Beagle Management Ltd v Targridge Ltd
[1996] FCA 1148
•18 DECEMBER 1996
C A T C H W O R D S
TRADE PRACTICES - misleading or deceptive conduct - prescribed interests in pine plantations - manager undertook to use best endeavours to ensure secondary market for the interests - dissatisfied investor obtained list of names and addresses of other investors from manager, after executing deed limiting use of that list - dissatisfied investor sent circular letter to other investors - allegations in letter that manager had not used best endeavours and had done nothing to create secondary market - letter included invitation to other investors to join dissatisfied investor in suing manager - manager and two of its directors sue dissatisfied investor and its principal director for publication of that letter - whether sending of circular letter was in breach of contract - whether making of statements in that letter was misleading or deceptive conduct - whether manager had used best endeavours to ensure secondary market - applicants claimed damages for loss of goodwill and reputation - whether actual loss or damage proved - assessment of damages - whether injunction should be granted - whether declaration appropriate - whether corrective statement should be ordered.
Trade Practices Act 1974 (Cth) ss.52, 80, 87
Hospital Products Ltd v. United States Surgical Corporation (1984) 156 CLR 41
Concrete Constructions Pty Ltd v. Nelson (1990) 169 CLR 594
Wardley Australia Ltd v. State of Western Australia (1992) 175 CLR 514
March v. Stramare (E & M H) Pty Ltd (1991) 171 CLR 506
Browne v. Dunn (1893) 6 R.67 (H.L.)
Trade Practices Commission v. Mobil Oil Australia Ltd (1984) 6 ATPR 40-482
Joye v. Beach Petroleum NL (1996) 137 ALR 506
Janssen-Cilag Pty Ltd v. Pfizer Pty Ltd (1992) 37 FCR 526
Brabazon v. Western Mail Ltd (1985) 8 FCR 122
Flamingo Park Pty Ltd v. Dolly Dolly Creation Pty Ltd (1986) 65 ALR 500
Typing Centre of NSW Pty Ltd v. Northern Business College Ltd (1989) 11 ATPR 40-943
Enzed Holdings Ltd v. Wynthea Pty Ltd (1984) 57 ALR 167
RAIA Insurance Brokers Ltd v. FAI General Insurance Co Ltd (1993) 41 FCR 164
Allied Pastoral Holdings Pty Ltd v. Federal Commissioner of Taxation [1983] 1 NSWLR 1
BEAGLE MANAGEMENT LIMITED & ORS v. TARGRIDGE LTD & ANOR
No. WAG 62 of 1995
CARR J.
PERTH
18 DECEMBER 1996
IN THE FEDERAL COURT )
OF AUSTRALIA )
WESTERN AUSTRALIA )
DISTRICT REGISTRY ) No. WAG 62 of 1995
GENERAL DIVISION )
B E T W E E N : BEAGLE MANAGEMENT LIMITED
First Applicant
and
JOHN CARLTON YOUNG and HELEN MARGARET SEWELL
Second Applicants
and
TARGRIDGE LIMITED
First Respondent
and
NICHOLAS RUSSO
Second Respondent
CORAM: CARR J.
PLACE: PERTH
DATE: 18 DECEMBER 1996
MINUTE OF ORDERS
THE COURT ORDERS AND DECLARES THAT:
Judgment be entered in favour of the second applicants against the respondents in the sum of $10,000.
The first respondent, by representing, in its letter dated 6 June 1995 to investors in the Templegate (now Beagle) Forestry Trust, that the applicants had done nothing to create a secondary market for the interests referred to in that letter, engaged in conduct that was misleading or deceptive or was likely to mislead or deceive, contrary to the provisions of s.52(1) of the Trade Practices Act 1974 (Cth), and the second respondent was a person involved in such contravention.
The first applicant's claim against the first respondent for damages for breach of contract be dismissed.
Costs reserved. Each party to have leave to file and serve written submissions on the matter of costs within 14 days and to file and serve further written submissions in reply within 7 days of such service. The matter of costs will be decided on the papers unless any party applies otherwise, as to which any party may apply on two days written notice to the others and to the Court.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
INDEX
Introduction 1
Factual background 2
The Pleadings 10
Did Targridge Breach the Terms of the Deed? 12
Did publication of the letter amount to conduct "in trade
or commerce"? 16
Did the Letter contain the representations alleged by the applicants? 18
Was the publication of the Letter containing the above
representations, misleading or deceptive conduct or conduct
likely to mislead or deceive? 21
(a) Whether Targridge was induced to invest in the Trust by the
representations that Beagle would use its best endeavours to
create a secondary market? 21
(b)Did the First Prospectus contain false statements? 27
What were Beagle's obligations in relation to the matter of a
secondary market for the pine plantation interests? 27
What endeavours did Beagle make in relation to the creation and
maintenance of a secondary market for the pine plantation interests? 29
(i) The List of Growers 30
(ii) The Call Programme 31
(iii) Gillon Securities Ltd 36
(iv) The Sale in 1991 37
(v) The Second Prospectus 39
(vi) The Finance Facility 39
Whether publication of representations concerning applicants'
lack of effort to use best endeavours constituted misleading or
deceptive conduct? 40
(c)Whether Beagle, by Mr Young and Ms Sewell, had promoted a
project (a Blue Gum project) contrary to the interests of
investors in the Trust? 47
(d)Whether Targridge had previously corresponded with Beagle in
relation to the allegations in the Letter? 49
(e)Whether Targridge knew from that correspondence that Beagle
had done nothing to carry out its undertakings, given in the
First Prospectus, to create a secondary market for the
forestry interests? 49
Have the applicants suffered loss or damage by that conduct? 52
Should the respondents be enjoined from repeating the
representations? 65
Should the applicants be granted any other relief, and if so,
what? 65
Conclusion 66
IN THE FEDERAL COURT )
OF AUSTRALIA )
WESTERN AUSTRALIA )
DISTRICT REGISTRY ) No. WAG 62 of 1995
GENERAL DIVISION )
B E T W E E N : BEAGLE MANAGEMENT LIMITED
First Applicant
and
JOHN CARLTON YOUNG and HELEN MARGARET SEWELL
Second Applicants
and
TARGRIDGE LIMITED
First Respondent
and
NICHOLAS RUSSO
Second Respondent
CORAM: CARR J.
PLACE: PERTH
DATE: 18 DECEMBER 1996
REASONS FOR JUDGMENT
Introduction
In this application Beagle Management Ltd ("Beagle"), the first applicant, and two of its directors, Mr John Carlton Young and Ms Helen Margaret Sewell (who are the second applicants) seek damages, an injunction and other relief against the first and second respondents. Beagle sues the first respondent Targridge Limited ("Targridge") for breach of contract. Beagle claims that Targridge was in breach of contract when it used a copy of a register of the holders of interests in a trust, the affairs of which were managed by Beagle, for the purposes of ascertaining the names of those interest
holders and sending them a letter dated 6 June 1995 ("the Letter"). All three applicants also allege that Targridge engaged in misleading or deceptive conduct in contravention of s.52 of the Trade Practices Act 1974 (Cth) ("the Act") and that the second respondent, Mr Nicholas Russo (who is a director of Targridge) was "a person involved in the contravention" within the meaning of that expression in the Act. The conduct complained of comprised the publication of the Letter to the holders of interests in the trust.
Factual Background
At the relevant times, Beagle carried on the business of promoting investment in forestry. It also managed forests.
On 11 April 1988 Beagle caused the "Templegate Forestry Trust" ("the Trust") to be established by a deed of trust executed on that date ("the Trust Deed"). The Trust Deed was made between Beagle (under its former name, Templegate Funds Management Ltd) and Perpetual Trustees WA Ltd ("Perpetual Trustees"). Perpetual Trustees is the trustee of the Trust. Until 4 July 1995 Beagle managed the business of the Trust, which is to grow and harvest pine trees of the Pinus Radiata species. Beagle is a subsidiary of Beagle Holdings Limited ("Beagle Holdings") which is the registered proprietor of various pieces of land in New South Wales on which there are established pine plantations. Beagle caused two prospectuses to be issued in respect of subscription for interests in the Trust ("the First Prospectus" and "the Second Prospectus"). The First
Prospectus was registered on 12 April 1988 with the Commissioner for Corporate Affairs for the State of Western Australia. The Second Prospectus was similarly registered on 8 June 1992. The First Prospectus was fully subscribed. The Second Prospectus was not fully subscribed. As will be seen, the Second Prospectus was registered with a view to enabling the issue of prescribed interests which included interests in land which was formerly the subject of prescribed interests issued under the First Prospectus, but which had been surrendered. But first I return to the events of 1988. Investors subscribing for interests in the Trust are described in the Trust Deed as "subscribers and lessees". I shall refer to them as "Growers". Each Grower entered into a lease and management agreement with Beagle Holdings, as Lessor, and with Beagle as Manager. Each lease and management agreement relates to one or more defined lots, of one hectare each, within a particular pine plantation. The term of the agreements is fifteen years. It is not necessary otherwise to refer, at this stage, to the terms and conditions of the lease and management agreements. I shall refer to the rights of Growers under such agreements as "the pine plantation interests". It is common ground that the pine plantation interests were "prescribed interests" within the meaning of the Companies Code and the Corporations Law.
Beagle used various financial advisers, accountancy firms and other persons holding security dealer's licences to promote sales of the pine plantation interests.
Targridge is Mr Russo's private company. It is the principal shareholder in a company called Equuscorp Pty Ltd, formerly known as Equus Financial Services Ltd. I shall refer to that company as "Equus".
On 27 June 1988 Targridge applied to Beagle for seven pine plantation interests. Its application was accepted and Targridge entered into lease and management agreements in respect of seven hectares of established pines in two separate plantations. At about the same time, Beagle and Equus reached agreement whereby Equus would provide loans to persons subscribing for pine plantation interests. Those arrangements were formalised by the execution of an agreement ("the Finance Provision Agreement") on 28 June 1988. The parties to that agreement were Beagle Holdings and Beagle (under their former names) and Equus. The Finance Provision Agreement included provisions for recourse by Equus against Beagle Holdings in the event that Growers defaulted in repayment of their loans under the terms of any loan agreement entered into with Equus. Beagle guaranteed Beagle Holdings' obligations to Equus under the terms of the Finance Provision Agreement. It would appear that by May 1992 Equus had made loans totalling approximately $8 million to Growers and some of those borrowers were in default. The recourse arrangements provided for in the Finance Provision Agreement included what may, somewhat loosely, be described as "repurchase arrangements". For example, the repurchase arrangements took effect if Equus, under the terms of any particular loan agreement, exercised its power of sale. Equus could then require Beagle Holdings to take an assignment of the defaulting Grower's pine plantation interest. The consideration payable by Beagle Holdings for such assignment was an amount equal to the current value of that interest less 15% and certain other expenses. By 8 May 1992 the total of loans in default which were subject to the repurchase arrangements amounted to approximately $400,000. Mr Russo's evidence was that Beagle Holdings failed to meet its repurchase obligations under the Finance Provision Agreement. It is not necessary, for the purposes of these proceedings, to
decide whether that is correct. Equus called upon Beagle to pay out the defaulting borrowers' loans, but Beagle was not in a financial position to do so. Equus and Beagle then entered into new arrangements which would enable Beagle to sell the pine plantation interests of the defaulting borrowers on behalf of Equus as mortgagee in possession, to members of the public so that Equus could be repaid its loans. The new arrangements involved surrender of the pine plantation interests of the borrowers in default and the issue of "new" pine plantation interests over the same lots. The evidence was (and this was common ground) that such "new" pine plantation interests were more attractive to purchasers because most of the subscription moneys paid by them would be allowable deductions for income tax purposes. To that end, the Second Prospectus was issued on 8 June 1992. Fourteen "new" pine plantation interests were sold pursuant to that prospectus. Mr Young's undisputed evidence was that all of these interests originated from former pine plantation interests held by Growers who had defaulted in respect of their obligations to Equus under loan agreements. Those defaulting Growers held eighty such interests. There is also evidence that, before the Second Prospectus was registered, at least two non-defaulting Growers had asked Beagle to find buyers for their pine plantation interests. One such Grower, Tom & Mary & Associates Pty Ltd, sought a buyer for twenty-two such interests. The other Growers [Messrs (or Mr & Mrs) A & C McMillan] wanted to sell fifteen such interests. Mr Young's evidence was that none of these Growers had been offered the opportunity to surrender their interests and have them "re-sold" via the Second Prospectus. I am satisfied (and so find) that Beagle arranged the Second Prospectus for the purposes of alleviating the problems which it and Beagle Holdings were encountering with Equus over Growers who were defaulting in making loan
repayments to that company.
In 1992 Beagle sued Equus in the Supreme Court of Western Australia alleging breach of the Finance Provision Agreement. Equus counter-claimed for damages against Beagle Holdings for failure to meet its repurchase obligations and for declarations in respect of a charge created over one of the pine plantations.
On 19 September 1994, Equus wrote to Beagle demanding that it (Beagle) take steps to create a secondary market for the pine plantation interests. The purpose of this was to facilitate the sale of such pine plantation interests owned by defaulting borrowers. As will be seen below, Targridge (which, as mentioned above, is the principal shareholder in Equus) contends that Beagle has at all material times been under an obligation to create a secondary market for the pine plantation interests.
During the period of approximately eight months from September 1994 Targridge attempted to obtain a copy of the Trust Deed from Beagle and Perpetual Trustees. At the same time, it attempted to obtain from Beagle a list of Growers which Beagle maintained on what was known as "the Growers' Register". Beagle agreed to make a copy of the Growers' Register available to Targridge subject to Targridge executing a short deed ("the Deed"). The Deed was executed on 5 May 1995 between Beagle and Targridge. In the Deed, Beagle is described as "the Manager" and Targridge as "the Grower". The Deed recites the fact that Beagle is the Manager of the Trust and that Targridge has requested it to provide a copy of the Growers' Register which is described in the Deed as "the Register". The operative parts of the Deed are short and
I set them out below in their entirety:
"NOW THIS DEED WITNESSETH that in consideration of the Manager agreeing to provide the Grower with a copy of the Register, the Grower convenants (sic) with the Manager as follows:
1.That the Grower will not make available the copy of the Register or any part of it to any person who is not a party to this Deed.
2.That the Grower will not use the copy of the Register or any part of it for any purpose other than the purpose of:
(a)calling a meeting of Growers;
(b)making an offer to a Grower to acquire the Leases held by him;
(c)notifying a Grower of a matter relating to the carrying out by the Manager or the trustee of his or its functions and duties under the provisions of the Corporations Law or the Deed;*
(d)bona fide research or statistical analysis; or
(e)any other purpose approved by the Australian Securities commission (sic).
3.In the event of any part of this deed being or becoming void or unenforceable then that part shall be severed from this deed to the intent that all parts that shall not be or become void or unenforceable shall remain in full force and effect and be unaffected by any severance."
[* defined in the recitals to the Deed as being the Trust Deed]
On 4 May 1995 Targridge received a copy of the Trust Deed from Perpetual Trustees. On 26 May 1995 Beagle supplied to Targridge a copy of the Growers' Register.
On 6 June 1995 Targridge wrote a letter to the majority of the Growers. This was the letter which I have earlier described as "the Letter". The relevant parts of the Letter were as follows:
"Our company is a Grower in the Templegate Forestry Project. We were induced by the Directors of the Manager, Templegate Management Limited (now known as Beagle Management Limited) ("Beagle") to invest in this project on their representations that Beagle would use its best endeavours to create a secondary market for the forestry interests in the event the Growers wished to sell their investment. We believe the Manager has failed to create a secondary market as promised. The Manager's representations and undertaking
to create a secondary market were also contained in the Registered Prospectus and we quote as follows:
Page 3:
"Repurchase:
Due to the nature of the investment and the associated taxation benefits, the Manager cannot repurchase Lease & Management Agreements. However, the Manager will use its best endeavours to ensure there is a secondary market for Lease & Management Agreements which are the subject of this Prospectus."
Page 11:
"Whilst the Manager has no obligation to repurchase Lease & Management Agreements investors are free to assign them. It is strongly recommended, however, that tax advice be sought before entering into any assignment agreement. The Manager has covenanted to use its best endeavours to introduce a buyer to an investor wishing to sell."
The Prospectus goes on to state that the Manager is entitled to charge a brokerage fee and the Manager is also not obliged to introduce potential buyers in priority to its own sales programme. The sales programme associated with the Templegate Forestry Project came to an end some five to six years ago and therefore, a potential conflict with the Manager's sales programme has not been an issue for some time. We believe Beagle has been promoting a separate "Blue Gum" project in direct competition with its obligations to create a secondary market for the forestry interests under the Templegate Forestry Trust.
We have spoken to a number of other Growers who relied on similar representations and we have jointly determined to commence proceedings in the Federal Court of Australia seeking damages from the Manager and its Directors for losses suffered by reason of Beagle's false and misleading conduct.
We enclose for your perusal a copy of a recent letter that we have written to Beagle Management Limited, which formalises our request for them to create a secondary market, even though we know from previous correspondence with them that they have done nothing to create a secondary market despite their clear and unambiguous obligation to do so.
We would be interested in hearing from any other Growers who have had similar problems with the Manager. If any Victorian based Growers are interested in becoming co-applicants in the foreshadowed Federal Court proceeding against Beagle Management Limited, then Targridge is prepared to meet their legal costs, provided Targridge retains carriage of the litigation and on the further proviso that any Growers' pro-rata share of the legal costs, if otherwise unrecoverable
from Beagle on a taxation of costs, will be met from any damages recovered from Beagle.
We are anxious to commence this proceeding in the very near future and therefore, we ask that you write to us expressing your interest in becoming a co-applicant (on the conditions set out above) and provide us with any details of any past unsatisfied requests from the Manager to sell your units. You may, alternatively, wish to send a letter along similar lines to that enclosed (suitably amended for your circumstances) to Beagle in the event that you have not previously formalised your request to sell your units. It must be stressed that a claim for damages will only succeed if you can show you were aware of the representations (either verbal or written) and on the reliance of those representations, you decided to invest in the project. It is not necessary that those representations were the primary motivation for your decision to invest. All that is required is that they played a part in helping you to reach your decision to invest.
...
Finally, as mentioned in Beagle's letter to you dated 19 May 1995, the writer is also the Managing Director of Equus Financial Services Limited and that company is involved in a claim against Beagle in the Western Australian Supreme Court for an amount in excess of $700,000. That action is separate and distinct from the matters raised in this letter. It is also worth mentioning that on 14 October 1994, Justice Scott granted an injunction in favour of Equus which prevents Beagle from disposing, to a third party, the land on which the Templegate forests are situated."
The enclosure referred to in the Letter was a copy of a letter dated 6 June 1995 from Targridge to Beagle which, omitting formal parts, reads as follows:
"We are an investor in the Templegate Forestry Trust holding 5 hectares in the Wombat Plantation and 2 hectares in the Jeremy Plantation. We wish to advise that we desire to sell our units.
Pursuant to the provisions of Clause 12(1) of the Trust Deed dated 11 April 1988, would you please provide to us:
1]The list of lessees who desire to assign their Lease & Management Agreements;
2]The part of the register of lessees kept pursuant to Section 172 of the Code; and
3]The information sufficient to enable us to comply with the requirements of paragraph 5.5.2(3)(a) of the Code.
Pursuant to the representations by your Directors, John Young and Helen Sewell and the undertakings contained in the Prospectus dated 12 April 1988, which states that you will use your best endeavours to create a secondary market for the sale of interests, we were induced to invest in the project. We understand that you obtained an exemption from the regulatory authorities to the normal "buyback" provisions under the Code/Companies Act, because of your undertaking to create a secondary market.
Would you please advise us:
a]What has been undertaken by you in this regard; and
b]Whether or not there is any realistic prospect of Targridge being able to sell its interests. We note your comment in your letter to Growers dated 28 September 1994 that "... the standing value of your trees is now in excess of the acquisition price"."
The Pleadings
Targridge admits executing the Deed, sending the Letter and using the copy of the Growers' Register for the purpose of sending the Letter.
Beagle alleges (and Targridge denies) that such use of the copy of the Growers' Register was not a purpose permitted by the Deed, was a breach of Clause 2 of the Deed and that it has suffered and will continue to suffer loss and damage. Particulars of that loss and damage were pleaded in the following terms:
"The letter proposed to the persons to whom it was addressed that those persons should combine together with the First Respondent to institute court proceedings against the First Applicant, whereby the First Applicant has incurred and will incur unwarranted expense. The First Applicant has suffered damage to its goodwill and business and trading reputation".
In the alternative, the applicants plead that the Letter contained certain representations namely:
.that the applicants had made certain false representations so as to induce Targridge to invest in the Trust;
.that a prospectus issued by Beagle offering prescribed interests in the Trust contained false statements;
.that Beagle by Mr Young and Ms Sewell had promoted a project contrary to the interests of investors in the Trust;
.that Targridge had previously corresponded with Beagle and Mr Young and Ms Sewell in relation to the allegations contained in the Letter; and
.that Targridge knew from previous correspondence with Beagle that Beagle had done nothing to carry out certain undertakings which it had given in the First Prospectus, namely to use its best endeavours to create a secondary market for forestry interests.
The applicants say that publication of the Letter containing the above representations to investors in the Trust was conduct in trade or commerce which was misleading or likely to mislead or deceive, in contravention of s.52 of the Act and that by reason of that conduct the applicants have suffered loss and damage.
The respondents deny that the Letter contained the representations, that the publication of the Letter was conduct in trade or commerce, that it was misleading conduct, or conduct likely to mislead or deceive, or that the applicants have suffered any loss or damage.
The statement of claim concludes with an averment that Mr Russo was knowingly involved in the contravention by Targridge and that, unless restrained, Targridge and Mr Russo intend to repeat the representations. At the hearing Mr Russo conceded that if Targridge had contravened s.52 of the Act as alleged, then he was knowingly
involved in such contravention (see paragraph 28 of the respondents' document dated 14 August 1996 headed "Issues on the Pleadings"). I have taken the plea and the concession to mean that if Targridge contravened s.52 of the Act, then it was admitted that Mr Russo was knowingly concerned in that contravention and thus a person involved in the contravention - see s.75B(1)(c).
The issues to be decided in this matter are as follows:
Did Targridge breach the terms of the Deed?
If so, did Beagle suffer loss or damage?
Did publication of the Letter amount to conduct "in trade or commerce" as that expression is used in the Act?
Did the Letter contain the representations alleged by the applicants?
If so, was the publication of those representations misleading or deceptive conduct, or conduct likely to mislead or deceive?
If so, have the applicants suffered loss and damage by that conduct?
Should the respondents be enjoined from repeating the representations?
Should the applicants be granted any other relief, and if so, what?
I now proceed to deal with those issues, in the above order.
Did Targridge Breach the Terms of the Deed?
It was common ground that unless the use which Targridge had made of the Growers' Register fell within Clause 2(c) of the Deed, then it was in breach of contract. In terms of that sub-clause, Targridge would not be in breach of contract if its use of the
copy of the Growers' Register can be characterised as being for the purpose of:
"Notifying a Grower of a matter relating to the carrying out by the Manager ... of its functions and duties under the provisions of the Corporations Law or the Deed."
The expression "relating to" is ordinarily regarded as an extremely wide one. The authorities have recently been reviewed by Beaumont and Lehane JJ in Joye v. Beach Petroleum NL (1996) 137 ALR 506 at pp.514-515. As their Honours explained (at p.514):
"... ordinarily, "relates to" is a wide term, and ... it will depend upon context whether it is necessary that the relationship be direct or substantial, or whether an indirect or less than substantial connection will suffice ...".
Applying that approach, I can see nothing in the context of the execution of the Deed which would require the term "relating to" to be read narrowly.
On behalf of the applicants, it is said that the matters referred to in the Letter relate to obligations expressed in the First Prospectus, not to Beagle's functions and duties under the provisions of the Corporations Law or the Trust Deed.
I do not accept that submission. First, Beagle's obligations, as expressed in the First Prospectus (in particular at pp.3 and 11 of that document), are expressed by reference to the Trust Deed. Mr D Stone, counsel for the applicants, acknowledged that fact in respect of the passage at p.11 where the verb "covenant" is used. The passage at p.3 invites reference to the latter passage (as Mr Stone also acknowledged). It is convenient, at this point, to set out the two paragraphs from the First Prospectus which read as follows:
[Page 3]
"Repurchase
Due to the nature of the investment, and the associated taxation benefits, the Manager cannot repurchase the Lease and Management Agreements. However the Manager will use its best endeavours to ensure that there is a secondary market for Lease and Management Agreements which are the subject of this prospectus. (Refer page 11)". (Emphasis added).
[Page 11]
"TRANSFER OF LEASE AND MANAGEMENT
AGREEMENTS
Whilst the Manager has no obligation to repurchase Lease and Management Agreements investors are free to assign them. It is strongly recommended however that tax advice is sought before entering into any assignment agreement. The Manager has covenanted to use its best endeavours to introduce a buyer to an investor wishing to sell. The Manager may charge for this service a brokerage fee of 15% of the sale price and seek reimbursement of its costs and expenses relating thereto. The Manager is not obliged to introduce potential buyers to such investors in priority to its own sales programme.
The Manager will keep a list of lessees who wish to assign their Lease and Management Agreements. This list and the relevant part of the Register is available for inspection without charge by other lessees. The Manager will also provide (at a charge fixed by the Commission) upon request by any lessee current information sufficient to enable that lessee to complete a "resale statement" required by Section 552 of the Companies Code."
Secondly, the relevant clause in the Trust Deed reads as follows:
"12(l)That if any lessee wishes to assign his Lease and Management Agreement the Manager will use its best endeavours to introduce to the Lessee a person willing to take an assignment of the same provided however that the Manager shall be entitled to seek reimbursement from the lessee of the Manager's costs and disbursements relating to the introduction and charge the Lessee a fee equal to fifteen per centum (15%) of the consideration given for the assignment and
(i)will keep a list of the name of each lessee who advises the Manager that he wishes to assign his Lease and Management Agreement;
(ii)make available, without charge, for inspection by any Lessee the said list and the part of the Register of Lessees kept pursuant to section 172 of the Code which relates to each of the Lessees referred to in the said list; and
(iii)provide to each Lessee at a charge approved for the purpose by the Commission or if no such charge is approved then without charge, current information sufficient to enable the Lessee to comply with the requirements of paragraph 552(3)(a) of the Code."
[There is evidence that this clause was inserted in the Trust Deed in accordance with a condition imposed by the National Companies and Securities Commission ("the NCSC") when, on application by Beagle, the NCSC declared under s.168(2) of the Companies Code that the Trust Deed was not required to contain a covenant to the effect of the covenant referred to in s.168(1)(b)(iii). Such a covenant (referred to in these proceedings as a "buy-back covenant") would have obliged Beagle, at the request of a Grower to purchase or cause to be purchased the Grower's pine plantation interest].
The terms of the Trust Deed place a duty on the Manager (not surprisingly) to manage the Trust - see Clause 10. I do not consider that it would be stretching language unduly to include compliance with undertakings given in the First Prospectus as forming part of the management of the Trust.
On one view, it might be said that the Letter "notif[ies] a Grower of" several matters. These include the alleged inducement of Targridge to invest in the Trust, the obligations assumed by Beagle in relation to the secondary market, Beagle's alleged
failure to do anything to create a secondary market, the foreshadowed Federal Court proceedings and the invitation to take part in those proceedings.
If it is necessary to identify several matters in that manner, I would regard each of those matters as relating to the functions and duties of Beagle under the provisions of the Deed. However, I do not think it is appropriate, for present purposes, to split the subject matter of the Letter into different categories. In my view, it is possible and sensible to read the Letter as a whole and thus to characterise "the matter" notified to the Growers. That matter was the alleged non-fulfilment of Beagle's undertakings in relation to the secondary market for pine plantation interests. In my opinion, that matter related to the carrying out by Beagle of its functions and duties under the provisions of the Deed.
For those reasons, I have come to the conclusion that Targridge was not in breach of contract in the use which it made of the Growers' Register. Accordingly it is not necessary to assess damages for breach of contract.
Did publication of the Letter amount to conduct "in trade or commerce"?
It is necessary to decide this question for two reasons. First, the relevant part of s.52 of the Act reads as follows:
"A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive."
Secondly, the respondents, in their defence, deny that publication of the Letter was conduct in trade or commerce as that expression is used in the Act.
Section 3(1) of the Act provides that "trade or commerce" means trade or commerce within Australia or between Australia and places outside Australia.
The leading case on the construction of the phrase "in trade or commerce" is the decision of the High Court of Australia in Concrete Constructions Pty Ltd v. Nelson (1990) 169 CLR 594. At p.604 in the reasons for judgment of Mason CJ, Deane, Dawson and Gaudron JJ there appears the following statement:
"What the section is concerned with is the conduct of a corporation towards persons, be they consumers or not, with whom it (or those whose interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which of their nature, bear a trading or commercial character."
In my view, when Targridge sent the Letter to registered holders of pine plantation interests in the Trust it engaged in conduct in trade or commerce. Viewed objectively, the purpose of the Letter can be seen as an attempt to solicit support from those Growers in respect of two matters. The first was to involve some of them in proposed Federal Court proceedings to recover damages in respect of their investments. The second (expressed in the alternative) was to suggest to those Growers that they approach Beagle with a request to sell their interests in the Trust.
The involvement of those holding pine plantation interests in the Trust was of a commercial character. The sending of the Letter was designed to secure a commercial advantage perceived by Targridge either in its capacity as a Grower or as a company associated with Equus (as its principal shareholder). In my opinion, the sending of the Letter was conduct "in trade or commerce". The ends which Targridge sought to achieve by sending the Letter bore a sufficiently commercial character so to characterise the conduct.
Did the Letter contain the representations alleged by the applicants?
There are five such representations alleged and I shall deal with them in the same sequence as they are pleaded in paragraph 9 of the statement of claim.
The first is that Beagle, Mr Young and Ms Sewell had made certain false representations "... so as to induce [Targridge] to invest in the Trust". There is certainly a representation in the Letter that Targridge was induced to invest in the Trust by the directors of Beagle (which at all material times included Mr Young and Ms Sewell) making representations that Beagle would use its best endeavours to create a secondary market. I refer to the passage in the Letter which reads:
"We were induced by the Directors of the Manager, Templegate Management Ltd (now known as Beagle Management Ltd) ("Beagle") to invest in this project on their representations that Beagle would use its best endeavours to create a secondary market for the forestry interests in the event that the Growers wished to sell their investment."
On page 2 of the Letter there is the passage which reads:
"We have spoken to a number of other Growers who relied on similar representations and we have jointly determined to commence proceedings in the Federal Court of Australia seeking damages from the Manager and its Directors for losses suffered by reason of Beagle's false and misleading conduct." (Emphasis added)
Later on the same page some emphasis is placed on the need (in order to claim
damages) to show awareness of the representations "either verbal or written" and reliance on them when deciding to invest in the project.
Although the Letter does not expressly state that the representations made by Mr Young and Ms Sewell were false, in my view a fair reading of the Letter as a whole is that it conveys such a representation. I think it is reasonable to infer, as I do, that Targridge was saying in the Letter that Mr Young and Ms Sewell made the representations in their capacities as directors of Beagle and on its behalf, that the representations were false in that when they were made neither Beagle nor its directors intended to use its or their best endeavours to create a secondary market for the pine plantation interests and, finally, that Targridge was induced by those representations to invest in the Trust.
Secondly it is said that the Letter contains a representation that a prospectus issued by Beagle offering prescribed interests in the Trust contained false statements. As can be seen above, the introductory paragraph of the Letter was followed by two quotations from the First Prospectus concerning Beagle's undertaking to use its best endeavours to ensure that there is a secondary market. The passages to which I have referred above (other than that referring to the inducement) followed the extracts from the First Prospectus. Once again, I consider that a fair reading of the Letter is that it says that the statements in the First Prospectus were false in the sense that at the time of issuing the First Prospectus neither Beagle nor its directors intended to honour the undertakings concerning the secondary market.
The third allegation is that the Letter contains a representation that Beagle, by Mr Young and Ms Sewell, had promoted a project contrary to the interests of investors in the Trust. The Letter contains this statement:
"We believe Beagle has been promoting a separate "Blue Gum" project in direct competition with its obligations to create a secondary market for the forestry interests under the Templegate Forestry Trust."
In my view, this amounts to a representation that Beagle and the second applicants had promoted a project contrary to the interests of the investors in the Trust.
Next it is alleged that the Letter contains a representation that Targridge had previously corresponded with Beagle and the second applicants in relation to the allegations contained in the Letter. The Letter contains the following paragraph:
"We enclose for your perusal a copy of a recent letter that we have written to Beagle Management Ltd, which formalises our request for them to create a secondary market, even though we know from previous correspondence with them that they have done nothing to create a secondary market despite their clear and unambiguous obligation to do so."
Once again, in my view, the above paragraph carried a representation that Targridge had previously corresponded with Beagle and the second applicants in relation to the allegations contained in the Letter i.e. in relation to the creation of a secondary market.
Finally, the applicants say that the Letter contains a representation that Targridge knew from previous correspondence with the applicants that Beagle had done nothing to
carry out certain undertakings it gave in the First Prospectus, namely to use its best endeavours to create a secondary market for forestry interests. In my opinion, the paragraph from the Letter which I have set out immediately above contains such a representation.
Was the publication of the Letter containing the above representations, misleading or deceptive conduct or conduct likely to mislead or deceive?
I propose to answer this question by first considering each of the representations of which the applicants complain. I shall then assess whether publication of the Letter, when considered in all the relevant surrounding circumstances, was misleading or deceptive conduct or conduct likely to mislead or deceive those who received it.
(a)Whether Targridge was induced to invest in the Trust by the representations that Beagle would use its best endeavours to create a secondary market? and
It is convenient to deal simultaneously with the two sets of the applicants' representations which the respondents put forward in their evidence. The first set were certain oral representations said to have been made in October 1987. The second set comprised the representations made in the First Prospectus. It is first necessary to determine from the evidence adduced whether the oral representations were made by Beagle and the second applicants.
Mr Russo's evidence was that he met Mr Young and Ms Sewell in October 1987 in an office on the 43rd floor at 1 Collins Street, Melbourne. Mr Russo said that at that meeting Mr Young told him that Beagle would use its best endeavours to create a secondary market and that he (Mr Young) was aware that unless Beagle created and maintained a "vibrant" secondary market they would not be able to meet their obligations to repurchase any "repossessed" forestry interests from Equus, in the event that Equus was to fund any investors. Both Mr Young and Ms Sewell, in their statements (exhibits F and R respectively) say that at no time prior to the receipt of the Letter, did they ever discuss a secondary market with Targridge or its officers or employees. Ms Sewell, in cross-examination, agreed that she and Mr Young had a meeting with Mr Russo in Melbourne in late 1987. She thought that the meeting was in September 1987 and that it was the first time she met Mr Russo. Neither Mr Young nor Ms Sewell were cross-examined about their denials of ever having discussed a secondary market with Targridge or its officers or employees.
In final submissions, Mr Stone submitted that the rule in Browne v. Dunn (1893) 6 R.67 (H.L.) required me to accept the evidence of Mr Young and Ms Sewell, because they had not been cross-examined about this matter. I do not think that what is called the rule in Browne v. Dunn applies in the present circumstances. My reasons for that conclusion start with the fact that, in accordance with interlocutory directions, witness statements were filed and exchanged. It was common ground that paragraph 11 of Mr Russo's statement (Exhibit 38) was in relevantly identical terms to paragraph 11 of his initial statement as originally filed, save that the place at which the meeting was alleged to have taken place was different (an address in South Melbourne in the first statement compared to an address in Collins Street in Melbourne in the second statement). That paragraph clearly gave to the applicants notice of the respondents' intention to rely upon the oral representations which Mr Russo said were made at that
meeting in October 1987. In those circumstances it was not necessary to put the matter to Mr Young or Ms Sewell; Allied Pastoral Holdings Pty Ltd v. Federal Commissioner of Taxation [1983] 1 NSWLR 1 at p.16; see also the discussion of the rule in Browne v. Dunn in Trade Practices Commission v. Mobil Oil Australia Ltd (1984) ATPR 40-482 at pp.45,527-45,528.
I find that a meeting did take place between Mr Russo, Mr Young and Ms Sewell in Melbourne in late 1987. It is common ground that the purpose of the meeting was to discuss whether Equus would be prepared to enter into an arrangement to provide financial assistance to enable investors to purchase pine plantation interests. It is in that context that the statements made by Mr Young and Ms Sewell to the effect that:
.they did not persuade or attempt to persuade Targridge or its officers to invest in the project;
.they never had any communication with Targridge with a view to persuading it to invest in the Trust; and
.they never discussed a secondary market with Targridge or its officers or employees prior to receipt of the Letter,
must be understood. I accept that, so far as Mr Young and Ms Sewell were concerned, Mr Russo was at the meeting in late 1987 in his capacity as a representative of Equus.
The next question is whether, as Mr Russo contends, Mr Young made the statements to which I have referred immediately above.
I take into account the fact that neither Mr Young nor Ms Sewell were cross-examined on this matter. I do not consider that compels me to a finding that they did not make these statements at the meeting in late 1987. Nor is it, as I see it, a situation in which a credibility finding has to be made either for or against Mr Young and Ms Sewell. I do propose to make a credibility finding on this point in respect of Mr Russo. There was nothing in Mr Russo's demeanour when he gave evidence, and in particular when he was cross-examined about this meeting, which leads me to disbelieve his evidence on this point. I appreciate that the meeting took place a long time ago and Mr Russo did not produce any diary note or other contemporaneous record. The same can be said in respect of the evidence of Mr Young and Ms Sewell. A major part of their evidence was directed to counter the suggestion of communication with Targridge or its officers on the three matters which I have set out above. However, it is important to bear in mind that if Mr Young and Ms Sewell made the oral representations to Mr Russo as alleged, the fact that he was at that time representing Equus does not preclude the possibility of subsequent reliance by Targridge upon the same representations. I think that the subject of the creation and maintenance of a secondary market was likely to have been of concern to Equus at the time of the meeting in late October 1987 and thus to have been discussed between the parties at that meeting. Exhibit 2, which is a letter dated 21 October 1987 from Beagle Holdings to Mr Russo, confirms that:
.there had been recent discussions between the parties;
.Beagle anticipated that total sales of pine forestry interests for the financial year ended 30 June 1988 would be approximately $12 million of which $6 million would be financed, involving approximately 350 applications;
.the proposed fund would be very similar to a project previously marketed by Beagle during the financial year
ended 30 June 1987 and known as "Australian Stock Developments"; and
.Mr Young planned to be in Melbourne for the week commencing 26 October 1987 and looked forward to "meeting once again with you during my visit".
The letter enclosed a copy of the prospectus and marketing material for Australian Stock Developments which was said to be similar in design, format and content "... to the Templegate Forestry Investment Trust". I accept Mr Russo's evidence that oral representations were made at the meeting by Mr Young to the effect that Beagle would use its best endeavours to create a secondary market for the forestry interests in the proposed trust.
The respondents' case is that similar representations were made in the First Prospectus. I have set out above the relevant passage from page 3 of the First Prospectus. The words in that passage (which I have underlined) state that Beagle will use its best endeavours to ensure that there is a secondary market for Lease and Management Agreements which are the subject of the Prospectus. Mr Stone contended that there was a difference between ensuring that there is a secondary market and creating a secondary market. I reject that submission. In my view, the distinction is too fine to be one which would have any impression on the ordinary reasonable reader considering an investment in the Trust. If at all relevant times there existed such a market without Beagle having to create one, then there would be no problem. But if such a market did not exist, in my opinion, an obligation to use best endeavours "to ensure there is a secondary market" must surely include using best endeavours to create such a market or cause it to be created.
Mr Russo was asked in cross-examination:
"So what you say is that there were two sets of representations: the first set was outside the prospectus, the second was within the prospectus? --- Yes.
And you were induced by both sets of representations, were you, to invest? --- Yes.
And there is no doubt about that? --- No.
The representations in the prospectus and the representations made, you say, by Young and Sewell? --- Yes."
I accept Mr Russo's evidence as meaning that when, on Targridge's behalf, he made the decision that Targridge would apply for the seven pine plantation interests, a relevant factor in his mind was the representation made orally by Mr Young (in Ms Sewell's presence) at their meeting in October 1987 and in the First Prospectus, that Beagle would use its best endeavours to create a secondary market for those interests. I think it was most unlikely that those representations would have been the sole or even the determinative inducement which resulted in Targridge's subscription for those interests. I have taken into account Mr Russo's evidence to the effect that Mr Young and Ms Sewell were extremely capable at marketing such interests. That evidence co-incides with my assessment of Mr Young and Ms Sewell when they were in the witness box. Both impressed me as being highly intelligent and articulate. I believe Mr Russo. I find that when Targridge decided to invest in the Trust, one of the material factors which led to, and thus induced, that decision was the representation made orally and in the First Prospectus that Beagle would use its best endeavours to create a secondary market. This means that, in my opinion, when Targridge made this statement in the second sentence of the Letter, it was telling the truth.
I have found that, on a fair construction of the Letter, Targridge represented that the representations made orally and in the First Prospectus were false in that at the time of issuing the First Prospectus neither Beagle nor its directors intended to use their best endeavours to create a secondary market. There is no suggestion that the applicants' intentions in October 1987 and at the time of issuing the First Prospectus were subsequently changed. Accordingly I think it is reasonable to infer (and I shall do so) the applicants' intentions at those times from the evidence of what they did in relation to ensuring that there was a secondary market for the pine plantation interests.
(b)Did the First Prospectus contain false statements?
What were Beagle's obligations in relation to the matter of a secondary market for the pine plantation interests?
It was common ground that Beagle's obligations were to be found in Clause 12(l) of the Trust Deed. The full text of that clause has been set out earlier in these reasons (at pp.14-15). In summary, the clause provides that if any lessee wishes to assign his Lease and Management Agreement Beagle will use its best endeavours to introduce to the lessee a person willing to take an assignment of it. There is a proviso that Beagle is to be entitled to seek reimbursement from the lessee of its costs and disbursements relating to the introduction and also to charge the lessee a fee equal to 15% of the consideration given for the assignment. The clause includes what I construe to be a non-exhaustive list giving particulars of what Beagle is obliged to do as part of its obligation to use its best endeavours to introduce an assignee. Those particular obligations are to:
.keep a list of the name of each lessee who advises Beagle that he wishes to assign his Lease and Management Agreement;
.make that list (and that part of the Register of Lessees relating to each of the lessees referred to in that list) available for inspection by any lessee without charge; and
.provide each lessee with current information sufficient to enable the lessee to comply with the requirement of paragraph 552(3)(a) of the Companies Code either free of charge or at the charge approved for that purpose by the National Companies and Securities Commission.
On first reading Clause 12(l) I thought that these obligations were in addition to the general obligation, expressed earlier in the clause, to use best endeavours. I was drawn to the draftsperson's use of the conjunctive "and". However, a closer examination of the particular obligations discloses that they are each steps which can easily be characterised as forming part of the obligation to use best endeavours. They are thus, in my view, particulars of what must be done, at the very least, as part of the more general obligation. But I do not think they should be regarded as exhaustively defining the content of that obligation. The language used is not consonant with an intention to restrict the preceding, more generally expressed, obligation.
It is also necessary to remember that in the First Prospectus (at page 3) Beagle gave an undertaking that it would use "... its best endeavours to ensure there is a secondary market for Lease & Management Agreements which are the subject of this Prospectus" and (at p.11) stated "The Manager has covenanted to use its best endeavours to introduce a buyer to an investor wishing to sell."
In Hospital Products Ltd v. United States Surgical Corporation (1984) 156 CLR 41 at p.64 Gibbs CJ observed:
"The meaning of terms of this kind has been considered in a number of cases, but it is trite to say that the meaning of particular words in a contract must be determined in the light of the context provided by the contract as a whole and the circumstances in which it was made, and that decisions on the effect of the same words in a different context must be viewed with caution ... an obligation to use "best endeavours" does not require the person who undertakes the obligation to go beyond the bounds of reason; he is required to do all he reasonably can in the circumstances to achieve the contractual object, but no more: [authorities cited]".
It seems to me that one of the most important questions (but not the only question), in the present case, is whether Beagle did all that it reasonably could in the circumstances to achieve the contractual object of introducing to a lessee wishing to assign his pine plantation a person willing to take such an assignment?
What endeavours did Beagle make in relation to the creation and maintenance of a secondary market for the pine plantation interests?
Beagle says that it did the following:
It kept a list of Growers who had advised it that they wished to sell their pine plantation interests ("the List").
It conducted what was described as a "call programme". This involved Mr Young and Ms Sewell calling upon various financiers, accountants, investment advisers and security dealers (whom I shall refer to as "the Dealers") in Melbourne and Sydney, but principally in Melbourne. The evidence of Mr Young and Ms Sewell was that these visits took place on various dates between February 1989 and November 1995. As Mr Young put it (at p.102): "... we were relying upon our own call program to introduce the secondary sale to the appropriate distribution market."
It arranged a facility whereby Growers could be introduced to a buyer through a Mr Colin Jones of Gillon Securities Limited ("Gillon"). Gillon is a licensed securities dealer and stockbroker in Melbourne. This was in August 1994.
It arranged the sale in 1991 of some 89 forestry lots under the exemption contained in s.66(3)(a) of the Corporations Law, concerning offers to subscribe at least $500,000 per person.
In 1992 it registered the Second Prospectus and sold a further 14 pine plantation interests in accordance with that prospectus.
It provided a finance facility for those wishing to purchase either primary or secondary pine plantation interests.
The List of Growers
It was not seriously in issue that Beagle had kept the List, and I find that it did so. However, it would appear that Beagle did not start to keep the List until 14 February 1991 when Messrs (or Mr & Mrs) McMillan's 15 pine plantation interests were put on it. Some 15 months earlier, on 23 November 1989, Tom & Mary & Associates Pty Ltd wrote to Beagle asking it to find a buyer for its 22 pine plantation interests. There was no evidence that Tom & Mary & Associates Pty Ltd were ever put on the List. I accept the applicants' assertion that if any Grower had asked to inspect the List, Beagle would have made the List available to that person for inspection, without charge. There is no evidence that any Grower other than Targridge made such a request. There was evidence, from Mr Wain (an expert witness called by the respondents) that Growers were the most likely purchasers of such secondary interests.The Call Programme
My assessment of the applicants' evidence in relation to its call programme was that very little, if any, of the effort made by Mr Young and Ms Sewell during these calls was directed to finding buyers for Growers who wished to sell their interests in the Trust. Both Mr Young and Ms Sewell acknowledged that other purposes of these visits included the promotion of other prescribed interests which companies in the Beagle group had on the market from time to time. My impression from the evidence was that this was the principal reason for those visits. Mr Young's evidence, in particular, on this matter was not impressive. For example (see p.169) he used expressions such as "I would have taken every opportunity to raise on behalf of Beagle the Templegate Forestry Trust under secondary market". In relation to a visit to a securities dealer called "Informed Sources" Mr Young said "... I would have taken an opportunity to discuss the Beagle situation including the progress of the Trust and also the secondary market."
Mr Young, in his oral evidence, said that he visited Messrs Elias Rosenberg, a firm of accountants, on 27 February 1989 and again on 6 March 1989. He stated that the object of the latter visit was "... to keep Elias Rosenberg and Morrows up-to-date with the progress of the Trust". He was then asked:
"So, not to persuade them to introduce buyers to growers? --- By discussing the Trust and the secondary market then by inference that was to request their assistance, or seek their assistance with regard to the secondary market."
In his responsive statement Mr Young referred to eight other calls upon Messrs Elias Rosenberg between 6 February 1989 and 23 November 1989. I accept that it would
not be reasonable, some seven years after the events, to expect Mr Young to have a detailed recollection of these visits.
However, the only evidence of any Growers having informed Beagle that they wished to sell in 1989 related to Tom & Mary & Associates Pty Ltd on 23 November 1989 (see Exhibit 8). Ms Sewell (in paragraph 13 of her responsive statement) confirmed this and in her oral evidence (at p.274) agreed that there would have not been any discussions about selling secondary interests in 1988 and 1989 when there were none to sell. Mr Young gave his evidence in the belief that Tom & Mary & Associates Pty Ltd had asked Beagle to find a buyer for their 22 pine plantation interests (purchased in May 1988 for a total subscription of $207,880) well before the visit to Melbourne in February 1989 (see p.168). I place no reliance whatsoever on his and Ms Sewell's evidence (in the latter case mainly in her responsive statement - Exhibit V pp.9-19) that the 16 visits to Melbourne in 1989, all of which were set out in some detail in each of their written responsive statements, had anything at all to do with Beagle's obligations to use its best endeavours to introduce a purchaser to Growers who wished to assign their pine plantation interests.
In their responsive statements both Mr Young and Ms Sewell referred to calls made upon Messrs Elias Rosenberg in 1991 (four such calls) and 1992 (two calls). Mr Young's evidence (see for example p.173) was that these calls were made to request those accountants to assist him in finding buyers for Growers who wished to sell their interests. Some correspondence from Messrs Elias Rosenberg was put into evidence [Exhibits 21A and 21B]. This was correspondence in which Messrs Elias Rosenberg were asking Beagle to find buyers (not the other way round) for the interests of Growers who were clients of theirs and who wished to sell.
The only documentary evidence which confirms discussions between Beagle and a security dealer or the like is a letter dated 30 August 1994 (Exhibit K) from Gillon Securities Ltd to Mr Young as managing director of Hampton Securities Ltd (a member of the Beagle Group of Companies), Beagle's reply [dated 30 September 1994 not in evidence but referred to in a fax dated 5 October 1994 (Exhibit 23)] and Beagle's letter dated 5 October 1994 in reply to that fax (Exhibit 29). Exhibit K referred to recent discussions and advised that Gillon Securities Ltd had clients who were interested in purchasing Lease and Management Agreements issued under the Trust Deed and also those issued in relation to the "Great Southern Blue Gum" project. At p.180 of the transcript there is reference to "Mr Gillon's" visit to Perth in August 1994. Mr Young was asked whether the purpose of this visit was to discuss the secondary market. Mr Young's answer was "with regard to Beagle, yes". From that I took Mr Young to be saying that so far as Beagle was concerned or involved in "Mr Gillon's" visit, that visit concerned discussing the secondary market but also that "Mr Gillon" was in Perth on other business with the Beagle Group as well. I have put the name "Mr Gillon" in quotation marks because in fact the relevant person from that firm appears to be Mr Jones (who signed Exhibit K).
The absence of any other correspondence with the Dealers on the matter of assisting the Growers who wanted to sell is, in my view, another piece of evidence which suggests that that matter was not seriously pursued by the applicants during the calls.
In particular, after 4 September 1994 there was no correspondence with the Dealers (other than Gillon Securities Ltd) about the matter of secondary sale notices which was referred to in Beagle's letter of 5 October 1994 to Gillon Securities Ltd.
If efforts were being made, during the course of these calls, to find buyers for Growers who had indicated their interest in selling, one might reasonably expect that fact to have been mentioned in one or other of the letters which Beagle sent acknowledging receipt of the Growers' requests for listing. Likewise, one would have expected this to be mentioned, by way of response to the Letter, in Beagle's subsequent circular letter to the Growers of 16 June 1995 and its initial correspondence to Perpetual Trustees. There was no reference in any of those letters to the call programme.
Furthermore, it seems to me to accord with what would be likely to be Beagle's and Hampton's principal interests in making the visits described in Mr Young's and Ms Sewell's statements i.e. to promote sales of prescribed interests in the various trusts which were the subject of current prospectuses from time to time. My assessment is, and I so find, that in the course of these visits they did very little, if anything, to solicit buyers for the pine plantation interests of the Growers on the List. There is no evidence that the List was ever produced to any of the Dealers before the Letter was sent. In fact, Mr Young's evidence (see p.172) was that such a list was never produced to any of those persons at any of the meetings. This contrasts somewhat with that part of his written statement [Exhibit F paragraph 10(f)] that Beagle's normal practice was to forward "... that list to interested licensed securities dealers, or
representatives of such dealers or accountants". If the List were not produced because it had already been so forwarded I would have expected Mr Young to say so when cross-examined on the point, or in re-examination. No emphasis or reliance was placed on behalf of the applicants on the qualifying adjective "interested". The impression sought to be created by the applicants' evidence was that most of these persons were interested in the trusts which the Beagle group were promoting.
It is not entirely clear how far, as a matter of law, the applicants were permitted, during the course of these calls, to raise the matter of the secondary sales in the absence of a registered current prospectus or the lodgment of a secondary sale notice. In view of my conclusion and finding, which I now make, that either nothing or at the most very little was done by the applicants to that end during those calls, the legal position has relevance only to what they might reasonably have been expected to do in such circumstances (i.e. without a registered current prospectus or lodgment of a secondary sale notice). I accept the applicants' submission that until the Corporations Law came into effect on 1 January 1991 they could have facilitated private offers or sales during the course of these calls. They could have informed the Dealers that there were investors in the Trust who wished to sell their interests. They could have provided the Dealers with a list of available interests, including the prices sought. Furthermore they could have involved the Dealers in secondary sales, provided that no offers or invitations were made to the public. I agree with the applicants' view (in their further written submissions filed on 4 November 1996) that even after 1 January 1991 they would have been permitted at least to do the following:
.to inform the Dealers that a number of Growers had asked that buyers be found for their pine plantation interests. It would have been permissible to give an indication of how many hectares were involved. However, no lists or price lists stating that a particular Grower wished to sell his interest could be provided;
.to extol the virtues of the pine plantations and to suggest that the plantations were "doing well"; and
.to ask the Dealers whether there might be sufficient interest among their clients to warrant the filing of a prospectus or organising secondary sale notices (depending upon the time concerned) to enable offers lawfully to be made. (This particular step was not specifically mentioned in the applicants' further written submissions, but is consistent with those submissions).
Gillon Securities Ltd
I accept that shortly before 30 August 1994 Mr Young had discussions with Mr Jones of Gillon Securities Ltd. I accept, further, that Mr Jones and Mr Young discussed the matter of the sale of established Lease and Management Agreements issued under the Templegate Forestry Trust and the Great Southern Blue Gum venture. Exhibit K (a letter dated 30 August 1994 from Gillon Securities Ltd to Hampton Securities Ltd) confirms that Gillon Securities Ltd was happy for Beagle to direct any buyers and sellers to it. Mr Young, in his capacity as managing director of Beagle, responded by letter dated 30 September 1994 and Mr Voloczi, as a director of Beagle, replied by letter dated 5 October 1994 to Gillon Securities Ltd's fax of the same date. That letter (of 5 October 1994) enclosed copies of forester's reports for the five pine plantations in which the Trust was interested together with a copy of the First Prospectus. It confirmed that although Growers had no on-going obligation to contribute towards maintenance (because a maintenance fund had been established), there was an obligation to contribute towards insurance costs. Some detail was given about the
location of the plantations. In the letter of 5 October 1994 Mr Voloczi said that he had contacted Beagle's solicitors and would forward to Mr Jones a format for the Secondary Sale Notice to be completed by any prospective vendor. The letter concluded with the suggestion that Mr Jones should telephone Mr Young the following week to discuss the terms and conditions applicable to commission.
It is worth noting that by this time the secondary sale provisions of the Corporations Law had come into effect (on 4 September 1994).
It is common ground that Gillon Securities Ltd did not introduce any purchasers to Growers who wished to sell their pine plantation interests. Nevertheless the discussions and exchange of correspondence referred to above must, in my view, be taken into account in weighing the efforts in that regard made by the applicants.
The Sale in 1991
The evidence establishes that in 1991 Beagle arranged sales of pine plantation interests formerly belonging to Growers holding 89 hectares. This involved the surrender of their leases and the issue of "replacement interests" by Beagle. Anyone reading paragraph 14 of Mr Young's responsive statement (Exhibit P) and paragraph 14 of Ms Sewell's responsive statement (Exhibit V), which were in identical terms, would be forgiven for thinking that they were putting forward this sale of 89 hectares as comprising part of Beagle's best endeavours to introduce a purchaser to those Growers wishing to sell. Furthermore, in the applicants' closing submissions (see paragraph 28.3) there is this passage:"Though not "secondary sales" (in the true sense of the term) this transaction enabled mortgagees in possession to dispose of forestry (prescribed) interests to the advantage of both the mortgagees and the grower mortgagors".
It is true that this sale, to the extent that it lessened the indebtedness of the mortgagors in default, was to their advantage. At paragraph 26.6 of their closing submissions the applicants claim that Beagle went further than it was required under the Trust Deed or Prospectus by repurchasing Growers' interests and sending out draft secondary sale notices to Growers. But that was not what the 1991 sale was all about. As the applicants acknowledge in paragraph 26.5 of their closing submissions, this sale was all about complying with their contractual obligations to Equus and G.I.O. Each of the 89 hectares sold had previously been the subject of a lease agreement to lessees who had borrowed from either Equus or G.I.O. to buy their interests, and who had defaulted. The circumstances of those defaults were such that Equus (and possibly G.I.O.) had the right to look to Beagle Holdings (and in turn to Beagle as guarantor) for repayment of the moneys which were the subject of such default. Beagle took those steps in 1991 (accepting surrender and re-issue of the interests) to mitigate its loss. It did not include Tom & Mary & Associates Pty Ltd's 22 hectares or Messrs (or Mr & Mrs) A & C McMillan's 15 hectares in these arrangements. Those parties, as has been mentioned above, had requested Beagle to find purchasers for their interests on 23 November 1989 and 14 February 1991 respectively. Their exclusion from these arrangements, in my opinion, confirms that it would be wrong to take the arrangements into account, other than to a very slight extent, when assessing whether Beagle used its best endeavours to introduce buyers.
The Second Prospectus
I have reached exactly the same conclusion in relation to the Second Prospectus as that which I have stated above in relation to the 1991 sale. This was Beagle once again protecting its own financial skin, not using its best endeavours to introduce purchasers to Growers wishing to sell their interests. The applicants sought to make much of the fact that, as a matter of law, the interests offered under the Second Prospectus would include the existing interests of those Growers who wished to sell. I shall assume that to be the case. However, there is not the slightest evidence that any efforts were made to promote the sale of those interests. For example, there was no evidence that any of the Growers concerned were approached to nominate a price for the interests which they wished to sell. My assessment of the Second Prospectus is that it was registered purely to lessen the financial impact on the Beagle group of companies which would otherwise result from its recourse obligations under the Finance Provision Agreement. Only to a very slight extent should Beagle's registration of the Second Prospectus and the sales made under it be taken into account when assessing whether Beagle used its best endeavours to introduce buyers.
The Finance Facility
I accept the applicants' evidence that there was such a facility. Mr Russo described this as "playing with mirrors". I took this primarily to be an attempt to discredit the applicants by suggesting that the financing arrangements amounted to a fraud on the revenue. I did not take it as a complete denial that the applicants had any arrangements in place to provide finance for a person wishing to buy a primary or secondary pine plantation interest. If I am wrong in that assessment, there was
insufficient evidence to justify my drawing such a conclusion (i.e. that there were no such arrangements). At best Mr Russo's evidence on this point comprised his incomplete recollection of what Mr Young and Ms Sewell had told him. Mr Russo conceded that he had "no great reason" to remember the matter in a lot of detail. In those circumstances I prefer to accept the applicants' evidence on this point.
Whether Publication of the Representations Concerning Applicants' Lack of Effort to Use Best Endeavours Constituted Misleading or Deceptive Conduct?
An assessment about whether the representations concerning the lack of effort on the applicants' part to use their best endeavours to introduce purchasers to would-be vendors of pine plantation interests constituted misleading or deceptive conduct requires a comparison between what they did and what they might reasonably have done.
I have found that, at about the time the secondary sale provisions of the Corporations Law came into effect, an arrangement was made between Beagle and Gillon Securities Ltd for the latter to introduce purchasers. I have indicated above my assessment of what little effort, if any, was made on behalf of the vendor Growers during the visits made to dealers under the call programme. I have also found that the arrangements for the sale in 1991 and the registration of the Second Prospectus need to be taken into account, but to a very slight extent, when assessing whether the applicants used their best endeavours to introduce buyers. I accept, also, that if a buyer had shown interest then Beagle would have arranged for one of the other companies in the Beagle group to provide financial assistance to such a buyer.
There is no evidence that Beagle or its directors gave any consideration to the development of a plan for introducing purchasers to those Growers who wished to assign their pine plantation interests. Rather, my impression is that Beagle and its directors focused on the particular obligations expressed in sub-paragraphs (i), (ii) and (iii) of Clause 12(l) of the Trust Deed.
It will be recalled that the First Prospectus was registered on 12 April 1988. On 14 April 1988 Beagle was issued with a dealers' licence under s.48 of the Securities Industry (Western Australia) Code. Condition No. 1 of that licence prohibited Beagle from carrying on a business of dealing in securities other than those created by the Trust Deed. In other words, Beagle was licensed to deal only in pine plantation interests created by that one trust deed.
In or about May 1992 Beagle surrendered its security dealers' licence. Ms Sewell said, in cross-examination, that this was to save the costs of security deposits and the like. The applicants submitted that this did not inhibit Beagle from offering securities for issue or sale through its associate Hampton Securities Ltd which issued the Second Prospectus. Even so, I do not think I should completely disregard this surrender. I give it some, relatively slight, weight. In my opinion it gives some slight indication of a situation in which Beagle was no longer regarding the business of dealing in securities created by the Trust Deed as one of major importance to it. My impression is that so far as Beagle itself was concerned, its main interest was in management. When prescribed interests had to be issued or sold after May 1992 Hampton Securities Ltd was brought in.
It was common ground that the main attraction of pine plantation interests was the extent to which they provided the opportunity for allowable deductions for income tax assessment purposes. It was also common ground that primary sales (i.e. by initial subscriptions to the Trust) provided such allowable deductions, but that secondary sales were an affair of capital and that accordingly no part of the purchase price would be an allowable deduction. The applicants had developed what might be described as a technique for solving this problem. This was to accept surrenders of the pine plantation interests and to resell them in such a manner that some 94% of the moneys payable by the purchasers would be an allowable deduction.
An important part of the respondents' case was that Beagle, as part of its best endeavours, should have made this technique available to vendor growers as part of its obligation to use best endeavours to introduce purchasers. The applicants say that this would be contrary to the statements in the First Prospectus that the Manager could not and was not obliged to repurchase Lease and Management Agreements. It is true that there are statements to that effect in the First Prospectus, but the primary focus of the assessment in relation to Beagle using its best endeavours must be the terms of Clause 12(l) of the Trust Deed. There is nothing in that clause which in express terms obliges the Manager to repurchase pine plantation interests. However, there is nothing in that clause which precludes it from doing so or exempts it from any obligation to do so. The applicants contend that it would be unreasonable, in all the circumstances, to construe Clause 12(l) as including an obligation to repurchase as part of its "best endeavours to introduce" a purchaser. I agree. On its proper construction Clause 12(l) deals with proposed transactions in which another party is to take the vendor
If the Court finds actual loss or damage, incurred by contravening conduct, then it must do its best to quantify the loss even if a degree of speculation and guesswork is involved. It must be emphasised, however, that this principle applies only when the Court has found that loss or damage has occurred: Enzed Holdings Ltd v. Wynthea Pty Ltd (1984) 57 ALR 167 at p.182; RAIA Insurance Brokers Ltd at pp.178-181 and the cases there cited.
Any assessment of damages for loss of reputation must necessarily be made with a broad brush, but is not confined to loss of income. It may include the capital loss of reputation or goodwill of a trading corporation or an individual: Flamingo Park Pty Ltd v. Dolly Dolly Creation Pty Ltd (1986) 65 ALR 500 at pp.524-525 [cited with approval by the Full Court in RAIA Insurance]; Typing Centre of NSW Pty Ltd v. Northern Business College Ltd (1989) 11 ATPR 40,943 at p.50,290-50,291 [also approved by the Full Court in RAIA Insurance at p.178].
Bearing those principles in mind, I now return to the particulars of damage pleaded and the evidence which was led on behalf of the applicants. The search, initially, is to see whether there is credible evidence of actual loss or damage incurred. Mr Stone submitted, on behalf of the applicants, that damage to their reputation and goodwill was to be inferred. There is a similar statement to that effect in the applicants' further and better particulars of loss and damage which are set out above. In my view, that
contention is inconsistent with the principles laid down by the authorities. Initially, there must be proof of actual loss or damage incurred even if the material is "extremely exiguous" [Foster J's description at first instance in RAIA Insurance, a description with which the Full Court agreed (at p.178)].
I shall deal first with the allegations made in the amended statement of claim itself. I note that there is no evidence that any Growers (referred to in the amended statement of claim as "members of the Fund") have been induced to commence Court proceedings against the applicants whether "unwarranted" or otherwise. As to the allegation that Growers are likely to be induced to do so, I would say three things. First, that in itself would not be actual loss or damage, but would constitute potential or likely damage as referred to in Wardley and would not get the applicant past the first stage of its proof. Secondly, even if such a likelihood could be used as a basis for finding actual loss or damage, there was very little evidence that any of the recipients of the Letter had threatened (whether orally or by letter) to commence Court proceedings against the applicants. There was Mr Whitty's letter dated 19 June 1995 (Exhibit 38.26) requesting inclusion with Targridge in its proposed application to the Federal Court, about which proposed proceedings there is no further evidence. There is also Mr Featherby's letter dated 9 June 1995 (Exhibit 38.23) expressing some qualified interest in the proposed proceedings. The application in the present matter came to trial well over a year after publication of the Letter. There do not appear to have been any further steps taken in relation to the proposed proceedings. Thirdly, in view of my finding that Beagle did not use its best endeavours either to ensure that there was a secondary market for the pine plantation interests or to introduce a buyer
to an investor wishing to sell or to introduce to a Grower a person willing to take an assignment of his interest, I am not satisfied that any proceedings based on such complaints would fall within the description of "unwarranted Court proceedings".
That leaves, so far as the statement of claim itself is concerned, the claim that the applicants have suffered damage to their goodwill and to their business and trading reputations. That head of damage is repeated in the further and better particulars. In addition, in the further and better particulars, there are the allegations that:
.Growers approached the applicants expressing concern;
.on 16 June 1995, the first applicant wrote to each of the Growers allaying concern;
.the applicants received correspondence from solicitors; and
.the applicants received correspondence from both Perpetual Trustees Ltd and the Australian Securities Commission.
Paragraph 24 of Mr Young's statement reads as follows:
"The security industry is based on trust. After the Targridge letter was sent to other Growers, I received a number of telephone calls from Growers who were concerned about what Targridge had stated in the Targridge letter. I did my best to try to clarify the situation."
In his oral evidence, Mr Young said that there were "approximately 3 to 4" such telephone calls. He was not able to identify the persons from whom he received those telephone calls. Nor did he expand upon the content of the telephone calls.
Ms Sewell's written statement, signed on 19 August 1996, contained a paragraph (paragraph 22) in identical terms to paragraph 24 of Mr Young's written statement. When asked, in examination-in-chief, how many telephone calls she received, Ms Sewell replied "about six that I remember". Ms Sewell was unable to recall all of the caller's names but identified Mr David Brown, Mr Brett Davies and Mr Keith Hamilton as being investors (which I took to be a reference to Growers) who telephoned her. She said that Mr Brown's investment was at the level of about $100,000. Mr Brown had telephoned "to see what was going on". He was concerned that there were problems for his investment "... and he was very concerned that there was some problem with the Trust ... He was quite nervous about the fact that he'd been approached in this way." Ms Sewell continued:
"And his comment to me was, "You should do something about this because you" - I seem to have put his mind at rest, but that every bit of mud sticks and where there's smoke there's fire."
In respect of the telephone conversation with Mr Brett Davies, Ms Sewell said:
"Brett Davies was much along the same lines. He also said, "Is this pine investment ever going to be any good? Is it worth anything?" He was concerned that something was happening to the management company and may be we would go under."
As to the telephone conversation with Mr Hamilton, Ms Sewell said:
"Much along the same lines. Felt that we should do something about it. If it was - if this letter was untrue, then we should do something about it and clarify it. When they said do something about it I assumed that they meant take legal action."
Ms Sewell, again in examination-in-chief, said that she had also received telephone calls from agents who were also investors. She identified one as being Mr Tom Elias
of Messrs Elias Rosenberg. Ms Sewell said:
"He rang me several times. He was very concerned. The - there were two concerns there. One as an investor and concern that he - that his own investment was at risk, but the second concern was that a considerable number of his clients had received the same letter and he was receiving - or he told me that he was receiving phone calls from them showing their concern that why had he recommended this investment to them and now there was trouble with it. So he was trying to ascertain that everything was all right from his point of view, but also from the point of view of his clients."
Ms Sewell gave evidence about Mr Leeds (from Messrs Leeds Bull), another agent, telephoning her. In that regard Ms Sewell's evidence was:
"Much the same. I'll repeat it all if you want me to, but it's the same sort of problem because once again, he was an investor in his own right and his partner and his partner's wife and Mr Leeds' wife - they were very concerned about it from their own personal point of view, but also from the point of view of their clients."
Ms Sewell also identified other agents who contacted her by telephone as being the partners of Morrows Ltd whom she named as Mr Murray White, Mr Terry Stanley and Mr Greg Levy.
Mr R.W. Richardson, counsel for the respondents, said that no weight should be given to Mr Young's evidence because Mr Young was unable to say who telephoned him or specifically what was said.
Mr Richardson also pointed to the fact that Ms Sewell's written statement (made two days prior to her oral evidence) did not specifically name or identify the callers as she did in her oral evidence-in-chief. He also took me to a passage in the cross-
examination of Ms Sewell (at p.272) in which there was the following exchange:
"You said yesterday that you had some conversations with some Growers that you mentioned after the date of the letter complained of, are you able to say whether it was before or after the letter that was sent by Beagle to the Growers, those conversations? --- Round about the same time. I can't tell you whether it was before or after."
Presumably, the reference to the absence of detail in Ms Sewell's written statement was to suggest recent invention. Similarly, I took the reliance upon the above passage as amounting to a suggestion that it was Beagle's letter of 16 June 1995, rather than the Letter, which provoked these telephone calls.
I have weighed up these submissions. I do not think that Ms Sewell indulged in recent invention. There must be some other reason for the omission of these details in her written statement. Nor do I think that Ms Sewell's answer, set out immediately above, establishes that Beagle's letter of 16 June 1995 breaks the chain of causation between the forwarding of the Letter and the telephone calls. I find as a fact that shortly after publication of the Letter, some Growers and some Dealers who were also Growers telephoned Mr Young and Ms Sewell. I accept Ms Sewell's evidence that about six such persons telephoned her and I accept Mr Young's evidence that about 3 or 4 Growers telephoned him. In relation to those who telephoned Ms Sewell I accept that some of them may have telephoned after Beagle had sent its letter in answer to the Letter.
Mr Richardson submitted that these telephone conversations "were very general conversations" and that some of them were misconceived because they expressed concerns that there were problems with the Trust or their investment or whether the Trust was any good". He submitted that in that regard there was a break in the chain of causation.
I do not think that there was such a break in the chain of causation. I bear in mind the observations made in March v. Stramare to the effect that causation is to be determined by reference to common sense and experience. In my opinion, a Grower receiving the Letter might quite reasonably become concerned not simply about the precise content of the Letter but also about the investment itself and the bona fides of those who were managing that investment. I bear in mind that there were several hundred Growers who received the Letter and that those who telephoned either Mr Young or Ms Sewell comprised a relatively small number of Growers. Nevertheless, some of them were agents whom I have earlier described as "Dealers". They were an important point of contact with existing and future investors. Multiple repeat business for the second applicants and their associated companies depended upon such contacts.
Apart from telephone calls, there was some correspondence from Growers. The communication from Morrows was simply a fax forwarding the copy of the Letter which had been sent to their clients, Mr & Mrs R Barrow. On 16 June 1995 a Grower, Second Lenbourne Pty Ltd (holding three pine plantation interests) wrote to Beagle. In that letter, signed by Mr T. Linardos, Mr Linardos referred to the Letter, asked what Beagle expected the net return to Growers would be at clear fell and when those expected returns were likely to flow to Growers. He also asked for details of any "bona fide secondary sale" including details of the price per hectare (see Exhibit
38.25). Two Growers wrote to Targridge in response to the Letter. In his letter dated 9 June 1995 Mr Featherby (of Messrs Featherby, barristers and solicitors) stated that one of the major reasons for his investment was that he would be able to sell his interest in the secondary market. He said that he relied upon representations made by Templegate [Beagle]. Mr Featherby referred to his unsuccessful contact with Beagle in relation to inquiries made about the secondary market. Mr Featherby asked to see a copy of counsel's advice in relation to the proposed Federal Court proceedings.
As mentioned above, on 19 June 1995 Mr Peter Whitty of Messrs Taylor & Whitty, solicitors, wrote to Targridge. Mr Whitty thanked Targridge for the Letter and requested Targridge to include him as a co-applicant in the proposed Federal Court proceedings. He attached copies of correspondence which he had had with Beagle and Perpetual Trustees.
The only other correspondence from a dissatisfied Grower was a letter dated 10 October 1995 from Mr Mark Joffe to Perpetual Trustees. Mr Joffe's complaints to Perpetual Trustees about the affairs of the Trust dated back to a time well before the Letter was published.
Mr Stone acknowledged that the applicant had to prove actual damage. But, so he submitted, actual damage can be proved in two ways. It can be proved by direct evidence or by inference. In the present matter Mr Stone submitted that I should infer that damage was caused to the applicants' reputation. The starting point for that submission is the existence of such a reputation.
Mr Butcher's evidence of Mr Young and Ms Sewell's reputation was not challenged by cross-examination. Mr Mews gave evidence of their good business reputation. I take their evidence into account. I take into account also the success enjoyed by Mr Young and Ms Sewell and their associated companies in the promotion of forestry and other prescribed interests. My assessment is that they have been very successful in that regard. My further assessment in this particular matter is that whatever business reputation Beagle enjoyed vis a vis the Dealers, the Growers and Perpetual Trustees was derived from, depended upon and was in reality the business reputation of Mr Young and Ms Sewell. I accept Mr Wain's evidence and that of Mr Young and Ms Sewell to the effect that that personal reputation is of great importance to those engaged in selling and managing forestry and the like investments. Such a proposition is almost self-evident. In my view, the first step in the chain of proof required of the applicants has been established. In other words, I accept that Mr Young and Ms Sewell and hence, through them, Beagle had a good business reputation and that that good business reputation was of great importance in the selling and managing of forestry and other like investments. The question is whether I can infer from the evidence, and in particular the Growers' and Grower/Dealers' response to the Letter that that reputation has been adversely affected?
Although I do not put aside completely the response of the Growers who were not Dealers, it is the response of the Dealers which I think is most important. I take into account that even though only some of the Dealers responded, there may well have been an impact on other Dealers who did not bother to contact the applicants. The importance of the Dealers lies in the fact that they are a source of repeat business.
The same applies to Growers but not to the same potentially multiplying effect.
The applicants suggested that their dealings with Perpetual Trustees became more difficult. I reject that submission. My assessment of Mr Butcher's evidence and the correspondence passing between Perpetual Trustees and Beagle during the second half of the calendar year 1995 is that Perpetual Trustees did not make life any more difficult for Beagle. Perpetual Trustees was simply carrying out its duties as Trustee. The correspondence shows that its faith in Beagle was never seriously shaken by Targridge's allegations whether in the Letter or otherwise.
There is no direct evidence of loss. There is not even any evidence, of the type seen in RAIA Insurance, of Growers declining to deal with the applicants. Nevertheless, I am prepared to infer, and I do infer, that the representation in the Letter to the effect that Beagle had done nothing to create a secondary market, adversely affected the second applicants' business reputation. They suffered actual loss and damage by the misleading or deceptive conduct engaged in by Targridge when it said that they had done nothing to ensure a secondary market. So far as Beagle itself is concerned, the evidence is (see Mr Young at p.46) that on 17 March 1995 it gave notice of its intention to retire as manager and that it ceased to be manager as from 4 July 1995. Thereafter Beagle took no further part in any dealings with Perpetual Trustees or any other relevant person in relation to the Trust. There is no evidence that Beagle was thereafter concerned in the marketing of pine plantation interests or the like. I infer that at the time when the Letter was sent, Beagle's directors had decided to remove it altogether from this type of business activity and plans were well advanced to vest
management of the Trust in a company called B.M. Limited. There is simply insufficient evidence to find that Beagle suffered any adverse effect to its reputation. I now turn to the matter of assessment of the extent of loss sustained by the second applicants.
If I had found that they had caused Beagle to have used its best endeavours to ensure that there was a secondary market, then the damages would have been substantial. However, I have found to the contrary.
I bear in mind the number of Growers to whom the Letter was published, the relatively few who responded, and the fact that some of those who responded were Dealers as well as Growers. In Flamingo Park at p.525 Wilcox J had to assess damages for loss of reputation as part of an award for breach of contract. It is apparent from his Honour's reasons at that page that he would have assessed damages for loss of reputation in respect of a contravention of s.52 upon the same basis. His Honour said:
"Any assessment of damages for loss of reputation must necessarily be made with a broad brush; as in a defamation case a court can do no more than fix a sum of money which, in the whole of the circumstances, appears to be proportionate to the damage which has been incurred. The greater the reputation, the more vulnerable it is to damage. In the present case the damage was in the area of greatest sensitivity, the applicant's reputation for excellence and for limitation of output. I think that the damage was likely to have been considerable ..."
I respectfully adopt a similar approach. In my view, in all the circumstances of this matter, an award of $10,000 to be shared equally by Mr Young and Ms Sewell would
be proportionate to the damage which they have incurred.
Should the respondents be enjoined from repeating the representations?
Mr Stone accepted that if I infer that the misleading conduct was not likely to be repeated, then the basis for an injunction was not made out in respect of the claim under s.52 of the Act. He submitted, however, that Mr Russo "was a gentleman prone to make allegations on inadequate grounds ... a man, who at the time of this matter, had a piece of litigation on with Beagle which he obviously felt pretty strongly about."
To some extent, I accept Mr Stone's assessment of Mr Russo. However, the question is whether Mr Russo is likely to repeat the representation that the applicants have done nothing to create a secondary market. Given the findings which I have made in this matter, my assessment is that he is unlikely to do so. Accordingly I do not propose to grant an injunction to that effect.
Should the applicants be granted any other relief, and if so, what?
The applicants seek a declaration that the respondents engaged in misleading or deceptive conduct. In RAIA Insurance the Full Court, after finding that this Court has power to make a declaration of right to the effect that s.52 has been contravened, referred to the exercise of the discretion (at p.177-178). In my view, there was a real controversy between the parties to be determined and, a contravention having been found, it is appropriate to grant the declaration sought. There will be a declaration that:
"The first respondent, by representing, in its letter dated 6 June
1995 to investors in the Templegate (now Beagle) Forestry Trust, that the applicants had done nothing to create a secondary market for the interests referred to in that letter, engaged in conduct that was misleading or deceptive or was likely to mislead or deceive, contrary to the provisions of s.52(1) of the Trade Practices Act 1974 (Cth), and the second respondent was a person involved in such contravention."
The applicants also seek an order under s.87 of the Act requiring the respondents to publish a corrective statement. I do not consider that this would be an appropriate remedy. I bear in mind the relatively few Growers who responded to receipt of the Letter. I accept that the Letter may have made an impression on other Growers who chose not to respond. However, I take into account my finding that the applicants did not use their best endeavours to ensure that there was a secondary market. In my view, requiring the respondents to publish a corrective statement to the Growers will not advance the policy reflected in s.87 of the Act. I do not consider that such an order would compensate the applicants in whole or in part for either past loss or damage or likely future loss or damage. I think that the sending of such a corrective statement is more likely to rekindle the Growers' memories of the affair and thus revive the controversy.
Conclusion
For the above reasons judgment will be entered in favour of the second applicants against the respondents for damages in the sum of $10,000 and there will be a declaration in the terms referred to above. I will hear counsel on the question of costs.
I certify that this and the preceding sixty-six
(66) pages are a true copy of the Reasons for
Judgment of Justice Carr.
(Acting) Associate:
Date: 18 December 1996
Counsel for the Applicants: Mr D M Stone
Solicitors for the Applicants: Messrs Williams & Hughes
Counsel for the Respondents: Mr R W Richardson
Solicitors for the Respondents: Messrs Stables Scott
Date of Hearing: 19-22 August, 16, 26-27 September and 25 October 1996
Date of Judgment: 18 December 1996
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