Di Beradino v GDF Partners (a firm)

SUPREME COURT OF VICTORIA

CAUSES JURISDICTION

Not Restricted

No. 4056 of 1996

DARIO DI BERADINO AND

KATARINA DI BERADINO

Plaintiffs

GDF PARTNERS (A FIRM)

Defendants

---

JUDGE:	McDONALD, J.
WHERE HELD	Melbourne
DATES OF HEARING:	22, 23, 24, 25, 26, 29 and 30 September 1997 1, 2, 3, 6, 7, 8, 9, 10 and 13 October 1997
DATE OF JUDGMENT:	10 August 1998
MEDIA NEUTRAL CITATION	[1998] VSC 22

---

CATCHWORDS:

Negligence - Negligent advice as to value of business given to purchaser - Damages, measure of, damages include interest paid on moneys borrowed to purchase business

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	MR I.R. JONES	Riordan & Partners
For the Defendants	MR D.G. COLLINS	Phillips Fox

HIS HONOUR:

In these proceedings the plaintiffs claim damages against G.D.F. Partners (a firm) in negligence for economic loss allegedly suffered by them. The defendant firm has at all material times carried on business as accountants. At all times relevant to these proceedings the partners comprising the firm were George Demetriou and Michael Fotinelis. In this judgment I shall refer to the partners collectively as the defendants.
Pursuant to a contract of sale dated 1 August 1991, the plaintiffs purchased from Joannis (John) Skitzis and Helene (Helen) Skitzis a catering business conducted by them in partnership, for the sum of $168,000, which by the terms of the contract was apportioned as to $160,000 for goodwill and $8,000 for other assets. John and Helen Skitzis were the parents of the wives of the defendant partners, Demetriou and Fontinelis.
The premises from which the business was conducted and in which food used in the conduct of the business was cooked and prepared, were situated at 29 Dickson Street, Mt. Waverley. Pursuant to the contract of sale, the sale was conditional on the plaintiffs obtaining by lease, possession of these premises. By a lease dated 12 August 1991, the plaintiffs leased the premises for a period of five years. The rent provided by the lease for the first year was $14,820 per annum ($1,235 per month) which rent escalated in amount for each of the remaining four years of the lease in amounts specifically fixed by the terms of the lease. As appears from the lease, the owners of these business premises and the lessors were John and Helen Skitzis and the defendant partners Demetriou and Fontinelis and their respective wives, Anni Demetriou and Polito Fontinelis.
For a number of years before 1991, the plaintiffs had consulted the defendants and particularly Demetriou as their accountants. They first became acquainted with Demetriou and his wife Anni when in the early 1980s these persons became neighbours of the plaintiffs. The plaintiffs' home was situated at 3 Cash Grove, Mt. Waverley and Demetriou and his wife were their next door neighbours for a number of years while they occupied 5 Cash Grove. The plaintiffs became close personal friends with Demetriou and his wife. The relationship between Katerina Di Berardino and Anni Demetriou was particularly close. They continued to live as neighbours until 1988 when Demetriou and his wife moved to premises situated at Elwood. The premises at 5 Cash Grove were thereafter and have continued to be occupied by John and Helen Skitzis. The close relationship between the plaintiffs and Demetriou and his wife continued until or about the end of 1994 or early 1995.
In 1982, the second plaintiff consulted Demetriou as an accountant and he advised her as to the advisability of her purchasing, in conjunction with her mother, a sandwich bar and cafe business. He again advised the second plaintiff, as an accountant, on the sale of the business some few years later. In 1986, the plaintiffs consulted Demetriou as their accountant and he gave them financial advice with respect to funds becoming available to the first plaintiff from a superannuation scheme. At or about that time Demetriou gave financial advice to the plaintiffs with respect to the purchase of a rental property, the purchase of which they were able to undertake from the proceeds of the superannuation fund which became available to the first plaintiff. The defendants also, for a number of years before 1991 and thereafter until late 1994 or early 1995, acted as the plaintiffs' accountants in the preparation and lodgement of their income tax returns. This work involved the preparation and lodgement of a partnership return for the plaintiffs including that relating to the rental property which they owned and rented in partnership with each other.
At the time that the plaintiffs purchased the catering business in 1991 the first plaintiff was engaged in full time employment at Monash University as a research officer. Until about a month before the purchase of the catering business, the second plaintiff had been employed by a company as Victorian branch manager. Her employment had always involved accounts, sales and secretarial-type work.
In consequence of the fact that John Skitzis was their next door neighbour and also because of their close relationship with Demetriou and his wife Anni, the plaintiffs were aware that John Skitzis operated the catering business. In early 1991, on an occasion of a social nature, the plaintiffs discussed with Demetriou and his wife that the second plaintiff was interested in becoming involved in the conduct of a business. In a further discussion between the plaintiffs and Demetriou and his wife in March 1991, on an occasion of a social nature, Anni Demetriou said that her father, John Skitzis, was thinking of selling his catering business as he had not been well. The plaintiffs indicated that they could be interested in purchasing the business.
It was the plaintiffs' claim in these proceedings that thereafter and on a number of occasions they consulted Demetriou professionally as their accountant and sought his advice on whether they should purchase the business and were advised by him on that matter including the value or worth of the business, that they also sought and obtained his financial advice and assistance in obtaining the necessary finance to purchase the business and their financial capacity to service the loan which was necessary. By reason of the financial circumstances of the plaintiffs it was necessary for them to borrow all the moneys necessary for them to purchase the business. As further part of the plaintiffs' case they have alleged that Demetriou during the period between March 1991 and the time that they entered into the contract of sale and lease, advised them as their accountant as to the reasonableness of the rent sought and provided by the lease for the premises at 49 Dickson Street. The plaintiffs have alleged that by both acts of commission and omission Demetriou, as their accountant and financial adviser, was negligent, which negligence was a cause of them entering into the contract for the purchase of the business and also the lease.
The plaintiffs alleged that at the time that they purchased the business, the price paid by them for the purchase of the same was grossly in excess of the real value of the same which was only some $20,000. They allege that as a consequence of the negligence of Demetriou which was a cause of them purchasing the business for $168,000, they suffered loss and damage. The primary damage alleged to have been suffered is the difference between the amount that they paid for the purchase of the business and its reasonable value at the time of purchase. This they allege to be $148,000. At the outset of the proceedings and at the commencement of the trial the plaintiffs sought further consequential damages under a number of headings including what was identified to be a loss of earnings by each plaintiff. At the conclusion of the trial the plaintiffs' claim for damages in addition to that which I have referred to as their primary claim for damages, was limited to the loss alleged to have been suffered by them, in consequence of them paying interest and associated financial costs in consequence of borrowing the sum necessary to purchase the business. The sum claimed finally under this head of damages was $78,657. It was calculated as being the interest payments incurred and paid by them in consequence of borrowing the sum of $148,000, being the difference between the purchase price paid and that which they allege was the reasonable commercial value of the catering business at the time of its purchase, together with costs incurred associated with borrowing the moneys to purchase the business.
The defendants denied liability to the plaintiffs. Although strenuously denying liability to the plaintiffs, on the question of damages, it was the submission of counsel on behalf of the defendants that if contrary to the defendants' contention, it was decided that there was negligence on the part of Demetriou which was a cause of the plaintiffs suffering loss and damage, such damage should be limited to the difference between the price paid by the plaintiffs pursuant to the contract of sale and the reasonable commercial value of the business at the time of purchase, which it was submitted on the evidence, should be found to be in the region of $50,000. It was submitted on behalf of the defendants that the plaintiffs, if entitled to damages, were unable to recover the further sum sought by way of damages.
Specifically, the plaintiffs' claim in negligence as pleaded by their amended statement of claim, fell into three categories. The first related to advice which the plaintiffs alleged was given by Demetriou to them and advice which he failed to give them as their accountant during the period from March 1991 until they signed the contract of sale and lease on or about 1 August 1991. They allege that during this period, they consulted Demetriou as their accountant on a number of occasions and he advised them that they would do really well out of the business, that the business was worth $168,000, that the business was worth more than $168,000 and was really worth $200,000, that the price asked by John Skitzis of $168,000 for them to purchase the business was reasonable, that they should not have another accountant investigate the figures for the business before signing the contract and that they were doing the right thing in purchasing the business for the price of $168,000 without having an independent accountant investigate the figures for the business.
The plaintiffs allege that the defendants breached the duty of care owed to them as their accountants in that Demetriou so advised them and that he failed to make a proper assessment of the value of the business, that he failed to advise that the business did not have a value of $168,000 but only a value at the highest, in the sum of $20,000 to $30,000, that he failed to advise them that they should not make a decision to purchase the business without having an accountant investigate the business and conduct a valuation of the same and that he failed to advise them that they should not purchase the business for $168,000.
That the purchase price for the business at $168,000 was greatly in excess of the value of the business at the time of purchase was not an issue in the case on trial. The plaintiffs called evidence, to which I shall later refer in more detail, that the purchase price of the business was greatly in excess of its value at the time of purchase. The defendants called no evidence to dispute this, but rather, when addressing the question of damages, counsel for the defendants, as I have referred to, submitted that on the evidence, the court should conclude that the reasonable commercial value of the business at the time of purchase was not $20,000 but was rather $50,000. The primary issue on this aspect of the plaintiffs' claim was whether the advice which they alleged was given to them by Demetriou was in fact given. It was the defendant's case that the advice alleged to have been given by Demetriou as to the value of the business was in fact not given to the plaintiffs. It was not part of the defendant's case that if Demetriou advised the plaintiffs that the business was worth $168,000 at the time of purchase, that he owed no duty of care to them in giving such advice or that such advice was given with reasonable care. However, insofar as it was part of the plaintiffs' case that there was negligence on the part of Demetriou by failing to give positive advice to the plaintiffs, for example, that the business was not worth $168,000, or that they should not purchase it without an accountant valuing it, issue was joined by the defendants. It was contended on their behalf that there arose no duty for him to give such advice. It was the defendant's case that this arose in circumstances where not only did Demetriou not undertake to, nor did he give to the plaintiffs advice as to the value of the business, but rather, he expressly said that he would not do so and advised them to get independent advice on this matter. The plaintiffs joined issue as to each of these matters.
It is therefore to be seen that central to this aspect of the plaintiffs' case in negligence against the defendants is the factual issue whether Demetriou gave to them positive advice of the nature alleged or whether he, at all times, informed them that he would not advise them on the matter of the value of the business but rather told them that they should get independent advice on that matter. Depending on my decision as to this factual issue will determine whether the issue of law arises in this case as to whether in the circumstances, the scope of any duty of care owed by the defendants and particularly Demetriou to the plaintiffs included a duty to advise, for example, that the business was not worth $168,000 as was being sought by the vendor as the sale price of the same.
The second part of the plaintiffs' claim concerned allegations made by them that before they entered into the contract to purchase the business they were advised by Demetriou, on or about 17 July 1991, that they would have sufficient income from the business to enable them to service interest on a loan of $210,000 which it was proposed that they should raise to purchase the business, to repay an existing loan which had been raised to purchase the rental property owned by them and which was secured over that property and to provide some working capital for the business and further, that they were advised by Demetriou that they would receive, on a worst case scenario, the sum of $1,623 gross income per month into their household. It was the plaintiffs' case that Demetriou was negligent in giving this alleged advice as he failed to properly calculate the likely projected earnings that they would receive from the business. It was alleged that on the financial returns of the business, being the basis of the advice given, they were not able to service interest on the loan of $210,000. As to this aspect of the plaintiffs' claim the defendants denied that in making calculations and advising the plaintiff, there was any negligence on the part of Demetriou.
The third aspect of the plaintiffs' claim related to the rent that they agreed to pay pursuant to the lease of the premises in which the food was prepared in the conduct of the business. The plaintiffs alleged that before they entered into the contract of sale, Demetriou advised them that a reasonable sum for the rent of the business premises was $1,235 per month. The plaintiffs alleged that such monthly rental was not a reasonable rental for such premises at the time. It was alleged that Demetriou failed to obtain a proper valuation of the monthly rent for the premises, that he failed to advise them to obtain an independent valuation for the rent and that he failed to advise them that a reasonable monthly rent for the premises would be in the range of $400 to $700 per month. It was the defendant's case on this aspect of the plaintiffs' claim that although Demetriou passed on to the plaintiffs information he had received from estate agents concerning the rental value of the premises, he did not hold himself out to possess any special skill to assess rent for the premises, which fact they accepted, that he did not advise them as to a reasonable rent for the premises, and that in the circumstances it was not within the scope of any duty of care that the defendants may have then owed to the plaintiffs to advise them as to a reasonable monthly rent for the premises. Further, it was the defendant's case that on the evidence called at trial, the rent agreed on by the plaintiffs for the premises in the year 1991 was not unreasonable.
I return to the facts and to the social meeting between the plaintiffs with Demetriou and his wife in March 1991. The evidence of Demetriou and his wife was that on this occasion Demetriou said that he would be unable to advise the plaintiffs on the purchase of the business.
Following this meeting, the plaintiffs met with and spoke to John Skitzis and indicated that they would be interested in purchasing his business. Both plaintiffs gave evidence that on 17 April they saw Demetriou at his office and spoke to him about the matter of purchasing the business of Skitzis and whether it would affect their lifestyle and would they be able to handle the catering business if they purchased the same. They gave evidence that Demetriou said that he did not know what the price would be, but expressed the view that it was a very good business and that it could be operated substantially at weekends. Demetriou denied that he met with the plaintiffs on this occasion. He produced his work diary which was marked, "out all day" against 16, 17 and 18 April 1991. Although the diary was so marked it was to be noted that there was marked against 18 April 1991 a number of work units entered by Demetriou relevant to that day. Also called on behalf of the defendants was the witness Rebecca Mahony who in 1991 worked as their receptionist at their office. Her evidence was that she entered in her receptionist diary appointments made for and attended to by the defendants. It was apparent from a comparison of her diary with that of Demetriou that there were numerous occasions when attendances, appointments, were entered in Demetriou's diary which were not reflected in the diary of Rebecca Mahony. Nevertheless, in her diary there was marked in capital letters at the heading of the pages for each of 16, 17 and 18 April 1991, "GD - NOT IN".
The second plaintiff in her evidence was adamant that she and her husband saw Demetriou and spoke to him at his office that day. The plaintiffs gave further evidence that on two further occasions during April 1991 they visited Demetriou in his office and discussed with him whether the business would be right for them. At this time the plaintiffs did not know the price that Skitzis would be asking for the business. The plaintiffs said in substance that at these meetings Demetriou told them that the business was a good business. Demetriou denied that these meetings took place.
At or about the beginning of May 1991, the plaintiffs again spoke to Skitzis. He told them that the purchase price for the business was $168,000 and that for anybody else the price would be $200,000 but he was giving them a reduced price as they were friends of his children.
The plaintiffs communicated with Demetriou and told him the price that Skitzis was asking and made an appointment to see Demetriou on 9 May 1991. They gave evidence that Demetriou told them that they should prepare and bring a list of their living expenses to that meeting.
It was common ground that the plaintiffs met with Demetriou at his office on 9 May 1991. The evidence of each of the plaintiffs was in part that at that meeting they told Demetriou that the purchase price was a lot of money and that they thought the price was too high. Their evidence was that Demetriou said that he could not help them with the price and that they would have to negotiate that with Skitzis. They gave evidence that at this meeting Demetriou said he could advise them about financing and their ability to service loans to be taken to purchase the business.

Demetriou's evidence was that at this meeting he told the plaintiffs that as it was his father-in-law's business they should make separate enquiries regarding any assessment of or valuation of the business and seek independent advice about that matter. He produced a diary note which he said was made shortly after the meeting, to that effect. In further evidence the first plaintiff said that at this meeting Demetriou said, "I can't do anything about the price. You will have to discuss that with Skitzis". In evidence-in-chief the first plaintiff said that in March of that year, Demetriou said to him that he was unable to advise in respect of the purchase of Skitzis' business. In cross-examination he retracted that latter evidence and said it was a mistake. In further cross-examination the first plaintiff said that Demetriou always said that he could not advise him on the price. When further cross-examined the first plaintiff was taken back to his initial evidence, that is, that Demetriou said that he could not help them with the price, and he was asked whether he was sure that Demetriou did not tell them that he could not give them advice about the price as it was his father-in-law's business. The first plaintiff replied, "No, he said, 'Look I can't help you negotiate a price. I can't give you any help with the price'."
The second plaintiff additionally in her evidence said that at this meeting the concern of she and her husband was the price and that Demetriou said he could not do anything about the price and they would have to talk to Skitzis about it. At this meeting a discussion took place between the plaintiffs and Demetriou about the plaintiffs' assets, their debts, income and living expenses. Further, at this meeting Demetriou offered advice to them that at the time of borrowing moneys to purchase the business it may be better to re-finance their rental property at Mulgrave on which they owed at the time some $34,000.
In evidence, Demetriou said that the plaintiffs did not say that $168,000 was a lot of money or that they thought the price was too high. He said there was no discussion whether the price was too high. His evidence was that at this meeting, the plaintiffs told him that they wanted to purchase the business for $168,000 if they could borrow the money they required. He gave evidence that he thought that the amount of money that they were borrowing was high. He said in cross-examination he believed that on 9 May he warned them about such borrowings and that it was too much. In the diary note of Demetriou for 9 May 1991 there is no mention of such warning being given to the plaintiffs. To the extent that Demetriou's evidence was that he was happy to discuss with them their personal arrangements and ability to service the loan required to purchase the business, if at that time Demetriou held the view and expressed it to the plaintiffs that the amount of money they were contemplating borrowing was too much, one would expect such advice would have loomed large.
The first plaintiff gave evidence that following this meeting he visited Skitzis at his place of business and unsuccessfully endeavoured to have him reduce the purchase price. Skitzis denied that such a meeting occurred. Both plaintiffs gave further evidence that they again met with Skitzis at their home and again unsuccessfully endeavoured to have him reduce his price. Skitzis in evidence denied that the plaintiffs ever asked him to reduce his price.
I accept the plaintiff's evidence on this matter against that of Skitzis. I am satisfied that at this time the plaintiffs were concerned about the amount and size of the purchase price of the business being asked by Skitzis. At that time they owned their family home which was not encumbered and they owned a rental property which was encumbered as referred to. To purchase the business it was necessary for them to borrow the whole of the purchase price. The sum of $168,000 was a very large sum of money for them to borrow. The events that occurred at about this time and leading up to the purchase of the business demonstrate that they were concerned about the amount of the purchase price and their need to borrow such a large sum. In such circumstances, I consider it more probable than not that they would have approached Skitzis and sought to have him reduce the purchase price. As between the plaintiffs and Skitzis where their evidence conflicts, I accept the evidence of the plaintiffs. Skitzis impressed me as a person who wanted to dictate and control his situation as a witness and the circumstances of his involvement in this case to his own best advantage and did not readily accept being challenged. The plaintiffs gave evidence that whereas he showed them menus and commendations before the purchase of the business he gave them no copies of the same before that time. This was disputed by Skitzis. I accept the description of the second plaintiff that Skitzis was a very private man. In my assessment he would not have readily, if at all, given much information to the plaintiffs concerning the conduct and management of the business until they had signed the contract to purchase the business. To the extent as is necessary I shall later return to this matter.
The plaintiffs again met with Demetriou at his office on the evening of 29 May 1991. Skitzis attended the meeting and brought with him copies of his tax returns and profit and loss statements for the years 1988, 1989 and 1990. There was a dispute as to the extent of any further financial documents Skitzis brought with him that evening. It is not necessary to resolve that matter. However, in deciding this case, this meeting is significant and important.
Demetriou gave evidence in part that one or other of the plaintiffs contacted him and told him they wanted to arrange a meeting with him and Skitzis. He said that they told him that they were having difficulties understanding Skitzis and wanted to arrange for him to bring his financial returns to the meeting so that they could ask him about them. He said further, in part, that it was his understanding of the meeting on 29 May that he was going to act as an interpreter and that the plaintiffs told him that.
Skitzis gave evidence that the plaintiffs told him that they were having difficulty in following his English and requested him to attend a meeting at Demetriou's office so Demetriou could act as an interpreter.
The plaintiffs rejected the notion that they asked Demetriou to be present to act as an interpreter for Skitzis. The plaintiffs each said in evidence, that they had no difficulty in understanding Skitzis.
Having seen and heard Skitzis in the witness box, and having regard to the fact that he had conducted a catering business for a number of years, I accept the plaintiffs' evidence that they did not have difficulty in understanding Skitzis and did not ask or wish Demetriou to be at the meeting to act as an interpreter. There was no need for them to do so. Rather, the plaintiffs wanted a meeting to be held with Demetriou present as their accountant in order that they may see for the first time the financial statements of the vendor.
The evidence of the plaintiffs was that Demetriou was not a spectator at the meeting, who, having set up the meeting, thereafter took no part in it. Rather, it was their evidence that Demetriou was actively engaged in taking the plaintiffs through the financial returns and figures presented to them by Skitzis. The evidence of the plaintiffs was that Skitzis produced his financial returns and profit and loss statements for the years ended 30 June 1988, 1989 and 1990 and that Demetriou went through the figures with them and showed them the expenses stated. They gave evidence that Demetriou explained to them the number of weeks that Skitzis was involved in working in the business each year, which was less than 52 weeks, and that he discussed with them variations in the respective yearly returns. They gave evidence that at this meeting they were not very impressed with the figures produced but that Demetriou said that it was a good business and that they would have no trouble getting finance. They said that at this meeting they raised with Demetriou the fact that the second plaintiff had previously purchased the cafe business for some $28,000 and that that business had a similar turnover to Skitzis' business. Their evidence was that Demetriou said that they could not compare the two businesses as the catering business had a much higher profit margin. They gave evidence that it was at this meeting that Demetriou told them that the business was suitable for them, that they could afford it, that they would do really well out of the business, that it was worth more than $168,000 and that it was really worth $200,000, that the business had good opportunities for expansion, that it had a "take-away licence" so they could operate a take-away food outlet and further that he said, "Don't miss the opportunity". It was the evidence of the second plaintiff that these latter statements made by Demetriou and advice given to them at this time were made and given after Skitzis had left the meeting. She acknowledged that this fact did not appear in her witness statement but said that after Skitzis left the meeting, Demetriou, as their accountant, discussed what the situation was. She said that at this meeting a very exciting picture was painted that the business would be profitable. The second plaintiff further gave evidence that at this meeting, Skitzis had told them that the financial gains to them as a family were predominantly that they could live off the business. This evidence is relevant when regard is later had to discussions between the plaintiffs and their lawyer, Pellicano before the contract of sale was entered into.
The second plaintiff said that at the meeting no figures were discussed as to how they could live off the business. In cross-examination she said that if Demetriou said in evidence that at this meeting he gave no advice about the purchase price, then he would be lying.
In his evidence-in-chief Demetriou said that at this meeting discussions got underway well between the plaintiffs and Skitzis and that he got up and made a cup of coffee and came back towards the end of the meeting. This evidence, if accepted, would distance him from any real involvement in the meeting and any discussion had concerning the financial returns produced to the meeting by Skitzis. In his further evidence, Demetriou, even on his own account, demonstrated that he was much more involved in the meeting and discussions had at the meeting. He said that the plaintiffs asked him if the tax returns could be discussed from the point of view of getting a loan and that the first plaintiff and Skitzis went through the returns for each year and identified and discussed various items which were identified from the returns which could be regarded as "goods for own use", and of advantage to them if they were proprietors of the business. Demetriou said that he just sat and listened and wrote down what he heard and what he was told. He said that he had no input into the figures discussed but just wrote down the figures. He said that he wrote down the figures because the plaintiffs had asked him, "Can we afford to get a loan?" On his evidence this was a question the plaintiffs were addressing to him as their accountant. Demetriou said that a three page document was prepared by him at the meeting. The three pages were identified by him in evidence. On the first page was an analysis in respect of each of the three years, 1998, 1989 and 1990, setting out details and providing what was said to be "net profit in real terms" as compared to the net profit shown in the profit and loss statement in the tax returns. For the year ended 30 June 1990, the net profit shown in the tax return was $25,912 as against that figure in the document written by Demetriou as "net profit in real terms" which was entered at $43,024. The second page of the document set out merely the figures relevant to the year ended 30 June 1990. The third page, Demetriou said, was prepared by him to give an example to the plaintiffs when varying profit figures were had regard to and when interest on a loan of $168,000 was taken into account, together with living expenses, what amount, if any, they would have left over. He said that on that evening he gave them the second page of this document, that dealing solely with the 1990 year.
The plaintiffs denied that this exercise was undertaken or that they saw the figures as represented by Demetriou and denied that he gave them any such calculation. Demetriou said that these calculations were done in the presence of Skitzis, that is, the calculations showing that as compared to the net profits disclosed in each of the three years of the financial returns produced by him, the net profit, in "real terms", was in excess of that amount. Demetriou and Skitzis both said that they all left the meeting together whereas the second plaintiff, as previously referred to, said that Skitzis left before them and before they had further discussions with Demetriou. Skitzis gave no evidence of discussions had between him and the first plaintiff concerning such figures or that they were written down by Demetriou or that calculations were made in his presence showing in respect of the three years what were the profits in "real terms" as compared to those disclosed in his profit and loss statements.
In his evidence, Demetriou denied that he told the plaintiffs that the business was suitable for them, that they could afford it, that they would do really well out of the business, that it was worth more than $168,00 and that it was really worth $200,000, that the business had good opportunity for expansion, that the business had a takeaway licence so they could operate it as a takeaway food outlet and that he said "don't miss the opportunity". He denied expressing any opinion as to the value of the business at the meeting.
Demetriou gave evidence in cross-examination that in the conduct of his practice as an accountant before 1991, he had advised clients with respect to the purchases of small businesses. He said he would advise clients as to what steps should be taken to see if a price for a business was reasonable. He said he would express an opinion and give advice if he thought a purchase price was too much or the purchase amounted to a good buy. He said that that was the type of work he had undertaken and it was part of his practice. He said that he considered he had the expertise to value small businesses. He gave evidence of the type of exercises he would undertake to give such advice. He said that one method he would use to value a small business was to have regard to the maintainable earnings of the business. He said that on applying such a method he would consider the market wage that would be attributed to the employment of someone to carry out the function of proprietor of the business. He said in cross-examination that on employing such an approach when looking at the figures for the subject business for the years 1988, 1989 and 1990, probably you would not pay anything for the goodwill of the business. It was put to him, "Having seen those figures on that night you should have told [the plaintiffs] to obtain an independent valuation of this business?" He replied, "I told them to get independent advice on 9 May ... I told them on 29 May to get independent advice and I kept on saying it on 17 July as well." He further said that in March when they had coffee, he said, "Look, I can't give you advice in relation to this business." He said that he had been saying that all the way through, "They had to make their own assessment."
Demetriou maintained in his evidence that he had only assisted the plaintiffs in relation to obtaining finance to purchase the business and that was the extent of his involvement and that he did not advise the plaintiffs on the value of the business or whether at a purchase price of $168,000, it was a good purchase for the plaintiffs to make. He said that on the occasion of this meeting the plaintiffs asked his advice whether, when regard was had to the information provided in Skitzis' financial returns, they could afford the loan. This he said required some analysis to be made by him of the figures presented by Skitzis. Demetriou said that if he saw the balance sheet and profit and loss statement of a business he could form an idea of the value of a business. He said that on 29 May 1991 he saw the balance sheets. He agreed that on seeing the profit and loss statements of the business as produced by Skitzis he observed that the net profits were low. He said he was surprised to see how low the figures were. He agreed that on the evening of 29 May 1991 he saw and read the profit and loss figures of Skitzis for the year ended 30 June 1990. After being taken to the document which comprised Skitzis' profit and loss statement for the year ended 30 June 1990. Demetriou said that he saw that document that night. He said that having seen that document he did not form a view in his mind that the sum of $168,000 was an excessive price for the business.
The plaintiffs gave evidence that having been assured by Demetriou that they could afford to finance the purchase of the business and relying on what he had said to them, they decided to proceed with the purchase of the business and communicated with Demetriou and told him that they intended to proceed and asked would he organise the finance person to meet with them.
On 3 June 1991 they met for the first time the finance broker, Henry Wynne. He occupied an office within the group of offices in the building in which the defendants conducted their practice. They engaged a common receptionist. In 1991 all clients of the defendants looking to borrow money were referred by the defendants to Wynne.
The plaintiffs' evidence was that they attended the meeting with Wynne which was arranged by Demetriou and which was held in Demetriou's office and that Demetriou was in attendance during the meeting. Demetriou contested this, giving evidence that having introduced the plaintiffs to Wynne he retired from the meeting.
Wynne, who was called as a witness by the defendants, said that he could not remember whether Demetriou attended the meeting or not. At this meeting Wynne obtained information from the plaintiffs to enable him to complete a statement of their financial position and he also obtained information to enable him to make an application for finance. He said that at some time he received a note in Demetriou's handwriting showing a calculation of a net profit of the business of $43,024. This appears to be the second page of the documents previously referred to which Demetriou said were completed by him at the meeting on 29 May. Wynne said that he could not remember who gave the document to him. On 17 June 1991, Wynne received from the National Mutual Royal Bank Limited a letter offering to the plaintiffs a financial facility being a bill acceptance and discount facility for $210,000 for a term of two years. This amount represented an amount to cover the purchase price of the business for $168,000, to re-finance the plaintiffs' debt on their rental property and to provide working capital.
During the holiday weekend in June 1991, the plaintiffs spoke to their parents and siblings about the purchase of the business. These people told them they were paying too much for the business. The second plaintiff gave evidence that she telephoned Demetriou and said to him that they needed to discuss the matter of the purchase and that as a result they met him. She said that at this time they were concerned about committing themselves to the kind of money involved in the purchase of the business and that they informed Demetriou that their family was concerned that they were paying too much. The plaintiffs gave evidence that Demetriou said that the family would be jealous and that they should not listen to them. The second plaintiff gave evidence that they believed Demetriou and believed that he had their best interest at heart and that they accepted and felt better by his reassurances. Demetriou denied that such meeting took place.

There was agreement, however, that on 17 July 1991 the plaintiffs again saw Demetriou at his office. They gave evidence that they told him that they were concerned about whether or not they would be able to make the repayments under the loan. This addressed the interest payments, not the repayment of the capital amount. At this meeting Demetriou made calculations which he committed to writing which demonstrated that by taking into account the net monthly income that the first plaintiff was earning in his employment at Monash University at $1,8000 per month, the rental income from the rental property and takings of the business at $100,000 per annum, being $8,333 per month, and also items for expenses including interest on the loan at 13%, being $2,275 per month and rent at $1,235 per month, there would remain available to the plaintiffs for their household $1,623 per month. The first plaintiff gave evidence that Demetriou told them that this would be a worst case scenario. The first plaintiff denied the suggestion put to him in cross-examination that at this meeting Demetriou advised them that the cash flow from the business may not be sufficient to support the borrowings of the whole of the purchase price. The first plaintiff said in evidence that it was absolutely false that Demetriou suggested at this meeting that it would be better if they sold the rental property to reduce the amount that they had to borrow. The second plaintiff also denied those suggestions when put to her in cross-examination.
In his evidence, Demetriou said that he did tell them that he was concerned that the cash flow from the business may not be sufficient to support the borrowings of the whole of the purchase price and further told them that they would be better off if they sold the rental property and reduced the amount that they needed to borrow. The calculations made by Demetriou and committed to writing at this meeting took into account both the income from the rental property and the expenses associated with it. That was part of the considerations to arrive at the figure as calculated by Demetriou that if they purchased the business and borrowed the sum of $210,000, which would also involve re-financing the rental property at Mulgrave, they would receive into their household $1,623 per month which is to be seen from the figures was less than the net monthly earnings of the first plaintiff at the time. Demetriou also gave evidence that he expressed to the plaintiffs during this period that they were borrowing too much and taking on too much debt so as to be able to purchase the business. He also said that he told them that they were making more money staying in their jobs.
Before this meeting on 17 July, the figure for the rent to be paid for the business premises had been identified. The second plaintiff's evidence was that she had enquired of Demetriou what the rent for the premises would be and that he said that he did not know but he would find out. Her evidence was that Demetriou contacted her and said that he had contacted three agents, that the rent would be $1,235 per month which he told her was not the highest nor the lowest but was the middle range so that it was fair to them. Her evidence was that she said that she thought that the rent was too high but Demetriou told her that he had made enquiries from reputable agents and bearing in mind the type of business, the rent was reasonable. She denied that Demetriou had simply passed on figures to her and offered her no advice although she accepted that Demetriou probably did pass on the figures to her for the rent.
Before the plaintiffs sighted the lease immediately before signing the same they did not know that Demetriou was a joint owner of the premises with his wife. He had not told the plaintiffs of this fact.
Demetriou's evidence on this matter was that in June 1991 he had had a conversation with his father-in-law, Skitzis, that following that and on 12 June 1991 he made a number of telephone calls to local agents to obtain information about rent being paid for similar shops and that he passed that information on to his father-in-law. His evidence was further, that he passed that information on to the first plaintiff but did not get involved in the negotiation of the rent or express an opinion on the subject of the rent. In cross-examination Demetriou said that he did not know what rent his father-in-law was seeking for the premises, that his father-in-law handled all the negotiations, that he made no enquiries from him and he had no idea about it. He said that after his father-in-law had decided on the rent he had told him.
In his evidence Skitzis said that he had agreed with the plaintiffs that they would make enquiries, that he would make enquiries and that he would have Demetriou make enquiries as to a fair rent for the premises and that he had told the second plaintiff during the preparation of a business lunch that a fair rent for the premises would be $285 per week, that she had told him that that was fair and reasonable as she had made her own enquiries.
In early July 1991, the plaintiffs consulted a solicitor, Dominic Pellicano. In addition to being a practising solicitor, Pellicano was a qualified accountant. He had previously acted as the plaintiffs' solicitor when they purchased their property at Mulgrave and he had also drawn their wills. He was called as a witness on behalf of the plaintiffs. He gave evidence that he saw the plaintiffs on three occasions, the first being in early July 1991, the second about the middle of that month or the 20th day of that month, and then again late in that month or early in the month of August. He gave evidence that at the first meeting, the plaintiffs asked him to act for them in the purchase of the catering business. They informed him what the catering business was about, its turnover and profitability. He said that he advised them that it was his opinion that they were paying too much for the business, that they should go to a business agent and have the business valued. He said from recollection they informed him that the profit figure was around $40,000, $50,000. He gave evidence that they said to him that they had discussed it with their accountant and their accountant thought it was a good business.
Pellicano said that at the second meeting on 20 or 21 July, he again said they were paying too much and strongly suggested that they should get someone else to look at it but they indicated to him that there were other benefits attached to the business and they said that they had decided to go ahead. The witness gave evidence that at this meeting he had the partnership accounts for the catering business for the years ended 30 June 1988, '89 and '90. The witness further said that when he discussed the business and the price, they informed him that they had discussed this with their accountant, that they trusted their accountant because they were friends, that the vendors were their neighbours and they felt that they would not be led astray. He said that he concluded this meeting by telling them that he had reservations on the whole venture but if they wanted him to act and to continue to do so he would start "the ball rolling", and they told him to go ahead.
In cross-examination he was asked whether he had a file note as to the first conversation, he said he did not believe so. He was asked to search his file and he produced a note made by him at or shortly after the second conversation with his clients. He was asked to read the note which he did. He said that in part it stated, "Told Mr and Mrs Di Berardino that in my opinion they were paying too much for the business as the profit did not appear to be great. They informed me that they trust the vendor and the accountant who was the accountant for the vendor and also their own. The vendor has indicated that there are other financial gains in the business to Mr and Mrs Di Berardino. I also told them to have a local agent give an opinion as to the rent requested by the lessor." Pellicano was asked what the plaintiffs had told him relevant to the vendor indicating that there were other financial gains in the business. He said that they told him that there were benefits to be self-employed and there were benefits to live off the business.
The plaintiffs' evidence was that after being advised by Pellicano that they were paying too much for the business they went and saw Demetriou at his office and told him that the solicitor had advised them against proceeding and that he had said they were paying too much for the business. Their evidence was that they asked Demetriou whether he could negotiate a lower price for the business but he said there was no way that he could and that the price for the business was reasonable. Their evidence was that Demetriou said that solicitors do not understand business, that they don't know what they are talking about. They gave evidence also that they told Demetriou that the solicitor had told them that they should take the figures and let an accountant in his practice have a look at them but that Demetriou said that he was their accountant and there was no need for anybody else to do so, reassuring them that they were doing the right thing. They said that they decided that they would proceed.
Demetriou in evidence said that the plaintiffs had never told him that Pellicano had advised them against proceeding and that they were paying too much for the business. He said that he had never said that solicitors do not understand business and they do not know what they are talking about.
In cross-examination, the first plaintiff said that he had told Pellicano that they thought there were financial gains in going into the business and he hoped that there would be financial gains if they worked hard enough, other than those based on the accounts of the business. He said that he knew that Skitzis' source of income was the business and he believed that he had done well in the business. He said he thought that they could do well based on his observations of Skitzis' prosperity and that he possibly suspected that Skitzis might have had financial gains not disclosed in the tax returns. He said based on that suspicion, he thought that the financial accounts of the business might not tell him very much at all about how well he would do if he purchased the business.
In cross-examination, the second plaintiff said that after speaking to Pellicano they were very wary of what they were getting themselves into and that Pellicano had put a very good argument against them buying the business. She said that they went in to see Demetriou because they had these questions, they had these hesitations. She said that Demetriou assured them again and again that solicitors didn't know what they were talking about, they had no idea what was going on. She said that he said that he was their accountant and that he knew the whole story. She said they were not wary about Demetriou because he was their friend as well as their accountant and they trusted him totally. She said that Demetriou reassured them that there was no need for anybody else to look at anything as he was their accountant. She further said in cross-examination that their complete trust in Demetriou as their accountant, their adviser, their friend overrode any other considerations and any other person that was giving any sort of advice on the matter. She disagreed that they had told Pellicano that Demetriou was the vendor's accountant. She said that they had said that he was their accountant. When cross-examined as to her saying to Pellicano that there were other financial gains in the business the second plaintiff agreed, stating that Skitzis had told them at the meeting of 29 May that the financial gains to them as a family were predominantly that they could live off the business, she added, "Which we have done".
The second plaintiff also gave evidence that in late July or early August 1991 she attended at Demetriou's office and paid to him the deposit for the business. She said that at this time Demetriou's wife attended and an emotional discussion occurred between them when she expressed the hope that by them entering into the business it would not affect their relationship. The second plaintiff, when challenged as to this conversation, was very adamant and strong in her evidence that it did occur. In cross-examination she was challenged as to her statement that she had gone to Demetriou's office to pay the deposit. She said that definitely happened. She said that she had paid the deposit by a personal cheque made payable to J. and H. Skitzis. There was then produced to her from the file of Pellicano, which had been apparently discovered to the defendants, a cheque signed by her dated 1 August 1991 for the sum of $8,000 and payable to Middletons. Middletons, Solicitors, were the solicitors for the vendors. There was also produced from Pellicano's file a copy letter dated 1 August 1991 from him addressed to the vendor's solicitors enclosing the cheque for $8,000 being the deposit. Faced with these matters she said that she was adamant that she met Demetriou to pay the deposit. She said he may have re-directed her to go and see Pellicano but that she was adamant that she went to Demetriou on that day and had the conversation with his wife as she had referred to. She said that where she had given evidence that she had paid Demetriou the deposit that was her belief, her recollection of six years ago.
In evidence Demetriou's wife, Anni, denied she had this contended conversation with the second plaintiff.
The subject of the apportionment between goodwill and other assets as appearing in the contract of sale was also the subject of evidence. As previously referred to the contract of sale apportioned the purchase price between goodwill $160,000 and other assets $8,000.
The first plaintiff in cross-examination gave evidence that when they first obtained the purchase price for the business of $168,000 it was going to be apportioned as to $100,000 for goodwill and $68,000 for equipment. The first plaintiff further said that Demetriou changed that figure. He further said that when they saw Pellicano they told him that the break up of the purchase price was $68,000 for plant and equipment and $100,000 for goodwill and that he told Pellicano that on the basis of discussions with Demetriou. It was put to him that Demetriou did not discuss the break up of the purchase price with him but he replied, "He did". This subject was taken up further with the first plaintiff in re-examination. He gave evidence that there was at least one conversation with Demetriou as to how the sum of $168,000 was to be broken up in the contract. He said that Demetriou said that they should break it up to $160,000 goodwill and $8,000 other assets. The first plaintiff said that although he did not understand it at the time the reason given to him by Demetriou was so that it would benefit them with capital gains tax later on as well as helping out his father-in-law in a way by the assets being put down at a lower figure than at $68,000. The witness said that he thought that if it was going in some way to help and benefit him as well as benefit Skitzis he had no objection to changing those figures.
In a letter written by the plaintiffs' solicitor, Pellicano, on 24 July 1991 to Middletons, the solicitors acting for the vendors in the sale of the business, after Pellicano had received a contract for the sale, he advised that in the particulars of sale it should read "goodwill $100,000 - other assets, $68,000". In evidence Pellicano said that he thought that the figure of $68,000 must have come from the plaintiffs.
In cross-examination it was put to the second plaintiff that she had told Pellicano that the break up of the price as between goodwill and chattels should be $100,000 for goodwill and $68,000 for goods and chattels. She said that that was likely. She further said that Skitzis said to them $168,000 all up and the break up would have been given to them by Demetriou. She denied that Skitzis had given the break up, saying that the only person they would have spoken to about that was Demetriou. Later she said she could distinctly recall the break up figure being given to them by Demetriou as $100,000 for goodwill and $68,000 for chattels and that that was how it was going to be placed in the contract but that it was later that Demetriou came back and said, "Would you mind if we put $160,000 for goodwill and $8,000 for chattels because it would benefit my father-in-law and in the long run it will benefit you". She gave evidence that Demetriou gave no explanation as to this matter. In his evidence, Pellicano was taken to the contract of sale for the business where the purchase price was apportioned between goodwill $160,000 and other assets were to be $8,000. He said that the plaintiffs told him of the different apportionment. He said further, that on 26 July 1991 he received a letter from the vendor's solicitors advising that they were instructed that the apportionment of the purchase price was that goodwill was to be $160,000 and other assets were to be $8,000. He said that he was subsequently instructed by the plaintiffs that they were agreeable to that being included in the contract of sale.
Demetriou gave evidence that he had a telephone conversation with the plaintiffs concerning the allocation or break up of the purchase price to appear in the contract. He said that before the conversation he had no knowledge and had not been told what the break up of the purchase price between goodwill and chattels was to be. He said that they told him that the break up was going to be changed and that the first plaintiff was concerned and asked him what did it mean. He said that he was informed that they had just come back from seeing Pellicano. He gave evidence that they told him that originally they had agreed with Skitzis that the break up was going to be $100,000 for goodwill and $68,000 for plant and equipment. He said that the first plaintiff said that it was going to be changed to $160,000 for goodwill and $8,000 for plant and equipment and asked him what it meant. He said that he explained the taxation situation, that they would lose depreciation entitlements because depreciation would be based on a lower figure so that they would be losing that expense in the earlier years but if they made a capital gain in the future they would have a capital gains tax exemption on half the goodwill on the capital gain.
In cross-examination he said that they did not discuss the actual apportionment but rather after the apportionment had changed they wanted to know what it meant. He was asked, "Are you seriously suggesting to his Honour that you believed that they could achieve, in relation to that business, some change so as that they would be able to sell it for a goodwill figure of in excess of $160,000?" He replied, "That was up to them, Mr Jones." He was then asked the following questions and gave the following answers -
"Q: Did you seriously consider at the time that one or other of them raised the question of apportionment with you that if they were to pay the figures or based upon the figures that you had seen for that
business, $160,000 for goodwill, that they would be likely to sell that
business in the future for a goodwill figure of more than $160,000?
A: When I explained that situation about the capital gain on goodwill
they understood that to mean that at a later date, after they had built
up the business and everything else and one day they sold it at a
higher figure, they understood about what happens in relation to
capital gain. We did not have a discussion about whether they will
get that figure in the future.
Q: You see that apportionment that was struck in the contract of
$160,000 for goodwill and $8,000 for assets could only assist your
father-in-law couldn't it in practical terms?
A: Obviously, yes."

On behalf of the defendants, however, it was submitted that on the evidence before the court the plaintiffs could not recover any amount under this head of damages.
Although maintaining that the defendants were not liable to pay the plaintiffs any sum by way of damages under this head, nevertheless it was the submission of counsel for the defendants that if damages were awarded under this head then in the event of it being assessed that the value of the business at the time that it was purchased by the plaintiffs was $50,000, as was contended for by the defendants, resulting in the plaintiffs paying a sum of $118,000 in excess of the real value of the business, then damages under this head should only be assessed in the sum of $66,863. This amount was arrived at by the following calculation.

Interest paid 12/8/91-30/6/95 - $78,293 x 118 43,993
210

Plus interest paid 1/7/95-30/6/97 20,474
Plus costs incurred in raising and maintaining financial

facility 12/8/91-30/6/95 - $4,264 x 118 2,396
210 66,863

It was accepted by counsel for the plaintiffs that the method used by counsel for the
defendant in arriving at that figure and as set out in the aforesaid calculation was
an appropriate method to calculate, under this head of damages, the damages
suffered by the plaintiffs in consequence of them paying interest and associated
costs on the amount which they borrowed to purchase the business, being the
amount in excess of the value of the business at the time that it was purchased.
Applying this method to the plaintiffs' claim for damages under this head, counsel
for the plaintiffs sought on their behalf damages in the sum of $78,657. That figure was arrived at by using a multiplier where referred to in the calculation 148 on the

210

basis that at the time that the plaintiffs purchased the business its value was only
$20,000.

I have assessed the value of the business at the time it was purchased as $35,000. It
is that amount which must be had regard to when applying the method referred to
as accepted by both counsel as the appropriate method to assess damages under
this head if damages are to be awarded. The multiplier would be, where appropriate, 133. In my view, the method of assessing damages under this head
210
on the evidence, if damages are to be awarded, as put forward by both counsel is appropriate. It has specific regard to the percentage of the interest and outgoings paid on the whole of the borrowing of $210,000 as was attributable to the amount paid to purchase the business which was in excess of its value. Using this method, the amounts paid by the plaintiffs by way of interest and outgoings by paying interest on borrowings made to purchase the business with respect to that amount which exceeded the value of the business is to be calculated in total to be $72,759, or in round figures, $72,000. In my view, it is that amount that the plaintiffs paid by way of interest during the period from 12 August 1991 to 30 June 1997 and associated costs on moneys borrowed to purchase this business, which represented the amount which was in excess of the value of the business at the time that it was purchased, namely, $133,000.
It was the submission made by counsel on behalf of the defendant that in the event of the defendants being found liable in damages to the plaintiffs in these proceedings no amount of damages should be awarded to them under this head of damage as claimed. It was submitted that any damage awarded should be limited to the first head of damage claimed and that they could not recover this further or consequential loss. Although on behalf of the defendants it was accepted that the plaintiffs had borrowed moneys to purchase the business and paid interest on the moneys borrowed, it was submitted that for the plaintiffs to recover by way of damages any more than the difference between the price paid to purchase the business and the real value of the same at the time that it was purchased, it was necessary for the plaintiffs to establish on the evidence that they were economically worse off by purchasing and conducting the business than if they had not done so and that it was only to the extent that it was established on the evidence that they were so economically worse off could they recover any sum by way of damages under this head. It was submitted on behalf of the defendants that this had not been established on the evidence. It was further submitted that although on the evidence it was open to be concluded that the plaintiffs' matrimonial home was mortgaged to the extent of $90,000 where it had not been before the purchase of the business and that the plaintiffs had sold their rental property causing them to lose an amount estimated to be in the region of $60,000, causing losses totalling approximately $150,000, against that had to be offset the assets and property that they still had in consequence of purchasing the business. It was submitted that it should be found that the value of the goods and equipment that the plaintiffs retained after leaving the rented premises from which the business was conducted should be valued at some $25,000 and in addition it was submitted that there was some value still in the business which they were conducting although on a much reduced scale. It was put that when these matters were taken into account it should be concluded that the loss suffered should not be assessed in excess of $120,000 and as that represented about the sum that the plaintiffs could recover under their primary head of damages, if damages were awarded, then no award of damages should be made under this secondary head. For reasons that I hereafter express, it is not necessary for me to make an assessment of the value of the goods and equipment retained by the plaintiffs after ceasing to trade in the business at the rented premises, nor is it necessary for me to make a valuation of the business which was unable to be sold as a going concern. On behalf of the defendants it was further submitted that the evidence demonstrated that the plaintiffs had, during the period they conducted the business, been able to pay interest on the sum borrowed, maintain themselves and make some improvements to their home and that accordingly it should be concluded that this demonstrated that in economic terms they were no worse off or had suffered no loss in consequence of purchasing the business other than that which may be recovered pursuant to the first head of damages claimed. It was further submitted that no reliance could be placed on the financial statements of the plaintiffs in order to assess to what extent, if any, they may have suffered an economic loss by purchasing and conducting the business as compared to what their circumstances would have been had they not entered into the contract to purchase the business.
The negligent advice given to the plaintiffs by Demetriou was a cause of the plaintiffs purchasing the business for a sum very much in excess of the real value of the business. That excessive sum, as I have assessed, was $133,000. To purchase the business for the sum of $168,000 it was necessary, as was at all times known to Demetriou, for the plaintiffs to borrow the whole of the purchase price and in consequence they were obligated to pay and did pay interest and associated costs on the sum borrowed including interest on that amount ($133,00) by which the purchase price of the business exceeded its real value.
The basic principle to be applied in awarding damages where a plaintiff has suffered damage in consequence of the tort of another is that the plaintiff is entitled to restitutio in integrum. In Hungerfords v. Walker (1989) 171 C.L.R. 125 at 143 Mason, CJ and Wilson, J after referring to the principle of a plaintiff being entitled to justitio in integrum, the said -
"According to that principle, the plaintiff is entitled to full compensation for the loss which he sustains in consequence of the defendant's wrong, subject to the rules as to remoteness of damage and to the plaintiff's duty to mitigate his loss. In principle he should be awarded the compensation which would restore him to the position he would have been in but for the defendant's breach of contract or negligence. Judged from a commercial viewpoint, the plaintiff sustains an economic loss if his damages are not paid promptly, just as he sustains such a loss when his debt is not paid on the due date. The loss may arise in the form of the investment cost of being deprived of money which could have been invested at interest or used to reduce an existing indebtedness. Or the loss may arise in the form of borrowing cost, i.e., interest payable on borrowed money or interest foregone because an existing investment is realised or reduced."
In Esso Petroleum v. Mardon [1976] 1 Q.B. the plaintiffs let to the defendant a service station after giving to the defendant an estimate of through put for petroleum sales. The defendant put all his capital into the business through a company controlled by himself and his wife and borrowed heavily on bank overdraft. The defendant suffered loss in the conduct of the business and the plaintiffs issued proceedings claiming possession of the premises. The defendant gave up possession of the premises but counterclaimed seeking damages for, inter alia, negligent misrepresentation which he alleged caused him to enter into the relevant tenancy agreements. The defendant succeeded before the Court of Appeal on his counterclaim. Although the court adjourned the final assessment of damages Ormrod, LJ at p.829 expressed the view that not only was the defendant entitled to recover his capital cost to the time that the business was closed but further, it was not unreasonable that the plaintiffs should be liable to interest on the overdraft.
In Medlin v. State Government Insurance Office (1995) 182 C.L.R. 1 at p.6 it was said by Deane, Dawson, Toohey and Gaudron, JJ -
"For the purposes of the law of negligence, the question whether the requisite causal connection exists between a particular breach of duty and a particular loss of damage is essentially one of fact to be resolved, on the probabilities, as a matter of common sense and experience."
It was the negligent advice of Demetriou which was a cause of the plaintiffs purchasing the subject business for $168,000 and borrowing moneys to pay the purchase price of the business. It was the negligent advice of Demetriou which was a cause of the plaintiffs paying $133,000 in excess of the value of the business for the purchase of it. The plaintiffs, in consequence of borrowing that amount paid interest and associated costs. It was the negligent advice of Demetriou which was a cause of the plaintiffs paying interest and associated costs on the sum of $133,000 which was part of the total purchase price. As the sum paid for the purchase of the business in excess of $35,000, on my assessment, was lost to the plaintiffs, similarly the interest and associated costs paid on that sum of $133,000 was lost to the plaintiffs.
In my view, the fact that the plaintiffs were able to maintain themselves from working in the business and pay interest and even make some home improvements, or that they were able to make profits from the business in an amount not able to be assessed with any reliability it does not prevent or impede the plaintiffs in any way from recovering damages under this head. This head of damages is directly related to the acquisition by the plaintiffs of the asset of the business and the means of acquiring it by borrowing the whole of the sum necessary to purchase it. It was the negligence of Demetriou which was a cause of the plaintiffs paying $133,000 in excess of the value of the business in order to purchase it and paying interest and associated costs on that sum.
In my view the additional interest and associated borrowing costs paid by the plaintiffs on the sum of $133,000 in order to purchase the business in a direct loss suffered by them as a result of the negligence of Demetriou. In order to recover that loss suffered as I have assessed it to be, in the sum of $72,000, it is not necessary for the plaintiffs to establish that over and above the sum of $133,000 they had suffered further economic loss in consequence of purchasing the business by at least $72,000 as was contended for on behalf of the defendants.
It was not contended, nor could it reasonably be so in the circumstances of this case, that damages of this nature were too remote, thereby preventing the plaintiffs from recovering the same. At all relevant times it was known to Demetriou that in order to purchase the business the plaintiffs needed to borrow the entire amount of the purchase price and as a consequence thereof pay interest on the sum borrowed.
The conclusion that I have reached is that the negligent advice which was given to the plaintiffs by Demetriou on 29 May 1991, that the subject business was worth more than $168,000 was a cause of them suffering economic loss and damage in the total sum of $205,000.

Plus interest paid 1/7/95-30/6/97	20,474
Plus costs incurred in raising and maintaining financial
facility 12/8/91-30/6/95 - $4,264 x 118	2,396

[1998] VSC 22

10 August 1998