CATCHWORDS

TRADE PRACTICES - application for damages for misleading conduct in relation to an agreement for lease of a fruit shop at first instance - whether agreement for lease entered into in reliance upon representation found to have been made that a survey predicted a certain weekly turnover.

TRADE PRACTICES - whether appellant can establish reliance by showing that active interest in leasing fruit shop by reason of misrepresentation - whether representation had effect of "propelling" down the path of further inquiry - whether investigations by a representee which confirm or tend to confirm the representation cannot displace the operative effect of the initial representation so as to establish lack of reliance.

APPEAL - conflict of evidence at trial - whether finding of fact by trial judge based on credibility of witness should be set aside - discussion of principles.

APPEAL - whether trial judge misapplied relevant legal principles.

PRACTICE and PROCEDURE  - whether procedural unfairness not to put certain matters to witness in cross-examination.

Trade Practices Act 1974 (Cth) s 82

Abalos v Australian Postal Commission (1990) 171 CLR 167

Devries v Australian National Railways Commission (1993)

177 CLR 472

Warren v Coombes (1979) 142 CLR 531

The Saints Gallery Pty Ltd v Plummer (1988) 80 ALR 525

Browne v Dunn (1894) 6 R 67

Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation

[1983] 1 NSWLR 1

Hoskins v Repatriation Commission (1991) 32 FCR 443

Dolan v Australian and Overseas Telecommunications Corporation (1993) 42 FCR 206

R v Birks (1990) 19 NSWLR 677

A Royale and Co (Aust) Pty Ltd v Harold Scruby Consultants Pty Ltd (unreported, NSW Court of Appeal, 12 April 1988)

Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336

Gould v Vaggelas (1985) 157 CLR 215

Pasko v Trela (1951) 46 NW (2d) 139

Ricochet Pty Ltd v Equity Trustees Executors and Agency Company Limited (1993) 41 FCR 229

March v E & M H Stramare Pty Limited (1991) 171 CLR 506

ELITEGOLD PTY LIMITED (Appellant)

CM HOLDINGS PTY LTD, AUSTRALIA FAIR SHOPPING CENTRES PTY LTD and CM DEVELOPMENTS (QLD) PTY LTD (Respondents)

No NG 800 of 1994

Jenkinson, Tamberlin and Sackville JJ

Sydney

28 June 1995

IN THE FEDERAL COURT OF AUSTRALIA)                 

NEW SOUTH WALES DISTRICT REGISTRY)    No. NG800 of 1994           

GENERAL DIVISION                  )

                ON APPEAL FROM A JUDGE OF THE

                 FEDERAL COURT OF AUSTRALIA

              BETWEEN:           ELITEGOLD PTY LIMITED

                                  Appellant

              AND:               CM HOLDINGS PTY LTD,

                                  AUSTRALIA FAIR SHOPPING

                                  CENTRES PTY LIMITED and

                                  CM DEVELOPMENTS (QLD)

                                  PTY LTD

                                  Respondents

CORAM:    JENKINSON, TAMBERLIN and SACKVILLE JJ.

PLACE:    SYDNEY

DATED:    28 June 1995      

                   MINUTE OF ORDERS

THE COURT ORDERS THAT:

1.   The appeal be dismissed.

2.   The appellant pay the costs of the respondents.

NOTE:     Settlement and entry of orders is dealt with in accordance with Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA    )

NEW SOUTH WALES DISTRICT REGISTRY    )    No. NG 800 of 1994

GENERAL DIVISION                     )

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

                    BETWEEN:      ELITEGOLD PTY LIMITED

                                      Appellant

                        AND:      CM HOLDINGS PTY LTD, AUSTRALIA FAIR SHOPPING CENTRES PTY LIMITED and CM DEVELOPMENTS (QLD) PTY LTD

                                      Respondents

CORAM:      Jenkinson, Tamberlin and Sackville JJ.

PLACE:      Sydney

DATE:       28 June 1995

                    REASONS FOR JUDGMENT      

JENKINSON J.

          The questions raised for determination in this appeal and the circumstances by reference to which those questions are to be considered are set out in the reasons of the other members of the court for their conclusion that the appeal should be dismissed with costs.  I agree in those reasons and with that conclusion.

          It often happens that representations by way of prophecy as to the future profits or takings of a business, calculated to induce the representee to commence or to take over the business, are made by a person who is conducting the business or who has conducted another business, or other
businesses, similar to that about which the representation is made.  If the inference is raised that reliance was placed on such a representation when it was made, a finding that reliance was altogether relinquished by the representee by the time a contract was formed by the representee will often be not easily gained merely by showing that other enquiries about the likely profits or takings were undertaken by the representee.  In this case the representation in question was not of the representor's belief or opinion about future takings, but of the existence of a "market survey", and of a part of the content of that document.  If the inference is raised that reliance was initially placed by Mr. Nizic on the prophecy which the document was said to have expressed, a finding that his reliance was altogether relinquished by the time he formed the contract may be not so hard to reach. The identities and the skills and the experience of those whose work would be required to produce the "market survey" and the prophecy it was said to contain were not known by Mr. Nizic, nor inquired about him.  Some of the factual information by reference to which the document would be thought to have been prepared, and the prophecy made, he sought out for himself.  The language used in judgments on cases of the class I first mentioned must be carefully scrutinised, in the light of the circumstances which evoked it, before it is applied without qualification to this case, in my opinion.

          The appeal should be dismissed with costs.

                             I certify that this and the 2    proceeding pages are a true copy of the Reasons for Judgment of the Honourable Justice Jenkinson.

                                         Associate

                             Dated: 28 June 1995

IN THE FEDERAL COURT OF AUSTRALIA)

NEW SOUTH WALES DISTRICT REGISTRY)    No. NG 800 of 1994

GENERAL DIVISION                  )

                ON APPEAL FROM A JUDGE OF THE

                 FEDERAL COURT OF AUSTRALIA

              BETWEEN:           ELITEGOLD PTY LIMITED

                                  Appellant

              AND:               CM HOLDINGS PTY LTD,

                                  AUSTRALIA FAIR SHOPPING

                                  CENTRES PTY LIMITED and

                                  CM DEVELOPMENTS (QLD)

                                  PTY LTD

                                  Respondents

CORAM:        JENKINSON, TAMBERLIN and SACKVILLE JJ.

PLACE:        SYDNEY

DATED:        28 JUNE 1995

                    REASONS FOR JUDGMENT

TAMBERLIN, SACKVILLE JJ:

This appeal is from a judgment of Hill J in an application under s 82 of the Trade Practices Act 1974 (Cth) seeking damages for misleading conduct in relation to an agreement for lease of a fruit shop at Southport.

The trial judge found that misrepresentation had been made but that the applicant had not relied on the misrepresentation.  He dismissed the application.

Factual Background

Elitegold Pty Limited ("Elite"), the appellant, is a company, the directors and shareholders of which were at all material times, Mr and Mrs Nizic and Mr George.  On 2 May 1990 Elite executed an agreement for lease of an area of 540 square metres of a large shopping centre complex now known as Australia Fair.  This area, referred to as Food Hall 1, or FH1, was to be used as a fruit shop.  The lessor was Burns Philp Trustee Co Ltd, now BPTC Ltd, which was formerly the first respondent in the proceedings below (the proceedings having been discontinued against it).  The rent under the lease was guaranteed by Mr and Mrs Nizic and Mr George.

Mr Nizic is a businessman of extensive experience.  He started a company in 1987 which he and a partner later sold to Mayne Nickless in 1983 for several million dollars.  He then carried on an international courier business which he again sold to Mayne Nickless and kept part of its US operations himself. During the period 1989-1990 he resided in the United States and visited Australia from time to time.  He also used another company, Eagle Resources Pty Limited ("Eagle"), to purchase and develop real estate and to engage in other business activities.

The first respondent to the appeal, CM Holdings Pty Ltd, ("Holdings"), holds all the issued shares in Australia Fair Shopping Centres Pty Limited ("AFSC"), the second respondent, and CM Developments (Qld) Pty Ltd ("Developments"), the third respondent.  One or more of the respondents was involved in the establishment of Australia Fair.

Elite claims that it entered into the agreement for lease in reliance on  misrepresentations by a Mr Farrell and a Mr Duncalfe, who were employees of Holdings. The allegation is that the misrepresentations were made on behalf of the respondents.  The respondents conceded that Holdings was a proper respondent to the application but deny any involvement of AFSC or Developments.

Findings on Representations

His Honour made the following significant findings in relation to representations alleged to have been made by or on behalf of the respondents:

1.   Mr Farrell advised Mr Nizic that a competitor fruit market in the Sundale Shopping Centre ("Sundale") at Southport was to close.  However, this was not a misrepresentation because there were reasonable grounds for Mr Farrell to believe that Sundale would close.

2.   Mr Farrell represented that the likely turnover after the closure of Sundale would be about $60,000 per week, but there was no representation as to the profitability of the fruit shop at Australia Fair.

3.   Mr Farrell represented that the rent would be tied to the likely turnover after the closure of Sundale. Mr Farrell referred to rent as being around 6% of turnover.

4.   Mr Farrell on 19 January 1990 said words to the effect that there had been a market survey undertaken and that, based on the closure of Sundale, the survey indicated a turnover of $60,000 per week for the fruit shop.  This representation was false, since there was no document which could be described as a market survey indicating that the shop was likely to have a turnover of $60,000 per week.

Relevant Credit Findings

His Honour said that the crucial issue in the case, having regard to the representations he found were made by Mr Farrell, was whether Elite, through Mr Nizic, had entered into the agreement for lease in reliance upon the representations.  In considering the arguments raised on the reliance question, it is necessary to have regard to his Honour's findings on credit.  These are set out below:

Mr Nizic

1.   Mr Nizic was a confident witness with generally good recall when compared with Mr George.

2.   Mr Nizic had embarked on a conscious policy of paying employees a cash supplement from which income tax had not been deducted and that this was "hardly commendable". His Honour considered that he should scrutinise the evidence of Mr Nizic carefully before accepting it. However, he considered that the cash payment incidents did not of themselves mean that Mr Nizic was not telling the truth in critical respects. He commented that he found it hard to accept the evidence of Mr Nizic to the effect that he was unaware whether group tax was being paid on the cash payments.

3.   Further doubt was expressed by his Honour in relation to Mr Nizic's denial of an ongoing problem with Mr George, a director and manager of the fruit shop, but he considered this did not, on its own, impugn Mr Nizic's credit.

4.   The evidence of Mr Nizic was to be preferred to that of Mr Farrell where their evidence was in conflict. This finding was, to a large extent, because contemporaneous diary notes prepared by Mr Nizic's accountant, Mr Holmes, supported Mr Nizic's version of events and because Mr Holmes' evidence corroborated that of Mr Nizic.

5.   Mr Nizic had rationalised his reasons for entering into the lease after the venture had failed and he had minimised unconsciously his own role in the decision- making process, although he was not deliberately untruthful. It was significant to his Honour's finding that, as late as mid-1991, one year after entry into the lease, Mr Nizic attributed the real cause of his loss to the failure of Sundale to close and not to the impossibility of achieving the $60,000 weekly turnover in accordance with the survey referred to by Mr Farrell.

6.   His Honour preferred the evidence of Mr George, contrary to that of Mr Nizic, in relation to whether Mr George told Mr Nizic that Sundale was to close prior to the initial meeting with Mr Farrell on 19 January 1990. However, he did not think that Mr Nizic's denial of Mr George's evidence, of itself, would destroy the credit of Mr Nizic.

The above findings make it apparent that the trial judge by no means accepted the credit of Mr Nizic without reservation.

Mr Farrell

His Honour made the following findings about Mr Farrell:

1.   Mr Farrell's evidence was not convincing concerning the existence of a survey supporting a $60,000 turnover for the fruit shop.

2.   Mr Nizic was to be preferred to Mr Farrell, as to the misrepresentation relating to turnover largely because Mr
Nizic's version of events was corroborated by other witnesses.

3.   The evidence of Mr Farrell was to be preferred to that of Mr Anderson, who was an adviser to the CM Group, in relation to "target" rents for retail outlets in Australia Fair during 1989 and 1990.

Mr Peter George

Hill J made the following findings concerning Mr George:

1.   Mr George was a director of Elite at all relevant times and was a guarantor of the rent.

2.   Mr George had been in the fruit shop business both retail and wholesale for most of his life and he had run at least eight retail shops. When he met Mr Nizic he was out of work. He was enthusiastic at the possibility of managing the fruit shop.

3.   Whilst his Honour found that Mr George had difficulties placing events within a time sequence, he accepted Mr George in preference to Mr Nizic on the question of whether Mr George had told Mr Nizic before 19 January 1990 that Sundale was to close.

4.   Most importantly, his Honour accepted the evidence of Mr George that Mr Nizic had done his own research and knew more than Mr George about the financial side of the business.

5.   Hill J found that there had been an ongoing problem between Mr Nizic and Mr George concerning stock purchases and wholesale sales, contrary to the denial of Mr Nizic.

6.   Mr George was confident in his own mind that he could "make a go" of the shop and that confidence was based on his own experiences, his own inquiries and his desire to return to the fruit retailing business.

Finding on Reliance

Having found that there was misrepresentation in relation to the existence of a survey which supported the prediction of a $60,000 weekly turnover, his Honour said:

     "Ultimately I am not satisfied on the balance of probabilities that Mr Nizic either (sic) was induced to enter the lease of FHI at Australia Fair by the representation that a survey existed indicating a turnover of $60,000 per week.  Rather, I think he was induced so to do by virtue of the inquiries he made of other fruiterers and the advice and guidance he received from Mr George and the latter's enthusiasm for the project.

     I reach this conclusion on a number of bases. First, I regard Mr Nizic as an astute and competent business man who would ensure he researched a project himself before committing to it.  Second, so far as the evidence discloses, Mr Nizic made no attempt to sight the survey, which, if significant to him, could reasonably have been expected to have been looked at by Mr Holmes and used as a basis for negotiations with his bankers. Third, his own inquiries suggested that a turnover of $60,000 per
week would be possible, particularly if Sundale closed.  The fact that it did not no doubt contributed to the failure of the Australia Fair venture. Fourth, I accept that Mr George probably did express the view that a turnover of $45,000 would be one with which he would be happy, meaning, no doubt, that the business would be profitable at this level and that $60,000 would represent a "bonus".  Finally, there is the influence and enthusiasm of Mr George which contributed to Mr Nizic's decision.  Nevertheless, I think that Mr George's observation to the effect that Mr Nizic had done his own research and knew more than Mr George did about the business (ie the financial side of the business) is a most astute observation.

     I would make it clear that in reaching this conclusion I do not find that Mr Nizic was deliberately untruthful in the witness box. I think it is more likely than not that he has rationalised the reasons for entering into the lease after the venture failed minimising unconsciously the significance of his own part in the decision-making process. It is not insignificant that, as I have already noted, as late as the middle of 1991 Mr Nizic attributed the real cause of loss to be the failure of Sundale to close, not the impossibility of achieving $60,000  per week in accordance with some survey he had never seen." (Emphasis added).

This appeal turns on the finding that there was no reliance by Mr Nizic on the representation made by Mr Farrell. The challenge is to his Honour's finding of fact on this issue.

Question of Fact

It is well settled that in resolving a conflict of evidence the subtle influence of demeanour can play an important part. This is important where reliance on misrepresentations is an issue, because the trial judge is assessing the likely influences which actuate a course of conduct in the light of a specific fact situation: Abalos v Australian Postal Commission (1990) 171 CLR 167 at 178-179 per McHugh J.

A finding of fact by a trial judge based on the credibility of a witness is not to be set aside even where an appellate court thinks that the probabilities of the case are strongly against that finding of fact.  If the trial judge's finding depends to any substantial degree on the credibility of the witness, the finding must stand, unless it can be shown that the trial judge "has failed to use or has palpably misused his advantage", or has acted on evidence which was "inconsistent with facts incontrovertibly established by the evidence" or on evidence which was "glaringly improbable". When a finding is even partly based on the trial judge's assessment of the trustworthiness of witnesses who have given oral testimony, allowance must be made for the advantage which the trial judge has enjoyed in seeing and hearing the witnesses give their evidence. See Devries v Australian National Railways Commission (1993) 177 CLR 472 at 479.

In the present appeal, Mr Motbey, who appears for the appellant, no doubt in an endeavour to avoid the impact of these principles, submits that the trial judge erred in the inferences he drew from primary facts found by him.  Mr Motbey further contends that the advantages enjoyed by the trial judge were not such as to constrain this Court in drawing different inferences from the primary facts.  Indeed, Mr Motbey suggests that this is not a case in which "the subtle influence of demeanour" determined or even played a part in determining the issue of reliance.

These submissions encounter the difficulty that his Honour refers on a number of occasions to matters involving evaluation and appraisal of the behaviour and assertions of witnesses.  These references indicate clearly that matters of impression and demeanour played a significant role in his Honour's conclusion on the issue of reliance.  On that issue the trial judge was making a judgment whether he would accept Mr Nizic's evidence that he did rely on the representation.  Some of the references made by his Honour are as follows:

1.   His Honour expressly stated that, in reaching his conclusion as to lack of reliance, he considered that Mr Nizic had rationalised his reasons for entering into the lease, as opposed to having been deliberately untruthful. This conclusion necessarily required an assessment of Mr Nizic's reliability as a witness, particularly in relation to his reasons for entering the agreement for lease.

2.   The conclusion that the influence and enthusiasm of Mr George contributed to the investment by Mr Nizic was an important factor. Again, this required a substantial degree of careful assessment and judgment based at least partly on the relative impressions created by Mr Nizic and Mr George.

3.   The assessment of Mr Nizic as an astute businessman was not merely a matter of considering documentary material and background history, but was very much dependent upon the impression created by Mr Nizic in the witness box.

4.   The assessment of Mr George as appearing to have great difficulties in placing events within a time-frame and the appearance of difficulty presented by Mr George with the English language.

It seems to us that questions of demeanour, impression and credibility assumed a significant role in his Honour's conclusions on the question of reliance.  Accordingly, the decision of the trial judge was not made in circumstances analogous to those in Warren v Coombes (1979) 142 CLR 531 at 552-553; or The Saints Gallery Pty Ltd v Plummer (1988) 80 ALR 525.  This Court on appeal should give weight to the obvious advantage enjoyed by the trial judge, recognised by the High Court, in assessing the evidence given at the initial hearing.  This is not a case where the appellate court is in the same position as the trial judge in drawing inferences from uncontested or independently established primary facts. The primary facts themselves were in dispute before the trial judge.

Procedural Unfairness

This submission is primarily directed to the second and fourth bases on which his Honour reached his conclusion on reliance. These bases were, respectively:

     (i)  that the evidence disclosed no attempt by Mr Nizic to sight the survey which, if significant to him, he might have been expected to obtain and show to his advisers and to use in negotiation with his bankers; and

     (ii)the acceptance by his Honour that Mr George probably did express the view that he would be "happy" with a turnover of $45,000 and that $60,000 would represent a "bonus".

This submission as to unfairness was founded on the principle in Browne v Dunn (1894) 6 R 67, as explained and applied in Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1 by Hunt J.  In essence the submission is that the two matters were said to be important, but were not put to Mr Nizic and that this constituted procedural unfairness.

In Allied Pastoral, Hunt J, after a close examination of the rule in Browne v Dunn said (at 16, 26):

     "It has in my experience always been a rule of professional practice that, unless notice has already clearly been given of the cross-examiner's intention to rely upon such matters, it is necessary to put to an opponent's witness in cross-examination the nature of the case upon which it is proposed to rely in contradiction of his evidence, particularly where that case relies upon inferences to be drawn from other evidence in the proceedings.  Such a rule of practice is necessary both to give the witness the opportunity to deal with that other evidence, or the inferences to be drawn from it, and to allow the other party the opportunity to call evidence either to corroborate that explanation or to contradict the inference sought to be drawn.  That rule of practice follows from what I have always believed to be rules of conduct which are essential to fair play at the trial and which are generally regarded as being established by the decision of the House of Lords in Browne v Dunn (1894) 6 R 67."

     ........

     "I remain of the opinion that, unless notice has already clearly been given of the cross-examiner's intention to rely upon such matters, it is necessary to put to an opponent's witness in cross-examination the nature of the case upon which it is proposed to rely in contradiction of his evidence, particularly where that case relies upon inferences to be drawn from other evidence in the proceedings." (Emphasis added).

His Honour went on to observe that it would usually be unfair to reject evidence upon which there has been no relevant cross-examination, where the rule in Browne v Dunn has not been complied with and where the witness has not otherwise been given the opportunity to deal with the suggestion raised for the first time in final address.  The principle has been consistently followed in a number of subsequent cases.  In Hoskins v Repatriation Commission (1991) 32 FCR 443, Pincus J characterised the rule as a particular application of the principle of natural justice.  See also Dolan v Australian and
Overseas Telecommunications Corporation (1993) 42 FCR 206 per Spender J; R v Birks (1990) 19 NSWLR 677; A Royale and Co (Aust) Pty Ltd v Harold Scruby Consultants Pty Ltd (unreported, NSW Court of Appeal, 12 April 1988) at pp 7, 8, 10 and 13.  The rule in Browne v Dunn is to be regarded as founded on the more general duty to ensure procedural fairness: Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336, at 345, per Kirby P.  As Kirby P said in Ghazal (at 345) the rule is not intended to provide an "artificially inflexible rule to be added to the obstacle course of litigation".

The Survey

No evidence was led at first instance from either Mr Nizic or Mr George, who was called in Mr Nizic's case, to the effect that they had attempted to obtain a copy of the survey in order to examine it, or to consider the basis on which it had been prepared.

Because the $60,000 figure was said to be, in effect, verified by the results of the survey, the appellant contends that the representation relating to the survey played a significant role in Mr Nizic's decision to enter the transaction.  In these circumstances one might have expected some evidence about attempts to obtain the survey to have been adduced or elicited by the appellant.  However, the appellant's submission is that, applying the principle in Browne v Dunn as explained by Hunt J in Allied Pastoral, counsel for the respondents was obliged specifically to suggest to Mr Nizic in cross-examination that he had made no attempt to obtain a copy of the survey and that his failure to do so led to procedural unfairness.

There was tendered in evidence a finance application made to the State Bank of New South Wales, dated 2 March 1990, on behalf of Eagle, which as has been seen, is a corporation related to the applicant.  In the application, Eagle sought finance of $450,000 to open and operate a fruit and vegetable shop at Australia Fair, Southport.  The application included a letter from Mr Holmes to Mr Nizic, dated 14 February 1990, which contained a cashflow projection prepared by Mr Holmes, together with an outline of relevant factors relating to the proposal.

That letter stated that the directors of Eagle were Mr and Mrs Nizic and that the funding of $450,000 was to be spent on a shop fit-out, general operating expenses and stock purchases. An attached projected profit and loss statement prepared by Holmes and Partners, showed a projected net profit of $336,500 after allowing for interest of $300,000.  The fruit and vegetable shop was predicted to have a turnover of approximately $2.86 million (which equates to about $55,000 per week).   A projected cashflow statement for the first twelve months of trading operation showed the gross takings of $2.86 million, less cost of goods sold of $1,887,600, leaving a gross profit of $972,400 and projected a net profit of $336,500.

The letter to the Bank does not mention or refer to any survey, nor any assurance given by Mr Farrell as to a $60,000 per week turnover.

Mr Nizic was cross-examined on the loan application to establish that he did not rely on what Mr Farrell had told him. It was pointed out to Mr Nizic that there was no reference in the finance application material to any assurance. The relevant part of that cross-examination reads:

     "Q:  Mr Nizic, if that which Mr Farrell has said to you was of such weight and importance as you would have the court believe, it would have been the natural thing to put in this document would not it?

     A:   I don't think so, no, I didn't think that.

     Q:   You tell the court that a survey and an estimate given by the developer would not be a matter of significance to the proposed financier of the operation?

     A:   I didn't say that. I didn't deem it - I didn't even consider it.  The reason that I applied for this was to get some funds on the advice of Capdeb and they said to me to get that. So I did what they told me to do and gave it back to them and got a loan. So obviously it wasn't required.

     Q:   Mr Nizic,  a man of your business experience knows that to persuade a financier to make an advance of finance it is always best to put your best points to the financier, that is correct is it not?

     A:   Yes, they are my security.

     Q:   And what you try and do is when you prepare a submission to a financier is put the fact as in the document that will persuade them to make the advance do not you?

     A:   Yes.

     Q:   And I suggest to you that if you regarded that which Mr Farrell said and of having great weight in the persuasion it would have gone into this document for submission to the financier?

     A    I didn't see it that way at all.

     Q:   Well, I suggest to you either two things: either Mr Farrell didn't say it or alternatively, it was of no moment to you at all..."

In the written submissions of the present respondents to the trial judge (at 28), the proposition was developed as follows:

                                  "If Nizic did rely upon Farrell, it would

have been easy for him to say so. It would obviously have been of interest to the financier to be informed that the developer had done a survey or a reliable estimate of weekly gross receipts and concluded that $60,000 was reasonable. The fact that Holmes does not mention this indicates either it was not said or it was not considered by Nizic or George to have been of any importance."

In the course of oral submission by counsel for the applicant his Honour raised Mr Nizic's failure to obtain the survey. That exchange went as follows:

     "His Honour:

          I must say that - and I cannot say more than just make this comment, that Mr Nizic strikes me as a very astute business man and I find it slightly surprising that if a representation was made about turnover he did not want to look at it I mean in terms of a feasibility study because I would have thought Mr Nizic would be quick to want to read whatever there was.

     Mr Motbey:

          Yes, although they were on very friendly terms, remember. Mr Farrell accepted they were on friendly terms.

     His Honour:

          Well, they were not going and visiting each other for breakfast.

     Mr Motbey:

          No, but the relationship was convivial. In time he voluntarily assisted with the engineering report.

     His Honour:

          I understand that, sure, but it is just unusual. You cannot take it too far because obviously it is of little matter but it surprises me if that is the way it happened.

     Mr Motbey:

          Yes, your Honour, but you see, what you have got to bear in mind is that the way the CM Group were playing the field then was that they were not only going to be the developers, they were going to be the managers and it was going to be a nice ongoing sort of relationship over the long term. There was nothing - it came as a surprise you will remember Mr Anderson saying, it came as  a big surprise...."

From this exchange it is apparent that the trial judge expressed his view that it was unusual that there was no evidence that Mr Nizic had wanted to look at the survey,
especially having regard to his Honour's impression that Mr Nizic was a very astute businessman.  His Honour, therefore, raised with counsel his concern on the issue.  An opportunity was given to counsel to comment on that concern and he did. The response was essentially to the effect that: yes, that is correct, but this was not so unusual because they were at that time on friendly terms and enjoyed a convivial relationship. After that explanation had been proffered his Honour remarked that he still considered that it was somewhat unusual.

Despite the concern expressed by his Honour, it is important to note that there was no attempt made to recall Mr Nizic to rebut the impression that Mr Nizic had made no attempt to sight the survey, if indeed that impression was false.

The obligation imposed by the principle in Browne v Dunn is to put to the witness the nature of the case sought to be made.  The issue of reliance was clearly central and in dispute. It was quite clear from the cross-examination that the respondents were raising the failure on the part of Mr Nizic to mention the survey in the loan application, to support the inference that he attached no importance to the survey having been mentioned. The applicant called no evidence that he had seen the survey or asked to see it. In our view, the point was sufficiently telegraphed to enable the appellant to lead evidence on this point from Mr Nizic if, in truth, he had made efforts to obtain the survey.  Consequently, we can see no procedural unfairness in the circumstances of this case in relation to Mr Nizic's failure to obtain the survey.  It was open to his Honour to draw an inference that, in circumstances where one would expect a copy of the survey to be requested, no attempt had been made to do so.

In our opinion there is no substance in the contention that the appellant was denied procedural fairness by the trial judge's reliance on the absence of evidence that Mr Nizic had attempted to obtain a copy of the survey.

Mr George's Mention of $45,000 Turnover

The second matter relates to the alleged failure by the respondents to cross-examine Mr Nizic in respect of the evidence given by Mr George, as to his being "happy" with the $45,000 turnover figure.  In particular, complaint was made that the respondents had not specifically put to Mr Nizic the proposition that Mr George had made that statement.

The evidence in question concerns a conversation which was said to  have taken place prior to 30 January 1990, between Mr Farrell and Mr George. The transcript reads as follows:

     Q:   I suggest to you that what Mr Farrell said to you was: "If you are interested on the basis of six per cent of $60,000 a week turnover, we will prepare a letter of offer which we will send out to you as we have done with the others."  Is that consistent with your recollection?

     A:   Firstly, there is nothing - he never discussed anything about six per cent, I never heard of that before. I know he said we should be taking his estimate on his feasibility that we should take $60,000. Now, me, I took it as a grain of salt because I know the fruit game, but I still was not going to let Mr Nizic get away because he was the financier. I let him absorb all that, not me. I had to go in there and prove my - I'm the person that's got to prove the business. I'm the one has to find those figures.

     Q:   Did you say to Mr Nizic, "I believe I can do those figures easily"?

     A:   No, I didn't say that to Mr Nizic at all.

     Q:   Did you say to Mr Nizic,"I believe I can do those figures"?

     A:   No, I said, this is the words I said: "If I can get it up to 45,000 I'll be more than happy".  But then he said: "Mr Farrell said you'd take 60."  I said, "Well, if we take 60 it's a bonus."  He was bandying on the 60,000, he was bandying around how many people would walk through a day; so many thousand cars a week, and it would improve over the next six months, and ---".  (Emphasis added.)

Plainly this evidence was important, since, if correct, it suggested that Mr Nizic was on notice from Mr George, who was a very experienced fruit shop operator, that the business could be profitable on a turnover substantially less than $60,000 per annum.  In other words, the figure of $60,000 was a "bonus" and not critical to profitability.  It is for this reason that his Honour attached significance to Mr George's evidence.

In our view, the absence of cross-examination of Mr Nizic on the evidence given by Mr George did not give rise to any relevant procedural unfairness.  At the trial Mr Nizic was called immediately after Mr George in the appellant's case.  Therefore, at the time Mr Nizic entered the witness box Mr George had given his evidence.  On the face of it, Mr George's account of what he told Mr Nizic was a matter, potentially at least, of some significance to the appellant's case.  Clearly it was open to the appellant to adduce evidence from Mr Nizic as to whether he disputed Mr George's evidence on this issue.  For whatever reason this course was not taken.  But the appellant had the opportunity to address the issue which, after all, had been raised in open court by one of its own witnesses.

In these circumstances, having omitted to avail itself of this opportunity, in our view it is not now open to the appellant to complain that the matter was not explored in cross-examination.  Indeed, it would be an odd result if Mr Nizic, having failed to correct, deny or comment on an important piece of evidence adduced before he entered the witness box could succeed on appeal because the cross-examiner did not explore the issue with Mr Nizic.

The present case is quite different from the circumstances confronting Hunt J in Allied Pastoral. In that case, counsel sought to raise a "new theory", based on inferences from the evidence as a whole, as a ground for disbelieving the taxpayer's account of events.  No opportunity was ever given to the taxpayer to deal with this theory.  Nor did counsel for the Commissioner put to any of the taxpayer's witnesses the "theory" on which his client relied in final addresses.  Indeed counsel gave no prior notice of the case sought to be made against the taxpayer.  In the present case, not only was reliance in issue, but the very evidence on which his Honour ultimately placed some weight was given by the appellant's witness before Mr Nizic himself gave evidence.

The "Propelling" Effect of the Representation

Mr Motbey makes a further submission.  He contends that, as a matter of law, the appellant can establish reliance by showing that Mr Nizic had become actively interested in leasing the fruit shop by reason of the misrepresentation made by Mr Farrell.  According to Mr Motbey, the representation had the effect of "propelling" Mr Nizic down the path of further inquiry.  Since the further inquiries did not falsify the representation, but rather confirmed its truth, it could not be said that the effect of the initial representation was exhausted or entirely overtaken by the subsequent inquiries.

It is suggested that, as a matter of principle, investigations by a representee which confirm or tend to confirm the representation cannot displace the operative effect of the initial representation so as to establish lack of reliance.  In our view, this categorical statement of principle is not correct.  Whether an applicant establishes reliance on a representation in a particular case must depend upon the circumstances.  These will include the nature and extent of the investigations, if any, undertaken by the representee and the significance of those investigations for the decision ultimately made.

For example, an estate agent may attribute a value to a particular property, falsely representing that his belief is based on a valuation by an independent valuer.  The representee decides to make independent inquiries.  To this end, the representee obtains valuations from several reputable valuers in which he or she has great confidence.  The valuations support the value attributed to the property by the agent.

In these circumstances it cannot be categorically said that a misrepresentation acts as an inducement to the representee simply because the misrepresentation caused the representee to verify the situation for himself or herself. In such circumstances, the conclusion may be open that the representee has acted on his or her own independent investigations to the exclusion of the representation have any operative effect on the ultimate decision.  True it is that the enquiries and independent investigations may not have been made but for the misrepresentation.  However, that does not necessarily mean that the misrepresentation was an inducing cause, at the time the transaction was entered into, within the well known principles enunciated by Wilson J in Gould v Vaggelas (1985) 157 CLR 215 at 236.  At the time the decision was made, the representee may have discounted completely the opinion expressed by the agent and placed no reliance whatsoever on the false claim that the opinion was supported by an independent valuation.

The position is, in principle, no different where purchasers make their own enquiries and satisfy themselves of a state of affairs, relying completely on their own business experience and judgment. Essentially, this is the conclusion of fact reached by his Honour in the present case.

In support of his submission, Mr Motbey referred to a decision by the Supreme Court of Nebraska in Pasko v Trela (1951) 46 NW (2d) 139.  There the appellate court, in a fraud case, accepted the proposition that the mere fact that a representee makes an independent investigation or examination of a proposal, does not necessarily show that the representee relies exclusively on his or her own judgment, rather than on the representations of the other party. Nor does the independent investigation give rise to a presumption of law to that effect.  The court observed that where the representee does not ascertain the truth from the examination or investigation, but in fact relies on the representation, he or she is entitled to relief, assuming all other ingredients of liability are present.  The court also said (at 144) that it is well settled that, where a representee makes only a partial investigation or relies on part of the representations and is deceived by such representation to his injury, he or she may maintain an action for such deceit or obtain appropriate equitable relief.  The case does not support the broad proposition advanced by Mr Motbey. 

We should add that Mr Motbey's submission assumes that Hill J found that Mr Nizic had become interested in leasing the first shop by reason of Mr Farrell's misrepresentation.  It also assumes that Mr Nizic's subsequent inquiries confirmed the truth of Mr Farrell's representation that the turnover would be $60,000.  Neither of these findings was made by his Honour.  In view of the conclusion we have reached on the matter of legal principle, it is not necessary to consider whether such findings could or should have been made on the evidence before Hill J.

Alleged Misapplication of Law

Mr Motbey submits that notwithstanding that his Honour correctly referred to the relevant legal principles as enunciated in Gould v Vaggelas (supra) at 236; Ricochet Pty Limited v Equity Trustees Executors and Agency Company Limited (1993) 41 FCR 229 and March v E & M H Stramare Pty Limited (1991) 171 CLR 506 at 518; he failed to apply those principles.

In our view, there is no indication in the judgment that his Honour did not apply the correct legal principles to which he succinctly referred in discussing the question of reliance.  In particular, there is no indication that his Honour misunderstood or misapplied the principle that an inducement does not have to be the sole inducement, but may be one among a number of inducing factors.  Furthermore, there is nothing to suggest that his Honour failed to follow any of the other principles set out in the decisions to which he referred.

Other Matters

The applicant also submitted that it was not put to Mr Nizic that he did not believe Mr Farrell or did not attach weight to anything Mr Farrell might have said in relation to the survey.

There is no substance in this contention because it was clearly in contest whether Mr Nizic believed Mr Farrell and relied on the representations made by him or attached weight to what Mr Farrell said.

Other matters raised by Mr Motbey related to the research carried out by Mr Nizic; the closure of Sundale; the influence of Mr George and the diary note of 22 January 1990. These submissions in substance allege either: (i) that his Honour did not advert to these questions or (ii) that there was insufficient evidence or (iii) that his Honour did not attach
enough weight to the evidence on these matters in reaching his ultimate conclusion.

In our view, it is apparent from his Honour's reasons for judgment and the transcript that he did consider these matters and that there was sufficient evidence to enable him to reach his ultimate conclusion that there was no reliance.

Conclusion

We can see no basis for suggesting that the decision reached by his Honour in relation to the question of reliance was not one which was fairly and reasonably open to him based on the evidence.   No error has been shown in his Honour's reasons.  This appeal should therefore be dismissed with costs.

I certify that this and

the preceding twenty-eight (28)

pages are a true copy of the

Reasons for Judgment herein of

his Honour Justice Tamberlin and

his Honour Justice Sackville.

Associate:

Date:                                     28 June 1995                                                           

Counsel for Appellant:                    Mr S J Motbey

                                          Mr M W Young

Solicitors for Appellant:                 Vaughan Barnes

Counsel for First & Second Respondent:    Mr J S Wheelhouse                                                      

Solicitors for Respondents:               Mallesons Stephen Jaques

Date of Hearing:                          16 May 1995                  

Date Judgment Delivered:                        28 June 1995