Downey v Carlson Hotels Asia Pacific Pty Ltd - [2004] QDC 310

DISTRICT COURT OF QUEENSLAND

CITATION:

Downey & Anor v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310

PARTIES:

PETER JUSTIN DOWNEY and TERESITA DOWNEY

Plaintiffs

v

CARLSON HOTELS ASIA PACIFIC PTY LIMITED

Defendant

FILE NO/S:

D4992/02

DIVISION:

PROCEEDING:

Trial

ORIGINATING COURT:

District Court, Brisbane

DELIVERED ON:

14 September 2004

DELIVERED AT:

Brisbane

HEARING DATE:

8 – 11 September 2003

JUDGE:

McGill DCJ

ORDER:

Judgment that the defendant pay the plaintiffs $125,419.

CATCHWORDS:

TRADE PRACTICES – Misleading and Deceptive Conduct – whether misrepresentations in brochures approved by the defendant but composed and distributed by others conduct of the defendant.

TRADE PRACTICES – Misleading and Deceptive Conduct – representation that return of seven percent per annum guaranteed – whether reasonable basis for making representation – assessment of damages.

TRADE PRACTICES – Misleading and Deceptive Conduct – whether defendant knowingly concerned in breach of s 52 by another.

TRADE PRACTICES – Limitation Period – Misleading and Deceptive Conduct – when cause of action complete – conditional contract.

Trade Practices Act 1974 (C’w’th) s 51A, s 52, s 75B, s 82(2).

Australian Competition andConsumer Commission v Universal Supports Challenge Ltd [2002] FCA 1276 – followed.

Henville v Walker (2001) 206 CLR 459 – followed.

MAM Mortgages Ltd v Cameron Bros [2002] QCA 330 – followed.

Pace v Westpac Banking Corporation [2002] QCA 350 – applied.

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 – considered.

Sydney Harbour Casino Properties Pty Ltd v Coluzzi [2002] NSWCA 74, [2002] ANZ Conv R 253 – applied.

Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 – applied.

Yorke v Lucas Pty Ltd (1985) 158 CLR 661 – applied.

COUNSEL:

M M Stewart SC and A P J Collins for the plaintiffs
J S Douglas QC and M R Bland for the defendant

SOLICITORS:

Quinn & Scattini solicitors for the plaintiffs
Gilbert & Tobin for the defendant.

The plaintiffs signed a contract dated 27 November 1997 to buy for $240,500 a lot in what was then a proposed building lot plan: Exhibit 1. Before doing so they were provided with advertising brochures which promoted the development, making extensive use of the name “Radisson”. The contract was subject to the lot being leased back to a particular company for a period of five years, and what was contemplated was that the development when complete would be operated as a Radisson hotel. The contract settled on 22 November 1999, and the lease was entered into, and for a short time the building was operated as a hotel, but in February 2000 the lessee failed to pay the agreed rent, and subsequently became insolvent. The plaintiffs say that as a result they have suffered a loss from the purchase.

The plaintiffs allege that the brochures contained a number of representations which were misleading or deceptive and therefore in breach of the Trade Practices Act (“the Act”). They allege that the defendant itself engaged in misleading or deceptive conduct by the making of those representations in those brochures, or in the alternative was knowingly concerned in a contravention of the Act by misleading or deceptive conduct on the part of those who produced and distributed the brochures, and hence liable under s 75B of the Act. The defendant disputes that the brochures contained most of the representations alleged by the plaintiffs, and that any representation in the brochure was misleading or deceptive. It also disputes that it is liable under s 52 in respect of any misleading or deceptive conduct in the form of misrepresentations in the brochures, or that it is liable under s 75B. It further disputes that the plaintiffs have suffered a loss as a result, and alleges that the proceeding has not been brought within the time limit specified in the Act.

Background to the transaction

Because the question of reliance is in issue on the pleadings, it is necessary to say something about how the plaintiffs came to sign the contract. The plaintiffs are both registered nurses living in Sydney; Mr Downey had previously worked briefly as a teacher: p.28, p.139. They own their own home and had in addition some savings, some invested in shares but most held in a cash management account: p.29. They had no previous experience of investing in real estate. He came to think about his retirement and was looking for a secure, low risk investment to provide some additional financial security: p.30. After seeing a newspaper advertisement, they attended a seminar in Sydney on 3 November 1997 on investing in residential real estate, organised by Southern Cross Investments: p.30. Reference was made to negative gearing: p.32.

In the course of this seminar Southern Cross offered what Mr Downey described as a one stop shop, where everything could be attended to by people who were described as being independent professionals: p.35, p.140. There was a solicitor there, Mr Richards, who was introduced to the audience, and an accountant. The audience were invited to bring their own solicitors or financial advisers or accountants but these people were made available to those who wanted them. In due course the seminar turned to promoting properties marketed by Southern Cross. There was however no direct mention of this particular project, the Radisson Suites Hotel: p.36. At the end of the seminar the plaintiffs registered their interest in taking matters one step further, and as a result attended a meeting in Sydney on 8 November 1997: p.36, p.142.

At this meeting they were interviewed by a representative of the marketer who obtained information about their financial position so as to confirm that they were from the marketer’s point of view suitable for investing in some of the residential stock that was available. Another representative provided information about what stock was available, including the Radisson Suites Hotel: p.37. This was the first time they had heard about this project, and he gave them some promotional material. Copies of this material became Exhibits 3, 4 and 5. Exhibit 3 is a glossy brochure with “Because it’s Radisson and it is on Queen” on the cover. Exhibits 4 and 5 are advertisements that have the general layout and appearance of newspaper articles. These three documents were read by the plaintiffs (p.44, p.142) before there was a further meeting, during which the contract was signed.

The marketers had contacted them again, and as a result they went back to another meeting, on 27 November 1997: p.47. By then the plaintiffs had discussed the matter and decided that it looked a good investment and that they would go ahead with it: p.47-8. On that day there were a series of meetings with various people, all of which were arranged by the marketers: p.48. They spoke to a person who organised the finance, to the solicitor Mr Richards, to an accountant, to an insurance representative and to financial advisers: p.37. They were not the only purchasers involved in meetings with these people on that day. Everything that required signing was signed that day: p.151.

On their account the solicitor said he had a lot to cover and proceeded to do so at great speed: p.48, p.151. They were provided with a document which Mr Richards went through: Exhibit 7. In the course of this he managed to convey some degree of personal enthusiasm for the project; he does not seem to have conveyed effectively that there were any particular hazards or dangers associated with this investment: p.49. Nothing occurred which caused the plaintiffs to reconsider their decision, taken previously, to go ahead, and at the end of the interview with him Mr Downey signed the contract Exhibit 1: p.50. They subsequently saw an accountant who suggested that the contract be in the names of both plaintiffs, and as a result it went back to Mr Richards who amended it and Mr Downey also signed it: p.52. As might have been expected in the circumstances, the accountant also did not provide any warnings about the contract or any hazards with it: p.154.

Some time after the contract was signed Mr Downey saw an article in a Sydney paper about risks associated with an investment of this kind, and went to a seminar where the speaker warned people about property sold on the basis of rental guarantees: p.54. There was no reference to this particular project, and although Mr Downey asked about it, and the speaker promised to get back to him, he did not hear any more about it from that source: p.54. Mr Downey then rang Mr Richards’ secretary, and eventually was able to obtain a copy of the contract from him: p.55. He then saw a solicitor, who basically told him that it would cost a lot of money to investigate the matter thoroughly, but that there may not be anything to worry about, because it would be unlikely that Radisson would be mixed up with somebody who was going to go bad: p.57. In any event they made no move to pull out of the contract, and completed it after the building was constructed and the plan registered, on 22 November 1999: Exhibit 6, para 24.

In the contract Exhibit 1 there is, in clause 4 on p.2 of the document under tab 1, a statement that the “serviced apartment manager”, identified in clause 1.1 as 570 Queen Street Management Pty Ltd, proposed to engage Radisson Hotels Pty Ltd as its manager to operate the serviced apartment/apartment hotel business. Mr Downey said he did not see that provision until after he had signed the contract, and indeed some time after, when he obtained a copy of the contract from Mr Richards: p.66. Prior to that he had thought that a Radisson company would be managing the hotel: p.67.

After the contract was signed, there was material sent by the developers such as progress reports, and in addition there was material sent by some Radisson company, including a card, apparently a Radisson privilege card (p.68, p.148), and other promotional material: p.57. One of the magazines sent out became Exhibit 8.

Brochure Exhibit 3 : paragraph 6 representations

Exhibit 3 was a glossy brochure which referred to the development. It was a marketing brochure, apparently produced by the developers or the marketers. A copy was given to the plaintiffs. It was alleged in paragraph 6 that the defendant approved of and consented to Exhibit 3, and knew or ought to have known that Exhibit 3 would be provided to potential purchasers in order to promote the sale of units in the Radisson Suites development. This was admitted in the defence: paras 9, 12.

The first issue is whether the defendant knew or ought to have known the wording in Exhibit 3 was intended to and did convey five particular things to potential investors.[1] I think that strictly speaking the allegation ought to have been expressed as one that the wording would convey various things to potential investors. There is evidence that the defendant knew of the content of the brochure, and therefore the defendant may be taken to have known, or ought to have known, that it would convey such things as the brochure naturally does convey to potential investors. That is essentially something which is derived from the wording used; there is no independent evidence of the existence of any particular intention on the part of developers as to what Exhibit 3 would convey, or any other evidence of the knowledge of the defendant as to what Exhibit 3 would convey.
[1]Statement of claim, para 6(b), most of which is in issue: defence paras 10, 11. The pleadings have been amended a number of times and the relevant one was filed 8 September 2003, the first day of the trial. The relevant defence is that filed on 8 September 2003.

It was admitted that Exhibit 3 would convey that the units referred to in the brochure were to be associated with Radisson, but it was denied that the brochure would have conveyed that by reason of the association the units would be a good investment: defence para 10. The defendant pointed out that that is not stated expressly in the brochure, which is true, but it was conceded in submissions that the Radisson name was widely associated with hotels of high quality and that a hotel associated with Radisson would be more likely to be patronised than one with no association with Radisson or a hotel operator with comparable prominence.[2] If that is so, one would expect the mere association would enhance the attractiveness of the proposal, and in that way tend to suggest that it was a good investment.[3] On page 6[4] there is a statement that “In keeping with the Radisson reputation for quality, an exceptional level of finishes and inclusions has been attained.” The title on page 12 is “the Radisson advantage” which in itself implies that by reason of the association a unit would be a good investment. There is also a statement on page 18 under the heading “Operator/Manager credentials – major international hotel ‘in house’ booking service.” Apart from these, it is obvious that the inclusion of the references to Radisson in the brochure was intended to make the purchase of the units more attractive because the hotel would be run by a reputable, competent and effective operator. The involvement of Radisson in the project added respectability to it, and the references to Radisson in the brochure added credibility to everything that it contained. I am satisfied that this allegation has been proved.
[2]See also the defendant’s self-promotional material in Exhibit 12 document 9.
[3]That was certainly the way Southern Cross saw it: see Exhibit 12 document 7 at pp.17, 22.
[4]As printed the pages of Exhibit 3 were unnumbered. For the purposes of the trial they were by agreement given numbers, starting with page 1 inside the front cover.

The next allegation was that the brochure would have conveyed that the defendant considered the purchase of units to be an outstanding opportunity for investment. This appears to be based on the statement on page 12 that Radisson was positioned “to allow the company to take advantage of outstanding opportunities in Australia. Radisson Suites is just the one they were waiting for.” That certainly suggests that the defendant regarded the “Radisson Suites” proposal as an outstanding opportunity, but for itself. There is nothing in that to indicate directly that the defendant regarded Radisson Suites as an outstanding investment opportunity for purchasers of units, although the inference is that they regarded it as an outstanding opportunity for operation of a hotel, and that indirectly suggests that the purchase of units which would be leased back for operation of the hotel was an attractive proposition. Accordingly I am not persuaded that paragraph 6(b)(ii) is made out. The next allegation is that the defendant would only be involved with such a development if it were an outstanding opportunity. Again I think that this is related to its being an outstanding opportunity for the defendant rather than being an outstanding opportunity for purchasers of units. For that reason paragraph 6(b)(iii) is also not made out.

The next question is whether the advertising brochure would convey to potential investors that the defendant considered the subject matter to be a guaranteed success. This depends on a statement on page 12 which, after referring to the prospects of growth in demand for serviced apartments, continued: “Such growth, coupled with the guaranteed success of such a centrally located and magnificently appointed complex as Radisson Suites, has propelled Radisson’s decision to enter into a hotel management agreement to operate the $32 million development.” That is an assertion that Radisson’s decision to act in a particular way was “propelled”, that is to say caused, by among other things the guaranteed success of the Radisson Suites complex. Such a statement could only be true if Radisson did consider that the project would be a guaranteed success, that is to say, the suites hotel being constructed by the developer, if operated by Radisson, would be a guaranteed success. That is strictly speaking not the same thing as saying that an investment in the project by the purchase and leaseback of a particular unit would be a guaranteed success, but if the hotel is a guaranteed success it would be a guaranteed success for everyone including those who had purchased and leased back units, and therefore, albeit slightly indirectly,[5] Exhibit 3 would convey to potential investors that the defendant considered investment in units in the project to be a guaranteed success.
[5]In view of the nature of the target audience, the significance of such a subtle distinction could easily be missed, and is therefore irrelevant.

This is not to say that this statement impliedly guarantees that any particular result would be obtained, but rather that the investment would be a success in some form or other. Accordingly I do not think that it is falsified or qualified to any material extent by the qualifications expressed in relation to the projections set out on page 10, and to the disclaimer in fine print at the foot of page 18. In my opinion reading the brochure as a whole may involve a qualification of the reliability of the detail of projections and estimates, but does not qualify or materially detract from a generalised assertion about success being guaranteed. What the brochure was saying overall in my opinion was that success was guaranteed, although specific figures quoted as to what would occur in the future were necessarily only estimates, so the result ultimately achieved may well have been different. There is plenty of scope for that to occur without removing the justification for regarding the operation as a success. That is the effect of reading the document as a whole, in my opinion.

Finally it is alleged that the defendant ought to have known that Exhibit 3 would convey to potential investors that they could rely on Radisson’s opinion as to the quality of the investment in deciding to invest. What is said on page 12 is that Radisson is a regional hotel management company, and that it has a strategic international affiliation with Radisson Hotels International Inc, which is one of the world’s major hotel companies with over 330 properties in 42 countries, which operates, manages and franchises deluxe plaza hotels, suite hotels, hotels, inns and resorts. That implies and conveys in my opinion that it is a company which is particularly likely to be able to detect a good opportunity when it sees one, and conversely to be able to distinguish between a building which because of its central location and magnificent appointments is a guaranteed success, and one which is not. Accordingly its opinion as to the quality of the building, and hence the hotel operating under Radisson’s management, is something on which the potential investors could rely as to the quality of what they were buying into by purchasing a unit with a leaseback to be operated as part of that hotel. In my opinion therefore paragraph 6(b)(v) is made out.

Paragraph 7(e) representations

Turning to paragraph 7(e) of the statement of claim, this was also concerned with the question of what was represented by the brochure Exhibit 3, that is by Southern Cross who produced and distributed the brochure. Paragraph 7(e) of the statement of claim alleged that at all material times the defendant knew that by this brochure Southern Cross made ten representations. The defendant admits the allegations in paragraphs 7(e)(i) – (iv), which refer to a guaranteed net return of seven percent per annum for five years:[6] defence para 16. Some question arose as to what was meant by the word “guaranteed”. In the legal sense, something is guaranteed if the promise of the promisor is supported by a collateral promise by someone else to answer for the debt or default or breach of the promisor. Plainly what was being offered was not a guaranteed return in this sense; there was no guarantee being provided by anyone else of any obligation of the lessee under the lease. However, in my opinion the more common or popular meaning of the term “guaranteed return” is one that is assured, one that will definitely be forthcoming, one that can be relied on.[7] That in my opinion is the ordinary meaning to the expression and is the meaning that Exhibit 3 would objectively convey to potential investors.
[6]Except for paragraph 7(e)(iii) which makes a representation which was not misleading or deceptive, and can be disregarded.
[7]See Sydney Harbour Casino Properties Pty Ltd v Coluzzi [2002] NSWCA 74, [2002] ANZ Conv R 253 at [46].

The defendant submitted that the word “guaranteed” merely indicated that the return did not depend on the actual income earned by the letting of the room. Reference is made to the evidence of Mr Downey at p.42, where he was asked and replied: “Would you have entered into the investment – would you have made the investment without the claim for the – the rental was guaranteed? -- I don’t think so because if you do – not that I have much to do with hotel rooms but I can imagine hotel rooms being vacant for a lot of the time. But here it talks about there – that’s not a problem. Even if the room is vacant you’ll still be paid the rent because there’s a guarantee.” That certainly indicates that Mr Downey understood that the return did not depend upon the income generated by letting the particular room or suite which was to be purchased by the plaintiffs, and leased back, but it still involves the proposition that the rent would definitely be paid because of the guarantee.

There are I think two aspects to this. Certainly the rent and hence the return to an investor was not dependent upon the occupancy of the individual room, and that aspect was clearly understood by Mr Downey. But there is the further question of whether the rent and hence the return was dependent upon the success of the business overall. What was in my opinion conveyed by the emphasis on a particular level of return being guaranteed was that this amount would definitely be forthcoming, and that this was independent not only of the income generated by the particular suite owned by a particular investor, but also independent of the income generated by the operation of the hotel as a whole.[8]
[8]See also as to Mr Downey’s understanding of “guarantee” pp.93, 99; and Mrs Downey p.144.

That was in my opinion the crucial feature of what was set up here, and why it can be seen that those responsible for marketing it in this way were rogues. They were promising a high rate of return from the investment,[9] but on the basis that this would be paid by way of rent by the company to which the units would be leased. That company was without means to meet its obligations to pay rent under those leases, except to the extent that the hotel could be operated with sufficient success to generate profits to cover the rent. It had effectively no reserves or other financial capacity to cover the rent if the profits proved inadequate for that purpose.
[9]A typical rate of return on an investment in a home unit is four to five percent: Smith p.133.

In theory if 570 Queen Street Management Pty Ltd had sufficient funds the proposition that this return was “guaranteed” would have been fulfilled, because that was the obligation on the lessee under the lease. That obligation was not dependent, so far as the terms of the proposed lease were concerned, on either the success of the hotel business, or fluctuations in matters such as interest rates. It was like any other lease, where the obligation to pay rent is in law absolute, and in practice dependent solely on the financial capacity of the lessee. The problem here was not with the terms of the lease, but with the financial capacity of the lessee.

Hence what was set up here was simply a trap for the investor. A company with no significant assets was put in place to hold the leases. There was an agreement between it and the defendant for the defendant to manage the hotel as a Radisson hotel, but the defendant was under no obligation to any of the lot owners in relation to the rent under the lease. The only obligation was on a company which was going to be without means if the hotel was not successful. Yet the promotional material, Exhibits 3, 4 and 5,[10] went to great lengths to suggest that the “management company” to which the units would be leased and which would be responsible for paying rent, and the Radisson company (ie the defendant) which would be managing the hotel, were one and the same. Careful reading of the material would have indicated that that was not being expressly promised, and that there was a specific management company for this property which may well not be a Radisson company or a company associated with Radisson, although that was never stated expressly. It was not a complete case of suppressio veri, but there was a great deal of suggestio falsi.
[10]The way in which Exhibits 4 and 5 did this is set out later.

Exhibit 3 uses the name “Radisson Suites 570 Queen Street” on pages 1, 4, 8, and the name “Radisson Suites 570 Queen” on pages 2, 7, 10, 13 and 19, thus associating the address 570 Queen Street with the name “Radisson”. Page 8 refers twice to “a guaranteed return”, and on page 9 there is the reference to the “five year seven percent per annum rental guarantee provided by 570 Queen Street Management Pty Ltd.” Page 10 also refers to the apartment being leased “back to 570 Queen Street Management Pty Ltd and receive a guaranteed seven percent per annum for five years.” On page 12 there is the statement that “Radisson is a regional hotel management company”, and that “Radisson Suites is just the one they were waiting for”, and subsequently at the foot of the page reference to “Radisson’s decision to enter into a hotel management agreement to operate the $32 million development.” This says that Radisson is a hotel management company and it has entered into a hotel management agreement and it is going to operate the development. Further on page 18 there is the heading and statement “Operator/Manager credentials – major international hotel ‘in house’ booking service.” That is obviously a reference to Radisson.

The message conveyed by pages 12 and 18 is that there is a hotel management agreement for Radisson, a hotel management company, to manage or operate this development, and this together with the repeated use of the name “Radisson Suites 570 Queen” suggests that the company “570 Queen Street Management Pty Ltd” is a Radisson company.[11] It is the management company, and Radisson is a management company, and it has entered into an agreement to operate the development. The obvious inference is that it is the Radisson vehicle through which Radisson will be managing the “Radisson Suites 570 Queen Street”. That in my opinion is the inference objectively conveyed by Exhibit 3 as a whole. Significantly there is nothing in Exhibit 3 which indicates that 570 Queen Street Management Pty Ltd has nothing to do with Radisson, and that it is a separate company interposed between the “major international hotel” identified as the “operator/manager” on page 18 and the owners.
[11]That is the conclusion Mr Downey reached: p.75; p.79.

There is nothing in any of the material in any of the brochures to suggest that the reference to a “guaranteed return” was to be taken in any way other than in what I have described earlier as the common or popular meaning of the term. Paragraph 7(e)(v) in my opinion reflects that meaning, and on that basis I find that Exhibit 3 did make a representation that a purchaser of a unit who leased it to 570 Queen Street Management Pty Ltd was assured of receiving rental which would amount to seven percent per annum net for five years. Some of the references, for example on page 7, add that the rental is “reviewed to CPI”. Clause 2.2 of the schedule to the draft lease which is under tab 9 in Exhibit 1 provides for the rent to be adjusted each year on the basis of the Consumer Price Index (see also the definition in clause 1.1.9). The point for present purposes in my opinion is that the investor was being promised that the payment of rent was assured. I find that Exhibit 3 did include the representation referred to in paragraph 7(e)(v).

The next allegation is also disputed, in that it is denied that the advertising brochure represented that the investment would be self-funding. But page 7 of Exhibit 3 contained an investment analysis which was based on a loan of 100 percent of the cost of the apartment, stamp duty, solicitors’ fees and borrowing costs. It purported to show how, taking into account tax deductions based on a taxable income of $45,000 per annum and an interest only loan at a particular rate of interest, and the rental income “guaranteed”, there was a particular after tax net cash flow, which was positive in each of the five years of the guarantee. On page 8 this is summarised, with the statement “the investment pays for itself, so you are not using any of your earnings. Your tax savings and rental income more than cover your commitments.” There was obviously some scope for variation in the applicability of this to different people depending on for example level of income, whether a 100 percent loan was available and at what interest rate, and in the case of later years whether the CPI increase was four percent. The basic message of the document was however that, provided that the purchaser met the appropriate profile and the transaction was financed in this particular way, it would be self-funding and it would produce a positive cash flow from the date of purchase. Subject to that qualification, Exhibit 3 did represent as alleged in paragraph 7(e)(vi).

The next representation alleged was that the investor “would receive the amount of $178 ‘in the pocket’ each week.” This is really associated with the previous representation, and, like it, is essentially correct although subject to the qualifications referred to, and also subject to the qualification of this amount only applied during the first year; the analysis on page 7 shows a lower net weekly positive cash flow in each of the subsequent years, apparently because the first “year” was not a full year, but relatively high tax deductions were still said to be available, for reasons which are not clear to me. Subject to those qualifications, this allegation is made out.

It was next alleged that Exhibit 3 represented that the purchase of the unit and its leasing back “would be an outstanding investment because it would produce assured returns and capital growth.” Insofar as this refers to the assurance provided by the “guaranteed return” during the first five years, the allegation is made out, but I am not persuaded that there was any representation in the document that capital growth was assured. There was a reference on page 4 to this being “your chance to capitalise on the growing market,” and there is also a reference on page 9 to “median unit prices in the CBD have enjoyed 22 percent growth in the last five years”, but that also does not amount to an assurance of capital growth in the future. There is also a reference on page 12 which, as mentioned earlier, suggested that Radisson regarded this as an outstanding opportunity, but an opportunity for them, rather than an outstanding opportunity for the investor. Overall the allegation in paragraph 7(e)(viii) is not made out.

The next question is whether Exhibit 3 represented that the defendant endorsed the representations referred to in paragraph 7(e)(i) – (viii). This is a question of what was represented by Exhibit 3, rather than whether the defendant in fact endorsed those representations. All that was said expressly about the attitude of Radisson were the statements on page 12, that “Radisson Suites is just the one [ie one outstanding opportunity in Australia] they were waiting for,” and later on the same page, that Radisson’s decision to enter into the hotel management agreement was propelled by an expected seven percent per annum growth in CBD based serviced apartments to the year 2000, coupled with “the guaranteed success of such a centrally located and magnificently appointed complex as Radisson Suites.” Those are representations about the attitude of Radisson, and involve the assertion that Radisson does hold those attitudes. On the other hand they do not involve any assertion of Radisson’s endorsement of the particular propositions referred to in paragraph (i) to (viii) of paragraph 7(e) of the statement of claim. I am not persuaded that such an assertion fairly arises by implication from the actual contents of Exhibit 3, and this allegation fails.

Both of the plaintiffs gave evidence that they thought Exhibit 3 was Radisson’s document: p.40, p.140. I accept this evidence, but for present purposes what matters is not what the document in fact conveyed to the plaintiffs but what objectively it did represent. I think that if one looks at Exhibit 3 overall it does not purport to be Radisson’s document. It certainly makes use of the name, and it makes it clear that Radisson is involved, in that it has entered into a hotel management agreement to operate the development, and the use of Radisson intellectual property in the document implies that it has been produced with the consent of Radisson, but on the whole the document does not purport to be Radisson’s document.

The next allegation is that Exhibit 3 represented that the defendant had investigated matters referred to in (viii) thoroughly and formed the opinion that there were reasonable grounds for making those predictions. It follows from the fact that I am not persuaded that the document made the representation referred to in (viii) that this allegation must also fail, but as well there is nothing to suggest any particular investigation of those matters by the defendant, nor is there any express or implied representation that there had been any investigation of anything in relation to the return to the investors by Radisson. This allegation also fails.

The defendant had seen and approved Exhibit 3 prior to the time when it was used by being distributed to potential purchasers, and in particular to the plaintiffs, and it follows that the defendant at all material times knew that that brochure made such of the representations alleged in paragraph 7(e) as I have found the document did represent.

Exhibit 4

Exhibit 4 is the brochure referred to in paragraph 7(c) of the statement of claim. The defendant admitted that it approved the content of and authorised the use of this document and its provision to potential purchasers: defence para 17. In this document the expression “Radisson Suites 570 Queen” or “Radisson Suites 570 Queen Street” is used 12 times, and another eight times the expression “Radisson Suites” is used. On page 3 there is a reference to “the Radisson reputation for quality”, and on page 4 there is an article in glowing terms about how large and respectable Radisson is, commencing with the statement that “Radisson Hotels Pty Limited (Radisson) is an Australian based hotel management group …”. The first page refers to the development as “managed by the renowned Radisson Hotels”, and an article on the second page refers to the hotel being “managed by internationally acclaimed operator, Radisson Hotels Inc.” In the same article there is the statement that “the hotel management company 570 Queen Street Management Pty Ltd is offering investors a seven percent per annum guaranteed net return for five years, regardless of room vacancies.” In circumstances where the reader has just been told that the hotel is to be managed by Radisson, the clear inference is that the hotel management company referred to is a Radisson company.

On page 3 there is a statement that “the hotel is to be operated by Radisson Hotels Pty Ltd (Radisson) as Radisson Suites 570 Queen.” In the same article there is a reference to “Radisson, who operate the complex on behalf of owner investors.” On page 4, in the article praising Radisson as one of the world’s top hotel operators, there is a reference to “Radisson’s decision to enter into a hotel management agreement to operate the $35 million property.” All of this material seems to me to invite the inference that 570 Queen Street Management Pty Ltd is a Radisson company, because of the association of “570 Queen Street” with “Radisson”, because of the word “management” in the name, and because of the statements to the effect that a Radisson company will be managing the hotel. 570 Queen Street Management Pty Ltd is on page 2 expressly identified as the hotel management company, in circumstances where it has been said that the hotel will be managed by Radisson.

It is true that, if one reads Exhibit 4 carefully, there are two indications to the contrary. The first is on page 4, where there is a statement that “The developer … is offering a net investment return of seven percent per annum for five years, in view of the involvement of an international hotel operator such as Radisson.” That ought to have been a clue to the fact that the return of seven percent was being promised by the developer, not by Radisson. But it does at least provide some suggestion that the promise was not being made by Radisson. There is also a note on that statement to refer to the Radisson disclaimer on page 4, and on that page, in the smallest print in the whole document,[12] there is a disclaimer: “Whilst the information inside this publication is believed to be true and correct, the figures and advice supplied are given as a guide only and no responsibility will be taken for any errors or omissions. Savings, projections, pay out terms and benefits will vary according to interest fluctuations, market conditions and the client’s individual financial situation. Specialist taxation or investment advice should be sought. Neither Radisson, nor its subsidiaries and any of their officers, or any local or overseas affiliates (including Radisson Inc and Carlson companies) make any representation or give any warranty or guarantee as to the performance of Radisson Suites 570 Queen. Investors should make their own independent assessment as to the likely performance of the hotel/apartment complex, and should note that the predictions and calculations in the determination of future trading performance rely upon a number and variety of anticipated outcomes which may vary significantly depending upon the actual future events and outcomes.”
[12]As to small print, see Britt Allcroft (Thomas) PLC v Miller [2000] FCA 699 at [57].

This disclaimer is really of no relevance, because it does not address the crucial features of this brochure. The most significant aspects of the brochure were that purchasers of units who lease them back would receive a guaranteed seven percent per annum for five years from the lessee, the association of the project with Radisson (both of which were express and undisputed), and the clear implication from the bulk of what is contained in the document that it was Radisson that was providing the guaranteed return. A disclaimer talking about figures and advice is not relevant to this; it would suggest that this was referable for example to the figures and advice in the box headed “Radisson Suites investment analysis” on the same page. The reference to “savings, projections, payout terms and benefits” is also naturally referable to that sort of analysis, which may well vary according to interest fluctuations, market conditions and a client’s individual financial situation. There is no reason to think that any of the three fundamentals to which I have referred would vary according to those things. They are clearly not what is being spoken of in this disclaimer. The disclaimer as to the performance of Radisson Suites 570 Queen is also really irrelevant in circumstances where, as is said higher up the same page, what is being offered to investors is “a seven percent per annum guaranteed net return for five years, regardless of room vacancies.”[13] What was being promised was a guaranteed return regardless of the success or otherwise of “Radisson Suites 570 Queen”. The disclaimer is therefore not speaking about what is actually being promised.
[13]Mrs Downey unsurprisingly did not connect the disclaimer with this promise: p.148.

Apart from this, it is well established that the mere existence of a disclaimer in a document which contains otherwise misleading information will not necessarily prevent the document from being in breach of the Trade Practices Act.[14] It is necessary to have regard to the overall effect of the document. Although if one scrapes away the layers of falsehood there may be a gem of truth hidden somewhere within this document, that is not enough to prevent it from being in breach of the Act.
[14]Petera Pty Ltd v EAJ Pty Ltd (1985) 7 FCR 375 at 377-8; Clark Equipment Aust Ltd v Covcat Pty Ltd (1987) 71 ALR 367 at 371; Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546 at 561; IOOF Australia Trustees (NSW) Ltd v Tantipech (1998) 156 ALR 470.

There is one other thing worth mentioning about Exhibit 4. On p.2 there is a reference to purchasers of units receiving a Radisson privilege card. The plaintiffs said that they subsequently received such a card, and other material from Radisson: pp.57, 68. That tends to confirm, and would have tended to confirm, that what appears on the face of Exhibit 4 as a promise by Radisson Hotels Pty Ltd can be relied on.

The statement of claim in paragraph 7(c) makes an allegation as to the brochure Exhibit 4, and as to the basis upon which the sale of the units was being promoted by Southern Cross by the use of that brochure. Those allegations are admitted by the defendant: defence para 14.

Exhibit 5

Exhibit 5 is the document referred to in paragraph 7(d) of the statement of claim. The defence denies paragraph 7(d), but on the basis that the document does not contain the representations pleaded. It apparently does not dispute that there was such a brochure distributed by Southern Cross to potential purchasers, and the evidence is that there was. As to the question of whether the defendant approved of the content of and authorised the use of this document and its provision to potential purchasers in the promotion of the project, paragraph 17 of the defence relevantly says simply that the defendant “repeats paragraph 15 above.” In my opinion this is not a denial of the facts alleged in paragraph 7A(a) about the document referred to in paragraph 7(d), and the defendant may be taken to have admitted this allegation.[15] Whether the document contained the representations alleged in paragraph 7(d) remains in issue, and that requires a consideration of the document.
[15]See UCPR r 166(5).

Again there are numerous references to the name “Radisson Suites 570 Queen”, no fewer than 23 in Exhibit 5. Towards the foot of the first page there is a statement that the hotel is “to be managed by internationally acclaimed operator Radisson”, and in the same article a statement that “the management company is offering investors a seven percent per annum guaranteed net return for five years. Outgoings such as rates, body corporate and management fees are paid by the lessee during that five year period.” On the second page in one of the articles there is a statement in the first paragraph that the hotel is “to be managed by Radisson Hotels International Inc,” and in the same article a statement: “Investors who purchase a furniture package will be offered a five year seven percent per annum net rental guarantee so they receive a guaranteed income. During this period the management company as lessee will pay all of the running costs including body corporate fees, rates and maintenance.” A statement about the management company as lessee paying outgoings during the guarantee period is repeated on the fourth page, where there is also a statement that “the hotel group [Radisson Hotels] has just entered into a management agreement with Valco Developments to operate its $32 million, four star international standard apartment hotel at 570 Queen Street Brisbane.” That same section of the document speaks about the strength and standing of Radisson Hotels International Inc.

In this document there are no qualifications or hints of the truth. At the foot of the first page there is some fine print which is less extensive than that in Exhibit 4, and for the reasons given in relation to Exhibit 4 is completely ineffective as a means of nullifying the natural inference from what is said elsewhere in the document. In my opinion that document clearly represented that the management company was offering investors seven percent guaranteed net return for five years, and that Radisson would be managing the hotel. It must be said that there is some vagueness about precisely which manifestation of “Radisson” would be involved. The reference on the first page is simply to “internationally acclaimed operator, Radisson”, on the second page to “Radisson Hotels International Inc”, and on the fourth page to “the hotel group” and in these circumstances it is difficult to identify the defendant (which at the relevant time was named Radisson Hotels Pty Ltd) as the entity represented as managing the proposed hotel. Perhaps the most obvious inference from Exhibit 5 looked at alone is that Radisson Hotels International Inc was going to be managing the hotel. But Exhibit 5 was not looked at alone, and in any case the important consideration is that it was a Radisson company that would manage the proposed hotel.[16] I find the allegations in paragraph 7(d) proved.
[16]Mr Downey did not distinguish between the different companies in the Radisson structure: pp.95-6.

Conduct of the defendant

The next question is whether the defendant is responsible for the purposes of s 52 of the Act for the representations made in those three documents or any of them. The plaintiff in paragraphs 7A and 7AA of the statement of claim puts this in two ways: that by approving the contents of these documents and authorising their use and provision to potential purchasers in the promotion of the project the defendant had engaged in conduct for the purpose of s 52, or that, because of the approval or authorisation of the use of those documents, the making of the representations contained in them amounted to conduct of the defendant.

It was not the defendant who actually made the various representations to various people such as the plaintiffs; that was done by Southern Cross, who presumably also produced the brochures Exhibits 3, 4 and 5. It does not necessarily follow in my opinion that there could not have been relevant conduct on the part of the defendant on the making of those representations. This is a different situation from one where the party actually in contact with the representee is not responsible for the formulation of the representation, and is simply passing on information provided by a third party.[17] There seems to be less consideration in the authorities of the opposite case, where the issue is whether someone other than the person actually making the representations is responsible. There are however some authorities which suggest that the actions of someone else who actually deals with the representee can be attributed to someone who does not, so that there is relevant conduct on the part of the latter.
[17]See Yorke v Lucas (1985) 158 CLR 661 at 666.

One situation in which this has arisen is where it has been suggested that manufacturers have been responsible for misrepresentations on the part of retailers of their products. In Braemar Appliances Pty Ltd v Rank Electronic House Wares Pty Ltd (1983) 78 FLR 446 Smithers J said at p.447: “There is a large gulf between the manufacturer who supplies goods to retailers and the conduct of the retailers themselves. If the manufacturer is to be made responsible in respect of misconduct of the retailer it must be shown with reasonable clarity that the respondent ought to have contemplated that it would occur, or knew that it was likely to occur.”

A similar point was made by Mason J as he then was in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 211: “Knowledge by a manufacturer that some retail salesmen, at some time, would deceive customers as to the identity of the manufacturer of its furniture would not amount to conduct breaching s 52. This is not to say that more specific knowledge about the practices of retailers could not provide grounds for attributing that practice to the manufacturer. If the appellant knew that certain retailers were removing its labels or otherwise disguising the furniture’s identity, then assuming that labelling was necessary to comply with s 52, delivery of labelled furniture to those retailers without more may be insufficient to discharge that requirement.”

This is plainly not a reference to any potential liability under s 75B. It is concerned with the conduct of the manufacturer, in that case by manufacturing and supplying furniture which, absent a label, might have been misleading or deceptive. The case was that the manufacturer was labelling the furniture, and that this prevented any misleading or deception of customers. There was evidence that some customers had in fact been mislead, but here the default was attributable to the retailers. But the point there really was that supplying labelled furniture to retailers for sale in circumstances where the furniture unlabelled was misleading or deceptive may well have amounted to misleading or deceptive conduct if the manufacturer had known that the retailers were in the habit of removing the labels. That does seem to mean that the conduct alleged to be in breach of s 52 by way of a representation does not necessarily have to be a representation directly by the defendant to the plaintiff. Arming another with the capacity to make a particular representation to a third party, knowing that there is an intention to make that representation, can in my opinion amount to conduct for the purpose of s 52 of the Trade Practices Act.

There is also the consideration that the defendant allowed the marketer to associate the project with the Radisson name, in particular in these brochures, thus conferring on the project and the contents of the brochures an aura of respectability that they did not deserve. This added credibility to the brochures, by association with a prominent and respectable company. Even though the brochures may not have gone so far as to say that Radisson was guaranteeing the return which was such a prominent feature of the marketing programme the association with Radisson would have added credibility to this guarantee, particularly in the eyes of unsophisticated investors.[18] This was something which in a practical sense the defendant contributed to the brochures, and in that way became a significant part of the process by which buyers such as the plaintiffs came to be misled. In my opinion it was an important feature of the defendant’s conduct in approving the brochures that this associated the Radisson name with the representations they contained.
[18]As recognised by Southern Cross: Exhibit 12 document7, p.22: “Investors feel that the experience of the operator will impact on … the strength of their guarantee.”

In my opinion the crucial question is whether there was a sufficient degree of control on the part of the defendant over the making of the relevant representations by the marketer so that it could be said that the marketer had been able to make the representations in those terms only because the defendant allowed it to do so. In those circumstances, in my opinion if the making of those representations was misleading or deceptive, the conduct of the defendant in allowing those representations to be made, having a capacity to prevent them from being made, amounts to conduct on the part of the defendant which, if the representations were misleading or deceptive, would be in breach of s 52. Here the defendant exercised a good deal of editorial control over the content of the documents, knowing that they would be distributed to intended purchasers of units in the development.

There was undoubtedly a capacity to control, if for no other reason than the use of the intellectual property of the defendant in the documents. It appears that there was an agreement with the defendant that the defendant could exercise supervision and control over this material.[19] The evidence suggests that a good deal of editorial control was exercised. The defendant admits that prior to the printing and distribution of Exhibit 3, a draft of this document was provided to it, and it signified its approval to the document subject to certain alterations. The draft was forwarded by fax dated 14 May 1997 (Exhibit 12, document 35) and certain alterations were made to this draft, and those changes were reflected in Exhibit 3. For example on p.8 under the heading “Success, an investment that pays for itself” in the second paragraph the first sentence in the draft concluded with the words “and then lease back to a hotel management company,” which were changed to “and then lease back for a guaranteed return.” Lower down on the same page in the last sentence on that page the words “and rent it out through Radisson” were changed to “and receive a guaranteed return.” The draft of what became p.12 under the heading “The Radisson advantage” had the second paragraph substantially changed, and a proposed fourth paragraph deleted.
[19]Such an arrangement is asserted in the defendant’s fax document 46 in Exhibit 12.

In some cases however what was approved on this occasion appears not to have been reflected in the final brochure. On page 9 under the heading “Maximise your income and growth potential” there are at the foot of the page under the subheading “Alternative Radisson Suites advantages” three dot points. The first of these in the draft forwarded on 14 May 1997 read: “A five year seven percent per annum rental guarantee. You will earn $11,675 in the first financial year, or $330 per week, no matter what the room vacancies are.” The defendant amended the draft by inserting the words “provided by the developer” after the word “guarantee”, which in the circumstances would have been an important qualification, because it is clear from the evidence of Mr Downey that he interpreted Exhibit 3, and indeed Exhibits 4 and 5, as indicating that the rental guarantee was provided by a company associated with the defendant, that is to say, a Radisson company. However the version that appears in Exhibit 3 says: “A five year seven percent rental guarantee provided by 570 Queen Street Management Pty Ltd. You will earn $11,675 in the first financial year, or $330 per week.”

On 3 September 1997 there was a fax from the defendant to representatives of the developer complaining about newspaper advertisements which were alleged to involve the unauthorised use of the Radisson name: Exhibit 12 document 46. This shows that the defendant was insisting upon enforcing its rights in respect of its intellectual property, and the fax goes on to insist that “we must submit drafts to Radisson in the US for its approval prior to the marketing material being placed in the public arena.” That in my opinion involves a clear imposition of the requirement that marketing materials were to be approved by Radisson. In all the circumstances, this was not a case where any approval or consent was essentially a formality on the part of the defendant; on the contrary, a right to control was asserted, and close editorial control was exercised, and in those circumstances approving the contents of the documents and authorising their use by distribution to potential purchasers such as the plaintiffs, so as to make such representations as those documents made, did in my opinion amount to conduct for the purposes of s 52 of the Trade Practices Act.

Does s 51A apply?

The next issue is whether the plaintiffs are entitled to rely on s 51A of the Act. This raises a question of whether the defendant “made a representation” for the purposes of that section. It was submitted that the relevant representations were made not by the defendant but by Southern Cross, and that therefore the section did not apply. It is true that the relevant conduct of the defendant was conduct preliminary to the making of the representations by Southern Cross. However, it was conduct which caused and permitted the representations to be made in those terms, with the knowledge that they would be made in those terms, by Southern Cross, and in that way in my opinion this could be seen to be a situation where in substance, and sufficiently for the purposes of s 51A, the representations are to be treated as being made by the defendant.

The defendant relied for the contrary submission on the decisions in King v GIO Australia Holdings Ltd (2001) 184 ALR 98, and Australian Competition andConsumer Commission v Universal Supports Challenge Ltd [2002] FCA 1276. These cases however are concerned with the question of whether s 51A applies in circumstances where a claim is brought not against a corporation contravening the Act, but against a person alleged to be knowingly concerned in the contravention by a corporation and thus liable under s 75B of the Act. The effects of the latter decision at least, at para [45], is that s 51A does not apply in the case of a claim under s 75B. But that is not the primary basis upon which the plaintiffs allege that the defendant is liable, and not the basis which is relevant for present purposes. Rather the authorities discussed in that case, and a consideration of the obvious purpose and function of that section, suggest that it is applicable to a claim for a breach of s 52 on the basis that the relevant conduct is conduct of a corporation as a result of which a representation is made. In my opinion s 51A does apply in the present case.

A future matter?

The plaintiffs allege that all the representations referred to in paragraphs 6(b), 7(c), 7(d) and 7(e) amount to representations with respect to a future matter for the purposes of s 51A. In general counsel for the defendant did not dispute that the representations (if they were made) were representations as to future matters, although that was disputed in relation to the representations alleged in paragraphs 6(b)(ii), (iii), (iv) and (v). It was submitted that these were not representations as to future matters. With regard to these, the first is a representation as to what Radisson “considered” at the time the brochure was produced, and is therefore not a representation as to a future matter.

The second is more difficult to characterise, since the question of whether something is an outstanding opportunity is I think a representation as to a future matter. But the representation as a whole is really one as to the current state of mind of Radisson, and as to its view of whether the development was an outstanding opportunity. This is not a case where a representation which is essentially as to the future contains an implication about the current state of mind of the representor, as in Ting v Blanche (1993) ATPR 41–282. This is one where the focus of the representation is really on the current state of mind of Radisson. It is therefore in my view not a representation as to a future matter. The third is also a representation as to what the defendant “considered” and therefore the current state of mind of the defendant, and not a representation as to a future matter.

The final one is also I think more difficult. The question of the quality of the investment turns on what will happen in the future and is therefore concerned with a future matter, but the existence of any particular opinion as to this on the part of Radisson is not a representation of a future matter, and the focus is on the opinion. But the proposition that the opinion could be relied on in deciding to invest is concerned with something that the representee would do in the future, that is after the representation was made, when deciding to invest. That may not be very far into the future, but it is strictly speaking something which would happen after the time when the representation was made, and therefore paragraph (iv) is a representation as to a future matter.

Were the representations misleading?

The next issue is whether the various representations were misleading. Where s 51A applies, this turns on whether the defendant has shown to the contrary. To represent that the units were to be associated with Radisson did not involve any misrepresentation, so the crucial question in relation to the first representation (para 6(b)(i)) is whether by reason of the association they would be a good investment. This is admitted to be a representation as to a future matter as it plainly is. This representation is closely related to the representations as to financial return, and in particular whether there was a guaranteed seven percent per annum return for five years, which in the light of the brochure as a whole was the principal basis for the assertion that the purchase of a unit would be a good investment. It is therefore convenient to consider first, as the fundamental question, whether there were reasonable grounds for the representation that a purchaser of a unit would receive “seven percent per annum net guaranteed five years reviewed to CPI.”

It is clear that what was proposed by the developers and marketers, as shown by the terms of the contract provided to the plaintiffs (Exhibit 1), was a lease of the unit after purchase to 570 Queen Street Management Pty Ltd for a term of five years, at a rent payable during the first year equivalent to seven percent of the purchase price payable in accordance with the contract: Exhibit 1, contract clause 23.3. The draft lease which was annexed to the contract provided in clause 2.2 for the rent to increase annually on the basis of the change in the Consumer Price Index, and for the tenant to pay the body corporate levies, local authority rates, charges, levies, water and sewerage rates, and insurance premiums in relation to contents insurance: clause 2.3, and see clause 1.1.21.[20] It follows that if this scheme were put into operation a situation would be created where 570 Queen Street Management Pty Ltd would be legally liable to pay to the purchaser of the unit a rental income of seven percent per annum for five years reviewed to CPI, with that company paying the expenses and outgoings.
[20]The defendant knew of the draft lease because a copy is attached to the management agreement: Exhibit 12 document 50.

The question of whether that is guaranteed, ie assured, depends not simply on whether such a legal obligation would be created, but on whether that company would have the capacity to honour its obligation. That involved a consideration of what sources of income would be available to that company, and what reserves that company would have available in order to meet its obligations in the event of income being insufficient. In relation to this, there is nothing in the material before me to indicate that the defendant had any reasonable grounds for a belief or conclusion or prediction that the company 570 Queen Street Management Pty Ltd would have a capacity to meet its legal obligations under the leases.

There is evidence that in May 1997 some officers of the defendant completed preliminary forecasts in relation to the operation of the hotel business.[21] It is not immediately apparent however how this figure relates to the rent payable for the units, and the document does not appear to make any provision in relation to rent.[22] Part of the difficulty is that it would not be known in advance how many of the owners would take up the leaseback arrangement, or which owners. Presumably the prices varied for different units, and I do not know what seven percent of the total purchase price of all of the units which were to be the subject of leaseback was going to be. Indeed at the time the representations were made, or at the time when the defendant approved the terms of the material in which representations were to be made, it would have been unknown what number of units would have been dealt with in this way, let alone which particular units.
[21]Exhibit 12 document 28. This shows estimates of net operating profit for the year ended 30 June 2000 of $1,310,318, and $1,787,654 and $2,107,619 for the two following financial years.
[22]Document 59 at the back of Exhibit 12 includes a table apparently based on one similar to the table in document 28, but with a separate figure for “rental guarantee”, suggesting that it was not covered by the other entries.

I have set out in an annexure to these reasons a chronology which summarises the history of the whole project, so far as it appears from the evidence before me. The arrangement between the defendant and the developer appears to have been that its management was conditional on at least 100 units being leased back, and the preliminary forecast document assumed 126 “keys” were available. Document 23 suggests that 126 “keys” was the equivalent of 90 units. The plaintiffs purchased Lot 95 which so far as I can gather was a reasonably typical lot, for $240,500. Seven percent of that is $16,835, which would have been the rent payable on the plaintiffs’ unit for the first year. Exhibit 1 shows that the plaintiffs’ levies to the body corporate were $2,872.95 per annum. If those amounts of rent and levy are regarded as typical, 90 such units would generate a total rental and levy obligation for the year of $1,773,715, a figure which is well in excess of the net operating profit in the first year, and approximately equal to that of the second, and which does not appear to have been covered by the various items of expenditure referred to in this forecast. Apart from this, it was also necessary for the company to cover all of the other outgoings for the units. It is not apparent how these costs have been taken into account in the preparation of the preliminary forecasts of May 1997, or how some other equivalent allowance has been made for these costs. Nor is it apparent that any consideration has been given to the capacity of 570 Queen Street Management Pty Ltd to meet its obligations under the leases on the basis of the forecast of income set out in this document; on the basis of these figures, it would appear to be unable to do so, so that the project was in fact unviable.

The defendant also relied on document 23 within Exhibit 12, a bundle of documents sent by the defendant to someone higher up the Radisson organisation on 2 May 1997. These contain no financial projections whatever, and certainly no information about the financial viability or otherwise of 570 Queen Street Management Pty Ltd. This document does not demonstrate any particular financial backing, or financial standing, of 570 Queen Street Management Pty Ltd; it is irrelevant whether there was an appearance of financial stability on the part of the developers, because there is no evidence of any basis for any belief on the part of the defendant that the developer would be putting its money behind this company. Reference was also made to document 43 within Exhibit 12. This is a bundle of documents sent by the defendant to its superior within the Radisson organisation on 3 June 1997. Again there is no relevant financial analysis. There are some assumptions made about occupancy and average room rate, which are presumably reasonable assumptions bearing in mind the experience of the defendant, but these figures appear to have been generated only for the purpose of quantifying the licence fee payable under the agreement. Again there is no analysis of the viability of 570 Queen Street Management Pty Ltd. They seem to be concerned merely to show that, assuming the project is viable, it will make money for the defendant. Again these figures provide no justification for any belief in the profitability of that company, or the viability of the whole project.

There is nothing in the material which indicates that the defendant was conscious of this at the relevant time; so far as the material I have seen reveals, it simply did not turn its mind to this question. But the relevant consideration is whether it had reasonable grounds for making the representation that this return was assured. In my opinion the defendant did not have reasonable grounds for making such a representation. Indeed on the evidence before me I would arrive at this conclusion, whether the onus were on the plaintiffs or the defendant. If the onus is on the defendant, plainly it has not been discharged. But even if the onus is on the plaintiffs, the discovered material in evidence suggests that no attention whatever was given to this issue at any relevant time by the defendant, and in those circumstances, and bearing in mind the defendant’s failure to call evidence and applying the principle in Jones v Dunkel (1959) 101 CLR 298, if the onus is on the plaintiffs, the plaintiffs have discharged it.

In my opinion it was misleading and deceptive to represent in relation to the proposed purchase of a unit on the basis of its leaseback to 570 Queen Street Management Pty Ltd, that the purchaser was assured of receiving rental which would amount to seven percent per annum net for five years reviewed to CPI, with annual expenses and outgoings paid by that company. There was no reasonable basis for such a conclusion, indeed there was simply no material available which provided any support for the proposition that that company was going to be able to operate on a basis which would permit it to make such payments to the purchasers of units which were then leased back.

Whether the purchase of a unit was a good investment depends entirely upon whether the scheme under which rent at those rates would be payable was viable. If that was not viable, it follows that 570 Queen Street Management Pty Ltd would itself not be viable. The continuation of the operation of the hotel by the defendant was dependent upon the continuation of that company, as shown by the fact that the defendant withdrew after that company failed. The defendant’s arrangement was simply that it would manage the operation of the hotel at the cost of that company, for reward. Hence it was not true to say that by reason of the association with Radisson the purchase of the unit would be a good investment; it was not a good investment despite the association with Radisson.

I have not been persuaded that the representations in paragraph 6(b)(ii) and (iii) have been proved. Had I been persuaded that such representations were made, I would have concluded that each of them was a misrepresentation, and therefore misleading and deceptive conduct. There is no basis for a conclusion that the defendant considered the purchase of a unit to be an outstanding opportunity for investment from the point of view of the purchaser, in circumstances where there is no evidence to support the formation of such an opinion ever on the part of the defendant, and where all the evidence that I have seen suggests that the defendant never gave any consideration to that issue at all. The same situation applies to the proposition that the defendant would only be involved with such a development if it were an outstanding opportunity, that is from the purchaser’s point of view. Those findings are however made on a precautionary basis only.

The next question is whether the representation in paragraph 6(b)(iv), that the defendant considered the subject investment to be a guaranteed success, has been proved. This is not a future matter, so the onus is on the plaintiffs. However, all of the material that I have seen suggests that no consideration was given to the question of whether the project was assured of success. There was the preliminary forecast to which I have already referred, but that was prepared without having completed a market study or a detailed analysis of manning estimates for the hotel, as noted in the covering document. It appears to have been prepared simply to give some idea of what figures would be likely to be involved, on the basis of the defendant’s experience in operating hotels of this nature, for use in connection with the negotiations with the developer as to the terms of the management agreement, which was not finally signed until about four months later: Exhibit 12 document 50.

It does not appear that the defendant ever actually considered whether the project would be a success, let alone a guaranteed success. This projection is directed to the viability of the hotel business, and conveniently ignores the obligation to pay rent for the rooms to be used in running the hotel. Indeed it had no particular reason for being concerned about this, since none of its money was at stake. In view of the terms on which it was agreeing to manage the hotel, if it were a success it would earn management fees, and if it were not a success it would not but none of its money was at risk, since any losses generated would be losses of 570 Queen Street Management Pty Ltd, not the defendant. The project would have been an attractive one for the defendant not because success was “guaranteed” (whatever that meant), but because the adverse consequences to the defendant of failure were minimal.[23] Accordingly I am satisfied that this representation was misleading.
[23]Besides it was being paid a significant fee for providing “technical services” in setting up the hotel: Document 42 in Exhibit 12.

The next question is whether the representation in paragraph 6(b)(v), that potential investors could rely on Radisson’s opinion as to the quality of the investment in deciding to invest, was a misrepresentation. This representation is to a future matter in respect of which the defendant has not discharged the onus. Even apart from this, for the reasons already given the evidence suggested the defendant did not ever make any assessment as to the quality of the investment, or indeed as to the prospects of success of the complex taking into account the rental obligations of 570 Queen Street Management Pty Ltd, and therefore whether the onus is on the plaintiffs or the defendant, I am satisfied that the representation was misleading.

Turning to the representations alleged in paragraph 7(e), the first four are admitted by the defendant. For the reasons referred to earlier, (i), (ii) and (iv) were misleading, because the defendant did not have reasonable grounds for making the representation, in the absence of reasonable grounds for a belief that the company 570 Queen Street Management Pty Ltd would be capable of meeting its obligations under the leases. I have already dealt with this earlier. The same process of reasoning demonstrates that the representations alleged in paragraph 7(e)(v), (vi), (vii) and (viii) were also misleading. All of these are concerned with financial returns, and are based on the proposition that the company was going to be able to meet the obligations under the lease. In circumstances where there was no reasonable ground for that proposition, the representations must be characterised as misleading.

The remaining representations alleged in paragraph 7(e) were not made out. On a precautionary basis, had they been made out I would have concluded that the representations in sub-paragraph (viii) and (x) were misrepresentations, because the defendant had no reasonable grounds for making such representations, because the returns were by no means assured, and because the defendant had not investigated the capacity of the company 570 Queen Street Management Pty Ltd to discharge its obligations under the leases, which were the basis of its being able to have a hotel for the defendant to manage. On the other hand, the proposition that the defendant endorsed the representations otherwise referred to (para 7(e)(ix)) was not a misrepresentation; in view of the approval of the contents of Exhibit 3 by the defendant, insofar as Exhibit 3 did make the representations referred to earlier in paragraph 7(e), those representations were thereby endorsed by the defendant.

The next question is whether the representations referred to in paragraph 7(c) of the statement of claim were misleading. These relate to Exhibit 4, and allege representations corresponding to those in paragraph 7(e)(iv), (vi) and (vii). For the reasons given above in relation to those representations, these representations were also misleading.

With regard to the representations alleged in paragraph 7(d) of the statement of claim, these relate to Exhibit 5. I have found that these representations were made, and the issue remains whether they were misleading. Taken separately, the first is not misleading, in the sense that the defendant did intend at the relevant time to manage the proposed development. The management agreement was executed in September 1997. The problem with the second representation is the word “guaranteed”, which in my opinion here conveyed the same meaning conveyed by the use of that word in Exhibit 3, as referred to earlier. For reasons already given, in my opinion it was misleading to say that payment of the seven percent per annum net return for five years was guaranteed, and it follows that the second representation was misleading. The real problem however in relation to Exhibit 5 is the misleading impression created by the combination of the two representations, that it was Radisson that was offering the guaranteed return to investors.[24] That representation was conveyed by that document, and was obviously misleading, since Radisson was not guaranteeing any return to anyone, and undertook no obligations to the investors whatever. The real problem with Exhibit 5 is that it conveyed the combination of the two representations pleaded in paragraph 7(d), which were more misleading in combination than taken separately.
[24]Mr Downey seems to have concluded this: p.104, p.110. See also Mrs Downey p.145.

Causation

The next issue is the question of reliance, or as it is perhaps more appropriately described, the issue of causation. A loss is, for the purposes of s 82 of the Trade Practices Act, proved to have been established “by” conduct contravening s 52 if the conduct in question materially contributed to that loss: Henville v Walker (2001) 206 CLR 459; MAM Mortgages Ltd v Cameron Bros [2002] QCA 330 at [9]. As the latter decision also shows, it is sufficient if the representations play a minor part in contributing to the course of action which results in loss, and if a representation is calculated to induce the representee to enter into a contract and the representee in fact does so, it is a fair inference of fact that the representee was induced to enter into the contract by that representation. In the present case the representations as to the return to be achieved by the investment in the project, and the other representations that I have found were made, were all representations calculated to induce persons such as the plaintiffs to enter into a contract to purchase a unit from the developer. That is what the plaintiffs did. MAM v Cameron Bros (supra) illustrates that a finding of causation can be made even in the absence of credible evidence of actual reliance. The decision in that case by the Court of Appeal, reversing the decision of a trial judge, that there was causation illustrates that such a finding will readily be made.

Mr Downey in his affidavit Exhibit 6[25] referred to receiving Exhibits 3, 4 and 5, that he formed various views consistent with some of the representations pleaded, and that the rental guarantee was of significance to him. He said that after he had considered this material they were contacted by the marketers as a result of which they went in, saw the various people and signed the contract. Mr Downey said he was very impressed with the investment analysis on page 7 of Exhibit 3, and that he thought that the rental guarantee for five years looked excellent: p.38. He regarded this as fundamental to his decision to go ahead: p.42. He also regarded the defendant has an honourable and reputable company, so that what was being said could be relied on: p.42. He assumed that the brochure Exhibit 3 was a Radisson document[26] because of the extensive use of the Radisson name and badge. He said that he would not have entered into the contract had the project not been supported by Radisson or someone like that: p.43. He thought that Exhibit 3 was the most influential of the three documents, which were the only documents they had to look at in the period between the time when they were told about this particular project, and the day when they signed the contract: p.44.
[25]Parts of this affidavit were excluded as inadmissible: part of paragraphs 1 and 8 (referring to Mrs Downey), and paragraph 18: p.25-6.
[26]See Mr Downey at pp.39, 40.

Mrs Downey also thought that Radisson produced Exhibit 3: pp.142-3. She read the documents and said that the matters which were influential in persuading her to go ahead with the contract were the association with Radisson and the belief that as a result it would be a successful venture, that it was described as a guaranteed success, that there was seven percent return promised, and that with the benefit of tax deductions the investment would pay for itself: p.144. She understood that no matter what she would get the seven percent per annum net return for five years, and that was a matter which gave her confidence in the project: p.145. She believed the contents of Exhibit 3 because she believed that it was a Radisson document: p.146.

There was no conflicting evidence from the defendant, and no challenge to either the methodology or the calculations in the reports from the accountants. The accountants have taken into account the rent in fact received, and all expenses associated with holding the property, in calculating the net rental loss, including the costs incurred in borrowing the money for the purchase of the unit, which in my opinion is properly seen as part of the plaintiffs’ loss. The accountants have also made allowance by way of deduction for the value of the tax benefits received by the plaintiffs because of the losses and such depreciation as was properly allowable. The net figure to 31 August 2003 calculated in Exhibit 14 is $41,912 and I accept that figure as recoverable as consequential losses.

There is one further item claimed by the plaintiffs, the cost at some time in the future of selling the unit. There is nothing to indicate that the valuation evidence gives value net of selling costs. In order to put the plaintiffs in the same position as if they had not purchased the unit in the first place, it is necessary to deduct the realisable value, that is the market value less the costs of sale, rather than the nominal market value, in order to determine the true loss. The agent’s commission is based on $175,000 rather than $185,000, so it will be a slight under-estimate. Again the methodology and calculations were not challenged by the defendant, and I accept that the amount of $5,275 should be allowed for this.

In summary therefore the damages allowable are as follows:

(a) difference between sale price and true value $55,500

(b) incidental costs of acquisition $7,866

(c) losses from ownership $41,912

(d) sale costs $5,275

Total: $110,553

Limitation defence [38]

[38]Logically this comes before the assessment of damages but both sides dealt with it last in submissions.

The defendant has pleaded that the plaintiffs are barred from recovering any part of the relief claimed by s 82(2) of the Act, which used to provide that an action claiming damages under s 82 might be commenced only within three years after the date on which the cause of action accrued. That period was extended to six years by the Trade Practices Amendment Act (No 1) 2001. Item 21(2) of schedule 1 to that Act provided that the amendment to s 82(2) “applies in relation to conduct engaged in before the commencement of that item, but only if the period that: (a) relates to the conduct; and (b) applied under s 82(2) of the Trade Practices Act 1974 before the commencement of that item; had not ended when that item commenced.” The amendment took effect on 26 July 2001, so the question is whether the three year period which previously applied had expired prior to that date. If it had not expired, it was then extended to a six year period, and it is clear that on any view of the matter the proceedings were started within six years from the time when the cause of action arose.

The defendant’s submission was that the cause of action arose at the time when the plaintiffs entered into the contract of sale; it was at that point that the plaintiffs suffered loss, so that the cause of action was complete; therefore the three year period dates from the date of the contract, 27 November 1997, and had expired prior to 26 July 2001. The plaintiffs on the other hand submitted that there was authority that the cause of action did not commence to run until the plaintiffs’ loss became ascertained or ascertainable, which at the earliest occurred in approximately May 1999 when Mr Downey became concerned about the worth of the rental guarantee, and sought legal advice.

There is high authority that in appropriate cases the cause of action is not to be regarded as complete as soon as a disadvantageous agreement has been entered into. In Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 the majority at p.527 said: “In many instances the disadvantageous character or effect of the agreement cannot be ascertained until some future date when its impact upon events as they unfold becomes known or apparent and, by then, the relevant limitation period may have expired. To compel a plaintiff to institute proceedings before the existence of his or her loss is ascertainable would be unjust.” That approach has subsequently been followed, most notably in the Full Court of the Federal Court in Karedis Enterprises Pty Ltd v Antoniou (1995) 59 FCR 35. In that case the majority said at p.40 that when loss or damage is suffered was a question of fact, and it was not necessarily suffered upon the making of a contract on the faith of misrepresentations. At p.43 the majority said that the question was objective: “At what time could it be said that it was reasonably ascertainable that the [plaintiffs] would suffer loss.”[39] That decision has been subsequently extensively followed.[40]
[39]See also 59 FCR at 46 per Sackville J.
[40]For example, in CAJ Investment Pty Ltd v Lourandos (1996) 83 FCR 189 at 202; Blacker v National Australia Bank Ltd [2001] FCA 254; Murphy v Overton Investments Pty Ltd (2001) 112 FCR 182; Commonwealth Bank of Australia v Davies [2003] QSC 470 at [47].

The proposition that the test is objective means that the issue does not depend on when the prospect or possibility of loss or risk of loss first occurred to the plaintiffs. The matter may perhaps be tested by considering a situation where the plaintiffs sought in early 1998 the avoidance of contract under s 87 of the Act, on the ground that they had been induced to enter into it by misleading and deceptive conduct. Could they at that stage have shown that they had suffered a loss?[41] In the ordinary case of a simple contract to buy and sell an existing thing, such as existing real estate, there may be no great difficulty in showing that the market value of the thing sold was at the date of contract, or the date of the proceeding, less than the contract price.
[41]Of course for the purposes of s 87 it would have been sufficient for the plaintiffs to show in the alternative that they were likely to suffer loss or damage, but that alternative test is not available under s 82 and should be ignored for present purposes.

In the present case however there would then have been difficulties in valuing the unit, which would have been still then a proposed lot in a building still under construction. There is also the consideration that it would not have been possible to know at that time what the market price would be as at the date of completion of the contract. Indeed it would not even have been possible to ascertain the date of completion of the contract. The problem would not have been any difficulty in showing that a valuation based on the “guaranteed return” was inappropriate, but in showing that the unit to be constructed would not then have a value as a home unit which was as great as the purchase price, in circumstances where completion was still 18 months away.[42] A lot can happen to a real estate market in 18 months, and the fact that we now know that it did not happen does not mean that it would have been possible to tell in early 1998 that it was not going to happen.
[42]The unit was readily usable as an ordinary home unit, and indeed that was the basis on which Mr Smith eventually valued it: p.132-3

It seems to me therefore that there were necessarily going to be difficulties in showing that there really had been a loss suffered much earlier than the date of completion, because it was not going to be known what the true market value of the unit at that date would be until then. But I think there is a more fundamental reason why there was no loss suffered at the time when this contract was entered into. It is established that a contingent loss is not a loss for the purposes of s 82 of the Trade Practices Act: Wardley Australia Ltd v Western Australia (supra). The contract was conditional upon the purchasers obtaining finance in accordance with clause 43, although that condition would have been satisfied promptly, and was also subject to conditions in clause 34, in relation to a willingness of the vendor to proceed with the construction of the building, but again presumably those conditions had been satisfied by the time of the contract, or were satisfied promptly thereafter.

Of greater significance however is clause 14 by which completion of the contract was made “subject to the registration of the plan” ie the building units plan over the land, which would be registered after completion of the building: clause 45.1. If the plan had not been registered by 30 June 2000 either party was entitled to terminate the contract by written notice to the other, whereupon the deposit would be refunded to the purchaser. There was a provision for extension of this time in certain circumstances, but it seems to me that in any event the plaintiffs had a right under s 27 of the Land Sales Act 1984 to terminate the contract and recover the deposit if the vendor had not given the purchaser a registrable instrument of transfer within three and a half years after the contract date.

It follows in my opinion that the contract in this case was a contingent contract up to the date of registration of the plan. Presumably that occurred not all that long before the date of completion, since under clause 6.1.2 completion was to be a date 14 days from the day the vendor gave notice in writing to the purchaser that the plan had registered. It follows that until that date in my opinion any loss was contingent, and was therefore not a loss for the purposes of s 82, and the limitation period had not commenced to run. It had therefore not expired prior to the commencement of the amendment effected by the Trade Practices Act Amendment Act (No 1) 2001, and the claim is not barred by s 82(2) of the Act. The limitation point fails.

Conclusion

The plaintiffs also claim interest by statute. This needs to be considered separately in relation to the different components of the damages. Insofar as the damages include the difference between the contract price and the market value of the unit on the date of completion, prima facie the plaintiffs would be entitled to interest on that amount from the date of completion to today.[43] However the plaintiffs borrowed the full amount of the purchase price, and have claimed and are recovering the amount paid by way of interest on that loan as part of their consequential loss. In that way it seems to me that interest (at an appropriate rate) has already been covered in respect of that part of the purchase price which represented the loss, and it would not be appropriate, and indeed amount to double compensation, for me to allow in addition interest by statute on this component of the damages, at least in respect of the period prior to 31 August 2003. I will therefore allow one year’s interest on this amount, at the rate I have been usually using for “commercial” losses or out-of-pocket expenses when allowing interest under the Supreme Court Act 1995, of eight percent per annum, $4,440.
[43]Sydney Harbour Casino Properties Pty Ltd v Coluzzi (supra) at [99].

With regard to the other purchase costs, I note that the total amount to be borrowed was in excess of the purchase price, by an amount ($12,550) which is more than the incidental costs. The difference does not reflect the amount of the tenancy fit-out package which was to be purchased following completion pursuant to clause 25 of the contract, since it appears that that was included in the purchase price. In any case, it is sufficient for present purposes for me to say that it has not been shown that these incidental costs were not covered in the amount borrowed, and therefore included in the interest taken into account in calculating the consequential loss, and therefore again I should allow only one year’s interest of eight percent per annum, an amount of $629.

With regard to the consequential loss, interest for the full period should not be allowed on the borrowing costs, which were apparently also covered by the money borrowed. Hence I will deduct $1,637, on which I will allow interest at eight percent for one year, $131. Otherwise, the loss was incurred progressively between the time of completion and 31 august 2003, although the greater loss occurred towards the beginning of that period. I think the fair solution is to treat the whole of that loss for the purposes of calculating interest as having been suffered in early September 2001. I will therefore allow interest for three years at eight percent per annum, a total of $9,666. Interest should not be allowed on the future sale costs.

Accordingly the total amount I will allow by way of interest is $14,866. There will therefore be judgment that the defendant pay the plaintiffs $125,419. I will invite submissions in relation to costs.

Annexure – Chronology

11 March 1997	Meeting Henderson-Smart of defendant and a representative of the developer, negotiating a management agreement for a hotel: document 8.[44]
21 March 1997	Marketing submission by Southern Cross to developer Valco Developments Pty Ltd. Proposed a rental guarantee of seven percent for five years, and association with a major (a top ten) hotel operator: document 7.
27 March 1997	Defendant wrote agreeing to enter into negotiations to manage the proposed apartment hotel, for 1% of total revenue and 10% of net operating profit. Radisson was seeking $75,000 plus expenses for technical services including completing three year forecasts for the hotel. Stated that Radisson was not providing financial guarantees but noted that “our management team are very experienced in … financial forecasting”: document 9.
10 April 1997	Letter Radisson to representative of developer confirming various matters including, in relation to lease structure, that “the developer will enter into leases with each strata owner and will deal with each owner on all matters. Our reporting will be to the developer (lessee).” Refers to not having yet prepared any forecasts, and that “the Radisson name may only be used in marketing of the hotel in circumstances where we are satisfied that the design and project budgets are appropriate for hotel of international four star standard”: document 13.
11 April 1997	Developer’s representatives fax to Radisson declining to pay the fee for technical services.
24 April 1997	Developer forwarded details of project to Radisson, but without any proper financial analysis: document 23.
2 May 1997	Fax defendant to developer, details of payments not yet resolved, but refers to a working capital budget: document 24.
6 May 1997	Developer sent information on other Brisbane hotels to Henderson-Smart, with a reference to their having “based our forecast profit and loss statements on the likely number of 126 [units] and I suggest that you do the same”: document 26.
6 May 1997	Preliminary forecast for operation of hotel (three years) forwarded by Radisson to developer. So far as I can see, they made no provision for payment of rent: document 28.
14 May 1997	Draft text of what became Exhibit 3 faxed to Radisson for approval: document 35.
21 May 1997	Further fax from Radisson to developer about terms of the engagement to manage the proposed hotel under the Radisson brand: document 38.
2 June 1997	Letter developer to Radisson. Contains apparent agreement about the technical services, and discloses the existence and position of 570 Queen Street Management Pty Ltd, that it will hold the leases and provide the “rental guarantee” to the individual investors, and be responsible for the building management fee for the body corporate: document 42.
3 September 1997	Fax Radisson to developer advising willingness to proceed subject to confirmation that its financial commitment is sufficient to cover the project costs, including pre-opening budget and working capital necessary to run the hotel: document 46. Also a second fax complaining about unapproved advertisements appearing in newspapers, insisting that no further marketing of the project in Radisson name occur until the management agreement and international licence agreement has been signed, and noting that approval of Radisson in the US was required prior to marketing material being placed in the public arena.
11 September 1997	Multiplex Constructions (Qld) Pty Ltd letter to Radisson advising intent to commence construction in the near future: document 47.
15 September 1997	First draft of what became Exhibit 4 sent by fax to defendant: document 53.
16 September 1997	Management agreement signed between Valco Developments Pty Ltd, the defendant and 570 Queen Street Management Pty Ltd. Includes draft lease from the investors: document 50.
3 November 1997	Plaintiffs attend “educational seminar” run by Southern Cross Pty Ltd in Sydney.
8 November 1997	Plaintiffs attend marketing meetings at Quay West and given brochures Exhibits 3, 4 and 5.
27 November 1997	Plaintiffs attend various meetings in the course of which the contract Exhibit 1 is signed.
2 August 1999	An “optimistic five year projection” prepared by defendant and sent to developer, which still does not appear to make any provision for paying rent on the leased units: document 117.
27 September 1999	Radisson sent developer revised budgets for the hotel operations, which still do not appear to make any reference to rent payable to the unit owners. These figures prepared on the basis that there would be 160 rooms available to the hotel, with presumably a corresponding increase in the amount of rent payable to the owners under the leases: document 127.
?? October 1999	Building units plan registered.
11 October 1999	Lease of plaintiffs’ unit for five years to 570 Queen Street Management Pty Ltd executed: Exhibit 2.
22 November 1999	Settlement of contract to purchase unit.
6 December 1999	Hotel opened (late) under the management of Radisson: document 164. As a result of the delay an increase in the pre-opening budget and a cash injection sought.
20 January 2000	Letter Radisson to developer threatening to terminate hotel management agreement: document 183. There was a failure alleged to provide the full amount of the agreed pre-operating budget, and the costs had increased because of the delay. There was also alleged a failure to provide the agreed working capital, or pay the full amount of the technical services fee.
2 February 2000	Letter 570 Queen Street Management Pty Ltd to defendant denying any breaches of the hotel management agreement, alleged that there had been losses suffered as a result of the defendant’s representations (not specified) and alleging that the hotel was being improperly operated, in particular being over-staffed: document 190. Reference made to net projected income of $900,000 being “some $550,000 less than the budget upon which our company relied upon in entering into the project.” I have not seen a document which provides a projected income of $1,450,000. The figure however is not very different from that provided for the first year in document 28, and may have been a variation on that; if so it suggests that the relevant documentation was a forecast which apparently did not take into account the obligation to pay rent.
20 February 2000	Internal report by local Radisson manager alleging breaches by developer and financial problems caused by other matters, and dispute between the developer and the builder: document 197. Claimed that so far as the hotel is concerned it is successful.
21 February 2000	570 Queen Street Management Pty Ltd failed to pay rent due: p.71.
15 March 2000	Provisional liquidator appointed to developer and 570 Queen Street Management Pty Ltd.
16 March 2000	Receiver and manager appointed to developer and 570 Queen Street Management Pty Ltd.
3 April 2000	Defendant still operating the hotel: document 242. Presumably very soon after this the defendant withdrew from the management agreement and ceased to operate the hotel.

[44]Most of the documentary evidence was in a bundle of documents which became Exhibit 12. I shall refer to these just as “document 7” etc.

CITATION:	Downey & Anor v Carlson Hotels Asia Pacific Pty Ltd [2004] QDC 310
PARTIES:	PETER JUSTIN DOWNEY and TERESITA DOWNEY Plaintiffs v CARLSON HOTELS ASIA PACIFIC PTY LIMITED Defendant
FILE NO/S:	D4992/02
DIVISION:
PROCEEDING:	Trial
ORIGINATING COURT:	District Court, Brisbane
DELIVERED ON:	14 September 2004
DELIVERED AT:	Brisbane
HEARING DATE:	8 – 11 September 2003
JUDGE:	McGill DCJ
ORDER:	Judgment that the defendant pay the plaintiffs $125,419.
CATCHWORDS:	TRADE PRACTICES – Misleading and Deceptive Conduct – whether misrepresentations in brochures approved by the defendant but composed and distributed by others conduct of the defendant. TRADE PRACTICES – Misleading and Deceptive Conduct – representation that return of seven percent per annum guaranteed – whether reasonable basis for making representation – assessment of damages. TRADE PRACTICES – Misleading and Deceptive Conduct – whether defendant knowingly concerned in breach of s 52 by another. TRADE PRACTICES – Limitation Period – Misleading and Deceptive Conduct – when cause of action complete – conditional contract. Trade Practices Act 1974 (C’w’th) s 51A, s 52, s 75B, s 82(2). Australian Competition andConsumer Commission v Universal Supports Challenge Ltd [2002] FCA 1276 – followed. Henville v Walker (2001) 206 CLR 459 – followed. MAM Mortgages Ltd v Cameron Bros [2002] QCA 330 – followed. Pace v Westpac Banking Corporation [2002] QCA 350 – applied. Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 – considered. Sydney Harbour Casino Properties Pty Ltd v Coluzzi [2002] NSWCA 74, [2002] ANZ Conv R 253 – applied. Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 – applied. Yorke v Lucas Pty Ltd (1985) 158 CLR 661 – applied.
COUNSEL:	M M Stewart SC and A P J Collins for the plaintiffs J S Douglas QC and M R Bland for the defendant
SOLICITORS:	Quinn & Scattini solicitors for the plaintiffs Gilbert & Tobin for the defendant.