Grimson, Martin Harold v O'Donnell, Garry Francis

CATCHWORDS

TRADE PRACTICES - misleading and deceptive conduct - purchase of hotel premises and business and contemporaneous on-sale of business and grant of lease of hotel premises - on-purchasers' allegation of concealment by on-sellers of on-sellers' association with original owner - numerous misrepresentations alleged - puffery - (no question of principle).

MARTIN HAROLD GRIMSON & ANOR v GARRY FRANCIS O'DONNELL & ORS

No NG 737 of 1994

Lindgren J
Sydney
8 November 1996

IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No NG 737 of 1994
GENERAL DIVISION )

BETWEEN:

MARTIN HAROLD GRIMSON
First Applicant
RICKY MARTIN GRIMSON
Second Applicant

AND:
GARRY FRANCIS O'DONNELL
                   First Respondent
EVENLONG PTY LIMITED
                  Second Respondent
ENIMA PTY LIMITED
                   Third Respondent

CORAM:Lindgren J
PLACE:Sydney
DATE:8 November 1996

MINUTE OF ORDERS

THE COURT ORDERS:

THAT the application be dismissed.

THAT the applicants pay the respondents' costs.

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

IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No NG 737 of 1994
GENERAL DIVISION )

BETWEEN:

MARTIN HAROLD GRIMSON
First Applicant
RICKY MARTIN GRIMSON
Second Applicant

AND:
GARRY FRANCIS O'DONNELL
                   First Respondent
EVENLONG PTY LIMITED
                  Second Respondent
ENIMA PTY LIMITED
                   Third Respondent

CORAM:Lindgren J
PLACE:Sydney
DATE:8 November 1996

REASONS FOR JUDGMENT

INTRODUCTION AND PARTIES
The first applicant ("Grimson") is the father of the second applicant. The applicants ("the Grimsons") seek to recover damages from the respondents. The claim arises out of a purchase by the Grimsons in 1991 from the second respondent ("Evenlong") of the business of the Royal Hotel, 34 Gibraltar Street, Bungendore ("the Hotel") and an associated lease by them from Evenlong of the Hotel premises. Bungendore is an historic rural village some 233 km south-west of Sydney and some 35 km north-east of Canberra. Grimson alone took an active role in relation to the transaction on behalf of the Grimsons.

On 31 August 1995, Wilcox J ordered that the issues of liability and damages be tried separately. These Reasons for Judgment relate only to liability.

Evenlong was incorporated as a "shelf company" under that name by registration on 22 May 1991. The first respondent ("O'Donnell") and his wife, Fiona Lee O'Donnell, have been, since 10 June 1991, Evenlong's only shareholders and directors.

The third respondent ("Enima") is a company of and in which O'Donnell and Michael Kouper ("Kouper") are the only directors and shareholders. It is an older company than Evenlong, having been incorporated on 31 July 1986. O'Donnell and Kouper have been Enima's only directors and shareholders since 27 August 1986. According to a "company extract" in evidence, Enima's "principal activity" is that of "property owner". It is a hotel-owning vehicle of O'Donnell and Kouper.

It is common ground that the Hotel premises and business were purchased by Evenlong from Sedore Pty Limited ("Sedore") and that contemporaneously there were settled an "on-sale" of the business and grant of a lease of the premises by Evenlong to the Grimsons. The contemporaneous transactions were entered into and settled on 28 October 1991.

According to a company extract in evidence, Sedore was incorporated under that name on 14 March 1988, and since 23 March 1988 its only directors and shareholders have been Peter Riddles ("Riddles"), James Huggett ("Huggett") and James Marshall Johnstone ("Johnstone").

The Grimsons contend that originally it was intended that Enima, the investment vehicle of O'Donnell and Kouper, rather than Evenlong, the family company of the O'Donnells, would purchase and on-sell the Hotel business. A significance of that contention, if it is right, is, according to the Grimsons, that certain representations on which they rely to ground their causes of action are to be treated as having been made by, inter alia, Enima. Again, if those representations were made by Enima, there is a particular advantage to the Grimsons: they executed a deed of release dated 16 April 1992 in favour of Sedore, Evenlong, and those companies' "representatives" including O'Donnell ("Deed of Release"), which does not shield Enima from the claims made against it.

For its part, however, Enima contends that it had nothing whatever to do with the transactions.

The Grimsons allege that O'Donnell already had an interest in the Hotel or in its owner, Sedore, prior to the transaction with which the case is concerned. The existence of any such interest is denied by the respondents. The effect of the Grimsons' allegation in this respect is to be contrasted with the position as asserted by the respondents. The respondents say that they were, relevantly, in the same situation as the Grimsons, namely arm's length purchasers, and that if there was any misleading or deception of a purchaser, they were as much misled and deceived as the Grimsons were. The Grimsons' case is that O'Donnell concealed from them the existing interest which he had, that he knew much more about the profitability of the hotel than he has ever acknowledged, and that he deceived, or knowingly participated in a deception of, the Grimsons.

STRUCTURE OF THE TRANSACTIONS
The transactions were effected by documents executed on 28 October 1991. They and their effect were as follows:

(a)By an Agreement for Sale of Land Sedore sold to Evenlong the freehold of the Hotel for $325,000 and a Transfer under the Real Property Act 1900 was executed.

(b)By an Agreement for Sale of Business, Sedore sold the business of the Hotel to Evenlong for $200,000, apportioned between goodwill, plant fittings and chattels, and fixtures.

(c)By a Deed of Assignment of Purchaser's Rights under Agreement for Sale, Evenlong assigned to the Grimsons all of Evenlong's interest in the Agreement for Sale of Business and the Hotel business itself. The Grimsons covenanted with Evenlong that they would perform and observe the terms, covenants and conditions of the Agreement for Sale of Business as if they were a party to it in lieu of Evenlong, and that they would keep Evenlong indemnified against liability under the Agreement for Sale of Business or any non-observance of its terms. Evenlong authorised and directed Sedore, although it was not a party to the document, to transfer the Hotel business to the Grimsons on their paying the balance of the price of $200,000.

(d)By a Deed of Agreement for Lease, Evenlong contracted to grant to the Grimsons a lease of the Hotel freehold for 10 years at an annual rent of $67,782.00 per annum (according to one's method of calculation, this gives a weekly figure of $1,303.50 or $1,299.93). By cl 5 of the Deed of Agreement for Lease, Evenlong undertook, upon completion of the Agreement for Sale by Sedore to Evenlong of the freehold, to lend to the Grimsons $100,000 to enable them to complete their purchase of the business. By the same clause, to secure repayment of that loan, the Grimsons charged the business in favour of Evenlong and undertook to execute a bill of sale. In fact, they did execute an ordinary bill of sale which, oddly, bears date 24 October 1991 (all the other documents are dated 28 October 1991) and was registered in the Land Titles Office.

The Deed of Release to which I have already referred was entered into on 16 April 1992. I will say more later about the terms of the releases by the Grimsons contained in it. At present, it is necessary only to note that in consideration of those releases, Evenlong agreed to vary the terms of the lease to the Grimsons by reducing the rent from $67,782.00 to $37,440.00 per annum (according to the method of calculation used, $720 or $718.03 per week).

The second applicant, Ricky Martin Grimson, became the licensee of the Hotel on 28 October 1991 and ceased to be licensee on 19 April 1994 (the Grimsons ceased to occupy the Hotel shortly before that date). The person who immediately preceded Ricky Martin Grimson as licensee was Robert William White ("White") who had been licensee from 10 August 1988 to 28 October 1991 and to whom reference will be made later. White was the nominee of Sedore.

FACTS
The suggested prior interest of O'Donnell in Sedore or in the Hotel
At the beginning of the period with which I am concerned, the Hotel was owned by Sedore. O'Donnell has sworn that he had known Riddles and Huggett since the early 1980s; that he first met Riddles when Riddles was working at the Commonwealth Bank in Canberra and doing part time accounting work for the owners of a hotel at Kambah in the Australian Capital Territory which O'Donnell bought; that he first met Huggett after that purchase, when Huggett opened the business of a real estate agency at Kambah; that he saw Riddles and Huggett at the Kambah Hotel from time to time; that some time after O'Donnell's purchase of the Kambah Hotel, Riddles retired from the Commonwealth Bank and worked with Huggett in the real estate agency business; that in about 1988, Sedore purchased the Hotel; and that Riddles and Huggett were directors of Sedore at the time of that purchase and remained directors of it until Sedore sold the Hotel to Evenlong in October 1991.

O'Donnell concedes that there were some business connections between himself and Sedore prior to Evenlong's purchase of the Hotel from Sedore. He says that at some time between 1988 and 1991 he lent Sedore approximately $10,000 in cash to assist it in the renovation of the Hotel. His evidence is that it was agreed orally that repayment would be made out of the proceeds of the poker machines at the Hotel and that he (O'Donnell) would send someone out on a regular basis to participate in the clearing of the poker machines and to check the meter readings.

There was a second business connection between O'Donnell and Sedore. O'Donnell's evidence is that in the period 30 November 1990 to 30 June 1991, Arko Investments Pty Ltd ("Arko"), a company with which he was associated, owned a pool table, and, he believed, a jukebox, which were, at various times in that seven-month period, located in the Hotel and that Arko paid "commission" to Sedore for the privilege. According to O'Donnell, his son "Jamie" regularly attended at the Hotel to "service" the equipment. He says that when Jamie attended for that purpose, Jamie and Sedore's manager and licensee of the Hotel (White), would clear the cash from the poker machines ("approved amusement devices - ‘AADs’"), count the cash, set aside sufficient to pay relevant taxes, and divide the balance equally. He says that Jamie would bring back and pay to him (O'Donnell) the half which Jamie had taken, on account of repayment by Sedore of the loan of $10,000. He says that he assumed that White accounted to Riddles and Huggett (more strictly to Sedore) for the other half. According to O'Donnell, the liability of Sedore to him in respect of the outstanding balance of the loan of $10,000 and interest, was satisfied upon settlement of the sale and on-sale of the Hotel on 28 October 1991.

The Grimsons issued a subpoena for production of Arko's records of commission payments made by it to Sedore in the period 30 November 1990 to 30 June 1991 in respect of the pool table and jukebox. O'Donnell swore that he had been unable to find such records. He said that in January 1995, he and employees of Arko "carried out a clean-up" of Arko's records and that he believed that the documents covered by the subpoena may have been thrown out in the course of that clean-up. In cross examination, his evidence was unequivocally to the effect that there was no point in his searching Arko's office again for the records, as he knew from his previous search that no documents covered by the subpoena were there.

The present proceeding was commenced by an application filed on 28 October 1994, some three months before the alleged clean-up. It is understandable, perhaps, that the Grimsons have suspected foul play. But it is far from clear that by January 1995 it could have been known to O'Donnell that there would be some forensic advantage to him if the records of payment of commission ceased to be available to answer any subpoena that might be issued. The applicants' statement of claim was not filed until 13 March 1995. While it is possible that by January 1995 O'Donnell foresaw issues which would arise, I see no reason why I should not accept his explanation.

I accept O'Donnell's evidence that he did not, whether through a company or otherwise, have any interest in any of the AADs at the Hotel. I accept that the only moneys which he received from those machines were in the nature of repayments on account of Sedore's indebtedness to him as a result of his loan to it of $10,000.

In more general terms, I find that O'Donnell was not familiar with the operation of the Hotel during the period when Sedore owned it and White was licensee of it, and that he had no interest in Sedore or in the Hotel. I also find that he had no part in the preparation of any of the figures which purported to be a statement of the takings of the Hotel when it was owned by Sedore (see later).

It is true that it might have been possible, on the basis of the amounts received by him as loan repayments, for O'Donnell to have calculated the amount of the Hotel's gross takings from the AADs over the period during which payments were made to him, and checked against that amount, the figure representing the takings of AADs which were referred to in a valuation of the Hotel by Mr L C Marjason ("Marjason") of L C Marjason & Associates, hotel/motel and liquor store consultants and valuers, of 359 Alfred Street, North Sydney ("the Marjason valuation") referred to later, which the Grimsons contend are incorrect. But I accept O'Donnell's evidence that he did not "calculate how much was going through the machines" (T 349.12-.13); that he did not check the relationship between the amounts of the payments to him and the AAD figures which appeared in the valuation (T 25.05); that he was not interested in what the Hotel was making out of the machines and was interested only in how much was being paid to him off the loan (T 340.25-.27); and that he relied on the figures for the AAD takings which appeared in the valuation (T 391.06-.08).

A particular piece of evidence on which the Grimsons rely is a letter dated 29 July 1991 signed by O'Donnell. The letter is wholly typed as distinct from being on printed stationery. It reads as follows:

"SEDORE PTY LTD
P.O. BOX 1568

CANBERRA CITY ACT 2601

29 July 1991

To:Lindsay Totman
Blowes Real Estate

ORANGE NSW 2800

Dear Lindsay,

As suggested please place the $20,000.00 deposit on call with the Advance Bank.

There are six (6) Video Poker Machines in the hotel, serial numbers to follow.

Yours faithfully,

[signature]

G. O'Donnell"

On its face, this letter suggests that O'Donnell signed on behalf of Sedore and purported to have authority from it to do so. The post office box 1568 was that of Arko which, it will be recalled, was an O'Donnell company.

O'Donnell was cross examined on the letter. He explained that Lindsay Totman of Blowes Bernard Real Estate needed to have an authority from Sedore to invest the deposit of $20,000 but that neither Riddles nor Huggett was conveniently available to sign the letter and so one of them authorised him (O'Donnell) to have the letter typed up and to sign it on behalf of Sedore. He said that he instructed a typist in Arko's office to type up the letter and that she must have taken it upon herself to type in Arko's post office box address. He said that he must have signed the letter without noticing this error.

While it was careless of O'Donnell not to notice and correct the post office box address, I do not see any reason why his evidence should not be accepted. O'Donnell did not purport to sign as a "director" or holder of any other office within Sedore. I accept his explanation.

The suggested role of Enima
Through Enima, O'Donnell and Kouper invested in hotels and licensed premises in New South Wales and the Australian Capital Territory.

The first mention of a sale of the Hotel by Sedore occurred early in 1991. According to O'Donnell, Riddles or Huggett told him that they wished to sell. O'Donnell says that shortly afterwards he raised this matter with his "partner" in Enima, Kouper (Kouper's full family name is "Kouperitsis"). The evidence of O'Donnell and Kouper as to the conversation is consistent. I accept their evidence. It is to the effect that O'Donnell inquired whether Kouper would be interested in Enima's buying the Hotel; Kouper responded to the effect that the operation was too small to be of interest to Enima; and O'Donnell then said that he might look at buying it himself, a suggestion in which Kouper acquiesced. Kouper said in cross examination (on 31 July 1996) that the conversation had taken place so long ago he could not say when it had occurred. This is perfectly understandable: he had had nothing further to do with the Hotel and so had not been involved in the sequence of events touching it by reference to which he might otherwise have been able to place the conversation.

O'Donnell said that the conversation took place in about April 1991. He said that it took place "a long time before [he] called for the valuation" (T 423.09-.10). The effect of the evidence of the valuer, Marjason, is that O'Donnell instructed him in the first half of June. Marjason inspected the Hotel on 1 July and said that O'Donnell had instructed him two to three weeks earlier (T 254.17-.19). O'Donnell's recollection is consistent with the facts that Evenlong was incorporated on 22 May 1991 and that O'Donnell and his wife became its directors on 10 June 1991. The evidence does not establish that O'Donnell caused Evenlong to be registered and it may well have been a "shelf company". But on the bases (which I accept) that O'Donnell instructed Marjason in the first half of June and that the conversation between O'Donnell and Kouper had taken place a long time before that, I find that it occurred in April or May 1991.

There is, however, one piece of evidence which is inconsistent with this finding. It occurs at T 423 which records the following cross examination of O'Donnell:

"Do you recall speaking to a Mr Hill of the Commonwealth Bank, do not you, to organise finance?---Yes.

That conversation took place in about October, or
thereabouts, in 1991, did not it?---It may well have.

And you were telling him then, were not you, that you at that stage had not decided on which company it would be that would purchase the Royal Hotel, that is the case is not it?---That's correct." (T 423.26-.32)

In re-examination, O'Donnell said that the conversation with Kouper took place prior to his (O'Donnell's) becoming a director of Evenlong (on 10 June).

The answer given by O'Donnell in cross examination quoted above cannot be correct. On 14 August 1991 Gallens Crowley & Chamberlain ("Gallens"), solicitors for Evenlong, wrote to Phillips Fox, solicitors for the Grimsons, advising that they acted for Evenlong, that Evenlong "proposed to purchase" the Hotel and that they enclosed a form of Deed of Agreement for Lease between Evenlong and the Grimsons for approval. (The letter followed a telephone call from Peter Crowley of Gallens the preceding day.) From that time, in all correspondence and documentation Evenlong was shown as the purchaser/on-seller.

It is clear, in my view, that O'Donnell's answer in cross examination was a slip, perhaps attributable to inadvertence at the end of a lengthy cross examination. Every other piece of evidence is consistent with his evidence that the conversation with Kouper took place before O'Donnell and his wife became directors of Evenlong on 10 June and "a long time" before he instructed Marjason in the first half of June. As I have already said, I find that the conversation took place in April or May 1991.

Kouper gave evidence, in answer to questions put in cross examination, in relation to his and O'Donnell's practice as to decision-making for the purpose of Enima's business activities. In summary, the effect of the evidence was that neither was entitled to, or did in fact, commit Enima to any investment without the prior consent of the other and that if, through the exigencies of a particular set of circumstances, a decision had to be taken by one before consultation with the other could occur, the investment would have to be made by the former or one of his own companies alone. I accept this evidence.

The Grimsons rely on three particular pieces of evidence for the purpose of showing that Enima was, for a time, intended to be the purchaser, and, apparently as a result, that O'Donnell's conduct of which they complain should be treated as the conduct of Enima.

First, on the cover sheet of the Marjason valuation dated 8 July 1991 the following appears:

"FOR AND ON BEHALF OF INTENDING MORTGAGEE

UNDER INSTRUCTIONS FROM
  MR. GARRY O'DONNELL
  ENIMA PTY LIMITED
                   147 NEWCASTLE STREET
  FYSHWICK
                   A.C.T.         2609"

The construction of these words contended for by the Grimsons is that the instructions came from Mr Garry O'Donnell on behalf of or for Enima, or in the alternative, from Mr Garry O'Donnell and Enima. But the words just as comfortably signify that the instructions were from Mr Garry O'Donnell of Enima. Indeed, this is their more obvious significance.

The words are therefore not inconsistent with the evidence of O'Donnell and Marjason now to be described. O'Donnell said that his instruction to Marjason to provide the valuation was as follows:

"It's Garry O'Donnell here. I am thinking of buying the Royal Hotel at Bungendore. Could you prepare a valuation?"

O'Donnell says that to the best of his recollection he did not on that occasion or at any time prior to the purchase of the Hotel by Evenlong, mention the name "Enima" to Marjason in connection with the purchase. He states that he did not ask Marjason to address the valuation in the way in which it is addressed on the front cover.

For his part, Marjason says that he does not believe that in giving the telephone instructions, O'Donnell mentioned Enima's name. However, he says that he (Marjason) did in fact assume that O'Donnell intended the purchase to be in Enima's name as a result of his earlier experience of valuing hotels being purchased by Enima. He estimates that prior to 1 July 1991 (the date of his inspection of the Hotel) he had valued approximately half a dozen hotels for Enima. By mid 1991 Enima had purchased several hotels. The evidence shows that when O'Donnell and Kouper agreed that Enima should purchase a hotel, the funds or part of the funds required were borrowed and, further, that a valuation of the hotel being considered had been, at least on several occasions, obtained from Marjason.

In summary, the words appearing on the front page of the valuation do not, in my view, suggest that Enima was Marjason's client, and if they do, they reflect in this respect an erroneous assumption by Marjason rather than anything said to him by O'Donnell.

The second piece of evidence relied on by the Grimsons is an "Agency Agreement for Sale of Business" bearing date 22 July 1991 signed by O'Donnell. By this document O'Donnell authorised "Blowes Bernard R/E trading as The Professionals" to sell the business of the Hotel for $200,000 plus stock at valuation or such other price as O'Donnell might agree to accept. For present purposes, it suffices to set out the first six lines of the document as follows:

"BETWEEN .... MR. GARRY O'DONNELL.....062 805052 Bridgette.... Principal
of .. ENIMA PTY. LTD........ .. 149 NEWCASTLE ST FYSHWICK A.C.T. ....

AND ..... BLOWES BERNARD R/E ........ .Fax ..(06) 2805448 ........ AGENT

TRADING AS ........ .. THE PROFESSIONALS ........ ........ ......
for sale of the business known as ....... THE LEASEHOLD, ROYAL HOTEL
..... 34 GIBRALTAR ST BUNGENDORE ........ .. 2621........ .. THE BUSINESS"

(Bold typeface indicates a standard printed part of the form of agreement.)

Far from indicating Enima as principal, the document literally indicates O'Donnell as principal and identifies him as being "of" Enima at the address stated. It is true that clause 1 of the document is a standard printed clause reading "The Principal warrants that he has authority to enter this Agreement", but this is also consistent with the respondents' case that O'Donnell was warranting that he had authority from Evenlong. The document does not support the Grimsons' case that it was intended that Enima purchase and on-sell the Hotel business.

The third piece of evidence relates to a call upon O'Donnell by Detective Sergeant Graham Wheeler ("Wheeler") of the Major Crime Squad, New South Wales Police Service, and Christopher John Stavenhagen ("Stavenhagen"), an officer of the New South Wales Department of Gaming and Racing, on 1 December 1994.

Stavenhagen swore affidavits dated 30 June 1995 and 25 July 1995. According to para 4 of the latter, when he and Wheeler called on O'Donnell, a conversation took place in which O'Donnell acknowledged, in reply to a question by Wheeler, that Enima had been intended to be the purchaser of the Hotel and that Evenlong had been substituted some time after initial negotiations had commenced with Sedore, the delay having been caused by the time taken to have Evenlong registered with the Australian Securities Commission.

In Wheeler's case, there was no affidavit but a "proof of evidence" which Wheeler swore in the witness box to be true. The document was admitted by consent as an exhibit on the basis that its contents would be treated as if they were the contents of an affidavit. According to para 8 of the document, Wheeler recalled that in reply to questioning by Stavenhagen, O'Donnell said words to the effect that Enima was originally to be the purchaser but that this was changed later.

For his part, O'Donnell agreed that the name "Enima" had been mentioned but denied being asked about Enima and denied having said that Evenlong had been substituted as purchaser. He was not cross examined on his denial.

In cross examination, Wheeler readily acknowledged that he had no recollection whatever of any conversation to the effect of that to which he had sworn. He said:

" ... I'm certainly not sitting here saying that Mr O'Donnell said that and I'm not saying that Mr Stavenhagen asked the question." (T 216.08-.09)

I turn now to the evidence of Stavenhagen. I found his evidence unsatisfactory. He had given evidence before Wilcox J in an interlocutory hearing in this proceeding on 27 July 1995. His evidence in cross examination on that occasion included the following:

"What I want to suggest to you is that you had no reason during the course of this interview to have any concern with the company Enima Pty Limited?---Well, the name Enima came up and the reason I remember it coming up is because of Mr O'Donnell's pronunciation of the word, which was - I think he pronounced it Enima and I hadn't obviously heard it pronounced that way before, and that is why it sticks in my memory.

What I want to suggest to you is that there was no question put to Mr O'Donnell to the effect, why was Enima Pty Limited a company that initially entered the offer to purchase the Royal Hotel?---I didn't put that question to him. I merely recorded the question or the answer to the question that Sergeant Wheeler put to him. It was a peripheral question. It was just - - -

The question of Enima Pty Limited was not a matter that was looming large in your mind, was it, in the course of discussions with Mr O'Donnell?---It was in the sense that having read a copy of the Marjason valuation on the Royal Hotel it was of interest to me why there was a change of company name.

But you asked Mr O'Donnell no question on that subject, did you?---No, I didn't ask the question on the subject to the best of my recollection.

I suggest to you that there was no suggestion put to Mr O'Donnell at this meeting that Enima Pty Limited had made any offer to purchase the Royal Hotel?---Well, my recollection was that there was a question put." (T 57.23-58.05)

"I suggest to you that whether or not Enima Pty Limited was mentioned in the course of the discussion, it was not suggested to Mr O'Donnell that Enima had made any offer to purchase the Royal Hotel?---I can't recall that.

HIS HONOUR: You say you cannot recall whether Mr Wheeler suggested to Mr O'Donnell that it was Enima that had made the offer?---Yes, he asked was Enima - why was the company substituted, words to that - you know, that sort of thing. It was just a minor point.

Wheeler asked why EvenLong was substituted for Enima, is that what you are saying?---Yes, your Honour." (T 59.04-.12)

[HIS HONOUR] "Well, was the suggestion put to Mr O'Donnell that in fact the hotel was really owned by Enima rather than Evenlong?---No, I never put that suggestion to him.

Did Detective Sergeant Wheeler put that?---No, he wanted to know why it was substituted, that was all." (T 60.21-.25)

[HIS HONOUR] "So, it comes down to this, does it, that some question was asked because the name Enima appeared on the valuation?---Yes, and -

And there was an assumption made by Detective Sergeant Wheeler that therefore Enima must have had some involvement in making the offer, is that is [sic] what is being said?---Pretty much so, yes.

And the response to that was that Mr O'Donnell, he decided to form a separate company for the purchase which you understood to be Evenlong?---That's was [sic] my understanding, yes, and then we passed onto other things.

And that is really the whole of this conversation is it, that you recall?---What, regarding - that's all I recall, yes, but Sergeant Wheeler may have other recollections, I don't know." (T 61.20-.31]

Thus, the cross examination of Stavenhagen on 27 July 1995 was consistent with para 4 of his affidavit sworn on 25 July 1995, two days earlier, noted above. Yet, surprisingly, in cross examination before me, there was the following exchange:

"[STEVENSON] Just to remind you, have a look at paragraph 4 of your affidavit of 25 July 1995?---Ah, that by 4 - those words should've been attributed to me. I should've said instead of 'Wheeler' I should've said 'I'.

Now, you did not say - - -?---I'm sorry about that; I didn't realise that had slipped through.

You did not say anything to that effect before Wilcox CJ, did you?---No. I didn't pick it up at that stage.

Even though I cross-examined you for around half an hour on this subject?---No, I'm sorry I didn't pick it up. I'm sorry if that's confused anybody but I was the person that asked the question.

When did you first realise that the affidavit attributed the questions to Detective Sergeant Wheeler rather than you?---It was only some time after it was all done.

All right.Well let us try and be a bit more precise. It was after the time you give evidence before Wilcox CJ last year, was it?---Yes, long after that.

And it was before today, was not it?---Yes, it was before today.

So when you acted in a surprised fashion just then you were not in fact surprised to see what this affidavit says were you because you had realised some time ago that paragraph 4, you say wrongly, attributes these questions to the Detective Sergeant?---Yes, well the first word is wrong. It should've been 'I' instead of 'Wheeler'.

When was it, please tell me, that you say you realised that paragraph 4 was wrong in that respect?---I can't tell you - I can't give you a day and a date or anything like that, but it was a long time after. What I intended to do was to - if given the opportunity was to correct it today during court." (T 157.10-.34).

Stavenhagen's explanation of the inconsistency was not convincing. He said that the evidence expressed in para 4 of his affidavit sworn 25 July 1995 had "slipped through" and
that he "didn't pick it up" (T 157.14-.16). Of course, this explanation was not available in respect of the evidence which he gave only two days later before Wilcox J, since on that occasion he had expressly attributed the questioning to Wheeler on numerous occasions. Before me, he said that what he had sworn to be true before Wilcox J represented his "memory at the time" (T 228.08,.28, .33). The "slipped through" explanation for the "error" in para 4 of his affidavit, and the "memory at the time" explanation for the error which permeated his cross examination before Wilcox J only two days later, are totally unsatisfactory. The "slipped through" explanation signifies that his best recollection on 25 July had been that he (Stavenhagen) had been the questioner, but his "memory at the time" explanation signifies that his best recall on 27 July had been that Wheeler had been the questioner.

Stavenhagen said before me that he had come to see that what he had sworn to be true before Wilcox J must have been wrong, because the question of the interest of a party other than Evenlong in the Hotel was something that mattered to him and his Department rather than to Wheeler. Accordingly, it appears that his ultimate version of the conversion was the product of a process of rationalisation rather than of recall.

I have no confidence in Stavenhagen's evidence in relation to the conversation on 1 December 1994. I do not accept the evidence which he gave on the subject.
There are, in addition, particular reasons why O'Donnell's evidence that he did not say the words attributed to him is correct. The fact is that there was no "new company" which was "substituted onto the documentation" and that there was no "delay" in having Evenlong registered. It is improbable that O'Donnell would have made statements inconsistent with these facts known to him.

I find that O'Donnell did not say that he had decided to form a separate company from Enima for the purchase of the Hotel, that the new company was substituted onto the documentation for the purchase some time after initial negotiations had commenced with Sedore, and that the main delay was caused by the time taken to have the new company registered.

Grimson had not heard of the name "Enima" until after the Grimsons' solicitors, Phillips Fox, had received the letter dated 14 August 1991 from Gallens which named Evenlong as the purchaser. I accept that apart from the brief discussion in April or May between O'Donnell and Kouper to which I have previously referred, there was never any consideration given to the possibility that Enima might purchase the Hotel, let alone an intention that it should do so. I find that the only entity ever intended to be the purchaser was Evenlong.

The Grimsons do not suggest any basis other the intention that Enima be the purchaser, on which liability in respect of the various representations pleaded should be sheeted home to Enima.

For the foregoing reasons, if for no others, the application must be dismissed as against Enima.

Negotiations, including the Marjason valuation and the role which it played
After satisfying himself that Kouper was not interested in purchasing, O'Donnell again spoke to Riddles or Huggett. He said that he was interested in purchasing subject to a proper valuation and subject to his finding a lessee.

He telephoned Marjason some time in the first half of June and requested a valuation. Pursuant to his retainer by O'Donnell, on 1 July 1991 Marjason drove to the Hotel and spent some hours inspecting it and examining records held by the licensee, White. He said that he was given duplicate pages taken out of "the handwritten takings book" for the 26 week period from the week ending 9 December 1990 to the week ending 2 June 1991. As well, he inspected the liquor purchases register. He also obtained a depreciation schedule.

The "Hotel Receipts" document assumed some importance in the case. It comprises 26 pages of figures showing weekly receipts. One page relates to each week. Each page is divided into printed columns with printed column headings such as "DATE", "DAY" and the various sources of revenue within the Hotel such as "PUBLIC", "SALOON" and "BOTTLE DEPT". Under the printed column headings appear figures for the respective days of each week, and at the foot of the columns, totals for the respective revenue sources for the week. The dates and monetary amounts in the document are all handwritten. Two column headings are also handwritten namely "DRAW POKERS" (a reference to the AADs) and "AMUSEMENT MACHINES". Finally, on the right hand side of the sheet appears a printed column headed "BANKING" and under that printed heading appear handwritten amounts representing the totals of the revenue amounts from the various sources for the respective days.

Upon returning to his office, Marjason had the weekly totals extracted from the six months' Hotel Receipts sheets and a summary of them prepared by a relative who was a retired accountant. He prepared his valuation (dated 8 July) and sent it to O'Donnell. He had no further involvement in the purchase and on-sale of the Hotel.

There was also evidence suggesting that O'Donnell may have supplied the Hotel Receipts document to Marjason. O'Donnell's evidence is that he does not recall having the document in his possession in June 1991. However, he concedes that he may have, that an Arko fax imprint dated 18 June 1991 on them suggests that he did, and that in fact the document must have been faxed from Arko's fax machine on that date. Moreover, the fact that Marjason's fax number appears in O'Donnell's handwriting on the front page of the document is consistent with his having supplied the document to Marjason. It is quite possible that Marjason obtained a copy when he attended at the Hotel on 1 July 1991 and that O'Donnell also faxed a copy to him.

Marjason's valuation assumed some importance in the case. It recorded that a perusal of the records of the business for the period to which I have referred showed average weekly takings from the various "Department[s]" of the Hotel in amounts specified in his report. These were totalled in the report to give a weekly average of $11,993. The report set out ratios (expressed as percentages) of "GROSS PROFIT TO SALES" in a section of the report beginning "Based on current selling prices, it would no doubt be realistic to budget on the following: ...". There followed the "GROSS PROFIT TO SALES" percentages to which I referred. The report continued with a discussion of weekly operating expenses as, apparently, quoted to Marjason, and arrived at a net weekly profit of $2,880, or $149,760 per year. The application of a capitalisation rate of 25% led Marjason to conclude that "the projected value would be in the order of $599,000." Immediately following this figure occurs the following passage:

"However, the above assessment has omitted any return from Draw Poker Machines - current trends indicate that the value of same represents three years' profits namely:" [there follow calculations giving $124,524 as representing three years' profits]

The report totalled the amounts of $599,000 and $124,524 to give a current market value of $723,524, which the report rounded off to $700,000. The report stated that this represented the current market value of the Hotel "as a ‘going concern’, as to FREEHOLD, LICENCE & POSSESSION, FURNITURE, FURNISHINGS & PLANT."

Marjason deposed that the operators of the hotel had told him that some "off-licence" purchases had been made. He said that his valuation was based on sales for the six months from 3 December 1990 to 6 June 1991.

Lindsay Totman ("Totman") of Blowes Bernard Real Estate (trading as "The Professionals") of Orange, telephoned O'Donnell. O'Donnell had not known Totman previously. In the course of the conversation, O'Donnell told Totman that he was considering purchasing the Hotel and was looking for a tenant to buy and run the business. Totman told him that he might have someone interested. It was shortly after this telephone conversation that O'Donnell signed the Agency Agreement for Sale of Business dated 22 July 1991 to which I referred earlier. O'Donnell says that he cannot now recall the circumstances in which he signed this document. However, he states that he did not tell Totman that Enima was to purchase the Hotel and that this had never been his intention.

Shortly after speaking with Totman, O'Donnell received a telephone call from Grimson. Totman had given Arko's telephone number to Grimson. Grimson's and O'Donnell's versions of this first telephone conversation differ. According to Grimson, O'Donnell said that "the lessee should make a million quid", that "the guys that are there don't know how to run a pub and the trade will go better with a decent operator", and that "this is a ripper pub, give me a ring any time you want to talk about it." O'Donnell says that he cannot recall saying these words but does not deny saying something to the effect that he thought the Hotel to be a good one and affirms that this was his view at the time. He says that the expression "ripper pub" is not one which he customarily uses.

Grimson instructed Phillips Fox, solicitors, to act for the Grimsons in connection with the purchase of the Hotel. Mr Don McDougall ("McDougall") of that firm's Sydney office handled the matter for them. Grimson says that in August 1991 he received from McDougall a copy of Marjason's valuation and noted that it stated an average weekly trade of $11,993. He says that he was impressed by the valuation.

The evidence shows that the route followed by the valuation was as follows: Marjason faxed it to O'Donnell on or shortly after its date, 8 July 1991; O'Donnell caused it to be faxed from Arko's fax machine to Totman on 18 July; Totman faxed it to McDougall on 2 August. The respondents accept that this happened with O'Donnell's express or implied consent. It is implied that the respondents consented to the Grimsons' being shown the valuation.

A Phillips Fox office note of a telephone message dated 8 August 1991 records that Totman telephoned advising that "vendor has new solicitors", "Gallens Crowley & Chamberlain of Canberra, Peter Crowley" and that a contract would be with Phillips Fox "on Monday". According to the same note, Phillips Fox advised Grimson of this. On 14 August 1991 Gallens advised Phillips Fox that they acted for Evenlong as proposed purchaser of the Hotel freehold and grantor of the lease. This was a clear statement to the Grimsons' agents that Evenlong was the purchaser and on-seller. According to the same note, Mr Crowley advised that Mr John Power (of Cross & Power, solicitors) acted for the vendor of the freehold and of the business (Sedore) "directly to lessee". Grimson saw a faxed copy of the valuation at McDougall's office on 22 August 1991. That was the first time he saw the valuation and the time when he became aware of the name of Enima. McDougall gave a copy of the valuation to him.

According to an affidavit of Grimson, in August 1991 O'Donnell told him by telephone "I am now buying the hotel through another of my companies and this does not affect you." O'Donnell denies saying this or in any other way speaking to Grimson about the identity of the company that would purchase the Hotel. Grimson agreed that O'Donnell did not mention to him the name of the company which was to be the purchaser, and said that he had assumed that Enima was to be the purchaser because its name appeared on the title page of the Marjason valuation which, as noted above, he saw for the first time on 22 August 1991 at McDougall's office.

It is improbable, in my view, that O'Donnell would have said to Grimson "I am now buying the hotel through another of my companies and this does not affect you." These words predicate an understanding by O'Donnell that Grimson was under the impression that a particular company of O'Donnell's other than Evenlong was to be the purchaser. But there is no reason to think that O'Donnell did have that understanding of Grimson's state of mind. As noted above, Grimson's own evidence is that O'Donnell had not told him the identity of any particular company of O'Donnell's which was to be the purchaser. I find that O'Donnell did not speak words to the effect of those which Grimson attributes to him.

In August and September 1991, Grimson visited the Hotel three times, once "on an inspection basis" and twice anonymously. He says that he telephoned O'Donnell and inquired as to the whereabouts of the liquor purchases register and that O'Donnell told him that it was kept in town and looked after by Sedore's secretary.

According to Grimson: the Commonwealth Development Bank asked him to obtain "three years' figures for the Hotel"; he told O'Donnell that he needed the figures; O'Donnell replied to the effect that it would take "them" (clearly a reference to Sedore and its representatives) some time to draw up the figures for 1991; Grimson subsequently inquired of O'Donnell as to progress; and O'Donnell couriered the figures to Grimson on or about 19 September 1991. For his part, O'Donnell said that he did not recall sending the figures to Grimson, but did not deny that he had done so. The "figures" to which Grimson's evidence refers were the balance sheet and profit and loss account for the years ended 30 June 1989, 30 June 1990 and 30 June 1991.

According to Grimson, in the week ending 28 October 1981, he and his son went to the Arko building in Canberra and met O'Donnell. He says that O'Donnell said "you guys won't have any worries as there will be a population explosion out there because of the new estate."

The transactions of 28 October 1991
I have noted earlier the documents by which the transactions were effectuated on 28 October 1991.

The Grimsons' complaint and negotiations to resolve it
By 12 November 1991, Grimson was already dissatisfied with the transaction. He telephoned McDougall on that date complaining that the Hotel business was doing only about $6,000 per week, whereas, he said, there had been a representation of about $11,400 per week. He telephoned O'Donnell several times between 12 November 1991 and 25 November 1991. He says that on one occasion O'Donnell said, "I am shocked to hear this development and I will ring my solicitor." He asked O'Donnell who the directors of Sedore were, to which O'Donnell replied, "They are a couple of real estate agents and some fellow who won Lotto" and "apart from buying the Hotel from them, I do not know a great deal about them."

Negotiations ensued between O'Donnell and Grimson over a period in relation to the Grimsons' complaint. In the negotiations, Phillips Fox represented the Grimsons and Gallens represented O'Donnell and Evenlong.

Eventually the parties agreed to vary the terms of the transactions of 28 October 1991. In general terms, the agreement was that the rent was to be reduced to a little more than one half of that previously agreed, in order to conform to the level of takings as alleged by Grimson; that Evenlong was to forego $50,000 of the sum of $100,000 owing to it by the Grimsons; and that the term of the lease of the Hotel was to be extended from eight years to ten years. O'Donnell told Grimson that he required Sedore to be party to the settlement because if Sedore were not released from any claim by the Grimsons, such a claim might lead to Sedore's claiming, in turn, against Evenlong.

The Deed of Release
On 16 April 1992 the Deed of Release was entered into. It recited the Agreement for Sale of Land and the Agreement for Sale of Business; the Deed of Assignment of Purchaser's Rights under Agreement for Sale; that repayment of the loan of $100,000 was to be secured under the Bill of Sale; that it was acknowledged that representations in relation to the business and the grant of the lease had been made to the Grimsons by, or on behalf of, Sedore, Evenlong or their representatives; that the Grimsons claimed that some or all of the representations were misleading and that they had relied on the representations to their detriment; that Sedore and Evenlong denied the Grimsons' claims; and that the Grimsons had agreed not to pursue any rights, claims or actions that they had or might have in relation to any of the representations, the sale of the business, or the grant of the lease, and to release Sedore, Evenlong and their representatives in consideration of certain matters. Those matters were:

(a)Sedore's paying to the Grimsons $100;

(b)Evenlong's agreeing to reduce the rent payable under the lease from $67,782.00 per annum to $37,440.00 per annum;

(c)Evenlong's agreeing to extend the term of the lease by two years so that it would expire on 27 October 2003;

(d)Evenlong's forgiving repayment by the Grimsons of one half of the loan so as to reduce the balance to $50,000 and;

(e)Sedore's and Evenlong's agreeing to release the Grimsons in relation to sale of the Hotel business.

The operative clauses of the Deed of Release gave effect to the agreement recited above. Clauses 3 and 8, in particular, were as follows:

"3. Tenants' covenant

In consideration of the covenants and agreements of the Vendor [Sedore] and the Landlord [Evenlong] contained in this Deed, but subject to the provision of Clause 6, the Tenants [the Grimsons] agree:

(1)to release the Vendor, the Landlord and each of their Representatives [the Representatives of Evenlong included O'Donnell] from any claims, rights or actions of the Tenants, either existing or arising later, in relation to the Representations, the sale of the Business or the grant of the Lease; and

(2)to indemnify the Vendor, the Landlord and each of their Representatives and keep them indemnified, from and against those claims, rights and actions.

8.This Deed a Bar and Estoppel

This Deed may be pleaded in bar to any action brought by, or on behalf of, a party arising out of the matters referred to in this Deed and shall create an estoppel to any such action."

Of course, O'Donnell and Evenlong submit that the Deed of Release defeats the Grimsons' claim made against them in this proceeding.

THE PLEADINGS
By their amended statement of claim, the Grimsons plead in the first place misleading and deceptive conduct which led them to enter into the transactions of 28 October 1991. The first group of representations are alleged to have been made orally
by O'Donnell and Enima in July 1991 ("the July 1991 Representations by O'Donnell and Enima") as follows:

"(a)The First Respondent had no prior connection with or prior knowledge of the business of 'the Royal Hotel';

(b)The First Respondent had no prior connection with or prior knowledge of the then directors of Sedore Pty. Limited, the vendor of 'the Royal Hotel';

(c)The Third Respondent had no prior knowledge of the business of 'the Royal Hotel';

(d)The Third Respondent had no prior knowledge of the then Directors of Sedore Pty. Limited, the vendor of 'the Royal Hotel';

(e)A valuation of the Royal Hotel by L.C. Marjason & Associates, dated 8 July, 1991 ('the Marjason valuation'), was an accurate document in all respects;

(f)The Marjason valuation was obtained by the First and Third Respondents;

(g)The Royal Hotel would be a highly profitable business."

(9 - numbers in bold indicate paragraph numbers in the amended statement of claim)

It is next pleaded that in or about June or July 1991 O'Donnell "by himself or with either or both of the second and third respondents", supplied or caused to be supplied to Marjason, information to be used in the preparation of the Marjason valuation, which information was false. The following particulars are given of the information alleged to have been supplied:

"PARTICULARS

(a)Revenue - Gross profit for amusements was $372.00 per week;

(b)The public telephone takings were $68.00 per week;

(c)Total weekly turnover for the Royal Hotel of $11,993.00;

(d)Total liquor purchases for the Royal Hotel from 1 July, 1989 to 30 June, 1990 was $140,700.00;

(e)The quantity of liquor purchased by the Royal Hotel as set out in the Marjason valuation was misstated;

(f)Takings of Draw Poker Machines was $1,470.00 per week." (10)

It is not pleaded that O'Donnell knowingly supplied or caused to be supplied false information to Marjason, although the Grimsons' case seems to have been conducted on the basis that the allegation was that he had done so.

The next category of representation is pleaded in para (12). It is there pleaded that in August 1991 O'Donnell and Evenlong orally "and by their behaviour" made the following representations to the Grimsons ("the August 1991 Representations by O'Donnell and Evenlong"):

"(a)The Royal Hotel was a very profitable business;

(b)The Royal Hotel was a very successful business;

(c)The purchase price of the business as a going concern at the Royal Hotel of $200,000.00 was a true indication of the profitability of the business as a going concern;

(d)The purchase price of $200,000.00 of the
business as a going concern at the Royal Hotel would produce an annual return in accordance with industry standards;

(e)The trading figures for the years ending 30 June, 1989, 1990 and 1991 were as represented in financial statements supplied to the Applicants;

(f)The Marjason Valuation was an accurate document in all respects;

(g)The quantity of alcoholic drinks sold by the Royal Hotel as represented by Liquor Licensing fees paid by the Royal Hotel was understated by between $20,000.00 to $30,000.00 as at July, 1991;

(h)The number of customers of the Royal Hotel would substantially increase in the immediate future as the population of Bungendore was increasing substantially as a result of a new subdivision of land in the town.

(i)The trading situation of the Royal Hotel was adversely affected by the incompetent management of the Royal Hotel.

(j)The First Respondent was a person who by himself or by his companies, successfully leased, operated and managed licensed hotels and/or other licensed premises.

(k)The Second Respondent had no prior connection with or knowledge of the then directors of Sedore Pty. Limited."

It is pleaded in para (13) that each of the representations was made in trade and commerce and, in para (14), that by making the representations O'Donnell, Evenlong and Enima engaged in misleading and deceptive conduct which was in contravention of s 52 of the Trade Practices Act 1974 ("the TP Act"). Particulars purport to indicate in what respects the pleaded representations were misleading or deceptive as follows:

"PARTICULARS

(a)The Royal Hotel produced returns of a level such that it could not be described as 'a very profitable business';

(b)The Royal Hotel produced returns of a level such that it could not be described as 'a successful business';

(c)The purchase price of the business as a going concern at the Royal Hotel of $200,000.00 was not a true indication of the profitability of the business as a going concern;

(d)The purchase price of $200,000.00 of the business as a going concern at the Royal Hotel did not produce an annual return in accordance with industry standards;

(e)The trading figures for the years ending 30 June, 1989, 1990 and 1991 as represented in the financial statements supplied by the First Respondent to the Applicants were not accurate;

(f)The Marjason Valuation was not an accurate document;

(g)The quantity of alcoholic drinks sold by the Royal Hotel as represented by Liquor Licensing fees was not understated by between $20,000.00 and $30,000.00;

(h)The number of customers at the Royal Hotel did not substantially increase at any time from the date when the Applicants commenced trading, about 31 October, 1991 to 31 March, 1991 as a result of any new subdivision of land in the town;

(i)The level of competence of the previous management of the Royal Hotel was not related to the trading situation of the Royal Hotel at that time.

(j)The First Respondent had a prior connection with or knowledge of the business of the Royal Hotel;

(k)The First Respondent, by himself or by his companies was not a person who successfully leased, operated and managed licensed hotels and/or other licensed premises;

(l)The First Respondent had a prior connection
with or prior knowledge of the then directors of Sedore Pty. Limited;

(m)The Second Respondent had a prior connection with or knowledge of the then directors of Sedore Pty. Limited;

(n)The Second Respondent had prior knowledge of the business of the Royal Hotel;

(o)The third Respondent had a prior connection with or knowledge of the business of the Royal Hotel;

(p)The third Respondent had a prior connection with or knowledge of the then directors of Sedore Pty. Limited." (14)

I digress to say that no facts, matters or circumstances are pleaded indicating any basis on which O'Donnell, not being a trading or financial corporation, is said to have contravened the TP Act as a principal contravener.

Paragraph (15) pleads that the Grimsons were induced by and acted in reliance on the representations, to enter into the transactions on 28 October 1991.

In paras (16)-(21), the Grimsons plead their case in relation to the Deed of Release. First, the negotiations are pleaded para (16) in general terms. It is pleaded that between January and April 1992, O'Donnell, orally "and by his behaviour", made to Grimson "on his own behalf and/or on behalf of the second respondent" the following Representations ("the January-April 1992 Representations by O'Donnell and Evenlong"):

"(a)The First Respondent had suffered loss as a result of the purchase of the Royal Hotel;

(b)The Second Respondent had suffered loss as a result of its purchase of the Royal Hotel;

(c)The First Respondent required Sedore Pty. Ltd to be released under the Deed of Release in order to protect his interests;

(d)The Second respondent required Sedore Pty. Ltd to be released under the Deed of Release in order to protect its interests;

(e)The Second Respondent would effect extensive renovations to the interior and exterior of the Royal Hotel;

(f)The First Respondent had no prior connection with or prior knowledge of the then directors of Sedore Pty. Limited;

(g)The Second Respondent had no prior knowledge of or connection with the then directors of Sedore Pty. Limited;

(h)The First Respondent had no prior knowledge of or connection with the business of the Royal Hotel;

(i)The Second Respondent had no prior knowledge of the business of the Royal Hotel." (17)

According to para (18), each of the representations was made in trade and commerce and, according to para (19), by reason of those representations, O'Donnell and Evenlong engaged in misleading and deceptive conduct in contravention of s 52 of the TP Act. Particulars of the respects in which it is said that the representations were misleading and deceptive are given in para (19) as follows:

"PARTICULARS

(a)The First Respondent had not suffered loss as a result of the purchase of the Royal Hotel;

(b)The Second Respondent had not suffered loss as a result of its purchase of the Royal Hotel;

(c)The First Respondent did not require Sedore Pty. Limited to be released under the Deed of Release in order to protect his interests;

(d)The Second Respondent did not require Sedore Pty. Limited to be released under the Deed of Release in order to protect its interests;

(e)The Second Respondent did not effect extensive renovations to the interior and exterior of the Royal Hotel;

(f)The First Respondent had prior connection with the knowledge of the then directors of Sedore Pty. Limited;

(g)The Second Respondent had prior knowledge of the then directors of Sedore Pty. Ltd;

(h)The First Respondent had prior knowledge of or a connection with the business of the Royal Hotel;

(i)The Second Respondent had prior knowledge of the business of the Royal Hotel."

According to paras (20) and (21) the Grimsons were induced by and acted in reliance on, those representations by continuing to operate the business and by executing the Deed of Release.

A case of "unconscionable conduct" is also pleaded. For this purpose the Grimsons repeat earlier allegations in the pleading and claim that by the making of the representations pleaded in para (23), Evenlong and Enima "engaged in unconscionable conduct with [sic] the meaning of the unwritten law, from time to time, of the States and Territories which was in contravention of s 51AA of the Act [the TP Act]". The particulars contained in sub-paras 15 (a)-(m) and 20 (a)-(i)
are repeated.

In para (24) the applicants plead that O'Donnell, by his conduct, aided, abetted, counselled or procured, induced, was directly or indirectly concerned in and a party to, and conspired with, Evenlong and Enima, to effect, the contraventions pleaded earlier (apparently by Evenlong and Enima) whereby he was "involved in" those contraventions within the meaning of s 75B and s 82 of the TP Act.

Finally, in para (25) the applicants plead that "as a result of and their reliance on the contraventions of the Act, the Applicants have suffered loss and damage". The following particulars of loss and damage are given:

"PARTICULARS OF DAMAGE

(a)Loss of capital value of the business - $200,000.00

(b)Losses in carrying on the business - $30,000.00

(c)Costs of going into and out of the
business- $30,000.00

(d)Cost of improvements of a capital
nature of the business - $20,000.00"

REASONING
The position of Enima
I have already concluded, for reasons given earlier, that the application must be dismissed as against Enima. However, additional reasons will appear below why the application should be dismissed against it as well as against O'Donnell
and Evenlong.

The July 1991 Representations by O'Donnell and Enima
In the sub-headings below, references to paragraphs are references to paragraphs in the amended statement of claim filed 28 November 1995.

Paragraph 9 (a) - that O'Donnell had no prior connection with or prior knowledge of the business of the Hotel.
There is no evidence of the making of this representation in July 1991.

Paragraph 9 (b) - that O'Donnell had no prior connection with or prior knowledge of the then directors of Sedore, the vendor of the Hotel.
There is no evidence of the making of this representation in July 1991.

Paragraph 9 (c) - that O'Donnell had no prior knowledge of the business of the Hotel.
There is no evidence of the making of this representation in July 1991.

Paragraph 9 (d) - that Enima had no prior knowledge of the directors of Sedore, the vendor of the Hotel.
There is no evidence of the making of this representation in July 1991.

Paragraph 9 (e) - that the Marjason valuation was an accurate document in all respects.
O'Donnell faxed a copy of the Marjason valuation to Totman on 18 July 1991 and Totman faxed a copy of it to McDougall, on 2 August 1991. The respondents accept that the inference arises that Totman did so with O'Donnell's consent. However, these facts do not give rise to the representation pleaded.

Whether one who passes on a document makes any representation and if so, the nature of that representation, depends on the circumstances of each particular case. Important circumstances in this context in the present case are that it was knowledge common to O'Donnell and Grimson that O'Donnell was purchasing and on-selling and that it was in that context that O'Donnell had told Grimson that he had a "full Marjason valuation" on the Hotel. It may well be, as counsel for O'Donnell and Evenlong conceded, that O'Donnell was representing to Grimson that:

(a)the valuation had in fact been prepared by Marjason;

(b)the valuation had been prepared at his [O'Donnell's] request;

(c)he [O'Donnell] had a reasonable basis for supposing that Marjason was competent to prepare the valuation; and

(d)he [O'Donnell] had no reason to suppose that the valuation was otherwise than accurate.

In my view it has not been shown that these representations were false. In any event, as noted earlier, the representation pleaded in para 9 (e) does not arise.

Paragraph 9 (f) - that the Marjason valuation was obtained by O'Donnell and Enima.

In my view, the evidence does not establish the making of a representation that the Marjason valuation was obtained by Enima. The words on the title page of the valuation do not, for reasons which I gave earlier, establish that Enima was Marjason's client.

Moreover, by the time Grimson first saw the valuation on 22 August 1991, it had been made clear that the purchaser was to be Evenlong. Accordingly, even if the pleaded representation did arise from the front page of the valuation, there is no evidence that the Grimsons relied on it.

In so far as the pleaded representation is that the Marjason valuation was obtained by O'Donnell, it was true.

Paragraph 9 (g) - that the Hotel would be a highly profitable business.

Grimson's evidence was that O'Donnell had said to him that the lessee of the Hotel "should make a million quid" and that the Hotel was "a ripper pub". O'Donnell denied that he had made
the earlier of these two statements and said that although he would not have used the expression "ripper pub", he may have said something to the effect that he thought that the Hotel was a good one. He said that this was in fact his opinion at the time.

In my view, both statements are in the nature of "puffery". They are intended to be understood as, and can only be reasonably understood as, utterances of such an extremely general nature as to be all but devoid of meaning. They are distinct from both statements of fact and from statements of opinion having such significant content that they are susceptible of characterisation as "misleading" or "deceptive". One may make the point by asking whether the "million quid" was a reference to turnover, gross profit, net profit or some other accounting concept, and what period of time (one year, a lifetime, the period of a lease) the statement predicates.

If, contrary to the view which I have expressed, the statements are statements of opinion susceptible of being characterised as "misleading" or "deceptive", I think that they were statements of the opinion that the Hotel was a "profitable" one. It is not shown that O'Donnell did not hold that opinion or that he lacked reasonable grounds for holding it. Indeed, Marjason valued the Hotel business at $200,000 and O'Donnell caused Evenlong to pay that amount for it. Moreover, it is not shown that the Hotel was not, at the time, "profitable".

The August 1991 Representations by O'Donnell and Evenlong
Paragraph 12 (a) - that the Hotel was a very profitable business.
What I have said in relation to para 9 (g) applies.

Paragraph 12 (b) - that the Hotel was a successful business.
What I have said in relation to para 9 (g) above applies.

Paragraph 12 (c) - that the purchase price of the business as a going concern of the Hotel of $200,000 was a true indication of the profitability of the business as a going concern.
Marjason valued the Hotel business at $200,000 and that is the amount that Evenlong paid for it, as Grimson knew. There is no evidence that O'Donnell said anything to Grimson about the appropriateness of the purchase price or its relationship to the profitability of the business as a going concern, nor do I think that the pleaded representation arises from O'Donnell's reference to the Marjason valuation or the faxing of a copy of it by Totman to McDougall with O'Donnell's consent.

Paragraph 12 (d) - that the purchase price of $200,000 for the business as a going concern would produce an annual return in accordance with industry standards.
What I have said in relation to para 12 (c) above, applies.

Paragraph 12 (e) - that the trading figures for the years ended 30 June 1989, 1990 and 1991 for Sedore were as represented in the financial statements supplied to the Grimsons.
As noted previously, Grimson gave evidence that the Commonwealth Development Bank asked him to obtain three years' figures for the Hotel, that he told O'Donnell about this request and that O'Donnell replied in a way which, I have previously said, made it clear that he (O'Donnell) would have to obtain the figures from Sedore's representatives. Thus, the balance sheets and profit and loss accounts for the Hotel for the years ended 30 June 1989, 30 June 1990 and 30 June 1991 which O'Donnell couriered to Grimson on or about 19 September 1991, were known to Grimson to be figures which O'Donnell had obtained from others and was passing on, as the following the passage from the cross examination of Grimson shows:

"Your evidence is therefore, you told Mr O'Donnell you needed the financial statements of Sedore for the past three years, and you understood Mr O'Donnell would ask Sedore to provide them to him so he could pass them on to you, is that right?---That's right." (T 91.04-.07)

O'Donnell did not participate in the preparation of the figures and gave Grimson no reason to think that he had done so. Grimson did not give evidence that he understood that O'Donnell was warranting the correctness of the figures.

Moreover, the Grimsons, through their solicitors, sought to have included in the Deed of Assignment of Purchaser's Rights under Agreement for Sale, a warranty by Sedore as to the receipts of the business. Evenlong's solicitors, Gallens, informed Phillips Fox that they would refer this request on to Sedore's solicitors. Subsequently Gallens advised Phillips Fox that Sedore's solicitors had advised that Sedore would not agree to provide the warranty. The point of this evidence is that the Grimsons, through their agents for the purpose, Phillips Fox, understood that the source of knowledge and of any warranty in relation to trading figures was the present operator, Sedore, rather than O'Donnell.

There was a discrepancy between financial statements for the year ended 30 June 1989 prepared by Michael Gallagher, Certified Practising Accountant, apparently produced in answer to a subpoena issued on the application of the Grimsons, and the figures, also prepared by Mr Gallagher, which O'Donnell had transmitted to Grimson. In the figures which O'Donnell had transmitted, the figure for sales for the year ended 30 June 1990 was $535,941.09 and in the financial statements apparently produced on subpoena, the figure for sales for that year was only $435,941.09 - a difference of exactly $100,000. Apart from establishing the existence of the discrepancy, the evidence cast little or no further light on the matter. In particular, it did not establish any explanation for the discrepancy. What is important for present purposes is that I accept O'Donnell's evidence that he had no knowledge of the circumstances in which the second set of financial statements, that is to say, those which were apparently produced on subpoena, had been created and had not seen those figures prior to being shown them in the witness box in cross examination.

Paragraph 12 (f) - that the Marjason valuation was an accurate document in all respects.
What I have said in relation to para 9 (e) earlier applies.

Paragraph 12 (g) - that the quantity of alcoholic drinks sold by the Hotel as represented by the liquor licensing fees paid by the Hotel was understated by between $20,000 and $30,000 as at July 1991.
Grimson gave evidence that O'Donnell told him in late August or early September 1991 that the reason why Sedore would not give a warranty as to the turnover at the Hotel was that there were "fairly big" "off licence purchases" which could be of the order of "about $20,000 or $30,000". Again, it is clear, on the basis of Grimson's evidence of this conversation, that O'Donnell was passing on information supplied to him by Sedore's directors, Huggett, Riddles or Johnstone, or the licensee, White.

In any event, it is not shown that the representation, if made, was false. It is interesting to note that Marjason observed in his valuation that the cost of liquor purchases for the year ended 30 June 1990 was $140,700.00 and calculated that the six months' trading figures which he was given for the period 3 December 1990 to 2 June 1991 suggested liquor purchases for the year ended 30 June 1991 of $153,348.00. The mid point between these two amounts is $147,024.00. In Sedore's statement of liquor purchases returned to the New South Wales Liquor Administration Board for the year ended 30 June 1991, the comparable figure was stated to be only $116,905, a difference of $30,119.

Paragraph 12 (h) - that the number of customers at the Hotel would substantially increase in the immediate future as the population of Bungendore was increasing substantially as a result of a new subdivision of land in the town.
Grimson's evidence is that O'Donnell said words to the effect:

"You guys won't have any worries as there will be a population explosion out there because of the new estate".

O'Donnell said that he could not recall the conversation but did not deny that it took place and said that he may have mentioned the "Buckingham Estate" subdivision which was apparently the name of a subdivision proposed at the time.

There is no suggestion in the evidence that O'Donnell did not believe that there would be a new subdivision which would give rise to an increase in the population of Bungendore and in the Hotel's source of patrons. O'Donnell was merely expressing an opinion on a matter of general public interest. There is no suggestion that he professed to have, or was believed by Grimson to have, any special expertise or source of information relating to the subject matter of the statement. O'Donnell was not cross examined on his state of mind in relation to the statement; the evidence does not establish that his belief did not accord with the statement; the evidence does not show that O'Donnell did not have reasonable grounds for holding and expressing the opinion; there is no evidence that no subdivision was proposed or that any subdivision proposed was of such a kind that it would not give rise to an increase in population; there was no evidence as to whether the Buckingham Estate Subdivision or any other subdivision proceeded; there is no evidence that the subdivision referred to in the statement would not have had, or did not in fact have, a beneficial effect on the Hotel's trade; and there is no evidence that Grimson was induced by the expression of opinion to purchase the Hotel.

The statement of opinion, if made, did not give rise to a cause of action for contravention of s 52 of the TP Act for the various reasons which I have mentioned.

Paragraph 12 (i) - that the trading situation of the Hotel was adversely affected by the incompetent management of the Hotel.
Grimson's evidence was that O'Donnell said words to the effect:

"the guys that are there don't know how to run a pub ... and trade will go better with a decent operator".

O'Donnell denied saying this. In cross examination, Grimson adhered to his evidence. O'Donnell's denial was not challenged in cross examination.

O'Donnell said that he had not been of the opinion that Riddle, Huggett or White were incompetent managers. In fact there was no evidence as to the quality of the previous management of the Hotel. Counsel for the Grimsons informed me that his clients had caused White to attend Court on subpoena but that they did not intend to call him. Counsel for the Grimsons said that he had conferred with White. I infer that White was available to be called by the Grimsons but would not have given evidence of assistance to them: Jones v Dunkel (1959) 101 CLR 298.

I am not satisfied on the balance of probabilities that the statement was made. If it was, it is not shown to have been misleading or deceptive.

Paragraph 12 (j) - that O'Donnell was a person who by himself or by his companies successfully leased, operated and managed licensed hotels and/or licensed premises.
There is no evidence that a representation to this effect was made by O'Donnell. There was evidence that O'Donnell had an interest in a number of hotels, but not that he had ever
leased, operated or managed one, or, as already indicated, that he had told Grimson that he had.

Paragraph 12 (k) - that Evenlong had no prior connection with or knowledge of the then directors of Sedore.
There is no evidence that this representation was made.

The January-April 1992 Representations by O'Donnell and Evenlong
The pleaded January-April 1992 Representations by O'Donnell and Evenlong are relied upon in connection with the relief sought in respect or the Deed of Release which, it will be recalled, was dated 16 April 1992.

Paragraph 17 (a) - that O'Donnell had suffered loss as a result of the purchase of the Hotel.
Grimson gave evidence which O'Donnell did not dispute that on or about 5 March 1992 O'Donnell said to Grimson, "I have lost more on this deal than you guys." There is no evidence that this was untrue and it may well have been true. By 5 March 1992, the agreement which was to be embodied in the Deed of Release on 16 April 1992 had been reached. Evenlong had paid Sedore $200,000 as the purchase price for the Hotel business. But far from having received this amount from the Grimsons, Evenlong had forgiven half of the debt of $100,000 owing to it by them; had reduced the rent payable by them for the Hotel premises by nearly one half; and had agreed to extend the term of the lease from ten years to 12 years. Thus, through Evenlong, O'Donnell had borne consequences of the reduced profitability of the Hotel that had been experienced under the Grimsons' management.

Paragraph 17 (b) - that Evenlong had suffered loss as a result of the purchase of the Hotel.
What I have said in relation to para 17 (a) above applies.

Paragraph 17 (c) - that O'Donnell required Sedore to be released under the Deed of Release in order to protect his [O'Donnell's] interests.
Grimson gave evidence that O'Donnell had said that the inclusion of Sedore as a party to the Deed of Release was to protect him (O'Donnell) from legal action by Sedore in case the Grimsons commenced legal proceeding against Sedore. There is no evidence that this was not O'Donnell's purpose and it is reasonable to think that it was.

Paragraph 17 (d) - that Evenlong required Sedore to be released under the Deed of Release in order to protect its interests.
What I have said above in relation to para 17 (c) applies, mutatis mutandis.

Paragraph 17 (e) - that Evenlong would effect extensive renovations to the interior and exterior of the Hotel.
Grimson's evidence was that in early December 1991, O'Donnell said that he had intended to renovate the Hotel later, but that he would do it "now to assist you guys to increase the trade." Grimson also gave evidence that a workman attended at the Hotel, that O'Donnell had said that he wanted the exterior rock work to be of the same finish as the interior extension and that he would repaint and recarpet upstairs and rebuild the men's and ladies' bathrooms and toilets. O'Donnell's evidence was that all that he said about renovation was that he intended to carry out some cosmetic building work at the Hotel. There was no evidence that O'Donnell did not have this intention.

I do not find it necessary to resolve the conflict between O'Donnell's and Grimson's versions of what passed between them in this respect, because I am clearly of the view that if O'Donnell did say in early December 1991 these things that Grimson attributes to him, the statements did not induce the Grimsons to enter into the Deed of Release on 16 April 1992.

In the first place, Grimson has not given evidence of that inducement. Indeed, in para 19 of his affidavit sworn 8 September 1995, he described the beliefs which, he says, induced him to enter into the Deed of Release and those beliefs do not include any reference to statements made by O'Donnell concerning renovation.

Further, it must be remembered that the Grimsons were represented by solicitors in the negotiation of the agreement which was to find expression in the Deed of Release on 16 April 1992. Gallens forwarded a form of Deed of Release to Phillips Fox on 20 March 1992; Phillips Fox replied on 25 March 1992 suggesting amendments; Gallens wrote on 8 April enclosing a new draft Deed of Release for approval; and on 15 April 1992 Gallens forwarded to Phillips Fox the final form of deed which was executed the following day. There was no reference in the correspondence or the Deed of Release to the subject of renovation.

In 1993, the Grimsons attempted to sell the Hotel and requested Evenlong to reduce their indebtedness to it to $25,000. By 28 February 1994 Phillips Fox had ceased to be instructed by the Grimsons.

If O'Donnell's statement about renovation of the Hotel had induced the Grimsons to enter into the Deed of Release, one would expect Phillips Fox to have raised the subject in the course of the correspondence by which the terms of the Deed of Release were negotiated, and one would expect the Grimsons to have complained at an early stage that the foreshadowed renovations had not been effected.

The Grimsons have not established the making of the representation pleaded in para 17 (e).

Paragraph 17 (f) - that O'Donnell had no prior connection with or prior knowledge of the then directors of Sedore.
According to para 22 of Grimson's affidavit sworn 12 October 1995, O'Donnell told him that the directors of Sedore were:

" ... a couple of Real Estate Agents and some fellow who won Lotto... . Apart from buying the Hotel from them, I do not know a great deal about them."

O'Donnell did not deny having said those words.

In cross examination, Grimson elaborated on his affidavit evidence as follows:

"At the time I was trying to find out who'd ripped me off. I asked him words to the effect of, 'who are the directors of Sedore Pty Limited?' he said to me words to the effect of, 'there are a couple of Real Estate Agents and some fellow who won Lotto'. In my mind I was convinced that he didn't know a lot about them. He didn't have a great connection with them." (emphasis supplied)

In my opinion, the evidence establishes that O'Donnell did not "know a lot about" Riddles, Huggett or Johnstone and did not have "a great connection with them". Accordingly, if it be accepted that Grimson's state of belief which resulted from what O'Donnell told him was that which Grimson described in his oral evidence quoted above, there was no discordance between that state of belief and the position in fact.

In any event, by the time of execution of the Deed of Release on 16 April 1992, Grimson had come to believe that there was a connection between O'Donnell and the directors of Sedore. On 21 October 1991, he told his solicitor, McDougall, "... in some way the people running the Hotel prior to the sale were in some way financially linked or connected with [O'Donnell]." On 16 December 1991 he told the same solicitor that he suspected that O'Donnell was in some way connected with Sedore and may have lent Sedore money. In fact, McDougall's diary note of a conversation with Grimson on 16 December is as follows:

" ... he suspects that GO'D is in some way connected with the Vendor; he may have lent them some $; ..." (Ex R1, p 258)

There is a question whether O'Donnell's words "apart from buying the Hotel from them, I do not know a great deal about them" gives rise to the representation pleaded. But even if it does, the Grimsons have not established that in fact the words generated an erroneous belief on the part of Grimson which induced the Grimsons to enter into the Deed of Release.

Paragraph 17 (g) - that Evenlong had no prior knowledge of or connection with the then directors of Sedore.
What I have said in relation to para 17 (f) above applies.

Paragraph 17 (h) - that O'Donnell had no prior knowledge of or connection with the business of the Hotel.
According to Grimson's affidavits sworn 8 September 1995 para 8, and 12 October 1995 para 26, O'Donnell said to him on 29 January 1992:

"I want a Deed of Release to cover myself as I am not involved in this matter."

O'Donnell did not deny having said these words.

I accept the respondents' submission that in the context in which the words were uttered, they signify that O'Donnell wanted a Deed of Release to cover himself as he was not involved in, or morally or legally responsible for, the matter of which Grimson was complaining, namely, the discrepancy between the trading figures as reported to Marjason and those being achieved by the Grimsons.

The evidence did not establish that Grimson was familiar with the Hotel, that he participated in the preparation of any document supplied to the Grimsons or that he knew that any document supplied to them was false in any respect. It is not established that O'Donnell was legally or morally responsible for the subject matter of Grimson's complaint.

Paragraph 17 (i) - that Evenlong had no prior knowledge of the business of the Hotel.
What I have said in relation to para 17 (h) above applies.

FALSITY OF THE REPRESENTATIONS
In the preceding section of these Reasons dealing with the making of the Representations, I dealt with the issue of falsity. However, I accept the respondents' submission that it is appropriate to give separate attention to the matters that have arisen in relation to the Marjason valuation, since it featured so largely in the Grimsons' case.

I gave an account earlier of para 10 of the amended statement of claim. I accept the respondents' submission that:

"The evidence demonstrates that Mr Marjason is, and was at the relevant time, a highly competent and vastly experienced valuer of hotels who brought to bear a healthy degree of scepticism ... in respect of information provided to him by publicans or their advisers." (para 173 of respondents' written submissions)

I also accept the respondents' submissions that Marjason "was well qualified to detect any irregularity in the trading figures presented to him" and that "the relationship between Marjason and Mr O'Donnell was an arm's length professional relationship" (respondents' written submissions paras 174 and 175).

The Grimsons make the following submission in relation to the Marjason valuation:

"38.In general, the accuracy of the valuation must be questioned if only because of the claim on page 5 that the liquor purchases for the year ended 30 June, 1990 would be understated due to 'off licence purchases' i.e. undeclared for liquor tax. In evidence, Mr. Marjason provided detailed calculations on data from the valuation to show these 'off licence' purchases were negligible. The assertion that the liquor purchases for 1990 were understated is therefore false and deceptive. As the calculations used no new data, Mr. Marjason must or must be taken to have known this when providing his valuation."

The submission that Marjason "must or must be taken to have known" that a particular statement in his valuation was "false and deceptive" is not one to be made lightly. The statement in question relates to the 1991 fee for the liquor licence in respect of the Hotel. The amount shown in the valuation as the cost of liquor purchases for the year 1 July 1989 to 30 June 1990 was $140,700 and the relevant licence fee was shown in the valuation as being 10% of that amount, namely $14,070. The statement in Marjason's valuation which, according to the submission, Marjason "must [have known] or must be taken to have known" made knowing it to be false and deceptive is the following:

"Note: we understand a quantity of liquor was purchased 'Off Licence Fee', therefore, the said liquor would be understated."

It was never put to Marjason in the witness box that he knew this statement to be "false and deceptive". The allegation was not referred to in the Grimsons' amended statement of claim. It found expression for the first time in the Grimsons' submissions, long after the end of the hearing. Marjason was not a party and so was not represented on the hearing. Apart from the fact that these Reasons for Judgment have had to deal with the submission, he would not know that the allegation was being made against him. In fairness to him, it must be said that the allegation has no foundation whatever in the evidence. Unfortunately, I feel bound to say that it was a baseless submission made gratuitously against a non-party witness and that in accordance with proper principles and standards of advocacy, the submission should not have been made: see New South Wales Barristers' Rules 35 (a), 36 (a) and 41. I have no hesitation in rejecting the submission.

The Grimsons submit that I should accept that the trading figures for the 26 weeks from 13 December 1990 to 2 June 1991 were false. However, they have not been shown to be false. Moreover, there is no evidence that O'Donnell believed them to be false or that he was in any way involved in preparing them.
Marjason, whom I accept as an impressive, well qualified and very experienced valuer of hotel businesses, gave the following evidence in cross examination:

"Mr Marjason, is not the bottom line regarding your valuation the fact that if the figures given to you were substantially wrong - - -?---I don't think they were.

I am not asking you to agree. Does it not mean though that if the figures given to you were substantially wrong it means that you valuation likewise would have been substantially wrong?---I'll agree with you on that but I do not agree that they would be substantially wrong because based on normal industry standards everything lined up. On the liquor purchases, on the poker machine takings, it all lined up with industry standards." (T 281.39-282.06)

I accept this evidence. Marjason explained in some detail why he held the view that the figures which had been provided to him were probably correct. I do not think it necessary to give a detailed account of his evidence in this respect. The Grimsons make the following submissions in paras 20 and 21 of their written submissions:

"20.The trading figures quoted in the valuation are demonstrably incorrect as regards AAD, public telephone, juke box and pool table takings.

21.The trading figures for alcohol sales are also demonstrably false when compared with the takings actually deposited by Sedore for the period December 1990 to June 1991. This is as set out in the table produced by Detective Sergeant Wheeler based on Sedore's banking records for the period." (emphasis supplied)

The "table" referred to in para 21 quoted above was not in evidence. In any event, Wheeler gave the following evidence:

"I knew that there was a savings account which I understood to include deposits made by the licensee in relation to the tax to be paid. I'm not sure now whether it was for amusement devices or for liquor, but I think it was the amusement devices. It was a savings account, the bank couldn't help me with any reconstruction of that.

All right so you did not have access to that?---No." (T 208.27-.32)

"There was another account in relation to the TAB, described just as that, the TAB account." (T 209.11-.12)

"There may be others [other bank accounts] but that's all I knew of at the time I created the schedule." (T 209.17-.18)

"MR STEVENSON: Detective Sergeant, in any event, you conducted no analysis, did you, of the manner in
which the expenses of the hotel were dealt with?---No.

For all you know, expenses of the hotel were, from time to time, paid in cash?---That may well be true. I'm not an accountant, I've just done an analysis for my own benefit at the time and that's as far as I can take it." (T 211.21-.26)

The somewhat breathtaking "demonstrably incorrect" and "demonstrably false" submissions of the Grimsons quoted earlier are simply not made out.

I find that O'Donnell retained Marjason because he had great confidence in his expertise; that he (O'Donnell) did not check the correctness of any part of the Marjason valuation; and that he relied on the figure of $200,000 arrived at by Marjason as representing the value of the Hotel business.

It is somewhat improbable that O'Donnell would have been a party to the preparation or supply of inflated figures for the takings of the Hotel. He knew that Marjason would arrive at his valuation for the Hotel business on the basis of such figures which would therefore form the basis of the price which his company, Evenlong, was to agree unconditionally to pay to Sedore. It is true that Evenlong assigned to the Grimsons its rights under the Agreement for Sale of Business and the Grimsons indemnified Evenlong. However, if the takings were substantially less than those on which the price of $200,000 was based, O'Donnell would have reason to fear encountering a problem with the Grimsons after a time. It is true that O'Donnell thought that he was getting the Hotel freehold and business for a bargain price and that there was therefore a "cushion" available in the price paid for the freehold. But I do not accept that at the relevant time, O'Donnell was in fact influenced by this consideration. A further matter is that in December 1991 Grimson had thought that O'Donnell must have been as much deceived by Sedore as he (Grimson) was. He had asked O'Donnell to join with him in suing Sedore. I reject the following submission of the Grimsons:

"27.All of the Respondents must be taken to have known of the misrepresentations at all times during the negotiations prior to the sale of the business to the Applicant [sic] and the execution of the Deed of Release. This is because the First Respondent had a detailed knowledge of the hotel and of at least the correct trade figures for the AAD's and other amusement machines. In addition, the First Respondent was involved in the supply of all other information under circumstances under which it must be inferred that he had knowledge of the falsehoods. It may also be inferred that he was involved in the production of those false trade figures."

The Deed of Release
Grimson's evidence is that he entered into the Deed of Release because of his belief that O'Donnell:

(a)had no role or connection with the Hotel business; and

(b)had no role or connection with the preparation of the trade figures supplied to Marjason.

In relation to (a), the evidence shows that O'Donnell had no role or connection with the Hotel business. Such a role or connection was not constituted by the facts that:

he had lent $10,000 to Sedore;

he had received repayments off that loan out of the proceeds of the AAD's;

(iii)he had, through Arko, a jukebox and pool table located in the Hotel premises.

Even if O'Donnell had had a role or connection with the Hotel business, by the time of the Grimsons' execution of the Deed of Release, Grimson believed that there was a connection between O'Donnell and Sedore and that O'Donnell may have lent money to the directors of Sedore. As I found earlier, the Grimsons were not induced to enter into the Deed of Release by any representation to the effect of that referred to in (a) above.

In relation to (b), my finding is that O'Donnell had no role or connection with the preparation of the trade figures supplied to Marjason.

The terms of the Deed of Release were negotiated by Phillips Fox on behalf of Grimson. It is not shown that O'Donnell or Evenlong engaged in unconscionable conduct towards the Grimsons in respect of the events leading up to execution of the Deed of Release.

There is no basis for the Grimsons' being relieved from the effect of the Deed of Release. Clauses 3 and 8 of the Deed of Release quoted earlier defeat any case which the Grimsons might otherwise be entitled to make out against Evenlong or against O'Donnell as a representative of Evenlong.

CONCLUSION
It is not amiss to note that as between the Grimsons, it was Grimson who carried out all negotiations of their purchase and lease and of the Deed of Release, and who gave evidence in the case. It was not suggested, and could not have been suggested, that if Grimson's case failed, his son, Ricky Martin Grimson, was entitled to succeed. The cases of both Grimsons stand or fall together.

The Grimsons have failed to make out a case against any of the respondents. It follows that their application will be dismissed with costs.

I certify that this and the preceding 68 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren.
Associate:
Dated:8 November 1996

Heard:       29, 30, 31 July; 1, 9 August; 29 October 1996
Place:       Sydney
Decision:     8 November 1996
Appearances: Mr Irving Wallach of counsel appeared for the applicants.

Mr James Stevenson of counsel instructed by Clayton Utz appeared for the respondents.

[1996] FCA 970

8 Nov 1996