APD Parcel Delivery Pty Ltd v Baumann and Anor No. Scciv-02-746
[2002] SASC 350
•26 November 2002
APD PARCEL DELIVERY PTY LTD v BAUMANN and ANOR
[2002] SASC 350Magistrates Appeal: Civil
PERRY J. The respondents to this appeal were the plaintiffs in an action in the Civil (General Claims) jurisdiction of the Magistrates Court. In the proceedings they brought various claims against the appellant (“APD”) arising out of a contract entered into between them in January 2000. Pursuant to the contract the respondents agreed to operate a courier round in a designated location forming part of a larger area in which APD conducted a courier service.
The respondents claimed damages for alleged misrepresentation on the part of APD which, it was said, induced the respondents to enter into the contract.
The learned trial magistrate found in favour of the respondents and awarded damages in their favour against APD in the sum of $13,460.
It is from that judgment that APD appeals to this Court.
APD contends that the respondents’ claim should have been dismissed.
Background
Although the claim was brought by both respondents, it was the respondent Mr Peter Baumann who conducted the relevant dealings with the appellant. I will from here onwards refer to Mr Baumann, which is intended to include Mrs Baumann where the context requires.
At some time Mr Baumann had suffered a work injury which resulted in an entitlement to weekly payments of compensation from WorkCover. When an opportunity arose to redeem the liability of WorkCover to maintain the payments, his father-in-law suggested investing in a courier business, more particularly that conducted by APD.
APD offered a courier service to the public. It conducted the service by engaging a number of drivers, described by APD as “operators”, who drove their own vehicles for the purpose of effecting pick-ups and deliveries in various designated areas or territories.
APD maintained contact with the operators by a two-way radio service. Items collected by operators from customers were brought to a central distribution point, from which they were in turn collected by the operator responsible for servicing the area in which the delivery was to be made. That operator then made the delivery.
On a stated time each day, the operator furnished details of the work performed by him or her on the preceding day, following which APD would pay a fee to the operator for each delivery and pick up. The operator, in turn, paid a service fee to APD in consideration of the maintenance by APD of a telephone answering service and the provision of the other necessary facilities.
There were various responsibilities upon the operators, which included the provision and maintenance of an appropriate vehicle, which they were entitled to paint with the “fleet colours” of APD; use of a uniform specified by APD; and the installation in the operator’s vehicle of a two-way radio.
Towards the end of December 1999, Mr Baumann met with Mr Aloisi, who was a principal of APD, and discussed the matter with him. At that time Mr Baumann was receiving weekly payments from WorkCover amounting to slightly less than $600.
The learned trial magistrate found that at the meeting Mr Baumann made it clear to Mr Aloisi that he was interested in a “run” that would return about $600 per week. Furthermore, he did not want a run that was “too onerous”. Mr Aloisi suggested that a run known as run 38 might suit Mr Baumann’s requirements.
The gist of Mr Baumann’s case is that in the course of the negotiations, Mr Aloisi misrepresented the rate of earnings being derived from run 38. I will deal with Mr Baumann’s specific allegations in that respect in due course.
It is sufficient to note that early in January 2000, Mr Aloisi furnished a set of figures relating to the operation of round 38 to Mr Baumann’s accountant, Mr Clarke. The figures were sent to Mr Clarke by fax. Mr Clarke discussed the figures with Mr Baumann, and advised him on the transaction generally. In the result, Mr Baumann decided to go ahead with the purchase.
Mr Baumann signed a memorandum of agreement with APD dated 24 January 2000, in which he agreed to pay the purchase price of $8,000. The agreement evidences the obligations of APD to provide various “services” as detailed in the agreement, and records corresponding obligations on the part of Mr Baumann in performing the work involved in servicing the run.
Mr Baumann purchased a new van and commenced operating the round at about the end of January 2000.
In June 2000, Mr Aloisi left the employ of APD. Mr Baumann then had dealings with the managing director of the appellant, Mr Christopher Lake.
From an early stage, Mr Baumann voiced his dissatisfaction with the return which he was receiving from the run. In July 2000, APD, through Mr Lake, offered to exchange Mr Baumann’s round for another round, or arrange for a Mr Wilson to buy his round for $8,000. This offer was not accepted by Mr Baumann. However, APD struck an arrangement whereby a bonus was paid to Mr Baumann, which effectively ensured that during the period he worked for APD, he received a minimum of $600 gross per week.
Eventually, towards the end of October 2000, Mr Baumann reached an agreement with APD whereby he ceased to operate the round, and the purchase price of $8,000 which he had paid was refunded.
It was not suggested that the refund operated to extinguish any further claim which he might have had against APD.
After he gave up the round, Mr Baumann surrendered the van which he had bought to the finance company which financed its purchase, which in turn sold it at a figure which gave rise to a liability on the part of Mr Baumann amounting to $4,560.68. This was the difference between the selling price and the amount which he owed to the finance company.
In his particulars of claim, Mr Baumann claimed a refund of $4,000, being the deposit paid by him on the purchase of the new van, together with the amount of the loss suffered by him on its re-sale, and a sum in excess of $5,000 which he maintained was the difference between the income represented to him and the actual income derived by him during the period that he operated the round.
He further claimed loss of income for the period between 30 October 2000, that is, from the time when APD resumed the round, until he obtained employment in February 2001, with respect to which he claimed a further amount in excess of $8,700.
In the prayer for relief in the particulars of claim, he claimed in addition to those items, unspecified “punitive and aggravated damages arising out of intentional misrepresentation by the defendant”, which is taken up in the total claim which was rounded off at $30,000.
The Alleged Misrepresentations
In Mr Baumann’s particulars of claim, the alleged misrepresentations are set out in the following terms:
“8.During the course of oral discussions in January 2000 between Mr Aloisi on behalf of the defendant and the male plaintiff, Mr Aloisi represented that the courier delivery business known as Run 38 was earning a weekly income of $605.68 based on a 50 week year.
9.To support his representation, Mr Aloisi provided to the plaintiffs a set of figures which alleged to set out the earnings of a previous driver for the period from the 1st day of July 1997 until the 26th day of June 1999.
10.The plaintiffs also sought from the defendants the figures showing the earnings for Run 38 for the period from the 1st of July 1999 until 31st December 1999 and that the figures provided were an accurate reflection of the earnings of Run 38.
11.Acting upon the representations and figures provided by the defendant, the plaintiffs agreed to purchase the courier business known as ‘Run 38’ from the defendant for the asking price of $8,000.00.”
Dealing with the allegations in paragraphs 8 and 9, the figures referred to in paragraph 9 are those which I have explained Mr Aloisi furnished by fax to Mr Baumann’s accountant, Mr Clarke, in January 2000. They represented the earnings of the previous operator of run 38 between 1 July 1997 and 26 June 1999. Based on a 50-week year, those figures in fact yielded $605.68 per week.
The accountant Mr Clarke gave evidence. He agreed that the figures which he received which related to that period showed “an average gross” of $600 per week.
There was, therefore, no misrepresentation as to the earnings for that period.
As for the allegations in paragraph 10, although the accountant Mr Clarke sought the figures for the last six months of 1999, they were not at that stage furnished by APD.
The learned trial magistrate preferred the evidence of Mr Baumann to that of Mr Aloisi, to the effect that when Mr Clarke suggested to Mr Baumann that he obtain the last six months’ figures, they were not supplied. In particular, the learned trial magistrate accepted Mr Baumann’s evidence on this topic which was as follows:
“A.Mr Clarke asked where the figures from 1 July 1999 to 30 December were, and I explained to him that I asked Mr Aloisi to send all the figures that he had to represent his figure and so he faxed it to him so it was out of my control at that stage.
Q.After you had seen Mr Clarke on 6 January 2000 did you do something in connection with the figures.
A.After Mr Clarke raised the issue of those particular figures I returned to APD, I had to wait for a little while but I spoke to Don [Aloisi] and asked him where these figures were.
Q.What did Mr Aloisi say to you.
A.Mr Aloisi explained to me that the gentleman before who was operating the run under his business became unreliable and after trying to help this gentleman get back on track, in order not to lose customers, they were forced to, through the contract agreement, cease his employment, negotiate a deal or contract for the business set up, that they had arranged. Whilst he was unreliable and after he left, other drivers from associated areas around him were used frequently to keep the customers and keep them afloat until they could find someone suitable to look after the run.
Q.Did Mr Aloisi make any comment about the state of business in run 38 in those six months compared to the figures he sent you.
A.He said in order for me to get any accurate representation it was not possible due to the fact that they were incorporated in other drivers’ runs and that the figures he represented through the faxing system to my accountant were his accurate representation of what the run was earning at this stage.
Q.Did he say to you, would you recall what in fact the run was earning during that six month period.
A.It was the same as the figures he sent to us by fax.
Q.Those figures you received by fax were the $605 per week.
A.Yes.
Q.When Mr Aloisi told you that, what was your attitude.
A.His explanation about the previous driver satisfied me that I had no doubt that he was lying to me or that he was in any way deceiving me, I took his word as truth and returned to my accountant and said that that’s all there is, that’s the only figures we have got.” (emphasis added)
From the wording of paragraph 10 of the particulars of claim, it is not entirely clear what it is alleged was represented. However, it appears that the trial was conducted on the footing that the allegation was that through Mr Aloisi, APD represented that for the last six months of 1999 the round was returning much the same figures as for the previous financial year, those figures having already been supplied.
Having regard to the passage of evidence to which I have referred, which I stress was accepted by the learned trial magistrate, the representation to that effect was a misrepresentation. The assurance which was apparently given by Mr Aloisi to Mr Baumann after the latter had seen Mr Clarke on 6 January 2000, to the effect that although accurate records were not available, “the run” was earning at the same rate as the figures which had previously been sent to Mr Clarke by fax, being the figures for the period between 1 July 1997 and 26 July 1999, was not true, at least for the last few weeks of 1999.
Based on figures which were offered at the trial, the learned trial magistrate found that during the 20 week period from July 1999 to 26 November 1999 the run earned an average of $582.88 per week. He found that to be a misrepresentation. But if the figures provided for the period from 1 July 1997 to 26 June 1999 were to be taken to represent 52 weeks rather than 50 weeks, the figure of $605.68 to which I have referred would drop to $582.35 per week, or almost exactly the actual earnings in the period from July 1999 to 26 November 1999.
So that in my view, the learned trial magistrate erred in regarding the figures supplied to 26 November 1999 as embodying a misrepresentation.
However, the earnings changed dramatically for the remainder of the year after 26 November 1999.
The figures appear in the following finding by the learned trial magistrate:
“Once Mr von Czapiewski left, the evidence of the earnings from round 38 are in Exhibit P7, the figures recorded by Mr Baumann. There is a gap, then the earning for the first full week reported, ended on 10 December were $529.60, then 17 December $500 and 24 December $532.80. The evidence is that one would expect the December figures to be higher than normal due to seasonal factors.”
Even if the figures referred to for that three-week period were adjusted to reflect a 50-week rather than a 52-week year, they would fall far short of $600.
Although there may have been reasons, such as the performance of Mr Czapiewski’s work by relief drivers to explain the drop, the fact remains that an assurance was given that the run was earning, down to the end of 1999, at a rate equating with the amount of $605 per week derived from the figures supplied for the previous financial year.
The learned trial magistrate correctly found that to be a material misrepresentation, although the learned trial magistrate wrongly concluded that it if the period to 26 November 1999 was considered discretely, the figures were not true.
The learned trial magistrate seems to have found that the relevant misrepresentation was made in late November 1999 when Mr Baumann had initial discussions with Mr Aloisi.[1] However, as I see it, the relevant misrepresentation was the assurance given after Mr Baumann had seen Mr Clarke on 6 January 2000, in the terms to which I have referred.
[1] Reasons for judgment, para 31.
I mention in parenthesis that surprisingly, the respondent did not give evidence that he was induced to enter into the agreement with the appellant on the basis of the statements given by Mr Aloisi and that he would not have done so if he had not been led to believe that the figures for the last six months of 1999 were materially different from the figures supplied to his accountant Mr Clarke.
However, despite that rather surprising hiatus in his evidence, it is reasonable to infer that he would not have proceeded with the transaction unless he had believed that the operation of the round, down to the end of 1999 produced of the order of $600 per week gross. That inference may be drawn from his evidence that he was looking to at least replace the $600 per week which he was receiving by way of weekly WorkCover payments.
It follows that Mr Baumann made out his case for damages for misrepresentation.
Damages
The amount awarded by the learned trial magistrate was made up as follows:
Loss on van
$ $
Deposit 4,000.00
Loss on termination of lease 4,560.68 8,560.68
Loss of income 900.00
Punitive and aggravated damages 4,000.00Total $13,460.68
In addition, he allowed interest which he fixed at $550.
The learned trial magistrate assessed damages by reference to the principles which apply where there has been a fraudulent misrepresentation, that is, in accordance with the assessment of damages in tort.
He reached that view, as if any misrepresentation was to be dealt with under the Misrepresentation Act 1972, the damages would be assessed as though the misrepresentation had been made fraudulently.[2] The learned trial magistrate found that the same result would apply if the damages were to be assessed under the Fair Trading Act 1987, or under the Land and Business (Sale and Conveyancing) Act 1994.
[2] Misrepresentation Act 1972, s 7(1).
He correctly held that the measure of damages in tort is not to be approached on the same footing as that which applies where the cause of action is for breach of contract.
In the case of a sale of a business the difference between the two modes of assessment of damages is significant. Although, for reasons which I will come to, in my view this was not the sale of a business, the same principles apply with respect to the approach to damages.
If the misrepresentation amounts to a breach of contract and the action is brought by way of damages for breach of contract, the defendant is liable to pay damages assessed by reference to what the plaintiff might have been expected to earn if the representation had been true, that is, “expectation loss” as it is sometimes called.
In tort, the plaintiff recovers what he or she has actually lost. Where the misrepresentation induces the purchase of an item of property, that loss is generally measured by reference to the difference between the real value of the property and the sum paid for it.
But consequential losses may be recoverable , whether or not foreseeable, if they flow directly from the tort. Consequential losses may include loss of profits, but not the loss of profits which might have been derived from the utilisation of the property the subject of the misrepresentation, if the representation had been true, that is, expectation loss. Expectation loss may be recovered only in contract, not in tort.
In tort, an award of loss of profits is limited to what the plaintiff might have earned if the tort had not been committed.
See, for example, the statement of principle in State of South Australia v Johnson:[3]
“The principle which underlines the award of damages in tort is, generally speaking, that of restitutio in integrum. The object is to restore the plaintiff to the position in which he would have been placed if the wrongful act had not been committed. The measure will vary as between deceit and negligence. In deceit, the plaintiff recovers the difference between the amount paid and the value of the property acquired, the object being to place him in a position equivalent to that which he would have occupied had the transaction not taken place. The defendant being guilty of a deliberate wrong, the damages will include the whole loss directly flowing from the fraudulent inducement because, as Lord Denning MR declared in Doyle v Olby (Ironmongers) Ltd,[4] ‘it does not lie in the mouth of the fraudulent person to say that they could not reasonably have been foreseen’.
It is otherwise in cases of negligent misrepresentation. Although the wrongdoer is liable for the damage which flows directly from his wrongful act or omission, the plaintiff’s damages are limited to that which was reasonably foreseeable. This limitation applies in accordance with the general principle in negligence.”
[3] (1982) 42 ALR 161 per Gibbs CJ, Mason, Murphy, Wilson and Brennan JJ at 169-170.
[4] [1969] 2 QB 158 at 167.
In Doyle v Olby (Ironmongers) Ltd (supra), the plaintiff was induced to buy a business by the fraudulent misrepresentation of the vendor. On appeal, the Court of Appeal held that the correct measure of damages was to have regard to the plaintiff’s position before the fraudulent inducement, and compare that with his position at the end of the transaction. The court held that he should recover what he had paid out, less any benefit which he gained from the transaction. See, for example, per Sachs LJ:[5]
“If the purchase is one of a business which the plaintiff but for the fraud would not have acquired at all, the objective of the court is to put the plaintiff, so far as it is possible, into the same position financially as if he had not entered into the contract at all: in other words one must look at the end result of his having entered into the transaction and find out what was his loss overall.”
[5] Ibid 171.
Consistently with those principles, one must therefore have regard to the question whether Mr Baumann proved actual loss directly resulting from the misrepresentation.
I deal first with the question of alleged losses associated with the purchase of a new vehicle.
During the course of the negotiations with Mr Aloisi, the latter advised Mr Baumann, when the latter raised with him the question of how best to obtain a suitable vehicle, to purchase a second-hand van.
Contrary to that advice, Mr Baumann accepted advice from his accountant to purchase a new van on terms which, in the events which happened, proved to be very disadvantageous to him.
At the trial, Mr Baumann’s decision to buy a new van as against Mr Aloisi’s advice was criticised by APD. That criticism was repeated on the hearing of the appeal.
In my view, with respect to him, the learned trial magistrate was correct in the conclusion which he reached on this aspect of the matter. The criticism advanced by the appellant of the conduct of the respondent in purchasing a new van is not warranted.
It is true that in assessing damages for fraudulent misrepresentation “... the court must obviously take care not to include sums for consequences which may be due to the plaintiff’s own unreasonable actions, and also not to include results which are too remote ...”.[6]
[6] Doyle v Olby Ltd (supra) per Sachs LJ at 171.
But in my view, Mr Baumann did not act unreasonably in purchasing a new van. He did so on the advice of his accountant, being advice which he was entitled to rely on. Furthermore, the losses associated with his purchase of the new van were not too remote; the purchase of a van of some kind was obviously necessary for him to carry out the contract.
The loss as assessed by the learned trial magistrate associated with Mr Baumann’s acquisition and disposal of the van, namely $8560.68, being the total of the deposit and the loss on termination of the lease, should stand.
The learned trial magistrate correctly dismissed a claim for loss of income advanced on the basis of an alleged difference in actual earnings derived from Mr Baumann’s operation of the round and the level of earnings represented. The learned trial magistrate correctly concluded that this was not recoverable, being in the nature of expectation losses. In any event, Mr Baumann received at least $600 gross per week while operating the round, which was as much as he expected to earn.
However, the learned trial magistrate allowed a sum of $900 with reference to the supposed loss of income between the date upon which the WorkCover liability was redeemed and the date upon which Mr Baumann commenced receiving income from the round. He allowed this supposed loss for a period of one and a half weeks at the rate of $600 per week, which was the amount per week which Mr Baumann would have received from WorkCover.
As to that element of the assessed damages, I accept the contentions of APD. No claim on that head was advanced at the trial. Furthermore, there is no reason to suppose that the lump sum redemption of the obligation of WorkCover to make weekly payments did not fully compensate Mr Baumann for their discontinuance.
While excessive technicality should be avoided, the court should not award damages with respect to a supposed head of loss which is not pleaded, was not the subject of evidence, and was not argued.
The learned trial magistrate proceeded to award $4,000 by way of what he described as “punitive and aggravated damages”. As will be seen, in my view, this was not a case in which a proper basis was established for the award of damages on that score.
With respect to him, in any event, the learned trial magistrate erred in proceeding to consider making an award of that kind, given that, as was expressly noted in the learned trial magistrate’s reasons for judgment, the claim under this head was not pressed by counsel for the respondent in his final address. As a result, the learned trial magistrate did not hear any submission from the appellant on that issue.
On the hearing of the appeal, Mr Pickhaver of counsel for Mr Baumann, who was also counsel for Mr Baumann at the trial, conceded that he did not make any submissions on this head before the learned trial magistrate. He said in his submissions to this Court:
“We left it [the claim for punitive and aggravated damages] in but we did not make submissions.”
If counsel do not make submissions on a head of claim, even though it is not expressly abandoned, it seems to me to be tantamount to an abandonment.
But at all events, on the hearing of the appeal, I heard argument as to the merits of an award on this head, which I will deal with briefly.
The learned trial magistrate’s treatment of this issue is dealt with in the following passage from his reasons for judgment:
“55.I have concluded that the historic figures were sent to obscure the true position of the round. The misrepresentation was deliberate. APD breached the legislation dealing with its obligations when selling a contract of this nature. APD was guilty of general conduct in breach of the prior rights of its drivers to the pickups and deliveries in their rounds. Mr Aloisi breached the contract between APD and the plaintiff by paying less than Mr Baumann’s entitlement for the Sawford bulk pick up.
56.Aggravated damages are to compensate the plaintiff’s loss of dignity. Exemplary or punitive damages are to punish the wrongdoer, not as a compensation of actual loss but as a retribution to the defendant and a deterrent to others. The plaintiff’s counsel did not press these in his final address, but I find both lie here. The plaintiff explained his position that he had an injury and he was willing to redeem his rights to re-establish himself as a self employed earner of his own income. The misrepresentation deliberately exploited him and he deserves some special compensation for that. I also punish the defendant for taking advantage of the plaintiff and ignoring its own contract with its driver. I award $4,000 on this account.”
Earlier, the learned trial magistrate had made the following finding:
“31.Mr Aloisi’s evidence was that the earnings of round 38 up to December ’99 would have been available. It is clear that APD keeps good records of the earnings from rounds and the information as to the earnings of this round up to December ’99 were accessible to APD. The representation of the earnings of round 38 were inaccurate when they were made and the accurate figures were in the knowledge of APD. The representation made in late November was not predictive as to what would happen in December, January nor in February once Mr Baumann took the round over having purchased it. However, when the figures were sent in January to support the accuracy of the representation, the inference was that there was nothing that was happening in round 38 in December that would have suggested to APD, had it turned its mind to it, from which it could infer that the round was not earning $600 per week. I conclude that when Mr Aloisi made a representation in late November that the identified run known as run, or round 38 was making slightly over $600 per week on the basis of taking the annual gross and dividing it by 50 to arrive at a weekly average of $605, it was false. He made the representation on behalf of APD and APD had knowledge of the falsity. When in January he caused the historic figures to be sent, the earnings of the round had deteriorated and that was also in the knowledge of APD. I draw the obvious inference that the historic figures were sent to obscure the true position of the round.”
There are a number of difficulties with those findings.
Insofar as the learned trial magistrate refers to a representation that Mr Aloisi made in late November as to the round at that stage making slightly over $600 per week, for the reasons which I have given, that representation was in fact true. As I have explained above, it was a representation which held good against an analysis of the 20-week period from July 1999 to 26 November 1999,
The relevant misrepresentation occurred by reason of a sharp falling off thereafter in the return from the round, coupled with a reassurance given when Mr Aloisi was spoken to by Mr Baumann in early January 2000, that reassurance being to the effect that the whole of the six months down to the end of 1999 maintained the same level of earnings.
As for the despatch of figures by fax by Mr Aloisi to Mr Clarke in early January, the period to which the figures related was apparent on the face of the communication.
When he was subsequently asked for figures to the end of the year, and gave the assurance which I have found was a misrepresentation, there is no evidence to suggest that Mr Aloisi did not believe the truth of his response.
I have perused carefully the examination and cross-examination of Mr Aloisi, and there is nothing in it to sustain the view that he deliberately sent what the learned trial magistrate describes as the “historic figures” “to obscure the true position of the round”.
It follows that all the evidence established in this case was an innocent misrepresentation.
It is true that pursuant to the Misrepresentation Act 1972 damages for an innocent misrepresentation are assessed on the footing that the misrepresentation had been made fraudulently. But it would not be proper in the making of an award of damages under the Act for aggravated or punitive damages to be awarded in the absence of deliberate conduct on the part of the defendant of the kind necessary to sustain such an award.
In my view, the award of $4,000 on that head was not justified, and the appeal should be allowed as to that head of loss.
Before parting with the matter, I will address the question whether or not the learned trial magistrate correctly held that the contract between the parties amounted to a contract for the sale of a business within the meaning of the Land and Business (Sale and Conveyancing) Act 1994 (“the Act”).
By definition, if the contract in question was a contract for the sale of a business, it was for the sale of a small business as defined on the Act.[7]
[7] Section 4.
It is common ground that no statement in accordance with s 8 of the Act was served on the respondent before the date of settlement of the purchase. Pursuant to s 15 of the Act, where such a statement is not given, accompanied by the certificate required by s 8(2) verifying the financial particulars, the purchaser may apply to the court pursuant to s 15(2) for an order of the kind referred to in that sub-section. The contemplated orders, including orders restoring “the parties to the contract to their respective positions before entering into the contract” and an award of “such damages as may, in the opinion of the court, be necessary to compensate loss arising from the non-compliance”.
In my view, the evidence does not satisfy the threshold question, namely that this was a contract for the sale of a business.
“Business” is defined under s 3 of the Act to include “...... a share of, or interest in, a business or the goodwill of a business, but does not include a share in the capital of a body corporate”.
The learned trial magistrate dealt with this aspect of the matter in the following passage from his reasons for judgment. After referring to dictionary definitions of the word “business”, he went on to observe:
“35.Here APD provided information about work and Mr Baumann picked up and delivered the parcels. APD charged the client and retained control over any negotiation of special prices for the client. Mr Baumann was not an employee and supplied his own equipment and within the constraints of the contract acted independently of APD. He undertook his activity as a partnership. The activity of the partnership was for commercial purposes, for gain and livelihood. He and his wife were engaged in a business as a contract courier driver. The fact that it was a business was consistent with the fact that the right to enter the business was purchased for $8,000. What were Mrs and Mr Baumann buying for $8,000? They were not buying any goods nor anything else tangible. The answer is they were buying the rights to the pickups and deliveries in the area that was carefully defined. They were buying access to customers and the opportunity of gaining new customers to the mutual benefit of them and APD. This is of the nature of goodwill. It is one of the essences of business. True it is that APD retained to itself the right to alter the round and otherwise affect Mrs and Mr Baumann’s rights but this does not affect the essential nature of the transaction. They were purchasing a business for $8,000.
36.In this regard it is instructive to note as I did above that Clause 1 of the contract, prepared by APD< refers to APD supplying services ‘which the Company in the absolute discretion of the Company considers may be useful to the Operator and is designed to assist and promote the business of the Operator’. (my emphasis) The language of APD’s own contract accepts that Mr Baumann had purchased business.”
Dealing with the last point which the learned trial magistrate makes, namely the reference to the “business of the operator” in clause 1 of the contract, in my view, the fact that those words appear in the contract does not assist in determining whether what Mr Baumann was purchasing was a business. There is no doubt that Mr and Mrs Baumann in partnership were conducting a business, that is, the business of supplying a courier service within the designated area. But it does not follow that APD sold a business to them, as opposed to the means to carry on such a business.
The fact that APD agreed, for the consideration referred to in the agreement, to supply services to assist Mr Baumann in the operation of that business does not mean that APD itself was selling a business to the respondent.
If APD was to be regarded as selling a business, one would look for an indication of the carrying on of a business by APD which, on settlement of the sale, was taken over by Mr Baumann to the exclusion of APD. There was, however, no such acquisition by Mr Baumann in that sense of any business conducted by APD.
On the contrary, all that the agreement provided for was that in consideration of the payment of $8,000 by Mr Baumann, APD would supply certain services to Mr Baumann, enabling Mr Baumann to conduct the courier operation within the area to which run 38 related.
If, on the other hand, Mr Baumann had purchased an assignment of the rights of a previous operator of run 38 to conduct the previous operator’s business, that would clearly be the sale of a business.
Furthermore, if APD had sold its enterprise to somebody else, who then took over the contracts with the various operators of the runs, this also would have been the sale of a business.
But here, all that Mr Baumann bought was a bundle of rights with respect to which, on its part, APD contracted to supply certain services.
In my view, this was not the sale of “a share of, or interest in, a business or the goodwill of a business” within the meaning of the definition contained in the Act.
Given that that is an inclusive definition, I would also hold that it was not otherwise the purchase of a “business” within the meaning of the Act.
Conclusion
For the reasons given, I would allow the appeal for the purpose of quashing the award of $4,000 by way of aggravated or punitive damages, and the allowance of $900 for the alleged loss of income before Mr Baumann commenced operating the round.
In the result, I order that:
1.the appeal be allowed; and
2.the judgment be varied by reducing the quantum of the award by $4,900 to $8,560.
I will hear the parties as to interest and costs.
JUDGMENT CITATIONS
LISTED IN ORDER OF APPEARANCE IN JUDGMENT1. Reasons for judgment, para 31.
2. Misrepresentation Act 1972, s 7(1).
3. (1982) 42 ALR 161 per Gibbs CJ, Mason, Murphy, Wilson and Brennan JJ at 169-170.
4. [1969] 2 QB 158 at 167.
5. Ibid 171.
6. Doyle v Olby Ltd (supra) per Sachs LJ at 171.
7. Section 4.