Hunt Contracting Co Pty Ltd v Roebuck Resources Nl
[1995] FCA 839
•17 Oct 1995
NO QUESTION OF PRINCIPLE
IN THE FEDERAL COURT OF AUSTRALIA )
)
WESTERN AUSTRALIAN )
DISTRICT REGISTRY ) No WAG 43 of 1995
)
GENERAL DIVISION )
BETWEEN:HUNT CONTRACTING CO PTY LTD
Appellant
AND:ROEBUCK RESOURCES NL
First Respondent
PETER DONALD ALLCHURCH
Second Respondent
SAMUEL WARNE
Third Respondent
CORAM: FOSTER, HILL & LINDGREN JJ
PLACE: PERTH
DATED: 17 OCTOBER 1995
MINUTES OF ORDER
THE COURT ORDERS THAT:
The appeal be dismissed.
The appellant 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 )
)
WESTERN AUSTRALIAN )
DISTRICT REGISTRY ) No WAG 43 of 1995
)
GENERAL DIVISION )
BETWEEN:HUNT CONTRACTING CO PTY LTD
Appellant
AND:ROEBUCK RESOURCES NL
First Respondent
PETER DONALD ALLCHURCH
Second Respondent
SAMUEL WARNE
Third Respondent
CORAM: FOSTER, HILL & LINDGREN JJ
PLACE: PERTH
DATED: 17 OCTOBER 1995
REASONS FOR JUDGMENT
THE COURT:
Hunt Contracting Co Pty Ltd ("the appellant") appeals from the judgment of a judge of this Court (French J) dismissing an application brought by it against the respondents claiming damages for conduct alleged to be in breach of s52 of the Trade Practices Act 1974 (Cth). Section 51A and 75B of that Act were also relied upon. In the alternative, the appellant had sought damages in negligence.
The application arose out of negotiations which led to the appellant entering into an agreement with the first respondent for the purchase of an alluvial gold mining operation located at Mary River in the Kimberley region in Western Australia. Numerous representations, both oral and in
writing, were alleged to have been made and to have been false. The case occupied approximately six weeks of hearing and the evidence was, as the learned judge below observed, both complex and protracted. The appeal papers comprised over 5,000 pages and the judgment appealed against 176 pages.
The background to the case, the case as pleaded and the role of the various participants are set out in considerable detail in the judgment appealed against and need not be repeated. Although the amended notice of appeal raised a number of matters, ultimately only one ground was pressed. Properly, counsel for the appellant accepted that many of the findings initially challenged depended upon his Honour's assessment of the evidence of both lay and expert witnesses which an appeal court would not interfere with.
The one matter raised in the appeal concerned what was said to involve a misrepresentation contained in a document (hereafter referred to as "the Valuation Document") entitled "Mary River Gold Mine Tenement and Equipment Valuations" which his Honour found had been forwarded to Mr Wreford, the principal of the appellant, by Mr Allchurch on behalf of the first respondent together with a letter of 17 May 1990 enclosing other documents. The factual background is discussed in greater detail later under the heading of "Reliance". It should be said at the outset that the alleged misrepresentation did not feature prominently during the trial
where the focus was more on oral representations said to have been made concerning the value of gold in the ground.
WAS THERE MISLEADING OR DECEPTIVE CONDUCT?
The Valuation Document on its face purported to be a valuation of the various elements of the gold mining operation then being offered for sale, namely the mineral tenements, water resources and plant and equipment. Under the heading "Mineral Tenements" the following appeared:
"Gold Resources: $000s
Present Measured Resources: 384,000 loose M3 at 0.4 to 0.5 g/m3 recovered. Value at present gold price ($480) $2,370,675 gross.
Inferred Resources: 1,000,000 M3 gross value $6.17 mill.
Potential Resources: 3,000,000 M3 gross value $15 mill.
Total Gross Resource Value: $23.47 mill.
Sale Valuation of Gold Resource, 8% of gross value of measured resource only: 189"
The appellant accepts that the quantity of "Present Measured Resources" is to be taken as a statement of opinion but says that, as framed, the Valuation Document is misleading and deceptive because there had not, as represented, been a measurement with a sufficient degree of precision to demonstrate that there were "measured" resources of the extent specified. The question thus turns upon the meaning of the words "Present Measured Resources" in the context in which the Valuation Document came to be handed to Mr Wreford.
After some preliminary contact in early May 1990, Mr Wreford met Mr Allchurch by appointment on 16 May 1990. According to Mr Allchurch's evidence, which his Honour preferred to that of Mr Wreford, Mr Allchurch spoke of a gold resource of 400,000 cubic metres with recoverable gold of between 0.3 to 0.5 grams per cubic metre at Mary River which was for sale and mentioned the likelihood of there being more than a million cubic metres of resources. Mr Allchurch warned Mr Wreford about his lack of experience in mining and on several occasions recommended that he should take advice from an expert on resource and metallurgical matters. It may be noted that his Honour found Mr Allchurch generally to be a credible witness, a view he did not hold of Mr Wreford.
The next day Mr Allchurch forwarded to Mr Wreford a letter in the following terms:
"Mary River Gold Mine
To follow up our conversation yesterday, I have enclosed for your information the following:
- Report on gold resource estimates by S.B. Warne
- Equipment Schedule with written down valuations
- Tenement map
- Information Memorandum
- Plant photographs
- Roebuck Resources N.L. 1989 Annual Report
- Roebuck Resources N.L. December and March Quarterly Reports
All tenements and plant are owned fully by Roebuck Resources N.L. All tenements are in good standing with the Mines Department.
We commenced mining on a measured resource of 150,000 cubic metres in November 1988. As you can see from the production summary on page 7 of the Information Memorandum we did well until our surface water was exhausted in June 1989. However, with good management I believe the plant could operate fully, using the present bore field.
To bring the summary up to date, in February we treated 8943 cubic metres, March 10, 749 cubic metres. Despite very low average ore throughput rates for the year the project was still cash positive. There is no doubt that with ore throughputs of greater than 600 cubic metres per day returns are good. With good management throughputs of 1,000 cubic metres per day are achievable.
As I mentioned, the plant is not recovering all the fine gold fraction and requires modification to improve this aspect. The plant designer-builder, Steve Sickerdick (085 244068), is keen to purchase the project, but has not so far been able to raise finance to do so. He has indicated to me that he would be prepared to consult on technical matters or come in as a partner with alluvial expertise.
We recently hired local plant consultant, Howard Fielding (450 4243) to advise us on plant modifications. Please feel free to speak to him if you wish.
We have not systematically tested the coarse tailings heap, but Sam Warne believes it will grade between 0.2 and 0.35 grammes per cubic metre. We have not measured the heap, but it would be between 60,000 to 100,000 cubic metres and as such represents a substantial and easily accessible gold resource.
If you are interested in the project I suggest you make a site visit as soon as possible to satisfy yourself as to the equipment, water and resource disposition. We would have no objection to check sampling of the ore zones, by you or your consultants.
Please contact me should you require further information."
The report on gold resource estimates was prepared by a Mr Warne, a geologist, for the first respondent's internal purposes, during February 1990. It referred to there being "assessed resources" totalling 400,000 cubic metres as well as unassessed resources within the "present tenements" of 1,000,000 cubic metres and unassessed resources outside those tenements of a further 2,420,000 cubic metres.
The report detailed the work done and methodology adopted in arriving at the assessed resource figure of 400,000 cubic metres. It is clear that the figure of 400,000 cubic metres is an estimate derived from the sampling procedure outlined in the report.
The Information Memorandum was prepared by Mr Olney, a director of the first respondent, who was also a geologist. It contained, among other information, details of gold production achieved from November 1988 to January 1990. Under the heading "Reserves and Resources" the following appears:
"The reserves and resources are distributed throughout the tenements and are summarised in Table 3.
1.Creekbed and bench deposits of the Mary River (between Dam and Thompson Creeks, Thompson Creek, Car Body Creek and Susan-Peter Creek) are estimated to total 250,000 bank cubic metres on the basis of detailed mapping and traversing. Preliminary sampling indicated grades in the range 0.3 to 0.5 grams per cubic metre. Gold in assessed creeks occurs mainly as fine grains and thin flakes, with some coarser and occasional small nugget gold.
Additional volumes of higher grade material available from unmapped smaller tributary creeks, alluvial and eluvial deposits are estimated to total 150,000 bank cubic metres. Preliminary sampling of most of these deposits indicates grades of around 0.5 grams per bank cubic metre.
Measured and indicated resources total 400,000 bank cubic metres.
2.Inferred resources within Mining Leases and Prospecting Licences comprise older red gravel deposits occurring in ancient channels, consisting of bouldery stream gravels overlain by lower grade flood silts and sands. In basal channel sections grades are estimated from test-mined parcels to range from 0.3 to 0.5 grams per bank cubic metre.
Overlying lower grade gravels and side bank flood gravels have not been tested in detail, but grades are expected to carry gold grades of 0.1 to 0.4 grams per bank cubic metre.
The old gravel deposits total in excess of 1,000,000 bank cubic metres, but will require further testing and sampling to upgrade to reserve status. The old Mary channel immediately west of Mary Dam provides a convenient section for testing
which could be carried out in conjunction with mining of Mary River streambed deposits.
3.Potential resources within the Exploration Licence and Prospecting Licences 80/1168 and 80/1169 are estimated to be in excess of 3,000,000 bank cubic metres. These potential resources will require detailed mapping and testing to determine their potential."
Table 3 summarises the make up of the 400,000 cubic metres and is derived from, and identical to, material in Mr Warne's report.
The Information Memorandum indicated that it was prepared for the purpose of enabling an interested party to carry out an independent assessment. It contained a disclaimer.
It is conceded that the statement in the Valuation Document complained of would not have been misleading if it had stated that the amount of 384,000 cubic metres represented "measured and indicated" resources and had referred to bench cubic metres, rather than loose cubic metres. It is common ground that a loose cubic metre is approximately 1.2 times a bench cubic metre and this conversion rate appeared in the Information Memorandum.
The appellant placed emphasis upon the difference between the word "measured" as descriptive of the resource used in the Valuation Document and the expression "measured and indicated" as used in the Information Memorandum. It was said that the representation of a "measured" quantity of ore suggested a precision absent from the expression "measured and indicated" and that a reader to whom the Valuation Document was addressed could understand that the figure disclosed as measured resource had been derived by a precise measuring process (at least to a 15% discrepancy) in contrast to the figure of measured and indicated resource (400,000 cubic metres) which contained within it some unspecified quantity of unmeasured and merely indicated resource. It was also submitted on the evidence that it had been so understood by Mr Wreford who had relied upon his understanding to this effect in entering into the contract to purchase and in the result had suffered damage.
His Honour found the representation not to be misleading. He said that the valuation had to be read in the context of the letter of 17 May and other documents enclosed with that letter. With this we would agree. We would add that it should also be read against the background of the conversation of 16 May to which we have already referred.
Two matters emerge from the context. The first is that the subject matter of discussion was at all times a resource of 400,000 cubic metres as assessed by Mr Warne using the methodology outlined by him. The second is that the
documents were, as his Honour observed, to be read in conjunction with the suggestions that the resources be checked and that Mr Wreford take expert advice.
Without a realisation that the reference to "loose M3" was intended to refer to bench cubic metres, it would be impossible to reconcile the 384,000 cubic metres with the 400,000 cubic metres referred to in the other documents. The evidence discloses how the figure of 384,000 was derived by Mr Allchurch but that is not of considerable assistance in resolving the case. In short, it involved subtracting the figures shown in the letter of 17 May as being the material treated in February and March, converted to bench cubic metres from the figure of 400,000. We are satisfied, however, that no expert would have been misled. An expert would assume something was wrong with the description if expressed in loose M3. An expert might perhaps have been momentarily confused but, in our opinion, would not have been misled or deceived.
Where a representation, be it of fact or opinion, is claimed to involve conduct which is misleading or deceptive or likely to mislead or deceive, it will be necessary to determine to whom the representation is directed where more than one possible construction may be open: cf Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1992) 38 FCR 1 at 49 ff per Hill J, with
which passage Foster J agreed at 27. See also at 4 per Sheppard J.
The letter of 17 May was, of course, addressed to Mr Wreford, but it is clear from that letter and the surrounding circumstances to which reference has already been made that it was intended not for the information of a lay purchaser without the benefit of technical expert assistance, but for a prospective purchaser who would obtain expert advice. It was open on the evidence to find, as his Honour did, that in the context a person to whom the representation in the Valuation Document would come would understand the 384,000 cubic metres as referring to the same resource as the 400,000 cubic metres to which Mr Warne and Mr Olney referred in the report and Information Memorandum as estimated in accordance with Mr Warne's methodology.
Once this is appreciated it follows, in our opinion, as French J held, that the representation was not misleading or deceptive.
This conclusion is reinforced by the fact that if the word "measured" as used in the Valuation Document was intended to mean "measured with precision" rather than "measured and indicated", it would be clear to any expert that the valuation was very substantially understated. The formula of 8% of gross value of resource is a formula relevant to
cases where the resource is measured and indicated rather than where there has been a more precise measurement.
It may be that Mr Wreford himself believed, as he suggested in evidence, that the figure given for the measured resource was different from the 400,000 cubic metres figure suggested by Mr Warne's report, the difference being that it excluded the less certain "indicated resource" included within the 400,000 cubic metres figure. There is no finding to this effect by his Honour and given the comments made as to Mr Wreford's credit by his Honour, this Court on appeal could not safely accept this evidence. More significant to Mr Wreford, it might safely be inferred, was the valuation of $2,370,675 gross at the then gold price and that figure, it is now accepted for the purposes of the appeal, was correct.
That leads then to two other difficulties in the way of the appellant. Assuming that the "Present Measured Resources" statement in the Valuation Document was capable of being misleading or deceptive, there was no direct evidence that Mr Wreford relied upon it. Nor did his Honour find that any damage suffered by Mr Wreford was caused by the representation. Indeed, his Honour's finding was to the contrary. We come to deal then with these two matters.
RELIANCE
Paragraph 8(b) of the amended statement of claim pleaded that Mr Allchurch represented to the appellant that the tenements contained a present measured resource of 384,000 loose cubic metres by handing to him the Valuation Document. Paragraph 14 pleaded that acting in reliance on, inter alia, that representation and induced thereby, the appellant entered into the contract of purchase.
As will be seen, the case is not one in which there was no evidence relating to reliance but rejection by the trial judge of certain of the evidence of Mr Wreford makes it impossible to say that any evidence of reliance on the "Present Measured Resources" representation has survived the trial. Moreover, as already noted, the way in which the trial was conducted shows that, having regard to the large number of representations pleaded, that representation did not feature prominently.
Mr Wreford's evidence was that the Valuation Document was handed to him by Mr Allchurch over Mr Allchurch's desk in his office in Emerald Terrace, West Perth in May 1990 when they discussed various matters mentioned in the document. He said that they adjourned to a restaurant or cafe in Hay Street where their discussion about the gold mine continued. He said that he read the reference to the "Present Measured Resources" of $2.37 million and that Mr Allchurch confirmed
that there was "$23 million worth of gold" all up; that he looked at the dollar amounts stated for the various items and asked for confirmation of the gross figure of $23 million, to which Mr Allchurch said "Yes, that's $23 million sitting in the ground"; that he asked Mr Allchurch in relation to the item "Present Measured Resources", the question "That's measured?", to which Mr Allchurch answered: "Yes, that is definitely there. That is a measured resource, we know it's there"; and finally that he (Mr Wreford) did a quick calculation and satisfied himself that "the stuff that was in the ground [a reference to 384,000 loose M3 giving $2,370,675 gross] would easily pay for the asking figure [of $735,000]."
Mr Allchurch's evidence was that he and Mr Wreford met in his (Mr Allchurch's) office on 16 May 1990, that they did not go out for lunch and that he did not give Mr Wreford the Valuation Document at that time. Rather, according to Mr Allchurch, they spoke about the Information Memorandum. Mr Allchurch denied saying that there was a measured resource of $23 million worth of gold, that there was $23 million of gold sitting in the ground or using the terminology "measured resource" in the conversation.
Contrary to Mr Wreford's evidence, his Honour found that the Valuation Document was not discussed or handed over at the meeting in May. His Honour accepted Mr Allchurch's
evidence that it was forwarded under cover of Mr Allchurch's letter of 17 May 1990. This finding is not challenged.
Accordingly, so far as the conversation relied on by the appellant is referable to the Valuation Document, it must be accepted that it did not take place. But over and above this, his Honour made findings on credit in relation to the conversations which tell strongly against Mr Wreford's evidence of reliance. After referring specifically to the two versions of the conversations on 16 May, his Honour said:
"Generally speaking, Allchurch presented as a careful witness. There is however real cause for reservation about the credibility of Wreford's testimony on critical points. In speaking of his initial discussions with Allchurch and subsequently, he tended to play on his own ignorance and Allchurch's superior wisdom and apparent paternal interest in his welfare. They had last had contact some years before. Allchurch had been helpful to Wreford on a previous occasion. His account of their conversations was broadly consistent with the nature of their relationship and I accept it as substantially correct subject to the ordinary vagaries of human memory. Wreford's credibility was also adversely affected by other matters going to his truthfulness under pressure which emerged in the evidence and to which reference is made later in these reasons."
In summary, the only evidence of reliance on the statement of "present measured resources: 384,000 loose M3" is part and parcel of Mr Wreford's evidence of a conversation over the Valuation Document, yet the trial judge has held that that document was not before the parties at that time and that statements which Mr Wreford alleges were made by Mr Allchurch confirming the representation referred to above and relied on in the appeal were not made. Further, irrespective of the rejection of that evidence, the case sought to be made at trial was predominantly one of reliance on a different representation altogether, namely the overall value of the resource. In all these circumstances, the terms of the "measured resources" statement in the Valuation Document do not, in our opinion, give rise to an inference of reliance: cf Gould v Vaggelas (1985) 157 CLR 215; Domminelli Ford (Hurstville) Pty Ltd v Karmot Auto Spares Pty Ltd (1992) 38 FCR 471.
Accordingly, in our view, in the light of the manner in which the trial was conducted and the findings of the trial judge on credit, there is no evidence of reliance by the appellant on the "Present Measured Resources" representation in the Valuation Document which survived the trial. For this further reason the appeal fails.
DAMAGES
In its amended statement of claim, the appellant pleaded that by reason of the respondents' misleading and deceptive conduct and negligent misrepresentation, the appellant suffered loss and damage. It particularised this as comprising $100,000 as the amount paid for the tenements,
$170,000 as its loss on plant and equipment acquired for the project and later sold at a loss, $1,126,096 as its operating losses incurred while it was attempting to mine the tenements, and $112,500 as the amount that it would have been able to earn through the exertions of its directors, Mr and Mrs Wreford, if they had not been engaged in the attempt to mine the tenements.
By their amended defence, the respondents denied these allegations and alleged in some detail that all and any loss suffered by the appellant was caused by the appellant and persons engaged by it. For example, it was alleged in para 22 that the tenements were not mined efficiently, that the appellant's testing procedures were "muddled, incompetent and did not yield accurate or true test results" and that the appellant "extensively modified the plant in accordance with its own design and advice".
The learned trial judge dealt at length with the appellant's operation after settlement of its purchase on 21 August 1990. His account covers 39 pages. The account deals with such matters as changes made by the appellant to the plant and system of mining, pressure on the appellant from its financier and frequent absences of Mr Wreford from the site. For example, at page 115 of the judgment there occurs the following:
"The original plant in its unmodified state was able to treat ore at the rate of 70 to 80 cubic metres per hour and recover in excess of .4 grams per cubic metre for most of its operation. After modification it was treating and recovering less than .4 grams per cubic metre at a rate of less than 40 cubic metres per hour. Even if throughput were doubled gold recovery would be less than originally at the existing site. Warne observed the project was in its present position due to a lack of experience and expertise in alluvial mining generally and plant design and engineering in particular."
The trial judge's treatment of the question of loss in his Reasons must be seen in the light of the pleading and evidence referred to above. His Honour's conclusion was expressed as follows (at 175-76 of the judgment):
"I am not satisfied that the applicant has made out any misleading or deceptive conduct on the part of the respondents. There being no such conduct and, in my opinion, no duty of care which has been breached in this case, there is no cause of action against the respondents. I should add that in my opinion what the applicant agreed to pay for the project was not less than its real value. The financial fate of the applicant seems to have been sealed roughly from the day at which it began operating. The plant modifications and associated non-productive time, the imposition of significant cost burdens, the reduction in plant throughput, the failure to shift the plant to the new site, the frequent absence of Wreford from the site and the absence of tight and well organised control of the operation by Wreford, conspired to ensure the failure of the venture."
It was put that this did not constitute a finding dealing with the entirety of the loss allegedly suffered by the appellant and that it dealt only with one aspect of that loss, namely the difference between price paid and value. It was not suggested that if such a finding was made it was erroneous. In our view, read against the pleadings and the extensive treatment of the issue earlier in his Honour's judgment, the passage quoted constituted a deliberate finding that the appellant had not established that any of the forms of loss alleged had been caused by any misleading or deceptive conduct or negligent misrepresentation.
For this further reason, in our view, the appeal fails.
I certify that this and the
preceding eighteen (18) pages
are a true copy of the
reasons for judgment herein of
their Honours.
Associate:
Date: 17 October 1995
Counsel and Solicitors LE James instructed by
for the Appellant: Williams & Hughes
Counsel and Solicitors DM Stone, GS Pitt and
for the Respondents: JK Panegyres instructed by Kott Gunning
Date of Hearing: 16 October 1995
Date of Judgment: 17 October 1995
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