, his Honour should have found that Coolabah was liable to Dib Group for the cost of repairs to the site in accordance with the sublease.
65 Coolabah conceded that his Honour had failed to address this particular head of damage, but contended that any award of damages under this head should be less than Dib Group’s claim of $15,000. Coolabah submitted that it was not liable for the full extent of repairs claimed by Dib Group and that its liability under this head should not exceed $7,300. It said its liability to Dib Group was not co-extensive with Dib Group’s liability to Kevmark.
The power to vary the judgment
66 Order 35 rule 7 relevantly provides:
7 (1) The Court may vary or set aside a judgment or order before it has been entered.
(2) The Court may vary or set aside a judgment or order after the order has been entered where:
(a) the order has been made in the absence of a party, whether or not the absent party is in default of appearance or otherwise in default and whether or not the absent party had notice of the motion of the order;
(b) the order was obtained by fraud;
(c) the order is interlocutory;
(d) the order is an injunction or for the appointment of a receiver;
(e) the order does not reflect the intention of the Court; or
(f) the party in whose favour the order was made consents.
(3) A clerical mistake in a judgment or order, or an error arising in a judgment or order from an accidental slip or omission, may at any time be corrected by the Court.
67 Order 35 addresses three separate circumstances. Order 35 rule 7(1) deals with the Court’s power to vary or set aside a judgment or order before it has been entered. Order 35 rule 7(2) empowers the Court to set aside a judgment or order after the order has been entered but only in the circumstances mentioned in paragraphs (a) to (f). Order 35 rule 7(3) empowers the Court to correct at any time a clerical mistake or an error in a judgment or order where that error is the result of an accidental slip or omission.
68 Not all orders are required to be entered, but only those identified in O 36 r 2(1) which provides:
2 When entry is required
(1) Subject to subrule (2), an order must be entered if:
(a) the order is to be served; or
(b) the order is to be enforced; or
(c) an appeal from the order has been instituted, or an application for leave to appeal from the order has been made; or
(d) a step is to be taken under the order; or
(e) the Court directs that the order be entered.
69 An order is entered in accordance with O 36 r 3(2) or O 36 r 5.
70 Order 36 rule 3(2) provides that a Registrar may enter an order by authenticating the order in accordance with O 36 r 7 when the order has been settled in accordance with O 36 r 4, or the Court or a judge has directed, or a party has requested that the order be entered.
71 Order 36 rule 5 empowers the Court to direct that an order be entered by the order being authenticated in Court in accordance with O 36 r 7(1) at the time the order is made.
72 Because of the provisions of O 36 r 3(2) and O 36 r 5, an order cannot be entered unless it has been authenticated in accordance with O 36 r 7. That rule provides:
7 Authentication of orders
(1) An order is authenticated by:
(a) the Court or a Judge, or a Registrar signing the order; and
(b) the Court or a Judge, or a person at the direction of the Court or a Judge, or a Registrar, affixing the stamp of the Court to the order.
(2) On request by a party to a proceeding, the Registrar must give a copy of an authenticated order in the proceeding to the party.
(3) The Registrar may give a copy of an authenticated order in the proceeding to any person who:
(a) appears to have a sufficient interest in the proceeding; and
(b) pays the prescribed fee (if any).
73 Coolabah did not dispute that the orders of 30 July 2010 had not been entered before the primary judge published the second reasons. Indeed, the appeal papers suggest that those orders were not authenticated in accordance with O 36 r 7 until 8 December 2010, when the Deputy District Registrar signed the orders and fixed the Court’s stamp to the orders.
74 However, when the orders were entered on 8 December 2010, the order for the money sum was in the following terms:
3. There be judgment in favour of Dib Group against Coolabah on the First Cross-Claim (being Dip Group’s Cross-Claim against Coolabah and Mr Grant) in the amount of $370,580.35.
75 That sum reflects the orders made on 30 July 2010 but does not have regard to the second reasons published on 2 August 2010.
76 On 8 December 2010 a further order was also entered by the Deputy District Registrar by signing the order and fixing the Court’s stamp to the order in the following terms:
Order 3 made by Foster J on Friday, 30 July 2010 be varied by deleting therefrom the figure “$370,580.35” and inserting in that order in lieu thereof the figure “$133,026.50”.
77 Courts exercise a power to set aside judgments or orders after those judgments or orders have been entered in only limited circumstances so as to uphold the principle that there must be some finality in litigation and that once an order has been entered it should not be subject to review by the judge who made the order: Preston Banking Co v William Allsup & Sons [1895] 1 Ch 141 at 144; Caboolture Park Shopping Centre Pty Ltd (in liq) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224 at 235. But even that principle must yield in the appropriate case to the interests of justice. The courts have an inherent power (in this Court an implied power) to set aside a judgment after it has been entered where there has been a miscarriage of justice: Taylor v Taylor (1979) 143 CLR 1. Circumstances in which a court will vary or set aside an order that has been entered are identified in O 35 r 7(2), but those paragraphs should not be understood to be the only circumstances in which the Court would exercise such a power.
78 The exercise of that power is different from the power which is contemplated in O 35 r 7(3), which is a statement of the slip rule: Milson v Carter [1893] AC 638. The express provision in O 35 r 7(3) demonstrates that an exercise of power under O 35 r 7(2), which identifies particular circumstances in which an order may be made under that subrule, does not depend upon proof of some slip or clerical mistake.
79 Order 35 r 7(2) is not directly relevant because the orders of 30 July 2010 had not been entered when his Honour made the orders of 2 August 2010. The orders made on 30 July 2010 were not due to a clerical mistake or a slip but were made consequent upon the publication of reasons. The slip rule and so O 35 r 7(3) are not relevant. Therefore his Honour, in publishing the second reasons and making the orders that he did on 2 August 2010, must have relied upon O 35 r 7(1).
80 On the face of it, O 35 r 7(1) is a power which may be exercised at any time before the judgment or order which is to be varied or set aside is entered, and does not require proof of any of the matters in O 35 r 7(2) or any evidence of a clerical mistake or slip as is contemplated in O 35 r 7(3). On its face, it is in the widest possible terms.
81 However, the authorities are clear that the exercise of the jurisdiction given under O 35 r 7(1) ought only to be exercised with great caution because of the public interest in the finality of litigation: Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300 (“Autodesk”).
82 If a judgment is pronounced or an order is made upon the Court giving reasons, the power to vary or set aside the judgment or order which follows the reasons would only be exercised “if there is some matter calling for review”: Smith v NSW Bar Association (1992) 176 CLR 256 at 265.
83 Where a judge after publishing reasons and giving judgment and making orders realises that he or she has proceeded on a misapprehension either in relation to the facts or the law, that judge may recall those reasons and make orders under O 35 r 7(1) to vary or set aside the orders made on those reasons. This is no more than an example of a court acting to prevent a miscarriage of justice and in furtherance of the administration of justice.
84 However, the jurisdiction is given to the Court only for the furtherance of the administration of justice and not to allow a party after the Court’s reasons have been given and orders made to reagitate the matters upon which the Court has opined. In Autodesk Mason CJ said of the circumstances in which the jurisdiction should be exercised at 303:
What must emerge, in order to enliven the exercise of the jurisdiction, is that the Court has apparently proceeded according to some misapprehension of the facts or the relevant law and that this misapprehension cannot be attributed solely to the neglect or default of the party seeking the rehearing. The purpose of the jurisdiction is not to provide a backdoor method by which unsuccessful litigants can seek to reargue their cases.
85 In this case, the primary judge acted on his own initiative because he thought that he had adopted an incorrect approach in the first reasons to the assessment of Dib Group’s damages on the cross-claim against Coolabah in relation to the repudiation of the sublease. His Honour was entitled to exercise the jurisdiction if he was of the opinion that he had proceeded upon an incorrect analysis of the assessment of Dib Group’s damages.
86 In the end, Coolabah accepted on the appeal that his Honour had the power to proceed in the way that he did. It confined its objection to his Honour’s analysis in the second reasons, claiming that this analysis was erroneous and that his Honour should not have corrected the assessment of Dib Group’s damages contained in the first reasons.
87 The question therefore on the appeal is whether his Honour’s analysis in the first reasons was correct or whether he was right to correct that analysis in the second reasons.
The varied assessment of damages
88 Dib Group’s entitlement to damages arose out of Coolabah’s repudiation of the sublease. By reason of that repudiation, Coolabah became liable to reimburse Dib Group for the loss of all the rental income under the sublease together with any other outgoings for which Coolabah were responsible under the terms of the sublease.
89 Those damages fell to be assessed having regard to the repudiation by Dib Group of the head lease the day after Coolabah’s repudiation of the sublease. Coolabah did not contend that Dib Group acted inappropriately in terminating the head lease immediately after Coolabah’s termination of the sublease. It accepted that it was appropriate for Dib Group to proceed in the way that it had. However, by terminating the head lease, Dib Group became liable for any loss or damage suffered by Kevmark, which would be calculated by reference to the loss of all the rental payable to Dib Group under the head lease together with any other outgoings for which Dib Group was responsible under the terms of the head lease.
90 As it happened, the rent which Dib Group had to pay Kevmark under the head lease was less than the rent Coolabah had to pay Dib Group under the sublease. However, the lessee who obtained the leasehold from 1 October 2010 paid a lesser rental to Kevmark than Coolabah had paid to Dib Group under the sublease.
91 Because of the termination of the head lease, Kevmark was entitled to its rent for the whole period from 1 July 2008 to 15 July 2013. Against that, it had to credit Dib Group with the rental paid by the new lessee from 1 October 2008.
92 The primary judge calculated Kevmark’s damages in that way: see [20] above. The damages for the loss of rent, interest aside, was $224,448.75. The remainder of Kevmark’s damages was for repair and reinstatement costs and interest on that amount, and interest on the rent payable for the period 1 July 2008 to 30 September 2008.
93 Dib Group, however, was not entitled to an indemnity from Coolabah. It was entitled to the loss of rent that Coolabah should have paid over the period 1 July 2008 to 15 July 2013. But to obtain that rent, Dib Group would have had to maintain the head lease. Therefore it had to offset against that lost rent the payment for rent it would have made to Kevmark.
94 That is the approach the primary judge adopted in the second reasons. His Honour was right to reason that way.
95 Dib Group will still be entitled to a profit in the sense that it receives from Coolabah a higher rent under the sublease than it pays to Kevmark under the head lease.
96 Dib Group argued such a result was illogical because the primary judge assessed the damages it was liable to pay to Kevmark at a higher figure than the damages Coolabah was liable to pay to Dib Group.
97 His Honour assessed damages in respect of both the head lease and the sublease in the same way. That was the right approach. There was nothing illogical about it. The reason Dib Group has to pay Kevmark more than it recovered from Coolabah is that after its repudiation of the head lease the new lessee paid Dib Group a lower amount in rent than it was receiving from Coolabah under the sublease. That does not make Coolabah liable for that amount. Dib Group is responsible to Kevmark for its loss under the head lease. Coolabah cannot be held to be responsible for the consequences of Dib Group repudiating the head lease. That is purely Dib Group’s responsibility. Coolabah’s responsibility is for the loss to Dib Group under the sublease. The liabilities are not co-extensive, nor are the losses. The primary judge was right to proceed as he did in the second reasons and the relevant grounds of appeal must be dismissed.
98 It is likely, as Dib Group argued, that his Honour’s failure to address the question of repair and reinstatement was simply an oversight in a judgment in which he had to address a very large number of separate issues involving a number of parties.
99 The primary judge found Dib Group liable to Kevmark pursuant to the head lease for the costs of repairing holes in the wall, painting unpainted portions of the wall covered up by cardboard, further cleaning, and the removal of the fuel pump badging.
100 The relevant findings of the primary judge are set out at [174]-[175] of the first reasons:
174 The evidence of the Roycrofts shows that the following damage required repair:
(a) holes in the walls; and
(b) unpainted portions of walls formerly covered up by cupboards, boards and equipment.
Some of the areas within the building required further cleaning. The Metro badging of petrol pumps and the Metro signage needed to be removed.
175 Doing the best I can to relate Mr Batger’s evidence to these items, I estimate that it would have cost Kevmark approximately $15,000.00 as at 1 July 2008 to have these items satisfactorily attended to. I therefore propose to award Kevmark under this head of claim the amount of $15,000.00 together with interest thereon from 1 August 2008 to date.
101 Coolabah admitted that it was liable for the costs of the first two items, but denied it was liable under the sublease for the further cleaning or the removal of fuel pump badging. It was agreed that the costs occasioned by the repairs and painting in (a) and (b) above amounted to $7,300. The question is whether Coolabah should be responsible for the balance of the $15,000 assessed by his Honour as being the total costs of repair and reinstatement.
102 Dib Group argued that, because it terminated the head lease the day after Coolabah had abandoned the site and thereby lost any right to occupy the site after that date, it could not have been the cause of the further cleaning costs as alleged by Coolabah. Coolabah submitted that the necessity of further cleaning must have been the result of Dib Group’s conduct after Coolabah had abandoned the site. It relied on the evidence of Mrs Roycroft that she had personally cleaned the site and that it had been left “spotless”. The primary judge accepted the evidence of Mr and Mrs Roycroft as to the state of the site when Coolabah vacated it on 1 July 2008. The effect of these findings is that Dib Group did not prove that the loss or damage was caused by Coolabah, and Dib Group cannot recover as against Coolabah in relation to any cleaning costs. It has not proved an entitlement.
103 Dib Group also argued that Coolabah was liable for the costs of removing the Metro signage and Metro badges from the fuel pumps under clause 5.1 of the fuel reselling agreement. Clause 5.1 provides:
Upon the termination of this Agreement for whatever reason:
5.1 Deliver up Documents and Cease to Exploit Industrial Property
The retailer shall at its own cost deliver to the Supplier any signs, Manuals, instructions, notes, writings and other documents relating to the Fuel Reselling Business and the Retailer shall cease to use or exploit in any way whatsoever any Industrial Property and Marks owned or used under licence or developed by the Supplier and used by the Retailer in respect of the Fuel Re-selling Business. All rights granted herein with respect to the Marks and any other Industrial Property shall immediately revert to the Supplier.
104 Coolabah submitted that clause 5.1 did not relate to the removal of fixtures from the site, but rather to the return of intellectual property in the form of manuals and other documents. Coolabah further submitted that any obligation on its part to remove signage or badging which was affixed to the premises at the time it took up occupation would be inconsistent with its obligation under clause 34(b) of the sublease to reinstate the site to its original condition.
105 Dib Group submitted that clause 5.1 was clear in its terms and imposed an obligation on Coolabah to remove all Metro signage and badging upon termination of the fuel reselling agreement, notwithstanding that the badging and signage predated Coolabah’s occupation of the site.
106 The better view of clause 5.1 is that contended for by Coolabah. Clause 5.1 is not directed to signs attaching to the premises but to signs, manuals, instructions, notes, writings and other documents provided by Dib Group in relation to the fuel reselling business. In those circumstances, clause 5.1 did not oblige Coolabah to take down any signage which was on the site at the time that it entered into possession. That being the case, Coolabah was entitled to rely upon clause 34(b) of the sublease and deliver the site to Dib Group in its original condition, which included that signage.
107 Because of the primary judge’s findings in relation to cleaning and because of the operation of the sublease, Dib Group’s damages in relation to the finding at [174] should be limited to the agreed amount in relation to paragraphs (a) and (b) of $7,300.
108 For the reasons given above, the appeal should be allowed but only to the extent of increasing the award of damages made on 2 August 2010 as a result of publication of the second reasons by $7,300.
The cross-appeal
109 In the cross-appeal Coolabah challenged the findings of the primary judge about the two representations allegedly made at the 4 May meeting concerning projected fuel and convenience store sales; the representations allegedly made in the George Dib email; the credit of Mr Grant and Mr Haddad; and the question of reliance.
The evidence about the representations
110 The evidence was that the 4 May meeting was attended by the following people: Mr Roycroft, his wife Deborah (who was the operations manager of Coolabah), Mr Grant, Mr Dib, and Louis Haddad (Dib Group’s franchise manager). Three other officers or employees of Dib Group – John Dib, Ross Morris and Gary Tong – entered the meeting from time to time but, on the primary judge’s finding, which is not challenged, did not participate in the discussions.
111 Coolabah called as witnesses Mr and Mrs Roycroft and Mr Grant. Dib Group called only Mr Haddad.
112 Coolabah’s first witness was Mrs Roycroft. She testified that it was Mr Haddad who did most of the talking at the meeting. In her evidence in chief she said on two occasions that a turnover of 400 litres a month of fuel (not 400,000, the figure the subject of the representation alleged by Coolabah) was mentioned. She attributed this statement to Mr Haddad. Only after counsel for Coolabah referred to the figure of 400,000 twice in introductions to questions did she say, first that Mr Haddad “estimated”, and then (in response to a leading question) that the site would “do” 400,000 a month. She adhered to that in cross-examination, insisting that her evidence was not a reconstruction based on what other people had told her about the meeting, but was an account of what she herself had heard at the meeting.
113 Mr Roycroft was the next to give evidence. He confirmed that it was Louis Haddad who “gave all the answers”. He said that Mr Haddad had cited figures of “400,000 litres a month, $100,000 in the convenience store”. He stated that Mr Dib made encouraging comments about how profitable the enterprise would be and he said he thought that Mr Dib also offered to supply relevant information about the bottle shop. Nevertheless, Mr Roycroft insisted that “Louis [Haddad] was mainly the speaker, and he offered all the information”. Like his wife, Mr Roycroft also insisted under cross-examination that Mr Haddad told him that the site would sell 400,000 litres of fuel a month and that no range was given.
114 Mr Grant’s evidence was to the same effect. He said that Mr Haddad was “one of the main talkers” from Dib Group and that “George [Dib] tended to sit back and let Louis [Haddad] do the talking”. Mr Grant said it was “advised” to the Coolabah representatives that “there were [scil.] conservative figures of 400,000 litres of fuel per month expected for the site”. He also said that that what was said in relation to the convenience store was that there would be “conservative sales figures of around $100,000 a month”.
115 Mr Grant made some brief notes at the meeting and also sent an email to Mr Roycroft on 8 May 2007 purporting to give “a snapshot of the meeting”. As we mentioned earlier, the email was said to support Coolabah’s claim that the oral representations had been made as alleged.
116 In an analysis attached to Coolabah’s application for finance in relation to the site (“the Wotif analysis”), the following assumptions appeared:
(a) in respect of the café, gross sales were estimated or assumed to be $30,000 per week ($1,560,000 per annum). The cost of sales was estimated or assumed to be $546,000 (or 35% of the gross sales figure), resulting in a gross profit of 65%;
(b) in respect of the convenience store, gross sales were estimated or assumed to be $23,000 per week ($1,196,000 per annum). The cost of sales was estimated or assumed to be $797,732 (or 66.7% of the gross sales figure), resulting in a gross profit of 33.3%;
(c) revenue from fuel sales was estimated or assumed to be $2,000 per week ($104,000 per annum). This equates to $8,666.67 per month, and is very close to representing two cents per litre in respect of 400,000 litres assumed to be sold per month; and
(d) in respect of the bottle shop, gross sales were estimated or assumed to be $12,000 per week ($624,000 per annum). The cost of sales was estimated or assumed to be $187,200 (or 30% of the gross sales figure) resulting in a gross profit of 70%.
117 It was argued that these figures were consistent with the account of the 4 May meeting given by Coolabah’s witnesses.
118 Mr Grant gave evidence that the Wotif analysis was prepared by Rodney Dee, Coolabah’s internal accountant. Mr Dee was not called to give evidence. He was sent a copy of Mr Grant’s and Mr Dib’s emails of 8 May 2007, but otherwise the origins and sources of the assumptions contained in the Wotif analysis were never disclosed. Mr Grant said that, while he had supplied Mr Dee with some of these assumptions, Mr Dee had made other assumptions with no input from him.
119 Mr Haddad’s evidence about what he said at the 4 May meeting was at odds with the evidence of the Coolabah witnesses. He said Mr Roycroft asked for figures but he replied that:
we didn’t have the figures for the service station… it was a completely new site that was being constructed in a completely different configuration to what it was, and that the figures weren’t given to us. We didn’t have any figures… it was a completely different operation as opposed to what it was.
120 In relation to fuel sales figures, Mr Haddad later said:
Figures, I recall saying were the site was capable of doing 3, 4 or 5 hundred thousand litres [per year].
121 Mr Haddad said nothing in his evidence in chief about a figure for convenience store sales.
122 In cross-examination, Mr Haddad denied saying that the site would generate fuel sales of 400,000 litres a month and that this was a conservative estimate. He also denied he was speaking about “the minimum turnover that could be obtained for the site” or that he spoke at all about minimum turnover. Mr Haddad further denied that he had indicated that the convenience store would turn over $100,000 a month. He maintained he had said only that “it was capable of turning over $100,000 a month”. It was variously put to Mr Haddad that he had said the store would turn over $100,000 a month; then that he “simply said ‘$100,000 per month’”; and, later, that Coolabah would “do $100,000 easy”, as all Dib Group’s stores “do at least 100,000 a month”. Mr Haddad denied each proposition. Unlike Mr Grant, he did not keep any notes of the meeting and was relying on his memory. Nevertheless, he professed to have no difficulties recalling what had occurred.
123 On 7 May 2007, three days after the 4 May meeting, Mr Roycroft sent an email to Mr Dib asking for information “to enable us to go forward”. It was in reply to this request that the George Dib email was sent. The George Dib email incorporated the text of Mr Roycroft’s email and marked Mr Dib’s responses by the use of the colour blue. It is set out below. For present purposes the responses are reproduced in bold. Otherwise the text is unaltered. References to “CTC” (in this email as in all other correspondence extracted in these reasons) are references to Coolabah.
Attached file for state award for service station console operator, in the same file, I listed 1) extra income on turnover on Liquor stores and newsagency alike 2) fixed expenses.
For the list below, please see comments in Blue
1. Time frame. Delay should not be a problem once all parties agree that the project is going ahead. August would be a possible date pending the speed on which all parties can execute the necessary documents, terms and conditions. Early August ok.
2. George to email AG a copy of their lease plus costs of outgoings etc. Our solicitor will forward that in due course
3. Goodwill price of $200k is based on the fact that we are receiving a fully fitted out servo excluding the restaurant fit out for free, for a term of 15 years.
Fixout and equipments to the site are for the dealer to use, and maintain, it must remain under dib’s asset register, never the dealer’s
4. Goodwill on other sites if any, will be based on their merit. We acknowledge that
5. George to supply contact for CTC to discuss scenarios’ re bottle shop turnover v profit and labor costs plus the same for the Post Office part of the business etc.
Please see attached file
6. George to arrange landlord to supply for the restaurant fit out. Tile floor, cold room, freezer, ceiling, Air-conditioning, any extra under floor hydraulics and wall partitions to CTC requirements. We would fit out service station side of the business including Tile floor, coolroom, ceiling, air-con and wall partitions, at the stage of discussion, there were no mentions on freezer, extra under floor hydraulics to CTC requirement. These must be discuss including other fitout like grease trap etc
7. George to supply current labor rates for console workers. CTC has to determine if it can bring all its employees under its CA or if it has to split them under the different awards EG, fuel and alcohol etc. I could only provide cost of labor for service station in the form of state awards see attached file. All others can be source from www.industrialrelation.nsw.gov au.
124 Mr Roycroft forwarded the email to Mr Grant and Mr Dee.
125 Coolabah alleged in its statement of claim that the George Dib email and the attached spreadsheet made the following representations:
(a) The bottle shop would obtain turnover of $12,000 per week and $187,200 gross profit per annum;
(b) The newsagency would obtain turnover of $4,000 per week and $31,200 gross profit per annum;
(c) Council expenses would be $3,500 per annum;
(d) Rubbish removal costs would be $1,500 per annum;
(e) Sewerage costs would be $1,000 per annum;
(f) Insurance costs would be $2,400 per annum; and
(g) Electricity costs would be $12,000 per annum.
126 Coolabah relied on the spreadsheet, rather than the George Dib email itself, as the source of these representations. In its statement of claim, Coolabah alleged that each of the representations was misleading. The argument on appeal, however, largely turned on the representations concerning turnover, principally from the bottle shop. Counsel for Dib Group submitted that there was no evidence that the figures given for expenses and costs were misleading or unrealistic and Coolabah did not argue otherwise.
127 The spreadsheet contained details of the award rates for various types of employees, which are irrelevant for present purposes. It went on to record the following details (emphasis added otherwise unaltered except where indicated):
Other Income beside service station and restaurant | ||
Yearly gross profit | ||
Based on historical data, Turnover bottle [scil.] shop per week 30% due to most retailing on single bottles | $12,000 | $187,200.0 |
Month fee from Post office | $400 | $4,800 |
Based on historical data, Turnover Newsagency per week | $4,000 | $31,200.00 |
15% on total turnover | ||
Total yearly gp | $223,200.0 | |
Other fixed expense | ||
Land/Council p.a. | $3,500 | $3,500 |
Land tax p.a. | Nil | Nil |
Rubbish removal general for service station only (not restaurant) | $1,500 | $1,500 |
Sewerage pump out | $1,000 | $1,000 |
Insurances for building | $2,400 | $2,400 |
Electricity per month (service station only) | $1,000 | $12,000 |
Total Yearly expense | $20,400 | |
The attack on the credibility findings
128 The first two grounds of the cross-appeal involved an attack on the primary judge’s findings relating to the credit of Mr Grant and Mr Haddad and, as a consequence, his finding that Mr Haddad did not make representations at the 4 May meeting in the terms alleged by Coolabah. The grounds are (without alteration):
1. The primary judge erred in making the factual findings at paragraphs 83(b) (final sentence), 83(d), 83(e), 83(f) and 83(g) of his reasons.
2 In making these findings the primary judge erred in the assessment of the credit of Andrew Grant at paragraphs 84(e) and 84(f) of his reasons and vis-à-vis the credit of Louis Haddad at paragraph 84(h) of his reasons.
Credibility findings in relation to Mr Haddad
129 Coolabah submitted that the sole foundation for the finding that Mr Haddad’s evidence should be preferred to that of Mr Grant was Mr Haddad’s demeanour, and pointed to the warnings courts have given against drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses: see especially Fox v Percy (2003) 214 CLR 118, [2003] HCA 22 (“Fox v Percy”) at [30]. Coolabah’s argument was that the primary judge should have “had regard” to a number of matters said to demonstrate the unreliability of Mr Haddad’s evidence, none of which, it contended, he considered in his assessment of the relative credit of the two witnesses.
130 In our opinion, the challenge (and therefore the first two grounds in the notice of cross-appeal) must fail.
131 This appeal is in the nature of a rehearing: Branir v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; [2001] FCA 1833 (“Branir”). It is not a new hearing where the appellate court can consider the matter afresh for itself. The decision of the primary judge can only be set aside if Coolabah can show that he made some legal, factual or discretionary error: Allesch v Maunz (2000) 203 CLR 172, [2000] HCA 40 at [23], [44]; Branir at [25]. As the plurality emphasised in Fox v Percy at [22]-[29], an appellate court is required to give the judgment which in its opinion ought to have been given at first instance but, at the same time, to observe the natural limitations affecting any appellate court. Those limitations include the disadvantage of not having heard or seen the witnesses and of not having “the ‘feeling’ of a case which an appellate court, reading the transcript, cannot always fully share”. Although the Court is bound to weigh conflicting evidence and draw its own inferences and conclusions, even where this involves disturbing a decision based on findings regarding the credibility of witnesses, it should make “due allowance” for such limitations.
132 It is true that the mere fact that a trial judge preferred the witnesses of one party over those of another does not bar appellate intervention. But Fox v Percy does not authorise such a radical departure from established authority as to allow factual findings based on the assessment of the credit of witnesses to be set aside merely because an appellate court might come to a different conclusion. What Coolabah needs to show, as the plurality in Fox v Percy made clear, is that primary judge’s findings are contrary to “incontrovertible facts” or “uncontested testimony”, “glaringly improbable”, or “contrary to compelling inferences”. In our view, none of the impugned findings falls into any of these categories.
133 Coolabah’s first contention was that, in contrast to the account given by each of its witnesses, Mr Haddad’s description of the 4 May meeting “was very limited” and “his answers were hesitant and evasive, even during examination-in-chief. He needed to be prompted by further questions to address the points of contention.” This Court, however, is in no position to second-guess the primary judge about the manner in which the evidence was given. The transcript provides an unsatisfactory foundation for doing so.
134 Secondly, Coolabah submitted that Mr Haddad’s account of the 4 May meeting was unreliable. It relied on Mr Haddad’s concession that he failed to remember when he prepared his outline of evidence that Mrs Roycroft was present at the 4 May meeting. This is hardly a matter of any moment. On any view of the evidence, her role was inconsequential. As Mr Haddad said when he was taken to the matter in cross-examination:
[Mrs Roycroft] didn’t say anything [at the meeting]. That’s why I missed her. It was Mike Roycroft that did all the talking. That’s what struck me.
135 That Mr Haddad omitted a reference to Mrs Roycroft in his outline does not mean that his evidence about what was said at the 4 May meeting was unreliable. Neither does the mere fact (as Coolabah also argued) that he was present in Court when Coolabah’s witnesses gave evidence. After all, the evidence of the Coolabah witnesses was the subject of written outlines served well before the hearing started.
136 Thirdly, Coolabah submitted that Mr Haddad’s oral evidence was inconsistent with documentary evidence in that Mr Haddad initially denied contacting Mr Grant despite his own emails showing otherwise. That submission is not made out either.
137 The first email relied on in support of the submission is dated 18 April 2008. It is addressed to Mr Dib and others (from Dib Group). It begins:
The whole problem has been from day one the illegal construction, poor quality materials and short cuts taken to build this site.
This has impacted on the site from day one.
I made contact with CTC and presented the Coolongolook franchise to Mike and Andrew they were happy as they say Go Forward and join this great petrol industry.
138 Coolabah relied on the third sentence.
139 The second email is dated 18 June 2007. It is addressed to Mr Dib. It refers to a meeting with the Coolabah directors on 4 May at which the parties agreed to an arrangement about the site (presumably the 4 May meeting), and concludes with the words: “Sorry for the urgency we don’t want to lose the deal with CTC.”
140 The oral evidence upon which Coolabah relied is as follows:
Now, you referred to a conversation with Mr Roycroft in May 2007, in which you say that they were chasing you for contact and then you gave them a call. Do you remember that evidence?—That’s right.
Isn’t it the case that prior to speaking to Mr Roycroft, you first called Mr Grant earlier in April?—I don’t recall.
Do you recall a conversation with Mr Grant about Coolabah coming onto the Coolongolook site?—No. I was given Mike Roycroft’s number to call him.
Are you saying that you never had a conversation with Mr Grant before speaking to Mr Roycroft?—That’s right.
Isn’t it the case that you had, in fact, earlier contacted Mr Grant to talk about your Maitland site earlier in the year?—No.
Did you say to Mr Grant at any time that you had up to 100 sites in the Hunter Valley, all the way down to Canberra; something along those lines?—No.
Isn’t it the case that you were the one who approached Coolabah Tree to see if they could come on board in terms of the sites you had?
[There followed an objection, but the primary judge allowed the question. Mr Haddad asked for the question to be repeated.]
The question is – I am asking whether it was you that had approached Coolabah Tree to ask them to come on board your site. That’s correct, isn’t it?—I approached them?
Yes?—Yes, I did call Mike Roycroft after I was told to call him.
141 At this point Mr Haddad was taken to the second email, and his attention drawn to the third sentence. It was put to him again that it was he who had approached Coolabah rather than the other way around. Mr Haddad’s response was that he did not consider it was relevant “at the time” who called whom. Presumably by “at the time” Mr Haddad was referring to the date of the email.
142 In our view the email is not inconsistent with Mr Haddad’s oral evidence. First, it does not refer to Mr Grant at all. Secondly, it does not indicate whether the contact with Coolabah to which he was referring in the email was the initial contact. Mr Haddad did not deny that he approached Coolabah to see if it “could come on board in terms of the sites that [Dib Group] had”. Mr Haddad simply said he called Mr Roycroft after he was told do so. The email does not indicate the circumstances in which the contact came to be made.
143 Mr Haddad was then taken to the first email, specifically the concluding words extracted above. He was asked:
Isn’t it the case you were very keen to make sure that Coolabah came onto and stayed at the site?
144 He replied:
Well, we were looking forward to a nice relationship with them after we met them, of course. They are good people.
145 This answer is not inconsistent with the other evidence.
146 Coolabah also submitted that:
More strikingly, [Mr Haddad’s] denial that he had discussed “minimum turnover” was contradicted by his own outline of evidence. When confronted by that he initially suggested it was in relation to shop sales but then testified that there was no discussion of any “minimum” quantities at all.
147 This submission overstates the effect of the evidence. Mr Haddad did deny that he discussed minimum turnover, but he did so in the context of being asked about volumes of fuel sales. Thus, his testimony that there was no discussion of minimum turnover related only to fuel sales. The outline of evidence was not tendered. Counsel for Coolabah took the witness to two sentences in it without identifying the context in which they appeared. Those sentences were:
(1) There were discussions about minimum likely turnover and potential for profits (“the first outline sentence”); and
(2) We always talk in terms of volume turnover because of each operator’s own margin arrangements (“the second outline sentence”).
148 After the witness was reminded of the first outline sentence, it was put to him that he had previously denied discussing minimum turnover. When the objection was taken that the question was unfair because the witness’s denial related to fuel sales and the outline did not refer to any specific product, counsel for Coolabah withdrew the question. Instead, he put to Mr Haddad that at the meeting he “did discuss the minimum likely turnover of fuel”. Mr Haddad denied that and said (emphasis added):
Well, we discussed the minimum likely turnover of the shop sales, such as what it could do volume wise, about the fact that the store could cater for large quantities of stock, and same with the fuel. But we never said we had figures or agreed to any – that we knew what the actual turnovers were. It was a completely new site.
You agree you did talk about minimum turnover in relation to those items that you have just mentioned?—I agree that I said what the store could do and what the – as far as the forecourt could do. It was a new – I will keep saying it: it was a brand new store, and they knew that it was a new store. We never said we had figures and we always said that from day 1.
149 As we noted previously, Mr Haddad had earlier insisted that with respect to the convenience store he had not said it would turn over $100,000 a month, or “do $100,000 easy”, but that “it was capable of turning over $100,000 a month”.
150 As a matter of logic, the statement that “there were discussions about minimum likely turnover and potential for profits” does not necessarily indicate that Dib Group gave any indication of the minimum likely turnover (in respect of fuel sales or otherwise). Mr Haddad agreed that Coolabah had asked for information about the turnover of the site. He also agreed that there was discussion about turnover. The concession that they discussed “the minimum likely turnover of the shop sales” was qualified. The thrust of Mr Haddad’s evidence, from which he did not waver, was that Coolabah asked for figures but that Dib Group did not provide figures relating to minimum turnover and confined itself to figures relating to potential turnover, because the site was new and therefore Dib Group did not have the information that enabled it to estimate likely minimum turnover. Otherwise put, the inference to be drawn from Mr Haddad’s evidence is that Coolabah asked him for such details but that all he told them was what the site could do, not what it would do.
151 Coolabah also submitted that:
The suggestion that Dib Group never discuss[ed] turnover was also contradicted by Mr Haddad’s outline of evidence, which admitted to a practice of discussing “volume turnover” with operators. He refused to clarify in evidence what “turnover” he was referring to in his outline of evidence, stating, “It could be anything.”
152 As we have already observed, however, Mr Haddad did not ever suggest that there was no discussion of turnover. What he said was that he did not provide figures relating to minimum turnover. The source of the alleged admission is the second outline sentence. Counsel for Coolabah put it to Mr Haddad that the second outline sentence was “referring to fuel”.
153 Mr Haddad replied:
What we’re referring to there is we don’t talk about dollars, we talk about litres, because the margin is all up to the operator.
154 He was then asked:
And so when you are talking about turnover, you are talking about litres of fuel; is that right?
155 He replied:
Turnover is turnover. The whole service station has, you know – it has got a bottle shop. It has got various things. It could be anything.
156 Coolabah argued that this was an evasive answer. That interpretation of the evidence is certainly open. Nevertheless, it is clear that his Honour did not have such an impression and, on a question like this, it is appropriate to recognise the advantage he enjoyed by virtue of having seen and heard the witness give his evidence. Moreover, it is difficult to reach a different conclusion without the benefit of seeing the document upon which Mr Haddad was being cross-examined. As Dib Group submitted, the statement “it could be anything” was an appropriate response to the particular question, which did not specify the context of his use of the word “turnover”. It is conceivable that the witness thought that the cross-examiner had moved away from the outline at that point and was asking him about his use of the word in his oral evidence. In all the circumstances we do not consider that the criticisms made of the witness’s testimony give rise to appealable error.
157 Finally, Coolabah submitted (footnotes omitted):
[27] The (irrelevant) suggestion that Coolabah put up prices at Coolongolook by 10 cents per Litre over Caltex was a recent invention not previously mentioned in [Mr Haddad’s] outline of evidence or correspondence.
[28] That allegation was also irrational since Coolabah was operating at a two cents commission arrangement and therefore had no interest in raising the price of fuel. Mr Haddad could not explain how his allegation was rational, instead resorting to a hearsay allegation that Coolabah’s management was delinquent.
158 There are several responses to these submissions. First, Mr Haddad did not suggest that Coolabah put up prices. What he said was that Mr Dib called him and said that he went to the site, where he saw that fuel sold there was 10 cents dearer than fuel sold at the Caltex site. For all we know, Caltex might have lowered its prices. Secondly, no objection was taken to this evidence at trial, either on the ground of relevance or of hearsay. Thirdly, the mere fact that the price of fuel at the site was not mentioned in Mr Haddad’s outline of evidence does not make it a recent invention. The outline of evidence is the product of a lawyer’s interview about matters the lawyer wishes the witness to canvass. It is unsurprising that a lawyer would not have included a statement allegedly made by Mr Dib in an outline of the evidence it intended Mr Haddad to give. Indeed, it would be remarkable if he or she had. Whether or not Mr Haddad or Mr Dib ever raised the question of fuel prices in correspondence is also immaterial. Mr Haddad testified that he telephoned Mr Roycroft and told him about the price discrepancy. He indicated that Mr Roycroft expressed disbelief, denied it, agreed to make inquiries and, after doing so, rang Mr Haddad and told him he was right and the manager would be disciplined. Mr Roycroft was not recalled to deal with this evidence.
159 As for the submission that Mr Haddad’s “allegation” that Coolabah had raised its fuel prices was “irrational” because Coolabah “was operating at a two cents commission arrangement”, that was so at the outset, but later (as the primary judge recorded at [60] of the first reasons) Coolabah became a franchisee, purchasing fuel from Dib Group and selling the fuel to the public. Dib Group submitted that this provided a motive for raising the price. Coolabah did not offer an answer to this submission. Mr Haddad was reminded that he had said that Coolabah was operating on a two-cent commission arrangement and then asked whether he agreed there was no reason why Coolabah would have any interest in raising the price of fuel. He replied:
I don’t know. That’s their operation. That’s the way they run their operation. They were hardly ever there, from what I was told.
160 Even if it were accepted that Mr Haddad made an allegation that Coolabah raised its fuel prices, the fact that Mr Haddad could not think of a reason why Coolabah would have an interest in raising the price of fuel does not mean that Coolabah did not have one (assuming it had in fact raised its price).
161 It is true that his Honour did not expressly advert to some of these matters. However, as the New South Wales Court of Appeal said in Mifsud v Campbell (1991) 21 NSWLR 725 (“Mifsud v Campbell”), “[i]t is plainly unnecessary for a judge to refer to all the evidence or to indicate which of it is accepted or rejected.” It may be accepted that “a failure to refer to evidence that is critical to an issue in the case and contrary to an assertion of fact made by one party and accepted by the judge” – as was in issue in Mifsud v Campbell – constitutes an appealable error; but the matters Coolabah complains were overlooked do not fall into this class.
162 For these reasons grounds 1 and 2 of the cross-appeal, insofar as they relate to the primary judge’s findings of credibility regarding Mr Haddad, must fail.
Credibility findings in relation to Mr Grant
163 Coolabah’s submissions in relation to the first two grounds of cross-appeal also rest on its challenge to the primary judge’s credit findings regarding Mr Grant. Coolabah submitted that Mr Grant’s evidence was reliable because it was borne out by the contemporaneous written materials, in particular, Mr Grant’s handwritten notes and his internal email of 8 May 2011.
164 The handwritten notes did not take the form of minutes. Neither did they purport to record what was actually said, or by whom. They were scrappy. Mr Grant also conceded that he might have added a couple of things to the notes from memory after the meeting. Later, he said that “most” of the notes were written during the meeting, but he could not say which parts were added later. The primary judge concluded that “the form of the notes is such that they do not appear to represent a record of what was said but rather notes of things Mr Grant was told, his interpretations of things he was told and his own thoughts about various matters.” That interpretation is a reasonable one.
165 In any event, the notes arguably are not inconsistent with Mr Haddad’s evidence in that they do not include a record of any representation made by the representatives of Dib Group in the form alleged by Coolabah. The only reference in the notes to the matters the subject of the alleged misrepresentations appears on the right-hand side of the page and takes the following form:
2¢ per litre | ||
(4–5¢ per litre) | ||
– 400k litres p.m. | ||
– $100k pm (shop) | ||
– Food | 35% GP | |
• – Liquor | ||
(Pubmart) | ||
(Bottleshop) | ||
166 In all the circumstances, and in the light of our rejection of the challenge to the primary judge’s credit findings in relation to Mr Haddad, it cannot be accepted that Mr Grant’s notes constitute a sufficient foundation for overturning the adverse credit finding made against him.
167 Mr Grant’s email of 8 May 2007 was sent to Mr Dee, Mr Roycroft and Mike Suthers, the other Coolabah director. The pertinent parts of the text of the email are set out below. The passages Coolabah relied upon are in bold. Otherwise it appears unaltered.
Just a snapshot of the meeting held Friday. In attendance MR, AG, DR plus Georg Dib (CEO), Louis Haddad (Franchising & Business development), Georges cousin???, plus Gary Tong (GM- Mobil/Hill & Co), Ross Morris (CFO) & John Dib (George’s Brother & MD).
After the initial 90 minute meeting we were joined by all the hierarchy and later had lunch. In all a 3 hr meeting.
It’s obvious that the Dib Group are excited that CTC may be an excellent fit to their current lack of good food options in their 90plus sites. Realistically, there may only be a dozen or so that may be worthwhile as a CTC operation or an “express” option. (To be assessed).
Firstly is Cooloongoolook, with offer currently as follows:- (Noting that MR has requested further info which will assist our financial modelling)
1. Plan supplied of the site, with a chance to make some changes in Cafe, now, prior to builders being on-site this week.
2 The main option we are considering is taking over the whole site, i.e. Fuel, Food, Convenience shop, Liquor license on takeaway Bottle shop, Post office, ATM.
3. Lease term of 15 years, either 5 x 5 x 5 or 10 x 5.
4. Rent $250,000 pa plus gst.
5. Fuel can either be 2% commission, and Dib will own fuel and set price. Anticipated conservative sales of 400,000 litres per month. (If we choose, at some point we can takeover ownership of the fuel, i.e. pay for the holding stock, and set our own price. Dib advises this normally increase margin to 4-5% of sales volumes)
6. Shop/Conv. sales estimated at $100,000 pm at a 35 % GP.
7. Liquor/Bottle shop sales. Estimate unknown. George to supply a contact with the Pubmart Group to give some advice. (liquor License needs urgent attention and has to be transferred prior to 30th June 2007??? (Need to assess in the timing of takeover, but if we are not on-site we can’t take this over!)
8. Food sales- Unknown. Need to consider Eagle Boys option. Consider worst case $20-$25k per week, but should be closer to $30k per week.
9. Dib to provide Coolrroms, counters, shelving, Planogram & training for console & convenience.
10. Stock for Console side must be thru Dib’s existing National Suppliers including Schweppes, Norco, Elgas, etc.
11. Console IT system to be used for that part of business. (8850 Fuel IT).
12. air-conditioning to be supplied by Dib. Water is at no charge as they use Bore water.
13. A fully furnished house is available for use by Management couple.
14. Internet cafe is also being installed and proceeds to CTC.
15. Timing: They were hoping an end of June/July, which does not seem possible and more likely August.
16. Fuel options: they will be installing 4 islands, with 6 diferent fuel offers including the popular Bio Fuel. Also it will be one of only a few in the area to offer Autogas.
17. Signage- The site is known for the “Golden Windmill”. CTC will be able to put signage on the windmill, and the rest of the site already lends itself to further “aussie theming”. Also Pole signage available.
18. Metro & Mobil cards are accepted.
19. Some truckie parking exists, but plenty of traveller parking.
20. Sit-down and alfresco dining available.
21. Franchise/Goodwill fee: Further details to follow as to how this is made up, but they would be looking at a fee of approx. $200,000 in 3 mths, to be part of the Group and this site.
22. Trading Hours: 24 hrs fuel/convenience. Probably 6am to 8pm (variable) for the cafe.
…
168 Like Mr Grant’s notes, the email did not purport to contain a transcript of the meeting or its minutes. In significant respects it added to the notes. For example, neither the words “anticipated conservative sales” nor the substance of them appeared in the notes. The email also differed from the notes in that, for example, the notes mentioned two cents per litre and 4-5 cents per litre, both of which were unexplained, whereas the email referred to 2% commission and increases in margin to 4-5% of sales volumes. In the circumstances, it was open to his Honour to reach the conclusion he did: namely, that the email, like the notes, was “not a record of what was said at the meeting”, and that the references to fuel and convenience store sales figures in the email were “consistent with the statement[s]… being less firm than the Coolabah witnesses would now have me accept.”
169 Coolabah submitted that Mr Grant’s memory of the meeting was not “premised on the notes” (referring to the handwritten notes and the email). It stressed that he remembered the meeting clearly and was able to describe it in detail in his evidence-in-chief. It is, however, entirely feasible that Mr Grant took the median figure from what Mr Haddad said about fuel volumes and honestly believed that his email was an accurate reflection of what he had said. So long after the event, it is reasonable to believe that Mr Grant’s memory was affected by what he had included in that document. The email was sent to Mr Roycroft, so it is unsurprising that he gave evidence to the same effect as Mr Grant. Mrs Roycroft was aware that her husband’s position was that Mr Haddad had spoken of 400,000 litres a month, and admitted to discussing her husband’s evidence with him. If the email had been copied to Mr Haddad or Mr Dib and they had not quarrelled with its contents, then it would have provided powerful evidence for Coolabah. But it was not. On any view of the matter, the email was not a verbatim account of what was said at the meeting but a reconstruction, based on an imperfect recollection and sketchy notes put together four days later. His Honour’s finding in that regard is unassailable.
170 Coolabah argued that Mr Grant’s notes and his email of 8 May 2007 were not the only contemporaneous materials that supported Coolabah’s case. It also relied on the figures in Mr Dee’s Wotif analysis. But those figures differed in some respects from the statements recorded in Mr Grant’s email, and the differences were not entirely or satisfactorily explained.
171 In the Wotif analysis, for example, projected gross profit from sales at the convenience store was calculated at 33.3% whereas the allegation Coolabah made was that Dib Group had represented that it would be 35%. In addition, Mr Dee calculated anticipated fuel sales at $2,000 per week, which we were told was based on a figure of 400,000 litres at two cents per litre. Although a reference to two cents per litre appeared in Mr Grant’s handwritten notes, it did not appear in the email, where the figure for commission was said to be 2%; and it was the email (and not the handwritten notes) that went to Mr Dee. This might also, of course, provide further support for his Honour’s conclusion that Mr Grant’s email was a reconstruction of what was conveyed at the meeting and did not accurately record what was said. It is also worth noting that, even if we were to accept that the figures contained in the Wotif analysis were in part derived from Mr Grant’s email, this would not be enough to displace the credit finding made by the primary judge in relation to Mr Grant. The email was based on Mr Grant’s handwritten notes and his own recollections of the 4 May meeting. The Wotif analysis does not afford independent evidence to support his account of what was said at the meeting. It is no more reliable than the information that went into it.
172 In our view, none of the contemporaneous documents provides a sufficient basis for reversing the primary judge’s credit finding relating to Mr Grant.
Comparative credibility findings
173 In reaching his conclusion as to the relative credit of Mr Grant and Mr Haddad, the primary judge noted that the first complaint Coolabah made about having been misled by anything Dib Group had said to them at any time was contained in the statement of claim. His Honour referred, in particular, to the fact that Coolabah had written a number of letters of complaint during the period from March 2008 to the end of June 2008 in which it made no mention of having been misled. He observed (at [84](f) of the first reasons):
If the statements which Coolabah now asserts were made to its representatives at the 4 May meeting had in fact been made, surely some reference to being misled at the outset would have been made. After all, Coolabah was desperate to extricate itself from the sublease and the fuel agreement and was casting around for any half reasonable basis for doing so. Yet no such allegation was made[.]
174 These observations are also challenged as wrong factual findings (in ground 1 of the notice of cross-appeal).
175 The documents confirm that Coolabah became increasingly desperate. Within six weeks of the sublease being signed, Mr Roycroft was complaining to Mr Dib about the loss of business from the LPG AutoGas tanks not having been installed (the first complaints about the site actually predate the commencement of the sublease). On 22 November 2007 Mr Roycroft was still making the same complaint. At that point, it is true, as counsel for Coolabah emphasised in argument, Mr Roycroft stated he was “not interested in who is at fault”. But later it is clear that Coolabah was. By 22 January 2008 Mr Grant was writing to Dib Group asking for rent relief and compensation, reporting a litany of problems with the operation of the business on the site, complaining about the loss of sales income and increased overheads, and expressing Coolabah’s concern that the matter may end in litigation. At that point Coolabah largely blamed Kevmark for its plight. On 10 February 2008 Mr Roycroft sent an email to Mr Haddad referring to a number of problems including reduction of sales, again said to be due to the lack of LPG AutoGas facilities, and stating that:
These issues are all due to the poor quality or non-compliant facilities that Kevmark [has] [scil.] installed.
176 On 28 February 2008 Mr Roycroft sent an email to Mr Dib (copied to Mr Haddad and Mr Grant) again speaking of rent reduction and compensation but declaring that “by April we may have to make some very important decisions re the future”. In March 2008 Mr Roycroft was complaining to the Dib Group about serious water problems but still blaming Kevmark. On 12 March 2008 Mr Grant emailed Coolabah’s internal accountant about the “alarming” February figures, stated that the site was “an error in judgment” and that “the majority of the issues were landlord related” (clearly a reference to Kevmark). In none of these communications was there any allusion to a misrepresentation by Dib Group made before the sublease was entered into, let alone any reference to the particular misrepresentations the subject of the proceeding. It is apparent that by this time Coolabah was seriously considering terminating the sublease. The email included the following statements:
8. We have also signalled to Dibs that we are not prepared to stay at the site losing money and will not exercise the Option until we know we can make money in future there! Dib agrees and they have intimated that if we walk they will walk as well as they supply fuel and do not want to run petrol stations. […]
9. Should we decide to vacate sometime before July, we will have to wear some significant losses, both since commencement and with out funding for the site.
177 Coolabah submitted that there was in fact a complaint about the alleged misrepresentations:
[T]here was in substance such a complaint in Andrew Grant’s email dated 28 March 2008, in which complaint is made in the relation to the fuel turnover not meeting expectations being less than 42,000L per week, as well as foot traffic not being sufficient to put the site into profit, and the lack of overall sales – such comments were consistent with expectations of particular turnover levels;
[T]here were more problems in relation to the operational difficulties on the site that were understandably of significant and more immediate concern, as found in Andrew Grant’s letter of 22 January 2008.
178 The email of 28 March 2008 does not refer to any statements made at the 4 May meeting or in the George Dib email. Neither does it indicate that Dib Group made any representations about fuel volumes or convenience store sales. There is no mention of the convenience store. Our attention was drawn during the hearing to two passages. They appear in bold below:
3. Café sales over the past 7 weeks averaged out @ $8,000 per week, wherein our breakeven estimate was $16,000 pw. Unfortunately, a minimum staffing level is paramount to maintain our Offer 7 days a week. The Hoed reports attached, reflect that our best efforts are to no avail, WHEN THE FOOT TRAFFIC IS JUST NOT THERE!
4. Fuel Sales – Averaging less than 42,000 litres per week over the past 7 weeks, is well down on our expectations and we are sure it is also well down on yours!
179 This material cannot be said to be a complaint “in substance” or in form about Dib Group making the pleaded representations. The reference to the absence of foot traffic reflects on nothing and no-one. Furthermore, it is one thing to have expectations and quite another to have raised them. There is no suggestion that Coolabah’s expectations were raised by Dib Group. At most it can be said that this statement is not inconsistent with Coolabah’s case.
180 For these reasons, his Honour’s findings of fact concerning Coolabah’s failure to complain of the alleged representations are unremarkable. In our view his observations on the significance of those facts merely reflected what one might have expected if the representations as pleaded had been made. Without the advantage of having heard from the various witnesses we are not persuaded that his Honour’s conclusions are wrong – and, as both the primary judge and Coolabah impliedly recognised, these conclusions reinforce his Honour’s findings with respect to the credit of Mr Haddad and Mr Grant.
181 Thus, the facts – whether or not considered in the light of the contemporaneous documents – were not incontrovertibly in Coolabah’s favour. The testimony of its witnesses was not uncontested. The conclusions his Honour reached were not glaringly improbable. Neither were they contrary to compelling inferences. As a result, his Honour’s findings concerning the relative credit of Mr Grant and Mr Haddad – and, consequently, his findings as to what was said at the 4 May meeting – ought not to be disturbed. Accordingly, and for the reasons given above, grounds 1 and 2 of the cross-appeal must fail.
Alternative argument
182 The third ground of the cross-appeal concerned the way in which the statements made at the 4 May meeting were interpreted by Coolabah’s representatives. It reads:
Further in relation to the factual finding at paragraph 83(e), even if the proper finding is that Louis Haddad had said that the Coolongolook site had “capacity” to turnover 400,000 litres of fuel per month, the primary judge erred in finding that the Coolabah representatives appreciated the nature of the remark having regard to:
3.1 the absence of evidence of the meaning of “capacity”;
3.2 the absence of evidence that the Coolabah representatives so understood;
3.3 the evidence that the Coolabah representatives had no previous experience or understanding of fuel operations.
183 Ground 4 was also predicated on this alternative basis. Coolabah submitted that even if Mr Haddad's evidence were accepted and, in particular, even if he had not referred to a “minimum turnover” (but rather a “capacity”) of 400,000 litres per month in relation to fuel sales, that representation was still misleading within the meaning of s 52 of the TPA in the sense that it induced or was capable of inducing error.
184 Coolabah argued that, as it had (to the knowledge of Dib Group) no previous experience operating fuel sites, and as Dib Group represented that it was experienced in the industry, an unqualified representation of this kind in relation to capacity for a particular volume of fuel sales was misleading. Consequently, it submitted, the primary judge should have found that the representation about capacity was likely, and was in fact understood, to be a prediction. As the representation therefore related to a future matter, absent any evidence from Dib Group that there were reasonable grounds for making it, a presumption arises that it was misleading: TPA s 51A.
185 There are a number of problems with this argument. The first is that it proceeds upon a false premise. Mr Haddad did not give evidence that he had stated in terms at the 4 May meeting that the site had the capacity to generate 400,000 litres per month in fuel sales. His evidence was not so precise. In chief he said that at the meeting Mr Roycroft asked Dib Group for figures and they told him they had no figures for the service station. Mr Haddad explained that it was a completely new site constructed in a completely different configuration. Mr Grant agreed that this was so. Mr Haddad said they did go on to speak about volumes, but only in terms of what the site was capable of doing. He said in answer to a question from the primary judge that he recalled saying the site was “capable of doing 3, 4 or 5 hundred thousand litres”, adding “we do have sites with similar configurations, quite a few of them, that do those volumes” and indicated that he mentioned that at the 4 May meeting. He also said that Coolabah’s representatives knew the other sites and had asked what they did. The primary judge accepted this evidence.
186 Contrary to Coolabah’s submissions, the primary judge’s finding at [83](e) of the first reasons – that Mr Haddad did no more than give a “broad indication of the trade at other comparable sites” – is not demonstrably wrong. It was open to his Honour on the evidence. It plainly accords with Mr Haddad’s evidence (which, for the reasons given above, the primary judge was right to accept). Once Coolabah’s attack on the credit findings fails (as it must for the reasons outlined above), his Honour’s findings that the Coolabah representatives “appreciated the nature” of Mr Haddad’s statements regarding fuel sales and understood that what was being put was an indication of what might be achieved if the site performed like comparable Dib Group sites, and efficiently and productively, cannot be disturbed. We accept that the knowledge of those to whom an allegedly misleading representation was made may be relevant (Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited (2010) 241 CLR 357 at [20]). But once Mr Haddad’s account is accepted, it is difficult to see what qualification or explanation was called for. This is not a case where the circumstances indicated that silence was apt to mislead (see, e.g., Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31). It was not in dispute that Dib Group had not previously occupied the site and that the configuration was a new one or that Coolabah knew that this was the case. As a result, it must have been clear to Coolabah that Dib Group would be in no position to make predictions of what would be achievable on that site. Coolabah’s witnesses were experienced businessmen, not artless innocents. They would have appreciated that, at most, Mr Haddad could have given an estimate, based on the company’s experience at other sites, of the capacity of the service station and the convenience store. We reject the contention in the notice of cross-appeal that Mr Haddad’s statements about capacity were misleading without qualification or explanation. Consequently, grounds 3 and 4 as they were put in the notice of cross-appeal must be rejected.
187 In oral submissions the argument shifted. Counsel for Coolabah submitted that:
Ultimately in relation to the range question, even if it was the case that Mr Haddad didn’t give a figure of 400,000 but gave a range of 300,000 to 500,000, that is still a representation that can be relied upon and in the absence of a case to say that there are reasonable grounds for that range, even at the lowest range of 300,000.
188 This argument was not put below. Dib Group submitted that, had it been, Dib Group’s forensic choices may have been different and it would therefore be prejudiced if Coolabah were permitted to run the argument on appeal. It is quite clear that the point could have been met by evidence had it been raised at trial. For this reason it cannot be raised for the first time on appeal: Water Board v Moustakas (1988) 180 CLR 491 at 497. See also Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438; University of Wollongong v Metwally [No 2] (1985) 60 ALR 68 at 71; Coulton v Holcombe (1986) 162 CLR 1 at 7-8. Having failed at trial on the pleaded representations, Coolabah should not be allowed on appeal to run a different case.
189 A further argument that the primary judge should have adjusted the figures to take into account the fact of accelerated receipt was also not run at trial but was ultimately abandoned.
The representations in the George Dib email
190 Ground 5 of the notice of cross-appeal pleads that the primary judge erred in his factual findings concerning the George Dib email and that, in making those findings, his Honour failed correctly to apply the test in Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 (“Butcher”). In substance, this translates as a complaint that the primary judge did not find (and should have found) that Mr Dib had adopted as his own information apparently provided by another. The paragraph of his Honour’s judgment containing the impugned findings (at [88] of the first reasons) reads:
A sensible interpretation of this email and its attachments is that Mr Dib had obtained some historical figures as to the turnover and gross profit of the other components of the business and was passing them on. There is no indication in the covering email or in the spreadsheet that he had performed any analysis of his own and the discussions leading up to the communication support the conclusion that he was going to get the historical figures and pass them on to Coolabah for what they were worth. I do not think Mr Roycroft viewed these figures in any other light.
191 In Butcher (at [40]) the Court found that a real estate agent who passed on from the vendor to the purchasers a brochure containing inaccurate information did not engage in misleading or deceptive conduct because he “did no more than communicate what the vendor was representing, without adopting it or endorsing it.” That conclusion, the majority said, flowed “from the nature of the parties, the character of the transaction contemplated, and the contents of the brochure itself”.
192 We do not consider that his Honour wrongly applied the test in Butcher. In our view, his Honour’s conclusions were open on the evidence. The spreadsheet clearly stated that the figures were “based on historical data”. As we have already observed, Dib Group, to Coolabah’s knowledge, had never operated the site before and, on Coolabah’s case, were experts on fuel sales, not sales of liquor or other items mentioned in the spreadsheet.
193 The inference from the George Dib email is that the spreadsheet recorded scenarios provided to Mr Dib by a contact. That interpretation is supported by the contemporaneous emails.
194 In the email Mr Roycroft sent to Mr Dib, Mr Grant and Mr Dee on 7 May 2007 – to which the George Dib email responds – Mr Roycroft noted at point 5 (emphasis added):
George to supply contact for CTC to discuss scenarios [scil.] re bottle shop turnover v profit and labour [scil.] costs plus the same for the Post Office part of the business etc.
195 The response in the George Dib email was to refer to the attached spreadsheet.
196 Similarly, at point 7 of the internal Coolabah email sent by Mr Grant on the same day as the George Dib email, Mr Grant recorded that the estimate of liquor and bottle shop sales was “unknown” and that Mr Dib was to “supply a contact with the Pubmart Group to give some advice…”. In his evidence in chief Mr Roycroft said he thought that it was Mr Dib who offered to supply relevant information regarding the bottle shop and said “he had a mate who had a bottle shop that would give them details of what to expect”. In cross-examination, however, he conceded that with respect to the bottle shop and the post office (two of the three items of income mentioned in the spreadsheet), Mr Roycroft said he assumed Mr Dib only passed on the information obtained from the previous owner.
197 Having regard to the statements in the various emails, to the evidence of Mr Roycroft, to the qualification in the spreadsheet that the figures were historical, and to Coolabah’s knowledge that Dib Group had not previously occupied the site, it cannot be said that his Honour should have found that Coolabah would have regarded Mr Dib as having adopted the representations made in the spreadsheet so that they would amount to predictions by him of likely earnings at the site: cf. Gardam v George Wills & Co Ltd (1988) 82 ALR 415 at 427. It is reasonable to conclude that in the spreadsheet Mr Dib was doing no more than passing on information from another source, for what it was worth, without any concomitant belief in its truth, with the result that his conduct in that regard did not contravene s 52 of the TPA: Heydon v NRMA Ltd (2000) 51 NSWLR 1; [2000] NSWCA 374 at [431]. In Butcher counsel for the purchasers conceded that the mere fact that a person had supplied a document containing misleading information did not mean that that person had engaged in misleading conduct; it was necessary to examine the role of the person: Butcher at [37]. We do not understand counsel for Coolabah to have contended otherwise.
198 There is another problem with Coolabah’s case concerning the representations allegedly contained in the George Dib email. The case was that the statements in the spreadsheet were false because they were representations as to future matters and Dib Group did not adduce evidence that they were based on reasonable grounds: see TPA s 51A(2). It is by no means obvious, however, that a statement about figures which are expressly said to be “based on historical data” should be construed as a representation about a future matter.
199 Despite the way this ground was pleaded, Coolabah’s argument was not confined to the Butcher point. At the heart of its complaint was a grievance about the failure of the primary judge to accept the evidence of its witnesses when Dib Group had not called Mr Dib, nor offered any explanation for his absence. The primary judge dealt with the matter in this way (at [84](g) of the first reasons):
The absence of George Dib from the witness box is unexplained. On the other hand, a party is not obliged to call every available witness who might be expected to testify as to the discussions which took place at a particular meeting. I have decided to apply Jones v Dunkel [(1959)] 101 CLR 298. But the circumstances of the present case are such that the inference to be drawn does not weigh heavily in the balance against Dib Group. I have approached my consideration of what occurred at the 4 May meeting upon the basis that the evidence of George Dib would not have assisted Dib Group’s case[.]
200 Coolabah argued, in effect, that the primary judge did not in fact apply Jones v Dunkel (1959) 101 CLR 298 (“Jones v Dunkel”) and this contributed to his “flawed credibility findings”. It went on to assert:
In fact the trial judge fails to draw any inferences favourable to Coolabah in relation to either the 4 May 2007 [meeting] or the George Dib email of 8 May 2007.
201 Coolabah submitted that, although the primary judge accepted that Mr Grant’s email record of “anticipated conservative fuel sales of 400,000 litres per month” was most likely sourced from something Mr Dib or Mr Haddad said at the 4 May meeting, he drew inferences favourable to Dib Group as to the nature of what Mr Dib might have said despite the fact that Mr Dib could not be cross-examined on the issue.
202 In circumstances where four witnesses gave versions of the evidence which were broadly consistent and one witness gave contrary evidence, it is surprising that Dib Group did not call Mr Dib or provide an explanation for his absence. It is equally surprising that in the circumstances of this case, where Mr Grant was the only one to make notes of the meeting or to record his recollections at the time, his Honour did not think that the unexplained absence of Mr Dib was more significant.
203 There are, however, three points we would make. First, it should be observed at the outset that the rule in Jones v Dunkel only permits an inference to be drawn that the evidence not called would not have assisted the party who failed to call it. It does not require the Court to draw such an inference. Here, it is true, the primary judge did say he would draw the inference. This brings us to the second point. The principle in Jones v Dunkel does not take the party relying on it very far. It does not permit an inference that the evidence would in fact have been damaging to that party. It does not permit, as Coolabah’s submission suggested, an inference favourable to the other party. Nor can it be used to fill in gaps in the evidence or to convert conjecture or suspicion into inference: Jones v Dunkel at 301-302, 308 and 320-321. See also Sagacious Legal Pty Limited v Wesfarmers General Insurance Limited [2011] FCAFC 53 at [79]. Thirdly, although we, in the position of the primary judge, might have put more weight on the lack of evidence from Mr Dib, that does not mean that his Honour fell into appealable error by according it little weight. Unlike us, he had the benefit of seeing and hearing from the witnesses, who clearly made an impression on him.
204 The result is that the primary judge erred neither in his application of the test in Butcher, nor in his application of the principle in Jones v Dunkel. Ground 5 of the notice of cross-appeal must also fail.
Reliance
Background
205 The sixth ground in the notice of cross-appeal alleged that the primary judge erred in finding that there was no evidence that Coolabah relied on Dib Group’s representations, and ought to have found that there was reliance on the representations in relation to fuel and convenience store sales.
206 There are three preliminary points we would make.
207 First, there is a degree of ambiguity about this ground of the cross-appeal. It is not evident (either from the pleading or the submissions) whether it relates to the findings on the representations concerning fuel and shop sales which Coolabah contends the primary judge should have made (which involved predictions of precise outcomes) or the representations as to fuel and shop sales which the primary judge found were made (which limited both statements to the site’s potential based on sales at comparable sites).
208 Secondly, on an appeal of this kind, it is insufficient for an appellant (in this case the cross-appellant, Coolabah) to ask the Court to look at all the evidence, “directed by the otherwise unassailable findings on credit” made by the primary judge, and to ask it to arrive at its own conclusions without positively demonstrating that the primary judge was wrong. As we said earlier, it is inappropriate to treat the appeal as though it were a new trial on the evidence. The views of the primary judge are not to be “laid to one side” in order that “a simple re-argument of the case take place”: Branir at [30].
209 Thirdly, Coolabah’s written submissions incorrectly characterise the primary judge’s finding. His Honour did not find that there was no evidence of reliance. He said he was not persuaded that Coolabah relied on any of the statements made to its representatives at the 4 May meeting or in the George Dib email (to which the spreadsheet containing the alleged written representations was attached). We are not persuaded that he was wrong.
210 The primary judge gave several reasons for his conclusion. Relevantly:
(1) His Honour noted (at [90] of the first reasons) that Mrs Roycroft said she did not participate in Coolabah’s decision to proceed with the sublease and the fuel reselling agreement, or in the preparation or discussion of any feasibility calculations in relation to the site. He said that Mr Roycroft, a director of Coolabah, might have done so, but the “nature and extent of his participation” was unclear. His Honour found that Mr Roycroft “did not analyse or make use of the figures he was given” at the 4 May meeting or in the George Dib email.
(2) His Honour further noted (at [92]) that although Mr Grant copied his email of 8 May 2007 to Mr Dee, who appeared to have included in the Wotif analysis the fuel and convenience store sales figures contained in that email together with the income and gross profit figures for the newsagency, post office and bottle shop contained in the George Dib email, there was no evidence of Coolabah’s decision-making process or the use (if any) to which the decision-makers put these figures. The evidence was that the proposal was submitted to the board and the board made the decision to proceed. His Honour said he was “left to wonder” about the process and about “what reliance (if any) was placed upon the statements which [he had] found were made” (at [93]).
(3) His Honour did not think that the remarks he had found were made about fuel throughput (which, it will be remembered, were limited to statements that “400,000 litres of fuel per month was the level of sales being achieved from similar sites elsewhere in the business of Dib Group”) were of any importance to either Mr Roycroft or Mr Grant as, when translated into a sum by reference to a commission of two cents per litre, they were “not large” in comparison with the café or convenience store sales figures, and the fixed costs and staff costs necessary to generate the fuel sales would be the same regardless of the volume sold (at [94]).
(4) His Honour said that the evidence of Mr Roycroft and Mr Grant made it “quite clear” that the assumptions or estimates Coolabah made about the gross sales and profit for the café were derived from Coolabah’s experience at other sites (at [98]). He did not think there had been any adequate explanation of the alleged link between the fuel sales figures allegedly provided by Dib Group, “foot traffic” at the site, and the expected café sales (at [95]-[96]).
(5) His Honour found (at [99]) that there was no evidence to show how, if at all, the decision-makers at Coolabah used the information concerning the gross sales and profit for the convenience store and the other components of the business (the bottle shop, post office and newsagency).
(6) Both the sublease and the fuel reselling agreement contained an “entire agreement” clause, and the Franchise Disclosure document made clear to Coolabah that Dib Group would not provide earnings information. His Honour observed that these circumstances were not in law an answer to Coolabah’s case, but were relevant in the assessment of its veracity (at [101]), and he took them into account “as part of the evidentiary matrix”.
211 Coolabah submitted that:
(1) In relation to both the fuel sales figures and the figures relating to the bottle shop, newsagency and post office, the primary judge “examined the question of reliance by asking whether the representations were of ‘importance’ or whether Coolabah was ‘particularly interested’ in the figures”. However, Coolabah submitted that reliance “does not require the representation to be the sole or dominant reason for the contract”, but is “made out where the representation plays some part, even a minor part in the decision to enter the contract”.
(2) “If a representation is made to induce a representee to enter into a contract and that person in fact enters into the contract an inference of fact arises that he was induced by the representation”, and it will fall to the representee to rebut this inference (citing Gould v Vaggelas (1985) 157 CLR 215 (“Gould v Vaggelas”) at 236). Whatever representations were made by Dib Group, the necessary inference (which the primary judge should have drawn) was that “they were made in order to induce Coolabah to enter into the franchise”. Dib Group did not lead any evidence to rebut that inference.
(3) Reliance “can also be inferred from the evidence that Coolabah relied on the expertise of Dib Group in the fuel industry in providing the figures and had sought those figures from Dib Group”.
(4) The entire agreement clause “should have been given no real weight”.
(5) The primary judge’s reasons did not “correctly state the full extent of the evidence in relation to reliance”.
212 In considering the reasons provided by the primary judge, it is important to recognise that his Honour was primarily concerned to make findings about the reliance (if any) that was placed on the pleaded representations he had found were made. They related to the signs that could be erected on the site, access to bore water, and the availability of LPG AutoGas. There was no dispute that the site did in fact have access to bore water. As noted above (at [25]) his Honour found that the statement was true. In relation to the other two matters, his Honour found (as noted above at [31]-[32]) that both Mr Roycroft and Mr Grant were prepared to proceed with the sublease and fuel reselling agreement despite knowing that they might not have been able to erect the signs and that that there was no LPG AutoGas tank or associated equipment at the site. In the former case, they understood that development consent from the local council was required, and in the latter, they knew that the tank and associated equipment would not be there when they started to trade, and that it might not be installed for “some considerable time”. Neither matter, he added, was “a deal breaker”. These findings are not challenged in the notice of cross-appeal.
213 Because of the conclusions his Honour reached about the other representations, it was strictly unnecessary for him to consider whether Coolabah relied on anything it was told about fuel volumes or the convenience store. However, as is apparent from the above summary of his Honour’s reasons, he did express views about whether Coolabah relied on the statements he found Dib Group to have made concerning fuel and convenience store sales (though, we note, without having considered whether these less precise statements could be characterised as misleading or deceptive). Nonetheless we will now deal with each of the points Coolabah made in sequence.
Importance of representations in decision to enter into sublease and fuel reselling agreement
214 It is true that Coolabah did not have to prove that any representation Dib Group made was the sole or dominant reason for Coolabah’s decision to enter into the contract. See, e.g., Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1998) 39 FCR 546 at 558-559; Como Investments Pty Ltd (in liq) v Yenald Nominees Pty Ltd [1997] ATPR ¶41-550 at 43,619. Yet we do not understand his Honour to have been labouring under any such illusion. Read in context, the observation he made (at [94]) that the remarks about fuel throughput were not “of any importance to Mr Roycroft or Mr Grant” meant no more than that his Honour did not consider the remarks to have been material to their thinking. His Honour also acknowledged Mr Roycroft’s evidence that fuel sales figures were of interest because they would assist him to estimate “the foot traffic” through the site – that is to say, the number of people entering the site by car who were likely to eat in the café and/or shop in the convenience store. Mr Grant gave evidence to similar effect. His Honour concluded, however, that neither Mr Roycroft nor Mr Grant “could sensibly explain the relationship between fuel volumes and foot traffic” except by reference to the truism that people coming on to the site to buy petrol “will often eat at the café and shop in the store” (at [95]).
215 The fact that Mr Roycroft and Mr Grant could not sensibly explain the relationship between the amount of fuel sold and foot traffic does not necessarily mean that they did not rely on any information they were given about fuel sales. Still, Coolabah has problems making out its case. The first problem is that his Honour referred to this very evidence in making his adverse credit findings in relation to Mr Roycroft, observing that Mr Roycroft’s evidence not only did not make sense, but was given (in his view) “in an endeavour to bolster or strengthen a significant weakness in Coolabah’s case”, namely, the difficulty it faced in showing that it relied on the representations allegedly made (at [84](d)). Mr Roycroft’s evidence as to the significance of the fuel sales figures is, therefore, intimately connected with the adverse credit findings made against him. We accept that Mr Grant’s evidence does not suffer from the same difficulty, but it was premised on the making of the representations his Honour found had not been made. It was also vague. Mr Grant said that when they were told “the conservative figures of 400,000 litres per month in fuel and 100,000 per month in convenience sales, that gave us comfort in that there would be enough foot traffic to boost the sales up to around 30,000”. Why Coolabah inferred that these numbers would boost sales of food to around 30,000 (presumably $30,000) was not explained. How the figures were relied upon was not explored. In view of the state of the evidence his Honour was entitled to conclude that Coolabah did not rely on the information.
216 While Mr Grant recorded the alleged representations as to projected fuel and convenience store sales figures in his email of 8 May 2007, and those figures were subsequently included in the Wotif analysis, there is no evidence that either the email or the Wotif analysis went to the Coolabah board before it made its decision, and Mr Grant’s evidence was that no other feasibility study or analysis was carried out. No board minutes were tendered at trial, and no witness gave evidence of the board’s deliberations. Whilst this is not fatal, as it might well be said that Mr Roycroft and Mr Grant acted as the company for relevant purposes (see Tesco Supermarkets Ltd v Nattrass [1972] AC 153 at 170-171), the absence of this sort of information supported his Honour’s conclusion that there was insufficient evidence to show that the Coolabah board, who made the decision to enter into the sublease and the fuel reselling agreement, relied on the figures contained in those documents when making that decision.
217 Mr Grant said he provided Mr Dee with his email of 8 May 2007 which contained the alleged representations with respect to the fuel sales and the convenience store, and the figure for the convenience store contained in the Wotif analysis bears this out. Mr Grant was one of the decision-makers at Coolabah, and was one of the three board members who voted to proceed with the sublease and the fuel reselling agreement. Mr Grant also said that he produced the finance application submitted to Westpac for funding for the site. The Wotif analysis was an appendix to that application.
218 Thus, to the extent that the Wotif analysis incorporated any representations made by Dib Group, Coolabah apparently relied upon them for the purpose of soliciting a loan from the bank.
219 On the other hand, while it is true that some information in the Wotif analysis appears to correlate with what appears in Mr Grant’s email, there are, as we mentioned earlier (at [171]-[172]), some differences between the information in the email and the figures appearing in the Wotif analysis. Those differences (with respect to both fuel sales and profit from the convenience store) support the conclusion that Coolabah did not rely on representations made by Dib Group concerning those matters in its decision to enter into the fuel reselling agreement and the sublease.
220 An email from Mr Morris of Dib Group to Mr Grant and others, dated 28 June 2007 and copied to Mr Roycroft, included this assertion with respect to “fuel margin”:
As was discussed, this initially will be a commission agency arrangement with the commission paid at 1.81 cpl + gst (app. 2.0 cpl).
221 This email might account for the assumption in the Wotif analysis of a margin of two cents per litre, but there is no evidence that it was forwarded to Mr Dee or that the contents of it were conveyed to him. Moreover, as it is inconsistent with what Mr Grant put in his email of 8 May 2007 and does not appear in the George Dib email, it undermines Coolabah’s case that the assumptions underlying the Wotif analysis were derived from anything said at the 4 May meeting or included in the George Dib email. The date of the discussion to which Mr Morris refers is not mentioned.
222 We cannot see any correlation between the figures for expenses in the spreadsheet attached to the George Dib email and those appearing in the Wotif analysis. Mr Grant conceded in cross-examination that he did not know what assumptions Mr Dee made in order to arrive at the expenses he allotted to any of the businesses apart from the café, and that information, he said, came from the Coolabah Group itself. The assumptions Mr Dee made were never proved.
223 The observation his Honour made that there was “no evidence” to show how the information concerning the gross sales and profit of the convenience store was used by the decision-makers at Coolabah was inaccurate. We do not think, however, that this is what his Honour actually meant because he referred to some of that evidence.
224 We do not consider his Honour was wrong to conclude (in effect) that the representations he found Dib Group to have made did not materially affect Coolabah’s decision to enter into the sublease and the fuel reselling agreement.
Inference of reliance
225 Turning to Coolabah’s second point, in Gould v Vaggelas Wilson J said (in the context of an action in deceit):
If a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract there arises a fair inference of fact that he was induced to do so by the representation.
226 Coolabah’s submission omitted the words “material” and “calculated” from this statement of the principle.
227 Perhaps more importantly, however, in this case there are competing inferences. The absence of any complaint about the alleged representations in the communications between the parties when things started to go wrong (to which his Honour referred in a different context, and which is discussed in detail above) supports the inference that Coolabah did not rely on them in entering into the agreements. Even if the inference for which Coolabah contended is open, it is not the only inference, and in the light of the unsatisfactory state of the evidence, the primary judge cannot be criticised for failing to draw it.
228 In any event, even if the inference should have been drawn, the submission that Dib Group led no evidence to rebut it is not made out. In cross-examination Mr Grant conceded that he could not blame Dib Group for forcing Coolabah into the site.
Reliance on expertise
229 In relation to Coolabah’s third submission, we note that Mr Roycroft’s evidence that Coolabah relied on Dib Group’s expertise in the fuel industry is caught up in the adverse credit finding. Mr Grant’s evidence to like effect is not. We accept that this evidence was relevant, but do not consider that it is sufficiently probative to persuade us that his Honour was wrong in all the circumstances to come to the conclusion that he did.
“Entire agreement” clause
230 Although his Honour referred to the “entire agreement” clause and the Franchise Disclosure document and said that he had taken them into account “as part of the evidentiary matrix”, there is nothing to indicate he gave them any “real weight”, as Coolabah submitted. In any case, Coolabah offered no reasons for its submission. These matters were undoubtedly relevant. Indeed, Coolabah did not submit otherwise. Mr Grant signed the fuel reselling agreement on Coolabah’s behalf having acknowledged that he had carefully read and understood its provisions and warranting to Dib Group that before he had done so Coolabah had not relied on any statement, representation or warranty Dib Group had made other than those set out in the agreement (cl 9.2). He also acknowledged that he understood that Dib Group did not guarantee to provide or make any representation as to a rate of return on investment or profit to Coolabah or sales of products at the fuel reselling business (cl 9.3). As a matter of fact, the agreement therefore supports an inference that, even if Coolabah relied on the representations before the agreement was signed, they did not materially affect its decision to enter into the contract.
Failure to state full extent of evidence
231 Coolabah cites a number of pieces of evidence to which it alleges the primary judge failed to have regard in reaching his conclusions on the reliance issue. His Honour did not mention all the evidence Coolabah cited. But this is far from being sufficient to found a conclusion that the primary judge fell into error (see the comments in Mifsud v Campbell quoted above at [161]). It is, however, appropriate that we consider the evidence to which Coolabah referred in order to determine whether, individually or collectively, it might justify a finding that the primary judge’s finding on reliance should be set aside.
232 First, Coolabah pointed to evidence indicating that Mr Roycroft and Mr Grant were primarily responsible for investigating the feasibility of new sites and taking the information to the board. This evidence, however, did not go very far. Mr Roycroft said it was part of his duties to “source sites”. He said he would visit these sites and “gather as much information about the profitability and potential of the sites, and then take that data back to the Board”. Mr Grant gave evidence that once Mr Roycroft identified appropriate sites, the two of them would find out “if there [was] any existing sales data available” and would then “run [their] profit models and see how far [they could] take it before [they] took it to the board for approval”. Mr Grant gave no evidence about whether that process was followed in this case; and, although it may have been reasonable to infer that it was, this is not a sufficient basis for disturbing his Honour’s finding.
233 Secondly, Coolabah pointed to evidence from Mr Roycroft suggesting that he had relied on the representations allegedly made by Dib Group in determining whether to proceed with the sublease of the site. However, this very evidence was the subject of the adverse credit finding made by the primary judge (at [84](d)), and, for the reasons given above, this finding should not be disturbed on appeal.
234 Thirdly, Coolabah pointed to evidence that Mr Grant and Mr Roycroft relied on the figures regarding fuel sales to estimate café sales. This evidence was in fact mentioned by the primary judge in his reasons. We have already referred to it. It related to the method of assessment of likely “foot traffic”. As the primary judge noted at [95]-[98], the connection was not clearly articulated or easy to understand. Furthermore, Mr Grant admitted (in answer to a direct question from his Honour) that “basically, … all that was done” was that Coolabah calculated the café sales based on its own experience at other sites. In the circumstances it was reasonable to conclude, as the primary judge did at [98], that the estimates Coolabah made with respect to café sales were “derived from [Coolabah’s] experience at other sites”.
235 Fourthly, Coolabah referred to evidence from Mr Roycroft that he considered Dib Group to be “experts” not only in relation to fuel sales, but also in running convenience stores. The basis for this assertion was never proved, and Mr Roycroft conceded that he did not have any clear idea of the source of the figures Dib Group allegedly provided in relation to convenience store sales. Certainly, no-one gave evidence that Dib Group had held themselves out as experts in convenience stores.
236 Fifthly, Coolabah submitted that Mr Dee used some of the figures contained in the representations Dib Group allegedly made in the preparation of the Wotif analysis. We have dealt with this matter already.
237 The challenges to the findings on reliance – and hence grounds 5 and 6 of the grounds of cross-appeal – fail.
The final grounds
238 The last two grounds of the cross-appeal are dependent on the success of the earlier grounds. They plead that the primary judge ought to have found that the representations about fuel and convenience store sales contravened s 52 of the TPA, that Coolabah suffered loss and damage by the conduct of Dib Group, and that the amount of that loss, calculated in accordance with the evidence of Coolabah’s expert’s assessment, should have been awarded to Coolabah with interest. In the light of the conclusions we have reached on the other grounds of the cross-appeal, both remaining grounds fall away.
Conclusion
239 The appeal is allowed in part. In view of the Pyrrhic nature of the appellant’s victory, there should be no order as to the costs of the appeal.
240 The cross-appeal is dismissed with costs.
I certify that the preceding two hundred and forty (240) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Gray, Lander and Katzmann. |
Associate:
