CATCHWORDS
Trade practices - Misleading or deceptive conduct - Representation as to the takings of existing food outlets - Representation as to projected sales for a proposed franchised food outlet - Whether representations were only as to the belief or understanding of the representor or as to facts in respect of which the belief or understanding was held - Whether representation of a current belief as to projected sales on stated grounds was a representation with respect to a future matter - Whether passing on of misleading information stated to or understood by the representee to have been provided by another constituted misleading or deceptive conduct - Whether the representor accepted, adopted and passed on the information of another without any express or implied disclaimer in relation to it - Whether parties should be heard when the misleading or deceptive conduct found to have occurred was not pleaded.
Trade Practices Act 1974 (Cth) ss.51A, 52, 75B
Fair Trading Act 1985 (Vic) ss.10A, 11
Haynes v. Top Slice Deli Pty. Ltd. (1995) ATPR (Digest) 46-147
Ting v. Blanch (1993) 118 ALR 543
Jacques & Ors. v. Cut Price Deli Pty. Ltd. & Ors. (1993) ATPR (Digest) 46-102
Yorke v. Lucas (1985) 158 CLR 661
John Glass Real Estate Pty. Ltd. v. Karawi (1993) ATPR (Digest) 41-249
The Saints Gallery Pty. Ltd. v. Plummer (1988) 80 ALR 525
Banque Commerciale S.A. En Liquidation v. Akhil Holdings Ltd. (1990) 169 CLR 279
NO. VG 433/92 MIBA PTY. LTD. & ORS. V. NESCOR INDUSTRIES GROUP PTY. LTD. & ANOR.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIAN DISTRICT REGISTRY
GENERAL DIVISION No. VG 433/92
BETWEEN:
MIBA PTY. LTD. A.C.N. 007 440 146, MICHAEL VITTOURIS
and BRONWYN MARIE VITTOURIS
Applicants
and
NESCOR INDUSTRIES GROUP PTY. LTD. A.C.N. 007 145 057 and
ROBERT KENNETH NELSON
Respondents
Coram: Merkel J
Place: Melbourne
Date: 17 September 1996
REASONS FOR JUDGMENT
Introduction
The applicant company ("Miba") conducted the business of a Muffin Break food outlet as a franchisee in the food court of the Northland Shopping Centre in Victoria from 2 August 1990 to 12 July 1992. The second and third applicants (Vittouris') are the directors and controllers of Miba.
The respondent company ("Nescor") has established 74 franchised or owner controlled Muffin Break outlets in Australia since 1989. The second respondent ("Nelson") is a director and controller of Nescor.
Miba's outlet was the fourth Muffin Break outlet established in Australia. The first outlet opened in Coolangatta in April 1989, the second opened at the Chadstone Shopping Centre in Victoria in April 1990 and the third opened in Knox City Shopping Centre in July 1990.
Miba's outlet did not live up to the expectations of the applicants or of the respondents and incurred a substantial loss. The applicants seek to recover that loss on the ground that it was incurred by reason of conduct of the respondents in trade and commerce which was misleading or deceptive or was likely to mislead or deceive ("misleading conduct") in contravention of s.52(1) of the Trade Practices Act 1974 (Cth) ("the TPA") and Section 11(1) of the Fair Trading Act 1985 (Vic) ("the FTA"). The misleading conduct was said to be constituted by certain representations made by the respondents which the applicants allege induced them to acquire the franchise. Claims were also made for breach of warranty and negligence in respect of the same conduct.
In order to avoid a costly and time consuming hearing on the issue of damages the parties reached agreement on the damages to be awarded if the applicants established their claims "as alleged". The agreement was that there be judgment for the applicants in the sum of $225,000 together with statutory interest calculated in accordance with the Supreme Court Act 1986 (Vic) as from 1 February 1996.
The alleged representations
The applicants allege that in order to induce them to enter into a franchise agreement, a licence agreement and personal guarantees ("the Muffin Break franchise") the respondents represented to the applicants:
6(e) (i) that a well managed operation in Northland Shopping Centre Food Court would achieve sales of between $8,000.00 and $12,000.00 per week; and
(ii) that the Respondents believed on reasonable and proper grounds that a well managed operation in Northland Shopping Centre Food Court could achieve sales of between $8,000.00 and $12,000.00 per week after adjusting for competition and demographics.
(f) that the Respondents believed on reasonable and proper grounds that the average Food Court operator in the Northland Shopping Centre then achieved sales in the order of $10,000.00 per week.
(g) that the Applicants would in the first year of operation of a Muffin Break franchise store at Northland Shopping Centre.
(i) achieve sales of at least $8,000.00 per week;
(ii) earn an income of at least $30,000.00 per annum;
(iii)achieve sales sufficient to provide adequate monies to pay the costs of operation;
(iv) achieve sales sufficient to service a bank loan of approximately $130,000.00.
The applicants also alleged that, induced by and relying on the truth of the representations, they entered into the Muffin Break franchise. The applicants pleaded that the representations were false and untrue in that:
. as at 3 July 1990 a well managed Muffin Break franchise store in the Northland Shopping Centre Food Court could not have achieved sales between $8,000.00 and $12,000.00 per week;
. as at 3 July 1990, the Respondents did not believe on reasonable and proper grounds that a well managed operation in Northland Shopping Centre Food Court could achieve sales of between $8,000.00 and $12,000.00 per week after adjusting for competition and demographics;
. as at 3 July 1990 the average food Court operator in the Northland Shopping Centre did not achieve sales in the order of $10,000.00 per week, but achieved sales averaging approximately $7,000.00 per week;
. the Respondents did not believe on reasonable and proper grounds that the average Food Court operator in the Northland Shopping Centre then achieved sales in the order of $10,000.00 per week;
. the applicants did not achieve the sales or earn the income referred to in paragraph 6(g) of the representations set out above.
The applicants relied upon s.51A of the TPA and s.10A of the FTA. Under these provisions the respondents carry the onus of establishing that they had reasonable grounds for making any representation with respect to future matters.
The respondents denied making the representations as alleged, denied inducement and alleged that the representations they made were true and that they had reasonable grounds for making them.
The main issue contested between the parties was whether the applicants established that the respondents engaged in misleading conduct which induced them to acquire the Muffin Break franchise.
The main witnesses
The Vittouris' had some prior business experience but no experience or background whatsoever in relation to a food outlet. The acquisition of the Muffin Break franchise was a significant decision for each of the Vittouris'. Although some of the relevant events involved only Mrs. Vittouris and Nelson I have little doubt that Mrs. Vittouris conveyed the detail of the matters discussed on each such occasion to Mr. Vittouris and Nelson would have expected that to occur.
Nelson had been involved with the franchising and establishment of Muffin Break food outlets in Canada and during 1990 endeavoured to establish a similar business in Australia. He had extensive experience and background in the promotion and establishment of such outlets. Nelson was also aware of the background and lack of experience of the Vittouris' and expected that they, at least in part, would rely upon the information provided by him. Nelson was conscious of the danger inherent in misleading prospective franchisees by providing inaccurate information or unrealistic sales or profit forecasts and endeavoured not to do so.
The representations were alleged to be in part documentary and in part oral. The oral representations were said to have been made in the course of several meetings between the Vittouris' and Nelson during May and June 1990. No independent witnesses attended the meetings and no contemporaneous notes were taken of any of the discussions at the meetings. It was my view that the evidence given by all three witnesses in relation to these meetings tended to be coloured by a selective or wishful recollection of the matters discussed. As a consequence each witness presented a version of events which in the mind of the witness, favoured the case that witness wished to put forward.
The general unreliability of the witnesses in that regard was exacerbated by the fact that they were purporting to rely upon unaided memories of the detail of conversations which occurred more than five years ago. As a result I did not find the detailed account of the meetings held in May and June 1990 by any one witness to be more reliable than that of any other witness.
Fortunately a substantial amount of uncontroversial documentation passed between the parties at the time. In arriving at my findings of fact I have drawn heavily on the contemporaneous documentation. Where a version of the relevant events proffered by a witness is more consistent with the contemporaneous documentation, I have preferred that version. The facts I have found and set out in these reasons are those which in my view, on the balance of probabilities, were likely to have occurred.
The facts
The proposed introduction of Muffin Break franchises into Australia was the subject of a carefully prepared and comprehensive business plan drawn up by Nelson in January 1990. The Coolangatta outlet was trading and tenancies at Chadstone and Knox City shopping centres had been approved. The Northland and Chadstone shopping centres were both conducted by the Gandel Group of Companies. Initially Nelson turned down a proposal for an outlet at Northland. However, on 17 May 1990 after the successful opening of a franchised outlet in the Chadstone food court, Nelson was invited by Mr. Stuart Macrae ("Macrae") the leasing executive employed by the landlord, to submit an offer for a lease of a Muffin Break outlet in the food court at Northland. On 31 May 1990 Nelson made an offer to enter into a six year lease of an outlet at Northland with a commencement date to be advised. He paid a refundable deposit for the premises to be held for him.
Early in 1990 the Vittouris' had become aware of advertising for Muffin Break franchisees. They first became interested in a franchise for themselves after being impressed with the Muffin Break outlet that had been opened at Chadstone.
On 21 May 1990 after an initial meeting with Mrs. Vittouris, Nelson sent to the Vittouris' a letter enclosing a General Information Package, a preliminary questionnaire and certain financial information. The package explained the Muffin Break franchise and provided general information on site selection and expected operating results and costs. It presented the applicants as having extensive experience and competence in "the Real Estate field", site selection and the establishment of outlets in appropriate and successful locations.
After a meeting with Nelson at Chadstone towards the end of May 1990, the Vittouris' became enthusiastic about acquiring a Muffin Break outlet. A further meeting was held early in June 1990 at which Mr. Nelson raised the possibility of an outlet at Northland. He produced and discussed a financial projection for the first year of the outlet. The projection was based on weekly sales of $8,000.00, $9,000.00, $10,000.00 and $11,000.00.
Nelson placed a cross above the "$10,000.00" weekly sales projection and probably indicated that amount as his preferred projected sales figure for the outlet.
Nelson had been informed by Macrae that the average food court outlet at Northland achieved sales of approximately $10,000.00 per week and conveyed that information to one or both of the Vittouris' in the course of one of the earlier meetings with them. Nelson had also made his own observations and general calculations as to likely takings of the operators in the Northland food court. Nelson's evidence was that he used his own methodology to calculate the likely sales figures and said he felt comfortable with the way "I came up with the same result essentially". In reliance upon those matters and his general experience, Nelson confirmed in his own mind the general accuracy of Macrae's statement to him.
In any event Nelson had no reason to doubt the accuracy of Macrae's figure. Leases of shopping centre outlets commonly contain provisions for rent to be payable as a percentage of sales. As a result the landlord of a centre was in a unique position to know the sales figures of its tenants. Although the landlord usually treated the individual figures as confidential, it was prepared to provide general information of the kind given to Nelson in order to induce prospective tenants to decide to lease premises at the centre. I am satisfied that these matters would have been known by Nelson and the Vittouris' in May and June 1990.
The information provided by Macrae as to the takings of the average outlet in the Northland food court was significant. It led Nelson to consider that $10,000.00 per week was an achievable weekly sales figure for a Northland Muffin Break outlet. It also led him to repeat Macrae's statement to the Vittouris' and ultimately it was a factor which contributed to Nelson's decision to commit Nescor to a lease of the outlet at Northland.
The financial projection stated that it was a "pro forma"and indicated that with $10,000.00 weekly sales, weekly earnings "pre tax, no depreciation, no debt service" would be $1,936.00. The Vittouris' read the "pro forma" closely and appreciated the significance of the note in it that:
This proforma is a guideline only and its accuracy should be verified by a prospective franchisee and their accountant.
Nelson attached some importance to the note as he was concerned to ensure that prospective franchisees, including the Vittouris', made their own enquiries and satisfied themselves as to the suitability of the premises and the accuracy and reliability of any of the financial projections he provided. As a result he indicated to the Vittouris' that they needed to satisfy themselves as to the proposed outlet and its financial viability. However, in his evidence Nelson conceded that he expected that the Vittouris' would, at least in part, rely and act upon the information, including the figures and projections, he provided to them.
On 8 June 1990 the Vittouris' returned the financial questionnaire providing personal and financial information, prior business experience and several preferred locations which did not include Northland. The preference for other outlets suggests that the pro forma did not induce the Vittouris' to seek the outlet at Northland. The preference for other locations also tends to support the view I have that the importance of the pro forma to the Vittouris' was exaggerated by them in their evidence. The information provided by the Vittouris' to Nelson made it quite clear that a decision to undertake a Muffin Break outlet involved a major financial commitment for the Vittouris'.
Discussions after 8 June 1990 began to focus on Northland as the proposed outlet. This had become of importance to Nelson as he had committed or was in the process of committing Nescor to a lease of the outlet at Northland. He was looking for a franchisee to take a sub-lease of the outlet from Nescor.
By the latter part of June 1990 the Vittouris' were prepared to sign a letter of intent to acquire a Muffin Break franchise at Northland. The letter set out the details of the Vittouris' financial commitment which involved an initial outlay of $160,000.00 (which included a $25,000.00 franchise fee) to establish the outlet. The letter, which was prepared by Nelson on 16 June 1990, was signed by the Vittouris' on 26 June 1990. It contained the following concluding paragraphs:
I/We have
attached herewith a cheque for $5,000.00, 1,000.00 now and 4,000.00 June
27/90 to show my/our intention to proceed with the Franchise Development under
your standard terms and conditions and to hold the above site. This amount is
refundable, less your legal costs.
I/We acknowledge and confirm that all the information given to me/us by yourself, your agents or your Franchisees has been given or will be given to me/us on the basis that it will be independently checked with my/our consultants, accountants or solicitors as necessary prior to entering into a formal Franchise and Licence Agreement.
I/We further warrant that any information given to me/us will be treated as confidential information and will solely be used to evaluate the above site and will not be passed on to any other party or copies without the prior consent of Nescor Industries Group Pty. Ltd.
The letter was not treated by the parties as an unconditional or binding agreement. The deposit was "refundable". At a meeting on 26 June 1990 the Vittouris' requested and Nelson agreed that the initial deposit be $1,000.00 which was handed over with the letter to Nelson.
The Vittouris' were in the process of approaching their bank manager to arrange for finance which they required to proceed with the franchise. They had been asked by the manager to obtain more precise information as to the projected cash flow for the outlet. At some time around 26 June Mrs. Vittouris informed Nelson of the request of the bank manager and Nelson agreed to provide the information sought.
The Vittouris's evidence was that a letter dated 26 June 1990 confirming the request was sent to Nelson. Nelson's evidence was that he believed that he first saw the letter in course of discovery by the applicants in these proceedings. The letter was in the following terms:
Dear Bob,
Further to our telephone discussion yesterday 25 June, we confirm that our Accountants and Loans Manager at the Commonwealth Bank require further information from Nescor Industries as to future cash flow for our proposed purchase of the Muffin Break store at Northland.
Our accountants and Bank are not wholly satisfied with projections previously produced and require substantiation of your figures prior to our accountants giving us their opinion, and the Bank giving approval, for a loan in the region of $130,000.00.
Obviously we would need considerable income to support a loan of this magnitude.
Thanks Bob - we look forward to hearing from you soon.
Attached is our cheque for $1,000.00 showing our "intention to proceed". This intention, however, is subject to substantiated and satisfactory figures from you to provide to our accountants and Bank.
Kind regards,
M & B VITTOURIS
I have no reason to disbelieve Nelson's evidence. It is supported by the fact that his written response on 3 July 1990 to Mrs. Vittouris's request for further information is more consistent with a response to the oral request of Mrs. Vittouris rather than the letter of the 26 June 1990 which sought information to enable the Vittouris's accountants to provide their opinion and for the Bank to give its approval.
The letter may have been prepared by the Vittouris' at the time but not sent. However, it evidences a concern which I believe they had to obtain as much cash flow projection information as they could so as to resolve any residual doubt they had about proceeding with the franchise, if bank approval for finance was obtained.
The statement in the letter that the information was required for Vittouris' accountant was untrue. They did not have an accountant at the time. They said that they made the statement to give the letter more "weight". The Vittouris's evidence in relation to the letter was another example of a preparedness to overstate the position if the Vittouris' thought it would assist them.
Nelson's response to the request was contained in his letter of 3 July 1990. The letter is critical and I will set out its contents in full.
CONFIDENTIAL
TO WHOM IT MAY CONCERN:
RE: MUFFIN BREAK FRANCHISE
NORTHLAND SHOPPING CENTRE, MELBOURNE
SHOP No c16, FOOD COURT
We understand that you have been approached by our prospective franchisees Michael and Bronwyn Vittouris for the financing of our store at Northland.
To assist you in the evaluation of a cash flow projection we are pleased to list the following weekly sales achieved at our Chadstone location that opened on April 30.
Week ending May 5 $14,779.94
May 12 $17,284.93
May 19 $18,396.31
May 26 $17,833.02
June 2 $15,055.69
June 9 $15,028.40
Note that we expect the sale to settle down between $14,000.00 and $16,000.00 per week then gradually increase with additional take-a-way, normal traffic, greater product acceptance and retail price increased.
It is our understanding that the average Food Court operator in Northland achieves sales in the order of $10,000.00/week.
The Franchisee at Chadstone have advised us that their food costs at Chadstone have ranged between 20% and 22%.
To compare Northland and Chadstone:
Overall Pedestrian Traffic:- comparable.
Food Courts:
Chadstone
has two food courts and Muffin Break is located in the new food court on the
lower level. There are 12 operators in the upper level food court and 12
operators in the main floor level food court. The main pedestrian
flows are not past or through the new lower level food court.
Northland has only one food court with 9 operators. One of the main entrances from the undercover parking encourages pedestrian flow right through or directly adjacent to the only food court. The centre is planning to add an additional 100 seats to cope with the busy trading periods.
Summary
Our Northland store has 60% fewer food court tenants to compete with and similar centre traffic. This would lead us to believe that a well managed operation in Northland could achieve sales of between $8,000.00 and $12,000.00 per week after adjusting for competition and demographics.
CONFIDENTIAL
The above information is provided to the reader on a strictly confidential basis and is to be used only to evaluate the success of a Muffin Break Store in the Northland Shopping Centre. This information is not to be copied or passed on to other parties without the written consent of the undersigned.
Yours faithfully,
ROBERT K. NELSON
I accept Nelson's evidence that he prepared the letter for the purpose of assisting the Vittouris' to obtain finance. However, he provided it personally to Mrs. Vittouris and expected that it would be read and its contents relied upon by the Vittouris'.
Nelson's evidence was:
Yes. You would have been very surprised when you handed it over to her if she did not read it, would you not?---I would think so. I mean, I would think people would under normal circumstances, human nature, would read this letter.
And you would be very surprised if she did not show it to her husband as well as the bank: is that not so?---It follows, yes.
Now, if there was any residual doubt in Mr and Mrs Vittouris' mind, you would have expected that they would take note of what was in the letter of 3 July, too, as the bank would, would you not?---Yes, but I think that they would see the confidentiality of the letter.
In these circumstances I find that the representations contained in the letter were made to the Vittouris' and to their bank manager. The present case is quite unlike that considered by Einfeld J in Haynes v. Top Slice Deli Pty. Ltd. (1995) ATPR (Digest) 46-147 in which his Honour was not prepared to conclude that a misleading statement to a bank for the purpose of finance approval was equivalent to a misleading statement to the borrower for the purpose of s.52. In the present case Nelson handed the letter of 3 July 1990 to Mrs. Vittouris expecting that the Vittouris' and the bank would read and rely upon the information contained in it.
The letter produced the desired results. Finance was formally approved by the ANZ Bank on 16 July 1990. The Vittouris' read the letter and were enthusiastic about proceeding with the franchise. They engaged an accountant to assist them with setting up a company to conduct the franchised outlet. The Muffin Break outlet was established at considerable cost to the Vittouris' and Miba commenced trading on 2 August 1990. Although the formal documentation for the franchise was not finally executed by the Vittouris' until about September 1990 I am satisfied that they were irrevocably committed to the franchise as at 1 August 1990.
It soon became apparent that weekly sales were and would remain considerably less than expected. During Miba's franchise they ranged between $3,000.00 and $5,000.00 per week. Since 1992 the average weekly sales improved but rarely exceeded $8,000.00. After trading unsuccessfully, in July 1992 the Vittouris' relinquished the franchise.
A great deal of time was spent during the hearing on the detail of negotiations between the parties in May and June 1990. The information imparted in those discussions and in documents which predated the letter of 3 July 1990 provided both the background and context for the letter, but in my view were in all other relevant respects overtaken by the letter.
I have arrived at this conclusion for several reasons. The letter of 3 July 1990 set out in written form the detailed information the Vittouris' and their bank manager were seeking in order to make the requisite decisions in relation to the Muffin Break franchise. I am satisfied that the specific information set out in the letter and the Vittouris' observations of the Chadstone Muffin Break outlet and the food court at Northland, induced the applicants to proceed with the Muffin Break franchise. Earlier information provided by Nelson was in a different category. It was more general and contained disclaimers or qualifications requiring that the Vittouris' and their advisers satisfy themselves as to its accuracy. Indeed these factors, inter alia, led the Vittouris' to seek the more specific and detailed information contained in the letter of 3 July.
Were the representations pleaded made?
The letter of 3 July must be construed and understood in the light of the background facts and the context in which it was sent: see Elders Trustee and Executor Co. Ltd. v. E.G. Reeves Pty. Ltd. (1987) 78 ALR 193 at 242 per Gummow J.
It contained a representation that:
The matters set out in the letter had led the respondents to believe that a well managed Muffin Break franchised operation in the Northland food court could achieve sales of between $8,000.00 and $12,000.00 per week after adjusting for competition and demographics.
The representation is a statement with respect to the current belief of Nelson. That belief related to the capacity of the proposed outlet to achieve the specified range of sales by reason of the matters outlined in the letter. The grounds for the sales projection were all set out in the letter for the purpose of providing information which would enable an evaluation of the cash flow projection. The reasonableness of those grounds was a matter left to be determined by the reader of the letter as part of the evaluation. In these circumstances it is difficult to imply a representation which differs from that set out above including a representation that the grounds were reasonable and proper. At best it may be an implied representation arising from the respective backgrounds of and relationship between the parties at the time, that Nelson believed that the grounds he was relying upon were reasonable and proper grounds.
The representations pleaded in relation to the sales capacity of the proposed outlet were in paragraphs 6(e)(i), (ii) and (g) of the applicants' pleadings:
(e) (i) a well managed operation in Northland Shopping Centre Food Court would achieve sales of between $8,000.00 and $12,000.00 per week;
I am not satisfied that a representation in these terms or to that effect was made by the respondents. No representation was made by Nelson in the letter or otherwise that sales of $8,000.00 to $12,000.00 per week would be achieved:
(ii) the Respondents believed on reasonable and proper grounds that a well managed operation in Northland Shopping Centre Food Court could achieve sales of between $8,000.00 and $12,000.00 per week after adjusting for competition and demographics.
The respondents represented that the grounds for their belief were those which were set out in the letter. In my view no general representation in the terms or to the effect of that pleaded was made. As I have stated, it may be that Nelson impliedly represented that he believed that the grounds were reasonable and proper. It is not necessary to explore this aspect further as I have no doubt that Nelson held that belief.
(g) that the Applicants would in the first year of operation of a Muffin Break franchise store at Northland Shopping Centre.
(i) achieve sales of at least $8,000.00 per week;
(ii) earn an income of at least $30,000.00 per annum;
(iii)achieve sales sufficient to provide adequate monies to pay the costs of operation;
(iv) achieve sales sufficient to service a bank loan of approximately $130,000.00.
I am satisfied that no representation was made in the letter or at any earlier date to the effect alleged. The source of the pleading appears to be the pro forma financial projections handed to the Vittouris' early in June 1990. In my view nothing said at the meeting or contained in the document constituted the making of a representation as specific as that alleged. In addition to my finding that the pro forma was overtaken by the letter of 3 July 1990 in respect of these issues, I have also found that Nelson was always careful about not representing sales or income projections in terms which expressly or impliedly conveyed any assurance or promise to the Vittouris' about these matters. I am satisfied that both Nelson and the Vittouris' were aware of the risks of sales and income estimates not being realised.
The representations as pleaded have not been established by the applicants. However, as I explain in the concluding section of these reasons the case was not strictly confined to the allegations as pleaded but was contested on broader grounds.
It is necessary to consider those grounds but before doing so some observations on the case of the applicants in reliance on s.51A is desirable.
Reasonable grounds - s.51A of the TPA
The applicants submitted that the representation as to projected sales was with respect to a future matter and the respondents have not established that they had reasonable grounds for making it: see Ting v. Blanch (1993) 118 ALR 543 at 552-3 per Hill J. The respondents replied that the representation was with respect to a present belief held on the grounds set out and that s.51A had no role in these circumstances: See Jacques & Ors. v. Cut Price Deli Pty. Ltd. & Ors. (1993) ATPR (Digest) 46-102 at 53435-6 per Spender J.
Section 51A of the TPA provides:
(1) For the purpose of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.
(2) For the purposes of the application of sub-section (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation.
(3) ...
In Ting at 552-3 Hill J discussed the operation of s.51A:
The section is but an interpretation section; it does not of itself create a cause of action, nor define a norm of conduct. The relevant cause of action is to be found in s.82(1) of the Act by reference to the norm of conduct laid down in s.52 of the Act. What s.51A does, in a practical sense, in cases where it applies, is to cast the burden of proof upon the respondent corporation who has made a representation about a future matter to show that in making that representation it had reasonable grounds for so doing. In the language of Sheppard and Neaves JJ in Cummings v. Lewis (1993) 113 ALR 285; ATPR (Digest) 46-103, s.51A is "designed to facilitate proof" (at ALR 294; ATPR 53,450).
Representation as to future facts may, of course, constitute conduct which is misleading or deceptive or likely to mislead or deceive within s.52 of the Act, irrespective of the operation of s.51A. However, without the intervention of s.51A the burden would remain upon the applicant to show that the representation, in whatever form it took, was misleading or deceptive or likely to mislead to deceive. In the ordinary case where a representation as to future conduct or events is alleged to have been made, that means that the burden would be upon the applicant to show not merely that the conduct or event has not come to pass but also that at the time the representation was made the respondent did not believe that the conduct or event would come to pass or that there was no basis for a belief that the conduct or event would come to pass: James v. ANZ Banking Group Ltd.(1986) 64 ALR 347; Global Sportsman Pty. Ltd. v. Mirror Newspapers Pty. Ltd.(1984) 2 FCR 82 at 88; 55 ALR 25.
It
will be readily apparent that a representation as to future conduct or a future
event will generally imply (and sometimes explicitly state) that the maker of
the representation was of a particular state of mind as to the future conduct or
event as at the time the representation was made. A representation that a
particular occupancy rate for a hotel might in the future be achieved, or, as
alleged here, that a particular rent for nominated premises could be achieved
in a future letting, impliedly involves a representation that the maker of the
representation believed that the occupancy rate or rental could be achieved. It
would be no less a representation as to the future by virtue of this
implication. If the actual term of the representation is
that the maker of the representation is of the view at the time that the
occupancy rate or rental nominated could
be achieved in the future, does that express statement turn a representation as
to the future into a representation as to existing fact?
I was referred to the decision of Spender J in Jacques v. Cut Price Deli Pty. Ltd.(1993) ATPR (Digest) 46-102 in support of a submission that the representations pleaded were not representations as to future fact. In that case the representations alleged in the statement of claim related to turnover in the future in a shopping centre of a shop operating under a franchise from the respondent to the applicant then under negotiation. There was also specific representation as to the respondent's state of mind as to that future turnover. As Spender J put it (at 53,436):
In so far as turnover is concerned, the allegation is first, a representation as to a future matter, namely, that the future turnover would be of a certain order and, secondly, a representation as to the present fact, namely, a present belief as to the trading potential of a shop.
The first of these representations, his Honour held, was a representation with respect to a future matter to which s.51A applied. However, the representation as to the present state of mind of the respondent was a representation, so his Honour held, to which s.51A had no operation.
Whatever may be the case where there is an express representation as to the maker's state of mind concerning a future matter, it is not, in my opinion, correct to treat a representation as to an event or conduct in the future, be that in the firm of a prediction or otherwise, as not being a representation with respect to a future matter merely because it implies a representation as to the maker's present state of mind. The language of s.51A is very wide and the words "with respect to" are, like the words "in respect of" discussed by Dickson J, delivering the judgment of the Supreme Court of Canada in Nowegijick v. R (1983) 144 DLR 93d) 193 at 200, (a discussion cited with approval by Toohey J in Smith v. FCT (1987) 164 CLR513 at 533; 74 ALR 411 at 424):
...words of the widest possible scope. They import such meanings as "in relation to", "with reference to" or "in connection with". The phrase "in respect of" is probably the widest of any expression intended to convey some connection between two related subject-matters.
A representation as to future rental, for example, will be a representation with respect to a future matter, even if also, impliedly, a representation as to the existing state of mind of the maker.
I agree with the observations of Hill J. However, it
is still necessary to characterise the representation made. In the present case
it is my view that it is properly characterised as a statement as to a present
belief based on the grounds set
out. In that context it relates to the capacity of the proposed outlet to
achieve the sales projection. Although the sales projection necessarily has a
future element in it that element does not transform the characterisation of
the representation into one which is with respect to a future matter. In my
view the applicability of s.51A is to be ascertained by a proper
characterisation of the representation made in each case. It is difficult to
see how s.51A can operate in a case such as the present where the grounds for
the sales projection are expressly stipulated and an assessment of their
reasonableness is left for evaluation by the representee. In these
circumstances a representation that the grounds are reasonable, rather than
that the representor believes that they are reasonable, is inconsistent with
the representation made.
I should add that the operation of s.51A cannot be rendered nugatory by merely stating a belief or understanding with respect to a future matter. For the reasons pointed out by Hill J in my view such a statement, without more, is and remains one with respect to a future matter.
If, contrary to the conclusion I have reached, the respondents were required to establish that the grounds set out in the letter were reasonable and proper grounds for the belief held, in my view they have done so.
Save for the issue relating to average takings at Northland, each statement of fact in the letter was true and each belief or understanding said to have been held by Nelson was held by him.
A sales projection for a food outlet yet to be established will inevitably be speculative. That is particularly so in respect of the early stage of the introduction of a new food concept into a competitive food court at a major shopping centre. Those matters were known to the Vittouris'.
In the present case witnesses were called and evidence given as to methodologies which were said to be reasonable and proper for establishing a sales projection. Ultimately that evidence, which was hypothetical in any event, was of little assistance. More direct and relevant evidence was available.
The highly successful opening and sales figures of the Muffin Break outlet at Chadstone, the general comparability between Chadstone and Northland as outlined in the letter and the use of the takings of the average food outlet in the food court at Northland provided a reasonable and proper basis for the sales projection made for the Northland outlet. Those factors had led Nelson, with his experience and expertise, to commit Nescor to a long term lease at a high rental at Northland.
A great deal of criticism was made by counsel for the applicants of the adjustment said to have been made to the projection for "competition and demographics". The parties were aware of differing competitive forces operating at the two food courts and also of the fact that different socio-economic groups frequented the two centres. In the light of that awareness the statement of the adjustment for "competition and demographics" was no more than and in my view was taken by the Vittouris' to be no more than a statement that those factors would necessarily influence, in an uncertain way, the comparability of sales of the Muffin Break outlets at the two centres. The statement indicated the uncertainties in demographics and competition and that those uncertainties required a range of estimates. The uncertainty was as to the range of projected sales and the likely outcome within the range. I am satisfied that the Vittouris' did not read any more than that into the statement.
Was there misleading conduct?
The real problem arising in the present case was initiated by Macrae. A critical factor in the evaluation of the sales projection was the statement that:
It is our understanding that the average Food Court operator in Northland achieves sales in the order of $10,000.00/week.
As pointed out earlier Nelson's "understanding" was initially derived from Macrae and supplemented by Nelson's own observations and estimates which led him to conclude that the information provided by Macrae was correct.
Macrae's statement to Nelson as to the $10,000.00 weekly sales was seriously misleading. The reality was otherwise. Sales figures varied from time to time and there was a degree of flexibility involved in determining which outlets takings were to be taken into account in determining the takings of an "average" operator in the food court.
However, these difficulties were not the problem. In order to induce Nelson to take a lease, Macrae simply discarded several of the lower takings outlets but no higher takings outlet. He also treated as one outlet a Chinese restaurant, which was not in the food court and its takeaway outlet which was in the food court, on the spurious and irrelevant ground that they each had a common kitchen. He gave no indication to Nelson that he made those adjustments in arriving at his figure of $10,000.00. As a consequence of his blatant misuse of figures Macrae produced an "average" outlet figure of weekly sales of $10,000.00 whereas the reality should have approximated between $7,000.00 and $7,500.00 and on any view less than $8,000.00. The $2,000.00 to $3,000.00 difference between fact and fiction was significant - it was likely to be the difference between a profitable and a struggling outlet. If the projections were reduced by $2,000.00 - $3,000.00 the lowest end of $5,000.00 was very borderline at best and in all likelihood would have confronted the Vittouris' with a real risk of incurring losses. Macrae's conduct seriously misled both Nelson and the Vittouris'.
The difficult question is whether the statement by Nelson of his "understanding" as to the takings of the average operation in the food court constituted misleading conduct. The applicants' counsel submitted that Nelson conveyed as a fact that which was not the fact.
The respondents' counsel submitted that the only fact conveyed by Nelson was "his understanding" which was honestly and accurately conveyed. It was also submitted that Nelson had no reason to suspect that the information he was conveying was incorrect and did no more than act as a messenger in respect of that information to the Vittouris'.
In support of his submission counsel for the respondents pointed to Mrs. Vittouris' evidence that she was not surprised to see the figures restated in the letter, as that information had been provided previously. The Vittouris' were aware that the original source of the information would have been the landlord. In a letter dated 9 November 1990 from Mr. Vittouris to Nelson complaining of the high rent at Northland he stated:
The rent Muffin Break pays ($5,213 incl outgoings) is at least 30%+ over what any other food retailer in the food court is paying and if Northland Centre Management is to be believed their income was in the vicinity of $10,000 per week.
I accept that the Vittouris' believed that the source
of the weekly sales figure of $10,000.00 was the landlord but they also
believed and were entitled to believe that in restating it Nelson was accepting
and adopting the figure as correct.
That conclusion is consistent with Nelson's evidence that he framed the
sentence:
so that people understand that I have - whoever is the reader, the bank, that we have put some thought into this.
The Vittouris' were entitled to rely upon Nelson's extensive experience and background in such matters.
The submissions require consideration of the circumstances in which the repetition of inaccurate information stated to, or understood to have been provided by, another can constitute misleading conduct.
When does the messenger engage in misleading conduct?
I find the following facts in relation to the representation that:
It is our understanding that the average Food Court operator in Northland achieves sales in the order of $10,000.00/week.
. the "understanding" was accurately stated;
. the "understanding" was arrived at on the basis of the information provided by Macrae which Nelson, after his own observations and calculations, accepted and adopted as correct;
. the grounds for the "understanding" were both reasonable and proper;
. when reading the letter the Vittouris' were aware that the information which led to Nelson's "understanding" was provided on behalf of the landlord and that this information had been accepted and adopted by Nelson as correct;
. the information provided by Macrae was misleading and untrue;
. the representation and the sales projection figures derived, in part, from it, induced the Vittouris' to acquire the Muffin Break franchise.
The leading case which considers the circumstances in which the passing on of misleading or untrue information supplied by another can constitute misleading conduct is Yorke v. Lucas (1985) 158 CLR 661. Ross Lucas Pty. Ltd. an estate agent, through its managing director Ross Lucas, acted as agent for the vendor on the sale of a business. Lucas informed Mr. Yorke, one of the purchasers, that the weekly turnover of the business he was engaged to sell was $3,500. The trial judge ((1982) 45 ALR 299 at 308 and (1983) 46 ALR 319 at 321) made several findings in relation to the role of Lucas. Lucas had acted carefully and conscientiously in informing Yorke that the turnover figure had been provided by the vendor and Lucas was not aware and had no reason to suspect that the information was incorrect. The trial judge also appeared to accept that Lucas informed Yorke that he had not verified the figures.
The trial judge found that the Lucas company had engaged in misleading conduct in breach of s.52 but that Lucas was not a person involved in the contravention in accordance with s.75B of the TPA. The High Court in upholding the dismissal of the claim against Lucas at 666 said:
It should be observed at the outset that the facts as found by the trial judge raise the question whether the Lucas company itself was guilty of any contravention of s.52. It is, of course, established that contravention of that section does not require an intent to mislead or deceive and even though a corporation acts honestly and reasonably, it may nonetheless engage in conduct that is misleading or deceptive or is likely to mislead or deceive: Hornsby Building Information Centre Pty. Ltd. v. Sydney Building Information Centre Ltd; Parkdale Custom Built Furniture Pty. Ltd. v. Puxu Pty. Ltd. That does not, however, mean that a corporation which purports to do no more than pass on information supplied by another must nevertheless be engaging in misleading or deceptive conduct if the information turns out to be false. If the circumstances are such as to make it apparent that the corporation is not the source of the information and that it expressly or impliedly disclaims any belief in its truth or falsity, merely passing it on for what it is worth, we very much doubt that the corporation can properly be said to be itself engaging in conduct that is misleading or deceptive. Had the Lucas company appealed from the judgment against it, it may have been necessary to form a concluded view on that question. It has not, however, done so and it is possible to resolve this appeal against the judgment in favour of Lucas upon the assumption that the finding of a contravention of s.52 on the part of the Lucas company was correct. As will be seen, that is so notwithstanding that the contravention was said to have taken place solely by reason of the conduct of Lucas. (Emphasis added)
That passage was applied by the Full Court in John Glass Real Estate Pty. Ltd. v. Karawi (1993) ATPR (Digest) 41-249. In that case an estate agent represented that the net lettable area of a building being constructed was 180m2. The representation was contained in a folder prepared for the sale of the building which disclosed that the figure of 180m2 was based on information provided by the vendor's consultant. It was argued on behalf of the agent on its appeal that the only representation made by it as an agent was that the information in the folder was obtained from its principal, the vendor. It was contended that the agent was no more than a conduit through which the information, albeit false information, passed from vendor to purchaser. The Court (Davies, Heerey and Whitlam JJ) in dismissing the agent's appeal at 41,359 said:
In our opinion an estate agent which holds
itself out as, amongst other things, "consultants to institutional
investors and to developers of major properties" would not be regarded by
potential
purchasers of properties as merely passing on information about the property
"for what it is worth and without any belief in its truth or
falsity".
Information of the kind in question, the net lettable area of a building, stands on a different footing from the puffery which often accompanies the sale of real property. The figure is one of hard physical fact. As the appellant's own calculations indicate, it is an essential factor in determining the likely profitability of a commercial building and hence its value. We think a purchaser like Karawi would ordinarily expect, to quote the terms of the appellant's own disclaimer, that the agent had no reason to doubt the completeness or accuracy of the information provided.
In the present case the appellant adopted the information in question and incorporated it as a central and prominent feature of their selling effort on behalf of the vendor. There was certainly no express disclaimer of the appellant's belief in the truth of the information in the brochure - indeed there was an express assertion of such belief. As part of its ordinary business the agent was providing information in a persuasive form with a view to achieving a sale of its principal's property and of course earning commission. It was this conduct which the learned trial judge, correctly in my opinion, held to be misleading and deceptive. Once the falsity of the figure was demonstrated, it seems to us that no other conclusion could follow.
The Court's conclusions are apposite to the present case. Nelson had developed and held himself out as having developed a special expertise in respect of food outlets. That expertise related to real estate, suitable sites, suitable rental, costs and sales projections for food outlets, particularly in major food courts. When passing on information in these categories but in particular actual or expected sales of outlets in food courts, Nelson would not be regarded by potential franchisees including the Vittouris', as merely passing on information "for what it is worth and without any belief in its truth or falsity".
The sales of the "average" food outlets in the Northland food court was an important factor in arriving at estimated sales for the proposed Muffin Break outlet. That information probably led Nelson to mark $10,000 as a preferred weekly sales estimate on the pro forma. It was also no accident that $10,000.00 was the middle of the range of projected weekly sales of $8,000.00 - $12,000.00 set out in the letter of 3 July. Further, the sales of the average outlet were stated to be one of the grounds relied upon for the projection. In my view the role of that statement in formulating the projection had the consequence that if it was misleading then the conclusion in reliance upon it must also be misleading.
The passage I have cited from John Glass may be applied to the present case. Nelson adopted the information in question and incorporated it as "a critical and prominent feature" in the sales projection which induced Miba to acquire the Muffin Break franchise. There was no express or implied disclaimer in relation to the respondents' belief in the truth of the information. To the contrary, as in John Glass, there was an "express assertion of such belief" and the information was provided in "a persuasive form with a view to achieving a sale" of the Muffin Break franchise. See also Gardam v. George Wills & Co. Ltd. (1988) 82 ALR 415 at 427 per French J.
The respondents sought to rely upon The Saints Gallery Pty. Ltd. v. Plummer (1988) 80 ALR 525. In that case a Full Court (Morling, Pincus and Burchett JJ) applied Yorke v. Lucas in concluding that the passing on by a gallery owner of information provided by a vendor as to the false provenance of a painting did not constitute misleading conduct. The purchaser was a professional art valuer and dealer who had in the course of his work valued and therefore necessarily authenticated works for the gallery owner. Although the purchaser relied upon the statement as to provenance he knew the owner lacked the capacity to determine authenticity and did not believe that the gallery owner possessed any information as to provenance other than that provided by the vendor. The Court concluded at 531 that:
A disclaimer of any personal knowledge of the paintings' authenticity was deducible from the parties' relationship and the whole of the circumstances we have recounted.
and
In the end, we have felt compelled to adopt the view that, on the primary findings of the learned trial judge, his Honour was not justified in holding s.52 to have been breached. In the particular circumstances of the case, we think it should have been held that nothing said or done on behalf of the appellant should have been taken by Mr. Plummer to convey more than that the paintings' owner had represented them to have a certain origin and history; the appellant claimed no more knowledge of the matter than that. It stood in the position of an intermediary between Mr. Kehoe, the source of information and the then owner of the paintings, and Mr. Plummer, who, like the appellant, did not check Mr. Kehoe's assertions and assumed them to be true. The matter would raise quite a different issue if Mr. Flannery were shown to have done, or purported to do, anything other than explain what Mr. Kehoe had claimed to be the facts.
The present case is a far cry from Yorke v. Lucas and Saints Gallery. Not only were there no circumstances capable of giving rise to an express or an implied disclaimer but the respondents did far more than merely purport to pass on what Macrae claimed to be the fact "for what it was worth". Nelson made his own observations and calculations and on that basis accepted and adopted Macrae's figures as the basis for his own sales projection.
In these circumstances I am satisfied that the delivery of the letter of 3 July 1990 constituted misleading conduct. At no time after 3 July 1990 did Nelson revise any of the matters in the letter or make any disclaimer in respect of those matters. There was clearly no intention on the part of Nelson to mislead the Vittouris' or Miba in any way in relation to the takings of other operators in the Northland food court or as to the sales projection calculated in reliance upon that information. However, intention to mislead is not a necessary element in a cause of action based upon s.52 of the TPA and s.11 of the FTA.
Accordingly, I find that Nescor engaged in misleading conduct in breach of s.52 of the TPA and Nelson engaged in misleading conduct in breach of s.11 of the FTA. I also find that the Vittouris' and Miba acted in reliance upon the statements contained in the letter and were induced by those statements to establish the outlet at Northland and acquire the Muffin Break franchise. I am also satisfied that the Vittouris' were not aware of the facts which made the conduct misleading until a date well after their acquisition of the franchise.
The applicants' other claims
In my view Nelson and through him Nescor, had reasonable and proper grounds for making the representations made by Nelson and he and Nescor did not act negligently in any way in that regard. Accordingly, the claims in negligence must fail.
The applicants also claimed that the representations as pleaded constituted warranties which were broken. I am quite satisfied that the representations did not constitute warranties: see J.J. Savage & Sons Pty. Ltd. v. Blakney (1970) 199 CLR 435 and Hospital Products Ltd. v. United States Surgical Corporation (1985) 156 CLR 41. The evidence to which I have referred leaves me in no doubt that any relevant statements made by Nelson were not promissory but were merely representational in the sense discussed in those cases. Accordingly, the claims for breach of warranty must also fail.
Finally, Nelson was also sued as a person involved in the contravention of s.52 alleged against Nescor. In my view that claim must fail for the same reasons the claim against Lucas in Yorke v. Lucas failed. Nelson lacked knowledge of the essential matters, being the falsity of the information provided by Macrae, which made the conduct of Nescor misleading.
The pleadings
In the present case the applicants have had some difficulty in formulating their claims. The proceeding commenced in 1992. The current formulation of the claims in paragraphs 6(e), (f) and (g), first made by way of amendment earlier this year, led to an adjournment of the trial. The amendments made it quite clear that the gravamen of the allegation against the respondents was that the weekly sales projection of $8,000.00 to $12,000.00 was misleading and one of the reasons for that was, in part, that it was based on the misleading statement as to the average food operators takings at Northland. However, the applicants did not plead the misleading conduct in the terms I have found it to have occurred.
A reason for the difficulty may be that in formulating the claims the applicants focused on pleading misrepresentation rather than on misleading conduct as explained in Yorke v. Lucas, Saints Gallery, John Glass and Lezam Pty. Ltd. v. Seabridge Aust. Pty. Ltd. (1992) 35 FCR 535 at 552-3 per Sheppard J. Misleading conduct may not always involve misrepresentation: see Demagogue v. Ramensky (1992) 39 FCR 31 at 41 per Gummow J.
It is fair to say that the respondents sought to confine the case to that pleaded by the applicants but I indicated to counsel for the respondents that although the pleadings identified the case that they were to meet it should not be assumed that it was not open to the trial Judge to find that a case of misleading conduct was made out which was different to that which was pleaded.
During the trial the issue of the takings of the other food outlets at Northland was fully ventilated and detailed submissions were put by both parties on the issues of fact and law arising in relation to that issue. The applicability of Yorke v. Lucas and the cases applying it was the subject of detailed submissions.
At the commencement of final submissions the following discussion occurred with counsel for the respondents:
HIS HONOUR: Now the other question I wanted to ask you is this: that one of the first steps for me is going to have to be to work out what the representation was. There is no quarrel that there was a representation and of course that may - I may come to a conclusion that it is not within either E1 or 2. I mean you have given me good reasons why it should be neither. But of course unless you say anything to the contrary, I would regard it as within my realm to have to decide on the evidence what the representation was and then decide whether it was misleading and then decide whether it was relied on.
MR. SEARLE: Well I am meeting the case that the applicants have brought as pleaded.
HIS HONOUR: I know, but the pleading is not a statute and my understanding of the role of the Court is the evidence has been given by the applicants as to what they say the representation was. You have dealt with that case and of course the question I have to decide is on the basis of the evidence is the representation made out as pleaded or some representation within the parameter of what was pleaded. I mean no person can ever anticipate in advance the precise formulation that the judge might arrive at of the representation that is based partly in writing, partly orally and so forth.
MR. SEARLE: Yes, well that might depend upon what the actual finding is in terms of your Honour's observations within the parameters of what is pleaded. If it is within the parameters of what is pleaded then that would form part of the case I am here to meet.
(Transcript 314-5)
In the course of his responding submissions counsel
for the applicants submitted at transcript 434 that I should read the relevant
statements in the 3 July letter not merely as statements of the understanding
or belief of Nelson, but as statements of the actual fact i.e. that the average
weekly takings were $10,000.00 and the projected weekly sales would be
$8,000.00 - $12,000.00. In reply to the applicants' submissions the
respondents' counsel at transcript 453 did not contend that it was not open to
me to go outside of the representation as pleaded in respect of the average
takings issue but submitted that I should not disregard the significance of the
use of the word "understanding" in that
regard. It was submitted that the relevant statement accurately conveyed a
particular state of mind. Whether that was correct depended in part on whether
the particular formulation of words used expresses merely a state of mind or is
also a statement of fact: see Tobacco
Institute of Australia Ltd. v. Australian Federation of Consumer Organisations
Inc. (1992) 38 FCR 1 at 46 per Hill J.
The view to which I am presently disposed is that although the misleading conduct has not been pleaded in the terms I have found it to have occurred the respondents were on notice that that conduct formed part of the case they were to meet and the case has been conducted by them on that basis. It also seems to me that the essential facts and allegations giving rise to the misleading conduct I have found to have occurred were treated by the parties during the trial as being "in the ring". To date no submission to the contrary has been put by the respondents' counsel. If that view is correct then it would not be open for the respondents to contend that the applicants' case must fail as the misleading conduct as found was not as pleaded. See: Banque Commerciale S.A. En Liquidation v. Akhil Holdings Ltd. (1990) 169 CLR 279 at 286-7, 288 and 293, Water Board v. Moustakas (1988) 180 CLR 491 at 497 and Qantas Airways Limited v. Cameron (Full Court of Federal Court of Australia unreported, 14 August 1996).
Three matters of concern arise. The first is that the agreement made between the parties as to quantum was stated to me to be confined to the case "as alleged". It may be open to argument whether the case on which the applicants have succeeded is the case "as alleged". In these circumstances I have concluded that I ought not to act on the agreement as to quantum without hearing the parties on that question.
Secondly, although I have expressed tentative views on the matters set out above in relation to the pleadings and the conduct of the trial, it is my view that it is appropriate to afford the parties the opportunity of being heard on that question. Further, submissions in relation to the agreement on quantum might be relevant to the pleadings issue.
Finally, it has been pleaded and submitted by the respondents that the claims added by the amendments made earlier this year are either statute barred or otherwise out of time. If an issue still arises in that regard by reason of my findings it is appropriate to afford the respondents the opportunity of making submissions in relation to it.
Accordingly, I propose to direct that the parties file written submissions on each of the three matters to which I have referred and on the question of the costs of the proceeding to date. I will then fix a date for any further hearing if that is requested by the parties.
I certify that this and the preceding 38 pages are a true copy of the Reasons for Judgment of the Honourable Justice Merkel.
Associate:
Dated:
Heard: 20, 21, 22, 23 & 24 May.
Place: Melbourne
Judgment: 17 September 1996
Appearances: Mr. M. Shatin Q.C. with Mr. R.D. Shepherd instructed by Rigby Cooke appeared for the applicants.
Mr. P. Searle instructed by Corrs Chambers Westgarth appeared for the respondents.
