Culligan v ACO Pty Ltd

[2009] NSWCA 290

Appeal Outcome: Special leave dismissed with costs by the High Court, 12 March 2010 s274/2009

New South Wales

Court of Appeal

CITATION:	Culligan & Anor v Aco Pty Ltd [2009] NSWCA 290 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	1 September 2009
JUDGMENT DATE:	15 September 2009
JUDGMENT OF:	Basten JA at 1; Young JA at 1; Sackville AJA at 1
DECISION:	1) Appeal allowed. 2) Set aside the order made by Johnstone DCJ on 24 February 2009. 3) In lieu thereof, enter judgment for the appellants (the first and second defendants). 4) Order the respondent to pay the the appellants’ costs of the trial and of the appeal. 5) The respondent, if otherwise qualified, should have a certificate under the Suitors Fund Act 1951 (NSW).
CATCHWORDS:	TRADE PRACTICES - purchase of a business- whether misleading or deceptive representations were made by vendor- whether the respresentations caused the purchaser loss or damage- significance of contractual disclaimer on reliance
LEGISLATION CITED:	Trade Practices Act 1974 (Cth), ss 52(1), 82(1) Fair Trading Act 1987 (NSW), ss 42(1), 68(1)
CATEGORY:	Principal judgment
CASES CITED:	Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; 218 CLR 592 Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; 257 ALR 610 Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd [1978] HCA 11; 140 CLR 216 Henville v Walker [2000] HCA 52; 206 CLR 459 Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd [1989] FCA 46; (1989) ATPR (Digest) 46-048 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; 149 CLR 191 Poulet Frais Pty Ltd v The Silver Fox Co Pty Ltd [2005] FCAFC 131; 220 ALR 211
PARTIES:	Andrea Culligan (First Appellant) Unimail Pty Ltd (Second Appellant) Aco Pty Ltd (Respondent)
FILE NUMBER(S):	CA 40121/09
COUNSEL:	Bannon SC/ Spinak (Appellants) Manousaridis/ Douglas-Baker (Respondent)
SOLICITORS:	Bundock/Palmer Lawyers (Appellants) Scarfone & Co Solicitors (Respondent)
LOWER COURT JURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	1982/07
LOWER COURT JUDICIAL OFFICER:	Johnstone DCJ
LOWER COURT DATE OF DECISION:	29 January 2009
LOWER COURT MEDIUM NEUTRAL CITATION:	Aco Pty Limited v Culligan [2009] NSWDC

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CA 40121 of 2009

BASTEN JA
YOUNG JA
SACKVILLE AJA

15 September 2009

CULLIGAN & ANOR v ACO PTY LTD

Judgment

THE COURT

1 This is an appeal against the decision of a Judge of the District Court entering judgment for the respondent (“Aco”) against the appellant in the sum of $160,000 plus interest. The primary Judge found that the first appellant (“Ms Culligan”), a director of the second appellant

(“Unimail”), engaged in misleading and deceptive conduct in contravention of s 42(1) of the Fair Trading Act 1987 (NSW) (“FT Act”). His Honour also found that by reason of the false representations made by Ms Culligan to representatives of Aco, Unimail engaged in misleading and deceptive conduct in contravention of s 52(1) of the Trade Practices Act 1974 (Cth) (“TP Act”).

2 The primary Judge, his Honour Judge Johnstone, awarded damages against Ms Culligan under s 68(1) of the FT Act and against Aco under s 82(1) of the TP Act. The award represented the full purchase price paid by Aco to Unimail to acquire a business which published and distributed a trade magazine known as “Impulse” (“the Impulse business”). His Honour found that Aco had been induced to purchase the Impulse business under an Agreement for Sale of 22 December 2005 by reason of the appellants’ misleading and deceptive conduct. That conduct caused Aco to lose the entire purchase price it paid for the Impulse business since, on his Honour’s findings, the business was in truth worthless at the time Aco acquired it.

3 On appeal, Aco, although not conceding that the appellants had made out their grounds of appeal, did not vigorously attempt to support the primary Judge’s reasoning. Mr Manousaridis, who appeared with Ms Douglas-Baker for Aco, sought to uphold the orders made by his Honour principally by reference to a notice of contention. The notice of contention challenged a number of findings adverse to Aco. Mr Manousaridis submitted that this Court should substitute its own findings for the impugned findings made by the primary Judge.

LEGISLATION

4 Section 42(1) of the FT Act provides as follows:

“A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”

5 Section 68(1) of the FT Act provides, among other things, that a person who suffers loss or damage by conduct of another person that is a contravention of Part 5 (including s 42) may recover the amount of the loss or damage by action against the other person or against any person involved in the contravention.

6 Section 42(1) of the FT Act corresponds to s 52(1) of TP Act, although the latter is expressed to apply to corporations. Section 68(1) of the FT Act corresponds to s 82(1) of the TP Act.

ACO’S PLEADED CASE

7 Aco pleaded in its Statement of Claim that in September or October 2005, Unimail engaged Claridges Business Sales, a business broker, to find a buyer for the Impulse business (par 5). Mr Smith, an employee of Claridges, arranged a meeting between Mr Wallace and Mr D’Angelo, both directors of Aco, and Ms Culligan on 28 October 2005 (par 7).

8 At the October meeting (“October Meeting”), Ms Culligan made the following four representations (par 8):

“(a) One person can run the business on 20 hours a week.


(b) [Ms Culligan] was putting in twenty hours a week in the running of the business.

(c) In the alternative to (b), [Ms Culligan] was putting in two days a week in the running of the business.

(d) No person other than [Ms Culligan] had been running the business.”

9 At a second meeting between Messrs Wallace and D’Angelo and Ms Culligan, held on 18 November 2005 (“November Meeting”), Ms Culligan is said to have made the following further representations (par 9):

“(a) At least during the period August 2004 to July 2005 referred to in a document ( costs break-up ) produced from computer records maintained by [Unimail], and provided to Mr Wallace by Mr Smith in about late October 2005, [Ms Culligan] had been doing all the work in relation to the business, save that Jan Peeters had been engaged under contract to do the bookkeeping and invoicing.

(b) Save for the bookkeeping and invoicing undertaken by Jan Peeters, no person other than [Ms Culligan] had undertaken any work in relation to the business during the period August 2004 to July 2005.

(c) Save for the bookkeeping and invoicing undertaken by Jan Peeters, [Ms Culligan] was doing all the work in relation to the business which took about 20 hours per week.

(d) Save for the bookkeeping and invoicing, during the period August 2004 to July 2005, [Ms Culligan] had been doing all the work in relation to the business and had been spending about twenty hours a week doing so.”

10 Each representation made by Ms Culligan was said to be false in that (par 11):

“(a) Contrary to the representations pleaded in paragraph 8(d), 9(a), 9(b) and 9(d), [Ms Culligan] and Jan Peeters were not the only persons who had been undertaking all the work in relation to the business.
Particulars
During the period from at least August 2004 to about July 2005, a full time employee of [Unimail] known as Lisa Woods, who had extensive experience and connections in the industry, undertook all, or in the alternative, most of the work in relation to the business, such work consisting in regularly contacting persons who wished or potentially wished to place advertisements in Impulse and arrange contracts between such persons and [Unimail] for the placement of advertisements with “ Impulse ”.
(b) Contrary to the representation pleaded in paragraph 8(a), the business could not be run part time by one person spending approximately on twenty hours a week or two days a week.
Particulars
[Aco] repeat[s] the particulars to paragraph (a) and further [says] that Ms Wood devoted all, or substantially all of her time as employee of [Unimail], in running the business. [Aco] further [says] that the business could only have been run on a full time basis by a person such as Ms Wood who had extensive experience and connections in the industry, but at a cost which, on the basis of the past financial trading performance of the business as disclosed in the costs break-up, would have rendered the business either unprofitable or at best marginally profitable.
(c) Contrary to the representations pleaded in paragraph 8(b) or, in the alternative, paragraph 8(c) and 9(c) … [Ms Culligan] was not undertaking work of twenty hours a week, or two days a week in relation to the business.”

11 Aco alleged that Ms Culligan, in making the pleaded representations, engaged in misleading or deceptive conduct in contravention of s 42(1) of the FT Act (par 12). Ms Culligan’s conduct was engaged in on behalf of Unimail and it therefore had engaged in misleading and deceptive conduct in contravention of s 52(1) of the TP Act (pars 14, 15).

12 Aco says that in reliance on the representations pleaded in pars 8 and 9, Mr D’Angelo and Mr Wallace caused Aco to enter into a contract to buy the assets of the Impulse business for the price of $160,000, to pay the purchase price and to acquire the business (par 16).

13 As a consequence of the matters alleged in par 16, [Aco] is said to have suffered loss and damage by reason of the conduct pleaded in pars 12 and 15 (par 17). The particulars of the loss and damage included the following:

“[Aco] paid $160,000 for a business which was of no value, or in the alternative, was of marginal value. The business could not be operated on a part time basis.”

THE PRIMARY JUDGMENT

Factual Findings

14 The following account summarises the factual findings made by his Honour concerning events leading up to and including the October and November Meetings.

15 Unimail purchased the Impulse business for $200,000 in April 2001. At that time Impulse was a well-established trade publication distributed to food retailers. Ms Culligan was recruited by Unimail in 2001 to assist in producing Impulse and other magazines produced by Unimail.

16 In October 2005, Unimail decided to sell the Impulse business and retained Claridges to act as broker for the sale. Ms Culligan provided a number of documents to Mr Smith of Claridges relating to the business.

17 Mr Wallace, who happened to be working for Claridges at the time as a business sales agent, obtained copies from Mr Smith of the documents provided by Ms Culligan. Mr Smith told Mr Wallace that Ms Culligan ran the business part time, doing twenty hours per week, with other work being undertaken by subcontractors. Mr Smith also told Mr Wallace that there was no wages recorded in a document setting out a costs break-up because Ms Culligan was the only one working on the Impulse magazine.

18 After Mr Wallace expressed interest in purchasing the business, the meeting of October Meeting was arranged. The primary Judge observed that the substance of the conversation at the meeting, as recounted by Messrs D’Angelo and Wallace, was not disputed by Ms Culligan. His Honour found (at [30]) that Ms Culligan told the meeting that:

“she ran the Impulse business herself along with the other publications … that she did so by putting in 2 days at the most into Impulse each week and the rest of the time was put into the other publications. She also told then that one person could run the Impulse publication on twenty hours per week or less and that she ran the business herself while doing the other three publications, such that there were no other expenses or salary costs, apart from those for … the bookkeeper.”

19 On 2 November 2005, Mr D’Angelo offered $140,000 to acquire the business, but this offer was rejected. However, the following day Mr D’Angelo and Ms Culligan agreed on a price of $160,000.

20 The November Meeting took place at Unimail’s premises, while Messrs D’Angelo and Wallace were undertaking due diligence on the business. The primary Judge recounted the evidence as to what was said at that meeting, but he found that by 2 November 2005 Messrs D’Angelo and Wallace had already decided to buy the business, subject to due diligence. His Honour concluded (at [29]) as follows:

“Nothing occurred during the due diligence that caused them to alter that decision. I am satisfied, therefore, that nothing occurred after 2 November 2005, including anything said by Ms Culligan on [18] November 2005, was the subject of any reliance by [Aco] in the purchase of the business, and the conversations on that date could not, therefore, amount to representations.”

21 The primary Judge, in these circumstances, found (at [52]) that, although the representations alleged in par 9 of the Statement of Claim were not proved, those made in par 8 were substantially proved, as follows:

“(a) Ms Culligan was putting in 20 hours a week in the running of the business. Any person could run the business on 20 hours a week.
(b) Ms Culligan had been running the business herself by putting in 2 days at the most into it each week, and there were no expenses other than those disclosed.”

Misleading and Deceptive Conduct?

22 The primary Judge noted (at [35]) that two matters were central to the determination of whether Ms Culligan’s conduct had been misleading or deceptive:

“Whether any person could run the business on 20 hours, or 2 days a week, and secondly, whether Ms Culligan had been running the business herself, without any other expenses.”

23 His Honour accepted (at [36]) Ms Culligan’s evidence that once the Impulse business had been established within Unimail, she had run the business on 20 hours per week. However, she did not tell Messrs D’Angelo and Wallace that:

“she had not run the business herself from August 2004 to June 2005 and that during this period it was run by Ms Lisa Wood, a person specially recruited for that purpose. Ms Wood was paid a significant salary, in addition to which she received commissions for the sale of advertising space in the Impulse magazine.”

24 The primary Judge then addressed Ms Wood’s evidence as to the time she spent on the Impulse business. His Honour noted that it was uncontested that Ms Wood had worked on all of the Unimail magazine businesses. What was in question was how much time she spent working on the Impulse magazine. Mr Wallace had claimed that Ms Wood told him in a telephone conversation in 2006 that she had spent 90 per cent of her time on the Impulse magazine. In her evidence, however, Ms Wood maintained that she spent only 50 per cent of her time on the magazine and said that she could not recall the conversation recounted by Mr Wallace.

25 The primary Judge characterised (at [40]) Ms Wood’s evidence as “unsatisfactory”, but did not explain why he had reached that conclusion. In the result, he said (at [42]) that he could not be satisfied as to the percentage of her time that Ms Wood spent on the Impulse business. He continued (at [42]-[44]):

“It may not have been 90%, but what does seem clear is that it was the majority of her time. I am satisfied, therefore, that the time she spent was on average in excess of 2 days a week and substantially more than 20 hours a week …
There could be no doubt that Ms Wood’s primary focus was the Impulse business, and that was Ms Culligan’s intention.
For these reasons, I find that Ms Wood did not run the business on 20 hours a week, and that Ms Culligan knew she didn’t.”

26 Later in the judgment, when dealing with the value of the Impulse business, his Honour said (at [79]) that it would be necessary to allocate a wages component representing the hours required by a competent operator which would “equate to those spent by Ms Wood, in the order of 67% to 75% of a 40-hour week”.

27 The primary Judge found (at [45]-[46]) that:

“The representation that anyone could run the Impulse business spending only 20 hours a week was, therefore, false. The totality of the evidence establishes that in reality, only a person with considerable expertise and experience could run the business on 20 hours a week, such as Ms Culligan …
The failure of Ms Culligan to disclose the involvement of Ms Wood in running the business for the period from August 2004 to June 2005 was conduct likely to mislead or deceive and which did mislead and deceive Mr Wallace and Mr D’Angelo … by telling them that she had run the business on 20 hours a week, but concealing the fact that Ms Wood had run the business for a significant period and that Ms Wood had been unable to run the business on 20 hours a week, Ms Culligan conveyed a meaning inconsistent with the truth … Had Mr Wallace and Mr D’Angelo known the full facts they would have been alerted to the reality of the true time demands the business required to operate efficiently and profitably. This is relevant to their decision to cause ACO to purchase the business, and at what price.”

28 For these reasons, the primary Judge found (at [47]) that the representations made in respect of the business to Mr Wallace and Mr D’Angelo were false, in that:

“(a) Although Ms Culligan was putting in twenty hours a week in the running of the business it was not true that any person could run the business on 20 hours a week.

(b) Ms Culligan had not been running the business herself such that there were no expenses other than those disclosed.”


Accordingly, the allegations of falsity in pars 11(a) and (b) of the Statement of Claim were made out, but not the allegations in par 11(c).

Reliance

29 The primary Judge found (at [52]) that both Mr Wallace and Mr D’Angelo believed and relied on what Ms Culligan told them about the business at the October Meeting. These matters were critical to their decision to cause Aco to purchase the business. His Honour was satisfied that Messrs D’Angelo and Wallace both relied upon the false representations when they caused Aco to enter into the Agreement for Sale on 22 December 2005. In his view, Ms Culligan’s false representations materially contributed to their decision to cause ACO to purchase the business from Unimail. Moreover, the loss and damaged proved by Aco as a result of purchasing the business was causally connected to the misleading and deceptive conduct of Unimail.

Exclusion Clause

30 The primary Judge next addressed the significance of cl 13.4 in the Agreement for Sale dated 22 October 2005. Clause 13.4 provided as follows:

“The Purchaser agrees that it is purchasing the Assets based on its own enquiries and does not rely on any representations whatsoever made by the Vendor [subject to irrelevant exceptions].”

31 The appellants had submitted that because Mr Wallace understood the effect of cl 13.4 and had agreed to it, he could not have relied on any representation made by Ms Culligan. His Honour pointed out (at [58]) that the appellants had conceded that the contract could not, of itself, oust the operation of the legislation. In his view (at [61]), the appellants could not rely on cl 13.4 to escape their statutory liability. In any event, Ms Culligan, who was not a party to the contract, could not rely upon its terms to exclude her liability.

Aco’s Loss

32 The primary Judge “instantly” observed (at [66]) that:

“The Impulse business could be operated on a part time basis. Ms Culligan did. Even Ms Wood did, albeit with a time commitment of something in excess of 50%. Only Mr Wallace could not operate the business successfully on a part time basis, but more probably than not, he could not have run the business successfully in respect of the time commitment. It was also clear to me that as a result of his complete lack of success in selling advertising space for the magazine, he simply gave up and walked away from the business.”

His Honour said (at [67]) that he had no doubt that the business ultimately failed because of Mr Wallace’s lack of skill. However, the failure of the business was not “ probative of the measure of loss suffered by Aco ”.

33 The proper measure of damage was the difference between the price paid for an asset and the “real” or “fair” value of the asset assessed in the light of later events. Aco’s expert opined that the business was valueless, while the appellant’s expert valued it in the range of $150,000 to $180,000 at the time of the sale. The primary Judge rejected (at [71]-[72]) the approach taken by the appellant’s expert, on the grounds, inter alia, that the expert had failed to take into account operating costs.

34 His Honour then turned to the “circulation issue”, noting (at [75]) that it had not been disputed that from 2002 Unimail had represented to advertisers that Impulse had a circulation of 26,000 per issue, when in fact it had published no more than 12,000 copies at any time. Knowledge of the true circulation of the magazine among customers would have drastically reduced the advertising revenue derived by the magazine. His Honour accepted that Messrs D’Angelo and Wallace were aware of the true position concerning circulation before they purchased the Impulse business. That, however, missed the point. The “circulation factor” went to the true value of the business that ACO had been induced to purchase.

35 His Honour considered (at [79]) assessment of the fair value of the business had to take account of two considerations:

“The first was the likely time commitment required by someone other than an experienced operator such as Ms Culligan to run the business. A fair price to be paid would have involved the allocation of a wages component in excess of 20 hours a week. More probably than not, the hours required by a competent operator would equate to those spent by Ms Wood, in the order of 67% to 75% of a 40-hour week. The second was the true future revenue likely to be derived for advertising space on the basis of a fully and properly informed market as to the actual circulation of the magazine. These two factors, taken together, were clearly sufficient to eliminate any of the illusory profit for which the [appellants] contend. The reality is that Aco would not have purchased the business at any price. As a result, it lost the totality of the purchase price.”


Hence his Honour assessed damages under s 68(1) of the FJ Act and s 82(1) of the TP Act at $160,000.

ADDITIONAL BACKGROUND

36 Before addressing the substantive issues debated on the appeal, it is convenient to provide some further background by reference to matters that were not in contest at the trial.

37 Ms Wood commenced contract employment with Unimail on 6 August 2004, initially on a part time basis. From 13 September 2004 she occupied the position of Business Development Manager. The salary in that position was $500 per week (plus superannuation) and she was entitled, in addition, to 18% commission on all sales booked.

38 Ms Culligan set targets for Ms Wood to achieve in promoting the Impulse business, but no targets were set in relation to the other Unimail magazines on which Ms Wood worked. Ms Wood did not in fact succeed in selling advertising space in any magazine other than Impulse and thus she did not earn commission from any other source.

39 From shortly after the commencement of Ms Wood’s employment with Unimail until June 2005, Ms Culligan spent no time on the Impulse business. However, in June 2005, Ms Culligan became dissatisfied with Ms Wood’s performance. On 6 September 2005, Ms Culligan gave Ms Wood an official warning in writing stating that Ms Wood had not attained the targets or budgets that had been set for Impulse and that she had not done so since November 2004. The warning identified a number of areas, not limited to activities connected with Impulse, that were not “being upheld”. On 28 September 2005, Ms Wood gave two weeks notice terminating her contract of employment with Unimail.

40 From June 2005 until Ms Wood’s departure on 12 October 2005, Ms Culligan devoted about five to ten hours per week on work connected with Impulse. After Ms Wood’s departure, as the primary Judge found, Ms Culligan resumed her previous practice of devoting twenty hours per week to Impulse. Thus at the time the first meeting took place with Messrs D’Angelo and Wallace on 28 October 2005, Ms Culligan was responsible for the Impulse business and was devoting approximately twenty hours per week to it.

41 Ms Wood was called by Aco to give evidence at the trial. Over objection, Aco’s counsel was permitted to ask her leading questions. She was also cross-examined by counsel for the appellants. In her evidence, Ms Wood accepted that her performance towards the end of her employment may have been affected by certain personal problems she had been experiencing at the time.

THE APPEAL

42 The appellants submitted that the primary Judge’s findings and conclusions were vitiated by a number of errors, including the following:

the finding that Ms Culligan had represented at the October Meeting that any person could run the business on 20 hours per week was neither pleaded nor consistent with the evidence;

neither Mr D’Angelo nor Mr Wallace understood Ms Culligan to convey a representation of that kind at the November Meeting;

the break-up costs document, upon which the primary Judge relied to find that Ms Culligan had represented that there were no expenses other than those disclosed, did not come into existence until 1 November 2005 and thus could not have been discussed at the October meeting.

43 The appellants contended that the primary Judge had erred in two further respects. First, his Honour had addressed the question of reliance by treating it as a matter to be determined independently of the terms of the Sale Agreement. His Honour, so it was argued, found that Mr D’Angelo and Mr Wallace had relied on Ms Culligan’s representation at the October Meeting and only then considered the effect of the clauses of the Agreement for Sale. The correct approach was to treat the terms of the Agreement for Sale “as part of the factual matrix against which reliance is to be judged”.

44 Secondly, assuming liability to have been established, the primary Judge had incorrectly assessed damages. According to Mr Bannon SC, who appeared with Mr Spinak for the appellants, his Honour erred in holding that Aco was entitled to be compensated for the loss of the full purchase price. The error was said to be that his Honour failed to take into account that the business was valueless (if it was) only because the true circulation figures were substantially less than some of Unimail’s documentation had suggested. Mr D’Angelo and Mr Wallace were fully aware of the true circulation figures before Aco entered the Agreement for Sale. Accordingly, the appellants could not be held responsible for the difference between the sale price and the true value of the Impulse business, insofar as the difference was attributable to the effect of the true circulation figures.

October Meeting Representations

45 In Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; 257 ALR 610, at 639 [102], the joint judgment of Gummow, Hayne, Heydon and Kiefel JJ quoted with approval the observations of McHugh J in Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; 218 CLR 592, at 625 [109]:

“The question whether conduct is misleading or deceptive or is likely to mislead or deceive is a question of fact. In determining whether a contravention of s 52 has occurred, the task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. It is an objective question that the court must determine for itself. It invites error to look at isolated parts of the corporation’s conduct. The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct. Thus, where the alleged contravention of s 52 relates primarily to a document, the effect of the document must be examined in the context of the evidence as a whole. The court is not confined to examining the document in isolation. It must have regard to all the conduct of the corporation in relation to the document including the preparation and distribution of the document and any statement, action, silence or inaction in connection with the document.”

46 As the Full Federal Court pointed out in Poulet Frais Pty Ltd v The Silver Fox Co Pty Ltd [2005] FCAFC 131; 220 ALR 211, at 226-227 [75]-[76]:

“Whether or not a corporation has contravened the norm of corporate conduct established by s 52 of the TPA … is not necessarily answered by asking whether someone was in fact misled, although evidence to that effect might be highly relevant.

…
The issue of whether the conduct of [the representor] was in the circumstances misleading or deceptive was required to be determined by reference to what a reasonable person in the position of [the representee] would have made of those documents.”

47 In the present case, the primary Judge found that the appellants engaged in misleading and deceptive conduct exclusively on the basis of the representations he found Ms Culligan made at the October Meeting. In order to determine whether his Honour’s reasoning can be upheld, it is necessary to consider Aco’s pleaded case and the evidence relating to the findings made by his Honour.

48 Paragraph 8(a) of the Statement of Claim alleged that Ms Culligan represented at the October Meeting that:

“One person can run the business on 20 hours a week.”

The finding made by the primary Judge (at [33]) was that Ms Culligan said that “ [a]ny person could run the business on 20 hours per week ”.

49 There is a substantial difference between a representation that one person can run a particular business on 20 hours per week and a representation that any person can run the business on 20 hours per week. As a matter of language, the first conveys to the representee (assuming no other factors bear on the message conveyed) that one person, acting alone, should be capable of running the business on 20 hours per week. The statement implies that whether a particular person in fact will be capable of doing so is likely to depend on his or her qualifications, experience and aptitude. By contrast a statement that any person could run a business on 20 hours per week, if interpreted literally, perhaps may convey a claim that any person, regardless of qualifications, experience and aptitude, can run the business on that part-time basis.

50 It follows that the representation found by his Honour to have been made by Ms Culligan does not correspond to the case pleaded by Aco in par 8(a) of the Statement of Claim. This, however, does not necessarily mean that the primary Judge should not have made the finding if the evidence supported it. It could be argued (although Mr Manousaridis did not make a submission to this effect), that a representation that anyone can run a business on 20 hours a week goes further than and therefore includes a representation that one person can run the business on 20 hours a week.

51 The difficulty with the finding in the terms made by the primary Judge, however, is that there was no evidence to support it. His Honour quoted (at [20]-[22]) the evidence of Mr Wallace and Mr D’Angelo as to what was said by Ms Culligan at the meeting of 28 October 2005:

“20. According to Mr Wallace, Mr D’Angelo asked Ms Culligan, ‘How many hours do you put into the business?’ She replied:
‘I do it along with other publications: Unigrad, Univac and The Recruiter. I probably put in 2 days at the most into Impulse each week and the rest of my time I put into the other publications.’
21. According to Mr D’Angelo, Ms Culligan said:
‘One person can run this publication on 20 hours per week or less … I run the business myself while doing the other three publications.’
22. Mr D’Angelo also stated that he asked Ms Culligan, ‘What other expenses are there?’ to which she replied:
‘There are none. I run the business in house with Unimail paying the rent’”.

52 It will be seen from these extracts that Ms Culligan was asked about what she was doing at the time of the conversation. She replied, truthfully on the findings made by the primary Judge, that she put in two days a week and that one person could run the publication on 20 hours a week. She said nothing, even on the accounts given by Messrs D’Angelo and Wallace, that could have been construed by them as suggesting that any person could run the business on 20 hours per week. On the evidence, Ms Culligan was simply not asked at this meeting for her views as to what training or experience was required to run the business in the same manner as she had. Nor was she asked whether a person of Mr Wallace’s background could do so.

53 As we have noted, the question of whether a person engaged in misleading or deceptive conduct is not necessarily answered by asking whether someone was in fact misled. It is nonetheless of some importance that Mr Wallace did not understand Ms Culligan to represent that any person could run the Impulse business on 20 hours, as his cross-examination shows:

“Q. You understood that Ms Culligan indicated that she thought she could do it or that she did it in two days a week correct?
A. Yes.
Q. You understood when she said that, that she wasn’t giving a warranty that anyone could do it in two days a week was she?
A. Yes.
…
Q. Yes? She wasn’t guaranteeing that anyone could do it in two days a week was she?
A. No she was explaining what she was doing.
Q. You didn’t think that was a guarantee that anyone could do it in two days a week did you?
A. No I didn’t think it was a guarantee.”

54 For these reasons, in our opinion, his Honour’s finding that Ms Culligan represented at the October Meeting that any person could run the Impulse business on 20 hours a week cannot be sustained.

55 The primary Judge also found that Ms Culligan said that she had been running the business by putting in two days at most a week and that there were no expenses other than those disclosed. Mr Manousaridis frankly accepted that this finding did not correspond to any representation pleaded by Aco. This concession was correctly made, as there was nothing in par 8 of the Statement of Claim alleging that any representation was made at the October 2005 meeting about expenses that had been incurred by the Impulse business.

56 In any event, there was no basis for the finding insofar as it related to expenses. Mr D’Angelo claimed in his affidavit that he had asked Ms Culligan at the October Meeting about expenses. However, in cross-examination he admitted that he had mistakenly assumed when preparing his affidavit that he had received the costs break-up document before the meeting. He also accepted that he had probably asked about expenses at the November Meeting, not the October Meeting.

57 Mr Manousaridis applied at the hearing of the appeal to amend par 8(d) of the Statement of Claim to include a reference to the representation relating to expenses found by his Honour to have been made at the October meeting. Quite apart from the other difficulties confronting an application to amend at this stage of the proceedings, the amendment would be futile. As we have explained, there was simply no evidence to support a finding in terms of the proposed amendment.

58 The following conclusions should therefore be reached about the representations which the primary Judge found had been made at the October Meeting:

(i) the representation that Ms Culligan was putting in twenty hours per week on the running of the business was made but was found by his Honour not to be false and was not in fact false;

(ii) the representation that any person could run the business on 20 hours per week was not pleaded and in any event, on the evidence, was not made at the October Meeting;

(iii) the representation that Ms Culligan had been running the business herself by putting in two days per week was made but was found by his Honour not to be false and was not in fact false;

(iv) the representation that there were no expenses other than rent was not pleaded and was not made at the October Meeting.

59 The appellants’ attack on the findings as to the representations made at the October Meeting and as to their falsity therefore succeeds. The reasoning which led the primary Judge to conclude that the appellants had engaged in misleading and deceptive conduct cannot stand.

THE NOTICE OF CONTENTION

60 Aco’s notice of contention proceeded on the basis that the primary Judge erred in concluding that because Mr D'Angelo and Mr Wallace had already decided to purchase the business on 2 November 2005 “subject only to due diligence”, nothing in the conversation that occurred on 18 November 2005 could amount to a representation. Aco submitted that this reasoning involved a non sequitor. Mr Manousaridis contended that the primary Judge should have found that the representations alleged in subpars 9(a), (b) and (d) of the Statement of Claim were made by Ms Culligan at the November Meeting and that each representation was false, as alleged in par 11 of the Statement of Claim. He invited this Court to make the findings necessary to support the orders made by the primary Judge.

61 Aco further submitted that this Court should find that Messrs D’Angelo and Wallace relied on the representations when they caused Aco to enter into the Agreement for Sale of the Impulse business. According to Mr Manousaridis, there was no basis for the primary Judge’s finding that the decision made on 2 November 2005 to purchase the business precluded Messrs D’Angelo and Wallace from relying on the representations made at the November Meeting, particularly as the decision to purchase the business was subject to due diligence. In any event, so he argued, the evidence as to reliance was “overwhelming”.

November Meeting Representations

62 Aco’s criticism of the approach taken by the primary Judge is well-founded. In a claim under ss 42 and 68 of the FT Act (corresponding to ss 52 and 82 of the TP Act), it is necessary to identify contravening conduct and a causal connection between that conduct and the loss or damage allegedly suffered: Campbell v Backoffice Investments Pty Ltd, ALR, at 639 [102], per Gummow, Hayne, Heydon and Kiefel JJ. As French CJ observed in Campbell v Backoffice (at 620 [25]) the question of whether conduct is misleading or deceptive within the meaning of s 42 of the FT Act is logically anterior to the question of whether a person has thereby suffered loss or damage for the purposes of s 68 of the FT Act.

63 Equally, the question of whether the defendant engaged in the conduct alleged to be misleading or deceptive (in this case the making of the representations said to be false) is logically anterior to the question of whether the plaintiff has suffered loss or damage by reason of the defendant’s misleading or deceptive conduct. A finding that the plaintiff did not rely on a false statement made by the defendant does not demonstrate that the statement was not capable of constituting misleading or deceptive conduct.

64 It is not entirely clear what the primary Judge meant when he found that in the absence of Aco’s reliance on anything said by Ms Culligan at the November Meeting, the conversations on that date could not amount to “representations”. If he intended to say that in the absence of proof of reliance by Aco, the appellants could not have engaged in misleading or deceptive conduct at the November Meeting, he was in error.

65 Aco submitted that, in these circumstances, this Court should make findings as to what Ms Culligan said at the November Meeting. Mr Manousaridis pointed out that the primary Judge, after setting out the evidence of Mr D’Angelo and Mr Wallace as to the discussion at the November Meeting, noted that “the substance of the conversations as set out above was not disputed by Ms Culligan”. His Honour also said that although there were some differences between the versions given by Mr D’Angelo and Mr Wallace, he was “satisfied that these did not derogate from the substance of what Ms Culligan was conveying to them”.

66 The primary Judge’s summary of the evidence given by Mr D’Angelo and Mr Wallace was as follows (at [24]-[26]):

“24. … According to Mr Wallace, during the [course] of [the November] meeting, Mr D’Angelo said to Ms Culligan, ‘There are no wages in this document. Who’s doing the work?’ and she replied:
‘I am doing it in my spare time about 20 hours a week.’
25. According to Mr D’Angelo, the conversation on this issue went as follows, when he raised the costs break-up document with Ms Culligan:
D’Angelo:
‘How come there’s no wages expenses on this breakdown of expenses?’
Culligan:
‘There’s no wages paid because I do it all myself. Jan Peeters does the bookkeeping and invoicing every second Thursday …’
26. Mr D’Angelo and Mr Wallace also undertook a due diligence on 18 November 2005 and had further conversations with Ms Peeters.”

67 The document referred to by Mr D’Angelo at the November Meeting was a spreadsheet showing distribution figures and costs for Issues 49 to 53 of Impulse. It was common ground that Unimail published Issues 49 to 53 during the period August 2004 to June 2005. The spreadsheet set out various costs for each Issue, such as mailing, editing and design expenses, but made no reference to wages.

68 On this evidence, it is by no means clear that the conversation at the November Meeting, assuming it to be substantially in the terms recounted by Mr D’Angelo and Mr Wallace, would justify this Court in finding that Ms Culligan made representations to the effect pleaded in pars 9(a), (b) and (d) of the Statement of Claim: in substance, that no person other than Ms Culligan and the bookkeeper had undertaken work in relation to Impulse during the period August 2004 to June 2005. Ms Culligan, when asked about the absence of any reference in the spreadsheet to wages, replied in the present tense:

“There are no wages because I do it all myself. Jan Peeters does the bookkeeping.”

Ms Culligan explained in her evidence that she had prepared the spreadsheet in early November 2005 at the request of Mr Smith of Claridges and that it was on his advice that she included only the direct costs of production.

69 Despite the primary Judge’s scepticism as to Ms Culligan’s intentions, her response to Mr D’Angelo’s inquiry may have been honest. She may have considered the role formerly played by Ms Wood to be irrelevant to Mr D’Angelo’s inquiry, given that she (Ms Culligan) had resumed sole responsibility for the Impulse magazine on Ms Wood’s departure some five weeks earlier, devoting 20 hours per week to it. The primary Judge appears to have thought that the significance of what Ms Culligan was telling Mr D’Angelo and Mr Wallace would not have been lost on her, but it is unclear whether his Honour was referring to the October Meeting, the November Meeting (which he found did not contain “representations”) or both.

70 Of course, representations may constitute misleading or deceptive conduct without the representor acting dishonestly or even carelessly: Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd [1978] HCA 11; 140 CLR 216, at 223, per Stephen J (with whom Jacobs J agreed); at 234, per Murphy J; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; 149 CLR 191, at 197, per Gibbs CJ. Moreover, as Stephen J pointed out in Hornsby Building Centre (at 227-228) a statement that is literally true may nonetheless be misleading or deceptive if, for example, it conveys a meaning to the representee other than the literal meaning of the words used.

71 In this case, the question is whether Ms Culligan’s statements at the November Meeting, taken in context, conveyed to Mr D’Angelo that no one other than Ms Culligan herself and the bookkeeper had worked on the Impulse magazine in the past. The understanding by Mr D’Angelo and Mr Wallace of those statements, although not determinative of the issue, is relevant to it. The primary Judge made no express findings as to how they understood Ms Culligan’s statements at the November Meeting, presumably because his Honour had previously concluded that no “representations” had been made.

72 This Court did not have the benefit of seeing the witnesses and, in particular, of evaluating the understanding of Mr D’Angelo and Mr Wallace as to what was conveyed at the November Meeting about Ms Culligan’s role in the Impulse business. In these circumstances, it might be difficult to make the findings sought by Aco. For the reasons that follow, we do not think it necessary to resolve that question.

Causation

73 Even if this Court were to find that the representations alleged in subpars 9(a),(b) and (d) of the Statement of Claim were made by Ms Culligan, in our opinion Aco faces an insurmountable obstacle to the success of its notice of contention. This is so because the evidence is incapable of establishing that any misleading or deceptive conduct by the appellants caused Aco to suffer loss or damage.

74 Both Mr D’Angelo and Mr Wallace gave evidence as to what they would have done had they not been misled by Ms Culligan. Mr D’Angelo said this in his affidavit:

“At the time I made this offer [of 2 November 2005], I believed that the Impulse business showed excellent profits according to the jobs list. I believed that it took only up to 20 hours a week to run the business, and that Andrea Culligan was the only person who had been running the business. My belief in that regard was based on what Andrea Culligan said to me in the meeting at the coffee lounge to which I refer above. I would not have made the offer had I been aware that my belief was wrong. I would not have made the offer had Andrea Culligan informed me that Lisa Woods had been employed as a business manager on a full time basis or near full time basis for the purpose of making sales for Impulse.” (Emphasis added.)

Later in his affidavit he said that Ms Culligan’s statements at the November Meeting:

“confirmed his belief that [Ms] Culligan was the only person who was and had been involved in the running of the Impulse business.”

75 Mr Wallace’s evidence was to similar effect:

“It was my intention that upon ACO acquiring the business it would be run on a part time basis. I was not then aware of what I subsequently became aware of, namely, that Unimail had employed a person named Lisa Woods on a full time basis during the period August 2004 to 12 October 2005 …Had I been aware of the fact that Lisa Woods was employed on a full time basis, and of the matters recorded in the discovered documents to which I refer, I would not have considered looking further into acquiring the business, and would not have agreed to ACO entering into the agreement to acquire the Impulse business.” (Emphasis added.)

76 It will be seen that both Mr D’Angelo and Mr Wallace directed his attention to what he would have done had he known that Ms Wood was employed on a full time basis (or in Mr D’Angelo’s case near full time basis) during the period August 2004 to June 2005. It is not surprising that the evidence should have been presented in this form since, as the particulars to par 11 of the Statement of Claim show, Aco’s case was that the pleaded representations were false because, during the relevant period, Ms Wood

“devoted all, or substantially all of her time as employee of [Unimail], in running the business.”
Aco claimed that the Impulse business could not be run on a part-time basis.

77 The primary Judge, despite finding Ms Wood to be an unsatisfactory witness, did not find that Ms Wood had devoted all, or substantially all, of her time as an employee of Unimail to the Impulse business. His Honour found only that Ms Wood devoted “the majority of her time” to the business, a commitment that amounted to “substantially more than 20 hours a week”. Later his Honour quantified this finding by determining that a competent operator would have to devote “in the order of 67% to 75% of a 40-hour week” to the business. This equates to 27 to 30 hours per week.

78 On his Honour’s findings, the question of causation would depend on what Mr D’Angelo and Mr Wallace would have done had they known that, during the period from August 2004 to June 2005, Ms Wood devoted an average approximately 27 to 30 hours per week to the Impulse business, rather than the 20 hours that Mr D’Angelo and Mr Wallace believed was required to run the business. The evidence given on behalf of Aco simply did not address this question.

79 In Campbell v Backoffice Investments, one issue was whether Mr Weeks would have proceeded with a purchase of shares had he known that sales revenue derived by the relevant business for a particular month had been overstated. Mr Weeks gave evidence that if he had known of both the overstatement of sales revenue and of an overstatement of EBIT (earnings before interest and tax) he would not have purchased the shares. The overstatement of EBIT was not proved. The joint judgment pointed out (at 649 [147]) that the only direct evidence given by Mr Weeks as to what he would have done assumed that he knew that both matters were false. He did not say what he would have done if he knew either matter was false. This contrasted with his evidence on other issues where he had said that if he had been aware of either or both of two matters, he would have taken a different course. In this state of the evidence, so their Honours held (at 649 [147]):

“it was not open to the Court of Appeal to infer [as it had], from its own assessment of the materiality of the representation and its own assessment of whether the representation was calculated to induce entry into a contract, that Mr Weeks would not have proceeded with the share purchase.”

See also (at 629 [55)], per French CJ.

80 There is no basis in the evidence in the present case to justify this Court in finding that, if Mr D’Angelo and Mr Wallace had known that Ms Wood had worked an average 27 to 30 hours per week on the Impulse business between August 2004 and June 2005, they would not have caused Aco to purchase the business. It is one thing for Ms Wood to have worked full time or substantially full time on the Impulse business. It is another for her to have devoted 27 to 30 hours per week to it while attending to other aspects of Unimail’s business. Had Mr D’Angelo and Mr Wallace given evidence that they would not have gone ahead had they known that Ms Wood devoted 27 to 30 hours per week to the business, their evidence might well have been vigorously challenged.

81 Even in the absence of direct evidence from a representee as to what he or she would have done in full knowledge of the facts, the objective evidence in a given case might support a finding that a certain course of conduct would have been taken by the representee. (Compare Civil Liability Act 2002 (NSW), s 5D(3)(b) which applies, where it is relevant to determine what the plaintiff would have done if the negligent person had not been negligent. The provision renders inadmissible any statement by the plaintiff as to what he or she would have done, except to the extent that the statement is against interest.) However, the present is not such a case.

82 The objective circumstances include the fact that Ms Culligan had operated the business on twenty hours a week, as she told Mr D’Angelo and Mr Walker. Plainly Mr Wallace overrated his own ability to conduct the Impulse business on a part-time basis. In this connection, his Honour found that Mr Wallace probably could not have run the business successfully even with a much greater time commitment. Mr Wallace’s own evidence indicated that he considered that he had the requisite skills and experience to sell the advertising space for the Impulse magazine and to run the business part time. Indeed, Mr Wallace agreed that he had never inquired about Ms Culligan’s expertise or managerial skills before deciding to commit Aco to the business. Furthermore, while Ms Wood devoted 27 to 30 hours a week to the Impulse business, for a significant portion of her period of employment she was regarded as performing unsatisfactorily. Mr D’Angelo and Mr Wallace would have had to take this into account in determining whether they would have caused Aco to proceed with the purchase had they known the truth.

83 For these reasons, the evidence is incapable of supporting a finding that had Mr D’Angelo and Mr Wallace known the true position concerning Ms Wood’s hours of work on the Impulse business, they would not have caused Aco to purchase the business. Subject to a challenge, discussed below, to the primary Judge’s findings as to Ms Wood’s hours of work on the Impulse business, Aco’s notice of contention fails on the causation issue.

Ms Wood’s Hours of Work

84 Mr Manousaridis submitted that this Court should set aside the primary Judge’s finding that Ms Wood devoted 67% to 75% of her time to the Impulse business and should find that Ms Wood worked full time or nearly full time on the Impulse business.

85 Although the primary Judge considered that Ms Wood’s evidence was “unsatisfactory”, he took into account that it was common ground Ms Wood had worked on all Unimail’s magazine businesses. His Honour also expressly took into account matters relied upon by Mr Manousaridis in this Court. These included the fact that the commission incentive in Ms Wood’s remuneration package related solely to the Impulse business and that she had failed to sell any advertising space for other publications produced by Unimail. His Honour was clearly aware of Mr Wallace’s claim that Ms Wood had stated to him in mid-2006 that she had spent over 90% of her time on the Impulse business while at Unimail. However, his Honour did not consider that Mr Wallace’s claim warranted finding that she had worked on the Impulse business for at least 90% of her time.

86 Mr Manousaridis did not identify in his submissions to this Court any evidence unequivocally indicating that Ms Wood worked substantially full-time in the Impulse business. For example, the targets Ms Culligan set for Ms Wood were consistent with her spending no more than two-thirds to three-quarters of her time on the Impulse business. Similarly, a letter describing Ms Wood’s position as “Business Development Manager” and setting out her salary and commission entitlements was equivocal on the question of the proportion of time Ms Wood devoted to the Impulse business.

87 The findings made by the primary Judge were based, in large part, on his assessment of the oral evidence of Ms Culligan and Ms Wood. Aco has not demonstrated any ground for setting aside these findings. Accordingly, this aspect of the Notice of Contention fails.

Causation – The Agreement for Sale

88 We have addressed the question of causation without reference to the appellant’s contention that his Honour erred in assessing the significance of the terms of the Agreement for Sale in relation to this question. We have taken this course because the appellants’ contention, if correct, can only further weaken Aco’s case.

89 The relevant principles as to the significance of contractual disclaimers are well established and were summarised by French CJ in Campbell v Backoffice Investments, (at 622 [31]):

“Where the impugned conduct comprises allegedly misleading pre-contractual representations, a contractual disclaimer of reliance will ordinarily be considered in relation to the question of causation. For if a person expressly declares in a contractual document that he or she did not rely upon pre-contractual representations, that declaration may, according to the circumstances, be evidence of non-reliance and of the want of a causal link between the impugned conduct and the loss or damage flowing from entry into the contract. In many cases, such a provision will not be taken to evidence a break in the causal link between misleading or deceptive conduct and loss. The person making the declaration may nevertheless be found to have been actuated by the misrepresentations into entering the contract. The question is not one of law, but of fact.”

See also Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd [1989] FCA 46; ATPR (Digest) 46-048, at 53,146 [7], per Morling and Wilcox JJ; Poulet Frais v Silver Fox, at 232 [101]-[103], per curiam.

90 The primary Judge did not approach the question of causation in the manner required by the authorities. As the appellants correctly submitted, he first found that the representations materially contributed to Aco’s decision to purchase the business. Only then did he turn to consider the significance of the terms of the Agreement for Sale. Although his Honour referred briefly to evidence given by Mr Wallace, he seems to have understood the question to be whether the contract should be “construed to have covered the field of the arrangements made between the parties”. He did not consider Mr Wallace’s evidence as an element of the material that had to be considered on the factual question of whether there was a causal link between the appellants’ misleading and deceptive conduct and the loss and damage flowing from Aco’s entry into the Agreement for Sale.

91 Mr Wallace’s evidence was that his solicitor had taken him through each of the clauses in the Agreement for Sale and that he was aware of both cl 13 and cl 19 (the whole agreement clause). His cross-examination included the following:

“Q. You would’ve gone over clause 13 with Mr Scarfone?
A. Yes, I was aware of that clause.

Q. And you were aware of it because you were a business broker?
A. Yes.
Q. And because you understood warranties, representations and exclusions in contracts for sale of business?
A. Yes.
Q. So when you read that and, in particular, clause 13.4 you would have understood what that meant and agreed with it?
A. Yes.

Q. Can I also take you to page 28 and to clause 19.4. Do you recall whether that clause was included in the contract that you reviewed?


A. I don’t recall.

Q. But you understand the effect of that clause?
A. Yes.

…
Q. And you agree with me that the time you saw Mr Scarfone prior to 14 December 2005 the contract – or, sorry, amendments could be proposed to the contract and you didn’t have to be bound by the contract that was put forward by UniMail’s solicitors at the time?
A. Yes.”

92 In our view, the primary Judge’s approach to the question of causation, in particular the significance of Mr Wallace’s understanding of cll 13 and 19 of the Agreement for Sale, was in error. This conclusion provides an independent reason for allowing the appeal.

93 It is unnecessary to determine whether this Court is in a position to make a finding that, when Mr Wallace’s understanding of the Agreement for Sale is taken into account, Aco did not rely on any misleading or deceptive conduct on the part of the appellants. We have already concluded that the evidence does not support Aco’s case on causation.

DAMAGES

94 It is not necessary to consider the appellants’ challenge to his Honour’s assessment of damages, in particular his conclusion that it was not necessary to reduce the damages award by reason of Aco having to pay an excessive purchase price having regard to the true circulation figures. The appellants’ arguments raise the question of whether this is a case of concurrent causes of loss as discussed by the High Court in Henville v Walker [2000] HCA 52; 206 CLR 459.

95 The issues raised in relation to the assessment involve questions of legal principle, rather than analysis of the facts. Such principles are best addressed in a case in which they have a direct bearing on the outcome. In the present case they are rendered moot by the findings on liability. Furthermore, little time was devoted to them on the hearing of the appeal.

CONCLUSION

96 The appeal must be allowed. The orders made by the primary Judge should be set aside. In lieu of those orders, the judgment should be entered for the appellants (the first and second defendants) against Aco (the plaintiff). Aco should be ordered to pay the appellants’ costs of the trial and of the appeal. Aco, if otherwise qualified, should have a certificate under the Suitors Fund Act 1951 (NSW).

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12/10/2009 - Incorrect spelling of name of counsel for the respondent. - Paragraph(s) Coversheet and paragraph 3.