All Fasteners v Grant Caple Pty Ltd; and Ors (No.3) - [2005] FMCA 1873

FEDERAL MAGISTRATES COURT OF AUSTRALIA

ALL FASTENERS v GRANT CAPLE PTY LTD
& ORS (No.3)

[2005] FMCA 1873

TRADE PRACTICES – Damages – loss of opportunity – causation.

Trade Practices Act 1974, ss.52, 82, 86AA, 87

All Fasteners (WA) v Caple Pty Ltd & Ors (No 2) 2004 FMCA 948
Wardley Australia Ltd & Anor v The State of Western Australia (1992) 175 CLR 514
Henville v Walker (2001) 206 CLR 459
Jones v Schiffmann (1971) 124 CLR 303
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
Amann Aviation Pty Ltd v Commonwealth (1990) 22 FCR 527
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
Yorke v Ross Lucas Pty Ltd (1982) 69 FLR 116
Brown v The Jam Factory Pty Ltd (1981) 35 ALR 79
Starborne Holdings Pty Ltd v Radferry Pty Ltd (1998) FCA 439

Applicant:

ALL FASTENERS (WA) (A FIRM)

Respondents:

GRANT CAPLE PTY LTD (ACN 058 483 686), GRANT CAPLE, PERFORMANCE BUSINESS SALES (A FIRM), KEN HALL and MICHELLE CAPLE

File Number:

PEG 263 of 2002

Judgment of:

McInnis FM

Hearing date:

17 May 2005

Date of Last Submission:

8 December 2005

Delivered at:

Perth

Delivered on:

16 December 2005

REPRESENTATION

Counsel for the Applicant:

Mr R Rumsley

Solicitors for the Applicant:

Alan Rumsley

Solicitors for the Respondents:

No appearance

ORDERS

The Second Respondent pay to the Applicant by way of damages, pursuant to s.82 of the TPA, the sum of $90,000.
The Second Respondent pay to the Applicant by way of interest on the damages, pursuant to s.51A of the Federal Court Act 1976, $39,683.42, calculated to 16 December 2005.
The Second Respondent pay to the Applicant by way of interest on the judgment pursuant to s.52 of the Federal Court of Australia Act 1976, $25.89 per day from 17 December 2005 until payment.
The Second Respondent pay the Applicant’s costs fixed in the sum of $20,000.00.
The Second Respondent indemnify the Applicant against any costs the Applicant pays the Fifth Respondent in respect of the Fifth Respondent’s costs of this Application.
Liberty to apply is granted to the Applicant in relation to any issues arising out of these orders.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
PERTH

PEG 263 of 2002

ALL FASTENERS (WA) (A FIRM)

Applicant

And

GRANT CAPLE PTY LTD (ACN 058 483 686), GRANT CAPLE, PERFORMANCE BUSINESS SALES (A FIRM), KEN HALL and MICHELLE CAPLE

Respondents

REASONS FOR JUDGMENT

On 19 March 2003, a Federal Magistrate of this Court ordered there be judgment entered for the Applicant against the Second Respondent with damages to be assessed. A subsequent hearing has resulted in judgment being obtained for the Applicant against the Fifth Respondent by order made on 4 December 2004. The issue of the assessment of damages was then listed for hearing on 17 May 2005. On that occasion, the damages applied to the default judgment entered against the Second Respondent and the judgment against the Fifth Respondent. After that hearing however, the orders made by the court in relation to the liability of the Fifth Respondent were set aside and the application against the Fifth Respondent dismissed. This occurred by orders made on 4 November 2005.
The remaining issue then, which now remains for determination by the court, is the damages claim by the Applicant as against the Second Respondent. Although submissions were made for and on behalf of the Fifth Respondent at the hearing conducted on 17 May 2005, no decision was made in relation to those damages pending the outcome of the appeal to the Federal Court, which as I have indicated, resulted in the setting aside of orders made by this court in relation to the Fifth Respondent and a dismissal of the claim against that respondent, hence it was not necessary for the court to consider formally the submissions made for and on behalf of the Fifth Respondent in relation to damages, though I accept the court is not precluded from having some regard to those submissions in considering whether or not the Applicant has discharged the onus of satisfying this court that damages claimed are recoverable.
The claims now made by the Applicant against the Second Respondent are as follows:
1.$11,706.70 by way of refund under section 87(2)(c) of the Trade Practices Act 1974.
2.Damages of $200,000 under sections 82 and 86AA of the Trade Practices Act 1974.
3.Interest of $52,191.71, and
4.The Applicant's costs of the application including any costs payable by the Applicant to the Fifth Respondent.
For the purposes of the assessment of damages against the Second Respondent in default, I am prepared to formally conclude that the Second Respondent has been guilty of misleading and deceptive conduct as alleged by the Applicant. The background to this claim is set out in the decision of the court referred to earlier which, although the orders were set aside, satisfactorily summarises the claims made by the Applicant (All Fasteners (WA) v Caple Pty Ltd & Ors (No 2) 2004 FMCA 948 at [20] to [27]).
The Applicant relies upon an outline of submissions forwarded to the court on or about 8 December 2005 which are claimed to supplements submissions filed previously by the Applicant for the hearing of the matter of the assessment of damages on 17 May 2005. It is presumed that the Applicant also seeks to rely upon the evidence produced at the hearing on 17 May 2005 which includes affidavits of Teresa Lea McKenzie sworn 5 March 2004 and 23 February 2005 and the affidavits of Mauro Federico sworn 4 March 2004 and 24 February 2005. Each of those affidavits were tendered as exhibits at the hearing on 17 May 2005 and the deponents gave evidence.

Relevant Law

Section 82 of the Trade Practices Act 1974 (TPA) provides that:
“A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part ... V ... may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.”
In this case that section provides for an action against the Second Respondent by the Applicant in circumstances where there has been a contravention of s.52 of the TPA.
The Applicant in order to recover damages must prove that loss or damage suffered was "by" conduct in breach of the TPA. It is useful to set out a relevant extract from a decision of the High Court in Wardley Australia Ltd & Anor v The State of Western Australia (1992) 175 CLR 514, where the Court states at 525 the following:
"The statutory cause of action arises when the plaintiff suffers loss or damage ‘by’ contravening conduct of another person. ‘By’ is a curious word to use. One might have expected ‘by means of’, ‘by reason of’, ‘in consequence of’. By the word clearly expresses the notion of causation without defining or elucidating it. In this situation, s.82(1) should be understood as taking up the common law practical or common-sense concept of causation recently discussed by this Court in March v Stramare (E. & M. H.) Pty. Ltd., except in so far as that concept is modified or supplemented expressly or impliedly by the provisions of the Act. Had Parliament intended to say something else, ti would have been natural and easy to have said so."
I accept that causation will be a question of fact to be determined by the court and the concept of "remoteness" in assessing damages is relevant in the sense referred to by the High Court in Henville v Walker (2001) 206 CLR 459 where at paragraph [136] McHugh J said:
“Given the long history of the common law’s recognition of the concept to remoteness in assessing damages in contract and tort and its relationship with the issue of causation, it seems proper to read the term ‘by’ in s 82 as including the concept of remoteness. By remoteness, I mean that the loss or damage was not reasonably foreseeable even in a general way by the contravener. …”
I accept that the assessment of damages is sometimes described as an inexact science which may involve guesswork rather than estimation (see Jones v Schiffmann (1971) 124 CLR 303, and simply because the Court may have difficulty estimating damages does not relieve it from estimating the damages as best it can (see Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64). I note that Davies J in Amann Aviation Pty Ltd v Commonwealth (1990) 22 FCR 527 at 527 stated:
“[A]s the circumstances of commercial life are complex and varied, issues of chance and contingency may play a part. Some damages are speculative. The value of a chance or a possibility, when relevant, must be taken into account, if it can be calculated.”
Damages for deprivation of commercial opportunity, which arise from a breach of s.52 of the TPA, need to be determined by reference to the court's assessment of success of that opportunity had it been pursued (see Sellars v Adelaide Petroleum NL (1994) 179 CLR 332). That case is clear authority for the proposition that loss of an opportunity to obtain a commercial advantage or benefit is "loss or damage" within s.82(1) of the TPA. The case is also authority (per Brennan J) for the proposition that although the issue of a loss caused by a defendant's conduct must be established on the balance of probabilities, hypotheses and possibilities, the fulfilment of which cannot be proved, must be evaluated to determined the amount or value of the loss suffered. It is sufficient for the present purposes to note from the headnote of that case that:
“Proof of the balance of probabilities has no power to play in the evaluation of such hypotheses or possibilities: evaluation is a matter of informed estimation.”
Of further assistance in this case is the decision of the Federal Court in the matter of Yorke v Ross Lucas Pty Ltd (1982) 69 FLR 116. In that case the court followed the decision of Federal Court in Brown v The Jam Factory Pty Ltd (1981) 35 ALR 79 and held that the principle to be applied is to compare the position, which the Applicants might have been in if they had never entered into the contract induced by the respondent's representation with the position when they left the business. It was held by the court in Yorke that the Applicants were entitled to the following:
Refund of their purchased money with an adjustment of the diminution of stock:
·    interest on the purchased money
·    compensation for trading losses
·    the amount payable by the Applicants to the landlord in     respect of loss and expense incurred by it on re-entry prior to reletting
·    the costs of going into and out of the business
·    any additional capital made available to the business by the Applicants out of the proceeds of their home.
It is noted that in Yorke, the Applicants were not entitled to financing costs associated with the purchase or loss of wages.
I apply the principles set out in the decision of the Federal Court in Starborne Holdings Pty Ltd v Radferry Pty Ltd (1998) FCA 439 and (1998) ATPR 41-634 where the Court held an Applicant is not entitled to recover damages from trading losses from having elected to operate a business at a lower level than it could have been run.
This court has a monetary limit imposed upon it in relation to the award of damages. Pursuant to s.86AA of the TPA, which provides:
“If proceedings under section 82 are instituted or transferred to the Federal Magistrates Court, the Federal Magistrates Court does not have jurisdiction to award an amount for loss or damage that exceeds:
(a) $200,000; or
(b)if another amount is specified in the regulations - that other amount.”
I accept that by operation of that section the court may not award loss or damages exceeding $200,000.
It is noted that orders have been sought in the present case under s.87 of the TPA, which provides a basis for an order directing the person engaged in the conduct or involved in the contravention may be subject to the orders of compensation. That clearly overlaps to some extent with s.82 of the TPA though I accept, as indicated by the High Court, that there may be a distinction between ss.82 and 87 with a claim under s.82 providing for a cause of action to arise only when actual loss or damage has been suffered, whereas a claim under s.87 may be made where a cause of action would arise where damage is likely to be suffered. In any event, in this case, I am satisfied the claim for damages arose from proceedings under s.82 of the TPA and for present purposes I accept that this court is limited in the amount of the awarded damages to an amount that does not exceed $200,000.

The Damages Claimed

The Applicant has submitted that in this case all losses suffered, which have been referred to in the affidavits filed by the Applicant, are losses for which representations were found by the court to be misleading and deceptive and in contravention of s.52 of the TPA are a cause and thereby recoverable in support of the claim for damages.
The evidence relied upon for the production of business records by Mauro Federico and the Applicant's accountant who produced the financial statements, those financial statements then appear to be in part relied upon by the evidence of Teresa Lea McKenzie, who by way of an update in her affidavit of 23 February 2005, deposes that the Applicant has suffered "a capital loss of $106,114.18." Combining her two affidavits, it seems that that figure is arrived at on the following basis:
·    $150,000 initial purchase price for the business
·    Plus $425 being settlement fees incurred on the purchase
·    Plus $1,623.20 being stamp duty incurred on the purchase
·    Less stock adjustment between the first respondent, its     volunteer administrator and the Applicant by way of a refund    of $15,641.93
·    Less sale price received from the sale of business on 21 November 2003, at $37,692.19
·    Plus deferred agent's fee of $7,400 being the selling agent's fee arising out of an agreement dated 21 October 2003, including commission payable upon the sale of the business.
It is clear to me that the analysis of capital loss provided in the evidence of the Applicant may properly be regarded as a starting point for assessing damages. A purchase price of $150,000 included the purchase of stock, which in this instance involved three motor vehicles; two of which were traded in prior to the sale of the business in November 2003.
There were criticisms made during the course of the hearing in this matter of the manner in which the Applicant conducted the business. It is important to at least make some allowance for that conduct which may lead a court to conclude that it was not conducted in a way which might have attracted a better "sale price". Of course in the assessment of damages it is difficult to make a precise finding in relation to that but rather simply make some allowance by way of reduction to the damages claimed.
I am satisfied loss and damage occurred as a result of the representations made by the Second Respondent, which are claimed in breach of s.52 of the TPA. At the very least a direct consequence was the business was purchased and then subsequently sold at a significant capital loss. I am satisfied the business would not have been purchased had the representations not been made, and therefore am prepared to conclude that the damages by way of capital loss have been sustained. I am not prepared however to accept that the total amount of capital loss of $106,114.18 is an appropriate amount of damages and I make some allowance for what might be described as the less than efficient conduct of the business on the evidence before me by the Applicant. This includes the failure to adequately provide appropriate staff to assist with the sales and marketing. A further reduction should be made for transactions including the acquisition and sale of at least two of the three vehicles. Doing the best I can on the material before me,
I am prepared to find that there has been a capital loss constituting damages, which I assess at $90,000.
I accept in this instance the downturn in the business occurred soon after the purchase and I do not find that there has been a contrived downturn in the business caused by the Applicant. Rather I accept, as indicated, that a loss and damage has occurred in the nature of a capital loss arising from the purchase and sale of this business. The sale in itself, I am satisfied, was appropriate in order for the Applicant to mitigate the loss, and that the loss as found was caused by the claimed contravention of the s.52 of the TPA by the Second Respondent.
It is not necessary in the assessment of damages for the court to analyse in minute detail each and every aspect of the damages claimed. I do not regard it as appropriate to make a separate award of damages under s.87(2)(c) of the TPA in the amount of $11,706.70 by way of refund of the rental paid as some value was gained by the payment of rental and adequate compensation is achieved by the award of damages for capital loss.
Likewise on an analysis of the material, any further losses, including loss of income would be adequately covered by the general award of damages for capital loss to which I have referred. I am not satisfied it is appropriate to allow further damages in this case as it is clear that some income and benefit is derived from the conduct of the business and it is almost impossible for this court to now make an assessment of loss of income which had been asserted in the affidavit material and ultimately claimed in the sum of $17,522 being the net loss of income forgone by Mr McKenzie, a partner of the Applicant.
Whilst I accept that the assessment of damages in this instance may reflect a somewhat robust approach, I should also add that it is not for the court to merely accept all the damages claimed in circumstances where it is clear that the court's duty is not to make a damages order for all losses, where it may well be that some of those losses do not arise directly out of the contravention of the TPA by the Second Respondent. It is clear that in the conduct of a business that other losses were sustained and adjustments made, though the substantiative loss, I am satisfied, which justifies the assessment of damages in the sum of $90,000 is for the capital loss, and that in my view, is sufficient compensation for the Applicant in this application.
I am not satisfied that the amount claimed for legal costs payable by the Applicant to the Fifth Respondent properly forms part of the damages to be assessed in this application. That is a separate and discrete matter, which has only arisen after the hearing and appeal, where an Applicant seeks to pursue a number of respondents and where ultimately albeit on appeal that claim is unsuccessful with consequential costs orders that I do not see how those costs can properly form part of the damages to be awarded in this claim against the Second Respondent.
For those reasons it follows in my view that the appropriate order of the court will be that the Second Respondent pay to the Applicant by way of damages, pursuant to s.82 of the TPA, the sum of $90,000 together with interest to be calculated pursuant to s.51A of the Federal Court Act, and I shall hear submissions in relation to the total amount of interest payable. It follows that the Second Respondent should pay the Applicant's costs. Again I shall hear submissions in relation to the amount of those costs.

I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate:

Date: 16 December 2005