Como Investments Pty Ltd (in liq) v Yenald Nominees Pty Ltd
[2012] WASCA 128
•27 JUNE 2012
3MEG.COM PTY LTD -v- TM & SM PIKE PTY LTD [2012] WASCA 128
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2012] WASCA 128 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | CACV:134/2010 | 10 MAY 2012 | |
| Coram: | PULLIN JA NEWNES JA MURPHY JA | 27/06/12 | |
| 31 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed | ||
| A | |||
| PDF Version |
| Parties: | 3MEG.COM PTY LTD TM & SM PIKE PTY LTD SUSANNE MARIE PIKE |
Catchwords: | Misleading or deceptive conduct Conduit defence Reliance Causation Practice and procedure Pleading requirements Surprise rule Rule in Browne v Dunn |
Legislation: | Rules of the Supreme Court 1971 (WA), O 20 r 9(1)(b), O 20 r 14(4) Trade Practices Act 1974 (Cth), s 51A, s 52 |
Case References: | Australian National Airways Ltd v Phillips [1953] SASR 278 Banque Commerciale SA en Liquidation v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 Browne v Dunn (1893) 6 R 67 Burke v Corruption and Crime Commission [2012] WASCA 49 Cackett v Keswick [1902] 2 Ch 456 Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 Como Investments Pty Ltd (in liq) v Yenald Nominees Pty Ltd (1997) ATPR 41-550 Crafter v Singh (Unreported, WASC, Library No 8202, 12 April 1990) F & G Nominees Pty Ltd v Verdell Pty Ltd [2003] WASCA 290 Hanave Pty Ltd v LFOT Pty Ltd [1999] FCA 357; (1999) 43 IPR 545 Lysaght Brothers & Co Ltd v Falk [1905] HCA 7; (1905) 2 CLR 421 Mullins Investments Pty Ltd v Richard Ellis (WA) Pty Ltd (Unreported, WASC, Library No 8608, 30 November 1990) MWJ v The Queen [2005] HCA 74; (2005) 222 ALR 436 Pappas v Soulac Pty Ltd [1983] FCA 3; (1983) 50 ALR 231 Rankine v Garton Sons & Co Ltd [1979] 2 All ER 1185 Ricochet Pty Ltd v Equity Trustee Executors & Agency Co Ltd (1993) ATPR 41-236 Stewart v Goldrange Pty Ltd [2003] WASCA 131 Suvaal v Cessnock City Council [2003] HCA 41; (2003) 200 ALR 1 Townsend v Roussety & Co (WA) Pty Ltd v [2007] WASCA 40; (2007) 33 WAR 321 Travel Compensation Fund v Robert Tambree t/as R Tambree & Associates [2005] HCA 69; (2005) 224 CLR 627 Wardley Australia Ltd v State of Western Australia [1992] HCA 55; (1992) 175 CLR 514 Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491 Weait v Jayanbee Joinery Ltd [1962] 2 All ER 568; [1963] 1 QB 239 Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 Zhang v VP302 SPV Pty Ltd [2009] NSWSC 73; (2009) 223 FLR 213 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : 3MEG.COM PTY LTD -v- TM & SM PIKE PTY LTD [2012] WASCA 128 CORAM : PULLIN JA
- NEWNES JA
MURPHY JA
- Appellant
AND
TM & SM PIKE PTY LTD
First Respondent
SUSANNE MARIE PIKE
Second Respondent
ON APPEAL FROM:
Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA
Coram : STAUDE DCJ
Citation : 3MEG.COM PTY LTD -v- TM & SM PIKE PTY LTD [2010] WADC 174
File No : CIV 1317 of 2008
(Page 2)
Catchwords:
Misleading or deceptive conduct - Conduit defence - Reliance - Causation - Practice and procedure - Pleading requirements Surprise rule - Rule in Browne v Dunn
Legislation:
Rules of the Supreme Court 1971 (WA), O 20 r 9(1)(b), O 20 r 14(4)
Trade Practices Act 1974 (Cth), s 51A, s 52
Result:
Appeal dismissed
Category: A
Representation:
Counsel:
Appellant : Mr A Metaxas
First Respondent : Mr A R Godecke
Second Respondent : Mr A R Godecke
Solicitors:
Appellant : Metaxas & Hager
First Respondent : Griffiths & Godecke
Second Respondent : Griffiths & Godecke
Case(s) referred to in judgment(s):
Australian National Airways Ltd v Phillips [1953] SASR 278
Banque Commerciale SA en Liquidation v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279
Browne v Dunn (1893) 6 R 67
Burke v Corruption and Crime Commission [2012] WASCA 49
Cackett v Keswick [1902] 2 Ch 456
Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304
(Page 3)
Como Investments Pty Ltd (in liq) v Yenald Nominees Pty Ltd (1997) ATPR 41-550
Crafter v Singh (Unreported, WASC, Library No 8202, 12 April 1990)
F & G Nominees Pty Ltd v Verdell Pty Ltd [2003] WASCA 290
Hanave Pty Ltd v LFOT Pty Ltd [1999] FCA 357; (1999) 43 IPR 545
Lysaght Brothers & Co Ltd v Falk [1905] HCA 7; (1905) 2 CLR 421
Mullins Investments Pty Ltd v Richard Ellis (WA) Pty Ltd (Unreported, WASC, Library No 8608, 30 November 1990)
MWJ v The Queen [2005] HCA 74; (2005) 222 ALR 436
Pappas v Soulac Pty Ltd [1983] FCA 3; (1983) 50 ALR 231
Rankine v Garton Sons & Co Ltd [1979] 2 All ER 1185
Ricochet Pty Ltd v Equity Trustee Executors & Agency Co Ltd (1993) ATPR 41-236
Stewart v Goldrange Pty Ltd [2003] WASCA 131
Suvaal v Cessnock City Council [2003] HCA 41; (2003) 200 ALR 1
Townsend v Roussety & Co (WA) Pty Ltd [2007] WASCA 40; (2007) 33 WAR 321
Travel Compensation Fund v Robert Tambree t/as R Tambree & Associates [2005] HCA 69; (2005) 224 CLR 627
Wardley Australia Ltd v State of Western Australia [1992] HCA 55; (1992) 175 CLR 514
Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491
Weait v Jayanbee Joinery Ltd [1962] 2 All ER 568; [1963] 1 QB 239
Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661
Zhang v VP302 SPV Pty Ltd [2009] NSWSC 73; (2009) 223 FLR 213
(Page 4)
1 PULLIN JA: I agree with Murphy JA.
2 NEWNES JA: I agree with Murphy JA.
MURPHY JA:
Summary
3 This is an appeal from a decision of the District Court in which the primary judge dismissed a claim by the appellant (the purchaser) against the first respondent (the vendor) and the second respondent (Ms Pike) for misleading and deceptive conduct in relation to the sale of a business. Ms Pike was a director of the vendor.
4 The claim arose from an advertisement for the sale of the business in a newspaper to which the purchaser had responded. The advertisement was placed on behalf of the vendor by Ms Pike (reasons [20]).
5 The vendor had, shortly prior to the sale to the purchaser, itself purchased the business from a Queensland company. The purchaser had also made inquiries directly to the Queensland company and its principal before purchasing the business from the vendor. The purchaser sued the Queensland company and its principal, along with the vendor and Ms Pike, in the District Court action. In the course of the litigation, the Queensland company was deregistered, and the claim against it did not proceed. The purchaser pursued its claim against the principal of the Queensland company, but he did not appear at the trial.
6 In relation to the claims against the vendor and Ms Pike, the judge found that the advertisement was not a 'puff' and that it constituted a representation to the effect that a person who joined the Queensland company's agency network could earn a net profit of $200,000 per annum (reasons [70], [75]) (the 'representation'). His Honour found that the representation was a representation as to a future matter within the meaning of s 51A of the Trade Practices Act 1974 (Cth) (repealed) (TPA). See reasons [75] - [87](a) and (b). He noted that the vendor and Ms Pike did not contend that there were reasonable grounds for making the representation. The judge, in effect, accepted that the representation was misleading (reasons [78]). The judge also recorded that the vendor did not allege that it had not engaged in misleading or deceptive conduct because it was a 'mere conduit of information from [the Queensland company's principal] and had disclaimed any belief in its accuracy as in Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 (reasons [22], [80]).
(Page 5)
- His Honour accepted that the business had no value and that the purchaser suffered loss, being the price paid for the business, expenses thrown away, and interest (reasons [1], [66], [93]).
7 On one reading of his Honour's reasons, they tend to elide the question of contravention with the question of causation. Nevertheless, the appeal proceeded on the basis that on the proper construction of his Honour's reasons, his Honour found a contravention of s 52, but dismissed the purchaser's claim on the basis that it had not established causation because it had not demonstrated that it was induced by the representation to purchase the business.
8 There is no notice of contention.
9 The appeal, in substance, involves the challenge by the appellant to the judge's finding that the representation did not induce the purchase of the business.
10 For the reasons which follow, in my view, the appeal should be dismissed.
The business
11 The judge found, in effect, that the 'business' the subject of the sale from the vendor to the purchaser had no goodwill, no work in progress, no debtors and no tangible assets.
12 The sale was conditional upon the purchaser obtaining the consent of the Queensland company. The Queensland company's consent, in effect, depended upon the purchaser entering into a separate contract with the Queensland company. In reality, the sale conferred on the purchaser no more than an opportunity for the purchaser to enter into a contract with the Queensland company. That contract provided, inter alia, in effect, that the Queensland company would provide a 'business development programme' to the purchaser to develop a staff-recruitment agency (cl 5); the programme included the provision of certain software and training (cl 5); the purchaser would retain the fees it charged for domestic placements (cl 7); the purchaser would refer potential staff to the Queensland company for international placement, and for each potential recruit it referred to the Queensland company, it would pay a fee of $110 to the Queensland company (cl 7); if, ultimately, the Queensland company placed the recruit overseas, the Queensland company would pay the purchaser a fee of $220 (cl 7) (reasons [44]).
(Page 6)
13 The business the subject of the sale was more accurately described as a 'business development program' (reasons [45]).
Uncontested findings - events leading up to the purchase
14 The judge made the following uncontested findings of fact.
15 The advertisement in question was published on 22 July 2006 and was in the following terms:
AN EXCEL OPPORTUNITY
BE YOUR OWN BOSS
NET $200k pa
Join in training and placing agency network for hospitality and childcare pos. Around world and Aus, great cash flow, world travel, ongoing support and training provided. Not a franchise. ph [telephone number] after 5.00 pm.
16 The purchaser's principal read the advertisement for sale on 22 July 2006. He spoke to Ms Pike on 24 July 2006 and on a number of other occasions. In the first telephone conversation, Ms Pike told the purchaser that 'all the information she had about the business development programme came from [the Queensland company's principal]' (reasons [51]).
17 In the following week, the purchaser's principal met Ms Pike at her home. At this meeting, Ms Pike told the purchaser's principal that she had purchased the business development programme for her son, that she and her son had done the training course associated with the programme, but that her son had decided to take up work elsewhere and that she could not run it alone because she was working long hours as a nurse. The purchaser's principal asked Ms Pike for profit and loss reports. She told him that there were none. She told him that she had only owned the business development programme for six weeks, and that she had done no more than obtain a number of curricula vitae by that stage (reasons [46] - [47]). There was no mention of a figure of $200,000 on this occasion (reasons [51]).
18 Also, at this meeting, Ms Pike described the business development programme to the purchaser's principal in the same terms in which it had been described to her by the Queensland company. The purchaser knew and understood that (reasons [52]). That was why the purchaser was concerned to speak with the Queensland company's principal before
(Page 7)
- making a decision (reasons [52]). The purchaser's principal told Ms Pike that he wished to speak to the principal of the Queensland company and get more information from him. Ms Pike provided the purchaser with the contact details of the Queensland company.
19 The principal of the purchaser then spoke to the principal of the Queensland company and sent him an email on 29 July 2006. The email raised a number of questions about the nature and operation of the business development programme.
20 The Queensland company's principal responded by email on 31 July 2006 (reasons [36] - [37]). The Queensland company's principal informed the purchaser, amongst other things, in effect, that (reasons [6], [48]):
(a) the scope and structure for the business in Western Australia was to provide a professional recruitment company in the hospitality, nanny and au pair markets;
(b) the components of the business were:
(i) overseas hospitality positions;
(ii) WA hospitality positions;
(iii) developing the WA nanny/au pair market; and
(iv) overseas nanny positions.
(c) the purchaser could reasonably expect to derive custom for the business from the 'mining market';
(d) 'international sign-ups would generate instant cash-flow and income' for the business and at the same time the purchaser could start the training side of the business as the purchaser would have a captive market for its candidates seeking overseas placements;
(e) with the captive market for candidates seeking overseas placements would come the 'local market' and this might also influence the international placements;
(f) the plaintiff should 'sign up plenty of people through newspaper and internet advertising';
(g) the Queensland company always had more positions to fill overseas than candidates for those positions;
(Page 8)
- (h) although there was some seasonality in demand the Queensland company was always able to place all applicants;
(i) at other times of the year other than the end of the year, end of semester, end of schooling time of the year, November to January, April to July and October to December, the Queensland company derived extra income from 'other legs' of its business so that the 'highs and lows' were minimal;
(j) there was no 'cap' in terms of monthly placements available from Australia, only a slow down during the European summer as hotels were staffed and families away on holidays;
(k) the Queensland company would allocate advertised opportunities to the business if it had the best candidates;
(l) the purchaser would retain all income it generated from training and local placements, for international placements the purchaser would collect a fee of $285 out of which $110 was payable to the Queensland company and the purchaser would be paid $220;
(m) international recruitment should comprise 50% of the income of the business;
(n) the Queensland company was expanding internationally to assure the continued promotion and opportunity for overseas placements; and
(o) as long as the purchaser supplied the Queensland company with files and handling fees the Queensland company would locate placements for the purchaser's candidates, the 'more the better'.
21 The purchaser executed the sale agreement with the vendor on 22 August 2006 and paid the vendor $44,000 for the purchase price. The vendor gave the purchaser the curricula vitae which had been obtained, and four books, for which the purchaser paid. On this occasion, there was again no discussion of the $200,000 amount mentioned in the advertisement (reasons [49] - [50]).
The purchaser
22 The principal of the purchaser had extensive business qualifications and experience. He graduated from university with a business degree. He worked as a licensed property valuer for a number of years and was involved in a car audio and mobile phone business which expanded to
(Page 9)
- nine stores. He ceased involvement in that business in 2002. He then purchased a master franchise for a vending machine operation. Subsequent to that, he was engaged in real estate investment (reasons [54]).
The case relevant to causation
Pleadings
23 The purchaser had pleaded that it had entered into the sale agreement with the vendor in reliance on, and induced by, the representation (s/c par 11).
24 The vendor, had in its defence, denied that allegation. The vendor had pleaded, as a fact, that it had, in effect, informed the purchaser that the business development programme was not a going concern. The vendor had also pleaded that the business development programme had not made a profit of $200,000 and that the records of income and profit in relation to the business development programme were not available. Although these pleas were in response to a plea of misleading or deceptive conduct, the pleaded facts were of arguable relevance to the issue of reliance.
Written submissions before trial
25 The parties filed and served written submissions before the trial.
26 The vendor, in its pretrial submissions, contended that:
(a) the representation was a puff, in that the reference to $200,000 in the advertisement was speculative in nature and conveyed a 'mere hope and expectation', which was apparent to the purchaser both from the language used in the advertisement, and from the subsequent discussions between the purchaser and the vendor (par 18);
(b) the purchaser had made it clear that it had wanted to make inquiries of the Queensland company before deciding whether or not to purchase the business development programme (par 21, 26); and in fact the purchaser had made its own inquiries about the business development programme from the Queensland company (par 31);
(c) it was obvious that Ms Pike was not in a position to guarantee the accuracy of any forecasted earnings of the business development
- programme, and that she was not in possession of information sufficient to make a 'reliable' projection about future profitability (par 23); and
- (d) there was no reliance on the representation (par 26).
Opening submissions at trial
27 Both parties referred to their written submissions at the commencement of their respective cases at the trial. Counsel for the purchaser said (ts 5):
METAXAS, MR: Both parties have filed written outlines, which I'm sure your Honour has read. And I don't think it's a complicated case factually or legally. But if your Honour wants me to open, in addition to what I've put in writing, I'm happy to. But I really don't know what I can add to what I've put in writing.
STAUDE DCJ: No. I'm happy to proceed as you see fit, Mr Metaxas---
METAXAS, MR: If it please your Honour.
STAUDE DCJ: - - - on the basis that I have read the---
METAXAS, MR: Yes.
STAUDE DCJ: - - - opening submissions---
METAXAS, MR: Thank you.
28 Counsel for the vendor, before calling his witness said (ts 65):
GODECKE, MR: Thank you, sir. I don't seek to open, sir, and I'd echo my friend's comments in relation to the submissions filed. There was a very small matter which I would seek to address the court on in due course and that concerned a very minor amendment to the list of orders wanted but I've flagged it with my friend and I believe it's best addressed in closing submissions.
STAUDE DCJ: Very well.
The purchaser's evidence
29 Evidence-in-chief in the purchaser's case was given by witness statement. The purchaser's principal said in his witness statement, in relation to causation:
In making that decision [to purchase] I was relying on the advertised income projection of $200,000 per annum and the other information provided to me by Sue Pike and [the principal of the Queensland
(Page 11)
- company] ... I had no other information available to me about the business or its prospects.
30 It is to be noted that the purchaser's principal referred to income, rather than to profit, whereas profit was the subject matter of the representation, as pleaded and found.
31 There was no mention by the purchaser's principal, in-chief, that he had ever had any discussion with Ms Pike about the figure of $200,000. He said, in effect, in response to a question in cross-examination, that the figure of $200,000 had not been mentioned at his meeting with Ms Pike. His explanation for not mentioning the figure was that 'We'd already seen that in the advertisement' and that Ms Pike had said she did not have a profit and loss report (ts 21). Although the answer was directed to the meeting with Ms Pike, as opposed to telephone communications, the effect of his evidence as a whole was that there had been no communication with Ms Pike concerning the figure of $200,000.
32 In cross-examination, the purchaser's principal was asked a number of questions relevant to his knowledge and state of mind (ts 21 - 26). It was put to the principal of the purchaser in cross-examination (ts 26, reasons [51]), and accepted by him, that during the first telephone conversation with Ms Pike, Ms Pike told him that 'all the information she had about the business came from [the principal of the Queensland company]'. There was no objection to that question or answer by counsel for the purchaser.
The vendor's evidence
33 In her evidence-in-chief, Ms Pike did not say, in terms, that she told the plaintiff's principal that all the information she had about the business development programme came from the principal of the Queensland company. Her evidence-in-chief did, however, include the following:
Right. Was there any discussion about records of income or profits concerning the business?---No. I told them I had none because - you know, I'd opened bank accounts and I'd had a contract with Seek. [The principal of the Queensland company] gave me a mobile phone and told me to get a contract with a mobile phone company as well, which I did. But I - you know, I'd advertised on Seek, I'd got CVs in from clients, but that's as far as I could go.
All right. So - so what did you - what, if anything, did you specifically tell him about handing over or producing records of income and profit?---Well, I said because I didn't have any that he was welcome to
(Page 12)
- have [the principal of the Queensland company's] phone number so he could get more information.
...
GODECKE, MR: Did you, at any stage, provide [the purchaser's principal's] contact telephone number - sorry, [the principal of the Queensland company's] contact telephone number to [the purchaser's principal]?---Yes, I did.
Can you recall at what point you - you did that?---No. It - it was definitely on the second occasion if it wasn't in phone calls between then because when he was asking more questions about it and I said that - did mention that [the principal of the Queensland company] was the person to talk to.
34 Counsel for the purchaser, in cross-examination of Ms Pike, elicited the fact that Ms Pike had, in effect, 'copied' the advertisement from the advertisement placed by the Queensland company to which she had originally responded when the vendor had purchased the business development programme. The following exchange occurred:
Yes. All right. So you bought the business from [the Queensland company]- - -?---Yes.
- - - for $44,000?---Yes.
And did he put in the advertisement anything about what sort of income you might generate from the business?---Two hundred - net two hundred thousand.
So he put in exactly what you put in?---Yes.
Net 200 K - - -?---Not - - -
- - - per annum?---Not exactly. But virtually identical words. I don't think they were word for word. But - - -
All right. So you in effect either copied or as good as copied what he put in his advertisement in your advertisement?---Yes.
All right. It's correct, is it not, that you had no idea what sort of money the business would make?---No.
35 It was shortly after this that the evidence, which is, in effect, the subject of attack in this appeal, was given by Ms Pike.
36 The evidence in question was given in the following passage of cross-examination (ts 76):
(Page 13)
- METAXAS, MR: We've been over that. All right. And the - the $200,000 in the advertisement in The West Australian newspaper had no foundation over and above - or beyond the fact that [the principal of the Queensland company] had put the same number in his advertisement?---That's right.
That's correct, isn't it?---Yes.
So you had no basis for making that statement - or including that passage in the advertisement, did you, from - from your own knowledge or experience or understanding of the business?---I passed on the information that [the principal of the Queensland company] gave me---
Yes?---- - - that you could net $200,000. And I told [the purchaser's principal] that.
Yes. That's what you put in the advertisement?---That's right.
Yes. But the advertisement doesn't say, 'But don't believe me. Ring [the principal of the Queensland company]', does it?---No. But I told [the purchaser's principal] that.
37 Counsel for the purchaser then cross-examined Ms Pike on this topic at length, covering over three pages of transcript. The cross-examination of Ms Pike included pointing out to her that her counsel had not put to the purchaser's principal in his cross-examination the assertion that Ms Pike had told the purchaser's principal that the $200,000 figure had been derived from the principal of the Queensland company. It also included suggesting to Ms Pike that she was 'lying and [had] just made this up'.
38 It concluded, relevantly, as follows:
Yes. And - and, Mrs Pike, at no stage prior to [the purchaser's principal] giving you $44,000 did you say to him that the $200,000 in the advertisement was not reliable or not to be relied upon, did you?---No.
No. Because you believed what [the principal of the Queensland company] had told you?---That's right.
Yes. But you never told [the purchaser's principal] that the only basis for the statement for 200,000 was that it came from [the principal of the Queensland company], did you?---Yes, I did.
39 Despite the lengthy cross-examination, she adhered to her evidence on this topic.
(Page 14)
Closing submissions
40 In closing submissions, counsel for the vendor said, amongst other things, that there was conflicting evidence on the question of whether Ms Pike had told the purchaser's principal that the figure of $200,000 had come from the Queensland company. He said:
My client says that she said that to [the purchaser's principal]. His evidence is to the contrary, that nothing was said about it.
I would submit that at the end of the day, on the [purchaser's] case, the suggestion that nothing was said to the effect that the information had come to [sic - from] the [Queensland company's principal] in fact strengthens my client's case because it is even - it in fact reinforces the conclusion that there was no basis for it.
41 The submission was to the effect that if the figure had, in fact, come from the Queensland company, there might have been some basis for contending that the statement regarding the $200,000 was not mere puffery. It was submitted that on the purchaser's evidence 'that source wasn't put forward. So it was even more the case that there was just simply no basis for it and it must have been puffery' (ts 91).
42 In closing submissions, counsel for the purchaser referred to Ms Pike's evidence that she had said to the purchaser that the figure of $200,000 had come from the Queensland company, and submitted that it should be rejected on the grounds that it was 'not to be believed'. Counsel, in support of that submission, noted that the assertion had not been pleaded, that it was 'never ... a part of the case, and it was never put in cross-examination'. It was not submitted to the judge that this part of the evidence had to be excluded entirely from the judge's consideration of the evidence as a whole. Counsel for the purchaser said (ts 101):
[W]ith the greatest of respect to Mrs Pike, she either had a severe lapse of memory when she was instructing her solicitor, or she just thought of it today and thought it was a good idea to say it. Doesn't matter which. Your Honour's entitled to say, and I would suggest almost obliged to say, that that suggestion is not credible.
43 There followed an exchange between the judge and counsel for the purchaser in which the judge queried whether the conversation deposed to by Ms Pike was one which 'makes sense' in the context of the other evidence. Counsel for the purchaser again said that the conversation had not been pleaded and had not been put in cross-examination and that, in effect, the tenor of the meeting did not support the evidence of Ms Pike
(Page 15)
- (ts 101 - 102). The submission was not left on the basis that the judge was required to exclude the evidence entirely from consideration.
The judge's reasons on causation
44 The judge found that the purchaser's decision to purchase the business development programme rested 'solely on the basis' of information supplied by the Queensland company's principal ([84], [87(f)]). He said [85] that the 'causal nexus contended for by the [purchaser] was broken by the further inquiries made by [the purchaser's principal] and the information so derived'.
Uncontested findings of fact
45 The judge found (reasons [80] - [81]), in effect, that:
(a) the purchaser knew that the vendor had purchased the business development programme from the Queensland company only six weeks before it was advertised;
(b) the purchaser knew that the vendor had not operated the business development programme other than to place a number of advertisements;
(c) the purchaser knew that the vendor had not generated any income from the business development programme.
(d) the purchaser knew that what was being offered was the opportunity to enter into a contract with the Queensland company; and
(e) such knowledge led the purchaser's principal to communicate with the Queensland company's principal to obtain detailed information from him about the business development programme.
46 The findings of fact in the preceding paragraph are not themselves contested in this appeal, save to the extent that the purchaser has, in substance, contested that the judge erred in treating these facts as being relevant to the issue of causation (in grounds 2, 4 and 6 of the grounds of appeal).
Other findings
47 The judge also found that:
(Page 16)
- (a) the purchaser knew, because Ms Pike had told the purchaser's principal, that the figure of $200,000 had been given to her by the Queensland company (reasons [51] - [52]);
(b) the vendor had no means whatsoever of vouching for its profitability (reasons [80]); and
(c) the success of the business development programme depended largely on information about overseas positions which the Queensland company was expected to supply (reasons [81]).
48 The judge also found that the representation was 'too empty of meaning' to be an inducement to purchase, and that it was 'no more than an inducement to make an inquiry about the subject matter in the advertisement' (reasons [87]).
49 The judge also found that based on information provided by the Queensland company to the purchaser, the purchaser's principal was 'able to calculate for himself what the represented profitability meant in terms of the business turnover' (reasons [81]).
Grounds of appeal
50 The 11 grounds of appeal may be grouped into four main categories.
51 First, it is said that the judge erred in law in finding that Ms Pike had told the purchaser that the figure of $200,000 had come from the Queensland company, when the vendor had not pleaded that matter, and the judge 'failed to have any regard' to the rule in Browne v Dunn (1893) 6 R 67 (ground 1).
52 Secondly, it is alleged that insofar as the judge found that the purchaser knew that there was no basis for the profit projection apart from the information provided by the Queensland company, the judge erred in law in that he, in effect, determined liability on the basis of a 'conduit' defence, which had not been pleaded and that he had 'ignored other evidence', such as the fact that Ms Pike and her son had gone to Brisbane for a training course (ground 2).
53 Thirdly, the judge allegedly erred in law in finding that the appellant knew that the Queensland company was the source of all the information in the advertisement, because the vendor had not pleaded that fact, and there was no evidence to support it (ground 3).
(Page 17)
54 Fourthly, it is, in substance, alleged that the judge erred in law in finding an absence of reliance, insofar as he took into account certain of his findings that were allegedly incorrect or baseless, and a number of matters which, it is alleged, were irrelevant to that issue, being:
(a) the knowledge of the vendor's limited trading period in reasons [80] (ground 4);
(b) the finding in reasons [81] that the purchaser was able to calculate for itself, from the information in the Queensland company's email, what the represented profitability meant in terms of business turnover (ground 5);
(c) the finding in reasons [81] that the purchaser knew that the success of the business development programme depended largely on information about overseas placements which the Queensland company was expected to supply, and that the purchaser expected that its own knowledge would enhance the prospects of the business development programme (ground 6);
(d) the finding in reasons [82] that the representation lacked sufficient meaning to be an inducement (ground 7);
(e) the finding in reasons [83] that the purchaser made its own judgment on the merits of the business development programme on the strength of the information provided by the Queensland company, when the Queensland company did not provide information on profit (ground 8);
(f) the finding in reasons [83] that the purchaser could not reasonably have relied on anything said by Ms Pike when there was no basis in fact or law for the findings (ground 9);
(g) the finding in reasons [84] that the appellant had undertaken its own due diligence, when the due diligence did not demonstrate that the representation was untrue or unreliable (ground 10);
(h) the finding in reasons [85] that the representation was not material to the decision to purchase, when the representation as to profit was 'on any reasonable analysis ... relevant to the decision to pay $44,000 for a business about which the [purchaser] knew little' and in the absence of evidence that the purchaser knew that there was no basis for the representation (ground 11).
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The procedural issues raised by the appeal
Introduction
55 In grounds 1 to 3, the purchaser contends, in effect, that the judge was not entitled to find that Ms Pike had informed the purchaser's principal that the figure of $200,000 had come from the Queensland company, by reason of two procedural matters. First, it is said that the judge was so precluded because the vendor had not pleaded that fact. Secondly, it is said that the judge was precluded from having any regard to the evidence because the assertion had not been put to the purchaser in cross-examination. In that regard, the purchaser relied on the rule in Browne v Dunn.
The pleading point - the argument
56 The purchaser argued that had the vendor wished to run a 'conduit' defence, it would have had to have pleaded it. The purchaser did not specifically contend that, and the point was not debated as to whether, a conduit defence is, strictly speaking, a defence of 'confession and avoidance' as that term was discussed and applied in Lysaght Brothers & Co Ltd v Falk [1905] HCA 7; (1905) 2 CLR 421 at 432 - 433, 437 - 439 and 442. Rather, the purchaser relied more generally on the proposition that a conduit defence was required to be pleaded under the 'surprise rule'. It then contended that, by analogy, the vendor was required to plead, as a fact, that it had told the purchaser that the figure of $200,000 came from the Queensland company, if the vendor wished to assert that fact as a matter relevant to causation.
57 Where a 'conduit' defence is raised in a s 52 case involving alleged misrepresentation, the defence generally involves (at least in the alternative) an admission that the defendant made a statement to the plaintiff and that the statement was false or inaccurate, coupled with a contention that the defendant, nevertheless, did not engage in misleading or deceptive conduct because of other facts, omitted from the plaintiff's pleading, which put a different complexion on the case. Those facts are, typically, that there existed circumstances from which it was apparent to the plaintiff that the defendant was not the source of the information, and that it expressly or impliedly disclaimed any belief in its truth or falsity and passed it on for what it was worth: Yorke v Lucas (666).
58 Before dealing with the substance of the submission, it is convenient to outline some of the presently relevant background principles concerning misleading or deceptive conduct and the question of causation.
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Causation and misleading or deceptive conduct - practical potential for overlap
59 The question of whether conduct is misleading or deceptive or likely to mislead or deceive is logically anterior to the question of whether a person has suffered loss or damage thereby. The conceptual distinction between characterisation of the conduct, and determination of the issue of causation, must be maintained. Nevertheless, in practical terms, there may be an overlap between the resolution of these logically distinct questions. The characterisation of conduct may involve an assessment of its notional effects, judged by reference to its context, and the same contextual factors may play a role in determining causation. See Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 [24] per French CJ.
60 One area in which the overlap is seen in practical terms is in relation to the question of 'puffery'. Sometimes puffery is regarded as not being misleading or deceptive conduct: Pappas v Soulac Pty Ltd [1983] FCA 3; (1983) 50 ALR 231 at 234 - 235. On the other hand, puffery often supports an inference that the plaintiff did not rely on it: Zhang v VP302 SPV Pty Ltd [2009] NSWSC 73; (2009) 223 FLR 213 [96] - [99]. See also Heydon JD,Trade Practices Law - Competition and Consumer Law (vol 3 [160.950]).
61 Similarly, facts relevant to a 'conduit' defence, such as whether in the circumstances it was apparent to the plaintiff that the defendant was not the source of the erroneous information and could not vouch for its accuracy, may also tend to negative the inference of reliance: see Stewart v Goldrange Pty Ltd [2003] WASCA 131 [53] per Wheeler J (Parker J agreeing) and, to similar effect, Malcolm CJ [22] - [25].
62 Causation is a question of fact: Campbell v Backoffice Investments [31]. Generally, the common law practical, or commonsense, concept of causation is applicable to s 82 of the TPA, except insofar as it is modified or supplemented by the express provisions of the TPA: Wardley Australia Ltd v State of Western Australia [1992] HCA 55; (1992) 175 CLR 514, 525. Ultimately, it is the purpose of the statute, as related to the circumstances of the particular case, which determine the question of causation: Travel Compensation Fund v Robert Tambree t/as R Tambree & Associates [2005] HCA 69; (2005) 224 CLR 627 [30], [45].
63 Causation may be inferred: Hanave Pty Ltd v LFOT Pty Ltd [1999] FCA 357; (1999) 43 IPR 545 [45] per Kiefel J (Wilcox J agreeing);
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- Townsend v Roussety & Co (WA) Pty Ltd [2007] WASCA 40; (2007) 33 WAR 321 [102]; Como Investments Pty Ltd (in liq) v Yenald Nominees Pty Ltd (1997) ATPR 41-550; 43,616 at 43,619. In Como v Yenald, the court said:
The law does not consider cause and effect in mathematical or in philosophical terms. The law looks at what influences the actions of the parties. Acknowledging that people are often swayed by several considerations, influencing them to varying extents, the law attributes causality to a single one of those considerations, provided it had some substantial rather than negligible effect. As Brennan J said in San Sebastian Proprietary Limited v Minister administering the Environmental Planning and Assessment Act 1979 (1986) 162 CLR 340 at 366:
The representation must be a real inducement or one of the real inducements to engage in the conduct which occasions the loss.
Where a representation is relevant to the decision in question, and in its nature persuasive to induce the making of that decision, it accords with legal notions of causation to hold that it has a causative effect. And where a respondent, who may be taken to know his own business, has thought it was in his interests to misrepresent the situation in a particular respect, the court may infer that the misrepresentation was persuasive. These inferences arise from the making of the representation followed by the respondent doing the thing it was calculated to induce him to do. (emphasis added)
[It] cannot be enough for a man to swear that he would not have entered into the contract if he had known something that was concealed from him. It is easy to be wise after the event, and many men can honestly persuade themselves when a company has failed that they would have been influenced by a circumstance which in all probability would have made no impression whatever on their mind when considering an investment or speculation. The test must be, Is the omission material? And if the Court sees that the fact omitted is of such a nature that it might reasonably deter, or tend to deter, the ordinary investor from entering into the contract, this is sufficient. It is in great measure an inference of fact to be drawn by the Court or a jury from the circumstances of the case. If a material fact is omitted from a statement brought forward to induce a person to enter into a contract, and he does enter into the contract on the faith of that statement,
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- it is a fair inference that he would not have contracted if he had known of the fact, and that in this sense the omission induced the contract.
65 Nevertheless, it is to be recalled that reliance is not a substitute for causation; also before drawing any inference, the court 'must always attend closely to all of the evidence that is adduced that bears upon the question being examined': Campbell v Backoffice Investments [143].
Disposition - the pleading issue
66 Pleading questions must necessarily be examined by reference to the particular litigation in which they arise, and the presence or absence of other pre-trial procedures for elucidating the issues and avoiding a trial by ambush will often be relevant to such questions. Nonetheless, I would accept that, generally speaking, a conduit defence 'might take [the plaintiff] by surprise' (O 20 r 9(1)(b) Rules of the Supreme Court1971 (WA)) at trial, if the material facts of that defence were not pleaded. Where the plaintiff's claim is simply that the making of the false statement constituted the misleading or deceptive conduct, the potential for surprise exists where the defendant intends to contend at trial that, despite having made the false statement, it did not engage in misleading or deceptive conduct within the meaning of s 52. A case by the defendant to that effect, involving evidence of additional facts beyond those relied on by the plaintiff to establish its prima facie case could, at least ordinarily, not be left concealed by a bare denial of an allegation of misleading or deceptive conduct.
67 The purchaser in this appeal submits that, similarly, if a defendant wished to dispute causation (as opposed to misleading or deceptive conduct) on the basis that there existed facts of the kind which could underpin a conduit defence, the surprise rule must operate to require those facts to be pleaded. The submission involves a consideration of the surprise rule in relation to the issue of causation.
68 Order 20 r 14(4) of the Rules of the Supreme Court provides that any allegation that a party has suffered damage and any allegation as to the amount of damage is deemed to be traversed unless specifically admitted.
69 In England, it has been held that the then English equivalent of that provision did not absolve a defendant from traversing an allegation by the plaintiff that the damage it had suffered was caused by the defendant: Rankine v Garton Sons & Co Ltd [1979] 2 All ER 1185, 1188. The question is whether a mere traverse is always necessarily sufficient. The Court of Appeal in England has also held that a defendant's contention
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- that a novus actus interveniens broke the chain of causation in a negligence case was a matter of which the plaintiff ought at least to have been notified prior to trial, although the court considered it unnecessary to decide whether the allegation should have been pleaded: Weait v Jayanbee Joinery Ltd [1962] 2 All ER 568; [1963] 1 QB 239. It also has been held that a defence of inevitable accident ought be pleaded: Australian National Airways Ltd v Phillips [1953] SASR 278, 279 - 280.
70 In Bullen & Leake & Jacob's Precedents of Pleadings (12th ed), the learned authors referred (at 1032) to the English rule of court referred to above, and said that the provision probably rested on the principle that the onus of proof of damage rests and remains with the plaintiff throughout. They, nevertheless, observed that the:
[P]revailing and better practice is for the defendant to deal specifically with the claim for damages though not the amount. The reason is that the plaintiff will know more clearly the case he has to meet and will not be taken by surprise at the trial. It is therefore common practice, not only for the defendant to traverse the claim for damages, but also to raise, as positive allegations, such defences on the question of damages as their causation, their foreseeability and their remoteness, and the failure ... to mitigate'.
71 The first two sentences of this passage were cited with approval by Master White (as his Honour then was) in Mullins Investments Pty Ltd v Richard Ellis (WA) Pty Ltd (Unreported, WASC, Library No 8608, 30 November 1990) at 5.
72 In Pleadings, Principles and Practice by Jacob, JIH; Goldrein, I (1990), the learned authors said at 124:
Damages, etc. Although the defendant is not strictly required to traverse the claim for damages or their amount, or matters alleged as particulars, or the prayer or claim for relief, it is nevertheless common practice for the defendant to deal specifically with these allegations and to traverse them by denial or non-admission. If, however, the defendant intends himself to raise specific questions or issues in relation to damages, such as, eg, that they are too remote and are not recoverable or that they were not caused or contributed to by the wrongful acts complained of, he must specifically raise such issues as to remoteness or causation in his defence.
73 In F & G Nominees Pty Ltd v Verdell Pty Ltd [2003] WASCA 290 [135], the court, in effect, adopted observations by the trial judge to the effect that, as a general rule, a party need not plead causation of its damages, however, it remained necessary to plead the material facts which entitled it to the relief which it claimed, and to plead 'every matter
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- which might take an opposing party by surprise'. These observations were evidently directed to the position of a plaintiff, rather than a defendant, but are of some significance insofar as they maintain the importance of observing the surprise rule in the context of the issue of causation. In Crafter v Singh (Unreported, WASC, Library No 8202, 12 April 1990), 51, Seaman J considered that a defendant may be required to plead a failure to mitigate if the omission to do so could take the plaintiff by surprise.
74 There could be no question of a plea of confession and avoidance if the facts underpinning a conduit defence were only to be relied upon in defence of the plaintiff's case on causation. Nevertheless, the potential for surprise may (depending on the litigious context in question) still arise if, eg, the misrepresentation was of a nature which would ordinarily be regarded as material, ie, as having the tendency to induce. In that event, a plaintiff might be taken by surprise if, after a bare denial of reliance, the defendant's case at trial was that there were other facts attending or surrounding the making of the misrepresentation which cast an entirely different complexion on its materiality.
75 In this case, the representation pleaded by the purchaser was, relevantly, a representation by the vendor as to the profit which would be earned by the vendor's business development programme in the future. Ordinarily, that would be regarded as material on the question of inducement because ordinarily, a representation as to profit would be 'in its nature persuasive', and the representor 'may be taken to know his own business': Como v Yenald at 43,619. There is considerable force in the view that, in this case, had matters been left on the basis of the vendor's bare denial of inducement, the purchaser could have been taken by surprise at trial by evidence led by the vendor which tended to qualify, or nullify, the materiality of the representation in these respects. Nevertheless, the potential for surprise in this case was overcome having regard to the course of the trial.
76 I have set out in [23] - [43] above the relevant events concerning the course of the trial. In summary, by the vendor's pre-trial written submissions, which were, in effect, adopted in its opening without objection from the purchaser, the vendor had put the purchaser on notice that the vendor's case involved assertions to the effect that it was obvious to the purchaser that Ms Pike was not in a position to make any reliable projection about the future profitability of the business development programme. The vendor's counsel cross-examined the purchaser's principal in a manner consistent with that assertion, and elicited the
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- answer, in response to one question, that Ms Pike had told the purchaser's principal that 'all the information she had about the business came from [the principal of the Queensland company]'. Once the evidence was given by Ms Pike to the effect that the information regarding the $200,000 had come from the Queensland company, counsel for the purchaser cross-examined on it for some time. Both parties made closing submissions on the evidence. The purchaser did not contend that the evidence should be excluded from consideration. Rather, the burden of the submission was that the evidence was not credible.
77 Had the vendor applied to amend its pleading to allege that it had told the purchaser's principal that the figure of $200,000 referred to in the advertisement had come from the Queensland company, there would, in my view, in the circumstances outlined above, have been no proper basis to refuse the amendment. Any prejudice to the purchaser in not having the assertion put in terms to the purchaser's principal, could be remedied, as discussed below, by recalling the purchaser's principal to give evidence on that topic.
78 In Banque Commerciale SA en Liquidation v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279, 296 - 297, Dawson J (dissenting in the result, but not, as I apprehend it, as to the relevant principles) said:
It is, of course, the purpose of pleadings to define the issues between the parties so that they may know the case which they have to meet and in order that the proceedings upon trial may be conducted in an orderly fashion by reference to those issues. The defined issues provide the basis upon which evidence may be ruled admissible or inadmissible upon the ground of relevance. But modern pleadings have never imposed so rigid a framework that if evidence which raises fresh issues is admitted without objection at trial, the case is to be decided upon a basis which does not embrace the real controversy between the parties. Special procedures apart, cases are determined on the evidence, not the pleadings. It is incumbent upon the trial judge to see that the pleadings or particulars are amended so that the record reflects the proceedings as they have been conducted, but his failure to do so will not result in the invalidity of those proceedings: Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658, at p 664; Water Board v Moustakas [1988] HCA 12; (1988) 62 ALJR 209, at p 211; 77 ALR 193, at p 197; Leotta v Public Transport Commission (NSW) (1976) 50 ALJR 666, at p 668; 9 ALR 437, at p 446; Maloney v Commissioner for Railways (NSW) (1978) 52 ALJR 292, at p 294; 18 ALR 147, at p 151.
79 In Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491, Mason CJ and Wilson, Brennan & Dawson JJ said (497):
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- [F]ailure to amend will not necessarily preclude a verdict upon the facts as they have emerged: see Dare v Pulham (1982) 148 CLR 658. In Leotta v Public Transport Commission (NSW) (1976) 50 ALJR 666 at 668; 9 ALR 437 at 446, a case having been submitted to the jury which was factually different from that alleged in the pleadings and particulars, Stephen, Mason and Jacobs JJ observed that the pleadings should have been amended in order to make the facts alleged and the particulars of negligence precisely conform to the evidence. The failure to apply for the amendment in that case was held not to be fatal. But in Maloney v Commissioner for Railways (NSW) (1978) 52 ALJR 292; 18 ALR 147. Jacobs J, with whom the other members of the court agreed, pointed out that the conclusion in Leotta was reached only upon the presupposition that the new issue or new way of particularising the existing issue had emerged at the trial and had been litigated.
It is necessary to look to the actual conduct of the proceedings to see whether a point was or was not taken at trial.
80 In this case, the point that the purchaser was told by Ms Pike that the figure of $200,000 had come from the Queensland company emerged at trial and had, in a practical sense, been litigated. If the matter was one which required pleading, the failure to amend did not preclude, in these circumstances, a judgment on the facts as they emerged. The course of the trial made the judge's finding in that regard 'permissible': Suvaal v Cessnock City Council [2003] HCA 41; (2003) 200 ALR 1 [23].
The rule in Browne v Dunn
81 The rule in Browne v Dunn has been considered recently by this court in Burke v Corruption and Crime Commission [2012] WASCA 49 [177] - [193] per Buss JA, Martin CJ and Mazza JA agreeing.
82 Both from the defence and the vendor's opening submissions, the purchaser was aware that the vendor contended that the judge ought not accept the purchaser's case and evidence to the effect that it was induced by the representation to purchase the business development programme. The purchaser was also aware that one of the bases upon which the vendor would invite the court to reject the purchaser's evidence on reliance was that, generally speaking, the purchaser had relied on the Queensland company rather than the vendor, and, in particular, that it was apparent to the purchaser that the vendor had insufficient information to make any reliable representation as to profit. In addition, counsel for the vendor put to the purchaser's principal that Ms Pike had told him that all the information that she had about the business development programme had come from the Queensland company. In the context of this case, that
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- included information as to its potential profitability and, hence, the figure of $200,000.
83 In my view, the vendor both gave sufficient notice of the grounds upon which it challenged the purchaser's evidence on reliance, and put in cross-examination the nature of the case upon which the vendor intended to rely in that regard. Having disclosed the grounds and put the nature of the case to the purchaser in cross-examination, it was not necessary to put every assertion in the same or identical terms to those in which Ms Pike gave her evidence. There was, in the circumstances, no relevant breach of the rule in Browne v Dunn.
84 In any event, a failure to cross-examine a witness on a point does not mean that any evidence adduced in contradiction cannot be taken into account. In MWJ v The Queen [2005] HCA 74; (2005) 222 ALR 436 [39] - [40], Gummow, Kirby and Callinan JJ said:
An offer to tender a witness for further cross-examination will however, in many cases suffice to meet, or blunt a complaint of surprise or prejudice resulting from a failure to put a matter in earlier cross-examination
…
Reliance on the rule in Browne v Dunn can be both misplaced and overstated. If the evidence in the case has not been completed, a party genuinely taken by surprise by reason of a failure on the part of the other to put a relevant matter in cross-examination, can almost always, especially in ordinary civil litigation, mitigate or cure any difficulties so arising by seeking or offering the recall of the witness to enable the matter to be put.
85 Also, in Cross on Evidence (8th Aust ed by Heydon, JD) the learned author referred to the 'sanctions' for a breach of the rule in Browne v Dunn. The learned author referred to a number of sanctions, one of which was (at [17460]):
Finally, where the party whose counsel has breached the rule in Browne v Dunn subsequently calls evidence inconsistent with that of the earlier witness, the party may be exposed to comment that the inconsistent evidence is not in accordance with instructions to counsel and should be disbelieved as a recent invention. (citations omitted)
86 It was this course which counsel for the purchaser took at the trial in closing submissions. Moreover, counsel for the purchaser did not seek to have the purchaser's principal recalled to deal with the point. The purchaser is bound by the decisions made on its behalf at trial. Having
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- said that, it is unlikely that any real advantage could have been obtained by recalling the purchaser's principal given that, in any event, the overall tenor of his evidence was that there had been no discussion at all with the vendor about the figure of $200,000. In other words, a specific denial was unlikely to add much, if anything, to the general effect of his evidence which was that there had been no discussion on the topic of the $200,000 figure.
87 In my view, the rule in Browne v Dunn did not require the judge to exclude from consideration the aspect of Ms Pike's evidence referred to in grounds 1 to 3 of the appeal.
Grounds 1 to 3 - disposition
88 Ground 1 ought to be dismissed for the reasons given in the preceding section of these reasons.
89 Ground 2 ought to be dismissed for the same reasons, and also because it was clearly open, on the evidence, for the judge to infer that there was no basis for the profit projection apart from the information provided by the Queensland company. The fact that Ms Pike and her son had been to Queensland on a training course is not contradictory of that inference, but, even if it were, the ultimate finding on reliance was properly open and no error of law is disclosed.
90 Ground 3 should also be dismissed for the same reasons, and also for the reason that it was open to the judge to infer, from all the evidence, that it was apparent to the purchaser's principal that the Queensland company was the source of the information in the advertisement.
Grounds 4 to 11 - disposition
91 Grounds 4 to 11 essentially attack the evidentiary basis for the judge's conclusion on causation. In Ricochet Pty Ltd v Equity Trustee Executors & Agency Co Ltd (1993) ATPR 41-236 at 41227, Lockhart, Gummow and French JJ observed:
Ultimately, the 'causative threshold' beyond which liability attaches to a misrepresentation which is one of a number of factors inducing a decision that produces loss will be a question of judgment.
92 The judge's finding of the absence of reliance is to be considered in the context of the uncontested findings, detailed in [14] - [21] above, in relation to the events leading up to the purchase, and the uncontested findings, save as to relevance, referred to in [45] above. In relation to the
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- latter findings, in my view, it is self-evident that those matters were relevant to a consideration of whether an experienced businessman, such as the purchaser's principal, placed any reliance on the advertised reference to profit in deciding to purchase the business development programme. The judge's finding is also to be considered with regard to the highly generalised, if not formulaic, evidence of the purchaser's principal, and its reference to income, rather than to profit (see [29] - [30] above).
93 In relation to ground 4, it was open on the evidence to find that the purchaser's principal knew that Ms Pike had purchased the business development programme from the Queensland company only six weeks before she advertised it, that she had not operated the business development programme other than to place a number of advertisements, that she had not generated any income and that she had no means of vouching for its profitability. These matters were properly to be taken into account and weighed on the issue of causation. No error of law is disclosed.
94 In relation to ground 5, the judge's use of the word 'calculate' in the finding that the purchaser's principal could 'calculate for himself what the represented profitability meant in terms of business turnover' was probably infelicitous. It conveys an unjustified degree of precision to the exercise referred to by the judge. Nevertheless, the general import of the finding was that the information supplied by the Queensland company by email in relation to the nature of the business development programme and its transactions, the share of turnover from overseas placements (50%), and the revenue to be earned on individual overseas placements, would have allowed the purchaser to form some idea of the turnover required for the business development programme to generate a profit of $200,000. The judge's finding, although infelicitously expressed, had a proper basis.
95 In relation to ground 6, it was open to the judge to infer that the success of the business development programme depended largely on information about overseas placements, having regard to the matters outlined by the Queensland company in its email to the purchaser dated 31 July 2006, referred to in subpars (b)(i) and (iv), (d), (e), (g), (l), (m) and (n) in [20] above. It was also open to the judge to find that the purchaser expected that its own knowledge would enhance the prospects of the business in light of the statement made by the purchaser's principal to the Queensland company, referred to by the judge in his reasons at [36], to the effect that:
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- We believe that our existing strong business relationships and understanding of the WA market will be integral to our and your success in WA.
Predominantly, we will focus on overseas placements as a priority and develop the local/domestic market as a fundamental base to our business to support the international front.
96 Both of these matters were relevant to the issue of reliance. On their own, they may not support an inference that the purchaser had not relied on the representation by the time it came to purchase the business, but they are matters which the judge was entitled to take into account in combination with the other evidence in the case relevant to the issue of reliance. No error is disclosed.
97 In relation to ground 7, the relevant finding is that 'the figure [of $200,000] was such as to attract the attention of prospective purchasers and to lead them to make inquiry into the subject matter of the advertisement, but lacked sufficient meaning to be an inducement to purchase' (reasons [82]). Insofar as his Honour found that the representation, concerning future profit, was 'in its nature' not 'persuasive' to induce the purchase (cf Como v Yenald at 43,619) in my respectful view, his Honour erred. The representation, which his Honour found not to be a puff, would, when considered in isolation, ordinarily be regarded as material, ie, as having a tendency to induce. Nevertheless, the overall effect of his Honour's reasons is that the representation could not be considered in isolation and that in the context of all of the circumstances subsequent to the response to the advertisement and leading up to the purchase of the business development programme, it could not be seen as operating as an inducement to purchase. To the extent that his Honour has erred in this particular finding, the purchaser has not established that it has led to any error in the ultimate finding of an absence of reliance.
98 In relation to ground 8, although the Queensland company did not provide the purchaser with information on profit in terms, it did supply written information relevant to any consideration of the financial prospects of the business development programme. This included the nature of the business development programme, the share of turnover from overseas placements and the revenue generated from individual transactions from overseas placements. It was also open to the judge to infer from the uncontested findings of fact that, to the purchaser's knowledge, the vendor itself had no grounds upon which to base any predictions as to profit. The inference is confirmed by the finding that Ms Pike told the purchaser that the figure of $200,000 had come from the
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- Queensland company. Whilst making inquiries of the Queensland company did not of itself necessarily preclude reliance on the advertisement, it cannot be said, as this ground of appeal suggests, that the inquiries made, and the information received from the Queensland company, were irrelevant to an overall assessment of the issue of inducement and causation. The submission that the information from the Queensland company did not 'create doubt as to reliance on the profit representation' has a circularity about it, in that it assumes reliance in the first instance. It also fails to recognise that the question of reliance is to be evaluated having regard to all the relevant circumstances as a whole. No error is disclosed.
99 In relation to ground 9, the purchaser's argument, as I understood it, did not assert that his Honour erroneously regarded reasonable reliance as itself a separate criterion, without which any finding of causation could not be made. Rather, the complaint is that, as a step in the reasoning process in the assessment of the evidence on inducement, the judge erred in fact in finding at [83] that the purchaser could not reasonably have relied on anything said by Ms Pike about the business development programme. In particular, it is contended that the finding was 'incredible', given that Ms Pike believed what she had been told by the principal of the Queensland company, and she presumably believed what she had told the purchaser.
100 The submission does not establish error. The finding at [83] was directed to the profitability and financial performance of the business development programme. It was those matters which, the judge found, could not have reasonably been relied on by the purchaser. Ms Pike's subjective belief in what she had been told by the Queensland company and in what she had told the purchaser did not alter the significance of the fact that the purchaser was told that everything Ms Pike knew about the business development programme had come from the Queensland company, and that the figure of $200,000 referred to in the advertisement had come from the Queensland company. The purchaser also knew that Ms Pike had no personal knowledge of the profitability of the business development programme. It was open to the judge to conclude, in effect, that it could hardly be expected that an experienced businessman such as the purchaser's principal would have relied upon what Ms Pike had said in the advertisement, and it was open to infer that, in all the circumstances, the profit figure in the advertisement was no real inducement to the purchase.
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101 In relation to ground 10, the inquiries of the Queensland company were relevant to the issue of causation. The question is not whether the information supplied by the Queensland company demonstrated a falsity or unreliability of the figure of $200,000. The question is whether it was open to the judge to find that, whatever its accuracy or reliability, its appearance in the advertisement did not ultimately operate as an inducement in the decision to purchase. For all the reasons given above, that finding was open.
102 Ground 11 does not disclose error, by reason of all of the matters addressed in relation to grounds 1 to 10.
Conclusion
103 I would dismiss the appeal.
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