Gard, B.L. v Marina Servicings Pty Ltd

[1985] FCA 211

CATCHWORDS

Trade Practices - sale	of	a business - misleading and
deceptlve conduct.

I

Trade Practices Act 1974 5.52

BERTRAM LEONARD GARD

and MARY ANN GARD

and

MARINA SERVICINGS PTY. LTD.,

M.I.C. COMPONENTS PTY. LTD.,

GEOFFREY EYERS LEVINGSTON and

GEOFFREY WILLIAM MEADES

V. No. G 129 of 1981

Northrop J.

Melbourne

19 April 1985

Not consldered approprlate for further

IN THE FEDERAL COURT OF AUSTRALIA	)
)

VICTORIA	DISTRICT	REGISTRY	)	V. No. G 129 of 1981
)

DIVISION	GENERAL	1
BETWEEN :

I

BERTRAM LEONARD GARD and MARY ANN GARD Applicants

and

MARINA SERVICINGS PTY. LTD.,

M.I.C. COMPONENTS PTY. LTD.,

GEOFFREY EYERS LEVINGSTON and

GEOFFREY WILLIAM MEADES Respondents

COURT: IJORTHROP J.

m: 19 APRIL L985

PLACE: MELBOURNE

/

I

EX TEMPORE REASONS FOR JUDGMENT

In this matter the decision depends essentially l

upon matters of fact and in those circumstances I consider it

I

desirable to give ~udgment immediately rather than to reserve

my declsion. But this does not Indicate that the matter has

been of easy resolution, nor	that difficult questions of act
and of law have not arlsen.

On 3 February 1981, the appllcants, Mr. and Mrs.

Gard, entered into an agreement to purchase a marine

accessories, fishing tackle and bait buslness, which I will

call the bait business, being part of a business then being

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conducted by the respondent, Marina Servicings Pty. Limited,

which I will call Marina, at premises located at 611 to 615

Nepean Highway. Carrum. Since about July 1980 Marina had

carried on the bait business In conjunction wlth the

businesses of boat sales, new and used, out board motor

sales, new and used, boat and motor services and other allied

services. All these businesses were conducted from common

premises on the beach side of the Nepean Highway just south

of the Patterson River and just north of the railway crossing

leading to Station Street and Thompson Road, which leads to

the Patterson Lakes development.

The premises comprise a large shop area from which

the balt business was conducted. At the southern end of the

I

shop area was a doorway which led to a secretary type offlce.

There was an entry from the office to a workshop area, a

storage area and other facilities. Immediately to the south of the office was an open space which extended around the south, the west and the north of the office, the workshop and

the shop areas. The boat selling and servicing business was conducted from this open area In whlch were erected two small

buildings, a boat sales office and an old shed. The open

area was fenced in with gates opening to Nepean Highway and

to Stephen Street which ran from the Nepean Highway to the

beach, a short distance to the north of the northern boundary

of the shop area. There was a driveway through this open

space from Nepean Highway to Stephen Street. Boats were

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stored in this area and parts of it could be used for car

parking spaces. There were two entrances into the shop from

Nepean Highway and one from the car park at the rear.

The land upon which the businesses were being

conducted by Manna was owned by the respondent, M.I.C.

Components Pty. Limited, which I wlll call M.I.C. . The

respondents Geoffrey Levinqston and Geoffrey Meades were

directors of Marina and M.I.C. and had control of each of

those companies. Marina traded under the name of Geoff's

Nautlcal World and the name Geoff Levingston Boat Sales.

The terms of the agreement by which the applicants

agreed to purchase the bait business are contained in a

letter written by Mr. Levlnqston in circumstances described

later in these reasons. The letter was handwritten on paper

under the letterhead of Marina. A carbon copy was taken of

the letter. It is necessary to read that letter in full,

leaving out the letterhead names and details printed on the bottom of the paper contalnlnq the letterhead. The letter is

as follows, and I quote:

"TRADING AS GEOFF'S NAUTICAL WORLD

AND GEOFF LEVINGSTON BOAT SALES

3/2/01

Attention B. & M. GARD

Dear Bert & Mary,

Further to our several discussions we confirm

your Purchase of our Marine Accessories, Fishing

Tackle & Bait Business excludinq Boat Sales New &

Used, Out Board Motor Sales New & Used, Boat &

Motor Servlce & other allied Services.

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The Purchase Prlce 1 s $15,000 for goodwlll and

a Selection of our exlsting stock to $5,000 Maklng

a total obllgatlon of $20,000 Payable By a deposit

of $1,000 ToDay & Further Balance of $9,000 in

Seven Days and a balance of $10,000 Payable on or

before the 2nd Day of March 1981.

You also agree to enter into a three year

lease at $200 Per Week Plus Rates for the Two

Northern most shops Payable Monthly in advance

(FOUR WEEKS) the lease will Be Signed on final

Payment of the Purchase Monles. It is also agreed to offer you a further 3 year Option on your lease at reviewed rent.

I

We would like to Point out that we will offer

you every asslstance in the running of your

Business i.e. encourage our customers to Purchase

from you. When you are absent to help as far as

Possible to Service your Customers answer your help where Posslble.

We feel that a great team can develop with

everyones co-operatlon. Our experience that we

have galned over the years at St Kilda Marlna will

no doubt stand us in good stead at this new

location. We moved down to Carrum at Patterson

River about July 80 & although we haven't kept

separate accounts of all our Busmess we will Point

out what Sections have taken in over the Several

months of Tradmg. We wlll also contact our

accountants I.e. Dean Howell of Frank James &

Associates 71 Queens Road Melbourne & have them as

you requested obtain a 34A if Possible for you

although you .S us realise that The Purchase of the

Business is Malnly a Potential not Past. We

suppose that to sum up you like us are Speculating

to bulld a good business and Perhaps the most

important thing is the closest	CO operation & Team
Work Possible.

Here's to us

Yours

Geof f Levingston"

The original letter was given to Mr. Gard. Mr.

Gard wrote on the second page of the carbon copy the words "Read and Received Copy" and slgned his name. At about the same time a form of acknowledgement of deposit was completed.

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The form was uocd by Marlna with respect o sales of	boats.
That document, as completed reads, as follows:

ACKNOWLEDGEMENT OF DEPOSIT

MARINA SERVICES P/L.

GEOFF LEVINGSTON'S BOAT SALES of 611-615 Nepean

Highway, Patterson River HEREBY ACKNOWLEDGE receipt of the sum of $1,000- from B. & M. GARD of Thornbury

(hereinafter referred to as the purchaser) which sum

represents a deposit guaranteeing the performance of

a contract made between the parties for the purchase

of BUSINESS "MARINE ACCESSORIE AS IN LETTER TO B & M

GARD & MARINA SERVICES P.L. 3/2/81.

The purchaser hereby agrees that the deposlt paid

shall not be recoverable by him in the event of his

rescisslon of the Contract referred to above for

whatsoever reason and the purchaser acknowledges that

in the event of such a rescission by him (or by his

agent) his deposit shall be unconditionally forfeited

to the Vendor.

Dated this THIRD day of FEBRUARY 1981

For and on behalf of Signed by the said

GEOFF' LEVINGSTON'S BOAT SALES purchaser

MARINA SERVICES P/L

(Geoff Levingston)	(Bertram Gard)
In the presence of:	In the presence of:
(Mary A. Gard)	(Mary A. Gard) "

Subsequently a lease was prepared at the direction

of Mr. Levinqston. The schedule to the lease had typed on it

the name of the lessee, "Albert & Mary Gard Clarendon Street,

East Thornbury" and the commenclng date was typed in as being "21st February 1981". In handwrlting the name of the lessee has been altered to read "Bertram Leonard and Mary Ann Gard,

123 Clarendon Street, Thornbury". This alteratlon has been

lnitlalled by Mr. Levmqston. The commencement date has

written beneath It the words "First rental Due 21st April

1981". This alteration has not been initialled. The lease

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is datcd 20 February 1981 and contains the seal of M.I.C. and

the signatures of Mr. Levingston and Mr. Meades. The lease

is slgned by Mr. Gard on behalf of the applicants. At the

hearlng the lease was produced from	the	custody of the
appllcants' solicitors.

Pursuant to the agreement the applicants took

possesslon of the balt business on Monday, 16 February 1981.

The busmess failed. The applicants have paid no rent. On	4
November 1981 M.I.C. gave notice to quit. The applicants

vacated the premlses on about 16 November 1981.

In these proceedmgs the applicants are making the

following claims:

A . As against Marina, a declaration that the

agreement made on 3 February 1981 is vold ab

I	initio or, alternatively, as from such other
date as the Court orders, and an order
directing Marina to refund to them all moneys paid by them to Marlna under that agreement.

B. As agamst M.I.C., a similar declaration with

respect to the lease, but it is noted that no

moneys were pald under the lease.

C. As against each of Mr. Levingston and Mr.

I Meades, damages.

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At the conclusion of submissions leave was given to the applicants to amend C. to add Marina so that damages were

sought against the two directors as well as Marina. At this

point It should be noted that there is no evidence to support

a claim for damages against Mr. Meades. Nothing further will

be sald about that particular claim.

The claims are made under section 52 of the Trade

Practices Act 1974, and a further claim is based on

fraudulent misrepresentation. Nothing further could be

ordered under the common law claim that could not be granted

under the Trade Practices Act. No specific submissions were

directed to the common law claim for deceit and in reality

the only clam pressed was based on sectlon 52 of the Trade

Practices Act namely, that the respondents In trade or

commerce had engaged in conduct that was misleading or

deceptlve or llkely to mislead or deceive. This is called

the llabllity Issue.

The basls of this clalm 1 s expressed In the

Statement of Clalm as follows and I read paragraphs 6 and 7:

“6. Between the 31st day of January, 1981 and the

3rd ay of February, 1981 the Applicants

conducted negotiations and discussions with

Levingston touching and concerning the sale of

the buslness to the Applicants and the

occupation of the premises pursuant to the

lease.

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l .	discusslons and with the intentlon of inducing	In the course of the said negotiations and enter Into the lease Levingston falsely stated
or represented that:
(a1 the gross receipts of the business were

$10,000.00 to $12,000.00 per month

I

~$120 ,000 .00 - $144,000.00 per annum);

(b) the net recelpts of the business were

$3,000.00 per month ($36,000.00 per annum);

(c)

Levingston would provide the Applicants the Estate Agents Act 1958;

(d) the business was and would be profitable."

After the close of evidence an appllcation was made

to further amend the Statement of Claim by addlng allegations

that Mr. Levingston engaged in fraudulent conduct in not

dlsclosing that the viability of the bait business depended

upon a Mr. Russell, a part tlme employee of Marina. Counsel

relled upon opinlons expressed In the decision Lubidineuse

and others v. Bevanere Pty. Ltd. (1984) 55 ALR 2 7 3 . The

applicatlon was withdrawn. In any event, on the facts of

this case there is no basis In law to found such a claim, nor

can the same clalm be ralsed under the allegation that the

business was and would be profitable.

In final submission Counsel for the applicants,

quite correctly in my opinion, announced that he did not

press the	clam based upon the absence of	a	section 34A
notice.

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Before expressmg my finding of fact it I s

necessary that I express my opinion on the rellablllty of the

varlous witnesses. In my oplnion Mr. Gard was a most

unreliable witness. He was vague, had a very poor memory of events and tended to reconstruct the events to support his

case. He denied signing documents which in fact he had

signed. The carbon copy of the agreement to purchase is one example. Similar examples can be given with respect to the

lease and the acknowledgement of deposlt document. He

claimed that he had kept a part time employee of the

busmess, Mr. Russell. as an employee for some six weeks

after he took possesslon of the bait business when it is

clear that Mr. Russell ceased work when he was told to cease

work and to leave after the first weekend. This appears from

the records kept by Mr. Gard as well as from the evidence of

Mr. Russell. Mr. Gard had no experlence of sales in boat

accessories, fishing tackle and bait. For all practical

purposes he had had no experience of fishing. Desplte his

I

lack of knowledge in these areas he appears to have adopted

an arrogant attitude and to have refused to seek o r accept

advice. Commencing in the month of March 1981 meetings were

held between Mr. Gard, Mr. Levingston, Mr. Meades and a Mr.

Artlett, an employee of Marina engaged In the boat selling

business, to try to Improve the bait business. Minutes were

kept of these meetings whlch were initialled by the persons

attending the meetlng. Mr. Gard's evidence conflicted with

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the contents of those minutes and his attitude to his

initials on them 1 s a further example of the evasive attitude

of Mr. Gard. I do not accept the evidence of Mr. Gard unless

it is supported by other material.

In my opinion Mrs. Gard gave evidence to the best

of her recollection. In substance she was a witness of truth

but in some respects her recollection was in error due

possibly to a belief that she and her husband had been

unfairly treated. In particular her recollection of what was

on a typed document prepared by Mr. Levlngston cannot be

accepted except where supported by other material.

The applicants called a retired bank manager, Mr.

McGee, who had had a meetlng wlth the applicants and Mr.

Levingston wlth regard to his bank making money available to

the appllcants to enable them to proceed with the purchase of

the bait business. This meeting took place some time after

the slgning of the agreement.

Mr. McGee's recollection was so vague that no

reliance can be placed upon his evidence. He was shown the

ledger sheets showing cash takings for the complex of

businesses but did not appear to be interested in how the

takings of the balt business were to be calculated from those

ledger figures. His evldence cannot be used to corroborate

the evidence of Mr. Ei Mrs. Gard. One thing I s clear, those

I

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ledger sheets did not record net takings, but were expressly

headed "Cash Taken" and showed, on a dally basis, the "Total

Take", "Cash in till", "Banked" and "Float".

I accept Mr. Levingston essentlally as a witness of

truth. On the issue of the representations made, I accept

his evidence where it is in confllct with the evidence of the

applicants and Mr. McGee. It was obvious that the appllcants

were to work In close proximity to and in conjunction with

Mr. Levlngston. It 1 s most unlikely that Mr. Levingston

would have made representations which would have been so

obviously wrong and so quickly and easlly discovered when he

knew he was to be in close contact with Mr. Gard almost every

day after the sale.. It was to hls advantage that the bait

business should prosper as that business formed an integral

part In the effective development of the whole group of

buslnesses. Mr. Levingston had nothlng to gain from making the representatlons alleged. In fact, he had everything to

gain from not exaggerating the past activitles. In my

opinlon hls credibility is not weakened by the advertisement

appearing In the Sun newspaper of 12 June 1981. He was very

enthuslastlc about future developments at Carrum and in my

opinion truly believed that they would come to fruition.

On the issue of llabillty, it is not necessary to express any opinion on the evidence given by the other

witnesses, namely, Mr. Meades, Mr. Russell, Mr. Artlett and

I

Mr. Butler. To some extent reference must be made to the

evidence of Mr. Russell. At present it is sufflcient to say

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I that of all the witnesses, leavmg aside Mr. Butler whose

evidence was directed to damages only, I find Mr. Russell the

most reliable. He was very voluble wlth an obvlous long and

wide experience In sales of sporting goods, including fishing

gear and bait. Those activities had formed a major part of

his whole life. He might en~oy telling a tall story,

especlally if it related to flsh, but	I	find his evidence
trustworthy and it is accepted.

I Further, in this case I have received much

assistance from the documentation produced as exhibits. All

those documents, In my opinion, tend to support the evidence

of Mr. Levingston, particularly the letter of	3	February
1981.

Having seen the wltnesses and observed their

demeanour in the witness box and having consldered all the evidence in the llght of my assessment of the wltnesses and their reliability and having consldered the documentation, I

set out the essential findings made. In most respects, there

is no real dispute as to most of those facts. The crucial

fact being whether the statement and representation as to

takings was in respect of gross takings or net takings of the

bait business for the period October	to December 1980 or
possibly January 1981.

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Mr. Levingston and Mr. Mcades had conducted a boat

selling type buslness at the St. Kilda Marina. In about July

1980 they left that Marina and purchased the premises at

Carrum. They caused the land to be vested in M.I.C.. They

had to refurbish the building on the land for the purpose

of

thelr buslneses. Mr. Levlngston was engaged mainly in boat

selling. He was assisted by Mr. Artlett. Mr. Meades was

concerned malnly wlth servlcing of motors. Mr. Levingston

and Mr. Meades and Mr. Artlett were concerned with the

selling of boat accessories In association with the sale of

boats. Some new boats, two to three a week, were sold, but most of the sale of boats was of used boats on commission.

Part of the technique of the boat selling was to sell the

accessorles. The fishing tackle and balt business Initially formed a very small part of the business being carrled out by

Mr. Levingston and Mr. Artlett. In reality It interfered

wlth the main business being conducted by them of selling

boats and accessories.

The shop area was used for the bait business as

well as accessorles. The shop area had an attractive

appearance, as appears from two photographs tendered in

evidence. Mr. Russell had retired from his normal business.

He saw the preparatlons bemg made for the new business. He

had met Mr. Meades previously. He offered his assistance,

which was accepted. He normally worked from dawn on Saturday

and Sunday mornings until about lunch time, times eminently

suitable for fishermen. He attended on a Friday afternoon to

arrange purchases of stock. He was pald a nominal wage only.

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From his contacts he was able to arrange for a full supply of

stock of fishing gear. He was an expert with respect to

bait, particularly with respect to pilchards for snapper and

surf fishing. He had wide contacts. He made great use of

those contacts. He built up the bait business into a

thriving business.

No separate accounts were kept of the takings or

expenditures of the bait business. Moneys from the sales of

boats and accessories assoclated with the sales of boats were

paid into one bank account. Takings from the bait business

were put in a cash register and a ledger was kept of those

accounts. It was from this ledger that the sheets showing

cash takings origmated. Some, but not all payments for

servicing of boats and motors were paid Into the cash

reglster and those amounts were entered on to	the	ledger.
Since all receipts were recelved for the benefit	of the

respondents, in the early stages at least, no attempt was

made to isolate the receipts and expenditures with respect to

each part of the businesses.

Mr. Levingston found that the necesslty of being

responsible for the bait business was nuisance, a

particularly during the weekdays when Mr. Russell was not

present. It interfered with his selling of boats. He and

Mr. Meades thereupon decided to sell the bait business. It

was not suggested to Mr. Levingston that Marina was having

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difficulties with the cash flow of its business and that the

sale of the bait business was	a means of obtaining much
needed cash.

On two occasions In January 1980 Marina caused an

advertisement to be inserted in the Age newspaper. The

second advertlsement appeared In the paper on Saturday,	31
January 1980. It read, and I quote:

"FISHING TACKLE, BAIT, BOAT AND YACHT ACCESS. SHOP.

This business has huge potential, long lease avall.

Ring us direct on 772 0011 for full detalls."

A number of persons had seen the advertisements and had

contacted Mr. advertisement on Saturday, Levingston. The applicants saw he

31 January 1980. Mr. Gard ln

evidence said that he thought the words "huge potential"

referred to past experience. I do not accept his evldence on

that polnt.

Mr. Gard rang Mr. Levingston on the Saturday and

arranged to see Mr. Levlngsjon at Carrum on the following

Sunday afternoon, namely, 1 February. At that meeting

general discussion took place. I do not need to refer to all of what was said. Mr. Levlngston explained what the business

was, how long It had been there, the development potential,

the Patterson Lakes development, particularly with its

connection to the development of boating, the boats using the

Patterson River and the posslbility that Mr. Levingston would

be able to develop a Marina in the Patterson Lakes area

itself. Mr. Levingston was very enthuslastic about the

prospects of all the busmesses, lncluding the bait business.

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Mr. Levingston told the applicants that the price was $15,000

for the goodwill of the bait business and $5,000 for selected

stock. The remainder of the stock could be sold by the

applicants and the amount paid for that stock by Marina was

to be refunded to Marina and the balance kept by the

applicants. Those items were described as the Gold Star

stock.

The applicants inspected the shop and all the

premises. Mrs. Gard sald that Mr. Levingston told them that

the net takings were $600 per week. I do not accept that

evidence. Mr. Levingston drew a sketch map of the Patterson

River development and the Patterson Lakes development,

including on It . various launching ramps and marinas,

I

including the launchlng ramp conducted by the local council.

The purpose of the sketch map was to enable the applicants to

get to know the area and assess the area with respect to potential growth of the business. The applicants inspected the area, came back to Carrum, and told Mr. Levingston they

were interested in buying. They agreed to come back on

Monday, 2 February.

I

On the Monday the applicants attended the Carrum

premises. They met Mr. Meades, Mr. Russell and Mr. Artlett.

On this occaslon Mr. Levingston produced a typed wrltten

sheet of paper containing takings of the balt business from

15 October 1980 to January 1981. I accept the evidence of

Mr. Levingston that these figures were taken from the ledger

with respect to the cash register; that IS, the ledger

- l? -

showing cash takings, that is, gross takings. The figures in

the ledger included receipts from services. Mr. Levingston

had made allowances for those Items he thought would not form

receipts from the bait buslness. He said that the figures

appearing on the typed written sheet were gross takings of

the bait business established in that way.

The typed written sheet has been lost. From the

copy ledger exercise. This shows that from 15 October 1980 to the end of sheets Mr. Levingston has done a similar

January 1981 the gross takings were - and I set them out with

respect to the flrst half month and thereafter each month: calculations made by Mr. Levingston from the ledger sheets the gross takings estimated by him to be received from the bait busmess for the same period were as follows: $3,229, $4,716, $8,168, $3,592 respectively. He says the figures on $4,306, $10,816, $14,896, $9,188 respectively. On the

the type wrltten sheet would have been of the same order.

The fishing season at Carrum is	essentially for the period
November to April.

In evidence in chief Mr. Gard said with respect to

the typed wrltten sheet, and I quote from the transcript at

pages 20 to 21:

“I only saw it on one occas1on and I did not get

possession of it. This heet of paper was

typewritten, showing takings for three months.

Those months were October, November and December, and those takings showed that there was ample

evidence of the figures he had fmally quoted to me

I that the business would net me $36,000 per year. I

enquired of the $36,000 because it sounded at that

particular time an awful lot of money. He

reiterated the $36,000. I then enquired: Is this

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net or gross, and I was told that it 1s a net

figure. He broke thls down into weekly and monthly

takings, and each one of them supported he $36,000

for the annum. ‘I

In relatlon to the meeting with Mr. McGee, Mr. Gard

said at page 25:

I

“Levmgston then at the meeting with the bank

manager showed a ledger to Mr. McGee. Figures that

were in the ledger were where he got his

informatlon from and where the figures that he

showed to my wife and I proving that it was a

profitable busmess and that we would make our

$36,000 a year from it.”

Then at pages 61 to 63 Mr. Gard again referred to

the ledger sheets, and I quote:

“Have you inspected those sheets?---I have looked

at them now, yes.

And do they reflect what was in the typewrltten

statement?---It 1 s difflcult tor me to say.

Why is it dlfflcult for you to say?---Because there

are sales on here of $750-odd in one instance;

1647, 1705 in one instance. There are sales

down as low as - well, I thlnk, 31, 34 whlch -

those partlcular figures could be qulte

applicable to the balt and tackle section. I

do not believe that the figure of 1600 or 1700

etcetera would be applicable to the sales from

the balt and tackle section.

In fact that was a difficulty that you were aware

of almost from the outset, 1 s It not - - -	?
---That is correct.

Just let me finish the question, Mr. Gard. There

was a difficulty In separating the bait and

tackle section from the other two sections in

bookkeeping terms, was there not?---Mr.

Levingston did not show me his ledgers. He showed me a typewrltten sheet and said these were the takings from the bait and tackle

section and he told	me they were very good
months. Figure-wise,	I do not know what they

were and I have not seen that document from

that day to this.

I You are not In a posltion to say those figures were

not correct, are you?---I have no reason	to
doubt that they were not correct.

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HIS HONOUR: Did it show the totals for a month?--- I

Yes, sir.

Can you remember what they were for a month?---No.

I saw them for a short while. That convinced

me.

Were they $3000 a month?---Excess of that.

How much in excess?---4,500."

Then at page 62 - and I should indicate there is a long

passage going right through to page 6 3 . which I will not read

now, but it does support the view that what Mr. Levingston

said was on the sheets was correct.

Mrs. Gard gave evidence that on the Sunday Mr.

Levlngston had said that the net taklngs were at least	$600
per week and that the business was very profltable. About

the typed wrrtten sheet, she sald at pages 108 to 109,	and
this is on the Monday, and I quote:

"we had quite a long conversation and we asked

again about the figures which the busmess was

taking and we were shown a piece of paper

which showed us that the business would be

taking $36,000 per annum net. My husband and

I discussed that In the presence of Mr. Meades

and Mr. Levingston, comparing that wlth what

my husband had been getting, the income he had

been getting from his truck business.

Can you recall what was on the piece of paper?---I

think it was takings for the months of

October, November, December and January. It

would not have been all of January. I think

January was on it.

Can you remember any of the figures that you

saw?---Not exactly, but I think that it showed

that he gross takings per month were

approxlmately $10.000, indicating that the net

per month was about 3000.

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That derivatlon of net per month, 3000, was that a

derivation made by you or did someone else

make that calculation?---No , I think we

discussed that with Mr. Levingston, but I

think also that there was some note of it made

on the sheet, but I am not sure, as I remember

it. 'I

In that passage it is interesting to note the

reference to takings of the busmess. At pages 113 to 116

there is a fairly lengthy part of	the cross-exammation which
I consider to be most important.	I will not read it in full.

!	It is sufficlent to say that from a conslderation of it, Mrs.
Gard's recollection of what was on the piece of paper is very
confusing and illustrates, in my mlnd, the fact that she, on
this aspect, 1 s trying to reconstruct what she thought should
have been on the paper.

I accept he vldence of Mr. Levingston. In

discusslon, and allowing for the winter months, he said that

it could be anticipated that the takings over a 12 month

perlod would be about $3000 per month. This was said in the

context of cash takings or gross taklngs without taklng into

account expenses of the business, including purchase of stock

and rent. I am not satlsfied that Mr. Levingston said that the $3000 per month were net taklngs or net profits.

On the evidence, I am not satisfied that the

applicants have made out a case based on representations

alleged in the Statement of Claim In relation to the takings

of the business. My conclusion 1 s supported by the fact that

at the end of the first week of trading Mr. Gard complained

that the takings were lower than he expected, and sought a

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delay in the commencement of paying the rent. That was

granted. He did not complain about any mis-statement of

takings made by Mr. Levingston. Mr. Gard remained in the

bait business. He paid the balance of the purchase price in actions of a person who believed that he had been the victim of conduct which was misleading or deceptive. March 1981. None of those actions are, in my opinion, the

I find that Mr. Levingston did say that the bait

buslness was profitable and would be profitable, but this

statement was made in the context of the development

potential of the bait buslness with the other businesses

being conducted by Marina. It was made in the context of the

need for close co-operatlon between all parties at the

complex. This was made clear from the terms of the letter of

3 February 1981. This letter had been written by Mr.

Levingston in the presence and with the co-operation of the

applicants. Its contents had been discussed during the

writing of the letter.

Nevertheless, this part of the claim, based on the

statements as to profitabillty. has been the most difficult

to resolve. It is not sufficient to say that on the findings

already made the applicants must fail. One curious feature

of this case is that no evidence was glven of conversations

leading to that part of the agreement relating to the lease

of the shop f o r $200 per week, that is $10,400 per year.

This was an expenditure which was not relevant to the conduct

of the bait business before the sale; likewise, no evidence

- 22 -

has been led as to the cost of the purchase of the site and

the cost of operating the shop prior to the lease to the

applicants. Normally one would have expected that allowances

would have been made for the capital cost of that shop as an

ltem of expenditure. An examination of the figures mentioned

illustrate the difficulty of resolving this part of the case.

On the findings made the gross takings for a year would be of

the order of. $36,000, that 1 s based on an average of $3000

per month gross takings. Mr. Levingston gave evidence that

on an average the mark-up on sales was 50 per cent. On that

basis the net takings for one year would be of the order of

$12,000. If rent was taken from that, and maklng allowance

for no other item of expenditure, the net profit would be

some $1600 per annum. It is dlfficult to see how, on that

calculation, It could be sald that the buslness would be

profitable. In this context it is strange that no evldence

was given by any witness as to the effect of the payment of

rent. In all of the clrcumstances I am satisfled that none

of the parties took Into account the effect of rent in

talking about the past and the future profitability	of	the
balt business.

On the evidence I am satisfied that there was a degree of enthusiasm on the part of all the parties relating

to the potential development of the buslness that the

applicants had agreed to purchase the bait business and to

carry on that buslness in con~unction with the businesses to

I

be carried on by Marina at this site. I am satlsfied that

the applicants agreed to purchase the bait business as a

- 23 -

speculative business. This 1 s consistent with the lctter of

3 February 1981. In that letter after reference to the

section 34A certiflcate, the letter continues:

"...although you & us realise that The Purchase of

the Business is Mainly a Potential not Past. We

suppose that to sum up you like us are Speculating

to build a good business and Perhaps the most

important thing is the closest CO operation & Team

Work Possible. "

In thls context the statement about profitability does not

constitute conduct which was mlsleadlng or deceptive, or

likely to mislead or decelve.

Counsel for the appllcants contended that the

failure of the bait business tended to show the statement

I

about future profitability was misleading. In my opinion

that contention is' contrary to the principle expressed by

Lockhart J. in Bill Acceptance Corporation Ltd v. GWA Ltd

(1983) 50 A.L.R. 242 at page 250 and I quote:

"The mere fact that representations as to

future conduct or events do not come to pass does make not th m mlsleading or deceptive, notwithstanding that the applicant has relied on

them and has altered his position on the faith of

them.

Even leaving aslde all the evidence relating to the

manner in which Mr. Gard conducted the bait business, on the

facts of this case no Inference can be drawn from the failure

of the balt business that the statements made as to

profitability, both past and future, could amount to conduct

in contravention of section 52 of the Act.

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In all the circumstances I find the applicants have

not made out their case on the questlon of liability. I do not find it necessary to consider what rellef, if any, they

would have been entitled to If a case had been made out. The

question of relief itself ralses difficult legal questions as

well as difficult reasons of fact.

i

The application must be dismissed with costs.

M.I.C. has cross-clalmed for rent for the perlod 21 Aprll

1981 to 16 November 1981 at the rate of $200 per week. That

amounts in all to $5,600. I can see no reason why that

l

amount should not be paid. Accordingly, on the counter-claim

i

there wlll be ~udgment	for M.I.C. in the sum of $5,600 with
costs.

There will be a stay of 21 days.