Ian Donaldson Johnston v Filaria Pty Limited & Ors;; Henry Posch v Filaria Pty Limited & Ors;; Alison Jane Whittle and ROSILIE Patricia Munday v Filaria Pty Limited

[2005] ACTCA 16

IAN DONALDSON JOHNSTON v FILARIA PTY LIMITED & ORS;
HENRY POSCH v FILARIA PTY LIMITED & ORS;
ALISON JANE WHITTLE and ROSILIE PATRICIA MUNDAY v FILARIA PTY LIMITED & ORS
[2005] ACTCA 16 (28 April 2005)

EX TEMPORE JUDGMENT

ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

No. ACTCA 20-2004
No. ACTCA 1-2005
No. SC 980 of 1999

No. ACTCA 21-2004
No. ACTCA 2-2005
No. SC 868 of 1999

No. ACTCA 22-2004
No. ACTCA 3-2005
No. SC 853 of 1999

Judges:         Higgins CJ, Gray and Marshall JJ
Court of Appeal of the Australian Capital Territory
Date:            28 April 2005

IN THE SUPREME COURT OF THE       )          
  )          
AUSTRALIAN CAPITAL TERRITORY    )
  )

COURT OF APPEAL  )

ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

No. ACTCA 20 – 2004

No. ACTCA 1-2005

No. SC 980 of 1999

BETWEEN:IAN DONALD JOHNSTON

Appellant

AND:FILARIA PTY LIMITED ACN 056 933 843

First Respondent

AND:INDEPENDENT GROUP PTY LIMITED ACN 008 659 792

Second Respondent

AND:GRAHAME O’BRIEN

Third Respondent

No. ACTCA 21 – 2004

No. ACTCA 2-2005

No. SC 868 of 1999

BETWEEN:HENRY POSCH

Appellant

AND:FILARIA PTY LIMITED ACN 056 933 843

First Respondent

AND:INDEPENDENT GROUP PTY LIMITED ACN 008 659 792

Second Respondent

AND:DAVID SHEARER

Third Respondent

No. ACTCA 22 – 2004

No. ACTCA 3-2005

No. SC 868 of 1999

BETWEEN:ALISON JANE WHITTLE and ROZILIE PATRICIA MUNDAY

Appellant

AND:FILARIA PTY LIMITED ACN 056 933 843

First Respondent

AND:INDEPENDENT GROUP PTY LIMITED ACN 008 659 792

Second Respondent

AND:DAVID SHEARER

Third Respondent

ORDER

Judges:  Higgins CJ, Gray and Marshall JJ
Date:  28 April 2005
Place:  Canberra

THE COURT ORDERS THAT:

1. Each of the appeals be dismissed.

2. The appellant pay the respondents’ costs of and incidental to the appeal.

3. The decision on the question of the indemnity costs be reserved.

IN THE SUPREME COURT OF THE       )          
  )
AUSTRALIAN CAPITAL TERRITORY    )
  )

COURT OF APPEAL  )

ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

No. ACTCA 20 – 2004

No. ACTCA 1-2005

No. SC 980 of 1999

BETWEEN:IAN DONALD JOHNSTON

Appellant

AND:FILARIA PTY LIMITED ACN 056 933 843

First Respondent

AND:INDEPENDENT GROUP PTY LIMITED ACN 008 659 792

Second Respondent

AND:GRAHAME O’BRIEN

Third Respondent

No. ACTCA 21 – 2004

No. ACTCA 2-2005

No. SC 868 of 1999

BETWEEN:HENRY POSCH

Appellant

AND:FILARIA PTY LIMITED ACN 056 933 843

First Respondent

AND:INDEPENDENT GROUP PTY LIMITED ACN 008 659 792

Second Respondent

AND:DAVID SHEARER

Third Respondent

No. ACTCA 22 – 2004

No. ACTCA 3-2005

No. SC 868 of 1999

BETWEEN:ALISON JANE WHITTLE and ROZILIE PATRICIA MUNDAY

Appellant

AND:FILARIA PTY LIMITED ACN 056 933 843

First Respondent

AND:INDEPENDENT GROUP PTY LIMITED ACN 008 659 792

Second Respondent

AND:DAVID SHEARER

Third Respondent

Judges:  Higgins CJ, Gray and Marshall JJ
Date:  28 April 2005
Place:  Canberra

REASONS FOR JUDGMENT

HIGGINS CJ:

1. We have considered the submissions made by the appellants and we are agreed we do not need to hear from the respondents on the substantive issues.

1. What I propose to do is to deliver some short reasons as to why I have come to that view.  And it is unnecessary to recite the facts because they are set out accurately in the judgment appeal led from and whilst the findings of fact his Honour made are not completely accepted by the appellants, they are, it is conceded, open on the evidence.  It is the inferences drawn that the appellants challenge.

1. The primary argument is that the brochure entitled “Investment Report” issued in 1993 contained false and misleading representations that the appellants relied upon to their detriment.  I summarise that, of course, with perhaps some inaccuracy in terms of the various causes of action, but nevertheless, I think that encapsulates it.

1. Because of the brochure, each of the appellants bought units, being rooms, one might say, refurbished, of course, of a previous hotel, expecting that under the management of Jaywood Pty Ltd they would be run as a hotel and return reasonable profits and capital gains.

1. This result was guaranteed by Filaria for three years upon a projection that after that time a real return of 11.9% or thereabouts would be realised.  This was expressly stated to be an estimate dependent on future economic trends, albeit to be optimistically viewed.  The Capital Executive Apartments, a nearby similar venture, was referred to as an exemplar.

1. Before completion of any contract, the offeror extended the guaranteed returns to five years rising from 9% to 10% over that period of five years.  Pages 13 and 14 of the brochure contained a projected cash flow and financials.  It is accepted that the initial figures for the first year were accurate enough.  However instead of improving after 1996, they declined.

1. Now it is not suggested that the manager caused this; a disclaimer in the brochure emphasised the uncertainty of any economic projections.  That does not mean that a representation of optimistic results is incapable of being false and misleading, it does make it less likely, however, that they would be so understood objectively.

1. It is apparent that the offer of five years of guaranteed returns was the operative inducement to investors, though all would have hoped that the underlying profitability of the venture would by then produce a capital gain.  At the end of the five years values remained depressed.  The situation was exacerbated by a falling out between Filaria and most other unit holders.

1. The learned trial judge did not accept that there was any representation that the return beyond five years would be otherwise than prevailing economic conditions would dictate.  In any event the assumptions made in the brochure were reasonably based.  That finding, though challenged, was clearly open to his Honour.  But I accept that it could have been found to be otherwise.

1. It therefore does not follow that any claim could succeed based on the pleaded causes of action in the absence of a factual finding supporting them.  The brochure clearly contained glowing puffery that was appropriately to be ignored.  As to the causal connection between the representations and the losses suffered, Mr Brodrick expressed a view that competition and failure by unit holders to support the hotel, were primary causes of the unfortunate fall in the economic value of the units evident from 1998/1999.  But that did not exclude, of course, economic conditions generally applying, nor did Mr Brodrick so exclude that consideration.

1. Some defects were alleged in the figures on pages 13 and 14.  None, even the “other income” seem significant in the overall picture.  “Other income”, for example, would be offset by added expenses.  As to the timing of the alleged loss, though this is not essential given the above, it seems to me that it arose on completion of the five year lease if at all.  Nothing, however, turns on that.

1. In summary, I agree that the learned trial judge’s findings as to the facts are not attended by error.  There was no issue as to the legal principles he applied and I can find no error in his application of those principles to the facts which he found.  It follows that I dismiss each of the appeals accordingly.

1. In the circumstances costs should follow the event.  I order that the appellant pay the respondents’ costs of and incidental to the appeals.

1. We will reserve our decision on the question of the indemnity costs order.

   I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable, Chief Justice Higgins.

   Associate:

   Date:     28 April 2005

IN THE SUPREME COURT OF THE       )          
  )
AUSTRALIAN CAPITAL TERRITORY    )
  )

COURT OF APPEAL  )

ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

No. ACTCA 20 – 2004

No. ACTCA 1-2005

No. SC 980 of 1999

BETWEEN:IAN DONALD JOHNSTON

Appellant

AND:FILARIA PTY LIMITED ACN 056 933 843

First Respondent

AND:INDEPENDENT GROUP PTY LIMITED ACN 008 659 792

Second Respondent

AND:GRAHAME O’BRIEN

Third Respondent

No. ACTCA 21 – 2004

No. ACTCA 2-2005

No. SC 868 of 1999

BETWEEN:HENRY POSCH

Appellant

AND:FILARIA PTY LIMITED ACN 056 933 843

First Respondent

AND:INDEPENDENT GROUP PTY LIMITED ACN 008 659 792

Second Respondent

AND:DAVID SHEARER

Third Respondent

No. ACTCA 22 – 2004

No. ACTCA 3-2005

No. SC 868 of 1999

BETWEEN:ALISON JANE WHITTLE and ROZILIE PATRICIA MUNDAY

Appellant

AND:FILARIA PTY LIMITED ACN 056 933 843

First Respondent

AND:INDEPENDENT GROUP PTY LIMITED ACN 008 659 792

Second Respondent

AND:DAVID SHEARER

Third Respondent

Judges:  Higgins CJ, Gray and Marshall JJ
Date:  28 April 2005
Place:  Canberra

REASONS FOR JUDGMENT

GRAY J:

1. I agree with the reasons given by the Chief Justice.

   I certify that the preceding paragraph numbered fifteen (15) is a true copy of the Reasons for Judgment herein of the Honourable, Justice Gray.

   Associate:
   Date:     28 April 2005

IN THE SUPREME COURT OF THE       )          
  )
AUSTRALIAN CAPITAL TERRITORY    )
  )

COURT OF APPEAL  )

ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

No. ACTCA 20 – 2004

No. ACTCA 1-2005

No. SC 980 of 1999

BETWEEN:IAN DONALD JOHNSTON

Appellant

AND:FILARIA PTY LIMITED ACN 056 933 843

First Respondent

AND:INDEPENDENT GROUP PTY LIMITED ACN 008 659 792

Second Respondent

AND:GRAHAME O’BRIEN

Third Respondent

No. ACTCA 21 – 2004

No. ACTCA 2-2005

No. SC 868 of 1999

BETWEEN:HENRY POSCH

Appellant

AND:FILARIA PTY LIMITED ACN 056 933 843

First Respondent

AND:INDEPENDENT GROUP PTY LIMITED ACN 008 659 792

Second Respondent

AND:DAVID SHEARER

Third Respondent

No. ACTCA 22 – 2004

No. ACTCA 3-2005

No. SC 868 of 1999

BETWEEN:ALISON JANE WHITTLE and ROZILIE PATRICIA MUNDAY

Appellant

AND:FILARIA PTY LIMITED ACN 056 933 843

First Respondent

AND:INDEPENDENT GROUP PTY LIMITED ACN 008 659 792

Second Respondent

AND:DAVID SHEARER

Third Respondent

Judges:  Higgins CJ, Gray and Marshall JJ
Date:  28 April 2005
Place:  Canberra

REASONS FOR JUDGMENT

MARSHALL J:

1. I also agree with the reasons given by the Chief Justice.

   I certify that the preceding paragraph numbered sixteen (16) is a true copy of the Reasons for Judgment herein of the Court.

   Associate:
   Date:     28 April 2005

Counsel for the Appellant:  Mr G McArthur SC and Mr S Gillespie-Jones

Solicitor for the Appellant:  Gillespie-Jones & Co

Counsel for the 1^st Respondent:  Mr J C Kelly SC and Mr D J C Mossop

Solicitor for the 1^st Respondent:  Phillips Fox

Counsel for the 2^nd and 3^rd Respondents:          Mr L G Foster SC and Mr I R Pike

Solicitor for the 2^nd and 3^rd Respondents:          Sparke Helmore

Date of hearing:  26 – 28 April 2005

Date of judgment:  28 April 2005