Accredited Aged Care Facilities Pty Ltd v Banyan Tree

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 7575 of 2000

ACCREDITED AGED CARE FACILITIES PTY LTD	Plaintiff
v
BANYAN TREE (AUST) PTY LTD and FRANCESCO MANCUSO	Defendants
and
COOPER NEWMAN PTY LTD and JOHN NEWMAN	Third Parties

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AND

No. 5501 of 2002

COOPER NEWMAN PTY LTD	Plaintiff
and
BANYAN TREE (AUST) PTY LTD	Defendant

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JUDGE:	McDonald J
WHERE HELD:	Melbourne
DATE OF HEARING:	30 and 31 May and 3, 4, 5, 6, 7, 11, 12, 13 June 2002
DATE OF JUDGMENT:	28 June 2002
CASE MAY BE CITED AS:	Accredited Aged Care Facilities Pty Ltd v Banyan Tree and ors
MEDIUM NEUTRAL CITATION:	[2002] VSC 261

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Contract: complete and clear in essential terms; consideration; repudiation and breach by a party; remedy not pursued by other party in consequence of misleading and deceptive conduct constituting contravention of s. 52 of Trade Practices Act (C’th); corporation acting by and through director; s. 75B(1) Trade Practices Act; liability of director; assessment of damages.

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Proceeding No. 7575/2000

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P. Riordan	Dandanis & Associates
For the Defendants	Mr R. Edmunds	Lou Castellano
For the third Parties	Mr A. Rodbard-Bean	Moores Legal

Proceeding No. 5501/2002

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr A. Rodbard-Bean	Moores Legal
For the Defendant	Mr R. Edmunds	Lou Castellano

HIS HONOUR:

Action No. 7575 of 2000, in which Accredited Aged Care Facilities Pty Ltd is the plaintiff, was commenced by writ filed on 13 November 2000. By the statement of claim endorsed on the writ the plaintiff alleged that pursuant to an agreement entered into between it and the first defendant, Banyan Tree (Aust) Pty Ltd (“Banyan Tree”), on or about 21 May 1999, Banyan Tree agreed to sell to it the business of the Edgelea Aged Care Facility, also referred to in some documents as Edgelea Private Nursing Home (“the Edgelea Facility”), owned and operated by it including the 80 “bed licences” it owned, for the sum of $2M, being $25,000 per “bed licence”. The plaintiff alleged that there were terms of the agreement which included: that the date of sale was 1 June 1999; that the purchaser would pay a deposit of $100,000 of which $10,000 was provided; that the balance of the purchase moneys would be paid on 1 September 1999 or earlier by mutual agreement; that immediately after exchange of contracts application would be made by the purchaser and the vendor to the Commonwealth for transfer of ownership of the bed “licences” to facilitate a settlement on 1 September 1999; that in relation to the purchaser obtaining approval in principle to relocate the beds to “Central Park” at K15 Raleigh Street, Windsor, the vendor made no representation that this could in fact be done; that the purchaser would indemnify the vendor against all claims by the lessor that may result by the purchaser relocating the “bed licences” from the date of assignment to the expiration of the lease; that the vendor acknowledged that it had not made any representations to the lessor that the licences were tied to the site and further that the vendor warranted that all documents and leases provided to the purchaser were true and accurate to the knowledge of the vendor.

The plaintiff alleged that on 17 May 1999 a part deposit of $10,000 was paid on behalf of the plaintiff to the defendants' real estate agent which was authorised by the defendants to sell the Edgelea Facility, Cooper Newman Pty Ltd (“Cooper Newman”). The plaintiff further alleged that in breach of the agreement Banyan Tree wrongfully refused to sell the “bed licences” to the plaintiff and evinced an intention to no longer be bound by the agreement and thereby repudiated the same. The plaintiff alleged that in consequence it suffered loss and damage.

Further, by its statement of claim, the plaintiff alleged that on or about 21 May 1999 Banyan Tree by its authorised agent, John Newman, represented to the plaintiff that there existed an agreement between the plaintiff and Banyan Tree for the plaintiff to purchase the Edgelea Facility on terms including those that I have referred to, and that acting on that representation and induced thereby it acted to its detriment in that it refrained from seeking to purchase 80 “bed licences” from another person or other persons at the relevant time for $25,000 per “bed licence”. The plaintiff alleged that Banyan Tree was thereby estopped from denying the existence of the agreement. The plaintiff further alleged that the second defendant, Mancuso, who was a director of the first defendant, Banyan Tree, and who it was alleged had the day-to-day control of its affairs, represented to the plaintiff by a letter dated 31 May 1999 addressed to its agent, John Newman, that Banyan Tree's acceptance of the plaintiff's offer to purchase the Edgelea Facility was subject to pre-emptive rights of other parties being exercised, but that such representation was untrue in that the represented pre-emptive rights did not exist. The plaintiff alleged that that representation was misleading and deceptive or likely to mislead and deceive the plaintiff and constituted a breach of s. 52 of the Trade Practices Act 1979 (C’th) and s. 11 of the Fair Trading Act 1999, and that in consequence the plaintiff suffered loss and damage. As against the second defendant, the plaintiff further alleged that he aided, abetted, counselled and procured and/or conspired to effect the acts of Banyan Tree and had directly and/or indirectly knowingly been concerned in and had been a party to each of the acts of Banyan Tree and its breach of s. 52 of the Trade Practices Act.

By their amended defence the defendants, while admitting that Banyan Tree owned and operated the Edgelea Facility, an 80 bed Commonwealth registered facility, and that the second defendant, Mancuso, was a director and shareholder of Banyan Tree, they denied that there was a binding agreement between the plaintiff and the first defendant for the sale of the Edgelea Facility entered into on or about 21 May 1999 or at any time. The defendants alleged that there was no concluded agreement entered into between the parties as to the essential terms of any agreement, that there was no consideration for the alleged agreement and that there was no identified purchaser of the business of the Edgelea Facility. The defendants admitted that Cooper Newman was authorised by Banyan Tree to sell the Edgelea Facility including the 80 “bed licences” it owned. However, they alleged that such authority was conditional upon any purchaser acquiring the “bed licences” and the business of the Edgelea Facility and the lease of the premises where the business was conducted, as a going concern. The defendants further alleged that if there was an agreement as contended for by the plaintiff that such agreement was procured by unconscionable conduct on the part of the plaintiff and in such circumstances it was unenforceable and liable to be set aside.

In that action the defendants instituted third party proceedings against Cooper Newman and John Newman pursuant to which the defendants sought to be indemnified by them in the event that they were found liable to the plaintiff. The defendants by their statement of claim in the third party proceedings alleged that by a written authority dated 18 March 1999 Banyan Tree engaged Cooper Newman to sell the business of the Edgelea Facility and that before that authority was signed the defendants made known to the third parties that such sale would be conditional upon a purchaser acquiring the “bed licences” and the business and lease as a going concern. The defendants alleged against the third parties that if any allegations made by the plaintiff as referred to in its statement of claim were established then the plaintiff’s loss and damage was caused or contributed to by breach of the duties owed by the third parties to them. By their defence in the third party proceedings the third parties, while admitting that Cooper Newman was an incorporated company engaged in the business of a licensed estate agent, that John Newman was a director and shareholder of it and a licensed estate agent, they denied liability to the defendants alleging, inter alia, that they at all material times acted in accordance with their instructions as to the sale of the Edgelea Facility and not otherwise. They specifically denied that they acted outside the scope of their actual or ostensible authority and, further, specifically denied that they offered the Edgelea Facility for sale without a condition that a purchaser must acquire the same as a going concern.

The proceeding numbered 5501 of 2002 was commenced in the County Court. Pursuant to Part 3 of the Courts (Case Transfer) Act 1991 the proceeding was transferred to this Court. Pursuant to an order made by the Listing Master on 20 May 2002 it was ordered that, subject to any order of the trial judge, the proceeding be heard with proceeding number 7575 of 2000. It was pursuant to that order that both proceedings were heard together. Pursuant to the statement of claim of Cooper Newman against Banyan Tree in that proceeding, Cooper Newman alleged that pursuant to the authority in writing dated 18 March 1999 whereby Banyan Tree appointed Cooper Newman as its agent to sell the business of the Edgelea Facility, it had by its actions and as agent for Banyan Tree caused an enforceable contract of sale to be entered into for the sale of the business of the Edgelea Facility thereby entitling it to be paid $50,000 by way of commission pursuant to the terms of the written agency agreement. In that proceeding, Cooper Newman sought to recover against Banyan Tree the sum of $50,000 together with interest as provided pursuant to the terms of the written agency agreement. By its defence in that proceeding, Banyan Tree denied liability to pay commission as claimed. It denied, inter alia, that Cooper Newman as its agent and on its behalf had sold the business of the Edgelea Facility.

The principal issue to be determined in these proceedings is did Accredited Aged Care Facilities enter into a binding agreement with Banyan Tree on or about 21 May 1999 whereby it was agreed that Banyan Tree sold to Accredited Aged Care Facilities and it purchased from Banyan Tree the business of the Edgelea Facility for the sum of $2M to be paid by Accredited Aged Care Facilities to Banyan Tree. Directly associated with that issue, is the further issue to be determined, in the event of it being determined that such binding agreement was entered into, namely, insofar as that agreement was entered into between Accredited Aged Care Facilities and Banyan Tree by its agent, Cooper Newman, was that agent acting within the scope of and pursuant to its authority as given to it by Banyan Tree to enter into such agreement with Accredited Aged Care Facilities for the sale to it of the business of the Edgelea Facility. Before addressing the evidence directly relevant to these issues it is necessary to have regard to a number of facts and matters relevant to these issues.

Accredited Aged Care Facilities is an “Approved Provider” under the provisions of the Aged Care Act 1997 (C’th) and as such is able to be paid subsidies by the Commonwealth under that Act. It is and was at all material times the proprietor and owner of the aged care facility in Punt Road, Windsor and known as “Central Park”. Accredited Aged Care Facilities purchased that facility in or about November 1998. At the time of purchase the facility provided 138 beds for patients. At that time there existed a planning permit which permitted the facility to be extended to a 207 bed facility. Gary Bares was at all material times a director of Accredited Aged Care Facilities. After acquiring “Central Park”, Accredited Aged Care Facilities commenced to refurbish the facility and to expand it. During the course of that refurbishment Central Park had some 108-110 beds occupied at any time.

Pursuant to the provisions of the Aged Care Act 1997, on an application by an Approved Provider, the Secretary to the Department of Health and Family Services is able to allocate to such a person “places” to provide aged care services. As is apparent from the evidence given on the trial of these proceedings such “places” as are applicable for the type or nature of the aged care services provided and the subject of issues to be determined in this case, are commonly known as and referred to as “bed licences”. For convenience it is that expression that I will use in this judgment.

Pursuant to the provisions of Division 16 of Chapter 2 of the Aged Care Act an approved provider to whom a “bed licence” has been allocate or granted may apply to have that “bed licence” transferred to another person. On such an application being made, the Secretary to the Department of Health and Family Services may approve such transfer. On such transfer being approved the subsidy paid by the Commonwealth in respect of the “bed licence” passes to the transferee.

On Accredited Aged Care Facilities acquiring “Central Park” and commencing its refurbishment, Bares sought to acquire, to purchase, “bed licences” to enable the expanded and refurbished the facility to operate closer to its capacity. Although the Planning Permit provided for a 207 bed facility and although there exists a current occupancy permit for 210 beds, “Central Park” is designed and staffed around a mix of 178 “bed licences”.

Within the industry conducted by approved aged care providers there was and is a market for the sale and transfer of “bed licences” between persons who had been granted or allocated a “bed licence” by the Secretary and persons seeking to purchase such “bed licences” for the purpose of them becoming allocated placements or “bed licences” with respect to an aged care facility owned and conducted by that person, within this industry, in Melbourne and its suburbs. There are a number of real estate agents who act as agents for and with respect to the sale and purchase of such “bed licences”. Cooper Newman was and is one such real estate agent and John Newman, a director of that company, has had considerable experience as an agent involved in the sale and purchase of such “bed licences”. Cooper Newman specialised in, amongst other aspects of work, the sale of nursing homes by private treaty.

Banyan Tree is the trustee of the Banyan Tree unit trust. Francesco Mancuso is and has at all material times been a director of Banyan Tree and a shareholder of that company. Clare Dyer is and has been at all material times a director and shareholder of Banyan Tree. She is a highly qualified nursing sister who, for a considerable period has been involved in nursing and managing aged care facilities.

Mancuso is a qualified architect and builder. In the recent past Mancuso was involved in building aged care facilities for companies associated with Neville Gontier, who has had a long experience in and has been associated with running and conducting aged care facilities. At the time of the trial Gontier was the “owner” of four such facilities. Gontier became acquainted with Mancuso as a builder and also be became acquainted with Dyer in her work in particular as a nurse educator. Gontier was a director of Ayden Springs Pty Ltd which had been the owner of the business of the Edgelea Facility which was conducted at 83-87 Chapel Street, St Kilda. Ayden Springs did not own the property at 83-87 Chapel Street, St Kilda. It leased the property from Alpajaro Holdings Pty Ltd, Scope Investments Pty Ltd and Gristall Pty Ltd, which companies were the proprietors of the property, pursuant to a lease dated 18 April 1995. Colin Madden a solicitor, is and was a director of the two last mentioned companies. His wife is a director of Alpajaro Holdings. He is and has been the solicitor for those three companies. The lease of the property was for a term of five years which commenced on 16 January 1995. By the terms of the lease the lessee had the option to renew the lease for five further terms of five years each, at the expiration of the term of the lease, on giving the lessor a request in writing not more than six months or less than three months prior to the expiration of a term.

It was further provided by clause 1(d) of the lease:

“The Lessee will conduct the Lessee’s business on demised premises as specified in the Schedule in good faith and in accordance with the reasonably acceptable methods and in a reputable manner and will not suffer or permit or commit any illegal or unlawful act thereon and further shall not during the term of the Lease or any further term or any period of overholding or on termination of the Lease or any option thereof save at the end of the term created by the fifth option for renewal make any application for the cancellation or transfer of the registration of the premises under the Health Services Act and shall do all things reasonable to ensure compliance with all legislation and regulations applicable to the use of the demised premises as a nursing home.”

The use of the premises as stated in the schedule to the lease was that of a “Nursing Home”.

At a time when Ayden Springs was the owner of the business of the Edgelea Facility and lessee of the premises at Chapel Street, St Kilda and following discussions between Gontier, Mancuso and Dyer it was agreed that a company would be acquired, whereby Mancuso and Dyer would purchase that business. To this end Banyan Tree was acquired. Mancuso and Dyer became directors of that company and they each became the holder of one share in the company. By a trust deed dated 1 December 1997, the Banyan Tree Unit Trust was established. Banyan Tree became and has remained the trustee of that Unit Trust. Pursuant to that deed the units of the trust were divided as to 40% to be held by a company associated with Mancuso, 20% to trustees of a superannuation fund established for the benefit of Dyer and her husband and 40% to a company associated with Gontier.

Pursuant to a Deed Poll of Amendment dated 28 June 1998 the trust deed was amended. It provided that initially the trust fund would be divided into 750,000 units of a nominal value of $1 each and that 400,000 units would be issued to a company associated with Mancuso, 100,000 units would be issued to Dyer and her husband jointly and that the remainder of 250,000 would be held unissued in reserve. Pursuant to that latter provision it was envisaged that Gontier may at a later time be invited to take up units in the trust, but this has not occurred.

It was provided by cl. 9(a)(b) and (c) of the Deed Poll of Amendment that cl. 9 as appearing in the deed of trust be amended to read:

“9.A Unit Holder wishing to sell and/or transfer the units held in the Trust shall authorise and request the trustee to sell the said units as trustee for the Unit Holder and in so doing the Unit Holder shall stipulate the acceptable price for the units whereupon
(a)the trustee shall during a period of 14 (fourteen) days offer the units to the Unit Holders or (if more than one) to the other Unit Holders proportionately to the units held in the Trust and so that in the case of any units in respect whereof the offer lapses or is declined the process shall be progressively repeated to the remaining Unit Holders (if any);
(b)subject to clause 9.1(c) the units may only be sold in their entirety to the other Unit Holder or Unit Holders and in consequence if at the end of 30 days any units offered for sale in accordance with the foregoing provisions remain unsold all prior offers and acceptances shall lapse;

(c)if the offer(s) for the units lapse or are earlier declined the Trustee may acting as Trustee for the Unit Holder sell or transfer the units in question in their entirety to any other person, firm or company but at a price less (sic) than the price at which they were offered to the other Unit Holder(s).

The business of the Edgelea Facility as conducted by Ayden Springs was purchased by Banyan Tree for the sum of $1,464,000 – pursuant to a contract of sale dated 27 August 1997. The sale was subject to and conditional upon the approved provider's approval of Ayden Springs not being revoked or suspended and the “allocated places” (“bed licences”) being transferred under the Aged Care Act to Banyan Tree.

Pursuant to a clause numbered 28 in the Contract of Sale it was provided:

“The Purchaser shall not, during the term of the lease that would run if the lease expired by effluxion of time and shall not during any period of over-holding:
(a)seek, request or apply for; or
(b)acquiesce in (whether by enforceable agreement or by way of an unenforceable or enforceable understanding or arrangement) or agree (whether enforceable or not) to a third party seeking, requesting or applying to; relocate, transfer, move, alter, cancel, revoke any registration or otherwise have the demised premises, or persons residing in the premises or the lessee, become de-registered.

The word 'registration' and 'deregistration' and derivates thereof includes the loss (by any direct or indirect means including Government intervention and Government processing of applications or requests) of any permission, consent, authority, permit, licence, registration, approval, approval in principle, certification, accreditation, rights to receive funding or subsidies from any Government Body or any other thing which, if it ceases to exist will result in the demised premises being no longer fully useable as a private nursing home (or Aged Care Service under the Aged Care Act when it commences) for the same number of residents as it presently accommodate and cared for, namely the Maximum Number of Aged Care Places, specified in the Particulars of Sale. The purchaser and the Guarantors indemnify the Vendor and the persons who have guaranteed the Vendor's obligations under the Lease against all loss and damage and costs on an indemnity basis that the Lessor suffers, sustains or incurs as a result of any and all breaches of the Lease which arise after completion of this Contract and further declare that, in order to better secure the Vendor's obligation under the Lease;
(a)the Purchaser will hold the Registration on trust for the Vendor so the Vendor can trace the benefits of any relocated Registration if the Purchaser has breached the Lease. This trust shall further arise if the Purchaser sells or deals with the Registration to any future assignee of the Lease who then breaches the Lease's terms; and
(b)the Purchaser and the Guarantors hereby agree to Charge in favour of the Vendor all their rights title and interest in real property situate in any State or Territory of the Commonwealth of Australia on terms applicable under the applicable real property law of the relevant lex situs and with such forms as may be prescribed in the real property laws of the lex situs.”

Pursuant to the Particulars of Sale the “Aged Care Places” was stated to be “80 residents”. Each of Mancuso and Dyer severally and jointly guaranteed the purchaser's obligations under the Contract of Sale.

Pursuant to a deed dated 27 January 1998 and with the consent of Alpajaro Holdings, Scope Investments and Gristall, Ayden Springs assigned to Banyan Tree its estate and interest under the lease by which it occupied the premises at which the business of the Edgelea Facility was conducted. Further, Alpajaro assigned to Banyan Tree the options provided by the head lease. By that deed it was further provided by paragraph 6 thereof:

“6.The Assignee [Banyan Tree] Hereby Covenants to indemnify the Assignor [Ayden Springs, Damien Mitsch, Neville Gontier, Rosemont Bond Pty Ltd and Nursing Home Administrative Services] against loss and damage of all kinds arising from failure, from the date of assignment, to pay the Agreed Rent reserved or to perform or observe the Lessee's covenants and conditions contained in the lease.”

Pursuant to paragraph 7 of the Deed of Assignment, Mancuso and Dyer guaranteed to the “lessor” and also the “assignor” due performance and observation by the assignee of the lessee's covenants and the conditions contained in the lease.

From the time that Banyan Tree acquired the business of the Edgelea Facility it was the intent of Dyer and Mancuso not to conduct the business in the long term but to improve the business and then sell it. The evidence of Mancuso was that it was their intent to do that prior to compliance with the Commonwealth “accreditation” requirements for aged care facilities, which were to be in place by the year 2000. Although in evidence Ms Dyer agreed with Mancuso as to this matter, her evidence was more specific as to that matter. She said that it was Gontier who she knew, who suggested to her that she might acquire an interest in the business of the Edgelea Facility. It was Gontier who introduced Mancuso to her. She said it was Gontier who suggested that she would be involved in the day-to-day running of the facility and that Mancuso would be involved in the legal side and also getting the business sold. She said that it was her job to tidy up the place and get it to a level that she and Mancuso could sell it. She said that it was always her understanding that the facility was going to be sold by them before the end of the lease. When asked in cross-examination, “Why were you wanting to sell it so quickly?” she replied:

“We bought it very cheap, it was a good price, it was about to be sanctioned, meaning that the care was not up to the Commonwealth standards. The residents were at risk. There was a lot of political unrest with the staff and the families, and it was very very difficult – it was in fact one of the hardest places in Victoria to run. It was very expensive. Accreditation was coming up, and it would have been a lot easier to sell it before we had to go through the accreditation process, which is very expensive. Also just the day-to-day running of the facility, I was there as the Don and the CEO but I was there 24 hours a day seven days a week. I had death threats, I had faeces in the handbag, I had my tyres slashed, so it was a very very difficult facility, because when you try and educate staff to come up to scratch they don't like it.”

She further said that the idea was to buy the business, that her position was to clean it up clinically and that Mancuso and Gontier were going to organise the legal side and the financial side and then they were going to sell it. She said that it was Mancuso's job to get the place sold. She said that in discussions she had before the Edgelea Facility was purchased it was their thought to acquire the business at a price which they would be able to sell it before the expiration of the lease and make a significant profit. She described Mancuso's role in the “triage”, and his job as being, to sell the business. I accept this evidence of Dyer. From her evidence it is clear that Mancuso from the outset had authority to sell the business of the Edgelea Facility which had been acquired by Banyan Tree. From an early stage in their business association, Mancuso and Dyer had difficulty working together.

The initial meeting that was had between Mancuso and Newman took place at about 30 November 1998. Mancuso was introduced to Newman through the referral of Gontier. At this time Newman had an understanding of the business and the general condition of the premises as he had been involved in a sale of the business at an earlier time. Newman gave evidence as to this meeting, which I accept, that in the course of this meeting he was informed by Mancuso that he wanted to get out of the business and that the partnership between him and Dyer was in difficulty. They discussed broad parameters of the sale of the business. It was mentioned that the lease by which Banyan Tree occupied the premises had a clause which purported to “tie the beds to the land” and consequently any relocation of the “bed licences” had to be at the expiration of the term and any relocation could not occur immediately on purchase and at settlement. Newman told Mancuso that he thought the value of the business was about $2,000,000. That valuation was made on the basis that the business could be sold as a going concern at a value of $25,000 per “bed licence” and on the basis that at the expiration of the term, on it being sold as a going concern, the business or “bed licences” would be able to be relocated. He said that selling such businesses and valuing the same was generally brought back to the ready reckoner within the industry as to what was the worth of a “bed licence”. At this time Mancuso engaged Cooper Newman to contact prospective purchasers of the business of the Edgelea Facility in a discreet manner, that would be associated with that which Newman referred to, as an “off market transaction”. At this meeting Newman suggested to Mancuso that the business of the Edgelea Facility be marketed on the basis of a sales price of approximately $28,000 per bed. He informed him that Cooper Newman's fees for negotiating a sale would range between 2% and 2.5% depending on the complexity of the transaction. Thereafter, Newman undertook a campaign in an endeavour to sell the business. Newman considered that the rent being paid under the lease by Banyan Tree was very high and that it would impact on the sale price of the business. Newman was aware that the lease was due to expire on 15 January 2000. He gave evidence that he informed Mancuso that the expiration of the lease provided a “window of opportunity” for a purchaser within the industry to be able to exit the property upon the expiration of the lease and transfer the “bed licences” to another nursing home facility. He told Mancuso, in the conversation had with him, that the business would be most suitable for the purchase by someone already involved in the nursing home industry for a “relocation purchase” with the capacity to take the existing residents and staff to their facility. Thereafter Newman set about seeking to find a purchaser for the business. During the course of that campaign Newman prepared a property report concerning and relating to the business.

On 18 March 1999 Mancuso, on behalf of Banyan Tree, as vendor, executed an Exclusive Business Sale Authority giving to Cooper Newman authority to sell the business of “Edgelea Private Nursing Home” for the sum of $2,000,000. The agent's fee as provided by that authority was 2.5% of the sale price, being $50,000 on a selling price of the business at $2,000,000. It was provided by the authority that the vendor was obliged to pay the agent the agent's fees “if the vendor sells the business and/or the property during the currency of [the] agreement”. The period of the authority was 90 days from the date of the agreement. Pursuant to the terms of the authority, “sale” was defined as, “the result of obtaining a Binding Offer and 'sell' and 'sold' have corresponding meanings in the same situations”. “Binding Offer” was defined as “an offer on terms set out in the particulars of appointment which if obtained in compliance with this appointment would (or does) result in a contract enforceable against the purchaser”. It was further provided by clause 5 of the authority:

“If the Vendor fails to pay the Agent any money due under this Agreement then interest at the rate of four percentum higher than the rate for the time being fixed under s. 2 of the Penalty Interest Rates Act 1983 will be computed and paid to the Agent on the money owing.”

Newman gave evidence that at his first meeting with Mancuso and Gontier on 30 November 1998, that they discussed the clause in the lease, the “Tied” clause purporting to tie the “bed licences” of the business of the Edgelea Facility to the premises where that business was conducted. He said that he told them that he was aware that there were legal opinions that such clause was unenforceable and that it would not stand up to legal challenge in a court.

Newman, in seeking to find a purchaser for the business, found that there was no purchaser who was interested to continue the business beyond the expiration of the term of the lease, however, he found a purchaser who was prepared to purchase the business to take over the lease and to run the business until January 2000 until the expiration of the term of the lease which was 16 January 2000. This purchaser was Bares, a director of the plaintiff. Newman said that there was nobody else who had the capacity to take the 80 residents of the Edgelea Facility in a single parcel. Newman spoke to Bares suggesting that as he had a planning permit in respect of Central Park, that eventually he would need all of the licences of the Edgelea Facility. Newman gave evidence that Bares indicated that at a pinch he could accommodate the 80 residents if he needed to.

Newman gave evidence that Bares communicated with him informing him that he had decided to purchase the business and that he would take “the lot”. Newman and Bares communicated with each other on a number of occasions relating to the purchase of the business. Newman had his secretary type a letter of offer addressed to him to be signed by Bares. This was delivered to Bares who signed the same and returned it to Newman’s office. That letter was dated 17 May 1999. Pursuant to that letter which was signed by Bares he made an offer to purchase the Edgelea Facility for the sum of $2M, that the sale date was to be 1 June 1999, that a deposit of $100,000 was to be paid, that the balance of the purchase moneys were to be paid on 1 September 1999 or earlier by mutual agreement, that the purchaser was “A Pty Ltd company associated with Garry Bares” and that immediately after exchange of the contracts application was to be made by the purchaser and the vendor to the Commonwealth for a transfer of the ownership to facilitate a settlement on 1 September 1999. There was set out in the letter a number of adjustments to which the purchase price was subject. There was also set out 10 listed “special conditions”. I set out five of the same. They were as follows:

“1.The sale is subject to obtaining Commonwealth Department of Health and Family Services approval in principle to relocate the beds to Central Park Aged Care Facility at K15 Raleigh Street, Windsor and obtain the necessary variation in extra service bed numbers. Verbal approval has already been obtained for the above.
3.The purchaser shall have the right to interview all employees prior to settlement. The purchaser will be allowed to select those staff required to be employed by the purchaser. A limit of not more than 35% of permanent staff (either part-time or full time can be made redundant).
…
8.In relation to the WorkCover premium the vendor will be responsible for any amount over and above industry average premium caused as a result of any employee claim up to the date of settlement and to manage existing claims in a professional manner or appoint a party to manage the claim to minimise the loss.
9.No new residents are to be admitted after the Contract of Sale is signed.
10.An assignment of lease is required from the lessee to the purchaser.”

In the letter itself there was provision made for a director of Banyan Tree to sign the same in acceptance of the offer. The offer was accompanied by a cheque dated 17 May 1999 for the sum of $10,000 payable to Cooper Newman and drawn on the account of Accredited Aged Care Services Pty Ltd. That company was a company which provided services to the plaintiff in the conduct of the Aged Care Facility, “Central Park”.

Newman sent the letter to Mancuso and on 18 May 1999 he spoke to him about the offer as contained in the letter.

Newman gave evidence that, following this discussion with Mancuso, he wrote a letter to Bares on 21 May 1999 which he sent by facsimile transmission advising him of the amendments that Banyan Tree required to be made to Special Conditions 1, 3, 8 and 9 as sought by the vendor. Newman said that after sending this letter to Bares he spoke to Bares about the amendments sought by the vendor, in which conversation Bares made suggestions as to the amendments sought by the vendor and seeking to have such amendments further amended. Newman gave evidence that when speaking to Bares he made alterations on a copy of the letter sent to Bares setting out the further amendments sought by Bares. Newman gave evidence that following this discussion with Bares he had a further telephone conversation with Mancuso in which they discussed the document that he had sent to Bares and the comments of Bares in relation to the same: Newman said that in this conversation Mancuso gave him instructions as to a further offer to be put to Bares in relation to Special Conditions 1, 3, 8 and 9 of the original offer. Newman gave evidence that after receiving Mancuso’s instructions and on 21 May 1999 he again wrote to Bares setting out the further amendments sought to Special Conditions 1, 3, 8 and 9. That letter dated 21 May 1999 was headed “Memorandum (Version 2)”. Newman gave evidence that after sending this document to Bares he had a further conversation with him during which they discussed the document that he had sent him and that Bares informed him that he required some further amendments to the special conditions. Newman gave evidence that he noted those further amendments on a copy of the letter, “Memorandum (Version 2)” which he had sent to Bares.

Newman gave evidence that following this discussion with Bares and on 21 May 1999 he sent a letter by facsimile transmission to Mancuso setting out the proposed amendments to Special Conditions 1, 3, 8 and 9. The facsimile transmission of this letter was received by Mancuso at 5.09 pm on 21 May 1999. That letter stated:

“The proposed amendments are as follows:
Special condition 1:
In relation to the purchaser obtaining approval in principle to relocate the beds to Central Park at K15 Raleigh Street, Windsor the vendor makes no representation that this in fact can be done. The purchaser shall indemnify the vendor against all claims by the lessor that may result by the purchaser relocating the “bed licences” from the date of assignment to the expiration of the lease.
The vendor acknowledges that they have not made any representations to the lessor that the licences are tied to the site. The vendor further warrants that all documents and leases provided to the purchaser are true and accurate to the best of the knowledge of the vendor.
Special Condition 3:
The purchaser shall have the right to interview all employees prior to settlement. The purchaser will be allowed to select those staff who are prepared to work on the terms and conditions and roster offered by the purchaser but in any case not more than 25% of nursing staff (either part-time or full-time) can be made redundant.
Special condition 8:
Subject to final confirmation of the figures by the purchaser and the vendor it is proposed that an adjustment in favour of the purchaser of $20,000 (twenty-thousand dollars) shall be made for WorkCover claims providing no new claims are made prior to settlement. In the event that any new claims are lodged for the period between now and when settlement occurs then the amount of adjustment shall be amended accordingly.
Special condition 9:
No new residents are to be admitted after one (1) month before the settlement date.”

Newman gave evidence that following sending this letter to Mancuso he spoke to Mancuso that day saying that they discussed the revised document. He said that Mancuso said to him words to the effect that the offer contained in the document was acceptable to him and that he would have his lawyers draft the wording of the special conditions in the contract. He gave evidence that he was instructed by Mancuso to contact Bares and accept his offer. He gave evidence that he then telephoned Bares and had a telephone conversation with him in which he informed him that Mancuso had accepted the offer contained in the letter dated 17 May 1999 as amended by the “Memorandum (Version 2)” and the rewording of Special Condition 1 as requested. He said that Bares asked him whether that was it and he replied, “Yes. The deal is done. Frank just wants to have his solicitor draft the wording of these special conditions in the contract, can you please provide me with a full deposit.” Newman gave evidence that Bares said to him, “I think we will probably be using another company. I would like to give you a deposit cheque for the full amount of $100,000 from another company”. Newman gave evidence that he said, “That’s OK. Give me the cheque as soon as you can”. Newman gave evidence that he then had a telephone conversation with Mancuso and recounted to him the conversation he had had with Bares and informed him that Bares would be providing him with a full deposit in the near future. He said that Mancuso said, “That’s great I will contact my solicitors and get them to start drafting the contract.”

Newman did not receive the deposit cheque from Bares shortly after that conversation and, in fact, never received such cheque. However, on 31 May 1999, Newman received from Mancuso a letter dated that day stating:

“I refer to your letter of 17 May 1999 and confirm acceptance of your offer subject to further negotiations in relation to amendments to Special Conditions 1, 3, 8 and 9.
Further, the acceptance is subject to and conditional upon the pre‑emptive rights of other parties being exercised or expiring no later than 7 June 1999.”

Newman gave evidence that before receiving that letter he had not been aware of the existence of any such “pre‑emptive rights”. He gave evidence that he spoke to Mancuso asking him what were the pre‑emptive rights to which he was told that there were pre‑emptive rights with his business partner, Clare Dyer. Newman gave evidence that when he asked what he meant by that and what was the impact of it, Mancuso said to him, “I have to offer the business to Clare first. It is my legal responsibility to do so because I can’t sell to Bares without her consent.” Newman gave evidence that he asked Mancuso what he was to tell Bares and he was informed by Mancuso that she had until 7 June 1999 to exercise her rights. Newman gave evidence that he said that he would tell Bares that nothing could happen until 7 June and Mancuso said that he would keep him posted. Newman gave evidence that he sent a copy of the letter dated 31 May 1999, that he had received, to Bares and that he spoke to him about the matter of the pre‑emptive rights. He gave evidence that in this conversation Bares was extremely annoyed that the issue of pre‑emptive rights had only been raised then and he said that he would speak to his lawyer.

On 10 June 1999 Newman received a letter from Zaparas & Dandanis, solicitors, stating that they acted for “Mr Garry Bares and his associated entities”. By that letter it was asserted that there existed a binding offer and acceptance for the sale and purchase of the business of the Edgelea Facility. The letter stated that their client required the vendor to comply with the terms of the offer and acceptance.

Before receiving that letter and on 9 June 1999 Newman met with Mancuso at his office. Newman gave evidence that Mancuso told him that the sale to Dyer was progressing but said that Mancuso would not go into the details. Newman gave evidence that Mancuso said to him that it did not matter if he sold his interests in the business to Dyer as he would look after Newman’s commission if the sale went through. Newman gave evidence that Mancuso told him that the deadline for the exercise of the pre‑emptive rights had been exercised and that he said that Dyer would be purchasing. Newman gave evidence that he spoke to Bares and told him that Clare Dyer had exercised her option and the sale was proceeding.

On 11 June 1999 the solicitor for Mancuso wrote to Zaparas & Dandanis, the solicitors for Bares. In that letter the solicitor referred to the letter of Zaparas & Dandanis dated 10 June 1999. The letter further stated:

“I am instructed to advise that the pre‑emptive rights which are referred to in the letter of 31 May 1999 have been exercised on or about 7 June 1999.
For your information I take this opportunity to point out that there has not been an offer and acceptance in the terms suggested by you and accordingly there is no binding agreement between the parties.”

Newman further gave evidence that during the second half of January 2000 Bares spoke to him and asked him what was happening with Edgelea. Newman gave evidence that he spoke to Mancuso and asked him as to the status of the sale to Dyer. He gave evidence that Mancuso went into a long explanation as to how the sale had fallen through and that he had felt compelled to exercise his option to renew the lease for a further term to protect his interest in the business. Newman gave evidence that when he asked Mancuso did he still want to sell, Mancuso said to him that he did but not at the price of $2M, but that he wanted $30,000 “per bed”.

In the course of his cross-examination Newman said that at the first meeting with Mancuso and Gontier he was informed that the lease, pursuant to which Banyan Tree occupied the premises, had a “tie in” clause and he was told that the owners representative or part-owner was a solicitor, Madden, who was a fairly litigious lawyer. He said that he told them that there was other legal opinion that such a “tie in” clause was not enforceable because of the provisions of the Trade Practices Act and the Aged Care Act. He said that in discussions with Mancuso he had been told by Mancuso that he did not want legal issues to come back and “bite him” if a sale was concluded. Newman gave evidence that at no time during the sales campaign, which he conducted, was he told by Mancuso that he could not be a party to any relocation of the “bed licence” because of the effect of the lease of the premises and the Contract of Sale by which Banyan Tree had purchased the business. Newman denied that Mancuso had told him that he could not be a party to the relocation of the “bed licences” from the premises. He agreed that in a conversation with Mancuso he was told that the purchaser of the business would have to purchase the “bed licences” as a going concern together with the lease of the premises. It is to be noted at this point that Special Condition 10 of the offer, made on 17 May 1999 and which was not the subject to any amendment, provided that an assignment of the lease was required from the lessee, Banyan Tree to the purchaser. Newman said that Mancuso said words to the effect that the licences had to be purchased as a going concern up to the expiration of the lease and that the licences could not be removed before the expiration of the lease. As to the legal advice that Mancuso said he had received concerning the lease, Newman said that no written advice, as to that matter, was shown to him. He said that Mancuso had told him that he did not want to be a party to challenges, that he was in dispute with his partner and he wanted a quick exit from the industry and the relationship that he was in.

Newman denied that Mancuso, during the period 21 May 1999 to 31 May 1999, had told him that he had to discuss any sale with his co-director. He said that he asked Mancuso whether his co-director had to sign the authority to sell and he was told that she did not, stating that he was the controlling entity. In cross-examination Newman said that he could not recall that in his last conversation he had with Bares on 21 May 1999 that Bares told him that Accredited Aged Care Facilities Pty Ltd, would be the purchaser. He said that it was his recollection that Bares said that he probably would be using another purchaser. He denied that his last conversation with Bares could have taken place on 27 May 1999. He denied that on 21 May 1999 Mancuso was not happy with the drafting of Special Condition 1. He re-stated that Mancuso had instructed him to contact Bares and accept his offer.

Newman further said that after receiving the letter of 31 May 1999 and when speaking to Mancuso he did not ask him what further negotiations he sought in respect of Special Conditions 1, 3, 8 and 9. He said that in his opinion the pre‑emptive rights were of greater importance in there being a sale. Newman accepted that in an affidavit sworn by him on 5 May 2000 in proceedings brought by Accredited Aged Care Facilities against Banyan Tree, in this Court (No. 4974 of 2000), in which the plaintiff sought “pre-action” discovery from the defendant, he deposed that Mancuso expressed concern to him about having the special conditions “vetted” by his solicitor prior to the formal contracts being executed.

Further, during the course of cross-examination, answers sworn by Newman to interrogatories were put to him and tendered on behalf of the defendants. In one such answer Newman had deposed that prior to Banyan Tree executing the written authority to sell he had been informed that Banyan Tree had received legal advice as to the terms and effect of the lease of the premises at Edgelea and the terms and effect of the contract by which it had purchased Edgelea and that the first defendant could not be a party to any relocation of beds and “bed licences” from the premises and that Banyan Tree would not sell Edgelea unless a purchaser were to acquire the “bed licences”, the business and the lease of the premises as a going concern. Further answers to interrogatories sworn by Newman were tendered in which, in part, he deposed that he could not recall conversations that he had with Mancuso on 18 May 1999 and conversations had with Bares and Mancuso on identified occasions on 21 May 1999 when he spoke to them and discussed matters with them which were identified as to subject matter. Further, in one long answer to interrogatory sworn by Newman and tendered the sequence of events which occurred on 21 May 1999 differed from his evidence given orally on trial. Although, when examined, that answer was consistent with his evidence on trial, in that in the answer to interrogatory, he deposed that when he said to Bares that the deal was done, further saying that Mancuso wanted his solicitor to draft the wording of the special conditions to the contract, the conditions and special conditions as identified by Newman in his answer to the interrogatory were, the offer made in writing on 17 May 1999 and the amendments as effected and set out in the letter written to and sent to Mancuso on 21 May 1999. Newman in evidence further said that at no time had he received from Mancuso or Banyan Tree Special Conditions 1, 3, 8 and 9 as drafted by the solicitor for Banyan Tree.

It is appropriate next to have regard to the evidence of Gary Bares a director of the plaintiff who was directly involved in matters relevant to these proceedings.

After the plaintiff had acquired “Central Park”, Bares was interested in obtaining “bed licences” to be transferred to that facility. He was aware of the Edgelea Facility. It was in the same local government area as “Central Park” and accordingly the approval of any transfer of “bed licences” to “Central Park” from the Edgelea Facility would be significantly easier to obtain because the “bed licences” available to patients in the same area would still remain available. In March or April 1999 Bares spoke to Newman who was well known to him as an agent dealing with sales of “bed licences” for aged care facilities. Newman informed him that he was acting for the Edgelea Facility, that he had 80 beds for sale and that the sale required the business to continue to be operated until the termination of the lease on 16 January 2000. Bares spoke to Newman on various occasions before 17 May 1999 and received a property report from him concerning the business and a copy of the lease.

As referred to, the plaintiff is and was an Approved Provider under the Aged Care Act. It engaged Accredited Aged Care Services Pty Ltd to provide services to and operate the “Central Park” business of the plaintiff. However, as an Approved Provider the plaintiff was in a position to have any “bed licences” purchased by it transferred to it, as under the Act as it is necessary for an approved provider, to hold or be allocated “bed licences”. Bares confirmed that on 17 May 1999 he made an offer to purchaser the business of the Edgelea Facility as contained in the letter of that date addressed to Newman. He also gave evidence that he delivered to Newman on that date a cheque for the sum of $10,000 drawn on the account of Accredited Aged Care Services Pty Ltd.

He gave evidence that on 21 May 1999 at 1.03 pm he received a letter from Newman by facsimile transmission, setting out the amendments as sought by the vendor to Special Conditions 1, 3, 8 and 9 as set out in the offer. He gave evidence that following receiving that letter he had a telephone discussion with Newman. He gave evidence as to the amendments that he was prepared to make with respect to those special conditions. He gave evidence that later in the day he received a further letter from Newman headed “Memorandum (Version 2)” which set out further amendments required by the vendor to Special Conditions 1, 3, 8 and 9 of the offer initially made. His evidence was that that memorandum recorded the terms which had been agreed to in his earlier telephone conversation with Newman.

Bares gave further evidence that he was telephoned later by Newman who informed him that the vendor required a couple of minor amendments to the amendments set out in Memorandum (Version 2). He said that those amendments were agreeable to him and he accepted the same. He gave evidence that Newman said that they had a deal, that his offer had been accepted, and that he asked him to provide the other $90,000 as the rest of the deposit stating that he would be banking the $10,000. Bares gave evidence that he said to Newman that he would be using another company and that he would like to give the full deposit of $100,000 by a cheque for another company. He gave evidence that Newman said that that would be fine, that Newman asked him to get the cheque to him and further asked him who was the purchaser. He gave evidence that he replied that Accredited Aged Care Facilities would be the purchaser and Newman agreed that that was fine.

Bares gave evidence that within the next couple of days Newman telephoned him and told him that Clare Dyer, a director of Banyan Tree, had a first right of refusal and was going to exercise it. He said that Newman sent him a copy of the letter received by him and dated 31 May 1999. He said he consulted his solicitors, Zaparas & Dandanis who wrote to Newman on 10 June 1999 stating that they acted for Bares and his “associated entities” and contending that there existed a binding agreement for the purchase of the Edgelea Facility. He confirmed that his solicitor had received the letter dated 11 June 1999 from the solicitor acting “for the proprietors of Edgelea Aged Care Facility” which stated that he had been instructed to advise that the pre‑emptive rights referred to in the letter of 31 May 1999 had been exercised on or about 7 June 1999. On 11 June 1999 the solicitors for the plaintiff responded to the letter of the same date from the solicitor acting for the proprietors of the Edgelea Facility requesting that they be provided with copies of all documents evidencing the purported exercise of the pre‑emptive rights and requesting that such information be provided by 16 June 1999 failing which they would make application for “pre-trial” discovery. On 15 June 1999 the solicitor for the proprietors of the Edgelea Facility responded to that last letter seeking formal confirmation of the plaintiff’s willingness to maintain in the strictest confidence all information that may be contained in any document that may be supplied.

Bares gave evidence that no documents were provided and that relying on what the defendants had represented, being that the pre‑emptive rights had been exercised, he decided to not make an application to have the agreement for the sale and purchase of the business of the Edgelea Facility, specifically enforced. He gave evidence that but for that representation he would have sought to enforce the agreement.

Bares gave further evidence that on or about 20 March 2000 he telephoned Newman to make general enquiries about the availability of “bed licences” for purchase and that in the course of discussions he raised with Newman the issue of the purchase of “bed licences” that the Edgelea Facility may have for sale. He gave evidence that Newman said that he would make enquiries and that subsequently Newman telephoned him and informed him that the owner of the Edgelea Facility was still operating the business, that it had exercised its option under the lease and further informed him that Edgelea did have beds for sale at $30,000 per “bed licence” not $25,000.

Bares gave evidence that after consulting his solicitor an application for “pre-trial” discovery was made, seeking discovery with respect to the pre‑emptive rights. In such proceedings and on 4 May 2000 the first defendant was ordered to provide discovery to the plaintiff with respect to the exercise of the pre‑emptive rights. To the further evidence of Bares relevant to the issue of damages, I shall later return.

In cross-examination when Bares was asked whether Newman had mentioned anything to him about the vendor’s concern with the lease, he said, in substance, that he was told that they (referring to the purchaser) had to stay to the end of the lease. Bares said that Newman did not mention anything about the contract by which the vendor had purchased the business of the Edgelea Facility. He said that before 17 May 1999 Newman told him that if the vendor was to sell the business the vendor required the business and the lease to be sold together as a going concern. He said that he had advised Newman during negotiations that he would be leaving the premises at which the business of the Edgelea Facility was conducted at the expiration of the term of the lease. He said that at the material time he was aware that old facilities with old leases had quite “tight” clauses regarding relocation. He said that it was a very common practice so he always assumed that there would be an issue as to that matter down the line. He said that he was aware that the rent for the premises of the Edgelea Facility was exceedingly high and that the freeholder was a solicitor who had drafted quite a tough, strong lease.

Bares gave evidence that after he had made the initial offer on 17 May 1999 Newman told him that the vendor had some concern regarding the relocation. The matter of the relocation of beds to the “Central Park” Aged Care Facility was the subject of Special Condition 1 contained in the offer of 17 May 1999. Bares said that it was because of that concern as expressed by Newman that he agreed to the removal of the relocation clause and to indemnify the vendor. He said that Newman informed him that the vendor was concerned about movement of the licences and the relocation clause had to be removed and an indemnity given. Bares gave evidence in cross-examination that he agreed to do this. He further said in evidence that he was prepared to remove the condition as to the relocation provided the information that had been supplied to him was correct, that is, all the information that he had to rely on to make his decision. It is such discussions as between Newman and Bares as is reflected, in my view, under the heading Special Condition 1 in the letter dated 21 May 1999, written by Newman to Mancuso and received by him at 5.09 pm that day.

In cross-examination Bares said that he first disclosed the proposed purchaser to Newman when Newman asked him for the balance of the purchase money on or about 21 May 1999. He said that he could not remember the date exactly but it was when Newman asked for the balance of the deposit. He agreed that in an answer to an interrogatory sworn by him he had identified that date as being 27 May 1999. Bares was also cross-examined on affidavits sworn by him in the proceedings for “pre-action” discovery. In that proceeding, on 28 April 2000, Gillard J adjourned the further hearing of the application made on behalf of the plaintiff when an issue had been raised whether there had been disclosed, on the evidence then before the Court, who was the purchaser of the business as contended for on behalf of the plaintiff. The material before the Court did not disclose who was the purchaser. In an affidavit sworn by Bares on 27 April 2000, Bares deposed that it was on 31 May 1999 that Newman told him that his offer had been accepted and when he asked for the balance of the deposit, namely $90,000, he said that he would be using another company. However, in that affidavit the other company was not identified nor did he depose that he had informed Newman of the identity of the purchaser. In his next affidavit sworn on 2 May 2000 Bares deposed that he was told by Newman that his offer had been accepted and he was asked for the balance of the deposit, namely $90,000, not on 31 May 1999 but on 27 May 1999.

Bares deposed, in that affidavit, that in answer to a question from Newman on that occasion he identified the purchaser as Accredited Aged Care Facilities Pty Ltd. In further cross-examination on the trial of this proceeding he denied that the conversation referred to took place on 31 May 1999. When further questioned about this matter he said that to the best of his present recollection the conversation in which he informed Newman that Accredited Aged Care Facilities Pty Ltd was the purchaser took place on 21 May 1999. In his evidence and when specifically cross-examined as to the matter, Bares said that his evidence was that he had reached a concluded and binding agreement in respect of the sale of the Edgelea Facility as a result of an exchange of facsimile messages on 21 May 1999 and in discussions he had with Newman. He rejected the proposition that negotiations between him and Mancuso were in a formative stage, that matters were still the subject of negotiations and there was still required, agreement on terms and the formation of the contract.

In further cross-examination he said that he regarded the letter of Mancuso of 31 May 1999 as an attempt by Mancuso to get out of the agreement. He said however that if pre‑emptive rights were being exercised there was no point of taking the matter further. He said that after taking advice from his solicitor at that time he decided, at that time, not to pursue the matter.

I next turn to the evidence of Mancuso relevant to these issues. As referred to he gave evidence that the work he did was that of a building and construction practitioner. He gave evidence that he first contacted Newman on or about 16 December 1998 when he was introduced to him through a referral by Gontier. He said that he made a general enquiry as to the state of the “nursing home market”. He gave evidence that he again contacted Newman on 17 March 1999 informing him that he sought to sell the business of the Edgelea Facility. He said that in the course of discussions that he had with him that day, he informed Newman that any sale would have to be subject to the “bed licences” of the business remaining at the premises due to the terms of the lease and contract by which the business had been purchased. He said that he had informed Newman that he had obtained legal advice as to the terms and effect of such lease and contract and that he could not be a party to any relocation of the beds or “bed licences” from the premises. The written advice of senior counsel dated 8 December 1998 was tendered in evidence. The advice of counsel addressed the provisions of the clause in the lease referred to in paragraph 15 of this judgment and in particular its effect on the termination of the first term of the lease, if Banyan Tree or any further assignee, decided not to exercise the option under the lease and whether in those events the covenant prevented Banyan Tree or a further assignee from relocating the business. In his opinion counsel expressed the view, inter alia, that the prohibition in the lease against cancellation, or transfer of registration, in its present form was meaningless. He further expressed the opinion that that prohibition would not be saved by the requirement that the lessee must comply with all legislative or regulatory requirements. In his written opinion counsel drew attention to the fact that the Health Services Act 1988 by amendments made pursuant to the Health Services (Amendment Act) 1994 repealed the provisions relating to nursing homes and hostels. He expressed the view that at the time that the lease was made, nursing homes were governed by the Nursing Homes Assistance Act 1954.

In his conclusion counsel expressed the view that the strongest point to be made was that even if the lease was rectified, incorporating the legislation in existence at the time of the lease, it did not take into account legislative change in the form of the Aged Care Act. In his final sentence counsel said: “…it could not be said with certainty that the Banyan Tree would ultimately be prevented from relocation.” This advice provides some basis for the concern expressed by Mancuso that he could not be a party to relocating the “bed licences”. However, that concern must be measured by the advice given. His level of concern was not such that he did not seek to sell the business.

Mancuso gave evidence that he told Newman that any purchaser of the Edgelea Facility would have to purchase the business and the “bed licence” as a going concern together with the lease of the premises. He gave evidence that on the following day, 18 March 1999, he gave Newman a copy of the lease and signed the authority appointing Cooper Newman to sell the business. Mancuso gave evidence that on or about 17 May Newman telephoned him advising him that he had an offer for the business at $25,000 per bed and that he subsequently received the written offer dated 17 May 1999. He said that on the following day he spoke to Newman about Special Conditions 1, 3, 8 and 9. He gave evidence that with respect to Special Condition 1, Newman suggested to him that an indemnity be provided by the purchaser, but that he informed Newman that any form of indemnity would still cause him to be dragged into litigation, that an indemnity did not protect him and that the risks were too great. He said that he told Newman that he wanted it all sold together as a going concern.

The evidence of Mancuso in chief as in the case of each of the other witnesses was given pursuant to a witness statement. In his witness statement the next event dealt with by him and which constituted part of his evidence in chief was that on 21 May 1999 he received a fax from Newman dated 21 May 1999 in which Newman detailed his proposed changes to the special conditions contained in the letter from Bares dated 17 May 1999. When the document was placed in front of him he said that he received it, when he was asked could he remember that he replied, “vaguely”. As to his evidence that he had discussions with Newman following receipt of the offer of 17 May 1999, he said that he could recall having the discussions but he was not too sure on the amount of the occasions saying that it was a couple. He said that in those discussions he and Newman continually discussed the problems associated with the relocation and where it would lead him to. He said there were discussions of an indemnity and there were a lot of discussions and words put to him after that.

Mancuso said that having received the letter dated 21 May 1999, he believed that he had a discussion with Newman on that day, that there were discussions about the Conditions 1, 3, 8 and 9 and there was a lot of discussion centred around Condition 1. He said that as to the WorkCover condition he told Newman that he needed to get further advice on that. As to Special Condition 9, he said that he told Newman that he needed to get some advice on that too. He said that he did not believe that he said to Newman words to the effect that the offer contained in the document was acceptable and that he would have his lawyers draft the wording of the special conditions. He denied that he instructed Newman to contact Bares and accept the offer.

Mancuso gave evidence that on or about 29 or 30 May 1999 he first made Dyer aware that he had discussions with Newman and had signed an authority to sell the business. He gave evidence that he informed Dyer that he had received an offer to purchase the business for the sum of $2M, that he showed her a copy of the letter dated 17 May 1999 and that in the course of the meeting that he had with her she told him that she had a backer and she and her husband wanted to buy his share of the units. He gave evidence that he told her that he did not care who paid the offer of $25,000 per “bed licence”, which equated to a value on sale of $2M, but he insisted that such offer be confirmed within a week otherwise he would continue negotiations through Newman. He said that at that time Dyer said that she would buy him out, but that a few days later she informed him that she had a backer who was Richard Buxton. On or about 7 June 1999 Mancuso received a letter addressed to the directors of Banyan Tree dated 7 June 1999 from Buxton Corporation. In the letter Buxton Corporation, “and or its nominees” made an offer to purchase 80 percent of the business of Banyan Tree to the value of $25,000 per licensed bed owned by Banyan Tree, stating that the total value of the purchase equated to $1,600,000. The offer was stated to be subject to a “due diligence review”. The letter further stated, in part, that it was the intention of Buxton Corporation to only buy out the interest of Mancuso and Gontier, “representing 80 percent of the Banyan Tree (Aust) Pty Ltd shareholding”.

On or about 11 June 1999 Mancuso received a further letter from Buxton Corporation Pty Ltd addressed to him making the same offer but stating that it was the intention of Buxton Corporation Pty Ltd to only buy out the interests of Mancuso Holdings Pty Ltd representing 80 percent of the Banyan Tree shareholding.

As to the letter dated 11 June 1999 written by Mancuso’s solicitor, Castellano, to the solicitors for Bares and his associated entities, in which the solicitor, Castellano, stated that he had been instructed to advise that the pre‑emptive rights which were referred to in the letter of 31 May 1999, had been exercised on or about 7 June 1999, Mancuso gave evidence that he instructed his solicitor to respond to the earlier letter from Bares’ solicitors, Zaparas & Dandanis, which was done by the letter of 11 June 1999.

Mancuso gave further evidence that on 16 July 1999, by letter, he was informed by Buxton Corporation Pty Ltd that it was not proceeding with the offer to purchase the business, as the return on the asking price was not satisfactory.

Mancuso gave further evidence that following the decision of the solicitor, Madden, to apply for approval to redevelop the site where the Edgelea Facility was situated, on 30 November 2001 Banyan Tree entered into an agreement to sell the business of the Edgelea Facility to Australian Retirement Communities Pty Ltd for the purchase price of $2,120,000 which sale was subject to the lessor obtaining a planning permit for unit development to be constructed on the site. He gave evidence that he understood that such re-development approval had been obtained. It became common ground that such was the case and that settlement of the sale was imminent. On 14 June 2002 counsel for the first defendant gave an undertaking to the Court that part of the proceeds of that sale as identified in the undertaking would be held in an interest bearing account in the name of the first defendant’s solicitors pending the determination of this proceeding or further order.

Mancuso said in the course of his cross-examination that Dyer was aware that he had spoken to Newman about selling the business and she was aware that Newman was handling the sale. At one point in his cross-examination he said that he had to put the offer that he had received from Bares before Dyer for approval. When it was put to him that he had never told Newman that he had to refer the offer to Dyer before he could effect a sale, Mancuso said that he could not recall if he did or did not do so.

In the course of his evidence in cross-examination, Mancuso said he knew and that it was common knowledge at the time that a “bed licence” was very much more valuable and worth a lot more money if it was “unencumbered” rather than if the “bed licence” had to stay with the facility. He said that he understood that if a “bed licence” was relocatable it would be worth in excess of $30,000 whereas if a “bed licence” was not relocatable it would have a worth in the mid-$20,000s. He said that he told Newman that he did not want to be part of the aspect of relocating the “bed licences”. When questioned as to instructions that he gave to Newman following receipt of the offer of 17 May 1999, he responded saying that he was negotiating at the time and as to Conditions 1, 3, 8 and 9, they were discussing those conditions. When asked whether he wanted Newman to do anything further, to attempt to arrange the sale, Mancuso said that they were negotiating aspects of the conditions. He said that he and Newman were discussing the issue of the conditions, that he expected Newman to go back to Bares and to discuss further with him the conditions, that he was discussing with Newman. He said Newman was asked to speak to Bares about the issues they had discussed. Mancuso at no time identified what, if any, specific instruction he gave to Newman to advance the sale other than saying he wanted Newman to discuss with Bares issues which they had been discussing and that he wanted Newman to continue to talk to Bares about the concerns that he had. At one point the following questions were put to Mancuso and answered by him as follows:

“Q.You say that you did not ask Newman to go back to Mr Bares and put a proposal that you would accept?
A.I was in discussions with Mr Newman, and we discussed these issues, and these issues were asked to be put back to Mr Bares to see what he thought.
Q.Is the answer to my question, no, you did not actually give him terms and say that you can tell Mr Bares that those terms would be acceptable to you?
A.It wasn’t spoken in that context, sir.
Q.And so after the conversation you did not expect Mr Newman to put a counter-offer on your behalf?
A.We were discussing and negotiating the conditions that is the way I understood it to be.”

Further, the following questions were put to Mancuso and answered by him during the course of his cross-examination by counsel for the plaintiff.

“Q.So if Special Condition 1 had … been removed so if just nothing appeared on Special Condition 1 that would have satisfied your concerns about this matter?
A.It may have but the aspect that they were going to relocate was concerning.
Q.I understand that, but you have given evidence you were still prepared to talk to him knowing that?
A.We were prepared to negotiate and discuss it. We were prepared to discuss the sale of the business but in terms of there was a concern that we had the fact that he wanted to relocate we didn’t know how to deal with it and we didn’t know how what the implications were and it was not something I decided on the spot.”

As to Mancuso receiving the letter from Newman dated 21 May 1999, which was received at 5.09 pm that day, Mancuso said that he had a recollection of speaking to Newman after receiving the letter and that the general conversation he had was that he would need to speak to his solicitor and send the letter off to him to discuss the matters in it and ask for advice. He said that it was not being sent to his solicitor for the terms to be drafted but rather he wanted to discuss the contents of the letter. When asked later whether, after receiving the letter of 21 May 1999, he asked his solicitor to draw some special conditions, Mancuso replied that they discussed the conditions and there may have been something drawn up.

As to the meeting that he had with Dyer, Mancuso gave evidence in cross-examination that when he met with her, the offer that he had, and that which he said he was negotiating, was tabled and immediately she said that she wanted to buy him out. He said that the meeting took place some three or four days before 31 May 1999. He gave evidence that the figure that Dyer put to him, to buy him out, was equivalent to 80 percent of the sale price that he had been offered by Bares. He agreed that in the sales negotiations he was having, Banyan Tree was seeking to sell the business. When it was put to him that Dyer was talking about something different he replied, “She wanted to buy me out”. When it was put to him that he knew that nobody had a pre‑emptive right to buy the business, he said he did not know whether that was correct. As to this matter, the following questions were put to Mancuso and answers made by him:

“Q.Are you saying at this point in time that you believe that Clare Dyer’s rights under the Banyan Tree Unit Trust entitled her to pre‑emptive rights to stop the purchase to Bares of the company’s business?
A.No, it wasn’t there to stop the sale of the business, we had a discussion that night and she wanted to buy my share out and from that there is an aspect in the trust that we can offer her the units… at this same value that is being offered. I didn’t say… that is what would happen.
Q.That is what you believed?
A.No. That is what happened that night and she had said that she wanted to buy me out okay so from that point that wasn’t used as an excuse to say look I don't want to go into that sale with Mr Bares, I take objection to that.”

When asked whether he knew what pre‑emptive rights mean, he replied:

“To me it means that she has got a right to purchase my units if she is wanting to buy them and I offer her the units at the price of what has been offered.”

Mancuso said, that after Buxton Corporation Pty Ltd informed him that it was not proceeding with the offer to purchase, as the return on the asking price was not satisfactory, it was his belief that he did not contact Newman and tell him that there had been no exercise of the pre-emptive right. He said that the business was not put back on the market but that the option under the lease was exercised in October 1999.

When cross-examined by counsel for Newman and after agreeing that the Edgelea Facility had been purchased for $1.46M in January 1998, that there was an offer to purchase in May 1999 for $2M, that he was fighting with his partner, Dyer, that there was a rising bank debt, that he had marginal profitability and that he wanted to sell and knowing that Bares wanted to buy, he was asked what did he say to his agent, Newman, to say to Bares on the Friday evening after receiving the letter from Newman dated 21 May 1999. He replied, “All I said to John was that I needed to get this over to get some advice from my solicitor to discuss what was being put to me. I did not say to John any sorts of things to go back to Mr Bares to say such and such, I don't recall any of those conversations taking place, it was basically we discussed the conditions and they took the same context as they did in the previous conversations and I was basically of the opinion that I had to get some further advice on these things because it was getting into an elongated discussion.”

Clare Dyer was called as a witness on behalf of the defendants, Banyan Tree and Mancuso. In the main her evidence in chief was that as stated in her witness statement. As to part of her evidence I have already referred to, she further gave evidence that from an early stage in her business association with Mancuso it was apparent to both of them that they would have difficulty working together and that either a sale of the business or a buy-out of the other’s interest in the unit trust was necessary. She gave evidence that she was unaware that Mancuso had discussions with Newman, of Cooper Newman, or that he had signed an authority to sell the business. Her evidence was that on or about 29 or 30 May 1999 Mancuso and Gontier attended her residence in the evening and she was informed by Mancuso that he had received an offer to purchase the business. She gave evidence that she advised Mancuso that she had first option to purchase and that she had a backer who was “very hot” and that she and her husband wanted to buy Mancuso’s share of the units. Her evidence was that before this meeting she had had a number of discussions with Richard Buxton of Buxton Corporation Pty Ltd and that after the meeting she had further meetings with Buxton and Gontier at which Buxton affirmed his interest. Her evidence was that she was aware of the two letters forwarded to Mancuso by Buxton Corporation Pty Ltd and that she was aware that by the letter of 16 July 1999 Mancuso was advised by Buxton that as a result of the due diligence exercise undertaken it would not proceed with the purchase. Her evidence was that due to the withdrawal of Buxton as a backer she was unable to proceed to acquire Mancuso’s interest in the Banyan Tree Unit Trust. In cross-examination she said that although she was not aware specifically that Newman had been engaged to sell the business she knew that Mancuso was involved in negotiating a sale and that they both seriously wanted that to happen. She said that she understood that her pre-emptive right was to buy his 80 percent of the units in the unit trust. She agreed that that would not apply if Banyan Tree sold the entire business. When it was put to her that at the meeting with Mancuso he told her about the sale that Newman had arranged, she said that what Mancuso said, was that he had a buyer. She was shown the letter dated 31 May 1999 written by Mancuso to Newman. She said she had not seen the letter before. She was taken to the second paragraph of that letter, which dealt with the assertion as to the existence of pre-emptive rights. She said that that was not discussed by her with Mancuso.

The claim of the plaintiff, Accredited Aged Care Facilities, for damages against the defendants, Banyan Tree and Mancuso, is that by reason of the contravention of s. 52 of the Trade Practices Act by each of them, it lost the benefit of the sale and purchase agreement and the rights that it had thereunder, thereby causing it to suffer loss and damage. Bares gave evidence that in the circumstances that existed, that is, that the sale and purchase agreement had been entered into and Banyan Tree, by its conduct, had evinced the intent not to be bound by it and to repudiate the agreement, had he not been informed that the pre-emptive rights for the sale of the business of the Edgelea Facility had been exercised, he would have taken proceedings to seek to enforce the sale and purchase agreement. Such a claim would have been made on the basis that by its actions Banyan Tree purported not to be bound by the agreement and that it had repudiated it. In my view, on the evidence, Banyan Tree did repudiate the sale and purchase agreement entered into. Not only did it and its director Mancuso, through whom it acted at the relevant time, engage in conduct which was misleading and deceptive by causing Accredited Aged Care Facilities and Bares to be informed that there existed a pre-emptive right which had been exercised when in both circumstances such was not the case, but when Buxton Corporation Pty Ltd did not proceed with the purchase of 80% of the units of the Banyan Tree Unit Trust, Mancuso did not inform Bares that Banyan Tree would proceed with the sale and purchase agreement but rather it exercised the option under the lease it then held and continued to conduct the business of the Edgelea Facility.

Not only did Accredited Aged Care Facilities at the relevant time, have the benefit of the sale and purchase agreement that it had entered into and the rights flowing from that, but it had the right to seek to enforce the sale and purchase agreement by specific performance, and also the right, at its option, to seek to recover damages against Banyan Tree for its breach of the agreement. It may be contemplated that in such a proceeding as this, had Accredited Aged Care Facilities taken proceedings seeking specific performance of the sale and purchase agreement, it may not have been successful in obtaining such relief, but if that had been the case, in the circumstances of this case, I am satisfied that it would have been able to recover damages for breach of contract against Banyan Tree. It was the benefit that Accredited Aged Care Facilities had, pursuant to the sale and purchase agreement, and the rights that it had pursuant to the same, that would have entitled it to recover damages for breach of contract against Banyan Tree. That proceeding was not brought in consequence of the conduct of each of Banyan Tree and Mancuso which constituted a contravention of s. 52 of the Trade Practices Act in the circumstances that I have referred to. On the evidence before the Court I am satisfied that had proceedings been brought by Accredited Aged Care Facilities against Banyan Tree, it would have been able to recover against Banyan Tree damages for its breach of the sale and purchase agreement.

Accredited Aged Care Facilities did not pursue the benefits and rights that it had pursuant to the sale and purchase agreement and the right to recover damages against Banyan Tree as a result of the conduct of Banyan Tree and Mancuso, which constituted their contravention of s. 52 of the Trade Practices Act. Accredited Aged Care Facilities has suffered loss and damage by reason of not pursuing its rights pursuant to the sale and purchase agreement by reason of the actions of Banyan Tree and Mancuso acting as they each did, and it is entitled to recover damages against each of them such as it would have been able to recover against Banyan Tree for its breach of the sale and purchase agreement. In determining the extent and nature of such damages it suffered it is appropriate to have regard to and assess such damages as would have been determined and assessed on the basis of damage suffered by it consequent upon Banyan Tree repudiating the agreement and acting in breach of the same.

In establishing its claim for damages against Banyan Tree, one of the matters that Accredited Aged Care Facilities would have needed to establish is that, as a result of the sale and purchase agreement, it would have been able to have the fruits of that agreement; that is, that it would have been able to obtain the required consent pursuant to the Aged Care Act for the “bed licences” to be transferred to it.

The plaintiff called two expert witnesses relevant to this matter, Mary-Ann MacKenzie, a real estate agent, and Daryl Nolch, a solicitor.

Ms MacKenzie has had a long period of experience as a real estate agent dealing exclusively with aged care facilities at four levels, retirement villages, supporting residential services, hostels and nursing homes. She was at the relevant time aware of the Edgelea Facility in St Kilda. She said that under the current regulations the rooms were too small and that there were too many patients sharing a room. She was also familiar with “Central Park”, which she described as a recently refurbished, high-quality facility in Windsor. She expressed the opinion that Accredited Aged Care Facilities was a “reputable and substantial” Approved Provider in the Aged Care industry. She expressed the opinion that had Accredited Aged Care Facilities acquired the Edgelea Facility in 1999 or at any time, the transfer of the “bed licences” to it would have received approval of the Department of Health and Family Services. She gave a number of reasons to support her opinion.

Ms MacKenzie, from her experience in the industry, was well qualified to express the opinions that I have referred to. I accept her evidence on this matter. She gave further evidence that the current market value for “bed licences” is between $35,000 and $43,000 per “bed licence” and that in 1999-2000 the value of a “bed licence” was in the range of $25,000 to $30,000 per “licence”. She said that the value of the “bed licences” being sold and purchased in the circumstances of this case, where they were being sold as one large parcel and that the purchaser was required to continue to operate the business until the expiration of the term of the lease and then the purchaser was to transfer the “bed licences” to another facility, was $25,000 per “bed licence” and that, had the purchaser in early 2000 sold small parcels of “bed licences” in the early part of the year, it would have been expected that such “licences” would have sold for between $33,000 and $35,000 per “bed licence”.

After being taken to the provisions of the lease pursuant to which Banyan Tree held the premises where the business of the Edgelea Facility was conducted, in the course of her cross-examination, and being that part referred to in paragraph 15 of my judgment, she was asked whether she saw that as a problem in selling the business with an on-selling or relocation of the beds. She said that it would be a hindrance but not a huge problem. As to this latter aspect of her evidence, I refer to the evidence of the witness Madden. He identified the lease dated 18 April 1995 by which Ayden Springs occupied the premises at which the business of the Edgelea Facility was conducted and the assignment of that lease on 27 January 1998 to Banyan Tree. He said that he had had discussions over the years with Dyer and Mancuso when they raised the possibility of selling the business and selling and transferring the “bed licences” to a purchaser of the business. He said that he had told them that under the lease that was not an option available, but that if they wished to proceed they would have to discuss the issue with them. He said, “We never discussed how we would deal with this issue, it never went that far.” He said that the lessor companies had now obtained a permit for the development of the land for unit redevelopment. It is with that course of events occurring that Banyan Tree has now sold the business of the Edgelea Facility for $2.12M.

It was submitted on behalf of the plaintiff that the provision of clause 1(d) of the lease would not have prevented Accredited Aged Care Facilities from transferring to “Central Park” the “bed licences” purchased by it pursuant to the sale and purchase agreement at the end of the term of the lease in January 2000. The Health Services (Amendment) Act 1994 repealed the provisions of the Health Services Act 1988 relating to nursing homes and hostels which repeal came into operation on 2 March 1995. At the time that the relevant lease was entered into, the Health Services Act was not relevant to the nursing home, the business of the Edgelea Facility conducted at the premises in St Kilda. In my view, when regard is had to the provision of clause 1(d) of the lease, that clause would not have prevented Accredited Aged Care Facilities from transferring the 80 “bed licences” from the premises at which the business of the Edgelea Facility was conducted at the end of the term of the lease in January 2000.

As referred to, there was also called the witness Nolch, a solicitor, who expressed in his evidence the opinion that, had Accredited Aged Care Facilities sought to transfer the allocated places, the “bed licences”, from the premises of the Edgelea Facility to “Central Park”, the Commonwealth department would have approved of such transfer. Attached to and forming part of his witness statement, which in turn formed the major part of his evidence-in-chief, was a document entitled “Summary of Experiences Relevant to Relocation of Nursing Homes”. It was with regard to this experience that his opinion evidence was led at trial. On investigating this part of his evidence and having regard to further evidence given by him, and notwithstanding that he said that Bares was known to him, it was revealed that he had acted for Bares and companies associated with him on matters relating to the acquisition of “bed licences”. Further, when the summary of his experience was investigated, I came to the conclusion that in parts it was misleading and less than frank. I put the evidence of this witness to one side and have no regard to it in reaching the conclusions that I do in this case. It is not necessary for me to deal further with this evidence. However, having regard to the evidence of Ms MacKenzie, which I accept, the conclusion that I have reached is that, had the sale and purchase agreement not been breached by Banyan Tree, the Department of Health and Family Services would have approved the transfer of the “bed licences” to Accredited Aged Care Facilities at its premises at “Central Park”, which was conducted in the same Local Government area as the Edgelea Facility, on being requested to do so at the end of the term of the lease in January 2000.

The claim made by the plaintiff, Accredited Aged Care Facilities, for damages against Banyan Tree was put in two parts. By the first part Accredited Aged Care Facilities claimed that it was required to bring proceedings for “pre-action” discovery in order for it to ascertain that there existed no pre-emptive right to purchase the business of the Edgelea Facility nor had any such right been purported to be exercised. Accredited Aged Care Facilities claimed that in such “pre-action” discovery proceedings and pursuant to orders made against it in those proceedings, it was required to pay Banyan Tree costs, taxed at $7,134.35, and that it also incurred legal costs with respect to such proceedings in the sum of $20,227.30. Under this head of damages the plaintiff claimed against Banyan Tree and Mancuso $27,361.65 by way of damages.

Under the next head of damages Accredited Aged Care Facilities claimed damages in the sum of $848,500.00. Accredited Aged Care Facilities claimed that it suffered this loss in consequence of the loss of the benefit of the rights that it had under the sale and purchase agreement. Accredited Aged Care Facilities alleged that, of the 80 “bed licences” that it purchased pursuant to the sale and purchase agreement, it would have acquired 31 “bed licences” itself for its “Central Park” facility and sold on the remaining 49 licences. It alleged that it would have sold those 49 “bed licences” for between $33,000 and $35,000 per “bed licence” in or about January 2000, returning to it a profit of $9,000 per “bed licence” sold, which would have returned it a profit of $441,000, which profit it lost. It alleged that of the 31 “bed licences” it would have retained for its own use and benefit, that in consequence of not obtaining the same pursuant to the sale and purchase agreement, it was obliged to seek to purchase the same elsewhere and that it purchased 16 of such “bed licences” at $35,000 per “bed licence”, causing it to incur an extra cost of $10,000 per “bed licence”, thereby causing it to suffer a loss of $160,000. Further, it alleged that the cost that would be incurred by it to purchase the remaining 15 “bed licences” at the present would cause it to pay between $40,000 and $43,000 per bed licence, which would cause it to incur an additional cost of acquiring such “bed licences”, above that which it purchased the same pursuant to the sale and purchase of agreement, of $16,500 per “bed licence”, thereby resulting in it suffering a further loss of $247,500.

Bares gave evidence that Accredited Aged Care Facilities had paid the legal costs incurred. When reference is had to the Orders made in the “pre-action” discovery proceedings, it is to be seen that part of the costs paid to Banyan Tree in those proceedings was the subject of an Order made by Gillard J on 28 April 2000 on granting to the plaintiff an adjournment of the hearing of the application, and when it was ordered that Accredited Aged Care Facilities pay the costs of Banyan Tree of the hearing before the Court on 28 April 2000 on a solicitor/client basis. The other part of costs paid by Accredited Aged Care Facilities to Banyan Tree in those proceedings was paid pursuant to the Order made on 4 May 2000, which was made by consent, whereby it was ordered that Banyan Tree make “pre-action” discovery to Accredited Aged Care Facilities and further that it pay the reasonable costs of Banyan Tree of making such discovery pursuant to the Order. Bares further gave evidence that, had the sale and purchase agreement been proceeded with and not breached by Banyan Tree Accredited Aged Care Facilities would have taken 31 licences and transferred them to its facility at “Central Park”, thereby bringing that facility to a capacity of 178 beds, for which it was designed and renovated. He said that the remaining 49 “bed licences” would have been on-sold and that he would have been able to sell these “bed licences” for $30,000 per “bed licence”. He gave evidence that on 22 December 2000 Accredited Aged Care Facilities purchased 16 “bed licences” at a cost of $35,000 per “bed licence” but that it had not been able to purchase the remaining 15 “bed licences” sought by it, and that it was extremely difficult to find “bed licences” able to be purchased. I accept this evidence. It was during the course of discussions had by Bares with Newman, the agent for Banyan Tree, that he identified to Newman his intention to onsell a number of the “bed licences” that he sought to purchase from Banyan Tree, and that the price at which such “bed licences” would be expected to be on-sold was $30,000 per “bed licence”. Accordingly, this intention was known to Banyan Tree by its agent, Newman.

On behalf of the third parties, Cooper Newman and Newman, who, as third parties, had an interest in the question of damages that may be awarded against Banyan Tree and Mancuso, if the plaintiff, Accredited Aged Care Facilities, was successful against them, it was submitted that any damages awarded should be assessed on the basis that, while Accredited Aged Care Facilities purchased the “bed licences” for $25,000 per “bed licence”, that the evidence supported the conclusion that such “bed licences” could be on-sold at $30,000 and that, therefore, the loss suffered by Accredited Aged Care Facilities was a loss in the sum of $5,000 per each of the 80 “bed licences” that it would have acquired had the purchase been completed. It was submitted that damages under this second head should be limited to $400,000.

On behalf of the defendants, Banyan Tree and Mancuso, it was submitted that in assessing damages regard should be had to the fact that the present contract of sale entered into by Banyan Tree for the sale of the business of the Edgelea Facility to Australian Retirement Communities Pty Ltd and dated 30 November 2001 was for the price of $2,120,000. It was submitted in substance that that was a relevant benchmark which the Court should have regard to in assessing any damages that it may award. As I understood that submission, it was that any damages suffered by Accredited Aged Care Facilities should be assessed under this head of no more than $120,000.

In my view, the claim for damages with respect to the costs paid and costs incurred by Accredited Aged Care Facilities, apart from the fact that part of it was with respect to costs ordered against the plaintiff on it obtaining an adjournment of its application for “pre-trial” discovery and part of it was pursuant to an Order made by consent, do not form part of and can not be recovered against the defendant, Banyan Tree and Mancuso, as damages caused by their conduct which constituted contravention of s. 52 of the Trade Practices Act. These costs and expenses were incurred by Accredited Aged Care Facilities in investigating whether it had a cause of action against these defendants, whether there existed a pre-emptive right to purchase the business of the Edgelea Facility from Banyan Tree, and, if such right existed, whether it had been exercised. Such costs incurred by it are not damages caused by the conduct of Banyan Tree, which was done by its director, Mancuso, and which constituted contravention of s. 52 of the Trade Practices Act.

In Wenham v Ella[15] Gibbs J said:
[15](1972) 127 CLR 454 at p. 473.

“The general principle that damages are normally measured by reference to circumstances at the date of the breach of contract does not mean that events that have occurred after that date may never be considered.”

In Hungerfords v Walker[16] Mason CJ and Wilson at p. 146, after stating that it was acknowledged by the Court in Johnson v Perez[17] that the rule that damages for breach of contract or tort are assessed at the date of the breach or when the cause of action arises was not universal, cited Wenham v Ella as a “striking illustration” of a plaintiff recovering loss which accrued after the cause of action had become complete.
[16](1989) 171 CLR 125.
[17](1988) 166 CLR 351.
In The Commonwealth vAmann Aviation Pty Ltd[18], Brennan J said:
[18](1991) 174 CLR 64, at p. 98.
“The general principle governing the measure of damages for breach of contract is stated in Robinson v. Harman[19]:
‘The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, be placed in the same situation, with respect to damages, as if the contract had been performed.’

It is common ground that that principle, which was applied in Wenham v. Ella[20], governs this case. Robinson v. Harman identifies both the subject of the compensation (loss sustained by reason of a breach of contract) and the measure of damages (the amount required to place the innocent party in the same situation as if the contract had been performed). Where a contract is rescinded for breach, the innocent party loses the benefit of performance of the contract so far as the contract remains unperformed. And there may be other losses resulting from the breach. The rule in Hadley v. Baxendale[21] prescribes the condition on which damages can be awarded in respect of a loss sustained by breach of contract:

‘Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.’

[19](1848) 1 Ex. 850, at p. 855 [154 ER 363, at p. 365], per Parke B.

[20](1972) 127 CLR 454, at p. 471.

[21](1854) 9 Ex. 341, at p. 354 [156 ER 145, at p. 151].

In the circumstances of this case, as a result of the conduct of each of Banyan Tree and Mancuso which contravened the provisions of s. 52 of the Trade Practices Act, Accredited Aged Care Facilities did not pursue against Banyan Tree the claim otherwise available to it to recover damages for repudiation and breach of the sale and purchase agreement by Banyan Tree. In recovering damages against Banyan Tree and Mancuso, as suffered in consequence of that conduct, which contravened s. 52 of the Trade Practices Act, the plaintiff is able to recover against them such damages as Accredited Aged Care Facilities would have recovered against Banyan Tree had action been taken against it for its repudiation and breach of the sale and purchase agreement.

On the evidence before the Court, and that of Bares in particular, I accept that it was the intention of Accredited Aged Care Facilities, at the relevant time, to retain from the 80 “bed licences” purchased by it, pursuant to the sale and purchase agreement, 31 “bed licences” for its use and to be transferred to the “Central Park” facility, and that it intended to onsell the remaining 49 “bed licences” in the market place. I am satisfied that it was within the contemplation of the contracting parties, Accredited Aged Care Facilities and Banyan Tree, that Accredited Aged Care Facilities would on-sell part of, a number of, the “bed licences” purchased by it. I accept that, had the sale and purchase agreement been not breached, Accredited Aged Care Facilities would have on-sold 49 “bed licences” in or about January 2000. Having regard to the evidence of Bares relevant to this matter, I have reached the conclusion that as a probability had such events occurred Accredited Aged Care Facilities would have made a profit of $245,000 from such on-sale being the profit of $5,000 per “bed licence” on-sold by it. Some costs would have been incurred by way of sale costs and commission. It is appropriate in my view to round off the profit lost by Accredited Aged Care Facilities under this head, to the sum of $240,000.

In December 2000, Accredited Aged Care Facilities was able to purchase 16 “bed licences” for $35,000 each. It claims that it has suffered loss in respect of the purchase of those “bed licences”, being the difference between that purchase price and the sum of $25,000 per “bed licence” under the sale and purchase agreement, and further claims a higher loss in respect of the remaining 15 “bed licences” on a basis that if such licences were to be purchased now it would cost it between $40,000 and $43,000 to purchase each “bed licence”. In my view, I should not seek to assess part of this claim by taking into account what it may cost Accredited Aged Care Facilities to purchase “bed licences” on the market at present, if the same were available. In my view, this part of the damages as suffered by Accredited Aged Care Facilities should be assessed on the basis of the cost to it when it purchased in December 2000 16 “bed licences” for $35,000. Accredited Aged Care Facilities lost the benefit of the sale and purchase agreement in consequence of Banyan Tree's repudiation of the same, from acquiring 31 “bed licences” to be transferred to its facility at “Central Park” at $25,000 per head. That benefit lost was a loss of acquiring such “bed licences” for $775,000. In valuing the “bed licences” able to be acquired by Accredited Aged Care Facilities at $35,000 per “bed licence”, being the price at which it purchased 16 “bed licences” in December 2000, properly evaluates the cost of such “bed licences” as able to be purchased by it to date. The cost of 31 “bed licences” at $35,000 per “bed licence” equates to $1,085,000. That sum is to be compared against the cost of such “bed licences” as would have been obtained by Accredited Aged Care Facilities had the contract not been repudiated and breached by Banyan Tree, namely $775,000. The difference between those two figures, $310,000, in my view, is the sum at which the damages suffered by Accredited Aged Care Facilities, in consequence of it being required to purchase “bed licences” on the market, should be assessed. Accordingly, in my view, the total damages suffered by the plaintiff, Accredited Aged Care Facilities, as a result of the contravention of Banyan Tree of s. 52 of the Trade Practices Act and the conduct and actions of Mancuso which also constituted contravention of that provision, should be assessed in the total sum of $550,000.

Although I am satisfied that Mancuso, in writing the letter of 31 May 1999 to Newman, which was conveyed to Bares, constituted a breach by him of s. 11 of the Fair Trading Act 1985, I am of the view that such breach was not a cause of Accredited Aged Care Facilities suffering damage. The distinguishing difference between that letter and the letter of 11 June 1999 was the fact that, in the latter letter, it was stated that not only did there exist pre-emptive rights but that the same had been exercised.

For the reasons previously expressed, I am satisfied that the defendants, Banyan Tree and Mancuso, have no sustainable claim against the third parties, Cooper Newman and Newman. In concluding the sale and purchase agreement on 21 May 1999, on behalf of Banyan Tree, Newman acted in accordance with the instructions of Mancuso and the authority given to him by Mancuso. That the “deal” had been done and that it was to the satisfaction of Mancuso was accepted by Mancuso when Newman reported to him finally on 21 May 1999. No act or omission on behalf of Cooper Newman or Newman caused or contributed to Banyan Tree or Mancuso being liable in damages to Accredited Aged Care Facilities. Accordingly, the third party proceedings must be dismissed.

On the claim of Cooper Newman against Banyan Tree for commission, as previously stated, I am satisfied that Newman acted on the instructions of Mancuso on the sale of the business of the Edgelea Facility, and pursuant to the written authority given by Banyan Tree to Cooper Newman to sell the business of the Edgelea Facility for $2M. Cooper Newman, on behalf of Banyan Tree, sold the business during the period of the written authority. Accordingly, Cooper Newman in the proceedings by which it seeks to recover commission against Banyan Tree, is entitled to recover its commission in the sum of $50,000 together with interest as provided by that agreement. I have been provided by counsel, for Cooper Newman, with a table of calculations setting out the interest due, pursuant to the written authority from 21 May 1999 to 12 June 2002, whereby it is calculated that the interest due and payable, as provided by the written authority, is to that date $25,495.62, and further that such interest accrues and continues to accrue at the rate of $22.26 per day. I accept those calculations.

Accordingly, for the reasons expressed, I propose to make orders in accordance with the following minutes, subject to any application that may be made on behalf of the plaintiffs, Accredited Aged Care Facilities and Cooper Newman, for damages in the nature of interest.

1.In proceeding No 7575 of 2000 wherein Accredited Aged Care Facilities is plaintiff and Banyan Tree and Mancuso are defendants, and Cooper Newman and Newman are third parties, that it be ordered:-
(i)that there be judgment for the plaintiff against the defendants and each of them in the sum of $550,000, and that it be ordered that the defendants and each of them pay to the plaintiff $550,000;

(ii) that the third party proceedings be dismissed.
2.In proceeding No 5501 of 2002 wherein Cooper Newman is plaintiff and Banyan Tree is defendant, that it be ordered:
¨ that there be judgment for the plaintiff against the defendant in the sum of $75,695.96 and that the defendant pay to the plaintiff the sum of $75,695.96.

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[2002] VSC 261

28 June 2002