Canatan Holdings Pty Ltd v Audori Pty Ltd

[1993] FCA 1076

l0TC 73

JUDGMENT No. ... ........ ....... / ..,.,.,,.,,

TRADE PRACTICES - licence of business and lease of premises - false representations as to past takings and expected future profits of the business - misleading and deceptive conduct - breach of warranty - wrongful ejectment - moneys not accounted for - cross claim for unpaid lease and licence fees and breach of contract

DAMAGES - causation of damage - contribution by applicant to claimed loss in trade practices actions

Trade Practices Act 1977 (Cth) ss 52, 82

Federal Court of Australia Act 1976 (Cth) S. 51A

McRae v Commonwealth DispoSalS Commission [l9511 84 CLR 377
Rea Glass Ptv Ltd v Rivers Lockina Svstems Ptv Ltd [l9681 120
CLR 516
Shevill v Builders' Licensing Board [l9821 149 CLR 620
Progressive Mailina House Ptv v Tabali Ptv Ltd [l9851 157 CLR
17

Gates v The Citv Mutual Life Assurance Societv Limited [l9861

160 CLR 1
- . . - -.. -

Elna Australia Ptv Ltd v International Computers (Australia1

Ptv Ltd [l9871 16 FCR 410	-p-
Sutton v-~hom~son [l9871 73 ALR 233
Munchies Manaaement Ptv Ltd v Belperio [l9881 84 ALR 700 Lowe & Anor v Cudal Nominees Ptv Ltd & Anor [l9911 NSW ConvR 55-585 Frith v Gold Coast Mineral Sprinas Ptv Ltd [l9831 65 FLR 213 Pavich v Bobra Nominees Ptv Ltd French J, unrep. 4 August 1988 Howe v Teefy [l9271 27 SR (NSW) 301 Austin v United Dominions Corvoration Ltd [l9841 2 NSWLR 612 Lombardo v Henne NSW Court of Appeal, unrep. 2 December 1973 Yorkshire Dale Steamshiv CO Ltd v Minister of War Transport [l9421 AC 691
Carter, Breach of Contract 2nd ed. (Law Book Company, 1991) Cheshire & Fifoot's L-5th ed. (Butterworths, 1988)
CANATAN HOLDINGS PTY LIMITED V AUDORI PTY LIMITED AND CYRIL EDWARDS
Einfeld J
Sydney
16 July 1993
IN THE FEDERAL COURT OF AUSTRALIA) NEW SOUTH WALES DISTRICT REGISTRY) NO. G 23 of 1992
GENERAL DIVISION 1

Between: CANATAN HOLDINGS PTY

LIMITED

Applicant

And: AUDORI PTY LIMITED

First Respondent
CYRIL EDWARDS

Second Respondent

MINUTE OF ORDERS AND FINDINGS

1.  The amount of the loss and damage of the applicant is $112,233.

2.   The amount of the loss and damage of the respondents on the cross claim is $14,458.

3.  The respondents are to pay the applicant the sum of $97,775.

4.  Any party seeking costs is to apply in writing within fourteen days stating the bases and grounds upon which costs are sought.

Note:	Settlement and entry of orders are dealt with in accordance with Order 36 of the Federal Court Rules.
Einfeld J
Sydney

16 July 1993
IN THE FEDERAL COURT OF AUSTRALIA)
NEW SOUTH WALES DISTRICT REGISTRY) NO. G 23 of 1992

GENERAL DIVISION 1

Between: CANATAN HOLDINGS PTY

LIMITED

Applicant

And: AUDORI PTY LIMITED

First Respondent
CYRIL EDWARDS

Second Respondent

REASONS FOR JUDGMENT

EINFELD SYDNEY 16 JULY 1993

The applicant, Canatan Holdings Pty Limited (Canatan), claims damages for misleading and deceptive conduct and false representations said to have been made by the second respondent, Mr Cyril Edwards, a director and shareholder of the first respondent, Audori Pty Limited (Audori), in mid

into agreements for the conduct and operation of the St George

1991. Canatan alleges that it was thereby induced to enter

Door Centre located at 102 Forest Road, Hurstville (the business) specialising in the manufacture and sale of doors. The business was set up in 1946 by Mr Edwards' father and was taken over in a managing capacity by Mr Edwards in 1969. Audori owned the Hurstville property in which the business was conducted (the property). Canatan had been operating a plumbing business in Cronulla for some time previously.

The facts

Mr Ross Stoodley and Mrs Janice Stoodley are the directors and sole shareholders of Canatan. In May or June 1991, Mr and Mrs Stoodley met Mrs Edwards whilst visiting the property. Mrs Edwards mentioned that the property had gone to auction but had failed to reach the reserve, and that they were now going to sell or lease the business. Mrs Edwards gave Mr Stoodley their telephone number. That evening Mrs Stoodley telephoned Mr Edwards and arranged to meet the following Saturday. Mr and Mrs Stoodley allege that on that occasion Mr Edwards:

a)	showed them a red-backed book entitled "Sales Journal" and said that it contained all sales figures of the business for previous years;
b)	explained high takings for January/February 1991 as the result of his son helping with the business;

c) said that the business would give a minimum of $100,000

per annum "in your pocket";

d)	produced invoices for purchase of stock and materials and said "These invoices establish what the cost is";
e)	said "You'll make more than 100 per cent profit on each
door" ;
f)	declined to produce his tax returns, profit and loss statements and balance sheets on the ground that the figures were combined with his other business of growing oysters and would be of no use; and
g)	said that he and his wife did not want to sell the business, only lease the property and the business on a yearly basis, and said that he wanted $1,500 per week -- $800 for the property and $700 for the business.

Mr Edwards does not deny that he showed Mr and Mrs Stoodley the sales journal but says that he told them that:

a)	the January to mid June sales were the most the business had known, and that a large part of these were attributable to his son Darren Edwards taking over the business on lease from 8 January to 29 April 1991;
b) Darren had his own business called Jubilee Doors which was combined with St George Door Centre whilst Darren was

working in it;

c)	St George's own figures for 1 January to 7 January 1991 were approximately $15,000, that similar amounts from the sales during the period St George and Jubilee were operated together had been earned by Audori, that in May 1991 Audori took $26,000, that June should top $25,000, and that approximately $200,000 should be made in the first six months of 1991:
d)	the sales journal was a means of keeping track of sales, payments and invoice numbers but did not reflect the true value of sales as he did not balance the books or include refunds, discounts or cancellations; and
e)	his accountant had the "true" record of the business' takings.

On 24 June 1991 Mr Stoodley telephoned his solicitor Mr Peter Knudsen and instructed him to draft a lease of the property and a licence for Canatan to operate the business, with an option to purchase for $100,000 less the value of any stock purchased by Canatan from Audori at the commencement of the licence agreement. Mr Knudsen advised Mr Stoodley that he would draw the documents which expressed the agreement made but he was not prepared to act for both parties, and that Mr

Edwards would have to take the responsibility for seeking

advice in relation to the documents prepared. This

information was passed on to Mr Edwards on 25 June but because he regarded solicitors as too expensive, it appears that Audori at no stage actually obtained legal advice or representation in this respect and in fact paid half of Mr Knudsen's fees for drafting the documents.

At the same time Mr Stoodley also asked Mr Edwards to guarantee that the figures in the sales journal were true. Mr Edwards then wrote on a piece of paper the figures for the calendar years 1988, 1989 and 1990 and for the first six months of 1991 which he handed to Mr Stoodley. Mrs Stoodley subsequently conveyed these figures to Mr Knudsen's managing clerk by telephone for inclusion in a warranty clause.

At about this time an arrangement was made by Messrs Stoodley and Edwards that Mr and Mrs Edwards would continue to manage the business until Mr Stoodley could relocate Canatan's existing plumbing business to the Hurstville property. This did not occur until about 20 September 1991. In the meantime Mr Edwards agreed to run the business on three days a week, with Mrs Edwards managing it the rest of the time. Some agreement was reached whereby M r Edwards would be paid for his quoting and fitting of doors and for any time he or Mrs Edwards spent working in the shop, although it is not clear what the details of this agreement were. In actual fact Mr

business was relocated. In addition, for the first four to Edwards continued to come into the business after the plumbing

six weeks of the licence and lease, Canatan also employed Mr Steve Gordon on Saturday mornings as a contract door fitter. After Mr Gordon left to set up his own business in Padstow, Canatan employed Mr Darrell Gibb to look after the business on

Saturday mornings. It seems that he then did the same.

Canatan went into possession of the property and commenced to operate the business on 1 July 1991, albeit without there yet being any concluded written agreement. On about 5 July 1991 Mr Stoodley gave Mr Edwards the documents drafted by Mr Knudsen and went through the documents with him clause by clause. He left them with Mr Edwards who had the documents for five or six days. On about 10 July Mr Edwards returned the documents to Mr Stoodley and asked him to change the option agreement so that it would not be exercisable until after one year. Mr Stoodley agreed and returned the documents to Mr Knudsen for correction. On about 11 July 1991 he gave the final agreements to Mr Edwards, including the option agreement duly re-drafted, all executed by Canatan. When Mr Edwards gave the agreements back to Mr Stoodley on about 15 July 1991, they were all executed by Audori but Mr Knudsen later advised M r Stoodley that Audori had not executed the documents properly. Thus on 17 July 1991 they were given back to Mr Edwards to be properly executed, and about a fortnight later, at the end of July, the documents were returned to Mr

backdated to 1 July 1991 as the actual date of commencement, Stoodley properly executed by Audori. Three agreements,

were executed (the agreements):

1)	a lease of 102 Forest Road, Hurstville for three years at $41,600 per annum, i.e. $800 per week (the lease);
2)	a collateral licence to Canatan to conduct the business at a fee of $700 per week (the licence);
3)	an option to purchase the business after one year for $91,193.98 (the option).

Canatan made its last payment of the licence fee and the rent on 8 November 1991, and on 26 November Mr Stoodley telephoned Mr Edwards and told him not to continue to come down to the business any more. At the same time Mr Knudsen wrote to Audori drawing its attention to the takings of the business and stating that the figures warranted were untrue. On 28 November 1991 there was a conversation between Messrs Stoodley and Edwards during which Mr Edwards gave Mr Stoodley a photocopy of two pages of his diary showing amounts which he had kept and not accounted for to Canatan. That these moneys were not accounted for by Audori is not disputed. However, Mr Edwards claimed that they were retained against amounts owing to Audori for licence fees and rent and perhaps stock. Mr Edwards insisted there was no malice or intent on his part to deceive and that these deductions were shown to, discussed with and agreed upon by Mr Stoodley at the time. Mr Stoodley

denied any such discussion or agreement.

On 6 December 1991 Messrs Slattery Thompson, Audori's solicitors, responded to Mr Knudsenrs letter of 26 November denying any misrepresentations as to takings and alleging mismanagement by Mr Stoodley. By letter dated 16 December 1991 Slattery Thompson notified Mr Knudsen that Canatan was in arrears with the payment of rent and licence fees and that unless this was corrected by 20 December 1991, Audori would take possession of the property and change the locks without notice. The locks were changed on about 2 January 1992 effectively excluding Canatan. Messrs Stoodley and Edwards thereafter jointly carried out a stocktake at which they agreed that the value of stock in the property was $23,421.96.

The issues

Canatan's principal claims were:

1. Three misrepresentations were made by Audori that were either false, misleading or deceptive, viz:

a)	that the gross takings (or sales) of the business were contained in the sales journal and that those takings were the amounts which were subsequently incorporated into the licence;
b)	that the net profit of the business was and would be
at least $100,000 per annum;
c)	that there was and would be more than 100 per cent profit on each door sold.

1. Audori was in breach of an express warranty contained in clause 14 of the licence whereby it warranted that the gross takings for the business were not less than the amounts set out in particular 0. The amounts are the same as those that ground claim l(a) above.

2. In breach of the agreement made between the parties for Mr Edwards to manage the business, he failed to account to Canatan for moneys he had received from customers.

4.  Canatan was wrongfully evicted from the premises by Audori, and the contract between them was thereby wrongfully repudiated.

Audori has cross claimed alleging breaches by Canatan of:

1.    the lease, by failing to make all rental payments due

1. the licence :

(a) an implied term and condition of which was that Canatan would do nothing to damage the goodwill of

the business, whereas it transferred the telephone	numbers to the name of Canatan, cancelled the entry
of the business in the Yellow Pages or its community version for 1992, and gave false information about Mr Edwards to suppliers

(b) an express term of which was that it would manage and conduct the business in a proper and businesslike manner, whereas it allowed employed staff to remain unsupervised for long periods, left

- l0 -

the business unmanaged for long periods, allowed sub-standard workmanship, and caused the showroom to be in an untidy condition

(c) an express term of which was that it would purchase manufacturing stock from Audori for $5,207.70, of which it only paid $1000 (apart from the moneys retained by Mr Edwards)

Liability

1. False, misleadina or dece~tive conduct

Gross takings/turnover

Mr Stoodley said that shortly after taking over the business on 1 July 1991, he noted that the takings were nothing like those warranted by Mr Edwards for past periods -- for example, the takings for July 1991 amounted to only about $9,000. Mr

made a loss of $64,646. Mr Edwards admitted that sales were	Stoodley alleged further that at no stage between 1 July and 31 December 1991 did the business make a profit -- in fact it
down in July but says that the figures were more in the vicinity of $16,500 -- with sales in August 1991 getting back on target at about $23,000. It was Mr Edwards' contention that the recorded figures were low because Mr Stoodley was keeping cash out of Canatan's bank account and not recording cash sales except in his private journal. In addition Mr Edwards alleged that Mr Stoodley failed to manage the business adequately and thus the fall in sales was a result of his inexperience and mismanagement.
Although challenged by the respondents, the evidence leaves little room for doubt that Audori represented that the gross takings of the business were as contained in the red-covered book known as the "Sales Journal" and that Mr Edwards wrote out for Mr Stoodley the figures contained in the warranty clause. It is true, as Audori submitted, that Mr Edwards at first denied that he wrote out the sales figures to be incorporated into the agreements, but in cross examination he admitted having done so, although the particular date of the writing was disputed.
Audori's primary submission was that this representation was not false, or misleading or deceptive conduct, as the figures evidenced in the sales journal were materially correct. Some argument was also put to the effect that if the figures were
wrong, Canatan should not have relied on them alone but should in such a commercial transaction have made further enquiries.
There is no doubt that Mr Edwards represented on behalf of Audori that on the basis of figures in the sales journal, the gross takings for the period 1 January to 30 June 1991 were $208,000. This figure was incorrect because it included almost four months trading when his son Darren was conducting the St George Door Centre concurrently with his own business of Jubilee Doors and the trading figures for those months comprised the activities of both businesses.
Evidence was given by Darren Edwards as to the proportion of these takings that could respectively be attributed to Jubilee Doors and to the St George Door Centre. His oral evidence was preceded by two statements filed in his name in the proceedings. The first one, filed by Canatan, said that at best only $15,000 of the sales journal figures shown by Mr Edwards to Mr Stoodley for the period 8 January to 29 April 1991 was attributable to the St George Door Centre. In the witness box Darren Edwards said that his second statement filed by Audori was correct, viz. that less than $50,000 of the $208,000 warranted by Audori for the takings of the business from 1 January to 30 June 1991 were the takings of the Jubilee Door Centre.
These two statements were not merely inconsistent or the product of accidental error or faulty memory. One or both
Edwards' radical change of position was the product of statements must be false and knowingly so. That Darren
internal family problems was corroborated by the evidence given by his sister Mrs Kym Johnson called by Canatan. Together with her husband, Mrs Johnson also has a door business. It is not necessary for me to examine these unhappy feuds, still less try to rationalise or resolve them. It suffices to say that Darren Edwards' oral evidence did not provide a secure basis for making findings of fact based on his testimony. However, even on the view of his evidence most favourable to Audori, it would appear that the sales journal figures from 1 January to 30 June 1991 overstated the income of the business by approximately $50,000, a not insignificant figure for a small business in a six month period.
I accept Canatan's evidence that at no time was it informed that part of the income in the sales journal for the first half of 1991 related to any business other than the St George Door Centre, and that the figures shown in the journal were significantly affected by the help given to the business in that period by Darren Edwards. The representation that the figures were true was clearly deceptive and misleading conduct in trade or commerce within the meaning of section 52 of the Trade Practices Act 1977 (Cth) (the Act). The second respondent aided and abetted or was knowingly concerned in this contravention and is thus also liable for the losses found to be caused thereby.
Canatan next submitted that if the sales journal was so
demonstrably wrong for the first six months period of 1991, then it was probably also wrong for the 1988, 1989 and 1990 years warranted by Mr Edwards. To support this proposition Canatan relied on the undisputed fact that some sales were entered up in the journal before the doors were completed and paid for. The evidence of Mr Edwards was that he made the entries in the journal when a customer gave the go-ahead on a job, sometimes before he had been paid, and without making any subsequent allowances for discounts or cancellations. Mr Edwards said that he informed Mr Stoodley either at the original meeting in mid May 1991 or at another meeting in June that the sales journal included some sales for which payment had not yet been received and that it also included orders which did not proceed.
This particular evidence was not credible. Apart from the way it was given, which was unsatisfactory, it is simply unlikely to the point of near certainty that such vagueness and lack of particularity would have been allowed to stand as the basis of an important and costly agreement. I accept the evidence of Mr Stoodley that no such explanation was given and that Mr Edwards represented that the journal recorded the true sales. Indeed Mr Edwards stated in cross examination that the "true" sales could be found in the sales journal, and that the sales figures used by his accountant were reduced in order to lessen Audori's income tax liability.
misleading figures. However, its entries were of gross sales I have no doubt that the sales journal did contain some
or turnover and revealed nothing about the costs incurred in achieving them, and therefore nothing about profit which would have been the basic interest of Canatan. Of even greater significance was the absence of evidence that the inaccuracies in the 1988, 1989 and 1990 years were errors of substance or materiality. Mr Finney, an accountant called by the respondents, stated that upon perusal of the sales journal, he had noted that, in a small number of cases, sales recorded were not coupled with invoice numbers. The evidence was that any amounts not marked paid were small in size and quantity. There was no contrary evidence. Mrs Bateman, the expert accountant called by Canatan, was persuasive about Canatants
accounts but could add little about Audori's. No reason was suggested as to why the journal would be other than basically accurate especially as it was written up as a contemporaneous business record at times when Audori had every reason to ensure even require its fundamental accuracy. I find that the sales journal was substantially correct and that the representation as true of the figures for the 1988, 1989 and 1990 years did not amount to misleading and deceptive conduct in contravention of section 52 of the Act. Because M r Edwards used them to write out the figures to be included in the agreements, they are the figures contained in the warranty.
P r o f i t
Mr Edwards flatly denied making the alleged representation to the Stoodleys that the profit of the business was and would be
at least $100,000 per annum "in your pocket". Apart from the evidence of these assertions given by the Stoodleys, Canatan submitted that it is more likely than not that this representation was made, given the circumstance that the Edwards were keen to licence the business, and that they were at pains to dissuade the Stoodleys from examining or even sighting Audori's financial statements and tax returns.
It is certainly true that, despite requests, the Stoodleys were not shown the official returns of the business, and that the Edwards were anxious to offload the business and the property as the Stoodleys undoubtedly realised. No doubt they would also have known that as licensor and potential vendor M r Edwards would have been trying to lift their interest by feeding their imagination. But as potential licensees and purchasers the Stoodleys would surely have wanted at least a reasonably documented idea of the profitability of the business in contemplation. It is not to the point that an examination of Audori's records would have been unhelpful without considerable accounting assistance and more information and material because they had been "doctored" for tax purposes and included income from Mr Edwards' oyster business. Indeed, as will appear, the whole situation concerning Audori's figures is far from satisfactory. But that the Stoodleys did not vigorously pursue the matter as might have been expected leaves Canatan open to the conclusion that any consequences of this failure were of its own doing
defiance of commercial reality and commonsense. alone. Part V cases cannot be conducted or presented in
I found Mr Edwards' credibility on the question of the $100,000 profit statement very suspect. I think he made the statement alleged but whether this aids Canatan in any way in the proceedings is affected by the fact that the expression "in your pocket" is too vague to identify whether he was speaking of gross takings (turnover) -- the least likely possibility -- gross profit (after expenses but before tax), nett profit (after expenses and tax), or what the operator cares to take "out of the tillw. Even more importantly, there was nothing to indicate that the quoted $100,000 took into account that Canatan was obligated by the agreements to pay $1,500 per week or $78,000 per year by way of rent and licence fees, a sum not paid by Audori. If anything, the contrary was established by Mr Edwards' statement, according to the Stoodleys, that he had himself been and was receiving $100,000 profit in his own pocket. It seems simply astonishing that the agreements could have been entered into with no verification at all of the "bottom line" return to the licensee/purchaser from its investment.
In express words, the statement was in any event not principally a representation of fact but a prediction or opinion. To this extent, there was no evidence that it was not a reasonably and truly held view. But to the extent that it was at all a representation of fact based on the past gross
any records, there was no evidence that, at the time it was takings of the business including cash not accounted for in
made, it was false, misleading or deceptive. It is likely that the Stoodleys knew that in a basically cash business, not all takings would be declared for tax purposes. In this connection, despite Canatan's evidence to the contrary, I find myself unable to accept that an uncorroborated off-the-cuff statement of a round figure like $100,000, without precision, documentary support or a clear reference to where the incidence of tax would fall, could be the means used to establish the real profit of a business about to be licensed and possibly purchased. Indeed, it is difficult to conceive how Mr Edwards could have hoped to achieve the exercise of the option, or even the completion of the term of the lease and licence, if this statement was grossly false. It would simply be too easy for Canatan to prove it to be false. Yet it has not been able to do so in relation to the past, amongst other reasons because the cash element and the net profit have been left wholly at large. I find that the statement concerning the $100,000 "in your pocket" was not a material representation of anything identifiable in a commercial context.
Profit on each sale
The Stoodleys said that they understood the promise that there would be more than 100% profit on each door sold applied whether the doors were made on the premises or were fabricated
elsewhere. Mr Edwards denied making such a representation although he admitted that some examples of home-made doors he
showed to Mr Stoodley had a mark up of 100%. There was nothing to indicate in evidence that the profit on a door fabricated on the premises was anything other than 100% in fact. In my opinion, when Mr Edwards said "you'll make more than 100% on each door", he was referring to doors manufactured on the premises. On the evidence, such a statement was wholly or largely true. It could not have misled the Stoodleys into believing that the 100% profit

applied to doors manufactured elsewhere, amongst other reasons because such profit would depend on how much in each case the manufacturer charged, the nature of the competition and many other factors which on the evidence they did not raise with him.

Re1 iance

In order to recover damages for the identified misleading and deceptive conduct, Canatan must first prove that it relied on the misrepresentations to its detriment, that is, that the loss or damage claimed was caused "by" conduct in breach of the Act.

The guiding principles on the question of reliance were summarised by a Full Court of this Court (Foster, Woodward and

Wilcox JJ) in [l9871 73 ALR 233 at 240:

However, in a case such as the present, where the allegedly misleading conduct consists in

particular person or group of people, with a view to	representations directed specifically towards a
making a single specific sale, it is more helpful to recall the principles of law restated by Wilson J in

S - : 5 [l9841 56 ALR 31 at 46. Although

these related to the common law action of deceit, they are, in our view, equally applicable to breaches of S 52 of the Act. The principles are:

(i)    notwithstanding that a representation is both false and fraudulent, if the representee does not rely on it, he has no case;

(ii)   if a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters the contract, there arises a fair inference of fact that he was induced to do so by the representation;

(iii) the inference may be rebutted, for example, by showing that the representee, before he entered into the contract, either was possessed of actual knowledge of the true facts and knew them to be true or, alternatively, made it plain that whether he knew or not he did not rely on the representation; and

(iv)  the representation need not be the sole inducement. It is sufficient so long as it plays some part, even if only a minor part, in contributing to the making of the con tract.

And further:

In this formulation, the possibility that a foolish person might be misled by some representation which no normal person would take seriously, is covered by the exclusion of representations which are not "calculated to induce" entry into the contract -- the test is objective, but must take into account the respective positions of the parties, including such matters as their knowledge of each other through previous dealings and their respective familiarity with the subject-matter of the contract.

In the present case the representation as to the sales of the

business for 1 January to 31 July 1991 was clearly calculated	to induce Canatan to enter into the agreements. No evidence
was tendered to rebut this inference and in my opinion the requirement as to reliance in this respect has been well satisfied.
2. Express warrantv
The express warranty contained in clause 14 of the licence provided:

The Licensor warrants t h a t t h e gross t a k i n g s of t h e

b u s i n e s s for t h e period set o u t i n O(b) o f t h e Par t i cu lars were not less than t h e amount set ou t i n

O(a) of t h e Par t i cu lars .

Particular 0 provided:

VENDOR'S WARRANTY a s t o Takings:

fa) Amount o f gross tak ings $341,000.00

fb)	F o r t h e period	from	1 s t January 1988	t o 3 1 s t
December 1988

f a ) Amount o f gross tak ings $336,000.00

f b ) For t h e period 1 s t January 1989 t o 3 1 s t

December 1989

f a ) Amount o f gross tak ings $337,000.00

f b For t h e period from 1 s t January 1990 to 3 1 s t

December 2990

f a ) Amount o f gross tak ings $208,000.00

fb)	F o r t h e period	from	1 s t January 1991	to 30th
June 1991

Given the falsity of the figures for 1 January to 30 June 1991, Audori was clearly in breach of the express warranty for that period. For the reasons given earlier, there was nothing

to establish breach of the warranties for the other periods.

1. Monevs not accounted for

What is in issue here is some $4000 made up of two amounts of $1,500 deducted for unpaid rent and licence fees plus two amounts of $500 for stock payments owing. The factual dispute between Mr Edwards and Mr Stoodley over whether the retention of some such moneys, as amounts due to him from Canatan, was agreed to by Mr Stoodley is unnecessary to resolve. The evidence is certainly unclear as to when Mr Stoodley might have become aware of the facts but there is no doubt that Mr Edwards failed to account for the $4,000 which must therefore now be brought to account in any award of damages either way. Canatan suggested but the evidence is insufficient to support fraudulent appropriation of moneys.

4. Wronaful eiectment

Clause 5(K) (ii) (I) of the lease provided that the lessor had a right to enter the premises where the lessee had failed to pay rent for a period in excess of two months. If the lessor intended to exercise his right to re-enter, the lease required the service on the lessee of a written notice stating the reason and demanding immediate possession.

Canatan claimed that it was wrongfully evicted when Audori re- took possession of the business, because as at 20 December 1991 Canatan had made a total of twenty one weekly payments

out of twenty six payments due to the end of December 1991.

Audori asserted that not all of the amounts paid by Canatan were attributable to rent and licence payments, but included for example reimbursement for invoices paid by Mr Edwards.

I have examined the records as best I can and am of the opinion that as at the date of repossession, namely 2 January 1992, the regularity and amounts of the payments were consistent with twenty one payments of rent by Canatan out of twenty seven then due. Thus as at that date the rent was not in arrears for a period of two months as specified in the lease agreement, and accordingly Audori wrongfully repudiated the lease and licence, and Canatan was wrongfully ejected from the premises.

Canatan's claim for damaaes

Canatan presented a total claim for damages as follows:

Economic loss from 1 Julv 1991 to 31 December 1991
Direct trading loss
Value of stock taken over by respondent

Expenses of moving plumbing business to

Hurstville and back

Cost of building office at Hurstville for

plumbing business

Loss of business to Hogan Bros Plumbing

due to failure to renew Yellow Pages entry

Loss of expected profits (1/2 year at $100,000 pa)

Economic loss from 1 Januarv 1992 to 30 June 1994

Loss of profits (2 1/2 years at $100,000 pa

discounted at 5%)

The addition of interest provided a total claim in the vicinity of $400,000.

As the only materially false and misleading statement made to Canatan by Audori was that the takings of the business from 1 January to 31 July 1991 were $208,000, and as this representation was subsequently incorporated into the lease as a warranty, damages are available either under section 82 of the Trade Practices Act or under contract law for breach of warranty or wrongful repudiation.

1.    Damaaes under section 82

Gibbs CJ in Gates v The Citv Mutual Life Assurance Societv
Limited [l9861 160 CLR 1 stated at 6:

Act ions based on ss. 52 and 53 are analogous t o a c t i o n s i n tort and the remedy i n damages provided

by s e c t i o n 8 2 ( 1 ) appears t o adopt the measure o f

damages app l i cab le i n an a c t i o n i n t o r t . That sub- s e c t i o n refers to l o s s o r damage by the conduct o f another t h a t contravened a prov is ion o f P t IV o r P t

V; i t therefore l o o k s t o the l o s s o r damage f lowing

from the o f f e n d i n g a c t o f the o t h e r person. The

a c t s r e f e r r e d t o i n ss 52 and 53 do n o t i n c l u d e the breach o f a con t rac t , and i n awarding damages under

S . 82 for a breach o f either o f those s e c t i o n s , no

ques t ion can a r i s e o f damages for loss o f a bargain. The contrac tual measure o f damages i s therefore inappropr ia te i n such a case . I t has been he ld i n

measure o f damages i n tort and n o t t h a t for breach the Federal Court i n a number o f cases t h a t the

o f con t rac t w i l l a p p l y i n the assessment o f damages S . 52 or S . 53: see Brown v Jam Factorv P t v Ltd under S . 82 where there has been a contravent ion o f

[l9811 53 FLR 340 a t 351; Mister Fiuains v Centrewoint Freeholds Ptv Ltd [l9811 36 ALR 23 a t 59; and Brown v Southwort Motors P t v Ltd [ l9821 ALR 183 a t 186.

Mason, Wilson and Dawson JJ stated at 14:

The ques t ion then i s whether i t i s appropriate t o

a p p l y the con t rac t measure o f damages t o the

contravent ions found t o have taken place. The

c o u r t s a r e n o t bound t o make a d e f i n i t i v e choice between the two measures o f damages s o t h a t one a p p l i e s t o a l l contravent ions t o the exc lus ion o f

t h e o t h e r . However, t h e r e i s much t o be s a i d f o r

t h e v i e w t h a t t h e measure of damages i n tort i s

appropr ia t e i n m o s t , if not a l l , P t V c a s e s ,

e s p e c i a l l y those i n v o l v i n g mi s l ead ing or d e c e p t i v e

conduct	and	t h e	making	o f	f a l s e	s t a t e m e n t s .	Such
conduct	i s	s i m i l a r	b o t h	i n	charac t e r	and	e f f e c t t o

t o r t i o u s	c o n d u c t ,	p a r t i c u l a r l y	f r a u d u l e n t
mi s repre sen ta t i on	and	n e g l i g e n t	miss ta tement .

In my opinion the circumstances in this case require the calculation of damages on the tortious basis: Frith v Gold Coast Mineral Svrinas Ptv Ltd [l9831 65 FLR 213. It is therefore noteworthy that Canatan's assertions include a claim for loss of expected profits. The method used by Canatan to calculate this loss was by measuring the difference between what it believes it would have received had the representation been true and what it in fact did receive. Such a loss is not applicable to damages under the law of tort, and is therefore inappropriate to this aspect of the claim.

Trading l o s s

$62,646 is claimed by Canatan to be the actual loss incurred

in running the business for the period from 1 July to 24

December 1991. There was no or no serious dispute with Mrs Batemanrs evidence that the sum claimed is mathematically justifiable. But Audori said that a large amount of this trading loss was caused, not by its misrepresentations, but by Canatants own inability and inexperience in running a business of this nature.

The law concerning the relationship between the issues of causation and damages claims under the Trade Practices Act is unclear. Some dicta exist to support the importation of such common law principles as contributory negligence, causation and remoteness to such claims. For example, in Pavich v Bobra Nominees Ptv Ltd unreported 4 August 1988, Justice French referred to Yorkshire Dale Steamship CO Ltd v Minister of War Transport [l9421 AC 691 at 706 and Elna Australia Ptv Ltd v Jnternational Computers (Australia) Ptv Ltd (No 2L [l9871 16 FCR 410 at 418-9, and expressed the view that the selection of a sufficient cause to establish the connection which gives rise to liability under ss 52 and 82 was properly influenced by policy and not mere logic. His Honour continued:

The primacy o f the causat ion p r i n c i p l e i n S 82 would

seem	t o exclude	r e l i a n c e	upon	such	concepts	a s
m i t i g a t i o n	o r	c o n t r i b u t o r y	negl igence ,	u n l e s s	i t	can
be	shown	t h a t	the	app l i can t ' S own	care le s sness	or

disregard f o r his o r her i n t e r e s t i s the cause o f

a l l o r some part o f the claimed loss. I t may s t i l l

be i n such a case t h a t the mis leading o r decep t i ve

conduct complained o f may be i d e n t i f i e d a s a s i n e

qua non o f the loss claimed. There may come a

p o i n t , however, where the app l i can t ' s own conduct i s

s o dominant i n the causal chain a s t o c o n s t i t u t e a

novus a c t u s i n t e r v e n i e n s . I t i s perhaps s i m p l y

p u t t i n g i t another way t o s a y t h a t i n such a case a

s e l e c t i o n p r i n c i p l e	o f	the	k ind	adverted	t o [in
Australia],	comes	i n t o	operat ion	to	exc lude

l i a b i l i t y . The c r i t e r i a for such s e l e c t i o n may

import concepts analogous t o remoteness, m i t i g a t i o n

o r c o n t r i b u t o r y negl igence .

Of this opinion, a Full Court of this Court (Fisher, Gummow
and Lee JJ) said in Munchies Manaaement Ptv Ltd v Bel~eri0
[l9881 84 ALR 700 at 712-3:

S e c t i o n 82 serves to i d e n t i f y the c l a s s e s o f

a p p l i c a n t s and r e s p o n d e n t s i n the a c t i o n , t o

i d e n t i f y loss or damage a s the g i s t o f the a c t i o n ,

o f t h a t loss or damage. The measure o f damages	and t o mark o u t the measure o f damages a s the amount
h a n g s on the words " b y c o n d u c t " ; the p r e p o s i t i o n
"by" h a s been i n t e r p r e t e d t o mean " b y r e a s o n o f " or
" a s a t e l e s c o p i n g o f r e s u l t o f " . T h e r e i s t h u s an a p p a r e n t

what t o the common l a w would be

c o n c e p t s	o f	c a u s a t i o n ,	r e m o t e n e s s	and	the	measure	o f
damages.

I must confess to being philosophically attracted by Justice

French's views in Pavich especially as the tortious measure of damages should surely carry with it all the various indicia of such damages. However, the weight of authority at present seems to limit the question of causation to the requirement of reliance. The reason behind such views is to be found in the

reasons for judgment of Justice Gummow in at 418:

Wrapped u p w i t h i n s 82 a r e t h u s c o n c e p t s t h a t common

l a w would d e s c r i b e by the t e r m s " c a u s a t i o n " and

" r e m o t e n e s s " and "measure o f damages".

I t i s to the first o f these, " c a u s a t i o n " , t h a t S

82(2) d i r e c t s a t t e n t i o n . I t d o e s so by f i x i n g the

l i m i t a t i o n p e r i o d by reference t o the d a t e on which

the c a u s e o f a c t i o n a c c r u e d and so t o the s u f f e r i n g

o f	the	loss or	damage	"by"	c o n d u c t	c o n t r a v e n i n g	the
s t a t u t e .	The	u s e	o f	the	p r e p o s i t i o n	"by"	i n d i c a t e s

the necessity for some s u f f i c i e n t c a u s e or r e a s o n

l i n k i n g	the	c o n d u c t	w i t h	the	r e c o v e r a b l e	loss	or
damage .

The	q u e s t i o n ,	t o a d o p t	the	language	o f Lord	Haldane
i n Thom	v	S i n c l a i r	[ l 9 1 7 1 AC	127	a t 135,	r e a l l y

t u r n s on the n a t u r e or q u a l i t y o f the c a u s a t i o n

which i s r e q u i r e d by the u s e o f the word " b y " . In

l o g i c , the c a u s e o f a n y s t a t e o f b e i n g may be not

less t h a n " t h e sum o f the entire c o n d i t i o n s " , b u t

the	c o u r t s both	i n e x p o u n d i n g the	common	l a w and	i n
c o n s t r u i n g	s t a t u t e s	wh ich	p r e s e n t	i s s u e s	o f

c a u s a t i o n ,	h a v e	s e l e c t e d	some	one	or	more	o u t	o f
what	i s	an	i n f i n i t e	number	o f	c o n d i t i o n s	t o	be
t r e a t e d	a s	the	c a u s e	. . .	And,	a s	those	l e a r n e d

judges a l s o e x p l a i n e d , the c a u s e or c a u s e s so

s e l e c t e d v a r y w i t h the purpose a t hand. In m a k i n g

t h a t selection the l a w i s moved by c o n s i d e r a t i o n s o f

p o l i c y , not s i m p l y o f l o g i c : A l e x a n d e r v Cambridue

C r e d i t Corx, L t d	[ l 9 8 7 1 9 NSWLR	310 a t 350 per	McHugh
JA .

In d e f i n i n g , c o n s t r u i n g and a p p l y i n g the common l a w

p r i n c i p l e s i n this f i e l d , p a r t i c u l a r l y i n n e g l i g e n c e

and i n c o n t r a c t , it i s t o be remembered t h a t what

a r e o f ten c l a s s e d a s r u l e s a r e s u c h only prima

f a c i e , and may be d i s p l a c e d or m o d i f i e d t o m e e t the

p a r t i c u l a r	c a s e :	Wenham v E l l a	[ l 9 7 2 1 127 CLR	454	a t
466.

Where the selection t o which I h a v e r e f e r r e d

concerns s t a t u t o r y r i g h t s and o b l i g a t i o n s it would

be an error to t r a n s l a t e a u t o m a t i c a l l y t o the

p a r t i c u l a r s t a t u t e what appeared the closest

ana logue	from	the	common	l a w	" r u l e s "	a s	t o
c a u s a t i o n .	I t	i s	r a t h e r	a	q u e s t i o n	o f	s t a t u t o r y

c o n s t r u c t i o n . . . T h a t p r o c e s s o f s t a t u t o r y

c o n s t r u c t i o n	c a l l s	for	e x a m i n a t i o n	o f	the	t e r m s	o f
the	s t a t u t e	i n	their	context,	u s i n g	" c o n t e x t "	t o
embrace	the	other	p r o v i s i o n s	o f	the	s t a t u t e ,	the
p r e - e x i s t i n g	s t a t e	o f	the	l a w ,	other	s t a t u t e s	i n
p a r i	m a t e r i a ,	and	the m i s c h i e f	the	c o u r t	c a n	d i s c e r n

a s t h a t the s t a t u t e was i n t e n d e d t o r e m e d y . . . The

p r o c e s s I h a v e d e s c r i b e d i s now supp lemen ted by the

A c t s I n t e r p r e t a t i o n A c t 1902, ss 15AA, 15 AB ...

Thus , i n c o n s t r u i n g section 8 2 i t i s a p p r o p r i a t e t o

b e a r i n mind s u c h m a t t e r s a s the s c o p e and p u r p o s e s

o f P t s IV and V o f the Trade P r a c t i c e s Act a s

d i r e c t e d s i g n i f i c a n t l y t o i s s u e s o f economic loss or

damage, the w i d e r a n g e o f s u b j e c t m a t t e r s d e a l t w i t h

i n P t s IV and V b u t a l l l i n k e d t o S 8 2 , the

extension o f l i a b i l i t y beyond the i m m e d i a t e a c t o r s

t o p e r s o n s i n v o l v e d ( w i t h i n the mean ing o f S 75B) i n

the w i d e s p e c t r u m o f c o n t r a v e n t i o n s t o which S 8 2

d o e s a t t a c h , the a b s e n c e o f a n y d i r e c t p r o v i s i o n t o

a p p o r t i o n r e s p o n s i b i l i t y for loss or damage b e t w e e n

a p p l i c a n t and r e s p o n d e n t or t h i r d p a r t i e s , and the

a p p a r e n t t e l e s c o p i n g o f what t o the common l a w would

be i s s u e s o f c a u s a t i o n , r e m o t e n e s s and measure o f

damages . However, common l a w a n a l o g i e s w i l l not

n e c e s s a r i l y o f f e r s u f f i c i e n t gu idance , p a r t i c u l a r l y

where , a s i s the c a s e w i t h the T r a d e P r a c t i c e s Act ,

the s t a t u t e evinces a new intention to supp lemen t

the common l a w or, f u r t h e r , t o t r a v e l in to new

f i e l d s .

. . . i t would be u n f o r t u n a t e i f S 8 2 o f the Trade

P r a c t i c e s A c t were t o be a p p l i e d t o p a r t i c u l a r c a s e s

by a p r o c e s s t h a t encouraged the c o u r t f irst t o t u r n

t o common l a w c o n c e p t s , w h e t h e r a s t o causation,

r e m o t e n e s s or measure o f damages.

I collected a number of authorities on this subject and discussed some of the principles involved in Lowe and Anor v Cudal Nominees Ptv Ltd and Anor [l9911 NSW ConvR 55-585.

Thus the rationale of consumer protection surrounding Parts IV and V of the Trade Practices Act, and their apparent aim to extend beyond the restrictions of the common law, justify the conclusion that the awarding of damages is not affected by concepts such as contribution by the applicant to the claimed losses under the Act except in the very limited circumstance where it can be established that the losses were effectively caused entirely by the applicant. In such a case the losses would not be caused "by" the contravening conduct.

On this basis the direct trading loss sustained by Canatan resulted from conduct contravening the Act and is recoverable under section 82.

Stock

Audori submitted that there is no evidence as to who owns the	stock it took over on repossession of the property, the value
of which, as established by Mrs Bateman and found in the joint stocktake performed by Messrs Edwards and Stoodley on 2 January 1992, was $26,463. Audori said that it is therefore not open to the Court to accept this figure as a debt owed by Audori to Canatan. In my opinion, upon the signing of the agreements, Canatan became the owner of this stock and is now entitled to reimbursement by Audori. Of course in the cross claim a certain amount of money will need to be offset against the sum claimed as Canatan admitted that some moneys were still outstanding for the purchase of the stock on 1 July 1991.
Costs relating to movement of Canatan's plumbing business
Audori submitted that these amounts should not be recoverable as the move was not part of the agreements and the lease specifically forbade the carrying on of any other form of business other than the sale of doors and windows. I accept the submissions of Canatan in this respect that it was always intended that the plumbing business be continued from the Hurstville property and that Audori waived the provision of the lease by Mr Edwards' actions and statements. 1n particular Mr Edwards agreed to manage the business until Mr Stoodley had moved the plumbing business, and helped Mr Stoodley to build an office for the plumbing business at the
Mrs Bateman and not otherwise challenged, are recoverable but property. The two amounts of $1,440 and $4,059, provided by
I find that there is insufficient evidence to justify the claimed loss of $705. Although the phone numbers of Hogan Bros Plumbing did not appear in the 1992 Yellow Pages, it is unclear how the advertisement was cancelled. It seems that somehow, because of the dispute between the parties, Hogan Bros Plumbing failed to meet the Yellow Pages deadline for 1992. Although this would no doubt have caused some little damage to the business, insufficient evidence was given to quantify this claim or to relate it to the contravention proved.
2. Wronaful re~udiation
Canatan's acceptance of Audori's wrongful repudiation of the agreements by repossession on 2 January 1992 brought the agreements to an end and gave Canatan an entitlement to damages.
A wrongful repudiation or termination of the performance of a contract has been defined as an indication of a serious absence of readiness or willingness to perform obligations under the contract: Carter, Breach of Contract 2nd ed. (Law Book Company, 1991) para 701. The general rule is that wrongful termination of the performance of a contract will constitute repudiation of an obligation. This can be justified on the ground that such an act indicates that there
will be no performance of outstanding obligations, and since the contract has been terminated, the requirement of
seriousness is satisfied. In such a case the applicant will not only be entitled to reliance damages, i.e. actual or past loss, but also to expectation damages, i.e. future loss, the object being to put the applicant in the position it would have been in had the contract been performed. As all the items of actual loss proved by the evidence have been allowed under the statutory claim, only the loss of bargain claim need be considered here. Canatan argued for a future loss of profits for 2 1/2 years of losses of the $100,000 "in your pocket" represented by Mr Edwards.
It is of course an element of the law of contract that the only damages recoverable are those which stem from or are caused by the breach: Rea Glass Ptv Ltd v Rivers Lockinq Svstems Ptv Ltd [l9681 120 CLR 516; Cheshire & Fifoot's Law of Contract 5th ed. (Butterworths, 1988) para 2405. Audori again submitted that a large portion of Canatan's expectation loss resulted not from Audori's conduct, but from other contributing factors including Mr Stoodley's own inexperience and his inability to run the business.
The evidence certainly established that Mr Stoodley had no experience in the fabrication of doors, that at all relevant times he continued to run his plumbing business adding to the pressures on his time, that Canatan dispensed with the services of Mrs Edwards after she had spent only three weeks
untidy, and that the Stoodleys failed to put in the volume of in its employ, that the showroom at the property was sometimes
time and personal labour that Mr Edwards had done when he conducted the business and was apparently necessary for its successful conduct. In addition, two of Canatan's employees left its employ during this period and set up competitive businesses. All of these and some other factors contributed to the losses.
Moreover, once the business resumed under Mr Edwards in 1992, it again became profitable and viable -- so that by the end of November 1992, the calendar year income of the business was $273,000. In addition it was submitted by Audori that apart from the inclusion of Darren Edwards' figures in the last period warranted, the figures contained in the sales journal and subsequently incorporated into the warranty were "substantially correct" and "generally reliable" (page 3 of Mr Finneyrs report). These were said to establish the fundamental profitability of the business. Mr Finney's report further showed that Canatan's gross profit figure halved compared to Audori's, despite the fact that both companies' costs of production were roughly commensurate. Some of this was due to a downturn in business and excessive stock therefore became a liability. Of course, Mr Edwards had operated the business for many years and although, according to its disclosed financial material, Audori had not always declared an annual profit (but due to cash withdrawals it may have actually always have made one), it has always been
other hand, Mr Edwards was specifically employed to manage the viable, never returning a huge loss like Canatan. On the
business on behalf of Canatan for the first three months of the licence, and in fact he stayed on until November. Thus for most of the period involved, the losses cannot solely be attributed to the failings of Mr Stoodley.
In my opinion the evidence supports the conclusion that at least 50% of Canatan's trading loss resulted from M r Stoodleyls own lack of specialised experience and entrepreneurial ability and Canatan's other inadequacies in its conduct of the business. In addition, any sum assessed would have to be substantially reduced for contingencies. For if Audori had not wrongfully terminated the contract:

1.     it would have had the right to do so two weeks later, assuming that Canatan had no intention of paying anything more under the agreements or exercising the option, as seems likely, and that Audori gave the requisite written notice required under the lease; and

2.     Canatan would have continued under the lease and licence, with the most likely result of a continued loss not a profit.

However, this type of exercise is not called for in this case. For just as I found that the $100,000 statement was neither a

deceptive, for the same reason it is my opinion that it formed	representation of fact nor shown to be false, misleading or
no part of the contract repudiated and therefore cannot found a claim for damages. If it was a term of the contract, there was no breach. Canatan put no alternative submission that the representations as to past profits, including the one found to be false, could found a claim in contract for future loss of profits; the expert financial evidence submitted by both parties was of no assistance in this regard. For example, Mr Finney gave evidence that Audori's average annual gross profit from 1 July 1987 to 30 June 1990 was $155,628 from the invoice books and $87,576 from other financial statements. The respective figures for turnover were $340,080 and $272,028. These massive discrepancies were quite unexplained. They suggest a considerable understatement of income for tax purposes, and certainly do not support the stated grounds for Mr Edwards' refusal to provide the Stoodleys with Audori's tax returns and financial statements that they were misleading because they included takings from the oyster farm. If this assertion were true, it presumably would have increased not decreased the disclosed earnings. Whatever else occurs, the respondents should not obtain a benefit from such conduct in that there is nothing to prefer the figures more advantageous to them over those which are less beneficial.
It has certainly been said time and time again that difficulty in determining damages does not justify non-assessment: Howe v
Teefv [l9271 27 SR (NSW) 301 at 306; McRae v Commonwealth
Henne, NSW Court of Appeal, unreported 2 December 1973 per Dis~osals Commission [l9511 84 CLR 377 at 411; Lombardo v
Glass JA at p. 11. However, no evidence was led as to the net profits of the business so that if profit "in your pocket" meant after tax, an assessment of loss of profits, assuming breach of contract, would require a quite arbitrary exercise. I can find no evidentiary basis for awarding damages for loss of future profits for the wrongful repudiation. All repudiation did in fact was to save Canatan from further losses.
3. Breach of warranties
Canatan also claims damages for breach of the warranties as to past profits in particular 0 of the licence. I have already found that the evidence did not prove the figures warranted to be untrue. But even if breach had been established, once again, only a loss of expected future profits would add anything to the damages already found under the Act. In my opinion the attitude of Canatan in making no submission that the warranties could form a basis for awarding damages for any such loss was correct. If there were any profits lost, they did not flow from the breach of warranties.
4. Interest
Interest pursuant to section 51A of the Federal Court of
Australia Act 1976 must be added in general accordance with the relevant rates of interest provided for in Schedule J to
the New South Wales Supreme Court rules. I find that the proper amount of interest is $17,625. Accordingly the damages recoverable are as follows:

$

Direct trading loss from 1 July to 31 December 1991	62,646
Value of stock taken over by Audori	26,463
Expenses of moving plumbing business to Hurstville

and back 1,440

Building costs for plumbing business at Hurstville	4,059
Interest	17.625 112.233
Cross claim bv Audori

The basis of Audori's cross claim was Canatan's indebtedness under the terms of the lease and licence, an outstanding indebtedness in relation to original trade and display stock, and a general claim for damage to the goodwill of the business during the currency of Canatan's licence. It also claimed 2 1/2 years loss of rent and licence fees.

As at 2 January 1992, Canatan had made 19 payments in 27 weeks

of occupation. Allowing for the two amounts of $1,500 appropriated by Mr Edwards, it was thus six weeks overdue in its lease and licence payments, and is thus indebted to Audori for the amount of $9,000, or six weeks at $1,500 per week.

Audori next claimed that Canatan did not discharge its agreement under the licence that it would purchase the manufacturing stock from Audori for $5,207.70. Including the two amounts of $500 appropriated by Mr Edwards, four payments totalling $2,000 have been made leaving an amount of $3,208 still owing.

In relation to the claim that the business was allowed to run down in breach of the specific term that Canatan would manage and conduct the business in a proper and businesslike manner, and the implied term that Canatan would not do anything to damage the goodwill of the business, Audori submitted that the business declined through poor decision-making and inadequate management skills on the part of Canatan. In particular it was alleged that Mr Stoodley allowed staff to remain unsupervised for long periods, left the business unmanaged for long periods, allowed substandard workmanship, transferred the telephone numbers to the name of Canatan, cancelled the Yellow Pages advertising for 1992, and gave false information about Mr Edwards to suppliers.

In my opinion, insufficient evidence was provided to support

Mr Edwards was employed to manage the business in the first	Audori's claims in these regards. It must be remembered that
half of the relevant period and he in fact did so for longer. There is no evidence that Mr Stoodley allowed substandard workmanship or that he ever gave false information about Mr Edwards to suppliers. As to the issue concerning the telephone numbers, clause 5(a) of the licence expressly authorised the transferral of the telephone numbers to the name of Canatan, and a change of entry in the Yellow Pages. Although Mr Stoodley's lack of relevant expertise certainly contributed to the trading loss sustained by Canatan in the period 1 July to 31 December 1991, I find that the evidence was insufficient to conclude that Audori suffered any real loss on this account. It seemed to have little difficulty restoring the profitability of the business very soon after recommencing its operation.
The claim for future rent and licence fees must also be refused. A lessor's re-entry into the demised premises releases the lessee from the obligation to pay rent for the balance of the term: Shevill v Builders' Licensina Board [l9821 149 CLR 620, applied in Austin v United Dominions cor~oration Ltd [l9841 2 NSWLR 612. Cf Proaressive Mailing House Ptv v Tabali Ptv Ltd [l9851 157 CLR 17. The same principles apply to Canatan's obligations under the licence.
The total damages recoverable by Audori in its cross claim for damages is thus $12,208 plus interest of $2,250 making a total
of $14,458. Deducting this amount from Canatan's damages, the amount payable to Canatan by Audori is $97,775. This
illustrates, as I suggested at an early stage of the case, that the matter could and should have been tried in the District Court. Any party seeking costs may apply in writing within fourteen days stating the bases and grounds upon which costs are sought.

I ceriiv tiial this a!?r! the

prccrriing {;7g7$ c?? a

Rezs,cns ior Ju?~: ; : ,s~: l li:,cin of his l-loilour

J,,,.':- U , L S , ~ Einizid

Counsel and solicitor	Mr D Lloyd QC and
for the applicant	Mr G Scragg instructed by Carroll & Knudsen
Counsel and solicitor	Mr T J ~ o + a n instructed
for the respondents	by Orford & Theodore
Dates of Hearing	7, 8, 9 December 1992
Written submissions completed	23 December 1992

Date of Judgment 16 July 1993