EME Cardiff Pty Ltd v EME (NSW) Pty Ltd
[2008] FMCA 476
•24 April 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| EME CARDIFF NO. 1 PTY LIMITED & ANOR v EME (NSW) PTY LTD & ANOR | [2008] FMCA 476 |
| TRADE PRACTICES – Judgment under r.13.03 of the Federal Magistrate Court Rules –where respondent failed to comply with an order of the court – applicable principles – trade practices claim – damages – loss of opportunity. |
| Civil Procedure Act 2005 s.101 Federal Magistrates Act 1999 (Cth) s.76 Trade Practices Act 1974 (Cth) ss.51AC, 52, 75B, 82, 86, 86AA, 87, 88A |
| All Fasteners v Grant Caple Pty Ltd & Ors (No.3) [2005] FMCA 1873 All Fasteners (WA) v Grant Caple [2007] FCA 1252 Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433 |
| First Applicant: | EME CARDIFF NO. 1 PTY LIMITED |
| Second Applicant: | EME CARDIFF NO. 2 PTY LIMITED |
| First Respondent: | EME (NSW) PTY LTD |
| Second Respondent: | EFTHIOS MARKANTONAKIS |
| File Number: | SYG 1608 of 2006 |
| Judgment of: | Barnes FM |
| Hearing date: | 17 December 2007 |
| Date of Last Submission: | 6 February 2008 |
| Delivered at: | Sydney |
| Delivered on: | 24 April 2008 |
REPRESENTATION
| Solicitors for the Applicants: | Hassett Dixon Solicitors |
| Respondents: | No Appearance |
ORDERS
The second respondent pay to the first applicant, by way of damages pursuant to s.82 of the Trade Practices Act 1974 the sum of $31,200 together with interest from the date of application in the sum of $5,708.20.
The second respondent pay to the second applicant, by way of damages pursuant to s.82 of the Trade Practices Act 1974 the sum of $30,200 together with interest from the date of application in the sum of $5,525.24.
The second respondent pay each applicant’s costs of these proceedings.
The costs shall be as taxed in accordance with the Federal Court Rules unless the applicants’ solicitor provides the court with details of the quantification and apportionment of the costs sought in these proceedings and proceedings SYG 1609 of 2006 within seven days of today’s date, in which case the costs will be in an amount to be ordered by the Court.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1608 of 2006
| EME CARDIFF NO. 1 PTY LIMITED |
First Applicant
| EME CARDIFF NO. 2 PTY LIMITED |
Second Applicant
And
| EME (NSW) PTY LTD |
First Respondent
| ETHIOS MARKANTONAKIS |
Second Respondent
REASONS FOR JUDGMENT
These proceedings
The first and second applicants seek judgment against the second respondent under r.13.03 of Federal Magistrates Court Rules in the amount of $61,400 together with interest and costs.
The applicants commenced proceedings against the respondents on 6 June 2006, alleging breach of the Trade Practices Act 1974 (Cth) (the TPA), breach of contract and fraud.
The first respondent was described in the application as a company conducting “a business providing road transport services” who “also advertised and sold regional franchises”. The second respondent was the managing director of the first respondent company. He was said, in the alternative, to be an employee of the first respondent or a duly authorised agent of the first respondent.
The matter came before the Court on several occasions for directions. At no time was there any appearance for the first respondent. It was noted that the first and second applicants intended to seek default judgment in relation to the first respondent on the date fixed for hearing.
The matter was initially listed for hearing on 27 August 2007 to be heard together with an associated matter (EME Transport – North Pty Ltd v EME (NSW) Pty Ltd & Anor [2008] FMCA 477). However before that time the second respondent (who was represented) failed to comply with orders for filing and serving evidence by a specified date. The hearing date was vacated and the matter listed for hearing on 5 September 2007.
On 5 September 2007 there was no appearance for the first respondent. Through recently instructed counsel, the second respondent sought an adjournment. The hearing was adjourned until 17 December 2007.
The second respondent was ordered to file and serve written submissions on or before 1 December 2007 and to pay the applicant’s costs thrown away by reason of the adjournment on or before 5pm on 17 October 2007, in default of which the defence contained in the response would be struck out and the applicants at liberty to apply for default judgment in relation to the second respondent.
In breach of the costs order of 5 September 2007 the second respondent did not pay the applicants’ costs on or before 17 October 2007.
On 17 December 2007 there was no appearance for either respondent. The applicants sought default judgment. The applicants rely on the application (and points of claim) filed on 6 June 2006 and affidavits of Francis Ryan and Nathan Ryan sworn on 18 January 2007 and 16 January 2007 and filed on 19 January 2007. The solicitor for the applicants was given the opportunity to clarify a number of matters in written submissions, including whether they still sought to proceed against the first respondent, as the Court had previously been informed in written submissions for the applicants that the first respondent had “gone into liquidation”.
There is no evidence before the Court as to service of the application on the first respondent. Nor is there any evidence as to the precise status of the respondent company or addressing the question of whether the applicants require, and if so have obtained, leave of an appropriate court under s.471B or s.500(2) of the Corporations Act 2001(Cth) (and see s.58AA).
The further written submissions filed for the applicants on 6 February 2008 did not address this issue, but seek damages or other orders under the Trade Practices 1974 (Cth) in relation to the second respondent by virtue of the operation of s.75B of that Act. It appears that the applicants no longer seek judgment in relation to the first respondent.
In these circumstances no orders for damages or payment of any of the amounts claimed under ss.82 and 87 of the TPA or otherwise should be made against the first respondent in these proceedings.
Default judgment
The applicants seek “default” judgment in relation to the second respondent under r.13.03 of the Federal Magistrates Court Rules which states:
(1) This rule applies if a party fails to take a step required by these Rules or to comply with an order of the Court.
(2) Subject to any other order or transfer the Court may, on the application of another party in the proceeding or of its own motion, make an order:
(a) that the step be taken within a stated time; or
(b) to end the proceeding or dismiss a response.
(3) The Court may make the order sought or another order that it considers appropriate
Rule 13.03 is analogous to the former Federal Court Rule Order 10 rule 7 which applied to proceedings in the Federal Court of Australia before Order 35A was introduced in 2004 (see Posner v Gibb & Anor [2001] FMCA 93). As was the case under O.10 r.7, r.13.03 is available “to authorise the giving of judgment terminating the proceedings wherever a party has failed to comply with a direction requiring the party to take a step in the proceeding” (See Australian Securities Commission v MacLeod and Others (1994) 54 FCR 309 per Drummond J at 313).
It is important to note the distinction between r.13.03 and a rule such as Order 35A of the Federal Court Rules. Under Order 35A an applicant may be entitled to relief on the basis of a statement of claim without the need for proof by way of affidavit evidence of the applicant’s claim, provided on the face of the statement of claim there is a claim for the relief sought and the court has jurisdiction to grant that relief (see Arthur v Vaupotic Investments Pty Ltd [2005] FCA 433 at [3] per Heerey J and Australian Competition and Consumer Commission v Albert (2005) 223 ALR 467). However there is no such provision in the Federal Magistrates Court Rules. In MacLeod Drummond J stated at 314 in relation to the former Order 10 Rule 7 of the Federal Court Rules:
…the applicant must prove his entitlement to the judgment claimed by evidence sufficient to prove, among other things, the facts upon which his cause of action is based.
I am of the view that, as McInnis FM accepted in Posner v Gibb at [14], the same principles apply to an application under r.13.03.
This means that, to paraphrase what Drummond J stated in MacLeod at 314:… where final judgment is sought against a respondent pursuant to [r.13.03] on the ground that he is in default in complying with directions given under the order, the applicants must support its motion for judgment with material in legally admissible form sufficient to prove not only that the Court has jurisdiction in the matter and that the circumstances are such as to justify the grant of this discretionary remedy, but also all the facts necessary to prove its entitlement to the relief claimed under the judgment applied for.
(Also see to the same effect Zomba Production Music (Aust) Pty Ltd v Roadhouse Productions Pty Ltd (in liq) (2001) 190 ALR 288 and Grey v Mango Pre Paid Calling Cards Pty Ltd (2004) 141 FCR 370).
Thus I must be satisfied that the applicants have put before the Court material in legally admissible form sufficient to entitle them to final judgment in the action.
The second respondent failed to comply with the order made on
5 September 2007 that “The Second Respondent pay the Applicants costs in the sum of $3,000 in relation to matters SYG1608/2006 and SYG1609/2006 on or before 5pm on 17 October 2007 in default of which the defence contained in the response be struck out and the applicants be at liberty to apply for default judgment”. This failure provides a basis for the operation of r.13.03.
In oral submissions the solicitor for the applicants addressed the facts said to be necessary to prove the applicants’ entitlement to recover damages from the second respondent under the TPA as sought in the application. He indicated that they maintained the action in deceit on the same basis as the TPA claim against the second respondent but abandoned the breach of contract claim. The applicants do not seek to rely on s.51A of the TPA as the reversal of onus on that section does not apply to a person who is claimed to be an accessory under s.75B (Quinlivan v Australian Competition and Consumer Commission (2004) 160 FCR 1). Nor is it necessary to address the pleaded contravention of s.51AC which relates to unconscionable conduct by a corporation in a business transaction.
The solicitor for the applicants was asked to clarify if the other bases for the action were pursued. The alternative claims were not addressed in submissions. There is evidence to support the claim in deceit as pleaded (see the discussion of s.75B below) on the basis that the second respondent knowingly or recklessly made false statements of fact as to customer base and long term work contracts (and did not have reasonable grounds for representations as to income projection and guaranteed work), intending that they should be (and were) acted upon by the applicants. However the damages are as sought under the TPA, as discussed below. For the reasons given below, the applicants are entitled to damages in respect of a contravention of s.52 under s.82 of the TPA. There is no evidence before the Court to establish that the damages recoverable in relation to the action in deceit would exceed those recoverable under the TPA.
Jurisdiction
The applicants claim that the first respondent breached s.52 of the TPA and that the second respondent is liable by virtue of s.75B of the TPA. As noted above, to obtain judgment under r.13.03 the applicants must first provide “sufficient material” to prove the Court has jurisdiction in the matter. This is a claim under the TPA. It is alleged that there has been a contravention of s.52. The amount of loss or damage sought does not exceed $750,000 (see ss.86 and 86AA). I am satisfied on the basis of the materials before me that the Court has jurisdiction in this matter.
Section 52 claim
Section 52(1) of the TPA is as follows:
(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
I am satisfied as to the evidence on which the cause of action under the TPA is based. There is evidence in legally admissible form of the facts necessary to prove a contravention of s.52 of the TPA by the first respondent.
The applicants rely on the affidavits of Nathan Ryan and Francis Ryan filed on 19 January 2007. On the evidence before me it is clear that the first respondent was a corporation conducting a business “in trade or commerce”. (See Mason CJ, Deane, Dawson and Gaudron JJ in Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 602 – 603).
There is evidence before the Court to prove a number of representations made orally by the second respondent on behalf of the first respondent and in various documents provided by the first respondent in connection with the possible purchase by the applicants of two sub-franchises in the Newcastle and Hunter region (with one truck operating per sub-franchise) for the carriage of freight which, it was represented, would give rise to a guarantee of minimum hours of work per week per sub-franchise.
It was alleged in paragraph 8 of the application that by making specified representations the respondents and each of them engaged in conduct that was misleading and/or deceptive and/or likely to mislead and/or deceive and contravened s.52 of the TPA.
It was also contended that specified representations were fraudulently made in that they were untrue to the knowledge of the respondents or were made with a reckless indifference as to whether they were true or false and they were made with the intention that they be acted upon by the applicants. Insofar as liability is sought to be imposed on the second respondent in relation to future matters there is evidence before the court to establish that the representations were made and were misleading or that the maker of the representation had no reasonable grounds for making them (Quinlan).
The representations are described in the application and the affidavit evidence. It is claimed that after the applicant companies were incorporated the second respondent on behalf of the first respondent made all these representations to members of the Ryan family on behalf of the applicants. The representations are:
(1)the “customer base representation” that the first respondent had long term contracts for the carriage of freight with Bunnings Building Supplies Ltd, the Hudson Group Ltd, Mitre 10 Ltd, Sydney Water, Bovis Lend Lease Ltd and Coates Hire Ltd. There is affidavit evidence that such representations were made orally by the second respondent as well as in a document entitled “Frequently Asked Questions” (see paras [4] – [8] and Exhibit FR8 to the affidavit of Francis Ryan).
(2)the “10 trucks representation” that there was a great deal of work to be done pursuant to these contracts, enough for approximately 10 2 tonne – 8 tonne trucks, made orally by the second respondent (see para [8] of the affidavit of Francis Ryan)
(3)the “work guarantee representations” that the first respondent would guarantee at a minimum of 40 hours per week per sub-franchise, made in an information memorandum and other documents sent to the applicants by the first respondent (see Exhibits FR 4, FR 8 and FR12 to the affidavit of Francis Ryan) and orally by the second respondent (para [8] of the affidavit of Francis Ryan).
(4)the “sub-franchisee service representation” that a sub-franchise fee of $38.50 per hour for a 2 tonne truck and $51 per hour for an 8 tonne truck would be paid by the first respondent to the applicants (see para [8] of the affidavit of Francis Ryan and para [6] of the affidavit of Nathan Ryan).
(5)the “net profit representation” that the net profit to the sub-franchisee would be approximately $590 per week or $30,700 per annum for a 2 tonne truck sub-franchise and $1,000 per week or $52,000 for an 8 tonne truck sub-franchise (see para [8] and Exhibits FR19 and FR27 to the affidavit of Francis Ryan).
(6)the “administrative tasks representation” that the first respondent would carry out all administrative tasks including invoicing customers and accepting customer payments on behalf of the applicants, payment of the sub-franchise service fee to the sub-franchisee and payment of driver of wages (see Exhibit FR4 to the affidavit of Francis Ryan).
(7)the “8 tonne truck worked example representation” that from an 8 tonne crane truck the sub-franchisee would be paid a service fee of $51 per hour or $2,040 per week (see Exhibit NR2 of affidavit of Nathan Ryan and paras [8] and [42] and Exhibit FR19 of the affidavit of Francis Ryan).
(8)
the “2 tonne truck worked example representation” that from a
2 tonne truck the sub-franchisee would be paid $38.50 per hour or $1,540 per week less an administration fee of $15.40 totalling a weekly income stream of $1,524.60 or $79,279.20 per anum (see paras [8] and [85] and Exhibits FR27and FR29 of the affidavit of Francis Ryan).
(9)the “sub-franchise income stream representation” that a 2 tonne crane truck sub-franchise would within the first year of trading achieve a 70% return on funds initially outlayed, including the sub-franchise fee, the purchase of a truck to operate the sub-franchise and other operating costs (see Exhibit NR9 of affidavit of Nathan Ryan and Exhibit FR 27 of affidavit of Nathan Ryan).
(10)the “truck purchase representation” that the respondents would purchase an 8 tonne truck from Bunnings and on-sell the same truck to the Ryan’s nominees including the first and second applicant at cost (see para [8] of the affidavit of Francis Ryan).
The affidavits relied on by the applicants provide a basis on which the Court can be satisfied that there is evidence that these representations were made and that the making of such representations constituted misleading or deceptive conduct within s.52, insofar as the representations as to existing guaranteed term contracts and customers provided the basis for the sub-franchise structures and their profitability, given the affidavit evidence that there were no such “term contracts” in existence.
As the applicants submitted, there is evidence to support the claim that the respondents had neither the clients nor work claimed and absent these two fundamentals everything which flowed from these matters (including the projected fees and cashflows) was necessarily false and misleading. (See Henjo Investments Pty Limited and Others v Collins Marrickville Pty Limited (No 1) (1988) 39 FCR 546).
I am satisfied that there is evidence on which this cause of action is based and that the first respondent contravened s.52 of the TPA.
Liability of the second respondent
There is also sufficient evidence before the Court to establish liability on the part of the second respondent under s.75B(1) of the TPA.
An action may be maintained against an individual alleged to have been involved in a contravention of s.52 within s.75B although proceedings are not pursued against the corporation which is the primary contravenor (see Matheson Engineers Pty Limited and Another v El Raghy and Others (1992) 37 FCR 6 at [9] per French J and Australian Competition and Consumer Commission v Albert [2005] FCA 1311 at [34] per Jacobson J. That is so even if the corporation is in liquidation or insolvent (Matheson at [11]).
As French J stated in Matheson at [9]:
Section 82 of the Trade Practices Act creates a cause of action for loss or damage suffered by a person by conduct of another in contravention of a provision of Pt IV or Pt V which the person who has suffered the loss or damage may recover "by action against that other person or against any person involved in the contravention". The words of the section in this respect are clear and do not impose as a condition of accessorial liability a requirement that the primary contravenor be a party to the action. It may be that in many cases a primary corporate contravenor should be joined as a respondent so that the entire dispute may be determined. In other cases the primary contravenor may be a company in liquidation or just insolvent. There may be no point to the joinder of that company in those circumstances which may require leave of the court under the Corporations Law in any event.
The evidence before the Court is that the second respondent was the managing director of the first respondent at all relevant times and that the representations in question were made by him or in company documents or emails from employees of the first respondent, provided by the second respondent on or behalf of the first respondent.
The second respondent conducted the major negotiations with the applicants’ representatives.
While s.51A (in relation to representations as to future matters) cannot be relied on in proceedings for accessorial liability (see Quinlivan), the affidavit evidence before the Court is that the second respondent knew that the first respondent did not have the customers or contracts represented and that hence the statements he made were false and misleading to his knowledge. There is an evidentiary basis for the claim that the second respondent knew that the first respondent had no “term contracts” with anyone and that all it had was some ad hoc work from Bunnings which was on an oral basis and could be terminated without notice. It can be inferred the second respondent knew this and that everything flowing from the representations as to customers and contracts including projected fees and cashflows, was also false.
I am satisfied on the evidence before the Court that the second respondent, as managing director of the first respondent who conducted the negotiations and made some of the representations, had knowledge of the essential facts constituting the contravention and was an intentional participant based on that knowledge within s.75B(1)(c) in the sense considered in Yorke v Lucas (1958) 158 CLR 661 at 670. Also see Genocanna Nominees Pty Ltd v Thirsty Point Pty Ltd [2006] FCA 1268 at [269] per Lander J. Hence I find for the purposes of these proceedings that the second respondent was involved in the contravention of s.52 of the TPA by the first respondent.
Damages
The first and second applicants seek to recover loss or damage occasioned by the conduct in contravention under s.82 (or s.87) of the TPA from the second respondent.
Section 82(1) of the TPA provides:
…a person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV, IVA, IVB or V or section 51AC may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.
In this case there is evidence of actual reliance by the applicants on the misleading or deceptive conduct (see Re Kabwand Pty Ltd; EJR Pastoral Company Pty Ltd; Edward Plantagenet Somerset and Elsie Joy Somerset v National Australia Bank Limited [1989] FCA 131 at [74] and Henjo at 558 – 559). Francis Ryan’s evidence is that he was primarily influenced by two factors: that there was a guaranteed minium of 40 hours per week and that the first respondent had the represented clients. These two factors were said to underpin the whole transaction for the applicants. In this respect I note that in Henjo Lockhart J stated (at 558 – 559) that “recovery under s 52 is founded by the applicant's actual reliance upon the misleading or deceptive conduct of the respondent”. His Honour considered that this could be established although the conduct “was not the only factor in the applicant's decision to enter a particular agreement, and although the applicants did not seek to verify the representations or did so inadequately and so failed to discover their falsity”. (Also see Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525 per Mason J).
The evidence is that in reliance on the representations the applicants (through Mr Frank Ryan, Mr Arial Ryan, Mr Jamin Ryan and Mr Nathan Ryan) entered into agreements with the first respondent for the purchase of two sub-franchises (described in the application as Cardiff No.1 and Cardiff No.2).
Assessment of damages
The applicants seek to recover consideration of $31,200 paid by the first applicant and $30,200 paid by the second applicant for the purchase of sub-franchises, loss of opportunity, inconvenience, disruption, wasted time and effort. The affidavit evidence is that on
28 July 2005there was a payment of $21,500 for the purchase of two trucks to operate in the sub-franchises. This purchase preceded the incorporation of the applicant companies on 4 and 5 August 2005, respectively. The applicants make no claim for this amount in the application.
The affidavit evidence details that between August 2005 and October 2005 Mr Francis Ryan caused a number of payments to be made to the first respondent on behalf of the applicants totalling $153,800, of which $61,400 was paid for Cardiff No.1 and Cardiff No.2 sub-franchises (the balance was in relation to other sub-franchises and trucks the subject of separate proceedings).
Francis Ryan’s affidavit evidence is that he believed he “owed the First Respondent the sum of $31,200 for Cardiff 1, $30,200 for Cardiff 2…”. Somewhat confusingly Mr Ryan’s affidavit evidence is that to make “payments and regularise … affairs” he made a total payment of $153,800 (as documented) out of the “$180,000” (sic), but did not pay the “balance” as he reached the view the first respondent “was not going to perform its part of the bargain”.
Kenny J stated in Walker v Citigroup Global Markets Pty Ltd [2005] FCA 1678 at [111]:
… if a litigant has established an entitlement to damages, he or she is not be to deprived of the benefit of this entitlement merely because an assessment of damages is difficult.
The assessment of damages is an inexact science which may involve guesswork rather than estimation (see Jones v Schiffmann (1971) 124 CLR 303 and All Fasteners v Grant Caple Pty Ltd & Ors (No.3) [2005] FMCA 1873 at [10] and on appeal at [2007] FCA 1252). Nonetheless, the applicants are required to prove the fact and amount of damage.
In Walker Kenny J went on to point out at [112]:
It by no means follows from this, however, that an applicants can recover substantial as opposed to nominal damages if he does not prove both the fact and the amount of damage: see Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 … at 80 per Mason CJ and Dawson J, 99 per Brennan J, 118 per Deane J and 137-8 per Toohey J. In JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237 … at 241, Brooking J said:
"If he proves the fact of the loss but does not call the necessary evidence as to its amount he cannot be awarded substantial damages (McGregor on Damages, 14th ed., pp. 190 and 222): he must put the tribunal in the position of being able to quantify in money the damage he has suffered: Watts v. Rake (1960) 108 C.L.R. 158, at p. 159, per Dixon C.J. So juries in personal injuries cases are often directed that the plaintiff must prove to their satisfaction what he has suffered and will suffer and what is fair and reasonable compensation in respect of that. It is often said that the amount of the damage must be proved with certainty, but this only means as much "certainty" as is reasonable in the circumstances: Ratcliffe v. Evans [1892] 2 Q.B. 524, at pp. 532-3. Where precise evidence is obtainable, the court naturally expects to have it; where it is not, the court must do the best it can: Biggin & Co. Ltd. v Permanite Ltd. [1951] 1 K.B. 422, at p. 438; The Commonwealth v Amann Aviation Pty. Ltd., at C.L.R. p 83, per Mason C.J. and Dawson J."
Sub-franchise fees
The applicants seek to recover $31,200 and $30,200 respectively being consideration paid for the purchase of the sub-franchises.
Although the application was brought by Cardiff No.1 and Cardiff No.2 the application states at para [18] that the “Cardiff No 2” sub-franchise was located at Cessnock. According to Mr Ryan’s affidavit this came about because there was no work for the truck used in this sub-franchise at Cardiff. Thereafter the truck was treated by the second respondent as his own and the applicants saw no return for this franchise. Some work was done by the truck assigned to the Cardiff No.1 sub-franchise but according to Mr Ryan the truck was used by the respondents to do work for Bunnings on an ad hoc basis and the first respondent paid the driver direct but not the regional franchisee.
The payments for or towards the Cardiff No.1 and Cardiff No.2 sub-franchises were made in conjunction with payments for two other sub-franchises (claimed in the separate proceedings SYG1609 of 2006 and referred to in those proceedings as the Maitland sub-franchise and the Nelson Bay sub-franchise) and possibly partial payment towards a fifth sub-franchise.
This reflects the fact that rather than paying separate and specified amounts for each sub-franchise Mr Francis Ryan on behalf of the applicants paid to the first respondent varying amounts over a 10 week period (19 August 2005 to 27 October 2005) which reflected a stated intention to pay for the purchase of four sub-franchises according to his affidavit evidence.
Nonetheless it is apparent from the application and the affidavit of Francis Ryan that a payment of $61,400 was made on behalf of the applicants to the first respondent through the Ryan’s family company for the purchase of the $31,200 2-tonne truck sub-franchise to be operated by the first applicant and the $30,200 8-tonne truck sub-franchise to be operated by the second applicant which are the subject of these proceedings.
I am satisfied that the sub-franchises would not have been purchased had the representations not been made. There is material before the Court, in the affidavits that the sub-franchises had no real value given the absence of the contracts, clients and work claimed (see Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 at 290 – 291). As discussed by Siopsis J in All Fastners v Grant Caple at [21] – [24] in all the circumstances the applicants should recover the capital loss of $61,400 paid for the two sub-franchises in these proceedings to give effect to the principle that the applicants should be put into the position they would have been in but for the contravening conduct (HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at 663). The first applicant should recover the capital loss of $31,200 and the second applicant the capital loss of $30,200 paid for the respective sub-franchises.
The trucks
I note that at para [18] the application states that “on or about 19 August 2005 the Second Applicant purchased one 8 tonne crane truck, from the First Respondent, for use in a sub-franchise to be located at Cessnock and paid the First Respondent the sum of $15,000”. The affidavit evidence is that a 2 tonne truck was purchased for Cardiff No.1.
However no amount in damages is claimed in relation to the trucks. The applicants concede that they may be disregarded for the purposes of damage calculation.
Loss of opportunity
The applicants claimed an unquantified amount for “loss of opportunity to pursue other commercial ventures using the capital consideration, or to invest the capital consideration paid to the First Respondent”. In light of the generality of this claim the applicants’ solicitor was given the opportunity to identify relevant evidence in post-hearing submissions.
In his written submissions the solicitor for the applicants submitted that the respondent’s use of the two 8 tonne trucks and the general wastage of the applicant’s time in this enterprise gave rise to a claim for deprivation of commercial opportunity and that there was precedent for such an award in Vera Gurr and Nicolas Lamont Gurr v Richard Forbes and Dakar Nominees Pty Ltd [1996] FCA 1385 per Carr J at [155].
However it is relevant to have regard to the specificity of the evidence before the Court in Gurr. Carr J had regard to evidence as to actual profit and loss in the business purchased, the profit which could have been achieved by an alternative trucking business which the applicants in that case had considered buying prior to purchasing the business in issue, evidence of calculation of adjusted profits and profits achievable in the alternative trucking business applied to periods in issue. There was also evidence that after deducting the adjusted profits notionally achieved by Mr and Mrs Gurr in conducting the business purchased from the total of the amounts which there was evidence that they would have earned had they purchased the alternative business, they lost a specified profit. There was also evidence of the interest paid in respect of funds borrowed to purchase the business and provide working capital.
Thus in Gurr the applicants provided evidence that they would have purchased a specific alternative business and detailed evidence as to the total capital and revenue loss sustained. Carr J accepted on the balance of probabilities that the applicants would have purchased a particular alternative trucking business if they had not purchased the business in issue and was able to attribute an amount for loss of profits based on the evidence before him.
While damages for loss of opportunity may be awarded on the basis that the prejudice or disadvantage suffered is the loss of the opportunity or chance to secure commercial benefits which entry into an agreement would have brought (see Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 348), the loss of opportunity must be measurable. As Mason CJ, Dawson, Toohey and Gaudron JJ stated in Sellars at 355: “…damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of s 52(1), should be ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued.” Their Honours confirmed: “… the applicants shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities.”
Brennan J at 364 referred to the fact that the alternative opportunity must offer a “substantial, and not merely speculative, prospect of acquiring a benefit that the plaintiff sought to acquire or of avoiding a detriment that the plaintiff sought to avoid” to be held to be valuable such that the loss of that opportunity was "loss" or "damage" for the purposes of s.82(1) of the Act. His Honour pointed out that “a causal relationship between the loss of such an opportunity and the defendant's contravening or tortious conduct must be proved before any issue of assessment of the amount of the loss arises”.
In this case there is an assertion in submissions that the applicants may have missed another substantial opportunity, or that the applicants would have purchased an alternative business had they not entered into the agreement with the first respondent. However here is no evidence before the Court of any such alternative or that any such missed opportunity would have been a success had it been pursued (see Sellars). The general claim of “loss of opportunity to pursue other ventures” is not sufficient to make out any claim under this head of damages.
Other damages
The applicants also claim damages (for an unquantified amount) for “[i]nconvenience, disruption, wasted time and time and effort expended on establishing and operating their respective sub-franchises”.
Again, despite being given the opportunity to do so in post-hearing written submissions, the applicants failed to elaborate on this claim. Nor did they provide any evidence to the Court as to the basis on which such damages were claimed. There is insufficient evidence before the Court on which any claim under this head of damages can be made out.
Damages
The first and second applicants should recover damages from the second respondent under s.82 of the TPA consisting of recovery by the first applicant of the sum of $31,200 paid in consideration for a two-tonne truck sub-franchise; and recovery by the second applicant of the sum of $30,200 paid in consideration for a eight-tonne truck sub-franchise.
Interest
The applicants make a general claim for interest from the date of filing on the amounts claimed as loss or damage. Under s.76 of the Federal Magistrates Act 1999 (Cth) orders should be made for interest from the date of the filing of the application to the date of judgment.
It is appropriate to have regard to the rate of interest that would be applied by the Supreme Court of New South Wales since the case was heard in New South Wales (see McCormick v Riverwood International (Australia) Pty Ltd [2000] FCA 32 in relation to s.51A of the Federal Court of Australia Act 1976 (Cth)).
Pursuant to the Uniform Civil Procedure Rules 2005 Reg 36.7(1) the prescribed rates at which interest is payable under s.101 of the Civil Procedure Act2005 (NSW) are as set out in Schedule 5. Schedule 5 states the interest rate (per cent per year) after 31 December 2006 is 10%. On this basis the first applicant should recover interest in the sum of $5,708.20 and the second applicant should recover interest in the amount of $5,525.24.
The judgment should also carry interest from the date of entry in accordance with s.77 of the Federal Magistrates Court Act at the rate of 10.5% fixed by Order 35 Rule 8 of the Federal Court Rules (pursuant to r.26.01 of the Federal Magistrate Court Rules).
Costs
The applicants also claim costs. On 5 September 2007 I ordered that the second respondent pay the applicants in this matter and matter SYG1609 of 2006 costs thrown away by reason of the adjournment of the hearing in the total amount of $3,000.
The second respondent should also otherwise pay the costs of each applicant. The applicants’ solicitor has not quantified the amount of costs sought despite being given the opportunity to do so in post-hearing written submissions. I will nonetheless hear submissions in relation to the amount and apportionment of costs as between the applicants in this and matter SYG1609 of 2006 which was heard at the same time.
I certify that the preceding sixty-eight (68) paragraphs are a true copy of the reasons for judgment of Barnes FM
Associate:
Date: 24 April 2008
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