Fico v O'Leary

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: FICO -v- O'LEARY & ORS [2004] WASC 215

CORAM: EM HEENAN J

HEARD: 2 - 6, 9 - 13 DECEMBER 2002 & 16 - 17 JANUARY 2003

DELIVERED : 11 OCTOBER 2004

FILE NO/S: CIV 2163 of 1999

BETWEEN: ANTHONY ALDO PASQUALINO FICO
Plaintiff
AND
BRENDAN O'LEARY
First Defendant
SIGMA CO LTD
Second Defendant
MARENA HOLDINGS PTY LTD (ACN 052 544 322)
Third Defendant
DEENA ASHOORIAN
Fourth Defendant
TOMMASO FICO
Third Party

Catchwords:

Trade Practices Act - Misleading or deceptive conduct - Breach of fiduciary duty - Negligent misrepresentation - Sale of business - Leasehold of proposed pharmacy - Alleged misleading or deceptive conduct and misrepresentations relating to turnover and profitability - Other representations - Failure to install air-conditioning - Representation as to proximity of operating medical clinic - Counterclaims for balance of purchase price, rent and unpaid stock - Claims for contribution for alleged negligence between defendants and against third party - Damages - Contribution - Indemnity - Equitable compensation - Contribution in equity - Law Reform (Contributory Negligence and Joint Tortfeasors Contribution) Act 1947

Legislation:

Fair Trading Act 1987

Law Reform (Contributory Negligence and Joint Tortfeasors Contribution) Act 1947

Trade Practices Act (Cth) 1976

Result:

Judgment for plaintiff on claim
Judgment for second defendant on counterclaim
Third and fourth defendants' counterclaims dismissed
Order that lease from third defendant partially void
Order that contract of sale between plaintiff and fourth defendant partially void
Partial contribution ordered between first, second, third and fourth defendants
Judgment for fourth defendant on cross-claim against first and second defendants

Category: B

Representation:

Counsel:

Plaintiff:     Mr P G McGowan & Mr A Metaxas
First Defendant             :     Mr J A Chaney SC & Ms S E Harrison
Second Defendant         :     Mr J A Chaney SC & Ms S E Harrison
Third Defendant           :     Dr P R MacMillan
Fourth Defendant          :     Dr P R MacMillan
Third Party                   :     Mr G R Hancy (2, 3 & 4 December 2002) & Mr R F F Edwards (16 January 2003)

Solicitors:

Plaintiff:     Metaxas & Vernon
First Defendant             :     Mallesons Stephen Jaques
Second Defendant         :     Mallesons Stephen Jaques
Third Defendant           :     MacKinlays
Fourth Defendant          :     MacKinlays
Third Party                   :     Phillips Fox

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

Adams v Kingsway Home Finance Co [1966] 1 NSWR 683
Armstrong v Commissioner of Stamp Duties (1967) 69 SR (NSW) 38
Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1
Bevanere Pty Ltd v Lubidineuse (1985) 7 FCR 325
Blundell v Musgrave (1956) 96 CLR 73
BP Petroleum Development Ltd v Esso Petroleum Co Ltd [1987] SLT 345
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Bradley West Clarke List v Kiernan (1998) ANZ Conv R 77
Breen v Williams (1996) 186 CLR 71
Brickenden v London Loan & Savings Co [1934] 3 DLR 465
Bristol and West Building Society v Mothew [1998] Ch 1
Brown v Jam Factory Pty Ltd (1981) 53 FLR 340
Burke v LFOT Pty Ltd (2002) 209 CLR 282
Clark Boyce v Mouat [1994] 1 AC 428
Combulk Pty Ltd v TNT Management Pty Ltd (1992) 37 FCR 45
Commonwealth Bank of Australia v Smith (1991) 42 FCR 390; 102 ALR 453
Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594
Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
Dempster & Biala Ltd v Mallina Holdings Ltd (1994) 13 WAR 124
Dering v Earl of Winchelsea (1787) 1 Cox Eq Cas 318; 29 ER 1184
Devenish v Jewel Food Stores Pty Ltd (1991) 172 CLR 32
Elna Australia Pty Ltd v International Computers (Australia) Pty Ltd (1987) 16 FCR 410
Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 4 FCR 450
Equity Access Pty Ltd v Westpac Banking Corporation (1990) ATPR 40‑994
Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (Reg) (1997) 188 CLR 241
Frith v Gold Coast Mineral Springs (1983) 65 FLR 213
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
General Newspapers Pty Ltd v Telstra Corporation [1993] ATPR 41‑274
Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd (1992) 11 WAR 40
Glenmont Investments Pty Ltd v O'Loughlin (No 3) (2001) 79 SASR 288
Griffiths v Kerkemeyer (1977) 139 CLR 161
Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298
Hawkins v Clayton (1988) 164 CLR 539
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465
Henderson v Merrett Syndicates Ltd [1995] 2 AC 145
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546
Henville v Walker (2001) 206 CLR 459
Hill (t/as R F Hill & Associates) v Van Erp (1997) 188 CLR 159
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
How v Carman [1931] SASR 413
Hunt Contracting Co Pty Ltd v Roebuck Resources NL (1992) 110 ALR 183
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109
James Hardie & Co Pty Ltd v Seltsam Pty Ltd (1998) 196 CLR 53
Jones v Canavan [1972] 2 NSWLR 236
Karrs v Karrs (1996) 187 CLR 354
Keith Henry & Co Pty Ltd v Stuart Walker & Co Pty Ltd (1958) 100 CLR 342
Kewside Pty Ltd v Warman International Ltd [1990] ASC 55‑964
Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281
L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225
Lake Koala Pty Ltd v Walker [1991] 2 Qd R 49
Leigh‑Mardon Pty Ltd v Wawn (1995) 17 ACSR 741
Maguire & Tansey v Makaronis (1997) 188 CLR 449
March v E & M H Stramare Pty Ltd (1991) 171 CLR 506
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494
Mayfair Trading Co Pty Ltd v Dreyer (1958) 101 CLR 428
Merryweather v Nixan (1799) 8 TR 186; 101 ER 1337
Moody v Cox & Hatt [1917] 2 Ch 71
Morgan Equipment Company v Rodgers (1993) 32 NSWLR 467
Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274
National Mutual Property Services (Australia) Pty Ltd & Ors v Citibank Savings Ltd [1998] FCA 564
Nella v Kingia Pty Ltd (1989) ATPR 40‑952
Nocton v Lord Ashburton [1914] AC 932
O'Brien v Smolonogov (1983) 53 ALR 107
O'Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455
Pappas v Soulac Pty Ltd (1983) 50 ALR 231
Parkdale Custombuilt Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
Pavich v Bobra Nominees Pty Ltd [1988] ATPR (Digest) 46‑039
Permanent Building Society (In Liq) v Wheeler (1993) 11 WAR 187
Pilmer v The Duke Group Ltd (In Liq) (2001) 207 CLR 165
Pizzale v Gumina Enterprises Pty Ltd (1994) 13 WAR 88
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
Re Dawson [1966] 2 NSWLR 211
Re La Rosa; Norgard v Rodpat Nominees Pty Ltd (1991) 31 FCR 83
Ricochet Pty Ltd & Ors v Equity Trustees Executives and Agency Company Limited (1993) 41 FCR 229
San Sebastian Pty Ltd v The Minister Administering the Environment Protection Act (1986) 162 CLR 340
Sent & Anor v Jet Corporation of Australia Pty Ltd (1986) 160 CLR 540
Sharp & Diamond v Ramage (1995) 12 WAR 325
Shevill v Builders' Licensing Board (1982) 149 CLR 620
Sutherland Shire Council v Heyman (1985) 157 CLR 424
Sykes v Reserve Bank of Australia (1988) 88 FCR 511
Taco Company of Australia v Taco Bell Pty Ltd (1982) 42 ALR 177
Target Holdings Ltd v Redferns (A Firm) [1966] 1 AC 421
The Mutual Life & Citizens' Assurance Company Limited v Evatt [1971] AC 793; 122 CLR 628
Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1988) 19 FCR 469
Trade Practices Commission v Manfal Pty Ltd (No 3) (1992) 33 FCR 382
Van Gervan v Fenton (1992) 175 CLR 327
Van Rassel v Kroon (1953) 87 CLR 298
Walden Properties Ltd v Beaver Properties Pty Ltd [1973] 2 NSWLR 815
Walker v Wimborne (1976) 137 CLR 1
Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514
Warwicker Assessments v Zadow (1989) 1 WAR 307
Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105
Yorke v Lucas (1983) 80 FLR 143
Yorke v Ross Lucas Pty Ltd (1982) 69 FLR 116
Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484

Case(s) also cited:

Andrews v Hogan (1952) 86 CLR 223
Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112
Baltic Shipping Co v Dillon (1991) 22 NSWLR 1
Bateman v Slayter (1987) 71 ALR 553
Bill Acceptance Corporations Ltd v GWA Ltd (1983) 50 ALR 242
Butcher v Locklan Elder Realty [2002] NSWCA 237
Global Sportsman Pty Ltd v Mirror Newspapers Ltd [1984] 55 ALR 25
Kabwand Pty Ltd v National Australia Bank Ltd (1989) ATPR 40-950
Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413
Laurinda Pty Ltd v Capalaba Shopping Centre Pty Ltd (1989) 166 CLR 623
Marsdon Pty Ltd v Pressbank Pty Ltd [1990] 1 Qd R 264
Norwest Refrigeration Services Pty Ltd v Bain Dawes (WA) Pty Ltd (1984) 157 CLR 149
Richmond v Savill [1926] 2 KB 530
St George Bank Ltd v MJK Pty Ltd [1999] FCA 1752
T N Lucas Pty Ltd v Centrepoint Freeholds Pty Ltd (1984) 1 FCR 110
Thompson v Master Touch TV Services Pty Ltd (No 2) (1977) 15 ALR 487
Ting v Blanche (1993) 118 ALR 543
Wheeler Grace & Pierucci Pty Ltd v Wright (1989) ATPR 40-940

INDEX

Introduction

The claim, counterclaims and cross-claims
The major issues
The transactions
The events after settlement on 17 October 1998
The plaintiff's allegations

The Evidence: Issues of Fact: Findings

Introduction of the Waratah Pharmacy to the plaintiff
Representations - That there were two other purchasers who would make an offer if Mr Anthony Fico did not submit an offer on 28 August 1998 – Ability to withdraw at discretion
Absence of air‑conditioning
Representation that Waratah Shopping Centre would include a supermarket occupied by Foodland
Computer issue
The role of Mr Hashemi and source of the turnover figure of $600,000 for the first year
The position of Mr O'Leary and Sigma as "facilitators" of the sale

Fiduciary Relationships
Equitable Compensation
Failure by Mr O'Leary/Sigma to recommend that Plaintiff should take Legal Advice
Duty of Care in Tort
Misleading or Deceptive Conduct
Damages for Misleading or Deceptive Conduct
The Position of the Third Defendant ‑ Marena Holdings Pty Ltd
The Position of the Fourth Defendant ‑ Mrs Deena Ashoorian
Opinion Evidence as to the True Value of the Waratah Pharmacy in August 1998
Contribution or Indemnity
Claim for Accounting Fees of $8,500
The Counterclaims

The fourth defendant's counterclaim against the plaintiff
The third defendant's counterclaim against the plaintiff
The second defendant's counterclaim against the plaintiff
The first and second defendants' counterclaim against fourth defendant
The fourth defendant's counterclaim against the first and second defendants

Interest
Compensation and Damages
Other Relief for the Plaintiff
Contributions between Defendants
Third Defendant's Counterclaim against the Plaintiff
First and Second Defendants' Cross Claim against Fourth Defendant
Fourth Defendant's Cross Claim against First and Second Defendants

Summary

EM HEENAN J:

Introduction

In early 1998 a new development to be known as the Waratah Shopping Centre was built at Canning Vale. Adjacent to the shopping centre there was also being constructed a medical centre intended for use by several general medical practitioners. The shopping centre included premises to be let for the conduct of a retail pharmacy. The owner of the shopping centre and of the building to be used as a medical centre was the third defendant, Marena Holdings Pty Ltd ("Marena"), of which Mr M Meshgin was a director.
Members of the Meshgin family feature prominently in these proceedings. Mr Q Meshgin was a director of Filton Pty Ltd (t/as Buildex Constructions) with whom Marena contracted for the construction of both sets of buildings. His brother, Mr Mehrdad Meshgin has two married daughters, Dr Neda Meshgin Varan ("Dr Neda Meshgin"), a duly qualified and registered medical practitioner, and Mrs Deena Meshgin Ashoorian (the fourth defendant), a qualified and registered pharmacist. Originally it was intended that Mrs Deena Ashoorian would take a lease of the proposed pharmacy premises in the shopping centre and conduct a pharmacy business in partnership with a colleague. Similarly, it was originally intended that Dr Neda Meshgin Varan would, with other medical colleagues, lease premises in the medical centre and carry on a general medical practise there from November 1998 onwards. For reasons which will be explained Mrs Deena Meshgin Ashoorian never set up or conducted a pharmacy business in the shopping centre and her sister, Dr Neda Meshgin Varan, was not able to commence medical practise in the nearby clinic until late March 1999. Mrs Deena Ashoorian's husband, Mr John Hamid Ashoorian, was at the material times and is, a duly certificated legal practitioner and had a role in the subsequent events which led to the lease of the proposed pharmacy premises.
Throughout 1998 the plaintiff, Mr Anthony Aldo Pasqualino Fico ("Mr Anthony Fico"), was a young registered pharmacist who was looking for an opportunity to commence a pharmacy business on his own behalf. He had made several enquiries about the availability of pharmacy businesses for sale and in this regard had dealt with Mr Brendan O'Leary (the first defendant) who was a representative of the pharmaceutical company, Sigma Company Limited ("Sigma"), the second defendant which, while disclaiming any formal status as agent for the purchase or sale of pharmacy businesses, performed a role in finding and introducing buyers and sellers of pharmacies and of entering into supply contracts with owners who were conducting a new or established pharmacy business.
In August and September 1998, as a result of introductions and alleged representations made by Mr O'Leary, Mr Anthony Fico entered into an agreement to purchase the Waratah pharmacy business and to take a lease of the proposed pharmacy premises in the shopping centre. The agreement to purchase the business and to take the lease was with Mrs Deena Ashoorian, the original intended lessee, who later assigned to him the lease granted to her by Marena, the owner of the premises. The venture turned out badly for Mr Anthony Fico. He arranged for stock to be supplied by Sigma and commenced a pharmacy business in the leased premises but the volume of trade was disappointing, the turnover never reached the levels which he expected, he was trading at a loss and eventually left the premises after a threat of eviction by Marena for non‑payment of rent in September 2000.

The claim, counterclaims and cross-claims

The plaintiff brings this action against Mr O'Leary, Sigma, Marena and Mrs Deena Ashoorian for alleged negligent misrepresentation, misleading or deceptive conduct and breach of fiduciary duties. He claims damages for the loss he made from the purchase of the business, for trading losses, for the loss of the opportunity to trade profitably, and for other expenses. These claims allege that Mr O'Leary, and Sigma, were instrumental in making representations which induced the sale and which were false and misleading in material respects. In this regard Mr O'Leary is alleged to be an agent of Sigma, which is admitted, and an agent of Marena and of Mrs Deena Ashoorian which is denied.
There are three counterclaims in the proceedings. The first is by Sigma for an unpaid balance for the sale of stock supplied by it to the pharmacy while operated by Mr Anthony Fico, plus interest. The amount claimed is $64,777.81 as at 26 December 1998 and interest at contract rates from then. The principal amount said to be owing is admitted by the plaintiff but liability to pay is denied.
A second counterclaim is advanced by Marena for a balance of unpaid rent and outgoings alleged to be due to it by the plaintiff under the lease. The non payments are admitted but liability to pay rent outgoings or damages for repudiation is denied.
The third counterclaim is by Mrs Deena Ashoorian, the fourth defendant, for an unpaid balance of $15,000 of the sale price of the pharmacy business plus interest. Again the non payment is admitted by the plaintiff, but liability to pay is denied.
There is also a series of cross‑claims for indemnity, contribution or damages. Mr O'Leary and Sigma, by notice of contribution and third party notices, claim indemnity, contribution or damages for any liability which may be established against them in favour of the plaintiff against Mrs Deena Ashoorian and against the third party Mr Tommaso Fico ("Mr Tom Fico"). Similarly, Mrs Deena Ashoorian claims a contribution or an indemnity for any liability which she may be found to owe the plaintiff, against Mr O'Leary, Sigma and Mr Tom Fico. A question of law about whether or not a claim for contribution towards, or indemnity for, any liability under s 82 of the Trade Practices Act or under s 79 of the Fair Trading Act (1987) will lie against another party who is also directly or indirectly involved in the misleading or deceptive conduct, whether under s 7 of the Law Reform (Contributory Negligence and Joint Tortfeasors Contribution) Act 1947 or at all, therefore arises. The cross claim by Mrs Deena Ashoorian against Mr O'Leary and Sigma also includes a claim for indemnity for potential losses which might be suffered by her due to the alleged negligence, misleading or deceptive conduct or breach of fiduciary duty by Mr O'Leary and Sigma.
The third party, Mr Tom Fico is the brother of the plaintiff. At the material times he was a qualified accountant and had a role in advising his brother, Mr Anthony Fico, about the purchase and lease of the proposed pharmacy business at the Waratah Shopping Centre. The first, second and fourth defendants allege that Mr Tom Fico was under a duty of care to Mr Anthony Fico in relation to the supply of advice relating to the proposed purchase and lease, that he was negligent or otherwise in breach of that duty and, as a concurrent tortfeasor, also caused the loss and damage (if any) alleged to have been suffered by the plaintiff. Consequently, as they claim, he is liable to contribute to each of them for any damages which they, despite their denials, may be found liable to pay to the plaintiff. During the course of the trial each of these three defendants abandoned his, her and its claim against Mr Tom Fico, the third party, and on 4 December 2002 an order was made, by consent, dismissing, with costs, all the third party claims against him. Nevertheless, it still remains necessary to examine his role in the events.

The major issues

It will be necessary to describe, in more detail, the nature of the causes of action advanced by the plaintiff and by the counterclaiming defendants later in these reasons. At this stage, however, it is useful to identify some of the principal issues of contention concerning the various transactions, although this is by no means an exhaustive summary of the issues arising from the pleadings. Nevertheless, important areas of controversy between the parties concern:
(a)whether there was ever any representation that, as from 1 January 1999, Dr Neda Meshgin Varan would be operating a medical practice from the nearby medical clinic;
(b)whether representations were made, in the course of negotiations leading to Mr Anthony Fico offering to purchase the proposed pharmacy business and taking a lease of the premises that the turnover of the pharmacy businesses would be $600,000 in the first year reaching a million dollars per annum by the third year and that the anticipated profit for the first year would be $139,000;
(c)whether there was any express or implied representation that the pharmacy premises as leased would be air‑conditioned;
(d)whether there were any express or implied representations that, as part of the fit out, a suitable computer system for the control of stock and sales of the pharmacy business would be installed;
(e)whether there were representations made by Mr O'Leary for Sigma and Mrs Ashoorian that:
•$250,000 was what the business was worth;
•that two other bidders were ready and able to purchase the business immediately if the plaintiff declined to do so on 28 August 1998;
•that the plaintiff could withdraw from the agreement to purchase at any time at his own discretion;
(f)whether Mr O'Leary, for Sigma, was acting as an agent both for Mr Anthony Fico and for Mrs Neda Ashoorian and whether the first and second defendants were in a fiduciary relationship with those parties;
(g)who prepared or endorsed the cash flow statements about the projected turnover and profit of the pharmacy which were supplied to the plaintiff.

The transactions

By a document entitled "Offer to Purchase Pharmacy Business" dated 28 August 1998 (Exhibit 3) the plaintiff offered to purchase the goodwill of the Waratah pharmacy business including the business name, plant, furniture, fixtures, fittings, chattels, stock‑in‑trade and other assets described. The offer was accepted by the fourth defendant on the same day. It was contained in a standard Sigma pro‑forma agreement entitled "Offer to purchase a pharmacy business" and the purchaser and the vendor each appointed Sigma as their representative in respect of the settlement of the transaction.
The description of the business and assets to be purchased listed the goodwill of the pharmacy business "now carried on by the vendor at Waratah Shopping Centre, Waratah Boulevard, Canning Vale under the name Waratah Pharmacy; the plant, furniture, fixtures, fittings and chattels specified in the First Schedule, the stock‑in‑trade when possession would be given, all licences, franchisees and agencies if any connected with the premises and the benefit of subsisting contracts and engagements if any as specified" - none were. The purchase price of $250,000 was allocated as follows:
•goodwill $140,000
•fixtures, fittings and chattels $110,000
$225,000
The purchase price was to be payable by deposit of $10,000 payable on acceptance and the balance on 12 October 1998 - the latest day for settlement. The contract included a restraint upon the vendor operating a pharmacy business within a radius of three kilometres for a period of three years from the date of settlement. The contract was subject to finance, for an amount to be advised, from a lender, also to be advised, with approval for the loan required not later than 15 September 1998. The provisions of the standard form relating to a lease of the premises were marked "not applicable".
The First Schedule identified the plant, furniture, fixtures, fittings and chattels which were to be included in the sale as a MINFOS system, meaning the computerised point of sale system for stock control, sales and other expenses. It contains a series of special conditions of which the following are material:
"5.This Contract is subject to and conditional upon the following:
5.1The sale and purchase of the business receiving the consent of the Pharmaceutical Council of Western Australia within three (3) months from the date of acceptance. The Purchaser will forthwith make application for such consent and use his best endeavours to secure the same.
5.2The Purchaser receiving written approval to an assignment of the Lease referred to in Particular G within three (3) months from the date of acceptance.
5.3The granting of a Pharmaceutical Chemists Licence to Sell Poisons in favour of the Purchaser by the Health Department of Western Australia within three (3) months from the date of acceptance.
5.4The granting of an Approval as a Pharmacist in favour of the Purchaser by the Pharmaceutical Benefits Branch of the Health Insurance Commission within three (3) months from the date of acceptance.
If any of the above conditions 5.1 to 5.4 inclusive are not fully satisfied by the latest date for approval or compliance, then, subject to the Purchaser having used his best endeavours to obtain such approval or consent as the case may be, and unless the Purchaser and Vendor shall have waived the requirements for approval or compliance, this Contract shall be deemed to have come to an end without the necessity for either party having to give notice to that effect. The deposit and all other monies (if any) paid hereunder shall then be forthwith refunded to the Purchaser and there shall be no further claim under this Contract by the Vendor or Purchaser against the other either at law or in equity. This clause shall operate for the benefit of both the Vendor and the Purchaser.
6.Subject to [satisfactory] lease at the absolute discretion of the Purchaser.
7.Subject to confirmation of a doctor insitu as of 1 January 1999.
8.The Vendor agrees to perform locum duties for two days per week for a period of twelve months from the date of settlement."
The contract (Exhibit 3) as executed contains several manuscript changes to the terms set out above, including an alteration to the amount of the deposit payable increasing it from $10,000 to $20,000 and specifying that the "settlement date not to exceed 12 October 1998". These alterations have been initialled by the vendor but not by the purchaser and there is no evidence that they were ever accepted by the purchaser. In those circumstances it is possible that the execution of the document by the vendor, including as it did an increase in the amount of the deposit payable, was not an unqualified acceptance but a counter offer which was never formally accepted by the purchaser. However, none of the parties made any such submission and I consider that the only conclusion is that both parties waived compliance with the provisions requiring the payment of a deposit in any amount. No deposit from the plaintiff accompanied the offer when it was submitted for acceptance and no deposit was paid by the purchaser upon acceptance, or at any subsequent time. There is no evidence that the fourth defendant, as vendor, or any person on her behalf later demanded payment of a deposit, whether in the amount of $10,000, $20,000 or any other figure.
Although the contract provided that the plant, furniture, fixtures, fittings and chattels which were to be sold and purchased were those listed in the First Schedule, the only such item there listed was the MINFOS system, yet $110,000 of the purchase price was allocated to fixtures, fittings and chattels. As we know that the MINFOS system was purchased for $20,000, this leaves $90,000 for other fixtures, fittings and chattels to be identified in the contract. Yet it is common ground that the business to be sold would be a fully fitted out pharmacy store, ready for immediate operations, and that the fit out would be conducted at the expense of the fourth defendant as vendor and that this was, in the event, done (subject to the controversy about the lack of air‑conditioning).
The written contract of sale also specified that the stock‑in‑trade at the date of possession would be sold and Special Condition 8 required the vendor to perform locum duties two days a week for a period of 12 months from the date of settlement. There was no evidence that the sale did, or was ever intended to, include stock. The premises had never operated as a pharmacy, there was no stock and the arrangement was that the plaintiff would obtain stock on credit from Sigma under a supply agreement which he later reached with the second defendant (Exhibit 37 - 12 October 1998). Apart from Special Condition 8 there has been no suggestion in the evidence from any party that Mrs Ashoorian was ever asked, or agreed, to work as a locum in the premises at any time. In such circumstances these aspects of the contract of sale do not appear to correspond to the real agreement between the parties and may not be enforceable. Put another way, the written agreement might have been be subject to rectification if either party had ever sought to insist upon compliance with those terms.
Similarly, the special conditions making the contract "subject to satisfactory lease at the absolute discretion of the Purchaser" and "subject to confirmation of a doctor in situ as at 1 January 1999" are by themselves incomplete and possibly uncertain yet the parties have acted, and this litigation was conducted, on the footing that they had a clear meaning. Whatever may have been the full meaning of Special Condition 6 – the requirement for a satisfactory lease at the absolute discretion of the purchaser – the parties have accepted that the lease which was eventually assigned to the plaintiff satisfied that condition (except for the unresolved dispute about air‑conditioning). Similarly, special condition 7 relating to a doctor in situ by 1 January 1999 was taken to mean that Dr Neda Meshgin Varan would be conducting a general medical practice full‑time from the nearby medical centre from not later than 1 January 1999. Reasons have been advanced on behalf of the defendants why it became impossible for Dr Neda Meshgin Varan to commence medical practice from those premises on 1 January 1999. Further efforts were made to suggest that the so‑called letter of assurance about the conduct of medical practice in the Centre sent, belatedly, to the bank, at the plaintiff's insistence signified that something less than a full assurance was given and accepted by the plaintiff but it was never suggested that Special Condition 7 in the agreement itself meant anything other than that at least one doctor would be in practice at the medical centre from 1 January 1999 onwards.
No precise form for confirmation of Special Condition 7 was ever stipulated by the parties, but the plaintiff and his brother, Mr Tom Fico, pressed for such confirmation from 28 August 1998 onwards. The only written "confirmation" that a doctor would be in situ at the adjoining medical centre which was ever provided by, or on behalf of, the fourth defendant was a letter from her sister, Dr Neda Meshgin, to Marena dated 20 August 1998 (part of Exhibit 56) which read as follows:
"Marena Holdings
4 Kearns Crescent
Applecross WA 6153
Dear Sir
Letter of Intent Re: Medical Centre, Waratah Shopping Centre, Canning Vale
I am pleased to inform you that after examining the terms and conditions in the proposed fit out I have decided to start a medical practice at this location. It is my intention to start my practice as of January 1999, therefore, you need to make an arrangement for the fit out of the medical centre.
I am confident that this area will suit my requirements and look forward to a successful business relationship.
Yours faithfully,
[Signed] Dr Neda Meshgin"
This letter pre‑dates the signing of the contract for the sale and purchase of the pharmacy but was not produced on that occasion. I do not accept that the date is correct or that the letter was in existence on 20 August 1998. However, that letter or a letter in similar terms was provided via Mr O'Leary, on or before 1 September 1998. The plaintiff's brother Mr Tom Fico refers to it in his letter to Mr O'Leary of 2 September (Exhibit 7) when saying "The letter provided by the doctor only deals with his intent and is not confirmation as required by Special Condition 7. Written confirmation is still required". The plaintiff, through his brother Mr Tom Fico, was still seeking acceptable confirmation that a doctor would be in practice at the medical centre from 1 January 1999 when he wrote to Mr O'Leary on 18 September 1998 (Exhibit 12). He was given a reassuring response by O'Leary by a fax transmission of 18 September (Exhibit 13) which, so far as material, said:
"I am addressing the 'Doctor's letter to commence operations in January' now and should have this resolved by Monday afternoon."
The plaintiff and Mr Tom Fico each said that they accepted this assurance and a subsequent oral statement made by Mr O'Leary to them that a second letter in acceptable terms had been sent to the Commonwealth Bank to support the plaintiff's application for a loan. I accept the plaintiff's version of these events because it explains why the matter was not raised again in correspondence until December 1998.
On about 15 December 1998, Mr Tom Fico enquired of the Commonwealth Bank whether it had, in fact, received written confirmation that a doctor would be practising from the medical centre from January 1999 onwards. The advice which he was given, later confirmed in writing by Exhibit 56, was that the bank had received only one letter, namely the letter of 20 August 1998, already quoted, which stated merely that it was the intention of Dr Neda Meshgin to start practice as of January 1999. The plaintiff took this up with Mr John Ashoorian on 29 December 1998 and was told that Dr Neda Meshgin may not be opening the medical centre for many months, if at all. He immediately sent a letter to Mr O'Leary complaining about this (Exhibit 20) and followed this up by a further transmission (Exhibit 22) on the same day stating:
"Due to recent events which have come to my attention, I would like to inform you of the following:
•the Commonwealth Bank has confirmed that the only correspondence they have received in regard to confirmation of the opening of the medical centre on January 1st is the original letter which we rejected. As you know, this letter was rejected as it was not a true confirmation for January 1st 1999, and even though you have confirmed to me on numerous occasions that a true confirmation letter existed, I now know that it does not. This was a crucial condition of settlement and settlement only occurred due to your confirmation that the bank had received the appropriate confirmation letter.
... "
There is no evidence of any response by Mr O'Leary to this complaint nor of any explanation to refute the assertions which were then made by the plaintiff.
In evidence at trial Mr O'Leary admitted that there was no second letter and that he had sent the first letter by fax to the bank. He treated the issue, so I have concluded from his actions at the time and from the evidence he gave, as having significance only to assist in securing bank approval for a loan to the plaintiff so that, once the loan was approved, it was not a point of any importance. This is one of several features of Mr O'Leary's evidence which have caused me to conclude that he was not a reliable witness, that he did not fully disclose his role in events and that he was almost entirely concerned in ensuring that the contract for the purchase of the pharmacy was completed and the plaintiff installed as a new pharmacist taking supplies as a regular client of Sigma. His failure to deal with the amount of the deposit and whether it was payable on acceptance is another such feature. His conduct in regard to the dispute over air‑conditioning and his acceptance, without protest, of Mr Anthony Fico tendering payment of $235,000 rather than $250,000 on completion are further indications of unreliability.
In the events which happened there were some delays in completing the fit out of the premises but Mr Anthony Fico did execute an Assignment of Lease (Exhibit 31) on 10 or 11 October 1998 and was let into possession on 13 October 1998. Mr O'Leary for Sigma, acting on behalf of the vendor and landlord, visited the premises on 13 October 1998 only to find that the plaintiff was complaining that the premises were not air‑conditioned and asserting that it was implicit in the agreement for purchase that the premises would be air‑conditioned because air‑conditioning was essential for the proper conduct of a pharmacy business for the purpose of the preservation of stock. Mr O'Leary accepted that this was the case and that the premises should come with air‑conditioning. He undertook to take it up with the vendor, although this reference could, in the circumstances, be equally taken to mean that he would take it up with Marena as the landlord. Because he was dissatisfied with the absence of air‑conditioning, Mr Anthony Fico made it plain to Mr O'Leary that he expected air‑conditioning to be installed and would not settle unless satisfactory arrangements in that regard were made. In the event, Mr Anthony Fico unilaterally decided to withhold $15,000 of the purchase price, evidently as a contingency, to deal with the need for air‑conditioning until the assurances given by Mr O'Leary in this regard were met. For these reasons actual completion did not take place until 17 October 1998 when the plaintiff handed Mr O'Leary a bank cheque for $235,000 (the purchase price of $250,000 less the $15,000 retention). Mr O'Leary received the cheque on behalf of the vendor and later delivered it to Mr Ashoorian. There was no immediate protest by or on behalf of the fourth defendant about the short payment.
As noted, the contract for the purchase and sale of the pharmacy business contained a provision making it conditional upon finance in an amount "to be advised" and from a lender "to be advised". There was no formal advice ever submitted by the plaintiff to the fourth defendant about the amount of the loan or the identity of the lender or any variation in the latest date for approval as contemplated by the written terms of the contract. However, to the knowledge of Mr O'Leary, representing the vendor, Mr Anthony Fico initially made application to the National Australia Bank ("NAB") at Fremantle for a loan of $250,000 to assist in the purchase of the pharmacy (see Exhibits 10 and 49). The plaintiff also made an application to the Commonwealth Bank of Australia ("CBA") at Fremantle (Exhibit 52). He was offered financial accommodation including a business investment combination loan, of $300,000 and other loans from the NAB on 11 September. He was also offered a "better business" loan of $250,000 and an overdraft facility of $15,000 from the CBA on 16 September 1998 (Exhibit 64). The plaintiff decided to accept the CBA offer of finance, rather than the offer from the NAB, apparently because the former could complete its procedures and have the loan funds available more quickly. His brother notified Mr O'Leary of the CBA loan offer by letter of 18 September (Exhibit 12) and Mr O'Leary, on behalf of Sigma, sought the preparation of a new assignment of lease in terms which would accommodate the CBA security document by letter dated 25 September 1998 (Exhibit 111).
The arrangement for the preparation of the assignment of the lease and other necessary steps to satisfy the bank, were made by Mr O'Leary on behalf of Sigma and he kept the bank informed of progress. By a facsimile transmission of 14 October 1998 (copied to the CBA) Mr O'Leary reported on progress dealing with the computer system, air‑conditioning, lighting and circuit breakers. Significantly, with regard to air‑conditioning, Mr O'Leary stated to the plaintiff's brother by this fax:
"At a meeting with Merhdad Meshgin this morning [representing the lessor] he confirmed that the air‑conditioning will be installed in accordance with the lease. He will communicate with you directly to arrange suitable times for accessibility."
Mr O'Leary was aware that the plaintiff's application for finance had been informally approved by 17 September 1998 but that the bank was waiting for a break down of the values attributed to fixtures and a costs summary and notified Mr John Ashoorian to that effect by fax of 17 September 1998 (Exhibit 110). It is the plaintiff's evidence that, in his meeting with Mr O'Leary on 28 August 1998 when the contract for the purchase of the pharmacy was signed, he sought a written cash flow to justify the sale price and the turnover which, as he alleged and Mr O'Leary denied, had been represented by Mr O'Leary as being $600,000 for the first year of operations growing to $1,000,000 per annum in the third year. It will be necessary to return to this issue in more detail later but it is clear that at the time Mr O'Leary appreciated that the plaintiff did require "cash flow" figures to support the value and the projected takings of the pharmacy.
By his fax of 1 September 1998, Mr O'Leary wrote on behalf of Sigma to Mr Tom Fico concerning the cash flow for the Waratah pharmacy (Exhibit 5). By this fax Mr O'Leary stated that he had spoken to Kamal (meaning Mr Kamal Hashemi) at Pharmacy Accounting Services ("PAS") that morning "to chase the cash flow" and that Kamal "is faxing it directly to me at home today and I will forward this to your office as soon as I receive it". Two sets of Profit Projections were prepared by Mr Kamal Hashemi in conjunction with Mr John Ashoorian. One was then transmitted to Mr O'Leary on or about 1 September 1998. He passed them on to the plaintiff's brother who acknowledged receipt the following day (Exhibit 7). This version of the profit projections involving the same turnover figures set out in the other but smaller, and therefore more optimistic, provisions for expenses was annexed to the plaintiff's application for finance to the bank (Exhibit 11) together with a more detailed, and less optimistic cash flow statement for the period from October 1998 to June 1999. This later document had been prepared for the plaintiff by his brother.

This led to a submission on behalf of the defendants that the plaintiff did not rely on the cash flow figures which were submitted by the vendor via Mr O'Leary but, instead, made his own evaluation and acted on the estimates contained in Mr Tom Fico's projected cash flow for the first eight months. In this regard I accept the evidence of Mr Tom Fico that, when compiling his cash flow statement for submission to the bank, he adopted, as a measure of caution and prudence, an approach that the turnover for the first year would not, initially at least, be equivalent to a full $600,000 per annum but would build up to that figure over the first 12 month period with cash flow not becoming positive until March 1999. His explanation for this approach was that, while reliance was placed on the figures represented by Mr O'Leary on behalf of the fourth defendant he thought that it would be wise to be conservative when borrowing the whole of the capital required and making estimations about capacity to service the loan. Mr Tom Fico maintained, and I accept, that he and his brother continued to rely on the representation that the turnover for the first year would be running at the rate of $600,000 per annum, at least to the extent that it would reach that rate before the end of the year, but that they were building a safety margin into their calculations when borrowing money. I consider that Mr Tom Fico and the plaintiff were entirely truthful in this regard and that their position was a reasonable one in the circumstances, that is, placing reliance on the representations which were made to them but discounting them to a degree when dealing with their bank to satisfy their own prudent desire for a margin of safety.
It is a little surprising that Mr O'Leary, or the fourth defendant for that matter, should be asked, and when asked be ready to offer projections for profit or turnover for this proposed pharmacy business. No pharmacy had ever been conducted from those premises before and there was, therefore, no history of trading which could be used as a basis to provide any such information to a purchaser. What was being asked of the vendor and her representatives, and what indeed they eventually supplied, amounted to a request for an estimate of the likely turnover based on an assumed knowledge of, or experience derived from, other pharmacy businesses which might be thought comparable. Neither the fourth defendant nor her husband had any experience in this regard to draw upon. The figures which were produced after Mr O'Leary had suggested that Mr John Ashoorian approach Mr Kamal Hashemi, were based simply on an estimate of turnover which was never fully explained. Mr Hashemi adopted this estimate and made no contribution to it himself, having no relevant experience or knowledge in the area. His contribution to the exercise was to estimate the expenses for a business operating at the anticipated turnover level. He did this and, after later discussions with Mr John Ashoorian, reduced his estimate of expenses.
The cash flow estimates or Profit Projections were then delivered to the plaintiff via Mr O'Leary. Mr O'Leary had examined them and was satisfied that they were consistent with his own general experience and opinion.
Any such statements which were prepared and passed on to the purchaser at a time when he was demanding this information to support an application for bank finance can only, in any commercial sense, be regarded as a representation about the likely takings, cash flow and profitability of the business. It is difficult to understand why a vendor, in the position of Mrs Deena Ashoorian, should venture such an estimate when it must have been known to her that to do so would entail at least potential, and probably actual, responsibilities for the accuracy of information which was quite plainly outside her knowledge and experience. I am satisfied that the fourth defendant embarked upon this course because, as she and her husband said, they were told by Mr O'Leary that the figures were needed for a "business plan" in circumstances where their true significance and intended use was not fully disclosed by Mr O'Leary to the Ashoorians. Why did Mr O'Leary press the fourth defendant for such information and suggest the engagement of Mr Kamal Hashemi for the preparation of the figures when he, too, knew that they would constitute representations about the anticipated trading operations of the business? I am satisfied that there is only one acceptable answer to these questions, namely, that Mr O'Leary had assured the plaintiff, as Mr Anthony Fico said he did, that the business would have a turnover of $600,000 in the first year rising to $1,000,000 in the third year, and that in the light of that assurance the plaintiff naturally asked Mr O'Leary before the contract was signed to provide information to support those representations, and that Mr O'Leary agreed to obtain it. From then on, in practical terms, it was essential in order for Sigma to achieve this sale that turnover figures matching, or approximating the representation made at the time when the contract was signed should be supplied to the plaintiff. I accept Mr Anthony Fico's evidence that this is what happened and I reject Mr O'Leary's denials that any such representations were made.

The events after settlement on 17 October 1998

As noted, when settlement was effected on 17 October 1998 the plaintiff unilaterally withheld $15,000 from the purchase price as a contingency to deal with the absence of air‑conditioning. He says, that at that point he had been promised by Mr O'Leary that the vendor (or possibly the landlord) would install air‑conditioning without charge to him and that Mr O'Leary accepted that the sale had taken place on the mutual assumption that air‑conditioning was essential for the operation of the pharmacy. The plaintiff had received written confirmation of this from Mr O'Leary on behalf of Sigma, ostensibly for the third defendant, shortly before settlement (fax 18 October 1998, Exhibit 15).
I am satisfied that, at the time of settlement, the plaintiff believed, his brother having been told this by Mr O'Leary, that a second letter had been provided on behalf of the vendor confirming that a doctor would be conducting practice from the nearby medical centre by 1 January 1999 and that the profit projections provided by Mr O'Leary on behalf of the vendor and submitted to his bank had been prepared on the footing that a doctor would be in operation at the medical centre from 1 January 1999. I am also satisfied that these profit projections stating as they did that the projected turnover of $600,000 for the first year and increasing to $720,000 in the third year implied that these projections were reasonable in all the circumstances.
After completion there was little in the way of communication with Mr O'Leary and, for the first time, Mr John Ashoorian on behalf of his wife communicated directly with the plaintiff and by 23 November 1998 was complaining about the failure of Mr Anthony Fico to pay the balance of $15,000 of the purchase price (Exhibits 112 and 17). The plaintiff replied on 25 November (Exhibit 18) asserting that:
•Mr O'Leary, as the vendor's agent, had agreed on the vendor's authority to the non‑payment of $15,000 until certain conditions set prior to the settlement date were met;
•that the main two conditions were the installation of appropriate air‑conditioning and the provision of a Year 2000 compliant computer system.
At that stage the plaintiff was not aware of the absence of any second letter dealing with the presence of a doctor in the medical centre by 1 January 1999 nor did he then have doubts about turnover. There were enquiries about and attempts to install air‑conditioning but these broke down over the question of whose responsibility it was and whether or not the plaintiff would share the costs of installing an acceptable system.
By late December 1998 Mr Anthony Fico became concerned that the medical centre would not open at the beginning of January 1999 and was told by Mr John Ashoorian on 29 December 1998 that the medical centre may not open for many months, if at all. He raised these and other concerns with Mr O'Leary of Sigma on 29 December (Exhibit 22), but little response resulted. Mr Anthony Fico made a request to the third defendant for a grant of a further three month rent free period under the lease (Exhibit 37). That request was granted subject to the plaintiff making payments for the variable outgoings for January and February (Exhibit 38).
By the beginning of May 1999 the plaintiff was concerned about the turnover of the pharmacy and wrote to Mr Merhdad Meshgin of the third defendant on 4 May (Exhibit 40) saying that the pharmacy was then only turning over about $12,000 per month (or about $140,000 per annum) instead of the forecast $600,000 per annum. He engaged solicitors who wrote to Sigma by letter of 25 May 1999 (Exhibit 44) which, among other things, asserted:
"On 28 August 1998, our client signed an offer to purchase the pharmacy from Mrs Deena Ashoorian. Mr Brendan O'Leary ('O'Leary') of Sigma (WA) Ltd, Pharmacy Services Division ('Sigma') was acting as the agent representing the vendor and the purchaser in this transaction.
Our client instructs us that he made it very clear to O'Leary that there were several outstanding issues which required resolution prior to the completion of the acquisition of the pharmacy. The main issue revolves around confirmation that a medical practitioner would be in situ as per a special condition of the offer to purchase the business ('the doctor issue'). We are fully aware that Sigma did not obtain any commission or fees for their intermediary role as agent for both vendor and purchaser however did obtain major supply benefits from the pharmacy. In order to effect completion of the settlement, various assurances were made to our client and his brother Mr Tommaso Fico. One of the assurances made by O'Leary was that there would be a doctor in situ as 1 January 1999. This was not the case and in fact it seems in hindsight that there was no firm intent to place a doctor in the complex. This has led to drastic reduction in cash flow seriously effecting our client's business.
Our client commenced operating the pharmacy from 18 October 1998. Settlement which was due to occur on 12 October 1998 but actually occurred on either 18th or 19th October 1998. This was due to several outstanding issues including the doctor issue. The only reason settlement did occur was due to O'Leary's direct assertion to Mr Tommaso Fico that the doctor issue had been resolved due to the fact that O'Leary had forward[ed] a second confirmation letter directly to the lender, that being the Commonwealth Bank of Australia. No such letter in fact existed.
In our opinion your employee O'Leary was clearly an agent for both the purchaser and the vendor. Furthermore, O'Leary clearly made representations which were false and thereby induced our client in completing the settlement in relation to the pharmacy."
There is no evidence of any response by Mr O'Leary, Sigma or their solicitors to those assertions.
From May 1999 the plaintiff continued in possession of the pharmacy and attempted to operate it. The air‑conditioning issue was never resolved and suitable air‑conditioning was not installed. Some temporary air‑conditioning was introduced by the plaintiff. Turnover never approached the level of $600,000 per annum and the trading operations continually incurred losses. Sigma was supplying stock on credit but the only payments for stock made by the plaintiff to Sigma were in June and August 1999 totalling $19,340.39, leaving a balance due for unpaid stock (after returns and adjustments) of $64,777.81.
The initial three month rent free period granted by the third defendant to the plaintiff was extended to a six month period, meaning that rent did not become payable until the period commencing on 12 April 1999. The plaintiff paid no rent and only part of the variable outgoings for the period when he was in possession until he vacated the premises in September 2002. Accordingly, Marena counterclaims for unpaid rent and variable outgoings plus interest on two alternative bases:
(a)rent and variable outgoings for the period 12 April 1999 to 30 September 2000, less payments received - $35,922; or
(b)rent plus variable outgoings for the period 12 April 1999 to 30 October 2000, less payments, plus further rent for the balance of the lease term of 41 months, less rent actually received or receivable from alternative letting to the end of the lease term of 31 August 2003 - $79,818.
Mrs Ashoorian, the fourth defendant, counterclaims for the unpaid balance of the purchase price for the sale of the business of $15,000 plus interest.

The plaintiff's allegations

By his statement of claim Mr Anthony Fico alleges that a series of express and implied representations were made to him by Mr O'Leary leading to him entering into the contract for the purchase of the pharmacy on 28 August 1998 and, further, these and additional representations made by Mr O'Leary caused him to complete that contract by going into possession on or about 13 October 1998 and then paying $235,000 of the purchase price on 17 October 1998. He alleges that, at all material times Mr O'Leary was the employee and agent of Sigma and in relation to the provision of cash flow or profit projections for the pharmacy Mr O'Leary was also the agent of the fourth defendant.
The plaintiff does not expressly allege that Mr O'Leary or Sigma acted as agent for the third defendant Marena but he does allege that the letter of 20 August 1998 from Dr Neda Meshgin to Marena stating her intention to commence medical practice in the nearby medical centre in January 1999 was provided by the third defendant to Mr O'Leary, and then by Mr O'Leary to the plaintiff in the knowledge that it would be used to induce the prospective purchaser to complete the purchase the pharmacy and that there was, thereby, an implied representation by Marena to the plaintiff that this letter could be relied upon to satisfy the special condition in the contract providing for confirmation that there would be a doctor in situ at the medical centre by 1 January 1999. This plea, in my view, necessarily implies that Mr O'Leary was the agent of Marena for the limited purpose of delivering that letter to the plaintiff as ostensible satisfaction of Special Condition 7 in the contract. It also necessarily implies that the delivery of the letter was performed by the first defendant also as agent of the fourth defendant in purported compliance with her contractual obligation under Special Condition 7 as vendor. That is not expressly alleged in the statement of claim either, although I consider it is implied, but the case was conducted on this basis at the trial without any point being taken or objection raised on behalf of the fourth defendant.
There is an express plea by the plaintiff that in providing a copy of the profit projections to him Mr O'Leary was acting as Mrs Ashoorian's agent. The plaintiff also alleges that by delivering the profit projections to him on behalf of the fourth defendant, Mr O'Leary impliedly represented that the document was based on reasonable projections for turnover expenses and profitability based on his and Sigma's knowledge of pharmacies and their financial performance, so linking the first and second defendants to the representations alleged to arise from the Profit Projections.
These alleged representations made by the first and second defendants and the other representations made by, or on behalf of, the third and fourth defendants are all said to have been made in trade and commerce and to have been false or misleading. Insofar as they relate to representations concerning future conduct they are alleged to be false or misleading because they were made without any reasonable grounds and, in that case, the onus of proof of the existence of reasonable grounds for the predictive representations rests upon the respective defendants. The plaintiff alleges that the several representations induced him to enter into the contract to purchase the pharmacy business and that the subsequent representations taken in conjunction with the earlier representations induced him to complete the contract at a time when he had misgivings about the fourth defendant's compliance with contractual terms and the reliability of representations made to him both before and after the contract up to the point of completion.
This alleged misleading and deceptive conduct, so the plaintiff contends, entitles him to recover damages under s 82 or other relief under s 87 of the Trade Practices Act against the first, second and third defendants and under s 79 or s 77 of the Fair Trading Act against the fourth defendant. The plaintiff also claims that because of the misleading and deceptive conduct of the third defendant he is entitled to a declaration that the lease is void, or other relief setting it aside and an indemnity from the first, second and fourth defendants against any remaining liability which he may have under the lease to the third defendant for rent.
In addition to these claims for relief under the Trade Practices Act and the Fair Trading Act against all the defendants, the plaintiff also claims damages for negligence against the first and second defendants for breach of an alleged duty of care due by them to advise and act on his behalf in relation to his purchase of the pharmacy business with reasonable skill, knowledge and care or, as the plaintiff pleads "with reasonable skill, care and diligence".
The third cause of action relied upon by the plaintiff is a claim for equitable compensation against the first and second defendants for alleged breaches of fiduciary duties said to be owing by them to him. The breaches of the fiduciary duties alleged are said to arise from the first and second defendants making various of the representations already mentioned, failing at all times to act in his best interests and acting for the plaintiff when simultaneously acting for the fourth defendant whose interests were in conflict with his own. The allegations of breach of fiduciary duty also include a number of subsidiary or derivative allegations which will be examined later in these reasons.
The representations alleged to have been made by the first defendant on behalf of the second defendant and the third and fourth defendants are significant, not merely because of the claims for relief for alleged misleading and deceptive conduct but because the alleged representations and the circumstances in which they were made are material to; the issues of whether or not a duty of care in tort was due by the first and second defendants to the plaintiffs; whether or not fiduciary obligations were owed by the first and second defendant to the plaintiff; and, to determine whether there was any fiduciary duty to the fourth defendant. Therefore, not only must the representations themselves be examined but the circumstances surrounding them and the position of the first defendant in making them must also be analysed.
The second defendant undertook a significant role in arranging for the sale or purchase of new or established pharmacy businesses in Western Australia. A large part of the first defendant's obligations as senior sales manager was to attend to these sales and to put prospective purchasers and vendors of pharmacies in touch with one another and to assist in arranging and completing the sales. This was incidental to the second defendant's business as a manufacturer and wholesaler of pharmaceutical products and any connections thus established through acting as an intermediary of any kind in such sales, enhanced the prospects of the second defendant becoming a major, or "first line" supplier of pharmaceutical products to such a pharmacy business.

It was, therefore, consistent with this role adopted by the second defendant that Mrs Ashoorian should first approach Sigma for assistance in setting up the new pharmacy which she intended to establish at the Waratah Shopping Centre and then, later, seek the assistance of Sigma to find a buyer for the proposed business when she found that it was no longer possible for her to conduct the business herself or in partnership. Independently of the position of Mrs Ashoorian, it was also consistent with the role adopted by the second defendant that Mr Anthony Fico should approach it to obtain the assistance of Mr O'Leary at a time when he was looking to acquire an established pharmaceutical business to conduct himself.
While the description is not entirely apt it is not going too far to say that Sigma was, to some degree, a broker of pharmacy businesses for would be purchasers and vendors. One conspicuous feature which distinguishes the role adopted by Sigma in these circumstances from that of a conventional broker is that it did not seek or accept a fee of any kind from a purchaser or a vendor but it did seek to establish a trade connection as a supplier to pharmacists whom it assisted to acquire such a business.
Mr Anthony Fico had approached Mr O'Leary some time in about June 1998 enquiring about the availability of a pharmacy business for purchase in the southern Perth suburbs with a turnover of about $1,000,000 per annum. Several pharmacy businesses which were thought might be suitable were suggested by Mr O'Leary to the plaintiff including the proposed new pharmacy at Waratah Crescent, Canning Vale then still in the course of fit out. Unknown to the plaintiff at this time Mr O'Leary, through Sigma, had been assisting Mrs Ashoorian to obtain a Pharmaceutical Benefit Scheme provider number for the premises; to obtain approval from the Pharmaceutical Council for the operation of the pharmacy at that location; to install a fit out with the supply of necessary furniture and fittings; and obtain an appropriate computer system for use in the proposed business.
Mrs Ashoorian had intended to open and operate a pharmacy business at those premises in partnership with a colleague, Elizabeth Chamberlain, but, in June 1998 the proposed partner withdrew from the venture and Mrs Ashoorian then decided that she should sell the pharmacy once it was ready to begin trading. At that stage she had, by purchase, secured access to a provider number for the premises and was committed to complete the installation of the necessary furniture and fittings to equip the premises for trading. She had also entered into a conditional agreement for the purchase of a second hand computer system for trading and stock control. She had been obtaining assistance from Sigma in connection with the set up of the proposed pharmacy since December 1997.
In early August 1998 Mr O'Leary informed Mr Anthony Fico that there was a new pharmacy business in the course of construction at the Waratah Shopping Centre which was for sale. The plaintiff alleges that Mr O'Leary then orally represented to him that:
•Mr O'Leary had located a pharmacy for sale at shop 8 in the Waratah Centre, Canning Vale which had just come onto the market in a new development namely the Waratah Shopping Centre;
•that he, Mr O'Leary, had never seen a new pharmacy with the potential possessed by this one; and
•the purchase of this pharmacy would be a good investment for the plaintiff.
Shortly afterwards, Mr Anthony Fico visited the Waratah Shopping Centre to conduct an external inspection of the proposed pharmacy and of the centre generally. He pleads that in early August 1998, after this inspection, he again contacted Mr O'Leary who orally represented to him that:
•the pharmacy was for sale because its owner, Mrs Ashoorian, had been intending to open it with a partner so that the two partners would each work for half the trading hours;
•the proposed partner's child had become seriously ill so that she was no longer able to work because of her responsibilities to care for her child, so that Mrs Ashoorian had decided that she did not wish to open the pharmacy alone;
•a doctor's surgery would be established within the Waratah centre and would open for business not later than 1 January 1999 with at least two doctors practising there and with more to follow shortly afterwards;
•the Waratah centre included space for a supermarket which would be occupied at the latest by mid‑1999 by Foodland or by a similar major supermarket operator; and
•within a few years after opening for business the pharmacy would have a turnover exceeding $1,000,000 per annum.
Mr Anthony Fico alleged, in his statement of claim, that on 28 August 1998 Mr O'Leary visited him at his home at about 8 am with a proposed contract for the sale and purchase of this pharmacy which he had prepared and with a floor plan of the proposed doctor's surgery. Mr Anthony Fico alleges that at this meeting Mr O'Leary orally represented to him that:
•he, Mr O'Leary, would obtain from Mrs Ashoorian or from the owner of the centre a letter from a medical practitioner stating that that doctor intended to establish a surgery in the centre from January 1999;
•there were two other pharmacists both ready to sign a contract to purchase the pharmacy immediately for $250,000;
•if Mr Anthony Fico was not prepared to sign the proposed contract immediately the pharmacy would be purchased by one of these other pharmacists;
•if Mr Anthony Fico signed the contract and subsequently did not wish to complete the purchase he could withdraw from the contract because it provided that his obligation to complete was contingent upon there being a satisfactory lease for the premises of the absolute discretion of a purchaser;
•the selling price was non‑negotiable because $250,000 was what the pharmacy was worth;
•Mr O'Leary would provide to Mr Anthony Fico a cash flow projection for the pharmacy which would be consistent with his statement that it was worth $250,000;
•the sale price included the MINFOS point of sale computer system which was to be installed at the premises and which was worth about $30,000;
•the pharmacy would have a turnover of $600,000 in its first year of operation, increasing to $1,000,000 after three years;
•the premises were fitted out for the operation of the pharmacy so that Mr Anthony Fico would only need to purchase stock in order to carry on the pharmacy business.
The plaintiff also alleges that, implicit in the alleged representation that Mr O'Leary would provide a cash flow projection for the pharmacy consistent with the statement that it was worth $250,000 there was a further representation that the cash flow projection, to be produced, would be based on reasonable assumptions, having regard to the expertise of Mr O'Leary and Sigma.
It is not in doubt that on the morning of 28 August 1998, at his home, Mr Anthony Fico signed an offer to purchase the pharmacy business which was then produced to him by Mr O'Leary and which was later that day accepted by Mrs Ashoorian. The terms of that contract have already been set out. The fact that the plaintiff signed the contract on this occasion immediately without further enquiry is a fact of some significance to which I will return.
Within a few days of the offer for the purchase of the pharmacy being signed and accepted Mr O'Leary delivered to the plaintiff, or to his brother Mr Tom Fico, who was by then assisting him in relation to the sale, a copy of a letter from Dr Neda Meshgin to Marena stating her intention to establish a medical practice and the nearby medical centre "as of January 1999". The actual copy of the letter so produced was not put in evidence but I am satisfied that the letter was in the same, or in substantially the same, terms as the letter from Dr Neda Meshgin to Marena dated 20 August 1998 (Exhibit 56) which the plaintiff obtained from the CBA in mid‑December 1998. Despite the date it bore – that letter was probably written on if after 28 August 1998.
Also, in early September 1998 Mr O'Leary sent to the plaintiff via his brother the Profit Projections, prepared by PAS, for the pharmacy putting the turnover for the 1998/1999 financial year at $600,000 with an estimated net profit of $139,900 and with higher projections for turnover and profit for the two succeeding years (Exhibit 64). This put the turnover for the 1999/2000 year at $720,000 with a projected net profit of $170,460 and the turnover for the 2000/2001 year at $792,000 with a projected net profit of $191,223 (contrast Exhibit 6 with the same turnover projections but with slightly higher estimated net profits). The plaintiff alleges that implicit in the provision by the first defendant on behalf of Sigma to Mr Anthony Fico of these Profit Projections were representations that:
•the content of the projection was based on reasonable projections for turnover, expenses and profitability based on O'Leary's and Sigma's knowledge of pharmacies and their financial performance;
•the purchase price of $250,000 was reasonable having regard to the projected turnover and profitability;
•the purchase of the pharmacy was a good investment because it would in the first year of trading generate a return of 50 per cent on the acquisition cost.
The plaintiff also alleges, against the third defendant Marena, that the provision by Marena, through Mr O'Leary, of the letter from Dr Meshgin concerning her intention to commence medical practice in the nearby medical centre as of January 1999 constituted an implied representation to Mr Anthony Fico that he could rely upon the contents of that letter as satisfaction of Special Condition 7 in the contract of sale so meaning that the plaintiff would be required to complete that contract.
The plaintiff also alleges against the fourth defendant, Mrs Ashoorian, that the Profit Projections which were delivered on or about 1 September 1998 to the plaintiff had been prepared by PAS for her, and that they were supplied to the plaintiff by Mr O'Leary as her agent. So it is alleged that by the provision of these Profit Projections by the fourth defendant to the plaintiff it was impliedly represented that:
•the content of the cash flow projections was based on reasonable projections for turnover, expenses and profitability;
•the purchase price of the pharmacy was reasonable having regard to the projected turnover and profitability;
In reliance upon all these representations the plaintiff asserts that he was induced, initially to enter into the contract of sale, and by the subsequent representations to proceed to completion by payment of the $235,000 on 17 October 1998.
The plaintiff alleges that the various representations were false, and so misleading and deceptive or, insofar as they were predictive of future events, were misleading and deceptive because they were made without any reasonable grounds.
The manner in which the representations are alleged to have been false or misleading or deceptive can now be considered. The plaintiff claims that:
(a)there was no reasonable foundation for the prediction by the first defendant that he had never seen a new pharmacy with the potential possessed by this pharmacy or for the representation that the purchase of this pharmacy would be a good investment for the plaintiff;
(b)there was no reasonable foundation for the representation that the space included in the centre for a supermarket would be occupied at the latest by the middle of 1999 by Foodland or by a similar major supermarket operator;
(c)there was no reasonable foundation for the representation that the pharmacy would have a turnover of $600,000 in its first year of operation increasing to $1,000,000 after three years;
(d)there was no reasonable foundation for the representation that within a few years after the opening for business of the pharmacy would have a turnover exceeding $1,000,000 per annum.
(e)the representation that the premises were fitted out for the operation of a pharmacy so that the plaintiff would need only to purchase stock in order to carry on that business was false because a pharmacy must be air‑conditioned for the proper storage of various drugs; that these premises were not air‑conditioned and, therefore, the plaintiff would be required to purchase more than stock in order to commence pharmacy operations;
(f)the representations that there were two other pharmacists both ready to sign a contract immediately to purchase the pharmacy for $250,000 and that if Mr Anthony Fico was not prepared to sign the contract on 28 August 1998 the pharmacy would be purchased by one of these other pharmacists were both false as there were no other pharmacists at that date prepared to purchase the pharmacy for that price;
(g)the representation that if Mr Anthony Fico executed the contract immediately on 28 August 1998 and subsequently did not wish to complete then he could withdraw because the contract was contingent upon there being a satisfactory lease for the premises at the absolute discretion of the plaintiff was false because, on its proper construction the contract only entitled the plaintiff to withdraw if there was a bona fide objection to some provision in the proposed lease;
(h)the representation that the sale price was non‑negotiable at $250,000 because that is what the pharmacy was worth was false because the pharmacy was not then worth that sum or any more than $38,000 being the alleged value of the HIC provide number;
(i)the representation that the selling price included a MINFOS computer system worth about $30,000 was false because the particular MINFOS system comprised outdated equipment and was not worth that sum (the evidence showed that it had been purchased second‑hand for $20,000);
(j)there was no reasonable foundation for any of the implied representations arising from the delivery to the plaintiff of the Profit Projections, that
•the content of these projections was based on reasonable projections for turnover expenses and profitability based on Mr O'Leary and Sigma's knowledge of pharmacies and their financial performance;
•the purchase price of $250,000 was reasonable having regard to the projected turnover and profitability;
•the purchase of the pharmacy was a good investment because it would, in its first trading year, generate a return of 50 per cent on the acquisition cost.
As an alternative to the allegation described in subpar (g) above, the plaintiff also alleges that if, on the proper construction of the contract of sale, he was entitled to withdraw from the contract without penalty at his absolute discretion then, in reliance upon the representations made by the first and second defendants and by the fourth defendant he waived his entitlement to withdraw and proceeded to complete the purchase of the pharmacy.

The Evidence: Issues of Fact: Findings

Introduction of the Waratah Pharmacy to the plaintiff

Mr Anthony Fico had graduated in pharmacy from Curtin University in 1995. He was then employed in a number of pharmacies for which Sigma was the principal supplier including the Phoenix Pharmacy where he became manager of the dispensary. This was a large pharmacy with an annual turnover of approximately $2,000,000. He was looking to obtain and conduct a pharmacy business on his own account from early 1998 onwards and raised this casually in discussion with his brother Mr Tom Fico on family occasions during the early part of that year. He had a slight acquaintance with Mr O'Leary whom he had met at a pharmacy guild day in 1997 so he telephoned Sigma's office and enquired about pharmacy businesses for sale. He was referred to Mr O'Leary but was unable to speak with him on that occasion.
There was a pharmacy fair conducted in Perth in June or July 1998 and Mr Anthony Fico met Mr O'Leary there and enquired about the prospect of purchasing a pharmacy. The two went aside sat down and spoke briefly about pharmacies for sale. In the course of that conversation the plaintiff indicated that he was looking for a pharmacy south of the river, in a shopping centre, and that he did not mind whether it was a six or seven days a week business. The conversation concluded with Mr O'Leary saying that he would organise a meeting at his office sometime later.
The meeting duly took place at Mr O'Leary's office at Wheeler Street, Belmont some time in July 1998. Mr Anthony Fico attended accompanied by his brother, Mr Tom Fico. They were told by Mr O'Leary that Sigma did not charge a fee but had experience in bringing purchasers and vendors of pharmacy businesses together.
At the meeting at Mr O'Leary's office in July 1998 the plaintiff said that he was looking for a pharmacy with a turnover of about a $1,000,000 per annum for an asking price of about $600,000 and, preferably, located south of the river. Mr O'Leary responded by saying that he had several pharmacies on his books at the time and that those with a turnover of $1,000,000 to $1,500,000 were the most sought after. He indicated that he would select pharmacies for sale which he thought were most appropriate to the plaintiff's circumstances. He wrote out a list of pharmacies which he believed, in one way or another, matched these conditions. This consisted of the Centrepoint Pharmacy at Midland for an asking price of $800,000 plus stock of about $180,000, fixtures and fittings at $30,000 and goodwill of $590,000. He also mentioned the Friendlies Chemist in Piccadilly Arcade, Perth but said that its lease was about to expire. He also mentioned the Forrestfield Pharmacy, which was located in a medical centre with a going price of about $700,000 but which was subject to growing competition. He also mentioned a pharmacy at Warnbro for sale at $400,000 which he thought was overpriced. The list of pharmacies which he then gave to the plaintiff became Exhibit 1 and named:
·Centrepoint Pharmacy – Midland
·Friendlies Chemist – Piccadilly Arcade, Perth
·Forrestfield Pharmacy – Hale Road, Forrestfield
The meeting concluded on the footing that Mr Anthony Fico would go and look at these pharmacies and consider them and that Mr O'Leary would contact him again if there were any other pharmacies which came onto the market which might be suitable. The plaintiff decided not to bother looking at the Friendlies Chemist in Piccadilly Arcade or the Forrestfield Pharmacy but he and Mr Tom Fico went to look at the Midland Pharmacy but they then decided to wait for a better opportunity.
Some weeks later Mr O'Leary telephoned Mr Anthony Fico and (according to the plaintiff) told him he had a pharmacy that had just come onto his books, that it was the best potential he had seen, that it was a green fields site and that there would be a medical centre opening nearby. He said that the new pharmacy was in the Waratah Estate at Canning Vale and had a five stream primary school across the road with about 800 students. He described it as a good investment for the plaintiff to start "on the ground floor". The plaintiff expressed interest and said that he would go and look at it. After some discussion within his family the plaintiff obtained the address of this new proposed pharmacy by telephoning Mr O'Leary and drove out to see it a day or so later.
The premises were locked and Mr Anthony Fico could not go inside but, through the windows, he could see that it was fitted out with shelving, carpets, moveable shelf units and counters but had no stock. The Waratah Centre was a strip shopping centre with 10 shops including hairdressers, a Chinese food takeaway shop, a childcare centre, a delicatessen, a fish and chip shop and a video store. A large space for a major tenant remained empty. There was a primary school across the road and the nearby area consisted of a housing estate mostly developed.

Total

$312,731

Plus interest

$94,385

Total

$407,116

The first and second defendant will be jointly and severally liable for equitable compensation and interest in that amount. All defendants will be liable jointly and severally for damages and interest in that amount. The first and second defendant's liability for compensation is concurrent with, and not additional to, their liability for damages.

Other Relief for the Plaintiff

The plaintiff is also entitled to an order under s 87 of the Trade Practices Act against the third defendant declaring that the provisions of the lease of the Waratah Pharmacy premises from the third defendant to the fourth defendant and assigned to the plaintiff, which would otherwise require the plaintiff to pay outstanding rent and variable outgoings in respect of the premises, to have been void on and after 12 October 1998.
Similarly, the plaintiff is entitled to an order against the fourth defendant under s 77 of the Fair Trading Act declaring that the part of the contract for the purchase and sale of the Waratah Pharmacy made between the plaintiff and the fourth defendant and dated 28 August 1998 which would otherwise require the plaintiff to pay $15,000 being the unpaid balance of the purchase price referred to in that contract to be void at all times on and after 28 August 1998.

Contributions between Defendants

Despite the first and second defendants being concurrently liable to the plaintiff for breach of fiduciary duty and for damages for misleading and deceptive conduct under the Trade Practices Act, whereas the third and fourth defendants are liable for damages for misleading and deceptive conduct under the provisions of the Trade Practices Act and the Fair Trading Act respectively, I consider that all these are co‑ordinate liabilities in respect of which equitable contribution between the parties liable may be ordered upon the principles earlier examined.
The pleadings in the cross claims between the defendants by which contribution is sought involve contribution claims being made by the first and second defendants against the fourth defendant and by the fourth defendant against the first and second defendants. No cross‑claims have been made against the third defendant nor has the third defendant sought contribution from any of the other three defendants. I am satisfied that orders for contribution, tailored to meet the particular circumstances, should be made but, for reasons earlier given, contribution in equity will only be awarded on an equal basis between those found liable. It follows from this that I am satisfied that I should order that the first defendant, the second defendant and the fourth defendant should, (subject to the adjustments set out below), be required to contribute, as between themselves, to one quarter of the compensation, damages and interest awarded to the plaintiff while each remains personally wholly liable to the plaintiff for the full amount of the judgment. But, if no orders for contribution are made in favour of, or against, the third defendant several anomalies could well arise. These range from the possibility that the plaintiff might enforce and satisfy his judgment entirely against the third defendant which would then have no enforceable right to contribution from any of the other defendants. At the other extreme, the plaintiff might enforce and satisfy this judgment entirely against the first or the second defendant who, in that case, would have no enforceable right to contribution from the third defendant. The various other permutations and combinations of possibilities arising from enforcement of the judgment in whole, or in part, against some of the defendants but not others, or to greater or smaller extent against all the defendants can also readily be appreciated.
Any orders for contribution made in favour of the first, second and fourth defendants will, as intended, confer benefits on each of them by ensuring that none is left to bear the total liability to the plaintiff without partial recompense from the others. As this is equitable relief I consider that those parties who seek the benefit of the remedy must be prepared to do equity in return by submitting to orders for payment of contribution to the extent of one quarter share in favour of the third defendant. This is no more than the application of well established equitable principles – Mayfair Trading Co Pty Ltd v Dreyer (1958) 101 CLR 428 and Maguire & Tansey v Makaronis (supra).
Accordingly, I consider that the only basis upon which orders for contribution can be made on the cross claims in favour of the first, second and fourth defendants is on the basis that a similar order is made in favour of the third defendant notwithstanding the absence of a formal claim for relief in that respect by the third defendant. The same considerations mean that an order requiring the third defendant to contribute to the extent of 25 per cent towards the liability to the plaintiff should also be made. This order will impose a burden rather than a benefit upon the third defendant but, again, as I consider that it is essential to impose an obligation on the parties seeking contribution to contribute to the third defendant's liability towards the plaintiff, the same considerations mean that, as the converse to that benefit, the third defendant must contribute to the extent of 25 per cent to the total liability found against all defendants in favour of the plaintiff.
The effect of such contribution orders would be to impose an unjustifiably high obligation to contribute on each of the first, second and third defendants if account were not taken of the fact that the fourth defendant received the $235,000 paid for the purchase of the pharmacy business by Mr Anthony Fico which, with interest, forms a component of the compensation and damages which he is entitled to recover in this case. If the contributions between the four defendants were equal, without any such adjustment, the other three defendants would bear 75 per cent of the burden of the liability for the purchase price plus interest although all the $235,000 was received by Mrs Deena Ashoorian. The component of the compensation and damages awarded to the plaintiff formed by this part of the purchase price can be readily isolated as:

· Paid on 17 October 1998	$235,000
· The component and interest on that sum included in the judgment in favour of the plaintiff at 6 per cent as from 1 October 1999 to 11 October 2004	$70,925
· Total	$305,925

Mrs Ashoorian obtained and retained the $235,000 and must be treated as having had the benefit of that money to the date of judgment. Accordingly, disregarding her cross‑claim against the first and second defendants, she alone should be responsible for this component of the compensation and damages awarded to the plaintiff and the orders for contribution should take effect in relation to the remaining balance of the sum awarded to the plaintiff. This means that, after giving effect to the payment of the purchase price to Mrs Ashoorian and allowing for interest which has been awarded in respect of that component of the judgment, the four defendants, should, after contributions, each be responsible for the following portions of the plaintiff's liability, without in any way diminishing the personal liability to the plaintiff for the whole of the judgment:

First defendant

$407,116

-$305,925

         Total

$101,191

         25 per cent

$25,298

Second defendant

$407,116

-$305,925

        Total

$101,191

         25 per cent

$25,298

Third defendant

$407,116

-$305,925

         Total

$101,191

          25 per cent

$25,298

Fourth defendant

$305,925

        25 per cent of balance

$25,298

$331,223

Accordingly, on the cross‑claims for contribution orders may be made that each of the four defendants shall contribute to the extent of 25 per cent, as between themselves to the extent of $101,192 of the aggregate judgment in favour of the plaintiff, leaving the fourth defendant without the benefit of any orders for contribution in her favour in respect of the balance but obliged to contribute to the other defendants in aggregate up to the sum of $331,223.
These proposed orders for contribution relate entirely to the liabilities of the four defendants to the plaintiff and are entirely distinct from the relief yet to be granted in the cross‑claim by the fourth defendant against the first and second defendants.

Third Defendant's Counterclaim against the Plaintiff

Because of my conclusion that the plaintiff is entitled to an order under s 87 of the Trade Practices Act declaring that the assignment of the lease of the pharmacy premises is void to the extent that it otherwise would require him to pay to the third defendant unpaid rent and variable outgoings in respect of the premises, after 12 October 1998 this counterclaim must be dismissed.
The third defendant also sought interest upon its counterclaim for unpaid rent and variable outgoings due under the lease of the premises. This claim was also opposed by the plaintiff who submitted that the interest rates set out in Exhibit 84, the letter from the National Australia Bank of 24 October 2002, relating to the "NAB base lending rate" did not correspond with the particular interest rate prescribed under the lease. I accept that position. Again the plaintiff, as a concession, acknowledged that there was power to fix a rate under s 32 of the Supreme Court Act. It is not necessary for me to address that issue because of the dismissal of this counterclaim.

First and Second Defendants' Cross Claim against Fourth Defendant

Apart from the orders requiring the fourth defendant to contribute to the liability of the first and second defendants to the plaintiff as already described this claim must be dismissed.

Fourth Defendant's Cross Claim against First and Second Defendants

The fourth defendant is entitled to orders for contribution in her favour against the first second and third defendants as have already been described in connection with her liability to the plaintiff in the principal action. Different considerations, however, apply in relation to her claims for compensation or damages against the first and second defendants for breach of fiduciary duty and misleading and deceptive conduct.
For reasons given earlier I am satisfied that the fourth defendant has established an entitlement to compensation or damages against the first and second defendants because of their breach of fiduciary duty to her and because of their misleading and deceptive conduct. This breach of duty and the misleading and deceptive conduct have not only caused Mrs Ashoorian actual loss and damage. In addition, she is likely to suffer loss or damage by reason of the first and second defendants' misleading and deceptive conduct because of her liability to the plaintiff for damages in the principal action. The extent to which she will actually suffer that loss or damage will depend upon the extent to which she is called upon to satisfy the judgment in these proceedings given in favour of the plaintiff and taking into account the result of actual contributions which may be made to that liability by the other defendants in compliance with the orders for contribution which are to be made. Accordingly, the power to make an order such as the Court considers appropriate against the first or second defendants so as to compensate the fourth defendant is available under s 87 of the Trade Practices Act.
Apart from the extent to which she may eventually be required to satisfy the judgment in favour of the plaintiff, after taking into account the effect of the orders for contribution made in the principal proceedings, I have found that Mrs Ashoorian has suffered loss and damage caused by the first and second defendants' breach of fiduciary duty and by this misleading and deceptive conduct by events which have already occurred. As set out earlier in these reasons she has lost, or lost the benefit of:

The provider number for the Waratah Pharmacy which she purchased in 1998	$80,000
The MINFOS computer system which she purchased from the Rokeby Pharmacy in 1998	$20,000
The benefit and the components of the fit out of the pharmacy premises which she installed	$96,000
$196,000

These were all items included in the sale of the pharmacy business to the plaintiff and formed part of the consideration for the purchase price. Because the fourth defendant has been found liable to the plaintiff to pay damages she has been obliged to return the moneys paid to her for the premises with interest. As this has been caused by the first and second defendants' breach of fiduciary duty she is entitled to compensation in equity to restore her to the position that she would have been in had she not entered into that transaction. This means that she is entitled to recover against the first and second defendants the amount of $196,000 which she outlaid for acquiring the assets for the business sold to the plaintiff.
In addition, I consider that Mrs Ashoorian is entitled to interest on that sum at 6 per cent per annum from 28 August 1998 until judgment. It was on 28 August 1998 that, as a result of the first and second defendants' actions, she entered into a binding obligation to sell the pharmacy to the plaintiff and, from then on, was no longer free to attempt to sell the operation to another purchaser or to put the asset to other uses. Interest from that date until 11 October 2004, a period of 6 years and 44 days at 6 per cent is $71,978 making a total loss of $267,978. I consider that the fourth defendant is entitled to judgment against the first and second defendants for that amount now being both the actual loss suffered by her to date and the amount necessary to restore her to the position in which she would have been had the first and second defendants not acted in breach of their fiduciary duty to her.
I might also observe that, in addition to these losses caused by the second and third defendants, the fourth defendant has also lost the benefit of the five year lease of the Waratah Pharmacy premises which she had been granted by the third defendant. That lease was assigned by her to the plaintiff by whom it was later repudiated and, as I have found, terminated by the third defendant's acceptance of that repudiation. Had it not been for the conduct of the first and second defendants Mrs Ashoorian would have been left with that lease which she could have offered to assign, as part of the consideration for the sale of the pharmacy business. Her opportunity to derive value from the lease in that way has been lost in the events which occurred. No evidence was adduced by or on behalf of the fourth defendant in an attempt to place a value on the lease assigned to the plaintiff but which might have been assigned to some other purchaser in different circumstances. No doubt there was good reason for this and I mention it only as a possible explanation for why Mrs Ashoorian's entitlement to compensation and damages against the first and second defendants is less than the $235,000 of the purchase price which forms part of her liability in damages to the plaintiff.
In addition to these past losses I am satisfied that the fourth defendant has established that she is likely to suffer loss or damage resulting from the misleading and deceptive conduct of the first and second defendants because of her liability under the judgment in favour of the plaintiff in the principal action and because of her liability to contribute to the extent ordered towards the liabilities of the other defendants to the plaintiff in those proceedings. I am satisfied that she should be entitled to recover from the first and second defendants the amounts, if any, to which she actually satisfies, after taking into account the effects of the other contribution orders, the liability to the plaintiff for consequential loss, that is, the liability under the judgment to the plaintiff to satisfy those headings of damages or compensation other than the $235,000 which Mr Anthony Fico paid for the purchase of the pharmacy business and the interest awarded on that component of the compensation and damages.
This component of the judgment in favour of the plaintiff has already been identified and calculated earlier when dealing with the different extent of the fourth defendant, as distinct from the first, second and third defendants to contribute to that liability. It is the amount of $101,191 being the judgment of $407,116 minus $305,925 (being the $235,000 of the purchase price paid by the plaintiff plus interest to the date of judgment). Until the judgment in favour of the plaintiff is satisfied by one or more of the defendants and the results of the orders for compensation as between them are worked out it will not be known how much of this portion of $101,191 of that judgment has been satisfied by the fourth defendant. If the contribution orders are fully worked out it should mean that the fourth defendant will, after contributions from the other defendants, be left to meet $25,298 of that liability but, at this stage, that cannot be regarded as the only certain eventual result.
While such a result may be the consequence of Mrs Ashoorian's dealings with the plaintiff, I am satisfied that she would not have incurred that liability (whether it be $101,191 or any smaller figure after contributions) but for the breach of fiduciary duty and misleading and deceptive conduct of the first and second defendants. Consequently, I consider that Mrs Ashoorian is entitled to have an order made in her favour under s 87 of the Trade Practices Act that, in addition to the damages or compensation and interest totalling $267,978 already assessed, the first and second defendants are also liable to pay damages to her up to the amount of $101,191 for so much of that part of the judgment entered against her in favour of the plaintiff as she may actually pay after taking into account contributions actually paid to her by the first, second and third defendants. Liberty to apply will be granted to the fourth defendant to fix the amount of compensation payable under this order after the plaintiff's judgment has been fully satisfied.

Summary

For these reasons I consider the judgment and orders should be:
1.Judgment for the plaintiff against each of the defendants for $407,116.
2.Order that the lease by the third defendant, as assigned to the plaintiff, is void to the extent that it requires payment of outstanding rent or variable outgoings for the premises from 12 October 1998 onwards;
3.Order that the agreement for the sale of the pharmacy business from the fourth defendant to the plaintiff is void to the extent that it would otherwise require the payment of $15,000 for the outstanding balance of the purchase price;
4.Judgment for the second defendant on its counterclaim against the plaintiff for the sum of $64,777.81 plus interest thereon at 9 per cent per annum, to be calculated in accordance with these reasons. Liberty is reserved for the parties to bring in a minute showing the calculations of the interest within 21 days;
5.The third defendant's counterclaim against the plaintiff be dismissed;
6.As between the defendants order that there be equitable contribution, to the effect that contribution be made by each of the defendants towards the judgment in favour of the plaintiff so that the defendants' respective net liabilities to the plaintiff, after contributions, shall be:
· first defendant - $25,298.00
· second defendant - $25,298.00
· third defendant - $25,298.00
· fourth defendant - $331,223.00
7.Judgment for the fourth defendant against the first and second defendants on the fourth defendant's cross claim by declaring that the first and second defendants: ‑
a.pay to the fourth defendant $267,978;
b.in addition, further declare that the first and second defendants are liable to indemnify the fourth defendant for such further amount, being so much of the judgment in favour of the plaintiff in excess of $331,223 (up to a possible total of $101,191) being her share of the contribution, as she may be called upon to discharge. Liberty be reserved to apply on notice for a determination of that amount after the judgment in favour of the plaintiff has been satisfied.

[2004] WASC 215

11 OCTOBER 2004

Key Legal Topics

Areas of Law

Commercial Law

Contract Law

Tort Law

Legal Concepts

Misleading or Deceptive Conduct

Breach of Fiduciary Duty

Negligent Misrepresentation

Compensatory Damages

Contribution in Equity

First defendant	$407,116 -$305,925
Total	$101,191
25 per cent	$25,298
Second defendant	$407,116 -$305,925
Total	$101,191
25 per cent	$25,298
Third defendant	$407,116 -$305,925
Total	$101,191
25 per cent	$25,298
Fourth defendant	$305,925
25 per cent of balance	$25,298
$331,223