Federal Court Dismisses Appeal Over Misrepresented Business Turnover

OUTCOME: Dismissed

FEDERAL COURT OF AUSTRALIA

[APPELLANT] v [APPELLANT] [2006] FCA 41 TRADE PRACTICES – appeal – misleading or deceptive conduct – purchase of [NAME] - misrepresentation of turnover – finding that misrepresentation corrected before conclusion of sale – finding of no reliance – no inadequacy in reasons of Federal Magistrate – no error in credibility findings – no material errors in evidentiary rulings and findings – no basis for appellate court to reach a different conclusion

Trade Practices Act 1974 (Cth) s 52 [NAME] 1895 (WA) s 7, 23 Federal Court Rules O 80 r 4 Browne v Dunn (1893) 6 R 67 [NAME] v [COMPANY] (1986) 66 ALR 613 [COMPANY] v [COMPANY] (No 2) (2002) 6 VR 1 [NAME] v Percy (2003) 214 CLR 118 Halge v George [2004] WASCA 141 [NAME] v [COMPANY] [2004] NSWCA 432 Jones v Dunkel (1959) 101 CLR 298 [COMPANY] v York (1935) 54 CLR 134 [NAME] v [COMPANY] (1991) ATPR 41-125 Mifsud v Campbell (1991) 21 NSWLR 725 [COMPANY] v [COMPANY] (1992) 110 ALR 449 [COMPANY] v [NAME] & Agency Company [COMPANY] (1993) 41 FCR 229 [COMPANY] v Massoud [1989] VR 8 Warren v Coombes (1979) 142 CLR 531

[APPELLANT] and [NAME] [APPELLANT] v [NAME] [APPELLANT] and [NAME] [APPELLANT] and [APPELLANT] 139 of 2005 NICHOLSON J 6 FEBRUARY 2006 [APPELLANT]

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY WAD 139 OF 2005

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN: [APPELLANT]

[NAME]

[APPELLANT] OF ORDER: 6 FEBRUARY 2006

[APPELLANT]

THE COURT ORDERS THAT: 1. The appeal be dismissed 2. The [NAME] pay the [APPELLANT]' costs of the appeal including the costs and disbursements of counsel appearing for the [APPELLANT] pursuant to O 80 r 4 of the Federal Court Rules. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY WAD 139 OF 2005

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

[APPELLANT]

[NAME]

AND: [NAME] [APPELLANT]

[NAME] [APPELLANT]

JUDGE: NICHOLSON J

DATE: 6 FEBRUARY 2006

PLACE: [APPELLANT] FOR

JUDGMENT 1 The [NAME] appeal from a judgment of the Federal Magistrates Court delivered on 20 May 2005. In his judgment, the Federal Magistrate ([NAME]) dismissed an application of the [NAME] brought on the ground of an alleged breach of the Trade Practices Act 1974 (Cth) as a consequence of misleading or deceptive conduct or conduct likely to mislead or deceive on the part of the first and second [APPELLANT]. The orders sought by the [NAME] include a declaration that the whole of a contract in writing dated 10 January 2004 between the [NAME] and the [APPELLANT] be void ab initio and further that the first and second [APPELLANT] refund to the [NAME] the sum of $51 000. Additionally orders are sought in terms of damages against each of the [APPELLANT], interest and other appropriate relief. 2 By direction of the Chief Justice dated 1 August 2005, the appeal was assigned to be heard by a single judge.

background circumstances 3 The issues in dispute arose as the consequence of the purchase by the [NAME] of a [NAME] ('the business') from the [APPELLANT]. The [APPELLANT] was the [APPELLANT]' selling agent. The [APPELLANT]'s consultant Mr [APPELLANT] had the responsibility for the relevant dealings for it with the [NAME]. 4 There was no issue before the Federal Magistrate that on 7 August 2003 the first named first [APPELLANT] ('Mr [APPELLANT]') told the [APPELLANT] that the average weekly turnover of the business was 'approximately $4000' and the [APPELLANT] had represented to the [NAME], via an internet advertisement, that the weekly turnover was 'around $4000'. There was no issue that the actual turnover was in the order of $2000 to $2500 per week; that is, 50 to 62.5 per cent of the represented turnover. 5 A meeting took place between the [NAME], the [APPELLANT] and [NAME] on 8 January 2004 ('the Meeting'). The issue in the hearing of the application was whether, at the Meeting, Mr [APPELLANT] falsely perpetuated the initial misrepresentation as to the turnover figure, or whether he corrected it in such a way as to remove the misleading or deceptive effect of the earlier misrepresentation. 6 His Honour made the following findings of fact: (i) Mr [APPELLANT] did not show the first named appellant ('Mr [APPELLANT]') or the [NAME] jointly falsified figures at the Meeting; (ii) Mr [APPELLANT] showed Mr [APPELLANT] documents identified in Mr [APPELLANT]' affidavit; (iii) Mr [APPELLANT] did correct the earlier errors or misrepresentations in relation to the gross weekly takings of the business at the Meeting; (iv) the [NAME] did not rely on the representations in either an internet advertisement or a sales brochure given by [NAME] to Mr [APPELLANT] at the Meeting; (v) the [NAME] did not rely on any of the representations made by Mr [NAME]. 7 On 10 January 2004 Mr [APPELLANT] on behalf of the [APPELLANT] negotiated the purchase price of $51 000 with the [NAME]. This was contained in an Agreement for Sale of Business ('Sale Agreement') concluded in writing on that date. 8 It is not in dispute that neither the [APPELLANT] or the [APPELLANT] did anything to document the correction of the turnover figure given on 8 January 2004. It was not noted on the Sale Agreement. 9 The [NAME]' case at trial was essentially that at the Meeting Mr [APPELLANT] had given them handwritten figures that showed a daily turnover of between $750 and $800. Mr [APPELLANT] retained those papers. The [NAME] were satisfied that those figures substantially confirmed the represented turnover of $4000 per week. 10 The [APPELLANT], who were self-represented, claimed that on or about the day before the Meeting, Mr [APPELLANT] had discovered for the first time that the represented turnover figure was wrong and that the true turnover was only in the order of $2000 to $2500 per week. Mr [APPELLANT]'s evidence was that at the Meeting he had shown Mr [APPELLANT] some handwritten figures informing him of the true turnover. 11 The affidavit evidence for the [APPELLANT] was given by Mr [APPELLANT]. His evidence was that he and his wife had purchased the business in November 2002 for $47 000. His affidavit did not include any explanation for the previous misrepresentation of turnover to Mr [APPELLANT], made on 7 August 2003. In cross-examination Mr [APPELLANT] said he and his wife decided to run the business for 12 months without concerning themselves with the day-to-day financial aspects of the business. Nevertheless, in August 2003 the [APPELLANT] decided to sell the business. Mr [APPELLANT] testified that he told Mr [APPELLANT] the turnover was $4000 per week on the basis of the financial accounts the previous owner had given to him. 12 The cross-examination of Mr [APPELLANT] on these issues ran as follows. He testified that he had told Mr [NAME] he was not aware of any circumstances likely to adversely affect the profitability of the business. Although he and his wife had operated the business for eight or nine months, they were not aware they were making a loss. He was not aware that they were not achieving sales or turnover of $200 000 per annum or $4000 per week or daily takings of $800 a day required to sustain the figures of $4000 per week. They were drawing on their savings to live. The reason they had bought the business was that they were looking forward to retirement. They both had medical problems. Mrs [APPELLANT] was in remission from cancer. They had received medical advice to avoid stress. They made the decision to only go into the business if they could borrow enough money to set themselves up for 12 months operation without the worry of day-to-day financial problems. Provided the money was in the [COMPANY] to pay the creditors and the bills, they were not going to concern themselves with the financial day-to-day running of things. At the end of the 12 months they had planned to have the accountant draw up their profit and loss and, from that, make certain decisions concerning the future trading of the business or their future direction. It was therefore always their intention to divorce themselves from the day-to-day financial requirements, other than paying bills, provided the moneys were in the [COMPANY] to cover their debts. 13 Mr [APPELLANT]' evidence was that they drew on savings or moneys in the [COMPANY] to pay their day-to-day expenses. The business operated a separate trading account. They had other accounts, mainly from the disability pension which gave them another source of income in a separate account. They were not living off the profits of the business. He did not know at the time it was not making a profit. There were no drawings made from the business for the first 12 months as originally planned. It was not until Mr [APPELLANT] had requested the current daily takings that Mr [APPELLANT] learned the business was not making a profit. He denied having said to Mr [NAME] that there had been no change, knowing it was making a loss or not caring whether his answer was true or false. 14 In relation to the [APPELLANT], his Honour accepted that in the circumstances before him, the proprietor ([NAME]), was liable for the conduct of [NAME]. His Honour found that neither [NAME] nor [NAME] were simply passing on information supplied to them by Mr [APPELLANT] and were not 'mere conduits'. He also found that they were not merely passing on the information concerning the gross takings of the business 'for what it is worth', disclaimers not having been present in the sales brochure prepared by them or in their internet advertisement. 15 It will be convenient to further refer to the findings and reasoning of his Honour in connection with the grounds of appeal.

grounds of appeal 16 There are 12 separate grounds of appeal with substantial overlap between them. As summarised in submissions for the [APPELLANT], they raise the following issues: (a) an alleged failure of the Federal Magistrate to give adequate reasons in relation to the evidence of Mr [APPELLANT] as to what occurred at the Meeting; (b) issues of credibility as raised directly or indirectly through various grounds; (c) evidentiary issues arising from the application by the Federal Magistrate of the rule in Jones v Dunkel (1959) 101 CLR 298.

ground one: inadequacy of reasons regarding meeting 17 The first ground raises the issue of whether his Honour erred in fact and in law in failing to give adequate reasons for preferring the evidence of Mr [APPELLANT] to that of the [NAME] concerning what occurred at the Meeting. The ground particularises this by reference to a failure to refer to material inconsistencies in Mr [APPELLANT]' evidence; a failure to consider a number of factors relevant to the relationship of the turnover with the purchase price; and the inadequacy of reasons generally. 18 The ground is supported by reference to the duty of a court to give adequate reasons as extrapolated in [COMPANY] v [COMPANY] (No 2) (2002) 6 VR 1 at 43, at [157] and at 44, at [164]; Mifsud v Campbell (1991) 21 NSWLR 725 at 728; Halge v George [2004] WASCA 141, at [38]-[40]; [NAME] v [COMPANY] [2004] NSWCA 432 at [36]-[40]. The adequacy of reasons will depend on whether the appeal court is unable to ascertain the reasoning upon which the decision is based or justice is not seen to have been done: [COMPANY] v Massoud [1989] VR 8 at 18.

FIRST PARTICULARISATION: MATERIAL INCONSISTENCIES 19 The relevant paragraphs of his Honour's reasons are: '88. I accept that [NAME] may well have asked Mr and Mrs [APPELLANT] for more recent figures than the June 2002 figures which were provided. I also accept that Mr [APPELLANT] might have told Mr [APPELLANT] than [sic] more recent figures were not available. Further, I accept that Mr [APPELLANT] could have analysed his daily banking records or obtained or calculated accurate records relating to the [NAME]'s gross daily or weekly takings from other sources.

89. I accept that Mr and Mrs [APPELLANT] should have been aware that the daily takings were substantially less than $800.00 and that they should have carefully analysed the figures at a much earlier stage than they did. I find that Mr [APPELLANT] is indeed likely to have suspected that the daily takings were substantially less than $800.00, but I find that he did not satisfy himself that that was the case until he prepared the figures presented to Mr [APPELLANT] at the Meeting. Having extracted those figures, I find that he disclosed them to Mr [APPELLANT].' 20 Critical to an understanding of these paragraphs is the finding previously made by his Honour of the evidence of Mr [APPELLANT] concerning the manner in which he and his wife approached the management of the business, expressed in the following paragraph: '82. I do not accept that the information provided by Mr [APPELLANT] to [NAME] on 7 August 2003 was "knowingly false". I accept Mr [APPELLANT]'s evidence as to the 12 month plan, and accept his description of his relative inattention to the financial health of the business during the period leading up to its sale. Mr and Mrs [APPELLANT] suffered from the health problems described by Mr [APPELLANT], and their decision to sell the business was reasonable in the circumstances. There is nothing illogical or unreasonable about their 12 month plan, and the evidence was to the effect that they borrowed sufficient funds (secured against their house) for the very purpose of tiding themselves over for that period. In such circumstances, and having regard to the findings that I have made, it is understandable that Mr [APPELLANT] would not have paid careful attention to the financial health of the business. I note, as well, that various expenses were met from the gross takings of the business (including the mortgage payments) — which would have made a systematic, detailed analysis of the financial health of the business more difficult than might otherwise have been the case.' 21 Further, he had made an important credibility finding, namely: '80. I was (of course) present throughout the trial. I saw and heard all the witnesses. I also saw and heard Mr [APPELLANT] as a self-represented litigant. I make no finding to the effect that Mr and Mrs [APPELLANT] are generally dishonest witnesses. I find, however, that I prefer Mr [APPELLANT]'s evidence where it is [sic] conflict with that of Mr and Mrs [APPELLANT] (or either of them).' 22 In my opinion, read in this context and in the light of the case law on the judicial duty to give reasons, there are not material inconsistencies in [88] and [89] or between them and other evidence of such character as would properly lead to a conclusion of inadequacy of reasoning.

second particularisation: inconsistencies concerning turnover 23 There are four sub-particularisations to this sub-ground. In the first and second it is said his Honour failed to consider the unchallenged evidence of the [NAME] that they had looked at other lunch bars for sale and the price of $51 000 was based on a turnover of $4000 per week based on their comparisons of asking prices to turnover of other lunch bars. Under cross-examination by counsel for the [APPELLANT], Mr [APPELLANT] testified that if the turnover was in the order of $2500 per week he would expect the price to be around $25 000 to $30 000; Mrs [APPELLANT] considered that with turnover at $4000 a week it was fair enough to make an offer at around $45 000. 24 His Honour found at [113] that 'at the end of the day' neither of the [NAME] had relied on any of the representations made by Mr [NAME]. He continued: '115. In [NAME] v [NAME] & [COMPANY] (1990) 26 FCR 112, it was held that: A case may perhaps be imagined where an applicant is so negligent in protecting his own interests that there will be a finding of fact that the representation complained of was not in the circumstances a real inducement to his entering into a contract. In such a case the element of causation between misrepresentation and damage will have been severed by the intervention of the negligence of the applicant.

116. Whether or not the attitude and conduct of Mr and Mrs [APPELLANT] can fairly or appropriately be described as "negligence", I find that the principles set out in the previous paragraph of these Reasons adhere in the circumstances of the case now before me. The purchase was on a "walk-in walk-out" basis, but Mr and Mrs [APPELLANT] took no (or no effective) steps whatsoever to properly inspect the plant and equipment or carry out a realistic stock take. I have already commented upon their attitude in relation to the sale generally.' Further, given his Honour's findings that inaccurate turnover was corrected at the Meeting, any issues concerning price and turnover of other lunch bars was irrelevant. 25 The third and fourth sub-particularisations are that among the evidence not considered was that stating the [APPELLANT] purchased the business for $47 000 on the basis of turnover of $200 000 per annum, being approximately $4000 per week; and evidence that Mr [NAME] had invited the [NAME] to make an offer of $58 000. Again, once his Honour had made the credibility finding in favour of the [APPELLANT] and their evidence of how they approached knowledge of the profitability of their business, these were irrelevant factors and the absence of reference to them does not establish any inadequacy in the reasons. 26 The general contention of inadequacy of reasons cannot, in the circumstances of the credibility finding and its import, assist the [NAME]. The acceptance of the [APPELLANT]' account of how they approached their business was of profound importance for the application of the relevant law concerning misleading or deceptive conduct and for the resolution of the case and hence to the reasoning of his Honour. The credibility finding was one which his Honour was entitled to make and the absence of express reference by way of criticism of the evidence of the [NAME] is not a necessary pre-condition of the finding. Having found the [NAME] were not dishonest, his Honour nevertheless – taking into account the requirements of demeanour as considered by him in [79] – preferred the evidence of Mr [APPELLANT]. By that, his Honour was saying that despite the unusual approach which the evidence of Mr [APPELLANT] disclosed, he believed him and, importantly, did not consider such evidence a contrivance meriting disbelief. His reasons were completely adequate to convey that finding.

grounds two and three: Mrs [APPELLANT]' knowledge 27 Ground two asserts that his Honour should have found that Mr [APPELLANT]' correction of the turnover on 8 January 2004 did not remove the effect of the earlier misrepresentation because neither the [NAME] or alternatively Mrs [APPELLANT] understood the true position concerning turnover after the Meeting. Ground three asserts that his Honour either failed to find whether the [NAME] understood the correct position concerning the turnover after the Meeting or to give adequate reasons for any implicit finding to that effect. 28 The [NAME]' case was that both [NAME] were at the Meeting when Mr [APPELLANT] confirmed the turnover of approximately $4000 per week. His Honour found that at the time of [NAME] presenting the correcting information to Mr [APPELLANT], Mrs [APPELLANT] was elsewhere engaged in the room. His Honour then stated at [94(f)] that he did not exclude the possibility that Mr [APPELLANT] failed to tell his wife about the true effect of the figures shown to him by Mr [APPELLANT] at the Meeting. He also stated that little turned on the issue and went on to say that he had found Mr [APPELLANT] dealt with Mr [APPELLANT] and accurately disclosed the relevant figures to him. 29 The [NAME] contend the issue was whether what occurred at the Meeting removed the misleading effect of the earlier misrepresentation. The submission is made that even if Mr [APPELLANT] knew the true position (which is disputed) his knowledge would not be imputed to Mrs [APPELLANT]: [NAME] v [COMPANY] (1991) ATPR 41-125 at 52,859; [NAME] v [COMPANY] (1986) 66 ALR 613; [NAME], The Law of Misleading or Deceptive Conduct, 2nd edn, [NAME], Australia, 2003 at [10.20]. 30 The [APPELLANT] submits that in the absence of a positive finding by his Honour that Mr [APPELLANT] did not advise Mrs [APPELLANT] of the corrected figures on turnover, his knowledge could be imputed to Mrs [APPELLANT] as joint purchaser of the business. 31 The Meeting occurred on 8 January 2004. The Sale Agreement was executed in writing by the [NAME] on 10 January 2004. In it the [NAME] covenanted to purchase the business: no words of severance were used, so that their purchase was as joint tenants. 32 The Sale Agreement did not expressly refer to the [NAME] intending to conduct the business as a [NAME]. Section 7 of the [NAME] 1895 (WA) provides that a [NAME] arises where there is a relationship which subsists between persons carrying on a business in common with a view to profit. Section 23 provides that notice to any partner who habitually acts in the [NAME] business of any matter relating to [NAME] affairs operates as notice to the [NAME], except in the case of a fraud on the [NAME] committed by or with the consent of that partner. [NAME] is authority that where the notice is given prior to the formal constitution of the [NAME], it may not operate as notice to all partners. 33 As stated above his Honour found that little turned on the issue of whether Mr [APPELLANT] had failed to tell his wife about the true effect of the figures shown to him by Mr [APPELLANT] at the Meeting. This was because Mr [APPELLANT] dealt with Mr [APPELLANT] to whom he had accurately disclosed the relevant figures. 34 Even if his Honour implicitly and incorrectly reasoned that notice to Mr [APPELLANT] constituted notice to Mrs [APPELLANT], he was not in error in reaching the view at [94(f)] that little turned on the issue. This is because his ultimate findings were to the effect that the [NAME] did not rely upon any of the representations. Depending on how his Honour's words in the subparagraph are to be understood the ground is therefore either not made out or, if made out, cannot support the orders sought on the appeal.

GROUNDs four AND five: CAUSATION 35 Ground four asserts that his Honour erred in fact and in law in finding that the [NAME] did not rely on the representation that turnover was approximately $4000 per week. 36 The central finding in the reasons on this issue is as follows: '110. To the extent that Mr [APPELLANT] has argued that the manner in which Mr and Mrs [APPELLANT] conducted the business after they took it over is irrelevant to the claims that they made in the proceedings, it is sufficient that I record that I regard Mr and Mrs [APPELLANT]' conduct — from the time that they first saw the initial internet advertisement to the time that they shut the doors of the business on 6 April 2004 — as being a form of continuum. They wanted to do things "their way", and they did. When their evidence is looked at as a whole, I find that, in reality, they did not rely upon any representations — whether made by Mr [APPELLANT], [NAME], or anyone else. They believed that they could make a success of the business, and they believed that they could do so without the input or assistance of anyone outside their family. At the same time, they made no real efforts to investigate the true financial position of the business, or to ensure that it could run efficiently and successfully after they took it over. It is in that context that my finding to the effect that Mr [APPELLANT] made a full disclosure of the actual gross takings for the business for the relevant three month period at the Meeting is to be situated. It is entirely consistent with the overall attitude of Mr and Mrs [APPELLANT] that they simply did not care what the true figures were. For whatever reason, they decided that they wanted to acquire the business and that they were going to conduct it in whatever manner they saw fit.' 37 In [113] his Honour recognised that the result of the proceeding would have been different if he had concluded that the [NAME] had relied, even to some extent, on Mr [NAME] representations. In [114] he stated that even if it were not the case that the [NAME] had failed to take reasonable care of their interests, they had not demonstrated that they were induced (by anyone, or by any representations – true or false) to do anything giving rise to loss or damage on their part. 38 There is no essential illogicality in the finding that there was no reliance on earlier representations concerning turnover and the fact that the Meeting was called for the purpose of verifying turnover. His Honour found that at the Meeting the inaccuracy concerning turnover was corrected and consequently there was no reliance on the earlier representations. 39 Ground five asserts his Honour erred in fact and in law in finding the [NAME] had a 'cavalier' attitude to running the business and were 'inept' in their attempts to effectively do so. Ground four relies also on assertions that the finding of cavalier attitude had led to the inference of non-reliance that it was not reasonably open to do so. 40 At [95]-[107] of his reasons, his Honour dealt with aspects of the [NAME]' case which he considered to be of concern. His findings in [110] cited above followed from those considerations. At [98] his Honour stated that the evidence revealed that the [NAME] had their own idiosyncratic view of the likely profitability of the business, namely that profit should amount to approximately 25 per cent of gross takings. At [49]-[52] he gave reasons for the finding that the [NAME] had conducted the business ineptly. The reasons include reference to relevant evidence. 41 Whether or not the [NAME] were 'cavalier' and 'inept' in the running of the business bears no relation to the issue of reliance. This is because the [NAME] did not rely on the representation as it was corrected at the Meeting. Such findings can only have relevance to the issue of contributory negligence and/or damages. 42 As examination of the abovementioned paragraphs makes apparent, there clearly was evidence to support the finding of a cavalier attitude and ineptitude on the part of the [NAME]. In my view it was open on the evidence for his Honour to characterise the evidence on this issue as he did and not to find, as the [NAME] urge, that they dealt with the business in the exercise of legitimate commercial judgment and managerial prerogative. 43 Evidence of alleged ineptitude on the part of the [APPELLANT] or the views of the [APPELLANT] on how the business could be improved are irrelevancies to the ground as is the evidence of the actual results resulting from the [NAME] operation of the business.

ground six: Mr [APPELLANT]' admission by conduct 44 On the third day after the [NAME] took over the business, Mrs [APPELLANT] complained to Mr [APPELLANT] that she could not understand how the takings, as represented by the [APPELLANT], could be sustained on the customer activity which the [NAME] were experiencing. Mr [APPELLANT] immediately wrote to the [APPELLANT] asking whether they would be able to spend time with Mrs [APPELLANT] to explain this to her and telling them they had a responsibility to support the figures which they maintained were valid. In response Mr [APPELLANT] visited the business. His evidence in cross-examination reproduced at [36] was that he had lengthy discussions with Mrs [APPELLANT]' mother in relation to what food was being prepared and how it was being prepared. He testified he had not written to the [NAME] to correct any misapprehension about the figures because he did not want to get involved in any dispute between the [NAME] on the information that had passed between them (his earlier evidence being that at the Meeting Mrs [APPELLANT] was not present at the table when the figures were given to Mr [APPELLANT] of the current daily figures). There was no evidence from any party that there was any reference to turnover when Mr [APPELLANT] attended at the premises. 45 The [NAME] submit that Mr [APPELLANT]' response to the letter and his failure to refute the allegation could only properly have been construed as a clear admission: [COMPANY] v York (1935) 54 CLR 134 at 143. The submission is that Mr [APPELLANT] had not responded in a way consistent with the allegation put to him by [NAME]. 46 His Honour dealt with these issues in [94(i)]: 'It is not the case that Mr [APPELLANT] "did not respond" to Mr [APPELLANT] letter of 4 February 2004. Mr [APPELLANT]'s evidence was that he went to the shop the following day to, in effect, sort things out. The evidence does not reveal that Mr [APPELLANT] took any steps – at that meeting – to "correct" the statement in Mr [NAME] letter to the effect that the represented gross takings of the business were $4,000.00 per week. …' 47 From this it is apparent that his Honour accepted the explanation of Mr [APPELLANT] of what occurred in the circumstances. His explanation was therefore found to be acceptable so that there was no room for his conduct to constitute an admission on the basis of it being otherwise unexplained. Additionally, his explanation removed the possibility of inconsistency between the allegation and his conduct because it explained that he chose to avoid engagement in a dispute between each of the [NAME] on the conveyance of information previously provided to Mr [APPELLANT].

ground Seven: the absence of any challenge by mrs [APPELLANT] 48 Also as part of [94(i)] his Honour said: '… Of equal significance, however, is the fact that Mrs [APPELLANT] does not appear to have pressed the subject with Mr [APPELLANT] either. It does not appear from her evidence that the alleged representation was mentioned at all. In my opinion, Mrs [APPELLANT]' failure to directly challenge Mr [APPELLANT] on the alleged misrepresentation when he attended at the shop is almost inexplicable. It was certainly unexplained.' 49 Under this ground the [NAME] contend that there was no evidence either way on whether Mrs [APPELLANT] had pressed the issue of turnover. Additionally it is contended that there was an inconsistency between her having pressed the issue with Mr [APPELLANT] and not having pressed it with Mr [APPELLANT]. Therefore it is submitted it was improper for his Honour to make the finding which he did when the issue had not been put to Mrs [APPELLANT] in cross-examination. Further, the absence of any evidence was explicable on the basis that evidence of out-of-court complaints of misrepresentation would have been inadmissible hearsay if led in chief: [NAME] on Evidence, 6th edn, [NAME], Australia, 2000. Even if Mrs [APPELLANT] did not make the complaint at the meeting at the business, it is submitted by the [NAME] that could not reasonably justify drawing a conclusion adverse to her credibility in circumstances where she had already made a complaint concerning the issue to [NAME]. The [NAME] therefore quarrel with his Honour's use of the description 'of equal significance' in the circumstances. 50 The [APPELLANT] submits that in cross-examination by Mr [APPELLANT], Mrs [APPELLANT] testified that she could not recall everything he said to her so that her evidence could not therefore assist her on this issue. 51 Further the [APPELLANT] states that when Mr [APPELLANT] attended the business it was subsequent to the Meeting and so subsequent to the correction of any inaccuracy in relation to turnover. Mr [APPELLANT] would therefore have attended his meeting with Mrs [APPELLANT] on the understanding that Mr [APPELLANT] had the correct understanding and he did not want to get into a dispute between them on whether Mrs [APPELLANT] had been so informed. 52 The [APPELLANT] also submits that his Honour would have been entitled to draw an adverse inference from the fact that there is no evidence Mrs [APPELLANT] pressed the issue of turnover with Mr [APPELLANT]. 53 In my opinion the ground is incapable of sustaining the appeal even if resolved in favour of the [NAME]. This is because it is directed to a limited fact which cannot effect the conclusion on causation.

GROUNDS eight AND nine: DRAWING OF INFERENCES 54 In [37] of his Honour's reasons it is recited that on 19 February 2004, some two and a half weeks after the [NAME] had taken over the business, they arranged for their solicitors to write to the [APPELLANT] stating, in part, that there had been a breach of the 'Fair Trading Act' and gross misrepresentations had been made to them in relation to 'the profitability of the business, stock and the working order of plant'. It further advised that the [NAME] would therefore not be taking up the three year lease. At [38] his Honour found that the solicitor's letter showed that the [NAME] did not allege at that early stage that misrepresentations had been made in relation to the turnover or gross takings of the business and that this was in contradistinction to their claims made in that Court. 55 Ground eight asserts there was no such inconsistency; it was not put to either of the [NAME] in cross-examination; the Federal Magistrate did not put the [NAME]' counsel on notice of his intention to make a finding adverse to the [NAME] that issue (Browne v Dunn (1893) 6 R 67); and in any event Mrs [APPELLANT] had already complained to Mr [APPELLANT] on 4 February 2004 concerning the 'takings' of the business. 56 At [39] his Honour referred to a letter from the [NAME]' solicitors to the agent of the landlord of the premises upon which the business was conducted. It advised that the [NAME] 'do not intend at this stage to sign the assignment of lease' and also stating they would be seeking to rescind the contract. It requested that the proposed lessors put on hold for two or three months the signing of the assignment 'at this stage'. At [41] his Honour drew the inference that the [NAME] were not then closing their mind to the possibility of entering into the lease agreement at some time in the future. 57 Ground nine asserts the letter, properly construed, was an attempt by the [NAME] to preserve the status quo and the benefit of the lease for the [APPELLANT] consistent with the [NAME]' rescission of the sale agreement to enable them to return the business to the [APPELLANT]. It also asserts that there was an absence of cross-examination on the issue and of notice of the intention to draw an adverse inference. 58 The [NAME] submit that the Court is in as good a position as his Honour to draw the appropriate conclusion concerning the letters: Warren v Coombes (1979) 142 CLR 531 at 551; [NAME] v Percy (2003) 214 CLR 118 at 126-127, at [25]. 59 Each of the letters the subject of these grounds was subsequent to the [NAME]' decision to purchase the business. They are therefore redundant to the fundamental finding that there was no reliance on the representation concerning turnover. The inferences are not in their terms apparently adverse in any event.

grounds 10 and 11: jones v dunkel 60 At [83] his Honour referred to accountant's financial statements received by Mr [APPELLANT] revealing that the gross takings of the business were significantly less than $4000 per week. He then stated that the fact that Mr [APPELLANT] did not call his accountant was of little significance. Mr [APPELLANT] was self-represented. Further the existence of the statements had been known to the [NAME]' solicitors for months before the trial so they could have arranged for the accountant to give evidence if they had thought the evidence may have assisted their case. 61 Ground 10 asserts that the fact of self-representation was not a proper basis for declining to draw an inference adverse to the [APPELLANT] by reason of their failure to call a material witness. It also asserts that the fact the [NAME]' solicitors had been aware of the existence of the statements was irrelevant and the fact that the [NAME] could have taken steps to have the accountant appear was not a proper basis for declining to draw an adverse inference against the [APPELLANT]. 62 In my view this is not a case of self-representation being utilised to avoid the drawing of an adverse inference. Rather it is the case where there was no necessity for the witness to be called. The accountant could not give evidence as to whether the incorrect turnover figure had been corrected. I agree that if the accountant could have given evidence concerning the business plan of the [APPELLANT], that could have gone to credibility but not to the fundamental issues before the Court. 63 At [84] his Honour referred to the fact that Mrs [APPELLANT] had not given evidence and stated that the rule in [NAME] v Dunkel did not assist the [NAME]. He stated at [85] that Mrs [APPELLANT] did not give evidence because of her state of health (being in remission from cancer) and because Mr [APPELLANT] was available to give evidence for both of them. In any event, said his Honour, she could not have given direct evidence on what the [NAME]' counsel at trial had said was the central issue of fact, namely whether Mr [APPELLANT] corrected the earlier misrepresentations at the Meeting. He therefore concluded there was a reasonable explanation for not calling Mrs [APPELLANT]. 64 Ground 11 asserts that this reasoning was in error because there was no evidence that Mrs [APPELLANT] had not given evidence because of the state of her health. Additionally, the availability of Mr [APPELLANT] was not a proper basis for declining to draw an inference against the [APPELLANT] because of Mrs [APPELLANT]' failure to give evidence. 65 As his Honour said, Mrs [APPELLANT] could not have given direct evidence concerning the discussions at the Meeting and so could not have assisted in determining the fundamental issue before the Court. No material adverse inference arises from the fact that she was not called.

ground 12: PREFERENCE OF MR [APPELLANT]' EVIDENCE 66 Ground 12 asserts his Honour erred in fact and in law in preferring Mr [APPELLANT]' evidence to Mr [APPELLANT] as to the existence of other potential purchasers to whom Mr [APPELLANT] showed figures of the business. 67 At [93] his Honour stated that the existence of the 'other potential purchasers' referred to by Mr [APPELLANT] and to whom Mr [APPELLANT] allegedly showed figures, was not put to Mr [APPELLANT]. He preferred Mr [APPELLANT]' evidence in relation to this issue to that of Mr [NAME]. 68 Again the issue raised by the ground is not one which can touch the basic issue of whether the [NAME] relied on a representation concerning turnover.

THe fundamental issue: non-reliance 69 Reference has been made throughout these reasons to the fundamental issue which was before the Court, namely the issue of reliance. Although each of the grounds of appeal has been addressed in detail, some of them, even if made out, could not assist the [NAME] because they do not assist in disclosing error in the fundamental findings relating to reliance. The fundamental issue as formulated to his Honour by counsel for the [NAME] was whether Mr [APPELLANT] corrected the misrepresentation at the Meeting or whether he presented false figures consistent with the represented gross takings. At the risk of undue repetition, it was the finding of his Honour that on the balance of probabilities Mr [APPELLANT] did not show Mr [APPELLANT] or the [NAME] jointly falsified figures at the Meeting. He further found that at the Meeting Mr [APPELLANT] showed Mr [APPELLANT] certain documents and did correct the earlier errors or misrepresentations in relation to the gross weekly takings of the business. Not only did he find that the [NAME] had not discharged the onus of proof but he also found that the [NAME] conduct in all the circumstances revealed a failure by them to take reasonable care of their own interests such that the element of causation between the alleged misrepresentation and damage was severed by the intervention of the conduct of the [NAME]. 70 In finding that there was not relevant nexus between the conduct complained of and the alleged loss or damage suffered and in finding that there was no relevant reliance by the [NAME], his Honour proceeded in accordance with the principles stated by the High Court in [COMPANY] v [COMPANY] (1992) 110 ALR 449. He made the findings fully cognisant of the causative threshold necessary to attach liability for misleading and deceptive conduct under s 52 of the Trade Practices Act: [COMPANY] v [NAME] & Agency Company [COMPANY] (1993) 41 FCR 229 at 235. 71 Examining the reasons of his Honour therefore in the light of both the particularity of the grounds of appeal and the fundamental issue which permeates many of the grounds and the reasons, I do not consider that reading the reasons in the context of the findings and conclusions involving elements of fact, degree, opinion and judgment, an appellate court would be warranted in reaching a different opinion from the court at first instance.

conclusion 72 For the above reasons I consider the appeal must be dismissed. 73 There should be as against the [NAME] an order to pay the [APPELLANT]' costs. 74 The [APPELLANT] were represented as the consequence of the issue of a certificate under O 80 r 4 of the Federal Court Rules. I consider that this is an appropriate case in which the costs order should expressly cover the costs and disbursements of counsel appearing pro bono pursuant to that Order. I certify that the preceding seventy-four (74) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholson.

Associate: Dated: 6 February 2006

Counsel for the [NAME]: [COUNSEL]

Solicitor for the [NAME]: [NAME] & [APPELLANT] Counsel for the [APPELLANT]: [NAME]

Counsel for the [APPELLANT]: [[APPELLANT]]

Solicitor for the [APPELLANT]: [[APPELLANT]]

Date of Hearing: 17 November 2005

Date of Judgment: 6 February 2006