Dalecoast Pty Ltd v Guardian International Pty Ltd - [2004] WASC 82

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: DALECOAST PTY LTD -v- GUARDIAN INTERNATIONAL PTY LTD & ORS [2004] WASC 82

CORAM: MCKECHNIE J

HEARD: 3 MARCH 2004

DELIVERED : 7 MAY 2004

FILE NO/S: CIV 2453 of 1996

BETWEEN: DALECOAST PTY LTD
Plaintiff
AND
GUARDIAN INTERNATIONAL PTY LTD
First Defendant
GUARDIAN PROTECTIVE COATINGS PTY LTD
Second Defendant
ANTHONY MAURICE MONISSE
GRANT DESMOND BOYCE
GARY JOHN DWYER
ANTHONY PETER WARREN
Third Defendants
ROBERT BRUCE ARUNDEL SMITH
ALAN FREDERICK BAMFORD
Fourth Defendants

Catchwords:

Trade Practices Act - Damages for misleading and deceptive conduct - Whether "no transaction" claim - Principles for award - Case turns on own facts

Legislation:

Trade Practices Act, s 52, s 82

Result:

Damages assessed

Category: B

Representation:

Counsel:

Plaintiff:     Mr D H Solomon & Mr J C Giles
First Defendant             :     No appearance
Second Defendant         :     No appearance
Third Defendants          :     No appearance
Fourth Defendants        :     Mr P G Clifford

Solicitors:

Plaintiff:     Solomon Brothers
First Defendant             :     No appearance
Second Defendant         :     No appearance
Third Defendants          :     No appearance
Fourth Defendants        :     Tottle Partners

Case(s) referred to in judgment(s):

Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
Dalecoast Pty Ltd v Guardian International Pty Ltd & Ors [2001] WASC 199
Dalecoast Pty Ltd v Guardian International Pty Ltd & Ors [2003] WASCA 142
Henville v Walker (2001) 206 CLR 459
Kenny & Good v MGICA (1999) 199 CLR 413
Murphy v Overton Investments Pty Ltd [2004] HCA 3; 204 ALR 26
Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; 196 ALR 257
Sharp & Dymond v Ramage (1995) 12 WAR 325

Case(s) also cited:

Armory v Delamirie (Chimney Sweeper's case) (1722) 1 Stra 505
Browne v Dunn (1893) 6 R 67
Caratti v The Queen (2000) 22 WAR 527
Clef Aquitaine SARL v Laporte Materials (Barrow) Ltd [2001] QB 488
Gould v Vaggelas (1985) 157 CLR 215
Hussey v Eels [1990] 2 QB 227
Potts v Miller (1940) 64 CLR 282
Purkess v Crittenden (1965) 114 CLR 164
Russo v Aiello (2003) 201 ALR 231
Tay v Koh, unreported; SCt of WA; Library No 980290; 28 May 1998
Toteff v Antonas (1952) 87 CLR 647
Vetter v Lake Macquarie City Council (2001) 202 CLR 439
Watts v Rake (1960) 108 CLR 158

MCKECHNIE J:

Introduction

After a lengthy trial Dalecoast's action for damages and other relief against three defendants was dismissed.
In the action between Dalecoast and Guardian International, I ordered:
"As to the first defendant, the plaintiff is entitled to an order for damages to be assessed in relation to the breach of contract in supply of graffiti coating products to Graffiti Proofing Sign Service Pty Ltd ['GPSS']." [cfc]
The decision is reported as Dalecoast Pty Ltd v Guardian International Pty Ltd & Ors [2001] WASC 199.
From that decision Dalecoast appealed on many grounds. The first, second and third defendants cross‑appealed against the order for damages to be assessed. The Full Court dismissed most grounds of appeal and dismissed the cross‑appeal. Nothing more need be said about those issues. The Court, by a majority, allowed the appeal against Guardian International and Messrs Smith and Bamford: Dalecoast Pty Ltd v Guardian International Pty Ltd & Ors [2003] WASCA 142.
The order allowing the appeal relevantly reads as follows:
"2.1Paragraph 2 of the Judgment ordering that the appellant's (plaintiff's) claim against the first respondents (first defendants) and the fourth respondents (fourth defendants) be dismissed be set aside and in lieu thereof it be adjudged and ordered that appellant (plaintiff) be entitled to damages pursuant to s.82 of the Trade Practices Act 1974 against the first respondent (first defendant) and the fourth respondents (fourth defendants) to be assessed in respect of the misleading or deceptive conduct in the negotiations preceding and the entry into or acquisition of the GCN franchise and the GCS franchise. Such assessment shall be conducted by, or as otherwise ordered by, the learned trial Judge."
I interpose at this point in the narrative to deal with an argument raised by the fourth defendants on the terms of the order and the phrase "or as otherwise ordered by". To my mind, the construction of the order is quite clear. That phrase gave me a discretion to conduct the assessment or order that it be conducted in some other way; that is, by a Master or perhaps an assessor. There is no other significance in the phrase and as I have decided to conduct the assessment myself, the issue becomes immaterial.
At a directions hearing held 11 September 2003 various orders were made including an order for the filing of affidavits containing further evidence relating to the assessment of damages ordered by me on 7 December 2001.
Pursuant to that order, Mr Thorpe, one of the directors of Dalecoast, filed an affidavit in support of the damages claim on 13 October 2003.
At a further directions hearing held on 18 February 2004 it was indicated by the defendants that no objection was taken to the contents of Mr Thorpe's affidavit. There was no application to expand the evidence in relation to the issue of damages under the Trade Practices Act s 82, the ground which was successful in the Full Court.
On 27 February 2004 Guardian International filed a notice that it had instructed its previous solicitors to cease acting for it and that it would henceforth act for itself. Consequently, at the hearing for assessment of damages, on 3 March 2004, there was no appearance for Guardian International. At trial Messrs Smith and Bamford had been represented by Mr P G McGowan of counsel but since that time Mr McGowan has been appointed Chair of the Town Planning Appeal Tribunal. Mr Clifford of counsel, who had previously appeared for the first, second and third defendants, appeared for Messrs Smith and Bamford, whose interests coincided with those of Guardian International on the issue of damages under Trade Practices Act s 82.
From the chronology I have outlined, it is obvious there are two distinct areas for assessment of damages:
•Damages to be assessed against the first defendant for breach of contract in supply of graffiti coating products to GPSS for a period which I find to be from 1 February 1994 (Thorpe affidavit par 6) until 12 December 1994 (judgment - [91], [92]).
•Damages to be assessed against the first defendant and the fourth defendants pursuant to s 82 of the Trade Practices Act in respect of misleading and deceptive conduct in the negotiations preceding and the entry into or acquisition of the GCN franchise and GCS franchise.

Damages for supply to GPSS

Mr Thorpe's affidavit was read by counsel for Dalecoast. I accept the affidavit as uncontested evidence of the facts outlined within it and have regard to those facts. Mr Thorpe annexed to his affidavit extracts from the order book of GPSS. Those extracts, in the main, match invoices from Guardian International.

Coating

The order books discloses delivery of anti‑graffiti coating ("coating") within the relevant period as follows:

25 March 1994	20 litres
29 March 1994	20 litres
15 April 1994	20 litres
3 May 1994	20 litres
7 June 1994	100 litres
18 July 1994	20 litres
23 September 1994	20 litres
TOTAL	220 litres

During the relevant period the order books show requests for graffiti remover ("remover") as follows:

27 May 1994	2 litres
7 June 1994	10 litres
21 October 1994	4 litres
TOTAL	16 litres

Mr Thorpe deposed that from May 1994 Dalecoast had a usual or standard rate for the supply of and application of anti‑graffiti coating to signs and similar applications of $35 per square metre although that standard price might be varied to take account of jobs that would cost Dalecoast more, or jobs that would cost Dalecoast less. In calculating the assessment of damages, I have taken the figure of $35 per square metre as a reasonable estimate.
Mr Thorpe deposed that 1 litre of coating covered an area between 8 ‑ 10 square metres when the area was metal or plastic signs. The procedure for doing signs was slightly different from that of other materials in that a procedure called "tacking off" was necessary to prevent the vinyl lettering on the sign being fried.
A coverage of between 8 - 10 square metres at $35 per square metre gives a range of between $280 - $350 per litre.
Mr Thorpe deposed that the average costs of application of coating per litre were as follows: Coating $20.50; labour at $10 per square metre $80 - $100; other costs not more than $10 per square metre [sic]. This gives a range of costs between $110.50 and $130.50 per litre. The gross profit therefore is between $169.50 to $219.50 per litre.
I accept all these figures. Having regard to my general impression formed during the course of the trial as to the application of coating, I think it is reasonable to average the coating coverage at 9 square metres per litre. There is no precise way to calculate the actual labour costs which I will also average at $90 per litre. The cost per litre of $20.50 remains constant and I will adopt the cautious figure of $10 per litre for sundry costs.
I calculate the assessment of damages for the breach of contract in relation to graffiti coating as follows:

Graffiti Coating Coverage Rate per litre - 9 m² Average price per m² - $35 Gross Profit per litre (9 x $35)	$315.00 per litre
Less Cost of coating $20.50 per litre Labour Costs $90.00 per litre Sundry Expenses $10.00 per litre $120.50	$120.50
Net profit per litre	$194.50
Damage from breach of contract in respect to coating: 220 x $194.50	$42,790.00

I accept Mr Thorpe's figures that removal of graffiti was charged at an average price of $35 per square metre. I accept his figures of an average coverage of 8 square metres per litre.

Graffiti Remover

Coverage Rate per litre - 8 m²

Average price per m² - $35

Gross Profit per litre (8 x $35)

$280.00 per litre

Less

Cost of remover $7.50 per litre

Labour Costs $45.00 per litre

Sundry Expenses $20.00 per litre

$72.50

Net profit per litre

$207.50

Damage from breach of contract in respect of remover:

16 x $207.50

Add damages for coating:

$3,320.00

42,790.00

Assessed Damages for breach of contract

$46,110.00

In view of the circumstances as I have outlined, no argument as to an alternative calculation was addressed to me. The defendants' cross‑appeal having been dismissed, nominal damages are inappropriate. Further, I do not regard the mere loss of profit on the sale of coating and remover as in any way an adequate or appropriate method of calculation of the damages. Dalecoast might well have chosen to do the jobs itself as the franchisee.
I find for Dalecoast as against the Guardian International damages for breach of contract in the sum of $46,110.

Damages pursuant to the Trade Practices Act s 82

All the Judges in the Full Court agreed that Guardian International had been guilty of misleading and deceptive conduct (s 52 of the Trade Practices Act) by failing to advise Dalecoast that its rights to the remover were limited, and in fact limited to a term expiring on 30 June 1995. Messrs Smith and Bamford were knowingly concerned in that conduct. At the hearing of the appeal the respondents contended that there was nothing to support the conclusion of actionable misrepresentation because the cause or relationship between the conduct and the acquisition of franchises was not established. This contention was rejected. Murray J (Wallwork J agreeing) held at [56] that the capacity to supply and apply the remover on an indefinite basis was a substantive consideration for Dalecoast to enter into the franchises. It may not have been a dominant or major part of the franchise business but it was a substantive part and in that regard Dalecoast, having been induced to enter into the franchise agreements by all representations, including that in breach of the Trade Practices Act s 52, suffered the loss in that it got less of an asset in respect of the remover than it had been promised. Murray J held that the remedy for contravention of the Trade Practices Act would be an award of damages assessed as for a tort rather than as in contract. The measure of damages would therefore be the measure of the diminution in the worth of the rights and licences acquired by Dalecoast related to the conduct and representations in respect of the remover: Sharp & Dymond v Ramage (1995) 12 WAR 325 per Ipp J at 332 - 333 [109]. Murray J regarded the contention that the franchises were worthless as a non‑issue. He opined that the franchises certainly had a value although it was equally apparent that the value to Dalecoast was not as great as if it was acquiring indefinitely an exclusive right to the remover: [110] and [111]. Murray J disagreed with Anderson J that Dalecoast should not be permitted to have the damages assessed on the basis that the value of the franchise was, if not worthless, at least diminished, because he did not see this as a different basis of the claim to that pleaded. Anderson J held at [123]:
"The amount of $315,720 is the total purchase price of the franchise business including of course the business of applying the graffiti coating product which on the whole of the evidence was the major business activity. It is not alleged that the first respondent engaged in any misleading or deceptive conduct with respect to that product. Therefore the appellant failed to establish that it had been induced by the misleading and deceptive conduct to acquire a worthless business. On the whole of the evidence the appellant operated the franchise successfully and profitably for several years."
As a result, Anderson J concluded, as a minority view:
"…there is no evidence upon which an award of damages can be assessed. There is no evidence of comparative values nor is there any evidence that the appellant would not have purchased the business but for the misleading and deceptive conduct. There is no evidence that the appellant has suffered operating losses which it would not have suffered but for the misleading or deceptive conduct."

The assertion that the franchises were worthless is no longer open

Dalecoast continues to assert that the acquisition of the rights under the franchise was worthless so that the loss is the total amount paid for the GCN and GCS franchises was $238,000 and $87,720 respectively.
Dalecoast places weight on Mr Bird's evidence that: "…we could get product as good, and that was quite clear to us, for a lot cheaper price" in support of submissions that the franchise agreements were worthless.
However, this is a re‑argument of a matter which has been decided adversely to Dalecoast. Mr Bird's evidence does not affect the finding at [66] of my judgment. The Full Court unanimously held that the franchises had a value.
In view of the reasons of the Full Court as outlined, the proposition that the franchises were worthless is no longer open. Furthermore, my conclusions at [47], [64], [65], [66] and [70] were not disturbed on appeal. In view of the conclusions at first instance, and on appeal, I proceed on the assessment of damages on the basis that Dalecoast acquired a valuable asset in the franchise agreements. However, that asset was less valuable because of the misleading and deceptive conduct concerning representations as to the permanency of the supply of graffiti remover.

The claim that Dalecoast would not have entered into the franchises

The foregoing does not preclude Dalecoast from asserting that it would not have entered into either franchise agreement except for the misleading and deceptive conduct. Such a claim is clearly open in law: Kenny & Good v MGICA (1999) 199 CLR 413 per Gaudron J at [19], [20] and [21]; Gummow J at [83] and [92]. Although Kenny & Good v MGICA concerned a tort, the principles are applicable.
In Kenny & Goodv MGICA the valuation was decisive and therefore satisfied the "but for" test. In Henville v Walker (2001) 206 CLR 459 the Court held that the real estate agent's misleading or deceptive conduct was one of two concurrent causes of loss and that was enough to enable damages to be recovered. A majority of the Court (McHugh, Gummow & Hayne JJ) held that the appellant was entitled to recover the whole of the amount lost on the project on the grounds that this was what he had suffered by way of prejudice or disadvantage in consequence of altering his position by reason of the breach of the Act. In that case, there was evidence as McHugh J accepted at [76]:
"Mr Henville would not have proceeded with the project unless he believed that it was likely to realise a minimum profit of $80,000."
He concluded that the Full Court had erred when he said at [78]:
"…They [The false and misleading statements] were as inextricably linked with Mr Henville's decision to proceed with the project, as they were at the heart of the profitability computation in the feasibility study."
Henville v Walker is also authority for the position as stated by McHugh J at [144]:
"Given its findings as to causation, it was strictly unnecessary for the Full Court to address the issue of damages. Nevertheless, it held that the approach of Anderson J had no justifiable basis in law. In my opinion, the Full Court was correct in so holding. With respect, the approach of Anderson J overlooks one of the fundamental purposes of the Act -- which is to protect consumers from being induced to enter into agreements and transactions by false or misleading conduct. The loss to a consumer from acting on such an inducement will usually be greater than the amount recoverable by treating the representation as a warranty. An award of damages under s 82 will therefore ordinarily be inadequate to achieve one of the main purposes of the Act unless the claimant is compensated for what he or she has 'suffered in consequence of his [or her] altering his [or her] position under the inducement of the fraudulent misrepresentations'".
At [155] Hayne J posed the question:
"The question is to what extent, if any, did the appellants suffer loss 'by' (that is, caused by) the respondents' misleading conduct?"
In Murphy v Overton Investments Pty Ltd [2004] HCA 3; 204 ALR 26 the case proceeded on the basis, as Gaudron J points out at [23]:
"…But the trial judge also reached critical conclusions favourable to the appellants which partly depended on the second of those two findings. These conclusions were that the statement of an estimate of outgoings implied that all expenditure that could properly be taken into account in forming the estimate had been taken into account; that since it had not been, the respondent's conduct was misleading or likely to mislead in contravention of s 52 of the Act; and that if the truth had been revealed, the appellants would not have entered the lease. …"
The High Court in Murphy v Overton Investments concluded there was an error in deciding that the Murphys had not proved that they had suffered any loss or damage. It was incorrect to assume that in every misrepresentation case, the only type of damages that could be redressed were differences between price and value, or any consequential losses. Although there was no evidence that the Murphys did not receive value for the maintenance fees they paid, it did not necessarily follow that they did not incur loss.

The critical issues in the assessment of damages

1.Would Dalecoast have entered into the franchise agreements but for the misleading and deceptive conduct? If the answer to that question is no, then the measure of loss may well be the recovery of the purchase price.
2.If the answer is yes, it might be accepted that Dalecoast has nevertheless suffered loss. There is no evidence of actual loss in the sense of approved diminution. However, having regard to Murphy v Overton, and applying commonsense, Dalecoast got less than it bargained for even if it is difficult to quantify the damage.

In such cases calculation of damages under the Trade Practices Act s 82 may be close to being guess or speculation: Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; 196 ALR 257 per Hayne J at [38]. This is a case where Dalecoast cannot adduce precise evidence of what has been lost.

The evidence at trial

The answer to the first question is a matter of fact, not law. In the cases to which I have referred, and the others to which Dalecoast has made reference, there were findings of fact that the transaction would not have proceeded if the true position was known. I return to the evidence at trial.

Mr Peter Alan Robinson

Mr Robinson gave evidence that he first came across an anti‑graffiti product called "Guardian" while working for Quality Glass and Maintenance. That company was using anti‑graffiti products because the shopping centres requested it. They used Guardian Products and Mr Robinson applied or supervised the application. Mr Robinson then went to work for Graffiti Coatings Australia, as a salesman, selling Guardian products and getting removal jobs and Guardian anti‑graffiti coating jobs for Graffiti Coatings Australia. That involved selling a coating product and a remover product. Mr Robinson approached Alan Bamford towards the end of November 1993 asking whether there might be a franchise available. Bamford said the Graffiti Coatings North franchise was up for sale because he had already sold the south franchise. Mr Robinson was told the price was around $250,000. Mr Robinson spoke to Mr Thorpe who was quite interested to find out a bit more about it.
Mr Robinson gave evidence of a meeting in December 1993 at Bob Smith's house:
"…we asked questions about the business, you know, about the products and this and that and the other and what they would involve, what would come with the franchise business. We were told we would get the exclusive rights to the Guardian products for north of the river."
There was a representation made that they (Robinson and Thorpe) would get the exclusive rights to the product. They were given a price of $238,000 which was said to be non‑negotiable. There was no further negotiation about price. Bob Smith said that they developed the actual products of Guardian and the remover:
"So when you say the Guardian, you mean the coating?‑‑‑Guardian anti-graffiti coating and the Guardian remover which was in the agreement."
…
"…They said they developed them products and they had exclusive rights to them products."
The four men had another meeting at their warehouse. Mr Robinson said:
"We were interested in purchasing it [the franchise agreement] because we felt we were getting exclusive rights to the product."
Messrs Robinson and Thorpe were given a profit and loss statement and other financial documents which were admitted into evidence as Exhibits 30 and 31, and handwritten notes Exhibit 32. They took advice from an accountant, Mr David Robinson:
"We took these figures and a copy of the agreement down because David and I aren't accountants, we're just builders, so we needed some advice on the figures, based on the figures that we were given, to see whether it was a good business or a good franchise or whatever."
The accountant said:
"Yes, based on this it looked a good proposition, really."
Under cross-examination by Mr Clifford, Mr Robinson agreed that he knew there were two steps in the process and:
"I knew how the product worked. When you apply the coatings you don't necessarily get the removal jobs after that."
And:
"…We thought at the time we were getting a good business and exclusive products but we weren't.
…
…Dalecoast did other works other than graffiti. Graffiti was only a franchise which was part of our business because we did a lot of building and maintenance work and he was a glazier and we did a bit of glazing work. We all had our own trades."
The franchise business being purchased by Messrs Robinson and Thorpe was for the protection against and removal of graffiti. The product that was used in the business was to be used for the business of removing and protecting against graffiti.
Under cross-examination by Mr McGowan, Mr Robinson described the application of remover; and the mixing part A and part B. There is a pot life of 3 to 4 hours. The remover was used to clean the equipment. A selling point for the anti-graffiti protective coating was that they could put the coating on a surface and it would enable graffiti to be removed from that surface a number of times. When cross‑examined about meetings with Smith and Bamford, Mr Robinson said he asked about the types of customers they had and was told there were contracts in place and relationships with certain customers and organisations which would enable Dalecoast to go to those customers for work.

Mr David Francis Thorpe

The evidence of Mr Thorpe was that at the meeting with Smith and Bamford, Smith said:
"If you buy the franchise you will get the rights to the product in the area where you buy."
"The product" was "Guardian and the removers".
At a subsequent meeting at the warehouse, Mr Thorpe was a bit concerned about the price to be paid for the franchise:
"It was very expensive but Bob then gave some figures and said, 'This is what it is taking'."
Mr Thorpe was handed some figures which were said to be the turnover figures for the last 6 months. He gave them to his accountant, Mr Laurie Praed, and Laurie said:
"Well, if this is right, you're on a real winner here, David."
Mr Thorpe then took the figures to another accountant, Mr David Robinson, and discussed the rights that they were getting with the accountant. At the second meeting Bob Smith turned round and said: "You buy this. You get the rights to the product within your area." After seeing Mr David Robinson, Messrs Thorpe and Robinson decided to buy the GCN franchise. Mr Cross at the Challenge Bank did not give them a loan but said it was a good business. Mr Thorpe said in answer to a question from Mr Solomon:
"When this document was signed, when you signed it, what things were you were relying on in doing that?‑‑‑Before we signed this document we had lots of people look at it, accountants, everything, who were used to franchise documents and I understood that we were buying - in the area in the north franchise - the rights to use the coating and the remover in the area we'd bought exclusively."
When they commenced in the GCN franchise business Mr Thorpe said:
"…We also did, when we first signed up, I was still finishing off some building works, small extensions and suchlike.
…We dropped the small extensions. I didn't have time. We more or less concentrated on the coatings."

Conclusions on the evidence

Neither Mr Robinson nor Mr Thorpe said in evidence words to the effect that I would not have entered into the franchise agreements if I had known that the rights to the remover were only for a limited period. If I had known that I was not acquiring an indefinite exclusive right to the remover I would not have entered into the contract.
This lack of evidence constitutes a considerable obstacle to Dalecoast's claim. Dalecoast submits that on the whole of the evidence an inference can and should be drawn that this is a "no transaction" claim. However, I am reluctant to draw an inference as to the existence of a fact when two witnesses capable of giving direct evidence of a fact do not do so. On the whole of the evidence, including that of Mr Robinson, Mr Thorpe, and Mr Smith, I find the predominant motive for entering into the franchise agreement was the apparently healthy turnover figures and profit and loss statement. The prospect of continuing work from existing customers was also a factor. The bulk of the business was generated substantially from application of coating. Application of remover, while an important part of the business, was not by any means the main income generating component. The probabilities are that Messrs Robinson and Thorpe would have entered into the franchise agreements in any event even if they had known the true position about the remover. Continued exclusive supply of remover was a factor, especially a remover branded "Guardian". However, it has not been proved that if the true position had been known, Messrs Robinson and Thorpe would have walked away from the transactions. I am satisfied they would still have entered into the franchises but especially in the case of GCN they would have used the non‑exclusivity as a lever to try and negotiate a purchase price lower than $238,000.
Mr Solomon argued that the only purpose of having the coating is to be able to repeatedly remove graffiti non‑sacrificially and to have the rights to the coating and not the remover is to make the franchise effectively worthless.
Mr Solomon illustrated his submission with an analogy:
"It is like having the rights to use the bottom 10 rungs of a ladder when the sole purpose of a ladder is to reach something above 20 rungs."
However, Mr Robinson conceded in his evidence that on occasions people who had contracted for coating did not return for remover.
Of course, as Mr Robinson noted, on other occasions people came for remover who had not purchased coating. Mr Solomon's analogy, though vivid, is not in accord with the evidence.
I find that the coating was the dominant part of the business and capable of generating income whether or not the rights to the remover were for the life of the franchise. It is clear from the evidence that there were other removers available which would remove graffiti so long as a protective coating had been applied to the wall or structure.
Dalecoast, through Mr Robinson and Mr Thorpe, would have entered into the franchise agreements even if it had it known the true position which was that the rights to the remover were only secure and exclusive for some 2 years.

The quantum of damages

Mr Clifford argued that the award of damages for breach of the Trade Practices Act s 82 should be nil because Dalecoast has failed to prove its damages.
That certainly was the view of Anderson J in the Full Court but he was in dissent on this aspect and the majority view as reflected in the order was, as expressed by Murray J at [111]:
"… the franchises certainly had a value, although it seems to me, as I have already said, to be equally apparent that the value to Dalecoast was not as great as if it was acquiring indefinitely an exclusive right to remover. The measure of those damages will be for the assessment process."
Mr Clifford argued that Dalecoast has not proved diminution in value or loss in any of the traditional ways that proof might be given and therefore I should assign a nil, or perhaps a nominal, value to damages. He argued that I am bound by the Full Court where Murray J said [109]:
"…the remedy for the contravention of the trade practices legislation would in this case, in my opinion, be an award of damages assessed as for a tort rather than as in contract..."
Mr Clifford further argued that there was no loss at an operating level and no extra cost, therefore, as a measure of damages as for a tort, Dalecoast has failed to establish damages. I accept there is no evidence of loss at any operating level and no evidence that the lack of exclusivity caused any operating loss. I acknowledge the duty of a trial judge to loyally follow the judgment of the Full Court but I decline to assess damages as for a tort for two reasons. I consider that the passage from Murray J [109] is not binding but obiter dicta intended to assist. I reach this conclusion because the subsequent order of the Full Court gave an unfettered discretion to award damages.
The second reason is that I consider the approach to assessment of damages under the Trade Practices Act s 82 is laid down in Murphy v Overton Investments, a decision which is binding upon me and is later than the Full Court's judgment.
In Murphy v Overton Investments Pty Ltd the Full Court laid down general principles, particularly at [44], [45] and [46]:
"44 This Court has now said more than once that it is wrong to approach the operation of those provisions of Pt VI of the Act which deal with remedies for contravention of the Act by beginning the inquiry with an attempt to draw some analogy with any particular form of claim under the general law. No doubt analogies may be helpful, but it would be wrong to argue from the content of the general law that has developed in connection, for example, with the tort of deceit, to a conclusion about the construction or application of provisions of Pt VI of the Act. To do so distracts attention from the primary task of construing the relevant provisions of the Act. In the present case, analogies with the tort of deceit appear to have led to an assumption, at least at trial, that a person can suffer only one form of loss or damage as a result of a contravention of Pt V of the Act.
45The Act's references to "loss or damage" can be given no narrow meaning. Section 4K of the Act provides that loss or damage includes a reference to injury. It follows that the loss or damage spoken of in ss 82 and 87 is not confined to economic loss. What kinds of detriment constitute loss or damage, when a detriment is to be identified as occurring or likely to occur, and what remedies are to be awarded, may all raise further difficult questions. Especially is that so when it is recalled that remedies may be awarded to compensate, prevent or reduce loss or damage that has been or is likely to be suffered by conduct in contravention of the Act.
46In Wardley Australia Ltd v Western Australia, a case about the application of s 82 of the Act, not s 87, a majority of the Court held that risk of loss is not itself a category of loss, and that, if a plaintiff enters a contract which exposes the plaintiff to a contingent loss or liability, that plaintiff 'sustains no actual damage until the contingency is fulfilled and the loss becomes actual'. Wardley illustrates that it is necessary to identify the detriment which is said to be the loss or damage which has occurred (or, when considering the application of s 87, has occurred or is likely to occur). In that case, the mere entry into obligations which might, but need not, have had detrimental consequences in the future was held not to have occasioned loss or damage to the party making the contract."
The fact that damages may be difficult to assess is no bar to recovery. In Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd Hayne J said at [38]:
"It may be that, in at least some cases, it is necessary or desirable to distinguish between a case where a plaintiff cannot adduce precise evidence of what has been lost and a case where, although apparently able to do so, the plaintiff has not adduced such evidence. In the former kind of case it may be that estimation, if not guesswork, may be necessary in assessing the damages to be allowed…"
I regard the present case as one of the former and so it is necessary to estimate to some degree what the loss is even if difficult: Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 per Mason CJ and Dawson J at 83.
The franchise agreement was for an indeterminate period and the false and misleading representation was that there would be exclusive rights to the remover for the whole of the period of the franchise agreement.
In reality, of course, the remover was available during the period of the franchise agreement. However, this is a factor of only slight relevance. Dalecoast did not receive all that it bargained for. Had Dalecoast wished to transfer the franchise to another party, for value, it could not transfer an exclusive right to the remover.
Some guide as to damage is the amount of profit which may be attributed to the remover during the period of the franchise. Although the franchise agreement was for an indeterminate time, in fact the franchise agreement was terminated after some years.
Murray J held at [51]:
"…about 75 per cent of the worth of the business in broad terms could be attributed to the supply of anti‑graffiti coating. At all events, it would seem clear that the supply and application of remover was much the lesser part of the remunerative work carried on by the business…"
I am unsure how Murray J reached the figure of 75 per cent - a figure I regard as more an observation than a finding.
As at 30 June 1994, when Guardian International was still in the hands of Messrs Smith and Bamford, the return of income over cost for coating was about $180,000. The return of income over cost for remover was about $22,000. On that basis, sales of the remover to GCN‑GCS accounted for about 12 per cent of the business. This reflected the percentage difference during the period that Messrs Smith and Bamford had the business. A further minor illustration is provided by the comparison between coating and remover in relation to GPSS set out earlier in this judgment.
It is not possible to apply the same logic to the profit and loss statements of Dalecoast because it was engaged in other painting works besides the application of Guardian coating and remover. However, it is clear, on any measure, that sales and application of the anti‑graffiti coating constituted the bulk of the business and sales and application of the remover was very much a lesser part of the income stream and profit.
Dalecoast's loss or damage did not crystallise on the day it entered into each franchise agreement. The loss or damage continued for the life of the franchises. As previously noted, the franchises terminated and so there is no continuing loss.
Although in assessing damages I have had regard to the ratio between application of coating and application of remover, I cannot assign a percentage to the loss sustained for each franchise. That would be to cloak an estimation with the costume of precision. In any event, there is both a compensatory element and a public interest element in the assessment of damages for breach of the Trade Practices Act.
After weighing all the considerations I have set out, and applying the various findings the Full Court has either made or left undisturbed from my first judgment, I assess the plaintiff's damages under this head in respect of both franchises at $55,000.

Conclusion

The plaintiff is entitled to damages in the sum of $46,110 from the first defendant and to damages in the sum of $55,000 from the first and fourth defendants.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: DALECOAST PTY LTD -v- GUARDIAN INTERNATIONAL PTY LTD & ORS [2004] WASC 82 (S)