Djaw Pty Ltd v Schmitz

Case [2002] QDC 168

DISTRICT COURT OF QUEENSLAND

CITATION:

Djaw Pty Ltd  v Schmitz & Ors [2002] QDC 168
PARTIES:

DJAW PTY LTD (ACN 086 936 192)
Plaintiff 
and
EDGAR SCHMITZ AND DAWN PATRICIA SCHMITZ
First Defendants
and
ACCOUNTANTS ACROSS AUSTRALIA PTY LTD (ACN 069 521 955)
Second Defendants
and
MARK THEIL
Third Defendant

FILE NO/S:

853 / 1999
DIVISION:

Civil Jurisdiction
PROCEEDING:

Claim
ORIGINATING COURT: Southport

DELIVERED ON:

12 June 2002
DELIVERED AT:

Southport

HEARING DATE:

12 & 13 September 2001
JUDGE:

Judge Alan Wilson SC
ORDER:

Judgment for the plaintiff for $120,404.25, plus interest
CATCHWORDS:

CONTRACT – FRAUDULENT MISREPRESENTATION

Vendors of business partially concealed business records shown to purchasers – concealment affected trading figures to vendors’ advantage – findings of fraud – no contributory negligence by purchasers

Cases considered:

BP Refinery (Western Port) v Hastings Shire Council

Derry v Peek (1889) 14 App Cas 33

Rejfek v McElroy (1965) 112 CLR 517, at 521-22

Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449, at 449-50

Leslie Leithead v Barber (1965) SR (NSW) 172

Jones v Dimbell (1981) VR 199

Commercial Banking Company of Sydney v R H Brown & Co (1972) 126 CLR 337, at 346, 350

John McGrath Motors (Canberra) Pty Ltd v Applebee (1963) 110 CLR 656

Karkowski v Eurolynx Properties Pty Ltd (1995) 130 ALR 1

Gould v Vaggelas (1985) 157 CLR 215, at 236

Demetrios v Gikas Dry Cleaning Industries Pty Ltd (1991) 22 NSWLR 561

Commercial Banking Co of Sydney Ltd v R H Brown & Co (1971) 126 CLR 337 per Menzies J, at 344

S Pearson & Son Ltd v Dublin Corporation (1907) AC 351, at 354 per Lord Loreburn LC

Henjo Investments Pty Ltd v Collins (Marrickville) Pty Ltd (1987-88) 79 ALR 83, at 98-99

Petera Pty Ltd v EAJ Pty Ltd (1985) ATPR 40-605 per Wilcox J, at 46, 887

Terry “Disclaimers and Deceptive Conduct” (1986) Australian Business Law Review p 478, at 486

Nocton v Ashburton (1914) AC 932, at 962

Redgrave v Hurd (1881) 20 Ch B 1

Fry v Chase, unreported 20 September 1991, NSW Supreme Court, 4183/82

Scarborough v Klich (2001) NSWCA 436 (6 December 2001) at

p 21

Hedley Byrne & Co Ltd v Heller & Partners Ltd (1964) AC 465

Dorotea Pty Ltd v Christos Doufos Nominees Pty Ltd (1986) 2 Qd R 91

Carman Construction Ltd v Canadian Pacific (1982) 136 DLR (3d) 193

Kizbeau Pty Ltd v W G & V Pty Ltd (1995) 131 ALR 363

South Australia v Johnson (1982) 42 ALR 161 at 169-70

Gates v The City Mutual Life Assurance Society Ltd (1985) 160 CLR 1

Esso Petroleum Co Limited v Mardon (1976) QB 801 at 820-21, 828-29

Toteff v Antonas (1952) 87 CLR 647 at 650

Archer v Brown (1985) QB 401
COUNSEL:

Mr A P Collins for the plaintiff
Edgar Schmitz, one of the first defendants, in person
SOLICITORS:

Messrs Gall Standfield & Smith for…

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Details
AGLC
Djaw Pty Ltd v Schmitz [2002] QDC 168
Case
[2002] QDC 168
Decision Date

CaseChat Overview and Summary

Djaw Pty Ltd, the plaintiff, sued Schmitz, the defendant, for fraudulent misrepresentation in the sale of a business. The dispute centred on the partial concealment of business records by the vendors, which affected the trading figures to their advantage. The Federal Court of Australia was tasked with determining whether the vendors' actions constituted fraud and, if so, whether the purchasers were contributorily negligent.

The primary legal issue before the court was whether the vendors' concealment of certain business records amounted to fraudulent misrepresentation. The court had to consider the extent to which the vendors' actions were intentional and whether they misled the purchasers about the true financial state of the business. Another issue was whether the purchasers were contributorily negligent in not conducting their own due diligence. The court's analysis focused on the nature of the misrepresentation and the purchasers' awareness of the information they were provided.

The court found that the vendors' concealment of business records constituted fraudulent misrepresentation as it was intentional and materially affected the purchasers' decision to proceed with the sale. The concealment was not a mere omission but an active act of misleading the purchasers. The court rejected the argument that the purchasers were contributorily negligent, holding that the vendors' actions were deliberate and the purchasers were not aware of the full extent of the information that was being concealed. The court awarded damages to the plaintiff for the misrepresentation.

Orders

Orders of the court

Judgment for the plaintiff for $120,404.25, plus interest

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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