Geale, J.E. v Glenhoun Holdings Pty Ltd (in liquidation)

[1985] FCA 405

Re: JOHN ERNEST GEALE and ADRIENNE GEALE
And: GLENHOUN HOLDINGS PTY. LIMITED (IN LIQUIDATION) AND ORS. No. G.218 of
1984
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Burchett J.

CATCHWORDS

Trade Practices - Misleading conduct, statements and representations - "Involvement" of directors - Inclusion of interest in damages as part of loss.

Trade Practices Act, 1974 - sections 52, 53, 59, 75B, 82.

HEARING

SYDNEY
#DATE 23:8:1985

ORDER

(1) The respondents, Michael Edwards and Kevin John Robinson, pay to the applicants the sum of $27,500 by way of damages.

(2) The respondents pay to the applicants their costs, including any reserved costs, to be taxed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

The applicants, Mr. and Mrs.Geale, are a husband and wife who, having sold a delicatessen business and invested the proceeds, were looking for some fresh enterprise to pursue. They saw an advertisement which portrayed in glowing terms the advantages of an investment in a video shop in association with Glenhoun Holdings Pty. Limited ("Glenhoun"). Following discussions with a salesman, a Mr Richard Wilkins (known to them as Wilde), they leased a shop and entered into a contract with Glenhoun. The venture proved an unmitigated disaster, and the present proceedings were brought upon a number of counts including counts which relied upon sections 52, 53 and 59 of the Trade Practices Act, 1974. In addition to Glenhoun, Richard Wilkins (sued under the name Wilde), Michael Edwards (a director of Glenhoun), and the managing director, Kevin John Robinson, were also sued. Before me, the only claims pursued were those against Michael Edwards and Kevin John Robinson who were alleged to be liable, pursuant to the provisions of ss.75B and 82 of the Act, as persons involved in breaches of the Act asserted against Glenhoun.

For the applicants, evidence was given by Mr. and Mrs. Geale themselves and also by a Mr. Crisford, who is I am satisfied experienced and knowledgeable in the video industry. For the respondents, evidence was given by Mr. Edwards and Mr. Wilkins. Mr. Robinson did not give evidence, although there was no suggestion that he could not have done so.

Generally, I accept the evidence of Mr. and Mrs. Geale. On matters of detail, I think Mrs. Geale's recollection is probably the more precise. I also accept the evidence of Mr. Crisford. I was not favourably impressed by Mr. Edwards or by Mr. Wilkins, and would hesitate to accept either of them without corroboration.

The evidence which I accept showed the following course of events. A newspaper advertisement was read by Mr. and Mrs. Geale in about early July 1983. It was in terms which had been employed by Glenhoun for some time, though they were altered upon legal advice and after discussion between the joint directors and shareholders, Mr. Edwards and Mr. Robinson, shortly afterwards. The advertisement read as follows:

VIDEO

UNIQUE CASH FLOW OPPORTUNITY

Join the winning team.

EXISTING STORES: Wagga Wagga, Bathurst, Orange, Lithgow, Queanbeyan, Condobolin, Nowra, Kandos, Bellingen, Grafton, Forbes, Pt Macquarie, Temora, Parramatta, Gordon.

NEW STORES OPENING: Dubbo, Mudgee, Cowra, Balmain.

STORES NOW AVAILABLE IN ALL CITY AND COUNTRY AREAS

.

You WILL double your investment in 8 weeks.

VIDEO - THE WORLD'S FASTEST GROWING INDUSTRY.

Glenhoun's unique package allows you to double or even triple your investment in a few weeks. Join the winning team. Investment opportunities from only $6,500.

RING NOW 498-6299

Monday-Friday

GH VIDEO MART A Division of Glen Houn Holdings Pty. Ltd.

My reproduction of the advertisement is necessarily less dramatic than the original which utilised a number of different letter formats. In particular, the words "unique cash flow opportunity" and "You WILL double your investment in 8 weeks" were printed in letters which stood out. It was the latter statement which was the subject of the amendment made shortly afterwards, by which the assertion was toned down to read: "You Can double your investment in 8 weeks."

Mr. and Mrs. Geale responded to the advertisement by telephoning Glenhoun, and arranging to discuss the matter with Mr. Wilkins. Mr. Geale gave the following evidence about the advertisement: "I saw the article in the paper under GH Video Mart, a franchise situation, where they told in that advertisement "double your money in 8 weeks". Well, that did not worry me because I had already been in business." Cross-examined,he added: "No I did not take the 'double your money in 8 weeks', that did not ride with me at all, really. It had some bearing, but not entirely." He indicated he was more concerned about the quality of the product. On the other hand, Mrs. Geale gave the following evidence:

"'Double your money', that attracted me, and also that they had all those existing stores, that attracted me as well."

I think on the evidence, and my assessment of Mr. and Mrs. Geale, the decision which they ultimately arrived at was a joint decision. Though the advertisement may have had a somewhat different impact upon one of them as compared with the other, I think that it is more probable than not that both of them were influenced, in the making of their decision, by the strong claim that the proposition would result in the doubling of an investment in 8 weeks. Such a claim, even if not taken absolutely literally, was well calculated to make them receptive to the proposals Mr. Wilkins brought. No doubt that was its purpose.

It should not be overlooked that claims in advertisements may well have an influence which is not fully acknowledged, or recognised, by the person influenced. The advertisement is not the less, and may even be the more, influential for that.

In Jones -v- Acfold Investments Pty. Ltd. (1985) ATPR 46513 at 46521 a Full Court of this Court (Sheppard, Morling and Spender JJ.) said:

"(I)f a representation is proved which is of such a nature as to be likely to induce a representee to act upon it, the inference may be drawn, if the representee does act, that he has acted in reliance on the representation. But since the inference is one of fact it may be rebutted by other evidence which is inconsistent with the inference."

In this case, on the probabilities, I think the inference should be drawn. The advertisement was not withdrawn or qualified in any way in the discussion with Mr. Wilkins which followed, and to which it is now necessary to turn.

Following the reading of the advertisement, Mrs. Geale telephoned Glenhoun and spoke to Mr. Wilkins, who advised her to obtain a suitable shop, "and then he would discuss the deal with us". Mr. and Mrs. Geale looked for, and found, an appropriate shop, and she then telephoned Mr. Wilkins again.

In due course, Mr. Wilkins called at Mr. and Mrs. Geale's home in North Wollongong, and together they inspected the shop, the choice of which Mr. Wilkins endorsed. A discussion ensued in which Mr. Wilkins said:

"I would suggest that you take the $25,000 deal. You would get 200 movies there and you also get your recorder, your TV set, cabinet, shelving, movie catalogues, pamphlets, advertising, store promotion; all of that will go in with the package deal."

According to Mrs. Geale, Mr. Wilkins said that the movies would be new, like a particular movie which he produced for their inspection, and they would be "all the top titles". He referred to Glenhoun's library of movies, and said that "they had 6,000 titles there that we would be able to draw from. . . and he said any movies that the people wanted we could ring up the library and ask them to send it down, and if there was anything that they did not have in stock they would get it in for us. He said we would get all the latest releases, because his company dealt with all the major companies, and we would get them on our shelves before any of the other stores. . . and he said: 'If you are getting all the current and top titles, you will have them before the other stores, and you will be getting them every month as they are released, you will be able to manage on the 300 titles.' He said we would get 60% of the movies - there would be the top titles, new, he said - and 40% would be used movies, but the ones that were used would be titles, good titles, that people were wanting to watch all the time, that would go out over and over again."

As I have already indicated, I accept Mrs. Geale as a witness of truth. I think there is some room for confusion, in the context of a video hiring business intended to turn over stock by the utilisation of a central library, as to the precise meaning of the word "new". But, at the least, its use must have been intended to convey that 60% of the movies to be obtained by Mr. and Mrs. Geale would be in as new condition. That it was understood by the parties at the time to refer to new movies, in the most literal sense, receives some confirmation from evidence, relating to later events, of assertions by Mr. Robinson and Mr. Wilkins about the unwrapping of deliveries from movie companies to fulfil Mr. and Mrs. Geale's requirement. There is also general confirmation of Mrs. Geale's version in a very nearly contemporary document emanating from the files of Glenhoun itself. This document consists of several sheets of paper in the writing of Mr. Edwards' secretary, referred to as "Elaine", the first of which bears the words "8th August 1983 Report on Wollongong by Michael" (that is Mr. Edwards) "and Elaine". One of the sheets included in that report contains the following:

"Richard said

200 movie package 60% good 40% alright Plus 100 movies extra - good They have 300% Alright/basic."

The reference to Richard is a reference to Mr. Wilkins, and the reference to 100 movies extra is a reference to the fact that the contract referred to 300 movies, and not 200 as had originally been proposed, the further hundred being added, at Mr. and Mrs. Geale's request, for an additional price. The report is cryptically expressed, and I was asked on behalf of the respondents to regard it as merely recording assertions by Mr. and Mrs. Geale, rather than setting out the facts of the case as understood by Mr. Edwards and his secretary. However it would be strange if Mr. Edwards and his secretary recorded, without any comment, a version contrary to their understanding of the facts, and there is no suggestion in the evidence that the report was followed by any assertion, on behalf of Glenhoun, to Mr. and Mrs. Geale that following consideration of the report it had been concluded their claims were false. Also, the adjectives "good" and "alright", while tending to confirm the evidence of Mr. and Mrs. Geale, are not the adjectives which they used in evidence, and the assertion "they have 300% alright/basic" seems to me to be a statement of Mr. Edwards' position concerning the deliveries which were in fact made - it is consistent with his evidence, in which he declined to claim that 60% of 200 and all of 100 of the movies delivered were of any particular standard of quality, and simply said that all the movies were a cross-section of available movies.

Mr. Wilkins gave evidence that he showed to Mr. and Mrs. Geale leaflets similar to certain leaflets which were clearly prepared later for use in connection with Mr. and Mrs. Geale's shop. Those leaflets contained, inter alia, the following: "Huge movie library", "all top movies available", "over 6,000 movies from master library", and "all the latest titles". If, as he indicated, he showed them leaflets containing statements of this kind, it would be consistent that in the conversation he should have made assertions to the effect that the movies to be acquired by Mr. and Mrs. Geale, or some proportion of them, would be new, at least in the sense that they would be current, and "all top movies available" would at all events convey that popular movies would be available. The references to the library would suggest that there was a large pool from which "all top movies" and "all the latest titles" could be drawn.

The library requires further explanation. The scheme, which Mr. Wilkins outlined to Mr. and Mrs. Geale, involved the acquisition by them of 300 movies which their customers could hire from them. It also involved that each month they would exchange a percentage of their stock of movies for other movies, to be drawn from the library, so that at any given time they would have 300 movies, a percentage of which however would not be those they had originally purchased, but movies obtained by exchange from the library. It was explained that this system would involve the advantage that a movie, which was not successful in North Wollongong, could be exchanged for another title which might prove more popular. There was a charge of $10 per movie payable upon exchange, and a minimum number of exchanges was provided for, but it was said that the minimum exchange requirement would not be insisted upon.

It was obviously essential to the functioning of this system that the library should contain a sufficient number of titles to permit a choice of appropriate movies upon exchange, and thus the representations that the library contained over 6,000 movies, that it could be described as huge, and that all the latest titles and top movies were available, were each of them significant representations.

There were other matters discussed at the meeting between Mr. and Mrs. Geale and Mr. Wilkins, including arrangements for the advertising of the proposed shop, to be undertaken by Glenhoun, and assistance to be provided for the opening day. In the view I take of the effect of the matters already referred to, I do not think it is necessary to go into the detail of these. After some negotiation about the price to be paid for the extra 100 movies, on top of the 200 for which Glenhoun's package provided, a contract was drawn up by Glenhoun, which Mr. Wilkins brought to Mr. and Mrs. Geale a few days later. The contract was signed by Mr. Wilkins (using the name Wilde), on behalf of Glenhoun and by Mr. and Mrs. Geale who paid a deposit of $2,000. The contract is dated 15 July 1983 and includes the following provisions:

"(1) GLENHOUN shall sell 300 video movies together with 300 blank video movie covers, one television set, Akai VS4 video machine, one Spacemade video cabinet, necessary shelving and index card system, initial promotion and advertising, signwriting at THIRTY THREE THOUSAND DOLLARS ($33,000.00).

. . .

(3) GLENHOUN agrees to exchange each calendar month from the owner's stock on hand 33 1/3% of the video movie library stock owned by J.E. & A. GEALE and exchanged from GLENHOUN at a cost of TEN DOLLARS ($10.00) per movie per month and J.E. & A. GEALE agree to accept such exchange.

. . .

(5) Additional video movies are to be purchased by J.E. & A. GEALE at eighty dollars ($80.00) per video movie and additional video machines and software and accessories are to be purchased by J.E. & A. GEALE at the cost paid by GLENHOUN plus 5%.

(6) J.E. & A. GEALE agrees to purchase all video machines and software and accessories and video movies from GLENHOUN.

(7) That the said parties will be bound by the terms of this agreement for the fixed term of one year from the date of commencement which date is deemed to be the 30th July, 1983. The agreement shall thereafter continue for further periods of one year without any further consideration except asformentioned (sic.) in clauses (3) and (5) at the option of J.E. & A. GEALE.
This option will be granted provided this agreement has been adhered to be (sic.) J.E. & A. GEALE.

(8) This contract shall be dependant (sic.) upon a satisfactory shop lease being arranged by J.E. & A. GEALE.

(9) GLENHOUN agrees not to open any other G.H. Video Mart stores in the following areas: Woonona, Fairy Meadow, Corrimal, Nth. Wollongong and Balgownie.

(10) All monies shall be paid to GLENHOUN, ten days prior to opening."

The opening date was arranged, to be 30 July 1983, and prior to that date Mr. Robinson himself collected from Mr. Geale the balance of the sum of $33,000.00. Some of the movies were delivered on the day before the opening and others, but to a total quantity still some 30 movies short of the agreed 300, were delivered on the day of the opening. The evidence establishes to my satisfaction that the movies delivered did not include one hundred new movies, and that as to the representation that of the other two hundred movies, 60% would be new, the movies delivered did not comply with that representation either. If there were any new movies at all they were an insignificant proportion of the total. If the representations which I have earlier referred to should be understood in the sense that the requisite number of movies were to be current popular titles or recent releases, this would not alter my conclusion. The movies delivered did not comply with such an understanding of the representations either. I accept the evidence which indicates that the movies are today in basically the same condition in which they then were, and that their present condition is "very knocked around with damaged covers" and that for hiring purposes they would constitute "the bottom of the range". The quotations are from Mr. Crisford's evidence. I also accept his evidence that no more than twenty or thirty of the total number of movies delivered (including the additional ones and replacements delivered in an endeavour to up-grade the selection) could be described as recognised titles and that the rest were "fillers", that is movies which would not be recognised as good movies or as popular current releases. Mr. Edwards himself gave evidence that he had looked at the movies as they now are and he described their condition as "grubby". He also conceded: "Some of those movies were in a grotty state when the Geales did receive them. I would not argue against that. I made the same comment to Mr. and Mrs. Geale." Yet his evidence was that he had personally made the selection of the movies delivered. He described his selection as an "across the board selection". Such a selection would, of course, be inconsistent with any view of the meaning of the representations made by Mr. Wilkins.

In my view it is significant that Mr. Wilkins said he delivered on the day before opening only about 150 movies and collected from Glenhoun's accountant a further batch to bring the total to no more than 272. He said he did not know why the 300 movies were not delivered and added: "That was all I was given to take." He was given the 150 movies by Mr. Edwards. He asserted that he had no idea where the movies obtained from Glenhoun's accountant came from but he later said that he was told by Edwards and Robinson that they were to be collected on the evening before the opening, and he added: "Obviously they were getting some more movies or something." It seems to me the most probable explanation, particularly in the light of other evidence suggesting that Glenhoun was in financial difficulties and that the library was extremely depleted, is that there were simply not enough movies to make up more than 150 until the return of a batch of exchange movies from some other shop or shops and that, far from the movies being a selection to comply with the represented percentages, they were simply whatever was to hand. It was conceded in argument that an inherent defect of the exchange system was that movies brought back following an exchange with a shop would be likely to be the dregs of that shop's stock which it was anxious to get rid of. Mr. Wilkins himself said of the movies he took down to Mr. and Mrs. Geale: "There were a number . . . which were tatty and worn", though he said he could not recall how many.

I do not think it is necessary to detail all of the events which followed. There were complaints and attempts to obtain further movies and to replace a number of the movies originally delivered. On one occasion when Mr. and Mrs. Geale attempted to exchange movies at Glenhoun's library there were only some two hundred movies in the library, and they were unable to obtain those which they were seeking. Mrs. Geale said that on one occasion Mr. Edwards came down to North Wollongong and "he said he would be upset too if he had to open a store with what was on the shelf like that, with that kind of shelf." Mr. Edwards did not deny this conversation and conceded that he had described some of the movies as "dreadful".

On about 20 September Mrs. Geale spoke about exchanging movies to the secretary, Elaine, who said: "The library is very low, we have hardly got anything in the library. There would not be anything there for you." With reference to this statement, it is noteworthy that shortly afterwards the liquidator of the company could only find some 166 movies in the library.

About the end of September Mr. and Mrs. Geale ceased to deal with Glenhoun, changing the name of their shop by deleting any reference to Glenhoun, and began to do business quite separately from the activities of Glenhoun by purchasing their own video movies from video movie suppliers and hiring out those movies. Their takings immediately increased dramatically and they have continued in that business ever since.

Their case is put on the footing that the stock purchased from Glenhoun was of minimal value and that they had been misled into its purchase by the conduct, statements, and representations to which I have referred. On the evidence which I accept I think they have made out that case.

But the case is pursued only against Mr. Robinson and Mr. Edwards. So far as they are concerned the question remains whether they were "involved", within the meaning of s.75B of the Trade Practices Act, in the contraventions which I find the company Glenhoun committed of s.52, s.53 and s.59 of that Act.

Mr. Robinson admitted on the pleadings that he was directly concerned with the making of statements in the advertisement to which I have referred. Mr. Edwards on the other hand denied any involvement in the advertisement. He said that marketing and advertising were the responsibility of Mr. Robinson while he, Edwards, was in charge of the procurement of films. However the evidence is that Mr. Edwards and Mr. Robinson were the sole directors and shareholders, Mr. Edwards being the majority shareholder. Mr. Edwards conceded that he was aware of the nature of advertisements placed by Glenhoun from time to time and that he did see the particular advertisement in question about July 1983. He asserted that he believed in the statement contained in that advertisement that an investor would double his investment in 8 weeks, and that this statement was based on the performance of other shops previously. Whilst he denied that he was concerned with the advertising, he said that he discussed with Mr. Robinson an alteration of the advertisement, which was made on legal advice "just after" the commencement of business by Mr. and Mrs. Geale and at latest within six weeks.

It seems to me that the nature of this relatively small two-man business was such as to make it extremely unlikely that Mr. Edwards would not have been a party in the fullest sense to the advertisement, even if the actual drafting was done by Mr. Robinson. In any case I do not think that a director of such a company, particularly a director who was also majority shareholder, can distance himself from a central aspect of its conduct of business, of which he knew, simply by saying that the matter was the responsibility of his co-director. S.75B of the Trade Practices Act, uses the language of accessory liability. The law of accessories requires, for liability, a knowledge of the essential matters which constitute the principal contravention and an intention to aid, abet, counsel or procure. See Giorgianni v. The Queen (1985) 59 ALJR 461 at 474-6. It has frequently been said that a positive act of assistance voluntarily done is also required, but this is subject to the qualification that some manifestation of assent or encouragement has frequently been held to be sufficient in particular circumstances. There have even been cases where a person having the power to control an offender has been guilty as an accessory by passive acquiescence in the offence (see Tuck -v- Robson (1970) 1 WLR 741). I do not accept Mr. Edwards' denial. I find that he was, as one of the two persons in charge of the company, a conscious participant in its advertising, and that, in the procurement and distribution of films, he was lending himself to the fulfilment of commercial purposes an integral part of which was to his actual knowledge the advertisement of the company's activities in the manner in question.

As to the misleading nature of the advertisement, I do not accept Mr. Edwards' explanation. Indeed, I think that explanation demonstrates Mr. Edwards' consciousness of the fact that in its natural meaning the advertisement was deceptive. For Mr. Edwards sought to justify it by giving a very special meaning to the word "investment". He said that owners of shops had been able to double their investments in 8 weeks, not by achieving net earnings equal to their investment, but by virtue of the acquisition of a further stock of movies through Glenhoun's "home package plan" equal to the quantity of the original stock. What he was referring to was a plan under which Glenhoun sold a video machine, with the right to swap movies for a period of a year, to an individual purchaser, and undertook to supply four movies to a shop such as that of Mr. and Mrs. Geale on the basis that two of the movies would go into the stock of the shop and two would go to the individual purchaser of the package plan, who would then have the right to keep exchanging his two movies, for no charge, at the shop. Mr. Edwards relied on the receipt of the four movies as an increase in the stock of the shop, which at the end of the year would be entitled to all four of them. But, of course, at any moment during the ensuing year, two of the movies (or replacements for which they had been exchanged) would be held by the package plan purchaser and not by the shop. No hiring charge would be payable to the shop for those movies. In no realistic sense could the stock of the shop be regarded as augmented during that twelve months period by those two movies. If one looks at the ultimate result at the end of the year, it must be borne in mind that Mr. Crisford's evidence shows that a movie would have depreciated by 80% of its value at the end of the year. Even if I accept, therefore, the factual position alleged by Mr. Edwards (which, on his bare assertion, unsupported by any records, I am far from doing), it would not justify the claim in the advertisement. Furthermore, the advertisement on a fair reading of it, links the doubling of an investment to what is described as a "unique cash flow opportunity" (emphasis added). The ingenuity of Mr. Edwards' explanation is reminiscent of Pascal's satirical reference, in the ninth of his Provincial Letters, to "the importance of defining things properly", by which, he suggests, anything at all can be easily justified] I think any normal reader would regard the idea that the advertisement really referred to an increase in the quantity (though not necessarily value or availability) of the stock only of a business, as nothing other than a distortion of its plain meaning.

Understood in the sense that there was, in the proposition the subject of the advertisement, a capacity to achieve the earning of a sufficient return in eight weeks to double the investment put into such a business by its proprietor, the advertisement, according to Mr. Crisford's evidence, could not have been true. I accept that this was so, and I infer that Glenhoun's directors, as persons also knowledgeable in the industry, knew it. Accordingly they did not believe the prediction in the advertisement would be fulfilled.

Both Mr. Robinson and Mr. Edwards denied involvement in the misleading representations of Mr. Wilkins. I find that both were involved. As directors and shareholders they were, in the particular circumstances of Glenhoun's operations, responsible for the handbills to which I have referred. The statements in those handbills make it clear that when Mr. Wilkins asserted the current nature and the quality of the movies, he was not engaging in some flight of fancy of his own: he was making representations it should be inferred he was entitled to make. Indeed, neither Mr. Edwards nor Mr. Wilkins suggested in evidence that Mr. Wilkins had exceeded his authority. The report referred to earlier is consistent with the normality of the transaction. When, on the Monday after the Saturday's opening, Mrs. Geale asked Mr. Robinson "Where are our new movies?" he did not suggest she had not been told the movies would be new; his answer rather implied that new movies in the strictest sense of the word "new" were to his knowledge what had been promised, for he said: "They have not come in from the movie companies yet; I will send them down tomorrow." Again, a few days later, when only 35 further movies in poor condition had arrived, Mr. Robinson explained that the new movies which had been paid for had still not come in. It appears they never did. Within a further few days, Mrs. Geale complained to Mr. Edwards that "we had not got our new stock or our up-to-date titles." Again there was no repudiation, but a visit following which the report previously referred to was prepared. In mid-August, when Mr. Geale complained to Mr. Edwards: "I spent $33,000 for the top titles. I have not received them as yet", Mr. Edwards did not deny the basis of his complaint but put him off with a promise of future remedial action.

The evidence I have just referred to casts a backward light on the preceding events. But at the time Mr. Robinson had collected the purchase money, prior to the opening of the shop, he had explained to Mr. Geale: "We have got to have the money in ten days before, so we can buy all these new movies in from the film companies." At that time, two of Glenhoun's cheques totalling over $9,000, payable to a major supplier, had been returned unpaid, and at the least it must have been clear to Mr. Robinson and Mr. Edwards that supplies to Glenhoun were in jeopardy. Yet Mr. Robinson's statement could only have been understood as an endorsement of Mr. Wilkins' statement that the new films would be provided.

So far as the statements about the size of the library are concerned, I have already referred to the handbills the preparation of which Mr. Robinson and Mr. Edwards must have authorised. Furthermore, Mr. Edwards himself asserted to Mrs. Geale that "the library carried all the top releases." Again, there is no suggestion that Mr. Wilkins was not authorised to represent that the library did carry all the top releases, and was a very large video library with 6,000 movies to choose from. But such statements were clearly most misleading, since in truth the library had pitifully meagre resources. Even if all the movies claimed by Mr. Edwards to have comprised the library had really belonged to it, almost all of them were unavailable. Mr. Edwards himself said that at the end of July 1,800 movies were out with clients (meaning the individuals who had rights under the package plans for a year), and 1,600 were in the library when the vans returned from exchanging movies, but it might be that only 500 were actually in the library when the vans were out on the road. He did not suggest that the represented 6,000 movies could be justified, except by counting in the stock of all the shops belonging to Glenhoun's exchange scheme. But it was implicit in his own argument in attempted justification of the claim in the advertisement that investments would be doubled, that the stock of the shops was their property, though with a right of exchange for movies in the alleged library of 6,000 movies. Mr. and Mrs. Geale's contract also confirms that the stock was actually purchased. Therefore the attempt to boost the numbers in the library in this way is impossible to accept. On his own evidence, the library could not have contained more than 1,600 movies plus another 1,800 out with individuals pursuant to commitments to them.

The representation that the library contained 6,000 movies was an assertion of fact. The statement "you will double your investment in 8 weeks", and the representations that 60% of the 200 movies would be new current popular titles and the additional 100 would be new, and that Mr. and Mrs. Geale would be able to exchange one-third of their stock each month getting all the current and top titles or latest releases, were each in the nature of promises or predictions. But a promise or prediction may bear within it a statement of fact about intention or about ability to achieve performance: Thompson -v- Mastertouch T.V. Services Pty. Ltd. (1977) 15 ALR 487, 494. In the present case there was, by implication, an assurance in the advertisement of the capacity of the particular investment, and in the later statements of the availability of the promised movies or the capacity of Glenhoun to obtain them - particularly in the light of the earlier mentioned statement of fact about the size of the library.

I find that each of Mr. Robinson and Mr. Edwards knew of, and intentionally participated in, both the advertisement and the statements by Mr. Wilkins. They did so knowing the statement and implied assurances which were involved were misleading, and indeed false. So far as predictions were involved in the advertisement and the statements by Mr. Wilkins, they did not believe the predictions would be fulfilled, knowing as I conclude they must have known in detail, the business of their own small company: see Thompson v. Mastertouch T.V. Services Pty. Ltd. (supra); Reardon v. Aquajet Holdings (S.A.) Pty. Ltd. (1982) ATPR 40-328; Jones v. Glen Houn Holdings Pty. Ltd. (In Liquidation), Neaves J., unreported, 26/7/85. In the case of Mr. Edwards I am confirmed in these findings by what he admitted in evidence, and also by a consideration of the matters he disputed, and those he did not dispute, in relation to the evidence given by Mr. and Mrs. Geale of their conversations with Mr. Wilkins. In the case of Mr. Robinson, I consider his failure to give evidence enables the evidence against him to be relied upon with greater confidence.

I consider that each of the implied statements to which I have referred, and also the statement that the library contained 6,000 movies, had the necessary causal relationship with the ensuing entry by Mr. and Mrs. Geale into the contract with Glenhoun to enable them to recover damages for the breaches, which I have held occurred, of ss.52, 53 and 59 of the Trade Practices Act. I find that the respondents Robinson and Edwards were involved in each of those breaches.

I turn to the question of damages. Mr. and Mrs. Geale paid $33,000 for videos and certain ancillary equipment. On the evidence of Mr. Crisford and Mr. and Mrs. Geale, and having regard to certain agreed figures put before me, I think the videos and equipment were worth no more than $7,250. I accept that Mr. and Mrs. Geale acted reasonably in attempting to conduct the video business contemplated by the contract for the period up to 27th September 1983, but not in the retention (involving further depreciation) of the videos to the present time. I think it is appropriate to allow a sum of $1,000 to cover rental and advertising expenses involved in the attempt to pursue the contract up to 27th September. I make no deduction from this amount of $1,000 since I do not think there was any profit clear of the other expenses which must have been involved. These considerations lead me to a figure of $26,750 ($33,000-$7,250 + $1,000).

It was submitted by counsel for Mr. and Mrs. Geale that I should also allow an amount in respect of interest on the sum of $33,000 invested, not under s.51A of the Federal Court Act which was not in force at the appropriate date, but as representing part of the loss involved, by virtue of the withdrawal of this sum from investment at an interest rate of at least 11% per annum. I was not asked to allow anything in this regard except for a short period, counsel taking the view that the money would, but for the contract with Glenhoun, have been withdrawn and invested in some such business as that in fact pursued after 27th September, with consequences incapable of reasonable estimation. This approach derives some support from the judgment of Neaves J. in Jelin Pty. Ltd. -v- Murdoch Pty. Ltd. (1985) ATPR 46522 at 46541. In Sanrod Pty. Ltd. & Ors. -v- Dainford Ltd. (1984) ATPR 45349 at 45358 Fitzgerald J. said:

"However, whatever may be the position otherwise in respect of damages under the Act, I can myself perceive no difficulty in accepting that, when money is paid in consequence of misleading conduct, the loss suffered by that conduct includes not only the money paid but also the cost of borrowing that money or the loss from its investment, as the case may be: cf, Frith & Anor. v. Gold Coast Mineral Springs Pty. Ltd. & Ors. (1983) ATPR 40-399; affirmed (1983) ATPR 40-394. Interest awarded as a component of damages in such circumstances is not for loss of the use of the money awarded as damages, but for loss of the use of the money paid over in consequence of the misleading conduct and is directly related to the misleading conduct."

I think it is appropriate to allow a further amount of $750 under this head. Accordingly I assess the damages at $27,500.

I order that the respondents, Edwards and Robinson, pay to the applicants $27,500 by way of damages and that the respondents pay to the applicants their costs, including any reserved costs. Costs to be taxed.