Badger v John Kagelaris Pty Ltd - [2019] NSWSC 1792

Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Badger v John Kagelaris Pty Ltd [2019] NSWSC 1792
Hearing dates: 13, 14 and 15 May 2019
Date of orders: 13 December 2019
Decision date: 13 December 2019
Jurisdiction: Equity
Before: Henry J
Decision:
(1) Pursuant to Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law, s 243, declare the whole of the Business Sale Agreement between the plaintiff and the first and second defendants dated 14 January 2017 to be void.
(2) Pursuant to Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law, s 237, order the second and third defendants to pay to the plaintiff the sum of $114,991.48.
(3) Order the second and third defendants to pay the plaintiff's costs of the proceedings.
(4) The plaintiff to file and serve any application for a special costs order by 14 January 2020.
(5) The second and third defendants to pay the plaintiff interest of $17,999.06 pursuant to Civil Procedure Act 2005 (NSW), s 100.

Catchwords: CONTRACTS – misleading conduct under statute – misleading or deceptive conduct – representations – inducement to enter into contract for purchase of business – false information provided about customer base and profitability of business – whether third defendant a mere conduit of first and second defendants – whether third defendant acting solely on behalf of corporation or personally liable – alternative claim of accessorial liability – whether contract affirmed – contract declared void
Legislation Cited: Civil Procedure Act 2005 (NSW), s 100
Competition and Consumer Act 2010 (Cth), ss 139B, 139C, Sch 2 – Australian Consumer Law, ss 18, 236, 237, 243
Corporations Act 2001 (Cth), s 601AD(1)
Uniform Civil Procedure Rules 2005 (NSW), r 36.17
Cases Cited: Alati v Kruger (1955) 94 CLR 216
Arktos Pty Ltd v Idyllic Nominees Pty Ltd [2004] FCAFC 119
Australian Competition and Consumer Commission v Birubi Art Pty Ltd [2018] FCA 1595
Awad v Twin Creeks Properties Pty Limited [2012] NSWCA 200
Borzi Smythe Pty Limited v Campbell Holdings (NSW) Pty Limited [2008] NSWCA 233
Butcher v Lachlan Elder Realty Pty Limited (2014) 214 CLR 592; [2004] HCA 60
CH Real Estate Pty Ltd v Jainran Pty Ltd; Boyana Pty Ltd v Jainran Pty Ltd [2010] NSWCA 37
Google Inc v ACCC (2013) 249 CLR 435; [2013] HCA 1
Havyn Pty Ltd v Webster [2005] NSWCA 182
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546; (1988) 79 ALR 83
Henville v Walker (2001) 206 CLR 459; [2001] HCA 52
Houghton v Arms (2006) 225 CLR 553; [2006] HCA 59
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109; [2002] HCA 41
Khoury v GIO of NSW (1984) 165 CLR 622
Munchies Management v Belperio (1988) 58 FCR 274; (1988) 84 ALR 700
Myers v Transpacific Pastoral Co Pty Limited (1986) ATPR 40-673
Rafferty v Madgwicks; Time 2000 Systems…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2019] NSWSC 1792
Decision Date: 13 December 2019

CaseChat Overview and Summary

In Badger v John Kagelaris Pty Ltd, the court considered a dispute between Badger and John Kagelaris Pty Ltd, a company involved in the sale of a business. The central issue was whether misleading conduct had occurred during the sale of the business, which potentially breached statutory prohibitions against misleading or deceptive conduct. Badger alleged that false representations were made regarding the customer base and profitability of the business, and sought damages for misleading conduct under the Australian Consumer Law.

The court examined whether the third defendant, who was involved in the sale, could be held personally liable for misleading conduct. This involved determining if the third defendant was merely an agent for the corporation or if they acted in a personal capacity that could result in individual liability. Additionally, the court considered whether the third defendant could be held accessorially liable for the misleading conduct of the other defendants. The alternative claim was also assessed to see if the contract could be affirmed, and if it could be declared void due to the misleading conduct.

The court found that the third defendant was not acting solely on behalf of the corporation but was personally liable for misleading conduct. The third defendant was held accessorially liable for the misleading conduct of the other defendants. The court also affirmed that the contract could not stand given the misleading conduct. As a result, the contract was declared void, and Badger was awarded damages for the misleading conduct.

The court ordered that the contract for the sale of the business be declared void. Additionally, the third defendant was held personally liable for the misleading conduct and was ordered to pay damages to Badger. The court also found the third defendant to be accessorially liable for the actions of the other defendants, thereby contributing to the overall liability in the case.

Orders