James Honner Nominees Pty Ltd v Geard - [2019] SADC 78

District Court of South Australia
(Civil)
JAMES HONNER NOMINEES PTY LTD v GEARD
[2019] SADC 78
Judgment of His Honour Judge Tilmouth
21 June 2019
TRADE AND COMMERCE - TRADE AND COMMERCE GENERALLY - STATUTES RELATING TO MISLEADING OR DECEPTIVE CONDUCT IN TRADE
The defendants entered into a Motel Agreement to run the Stansbury Holiday Motel in 2014. This agreement contained a clause that the defendants needed to obtain at least 50% occupancy for the agreement to be continued after the first year and that they would receive a bonus if 60% was achieved. The plaintiff claims breach of contract in that the defendants failed to remit a specified percentage of proceeds as required by the Motel Agreement. The defendants claim they were misled prior to the formation of the contract as to the achievable occupancy rates, motel earnings and motel turnover.
Held:
1. It is proven that representations were made that the Motel had a minimum 40 per cent occupancy rate, when that was not in fact the case.
2. There was an additional misrepresentation by failing to correct the misrepresentation.
3. Breaches of s 18(1) of the Australian Consumer Law and s 7 of the Misrepresentation Act are proven.
4. The plaintiff’s claim is dismissed.
5. The defendant’s claim for set-off be dismissed as unproven.
6. The Motel Agreement is declared unenforceable at the instance of the plaintiff pursuant to s 243(c) of the Australian Consumer Law.
Retail and Commercial Leases Act 1995 (SA); Misrepresentation Act 1972 (SA) s 13; Competition and Consumer Act 2010 (Cth) ss 1, 236, 243, Schedule 2 Australian Consumer Law; Trade Practices Act 1974 (Cth) ss 51, 52; Brown v Jam Factory Pty Ltd (1981) 53 FLR 340; Australian Securities and Investment Commission v PFS Business Development Group Pty Ltd (2006) 57 ACSR 553; Skinner v Redmond Family Holdings Pty Ltd (2017) ACSR 593, referred to.
Parkdale Custom Built Furniture Pty Ltd v Puxu Ltd (1982) 149 CLR 191; Marks v GIO Australia Holdings Ltd (1988) 196 CLR 494; Australian Competition and Consumer Commission v Telstra Corporation Ltd (2004) 208 ALR 459; Campomar Sociedad Ltd v Nike International Ltd (2000) 202 CLR 45; Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640, applied.
Slinger v Southern White Pty Ltd (2005) 92 SASR 303; Jacques & Ors v Cut Price Deli Pty Ltd (1993) ATPR (Digest) 46-102, discussed.
Bugg v Day (1949) 79 CLR 442; Jones v Dunkel (1959) 101 CLR 298; Spence v Demasi (1988) 48 SASR 536; Nominal Defendant v Clements (1960) 104 CLR 476; Transport & General Insurance Co Ltd v Edmondson (1961) 106 CLR 23; Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; Sheen v Fields Pty Ltd (1984) 58 ALJR 93; Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82; Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112; Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682; Ting v Blanche (1993) 118 ALR 543; Digi-Tech (Aust) Ltd v Brand [2004] NSWCA 58; Sykes v Reserve Bank of Australia (1998) 88 FCR 511; City of Botany Bay Council v Jazabas Pty Ltd [2001] NSWCA 94; Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; Software Integrators Pty Ltd v Roadrunner Couriers Pty Ltd (1997) 69 SASR 288; Miba Pty Ltd v Nescor Industries Group Pty Ltd (1996) 141 ALR 525; Southern White Pty Ltd v Slinger & Slinger [2004] SADC 43; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; AWAD v Twin Creeks Properties Pty Ltd [2012] NSWCA 200, considered.

JAMES HONNER NOMINEES PTY LTD v GEARD
[2019] SADC 78
Table of Contents
Overview
The underlying documentation
Post contract events
The evidence of Mr Honner
The evidence of Mrs Geard
The contractual representations
Characterisation of the agreements
The Australian Consumer Law
Misleading and deceptive conduct
Promises and predictions
Misrepresentation by silence
Principles applied to the facts
Misleading or deceptive conduct
Misrepresentation by omission
Causation and reliance
Misrepresentation Act
The claims for damages
Conclusion and orders
Overview

Elderly farmer and resident of the Yorke Peninsula, Robert Honner is the Director of the plaintiff. The company is the owner of the real property and business known as the ‘Stansbury Holiday Motel’, situated on Adelaide Road at Stansbury on the Peninsula.[1]
[1] The plaintiff is hereinafter referred to as Honner Nominees.
The property and the business was purchased by Honner Nominees in May 1983. The Motel originally consisted of eight Units, but soon after purchase was increased to 16. That remains the present situation. Except for a short period of four months at the very beginning and a second longer period in around 2011 and 2012, the day-to-day operation and management of the business was contracted out.
The defendants are husband and wife. They entered into an arrangement with Honner Nominees through the agency of Mr Honner, whereby they were granted rights to occupy and operate the Motel business from the premises, together with a licence to use the ‘Stansbury Holiday Motel’ business name for that purpose. As will be seen, the agreement effectively ran from year to year, and in this instance began in early March 2014, ending in termination during September 2017.
The within action is brought against the Geards claiming damages for what is alleged to be a breach of contract by their failure to fully remit a specified percentage of gross occupancy proceeds over the period in question. The action is defended largely on the basis of alleged misrepresentations in the period leading up to the formation of the subject contract.[2] Mrs Geard herself expressed their case in her cross-examination of Mr Honner during the course of the trial:[3]
… My point is that I think that morally you are obligated to tell somebody that the Motel is running that poorly financially and using the cop out of it's each operator's business I don't really think that that's right.
[2] Statement of Claim para 13.
[3] T95.1-.5.
The particulars of the alleged representations are those pleaded in paragraph 4.2 of the defence filed on 22 March 2018. These are detailed later in these reasons.[4] In their defence, the Geards pray in aid ‘misleading and deceptive’ conduct contrary to the Australian Consumer Law by reference to ss 4 and 236 thereof, and misrepresentation contrary to s 4 of the Misrepresentation Act 1972 (SA). An alternative claim for set-off by way of an entitlement ‘to a fair wage on a quantum meruit’ basis raised in paragraphs 15 and 16.5 of the defence, can be summarily dismissed as having no foundation whatsoever in the evidence.[5]
[4] Trial Book pp 12-13.
[5] T155.27-155.34.
The underlying documentation
Contact between the parties commenced with an advertisement seeking:[6]
A couple with marketing ability in tourism to run the 16 unit Seaside Motel on Southern Yorke Peninsula House provided.
This appeared in local and State-wide newspapers. Mr and Mrs Geard were placed on a list of applicants responding to this advertisement, of whom there were initially some 70 interested parties. This was soon shortlisted to five, including the defendants.
[6] Exhibit P4.
An initial meeting between the parties took place in early February 2014 at the Motel itself. Mr Honner earlier received a resume of Mrs Geard’s previous experience in the service industry going back to 1998.[7] In this she described herself as ‘hard working, dependable, organised, dedicated [and] highly committed’. Mr Honner offered an opportunity to inspect the site and speak with the outgoing managers, who were struggling to run the Motel because of a serious illness. Most, if not all of the discussions took place between Mr Honner and Mrs Geard, although Mr Geard was present. These discussions took place either around the pool area or otherwise in the largest Unit, room 16. The precise location is immaterial.
[7] Exhibit P5.
At this first meeting Mr Honner produced a single page of handwritten notes calculating what income would derive from occupancy rates of 40, 50 and 60 per cent. He claims to have given the Geards a copy although Mrs Geard denied that was the case.[8] Once again, whether they did retain a copy or not is largely immaterial. If anything given that precise sums were not specified in the defence filed in March 2018, rather suggests they did not have it, at least by then. By all accounts, the note was pre-prepared by Mr Honner, and was in fact given ‘to all short-listed people’.[9]
[8] T53.22-.29, 121.18-.21, 175.18-.26.
[9] T19.13.
The handwritten note was this:[10]
[10] Exhibit P3, p 65.
As part of the proposed arrangement, the Geards were offered occupancy of a house on the property, which doubled as an office for the Motel itself.[11] Following this meeting, Mr and Mrs Geard were sent a copy of a proposed ‘Motel Agreement’ for their consideration and execution, as well as an ‘Authorisation’ for use of the ‘Stansbury Holiday Motel’ name.[12] The Geards executed both documents on 21 February 2014. They were counter-signed by Mr Honner on 24 February 2014. The defendants took possession and commenced operating the Motel as of 12 March 2014.
[11] T31.1-.3.
[12] Exhibit P3, pp 66-67 and 68 respectively.
The Motel Agreement was one Honner Nominees devised with legal assistance for this purpose, as a ‘basic template that had been used for about 30 years’.[13] The Motel Agreement provided:[14]
[13] T34.5-.9.
[14] Exhibit P3, pp 66-67.
This Share Motel Agreement in respect of Stansbury Holiday Motel between James Honner Nominees Pty Ltd, the owner and David Paul GEARD and Nicola Dawn GEARD, the share operators of the Motel, serves to outline the conditions to be honoured by both parties.
The arrangement shall be terminated if the total proceeds from any one year fall below the equivalent dollar value of 60% occupancy, having allowed for normal CPI annual increases in tariff.
All decisions on tariff, capital expenditure and replacements over $1000 in value to be by mutual agreement.
Insurance and Public Risk policies will be taken out in the name of the owner and the cost reimbursed by the operator. The operator will also take out an insurance policy covering such areas as Public Risk, Loss of Income to themselves and the owner and hereby indemnifies the owner in respect of any action in respect of employment, taken by the operator.
The owner shall receive 45% of the gross occupancy proceeds to cover his investment in the Motel and rental on the house. This shall be calculated and paid at the end of each month. An appropriate monthly statement as well as the daily chart with all details shall be furnished showing all incomings and outgoings as a clear record to the owner’s satisfaction. The balance shall be apportioned in the following manner:
1.   25% of gross occupancy to the operators out of which Wages, Group Tax, Workcover and other costs incidental to the employees shall be taken.
2.   20% toward all running costs, including Council Rates, normal insurance, ETSA, Gas, telephone, painting, maintenance, pool etc., not less than one quarter of this amount to be spent annually on replacements, $1000 for car maintenance to come out of the 20% running costs.
3.   10% of the 60% occupancy to be spent on new items in each year. This can include such things as steps to the beach, pop-up sprinklers but not replacements which are covered above. Any surplus arising at the end of each year due to a higher occupancy rate to be retained by the operator.
All income and outgoings in respect of the provisions of meals and any kitchen replacements and expansion to be a separate account and the responsibility of the operator. Repalcements [sic] and expansion equipment to be vested in the Motel Inventory.
The owner shall not sell or offer for lease the Motel to any other party without first offering the same to the operator on the same terms and conditions as those to be offered to any other party. The operator to be given reasonable time to consider the purchase or the lease of the Motel.
When the share operator vacates the Motel, the Inventory of the Motel contents must match the Inventory signed at the time of this Agreement with the addition of any new items purchased in accordance with 3. above; the operator to compensate the owner for items missing at their current replacement value.
The owner in no way takes any responsibility in respect of the taxation liabilities that may arise to the operator as a consequence of this Agreement or any conduct arising from the carrying out of this Agreement.
ADDENDUM:
This contract will not be renewed if the occupancy rate does not exceed 50% in the financial year 2014/2015. A bonus will apply if 60% occupancy is achieved. In the following financial year, 2015/2016, the Motel agreement as above will apply.
According to Mr Honner the addendum was inserted in this particular instance because:[15]
I mean basically, well Nicky believed she could run it at 60%. I said, well look Nicky, you won't run it 60%, certainly in your first year and it is more likely situation that if she can run it at 50% then I'd be very happy. So we agreed on that percentage.
[15] T29.17-.21.
The accompanying authorisation was limited to permitting the defendants as operators under the Motel Agreement, to use the business name ‘Stansbury Holiday Motel’ for trading purposes. This aspect of the arrangement meant that debts incurred by the Geards trading as ‘Stansbury Holiday Motel’ were nevertheless incurred by them personally.[16]
[16] Exhibit P3, p 68.
Post contract events
Unfortunately it became evident that the situation was not as the defendants expected. To begin with, a long note written by Mrs Geard as soon as 30 April 2014 pointed to an extensive number of substantial deficiencies in the Motel property, with specified fixtures and fittings requiring ‘immediate attention’.[17] These included:
[17] Exhibit D6.
·The Sofa beds in rooms 1, 2, 3, 4, 5 and 9 were in an ‘appalling condition, having stains and rips’ and therefore they were unable to ‘rent these rooms out to their capacity’;
·The linen was ‘dated and stained … during the busy weekends ... [we] struggled to find enough satisfactory linen … without waiting for it to be laundered’;
·The ‘televisions in most of the rooms in the new block [were] old and outdated and some of them [had] a very poor picture’;
·The roof in room 12 leaked and there was a mould patch on the roof;
·A large BBQ in the pool area was ‘ruined’ and ‘unusable’;
·The doors to ‘the rooms in the old block [were] … internal doors … swollen from exposure to the weather, some have had holes in them poorly repaired’;
·A kitchen extractor fan needed replacing;
·Some single beds in the old block were ‘way past there [sic] use by date and need[ed] replacing’;
·A large sign at the front was ‘dated’ and ‘not very inviting to attract those drive-in customers’;
·A drain in the driveway was blocked;
·The carport area to the home leaked and the carport was in ‘very poor condition structurally’;
·A trampoline for the use of children was becoming dangerous as the springs were coming away, ‘creating large gaps for someone to fall through’; and
·A door in room 16 was ‘in an appalling state with newspaper stuffed down the bottom to … stop the weather which looks pretty bad’.
In the same note she added:
During the past six weeks we have had some very good feedback from customers regarding the cleanliness and the tidiness of the Motel, these are people who have previously been here and not been happy. We feel the Motel has great potential but in order to have it running at a good profit the maintenance issues and purchase of some new items need to [sic] addressed. We have worked very hard in the past six weeks tidying up the grounds and getting the Motel cleaned to an acceptable standard, we have so far really enjoyed our time here and look forward to working with you to get the Motel up to the standard that it should be so that we can get the occupancy up. I have done some sums based on the bookings that are in the current financial year diary and it seems that the turnover for the past eight months was only 70,000, I feel this is very poor based on the figures that we discussed that the Motel should be doing but am not surprised given the state it was in when we took over, based on these figures I believe that the Motel has been running at less than thirty per cent occupancy which is well below the expectations that we have. We will do every thing in our power to once again bring the occupancy up to above 50 per cent but we will be unable to do so if some improvements are not addressed in the very near future.
It transpired that Mr Honner accepted most of these criticisms, as is apparent from a document entitled ‘AREAS THAT NEED ATTENTION’, mutually agreed between the parties sometime later.[18] By this understanding, they allocated areas requiring remediation in the following way:
[18] Exhibit D8.
To Mr Honner
.       Room 16 door/kitchen/bathroom
.       Dangerous septic tank cover replacement
.       Fencing for the area
To the Geards
.       Window screens and latches
.       Leaking and unstable carport
.       Exterior paint flaking and peeling on the Motel
Shared responsibility
.       Gravel to the driveway
.       Some queen beds ‘very worn’ and ‘all of the singles except 4 are very old’
.       Repair of ‘perished’ front sign
It is unclear what the arrangement was with respect to the air-conditioners, although it appears Mr Honner accepted the primary responsibility. It is less clear what was to happen with the roof to room 12, as this item was simply noted ‘Stewie 12 and 16’. Mr Honner acknowledged this document was typed by Mrs Geard ‘two years after’ her initial note and following a meeting between them to discuss those issues. His response was that ‘until I got the payment I had not money to do those jobs that she had listed there’.[19] Mrs Geard put forward a different explanation:[20]
… in the years prior to that he had had funds and they had not been spent improving apart from the couches that he did replace which I did bring up once we first got there.
[19] T98.28-100.34.
[20] T126.9-.12.
She adverted to her correspondence of 30 April 2014 in another letter to Mr Honner of 30 July 2017. In this she complained ‘to date at least 4 of these items have still not been addressed by you’ and the ‘ones you have addressed took almost 2 years to actioned …’.[21] She again drew attention to the pre-contract discussions:
In march of 2014 we applied for the position of managers of the Stansbury holiday motel, during the initial meeting held at the Motel you informed us that we could expect an income in the region of $80,000 to $100,000 as this would be the 25% share of the turnover, you told us that the reason the current managers were leaving was due to health issues, at no time did you indicate that they had let the Motel occupancy drop to the level that it had … this is not a fair situation as most of these issues were inherited due to your lack of a maintenance programme.
[21] Exhibit P3, pp 128-129.
The evidence of Mr Honner
Mr Honner denied the misrepresentations alleged, both in his affidavit and oral evidence.[22] He stated that the figure of 30 per cent to cover expenses and replacements was devised as a consequence of ‘a proven formula for many years … that 30% is very achievable’.[23]
[22] Exhibit P3, paras 25-26 and T25.33-27.7.
[23] T27.9-.19.

On the other hand he did not ‘recall giving … a figure’ of current occupancy rates during the pre-contractual discussions.[24] Nor did he say the ‘Motel was currently running at a very low occupancy’. At the same time he conceded ‘if you’d have asked me the question I may have given you an answer to that’.[25] When asked why he did not tell them ‘what the actual figures were at the Motel’ he added he would ‘never make a prediction like that’,[26] and:[27]
… we virtually arrived at 50% as being less than what she thought she could do but more than probably what I thought she might be able to do.
[24] T53.30-33.
[25] T53.30-54.3.
[26] T57.2-.7.
[27] T58.22-.31.
When pressed by Mrs Geard that ‘never at any time during the interview … did you state that it was a lot less’ than 40 per cent occupancy, or $70,000 annual income, Mr Honner somewhat elliptically responded:[28]
What I purposely did is let you go through the house with Scott and Lyn Aries and you were quite at liberty to ask them whatever they did at the Motel. I prefer you to ask them those sort of questions than ask me and you were quite at liberty to say whatever you liked to them. You said you got on very well with them. It is not what I understood from Lyn when she left and you took over.
[28] T70.17.32.
In a letter to the Geards of 24 February 2014, Mr Honner specifically referred to contacting Bank SA for ‘a quote on a turnover of $300,000 … with respect to obtaining an EFTPOS facility for the Geards’.[29] Mr Honner told the court the figure of $300,000 was nominated only because ‘you get a better rate as far as the bank is concerned’.[30] The implications of this letter are considered further later in these reasons.
[29] Exhibit P3, p 69.
[30] T59.31-.37.
The evidence of Mrs Geard
The Geards were unrepresented throughout the trial and for much of the pre-trial process as well. Their case was conducted exclusively by Mrs Geard during the trial. She said that after seeing an advertisement in The Advertiser, she telephoned Mr Honner and they conversed at length. He rang her the following day, a Sunday, and requested them to travel to Stansbury for an ‘interview’ that very afternoon, which they did. They returned to Adelaide late the same day as her husband had work commitments the following morning. Soon after, he in fact resigned from that employment, from which he was earning $70,000 a year in order to run the Motel.[31]
[31] T94.23-.25.
Mrs Geard deposed that during the first meeting, Mr Honner explained there was a ‘bit of a health issue with Lyn Aries’ and that he was ‘quite keen to get a new manager in there so they could relieve her’.[32] This was a reference to the outgoing operators. Mrs Geard said they were shown through ‘several of the rooms in the self-contained block and also in the studio block’ and that there was a ‘very brief walk-through’ of the house, during which they had a ‘two or three sentence conversation’ with Mr Aries.[33] She added that they had no conversation of any substance with Lyn Aries herself.[34]
[32] T121.9-.11.
[33] T121.21-.29.
[34] T121.29-.31.
During the course of a long unprompted answer, Mrs Geard spoke of the initial face-to-face meeting with Mr Honner:[35]
I certainly did express during the meeting that I felt that we would be more than capable of doing the job and that we could see that the Motel did have a lot of potential but had clearly been let go somewhat. Based on what we saw as the figures on p.65 at the meeting we very wrongly took that to assume that that's the kind of turnover that the Motel was currently seeing.
[35] T121.38-122.7. The reference to p 65 in this extract is to Exhibit P3 at that page.
The Geards owned to the fact that after receiving the Motel Agreement from Mr Honner by post, they felt ‘a little bit nervous about the large percentage that the owner was taking’, but on the other hand felt that ‘from the perspective that it is his Motel, we’re not putting anything financial into going in there … not like buying a lease’ they went ahead.[36] They reasoned:[37]
… if the figures were accurate at the 40, 50 and 60% that it would still be a reasonably sustainable income for ourselves once you include the fact that you do get a house and electricity and such forth as part of the package.
[36] T123.19-.14.
[37] T123.14-.18.
So far as the insertion of the Addendum into the Motel Agreement was concerned, Mrs Geard considered Mr Honner ‘felt that 50% was achievable for the first year …’.[38] She acknowledged they ‘certainly believed’ they could achieve 60 per cent although not recalling he said as much in so many words.[39]
[38] T124.16-17.
[39] T124.19-.25, 179.18-.23.
Mrs Geard next referred to a telephone conversation with Mr Honner several days later, during which they were asked to ‘start within a 14-day period as the Aries were quite keen to vacate’.[40] It was then that her husband gave notice terminating his employment. She added that in the meantime she and her daughter then aged 20, spent a day with Mr Honner compiling an inventory at the Motel of such things as sheets and blankets. She volunteered ‘that was probably my first alarm bell trying to find my way through the linen cupboard and such forth’.[41]
[40] T122.19-.22.
[41] T122.28-.32.
She acknowledged the letter making reference to the SA Bank of 24 February 2015 was received along with the Motel Agreement. They considered the reference to $300,000 indicated Mr Honner ‘clearly had discussed that with Bank SA’. As the figure of $300,000 more or less correlated with the $286,000 annual turnover referred to in the handwritten note based on 40 per cent occupancy, they reasoned this ‘marries up with what he’d shown us in the interview’.[42]
[42] T125.13-.28.
Immediately before settling in, Mrs Geard described having around three quarters of an hour with Mr Honner before spending the weekend ‘trying to find our way around the Motel’.[43] As her husband returned to Adelaide the following Sunday, Mrs Geard spent the week cleaning the Motel herself, a process that proceeded to take a month.[44] It was at this time that she began to realise it was going to be difficult to bring the Motel ‘up to a standard that we felt was acceptable’.
[43] T127.12-15.
[44] T127.17-.22.
It soon became evident that they required ‘new sheets, new towels, new linens for the beds’.[45] As time went on, the Geards began clearing the grounds in order to make it ‘more attractive for people to want to come in’. They organised clearing of ‘very large amounts of rubbish, old TVs, beds, sofa beds and such forth’, in which they were assisted by Mr Honner to the extent that he brought his ‘large truck over and remove[d] quite a substantial amount of rubbish’.[46]
[45] T127.23-.25.
[46] T128.19.
Eventually things came to a head when she suffered a mental breakdown in 2017. She and her husband separated, culminating in her leaving the Motel. Mr Geard stayed on ‘until such time as [Mr Honner] had arranged for another manager’, a period of about a further 10 weeks in her estimation.[47]
[47] T130.16-.26.
Mrs Geard gave evidence with a considerable degree of composure and dignity. The same can be said of her closing address. Notwithstanding, a particular difficulty with her evidence are admissions of telling Mr Honner a number of untruths when it came to their capacity to raise funds and to pay for what had become as time went on, an outstanding debt under the Motel Agreement of around $102,000. Amongst other things, she represented that she was ‘waiting for the receipt for the funds transfer’, was processing payments and that she was expecting to receive some monies, none of which were true. She in fact drew two cheques, one in the amount of $102,922, well knowing there were no funds to cover them in their bank account.[48] Under cross-examination she readily admitted a number of times to lying to Mr Honner in these instances and she likewise admitted drawing funds well knowing the cheques would dishonour.[49] She also admitted as much in her letter to Mr Honner of 12 June 2017.[50] She explained ‘I was not [in] a very good place at that time’,[51] and in her closing address she readily conceded making some ‘very poor decisions’.[52]
[48] These observations are gathered from the materials contained in Exhibit P1, Tabs 26-40 and T143.36-155.6, 166.15-.35, 167.11-168.13.
[49] T126.26-.36, T140.11-T141.14, T166.15-168.34. The dishonoured cheque letters are found in Exhibit P3 at pp 113 and 117.
[50] Exhibit P3, p 124-.7.
[51] T142.37-.38.
[52] T217.24-.31.
It can be accepted the situation was one in which she was under extreme emotional and financial pressure, but that does not excuse what were a series of deliberate and sustained lies. These matters are significant enough to substantially weaken confidence in her credibility and trustworthiness as a witness of truth: Bugg v Day.[53] For that reason her evidence must be considered with caution, although it is by no means rejected outright especially when it is supported by objective or proven facts.
[53] (1949) 79 CLR 442, 467.
Counsel for Honner Nominees was especially critical of the failure of Mr Geard to give evidence. Although Mr Geard attended throughout the trial, he said very little. As noted already, Mrs Geard conducted the proceedings on behalf of them both. Since he was present during the course of the critical discussions leading up to execution of the Motel Agreement, it would ordinarily be expected the failure to give evidence entitled the court to draw an adverse inference that his evidence would not have assisted their case: Jones v Dunkel.[54]
[54] (1959) 101 CLR 298, 312.
Despite this, it is not appropriate in the particular circumstances of this case to draw such inferences. It is common ground that he barely participated in the pre-contractual discussions as Mrs Geard effectively ran the negotiations for them both. It is quite evident that he had very little to do with the negotiations thereafter. Mr Honner conceded as much during his evidence - ‘Nicki would have done most of the talking’.[55] Indeed his counsel cross-examined Mrs Geard on the very premise that ‘he didn’t say anything much during the meeting’.[56] The Court should in any event be cautious in drawing adverse inferences when litigants are unrepresented and unlikely to appreciate the legal implications of taking that course. There is clearly a close personal relationship involved between the defendants thereby leaving them vulnerable to criticism for want of detachment, if he did give evidence: Spence v Demasi.[57]
[55] T18.6.
[56] T181.16-.17.
[57] (1988) 48 SASR 536, 548-549.
The contractual representations
Based primarily on the evidence of Mr Honner, it clearly emerges that the Motel Agreement was devised on the uncontroversial premise ‘the higher the rate of occupancy of the Motel’ the ‘greater financial return to the operators’.[58] The Aries were in possession for the financial year 2012/2013 as well as from 1 July 2013 until departure on 12 March 2014.[59] Their tenure was abruptly brought about by Mrs Aries’ diagnosis of cancer in late 2013, who consequently wished to withdraw from operating the Motel as soon as a replacement was found.[60]
[58] Exhibit P3, p 2, para 12.
[59] T16.1-.3, T54.21-55.10.
[60] T16.6-.13.
Returning to the meeting of early February 2014, the handwritten note prepared by Mr Honner was undoubtedly already in existence, so it does not reflect in any sense the outcome of the discussions with the Geards. Mr Honner explained these as showing ‘what income they would personally receive if they achieved occupancy rates of each of 40%, 50% or 60%’.[61]
[61] Exhibit P3, p 4, para 24.4.
Nevertheless, the note is plainly predicated on the achievement of at least 40 per cent occupancy and prospectively as much as 50 or even 60 per cent. It is difficult to understand how any reasonable person in the position of the Geards could think otherwise. A consistent 40 per cent occupancy rate over a period of a year yielded on Mr Honner’s own calculations $286,880, as appears in the note itself.[62] During the course of his oral evidence Mr Honner explained ‘this is just an outline as to what operators could expect’, an expectation ‘borne from our own experience and other operators who have been at the hotel’.[63]
[62] Exhibit P3, p 65.
[63] T22.6-.11.
This somewhat benign interpretation of the note is maintained in his affidavit:[64]
I provided the Defendants with a handwritten summary of what income they would personally receive if they achieved occupancy rates of each of 40%, 50%, or 60%, and explained that document to them.
Mr Honner obviously explained the downside ‘hard work 24/7’, as well as the benefits, ‘personal perks that bolster the income … rent free house’, in addition to ‘no bills such as water, power, council rates, insurance and telephone’.[65] There is no fault in these latter aspects of the note.
[64] Exhibit P3, p 24.4.
[65] T22.12-23.12.
It may well be that Mrs Geard was over-enthusiastic and indeed over-optimistic as to what she could achieve. She certainly presented as a confident and capable person so far as her resume of experience in the hospitality industry was concerned. Clearly she ought to have inspected the Motel and Motel stock far more thoroughly than she did.
The fact remains that the representations encompassed by the handwritten note, plainly hold out that the Motel was achieving at least 40 per cent occupancy. The Addendum to the Motel Agreement confirms there were discussions concerning the expectation of achieving at least 50 per cent in the first year, because of the explicit provisions that ‘this contract will not be renewed if the occupancy rate does not exceed 50%’, and that if 60 per cent was achieved ‘a bonus will apply’.[66] All that Mr Honner did by way of explanation or qualification was to point out that the Geards would not achieve 60 per cent in the first year. He did nothing else to disabuse them of the expectation of what the note otherwise unambiguously conveys, of at least 40 per cent occupancy.
[66] Exhibit P3, p 67.
The Bank SA contract sent to the Geards referring to a ‘turnover of $300,000’, could only have served to reinforce their understanding that turnover stood at no less than 40 per cent. This expectation is perfectly consistent with Mrs Geard’s evidence that she correlated the figure of $286,880 based on 40 per cent occupancy with the figure in the letter. Viewed objectively, Mrs Geard’s perception that the $300,000 figure married up with and ‘did … back up what he had shown us at the interview’, makes common sense.[67] Although Mr Honner purported to explain the reference in the Bank SA letter as purely for the purposes of getting ‘a better rate as far as the bank is concerned’, it is significant that he did not tell the Geards that.[68]
[67] T134.9-.15, T161.1-.12.
[68] T59.34-60.5.
Mr Honner’s denial of telling the Geards the Motel could easily make $80-100,000 per annum cannot therefore be accepted. The unmistakable fact of the matter is that so much is implied in the written material he provided to them and by expressing their 25 per cent expected portions of the income stream as lying between $71,720 and $107,580.[69] His evidence to the effect that the note was merely ‘an outline as to what operators could expect’, affirms the impression that at least 40 per cent current occupancy was historically the fact.[70]
[69] T21.15-.17, T26.13-.15.
[70] T22.6-.7.
If his evidence was meant to convey something less, the note would then amount to nothing more than an exercise in simple arithmetic projection, which the Geards could readily calculate for themselves. It is the premise that adheres in the predictions that matters. The fact of the matter is that any optimism exhibited by Mrs Geard necessarily springs directly from the figures provided, which it must be stressed were pre-prepared. It transpires now that figures of anything like 60 per cent were only achieved over a winter period of four months ‘way back then’ not that long after the Motel was purchased during the mid-1980s.[71]
[71] T34.1-.4, T103.35-104.8.
The inescapable fact is that occupancy rates of approximately 50 per cent were not historically achieved by this business for around two decades beforehand. At first, Mr Honner suggested an annual turnover approaching $300,000 was ‘not an unrealistic figure because 10 years previous the figure was $250,000’, that is ‘10 years previous as of today’.[72] Later he accepted 60 per cent occupancy over a 12-month period was not achieved ‘recently’, but rather in ‘probably the first 10 years of the Motel, a little bit more probably’.[73]
[72] T60.12-.33.
[73] T62.37-63.10.
Still later he responded to questioning by Mrs Geard:[74]
[74] T102.24-103.5.
Q.So, historically, are you able to provide the years when the Motel was running at, at least, 50% occupancy.
A.I'd have to go back a good way, but yes.
Q.So you can say that there were years when it was running at 50 and above, over the period of a financial year.
A.I think what I've got to say is that you sold yourself - when we were at the swimming pool that this -
Q.Excuse me -
A.- Motel could run at 60% and you had the ability do it.
Q.Excuse me, Anthony, I just am asking you if you are able to provide evidence that the Motel over the 10 years, let's say, prior to our taking over, was running at 50% occupancy over the period of a financial year or more. That's the question I am asking you.
A.I don't have figures back 30 years, but we did run it at over 60% for 10 - I would probably say 12 years in, not the first two years when the lease was in vogue, but according to the formula from then on, 10 or 12 years over 60%.
He accepted turnover was declining in the six months beforehand because of the illness of Mrs Aries.[75]
[75] T71.12-.18.
In contrast to the picture presented by the handwritten note, occupancy rates of nothing like 40 per cent were achieved consistently in proximate years. The limited figures produced by Honner Nominees were as follows:[76]
[76] Exhibit P3, p 70.
It can be seen from this incomplete table that the highest occupancy rate was for the financial year 2009/2010 at 43.5 per cent, producing a combined income of $253,839.99.[77] Occupancy rates were lowest at $114,503.66 for the 2013/2014 financial year (or approximately a little under 20% occupancy) and $158,800.80 for the 2014/2015 financial year (an occupancy rate of 24.9%). It emerged during the course of his evidence that Mr Honner took over from the earlier operators, Mr and Mrs McLeod, during the 2010/2011 and 2011/2012 financial years, for which occupancy rates and income figures are not available.[78] The return of $169,552.45 for the financial year 2012/13 suggests an occupancy rate of around 26.22 per cent when compared against the occupancy rates and dollar returns that are known.
[77] Exhibit P3, p 70.
[78] T90.31-.38.
Mr Honner’s evidence that within the first full financial year of operation by the Geards that there was no complaint is incorrect because Mrs Geard plainly did so in her letter of 30 April 2014, ‘turnover … is very poor based on the figures that we discussed … well below the expectations that we have’.[79] Here she plainly stated that turnover was well below the expectations they were given to understand was the case.
[79] T34.36-35.20, the relevant portion was quoted earlier.
Counsel for the plaintiff raised no objection to the admission or use of this letter.[80] At first sight it might appear to comprise largely inadmissible self-serving statements. The evidence led in the plaintiff’s case to the effect that there was no complaint, renders it admissible at the very least in order to rebut any suggestion of recent invention: Nominal Defendant v Clements,[81] Transport & General Insurance Co Ltd v Edmondson.[82] The same consideration applies equally to Mrs Geard’s letter of 30 July 2017. The former is further admissible as probative of the poor state of repair of the premises, particularly in light of the implied admissions of acceptance contained in the ‘Areas that Need Attention’ document.
[80] Exhibit P3, p 69.
[81] (1960) 104 CLR 476.
[82] (1961) 106 CLR 23.

All the evidence is therefore to the effect that the Stansbury Holiday Motel rarely achieved anything rising above 40 per cent occupancy over the preceding years. In contrast, the handwritten note viewed objectively, is premised on a minimum of 40 per cent. It could not be reasonably or sensibly read in any other way.
It may be that Mr Honner said something along the lines that the current managers ‘had not been maintaining the Motel properly’, but that was the fact due to Mrs Aries’ poor state of health and also because of the state of disrepair of the Motel itself. The poor returns for the financial year 2013/2014 clearly support that conclusion.
Mr Ryder was especially critical of supposed differences between the evidence of Mrs Geard and her particulars of misrepresentation as pleaded.[83] Since it is clear Mr Honner produced the note and that it was discussed, nothing of significance turns on whether the representations were oral or were confined to the note itself, for it is perfectly clear they were conveyed in writing irrespective of what else was or was not said during the first meeting.
[83] T176.25-179.30.
Characterisation of the agreements
The agreement between the parties is somewhat unusual. As mentioned earlier, the scheme of the arrangement between the ‘owners’ and the ‘operators’, was formulated some 30 years previously, on legal advice. The arrangement was devised in this form because an original lease ‘actually failed’.[84] It was neither the sale and purchase of a business, nor a lease over real property. Howsoever described, the arrangement does not appear to attract the provisions of the Retail and Commercial Leases Act 1995 (SA). At face value the relationship is more in keeping with a mere licence. Perhaps Mr Honner was close to the mark by describing it in non-legal terms as ‘a rolling annual financial year agreement’.[85]
[84] T33.35-.37.
[85] T94.33.
The Australian Consumer Law
Section 13 of the Fair Trading Act 1987 (SA) serves to pick up and apply Schedule 2 of the Competition and Consumer Act 2010 (Cth) as an ‘application law’ within the meaning of s 1(b) of Schedule 2. Schedule 2 is cited as Australian Consumer Law.
Section 236 thereof provides for the recovery of loss or damage in an action against persons engaging in conduct in contravention of Chapters 2 or 3 thereof. Section 243 provides for additional remedies, such as variation and avoidance of contracts for instance. Section 18(1) of the Australian Consumer Law which lies in Chapter 2, provides:
A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
The phrase ‘or is likely to mislead or deceive’ makes it clear that it is unnecessary to prove the impugned conduct actually deceived or misled: Parkdale Custom Built Furniture Pty Ltd v Puxu Ltd.[86] This section succeeds the former s 52 of the Trade Practices Act 1974 (Cth), which became the Competition and Consumer Act effective from 1 January 2011. These provisions are comprehensive, of wide impact, ‘fundamentally remedial’ and establish a norm of conduct with which Corporations must comply: Marks v GIO Australia Holdings Ltd,[87] Brown v Jam Factory Pty Ltd.[88] The arrangements between the present parties clearly comes within the scope of ‘trade or commerce’.
[86] (1982) 149 CLR 191, 198.
[87] (1998) 196 CLR 494, [99]-[103].
[88] (1981) 53 FLR 340, 340.
Misleading or deceptive conduct
Whether conduct is misleading or deceptive (or is likely to mislead or deceive), is a question of fact resolved by reference to the entire course of dealing in the context of the surrounding circumstances, and by an objective analysis of the conduct in question: Butcher v Lachlan Elder Realty Pty Ltd,[89] Campbell v Backoffice Investments Pty Ltd,[90] Slinger v Southern White Pty Ltd.[91] It is first necessary to determine whether the alleged representations were conveyed: Campomar Sociedad, Limitada v Nike International Ltd,[92] and if so whether they are as a question of fact, false, misleading or deceptive, (or likely to mislead or deceive): Australian Competition and Consumer Commission v Telstra Corporation Ltd.[93]
[89] (2004) 218 CLR 592, [109], [111].
[90] (2009) 238 CLR 304, [102].
[91] (2005) 92 SASR 303, [63].
[92] (2000) 202 CLR 45, [105].
[93] (2004) 208 ALR 459, [49].
Conduct becomes misleading or deceptive (or likely to be so), when it has a tendency to cause a party to act in error, or under misconception: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd,[94] Australian Competition and Consumer Commission v TPG Internet Pty Ltd.[95] The inquiry directs attention to the likely reaction to the conduct by ordinary or reasonable members of the class to whom the conduct is directed: Campomar Sociedad Ltd v Nike International Ltd.[96] Proof of an intention to mislead or deceive is unnecessary, as the impugned conduct is objectively determined: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd.[97] Conduct is likely to mislead or deceive, if at the time the conduct occurred, there is a ‘real or not remote chance or possibility, regardless of whether it is less or more than a fifty per cent chance’: Sheen v Fields Pty Ltd,[98] Global Sportsman Pty Ltd v Mirror Newspapers Ltd.[99]
[94] (1982) 149 CLR 191, 198.
[95] (2013) 250 CLR 640, [39].
[96] (2000) 202 CLR 45, [102]-[103].
[97] (1982) 149 CLR 191, 216.
[98] (1984) 58 ALJR 93, 95.
[99] (1984) 2 FCR 82, 87.
On the other hand a party whose conduct is so negligent in protecting its own interests, may mean that a representation was not in the circumstances a real inducement to enter into a contract and thus to sever the causal connection: Argy v Blunts & Lane Cove Real Estate Pty Ltd.[100] A party is not obliged to volunteer information of assistance to the other party to avoid the consequences of the careless disregard of that other party’s own interests: Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd.[101] Still further, there must be a sufficient causal link between the impugned conduct and error on the part of the person exposed to it: Australian Competition and Consumer Commission v TPG Internet Pty Ltd.[102]
[100] (1990) 26 FCR 112, 138.
[101] (2010) 241 CLR 357, [22].
[102] (2013) 250 CLR 640, [39].
Promises and predictions
In contrast, a representation as to a future matter, that is to say a statement made about what will happen in the future, is generally characterised as a non-actionable expression of an opinion: Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd,[103] and Australian Competition and Consumer Commission v Dukemaster Pty Ltd.[104] As stated in Global Sportsman Pty Ltd v Mirror Newspapers Ltd:[105]
The non-fulfilment of a promise when the time for performance arrives does not of itself establish that the promisor did not intend to perform it when it was made or that the promisor's intention lacked any, or any adequate, foundation. Similarly, that a prediction proves inaccurate does not of itself establish that the maker of the prediction did not believe that it would eventuate or that the belief lacked any, or any adequate, foundation. Likewise, the incorrectness of an opinion (assuming that can be established) does not of itself establish that the opinion was not held by the person who expressed it or that it lacked any, or any adequate, foundation.
[103] (1984) 2 FCR 82, 88.
[104] [2009] FCA 682, [10].
[105] (1984) 2 FCR 82, 88.
Section 4(1) and (2) of Australian Consumer Law provides:
4      Misleading representations with respect to future matters
(1)     [No reasonable grounds for making representations]
If:
(a)a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act);
(b)and the person does not have reasonable grounds for making the representation;
the representation is taken, for the purposes of this Schedule, to be misleading.
(2)     [Defendant to adduce evidence of reasonable grounds]
For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by:
(a)a party to the proceeding; or
(b)any other person;
the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary.
In Jacques and Ors v Cut Price Deli Pty Ltd & Ors,[106] it was said that representations as to the level of gross profit that could be made in a delicatessen franchise were ‘presented as realistically based estimations of the turnover and gross profit that the Jacques would achieve … on which they could confidently plan’. The trial judge held:[107]
In so far as turnover is concerned, the allegation is first, a representation as to a future matter, namely that the future turnover would be of a certain order and, secondly, a representation as to present fact, namely, a present belief as to the trading potential of the shop.
This aspect of Jacques was cited with apparent approval by Hill J in Ting v Blanche, who there wrote:[108]
The first of these representations, his Honour held, was a representation with respect to a future matter to which s 51a applied. However, the representation as to present state of mind of the respondent was a representation, so his Honour held, to which s 51a had no operation.
Whatever may be the case where there is an express representation as to the maker's state of mind concerning a future matter, it is not, in my opinion, correct to treat a representation as to an event or conduct in the future, be that in the form of a prediction or otherwise, as not being a representation with respect to a future matter merely because it implies a representation as to the maker's present state of mind. The language of s 51a is very wide and the words “with respect to” are, like the words “in respect of” discussed by Dickson J, delivering the judgment of the Supreme Court of Canada in Nowegijick v R (1983) 144 DLR (3d) 193 at 200 , (a discussion cited with approval by Toohey J in Smith v FCT (1987) 164 CLR 513 at 533; 74 ALR 411 AT 424):
… words of the widest possible scope. They import such meanings as “in relation to”, “with reference to” or “in connection with”. The phrase “in respect of” is probably the widest of any expression intended to convey some connection between two related subject-matters.
A representation as to future rental, for example, will be a representation with respect to a future matter, even if also, impliedly, a representation as to the existing state of mind of the maker.
[106] (1993) ATPR (Digest) 46-102.
[107] Ibid 53, 436.
[108] (1993) 118 ALR 543, 553.
As pointed out in Digi-Tech (Aust) Ltd v Brand,[109] Hill J’s approach in Ting v Blanche was accepted as correct in Sykes v Reserve Bank of Australia.[110] A similar approach was adopted by Mason P in City of Botany Bay Council v Jazabas Pty Ltd.[111] In this context, French CJ and Kiefel J in Campbell v Backoffice Investments Pty Ltd,[112] considered the first question to be asked:
Was it a statement of historic or present fact made on the basis that its truth was known to the maker? Was it a statement of opinion?
[109] [2004] NSWCA 58, at [100]-[101].
[110] (1998) 88 FCR 511, 520-521.
[111] [2001] NSWCA 94, [81].
[112] (2009) 238 CLR 304, [32].
Misrepresentation by silence
It was authoritatively established in Miller & Associates Insurance Broking Pty Ltd v BMW Finance Limited that:[113]
… mere silence, with regard to a material fact, which there is no legal obligation to divulge, will not avoid a contract, although it operates as an injury to the party from whom it is concealed.
The joint judgment of French CJ and Kiefel J proceeds to note the ‘characterisation of conduct will be undertaken by reference to its circumstances and context’, in which ‘[S]ilence may be a circumstance to be considered’, as well as the ‘knowledge of the person to whom the conduct is directed’: Miller & Associates Insurance Broking Pty v BMW Australia Finance Limited.[114]
[113] (2010) 241 CLR 357, [16].
[114] (2010) 241 CLR 357, [20].
In Demagogue Pty Ltd v Ramensky, Gummow J considered mere silence could ‘support the inference that the fact does not exist’; where the ‘circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed’.[115] Black CJ expressing his agreement with Gummow J, added:[116]
Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. To speak of “mere silence” or a duty of disclosure can divert attention from the primary question. Although “mere silence” is a convenient way of describing some fact situations, there is in truth no such thing as “mere silence” because the significance of silence falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed.
[115] (1992) 39 FCR 31, [41].
[116] Ibid [32].
On this question Doyle CJ explained in Software Integrators Pty Ltd v Roadrunner Couriers Pty Ltd:[117]
… it is now beyond question that silence or nondisclosure can be misleading when combined with other factors such as the provision of incomplete information, or half truths, or the failure to correct a representation which has become false. Section 52 plainly contemplates that misleading and deceptive conduct may be constituted by a factual matrix consisting of silence as well as the paradigm situations concerned with overt activity.
At common law, a failure to correct a representation which has become false may constitute an actionable misrepresentation: see With v O'Flanagan [1936] Ch 575. Such a failure could also be misleading and deceptive conduct. A duty of disclosure may also exist where there is the provision of incomplete information or half truths. An example of the latter situation is Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546. In that case Lockhart J stated the position as follows (at 557):
“At common law, silence can give rise to an actionable misrepresentation where there is a duty upon the representor to reveal if a matter exists, and where the other party is therefore entitled to infer that matter does not exist from the silence of the representor … ”
However, the law has moved on from this statement. Contemporary authority approaches the question from the perspective of whether the circumstances are such that they give rise to a reasonable expectation that if a relevant fact exists, it will be disclosed. The notion of a reasonable expectation, which is becoming common in modern jurisprudence, was employed in this context by French J in Kimberley NZI Finance Ltd v Torero Pty Ltd [1989] ATPR 53,193 at 53,195:
“ … unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist.”
[117] (1997) 69 SASR 288, 296.
Another consideration in circumstances of non-disclosure is the significance of the material left undisclosed: Australian Securities Investment Commission v PFS Business Development Group Pty Ltd,[118] Skinner v Redmond Family Holdings Pty Ltd.[119]
Principles applied to the facts
[118] (2006) 57 ACSR 553, [362].
[119] (2017) ACSR 593, [88].
Misleading or deceptive conduct
Mr Honner represented the business as capable of achieving at least 40 per cent occupancy, knowing this level was historically rarely achieved over the better part of two decades. It is clear from his evidence that he consciously withheld that information:[120]
[120] T53.30-54.3, T56.1-.8, T57.2-.7, T57.23-.30, T58.4-.31, T93.25-.31.
Q.But would you agree that at no time during the interview did you tell us how low the occupancy currently was at the Motel.
A.I don't recall giving you a figure.
Q.No. I'm just sort of a bit puzzled why, in hindsight now, you might not have said to us 'The Motel was currently running at a very low occupancy and that this realistically is probably not going to be the figure that you would be earning'.
A.I mean, if you'd have asked me the question I may have given you an answer to that but I don't recall that question.
…
HIS HONOUR
Q.As I understand what you're being asked is that you didn't tell the Geards exactly what the occupancy rate had been in the period of several years before February of 2014.
A.I doubt that I would have volunteered it, yes.
Q.You doubt you would have volunteered it.
A.Yes.
…
Q.So at no time during that interview did you think that it would be advantageous for us to make a decision about the job, to actually tell us what the actual figures were at the Motel.
A.I would never make a prediction like that. You're the person running the Motel.
…
Q.But what I'm saying is don't you think it would have been clear and advantageous to us to make a decision about whether or not to take the job, had you provided us with the actual figures that the Motel had been turning over for the two previous years, which is substantially lower than that; is that not true.
A.The answer to your question is, depending who is running the Motel, the figures can be higher or lower.
…
HIS HONOUR
Q.So you didn't tell the Geards that for the previous year the turnover was 43.5, or anything here.
A.No.
Q.The previous year to that, 2008/9 the total income was $217,000-odd, wasn't it.
A.That's correct.
Q.So on a rough count, it would have to be something less than 40%, wouldn't it.
NOT ANSWERED
Q.263 is 43%.
A.Yes, yes.
Q.At a rough estimate, that would be less than 40%, wouldn't it.
A.Yes, the tariff would have been lower in those days but you would be correct, less than 40%.
Q.If my assumption's wrong then -
A.No, I think you would be right.
Q.If you go back to p.65, I think what you're being asked is it was unrealistic in the light of those two years to be even thinking about 50 or 60% occupancy, I think that's what is being put to you.
A.My answer to that question, Nikki is the one who said 'we can do 50% here, piece of cake' and convinced me she was pretty good. What I did say is 'look, you won't make 60%' and we virtually arrived at 50% as being less than what she thought she could do but more than probably what I thought she might be able to do.
…
Q.Yes, I'm aware of that. What I'm trying to establish is the decline of the occupation of the Motel which had we been shown that, would have had a contributing factor to whether or not we would have taken the position because nowhere near is this figure here, 114, 169 and 156, anywhere near the projection back on p.65.
A.Well, you didn't ask for any figures.
Mr Honner sought to deflect any adverse consequence arising from his failure to produce or disclose the current occupancy figures by whimsically suggesting that ‘you could have asked Lyn and Scott’.[121] Matters were compounded by the unquestioned fact that the Motel was in a run-down state of repair when this representation was made, rendering it even more unlikely that such figures as contained in the written note could be achieved with the premises in such a poor state of repair. Since the Geards were led to understand that occupancy stood at 40 per cent despite the run-down state of the Motel, it is understandable they considered the situation could only improve.
[121] T70.18-.32, T72.3-.5. This was a reference to Mr and Mrs Aries the outgoing operators.

The understanding conveyed to the Geards was enhanced by the letter Mr Honner wrote concerning his approach to Bank SA in which the stated turnover was consistent with that contained in his note. It is noteworthy in this context that in Miba Pty Ltd v Nescor Industries Group Pty Ltd,[122] Merkel J considered a letter sent to a Bank to assist the purchaser of a food franchise to obtain finance stating that it ‘is our understanding that the average Food Court operator … achieves sales in the order of $10,000.00/week’, constituted a representation to the same effect to the purchaser as if it was ‘provided … personally to [the purchaser] … and expected that it would be read and its contents relied upon by … [them]’.[123] His Honour distinguished Haynes v Top Slice Deli Pty Ltd,[124] on the footing that:[125]
In the present case Nelson handed the letter of 3 July 1990 to [the purchaser] expecting that the Vittouris’ and the bank would read and rely upon the information contained in it.
This view was upheld on appeal: Nescor Industries Group Pty Ltd v Miba Pty Ltd.[126]
[122] (1996) 141 ALR 525.
[123] Ibid, 532.
[124] (1995) ATPR (Digest) 46-147.
[125] (1996) 141 ALR 525, 533.
[126] (1997) 150 ALR 633, 639.
Here again the present situation is much the same. It is opportune to observe that Merkel J observed in Miba Pty Ltd v Nescor Industries Group Pty Ltd:[127]
Although the sales projection necessarily has a future element in it that element does not transform the characterisation of the representation into one which is with respect to a future matter.
Likewise in Jacques and Ors v Cut Price Deli Pty Ltd & Ors,[128] Spender J considered recommendations as to profitability were made with respect to present belief.
[127] (1996) 141 ALR 525, 536.
[128] (1993) 15 ATPR (Digest) 46-102.
The fact that Mr Honner referred in his letter to the Geards on 2 August 2017 ‘expectation of you at 50%’,[129] rather supports this conclusion, for how otherwise could he reasonably expect 50 per cent when 40 per cent was not then achieved?
[129] Exhibit P1, p 400.
The situation was that Mr Honner knew only too well that the Stansbury Holiday Motel was not trading at anywhere near 40 per cent occupancy rates. There was no reasonable basis on which he could possibly think otherwise. As reasoned earlier, it is difficult to accept that his note of projected returns was merely produced as an ‘outline as to what operators could expect’, when 40 per cent was not realistic. To accept that proposition is to accept that the note simply contained theoretical projections, divorced entirely from the actual trading position. Any reasonable person in the position of the Geards at the time could hardly have taken the note as representing anything else other than that a base level of 40 per cent occupancy was the actual trading position.
In the circumstances, this state of affairs amounts to misleading and deceptive conduct, and if not conduct that was likely to mislead, without reasonable ground to support it. In light of these conclusions and returning to the claimed misrepresentations, the following observations are made with respect thereto:[130]
·The Stansbury Motel turnover was $300,000 per annum – this representation was conveyed by Mr Honner’s handwritten note in that turnover was put at $286,880 based on 40 per cent occupancy. The $300,000 figure was expressly conveyed in the letter of 24 February 2014 reinforcing that understanding as the two sums are not materially different;
·The current managers were not maintaining the Motel properly – this was literally the case due to ill health and because of the poor state of maintenance, however this is not an actionable misrepresentation as the Geards were fully aware of the situation;
·Occupancy rates of between 40 and 60% were achievable – this is literally what the notes describe; the 40 per cent figure is unqualified and although rates of 50 per cent and 60 per cent are qualified, the addendum inherently contemplates those rates were achievable. The 40 per cent level was false and misleading for the reasons stated. The predictions of 50 per cent and 60 per cent occupancy rates were not taken alone, but they were false and misleading to the extent that they depended on a minimum 40 per cent extant occupancy rate;
·It would be easy for the defendants to achieve 60% occupancy or more – this is not proven given the statement that 60 per cent would not be achieved in the first year and that there is a question mark against that projection and indeed 50 per cent occupancy in the handwritten note;
·They could easily make $80-100,000 – the Geards’ 25 per cent allocation of gross income as operators, is compatible with a return of $71,720 based on a 40 per cent occupancy, $95,132.50 at 50 per cent and $98,615 at 60 per cent occupancy, which are therefore entirely consistent with such a statement. This does not otherwise substantially add anything of substance to the dollar figure projections based on occupancy rates above in the handwritten note;
·30% of gross receipts would be ample to cover expenses and replacements – this is no more than a reference to the combined contributions of 20 per cent allocated to ‘running costs’ and 10 per cent to ‘new items in each year’ under the Motel Agreement, and hence do not add anything further to the underlying assumptions made in the note.
[130] Taken from paras 4.2 (a)-(e) of the defence.
Misrepresentation by omission
The situation was that the Geards genuinely expected to improve turnover to up to 50 per cent in the first year, hence the Addendum, and hopefully up to 60 per cent later on. The Addendum itself encouraged them to think as much. This expectation was grounded in the understanding that turnover stood at 40 per cent as of mid-February 2014, which of course was not the case. As demonstrated earlier, based on turnover of $169,552.45 for the 2012/2013 financial year, occupancy stood at just over 26 per cent. It fell to $114,503.66 during the 2013/2014 financial year, and correspondingly the occupancy rate was a little less than around 20 per cent. As seen from the table reproduced above, the highest turnover of the figures available was for the 2009/2010 financial year of $253,839.99 or 43.5 per cent, whereas for the previous year it was $217,248.98, which probably equates to approximately 34 per cent.
Although the Geards operated the Stansbury Holiday Motel for no less than four months of the latter financial year 2013/2014, the trading position was ‘inherited’, rather than one of their own making. The position was as Mrs Geard reported it to be in her letter of 30 July 2017 ‘inherited due to your lack of a maintenance programme.’[131] Mr Honner was aware their expectations and optimism was generated by his written note and must have surely realised this was founded on the understanding of a 40 per cent minimum base occupancy. Yet he failed to disabuse them of the understanding he had given them to accept was the case. The difference between actual and 40 per cent turnover was clearly highly material, being around a $100,000 per annum difference.
[131] Exhibit P1, p 395.
Objectively speaking, the Geards were entitled to infer occupancy stood at no less than 40 per cent. They were justified in holding a reasonable expectation of disclosure if that was not the case. Correspondingly, Mr Honner held a duty to reveal the true state of affairs so far as turnover was concerned. The combined circumstances and context of the discussions at the meeting of February 2014, called for disclosure of the actual turnover figures. The failure to do so therefore also amounted to misleading and deceptive conduct by omission. There was no reasonable basis to support the representation that turnover stood at no less than 40 per cent.
This conclusion is consistent with the approach taken by the trial judge and approved on appeal in Southern White Pty Ltd v Slinger & Slinger.[132] That was a successful claim for damages based on an inducement to enter into a contract of sale and purchase of land and a childcare business, based on information relating to turnover that was correct at the time it was conveyed, but inaccurate at the time the contract was entered into. The trial judge reasoned:[133]
In the final analysis, the defendants were responsible for misleading and deceptive conduct in the form of omission rather than commission. The omission was the failure to update to the time of the contract the figures disclosed to the plaintiff before the contract. The profit and loss statements in the Form 2 did not go beyond 31 December 1996. The history in the Pied Piper History did not go beyond the March 97 quarter. Only projections were provided in the ensuing months, notwithstanding that the defendants were in possession of information that showed that in fact the business was in decline at that time.
The judgment continued:[134]
... the performance of the business in terms of assistance acquitted was trending downwards throughout the 96/97 year. Prior to the contract, the figures in the table, and the direction that they were taking, were known only to the defendants. All that the plaintiff knew was the projection in the defendants’ documents that quarterly turnover would be in the order of $60,000 and annual turnover would be in the order of $240,000. By the time that the contract was signed, there was no reasonable prospect that these projections would be achieved, at least in the short term.
[132] [2004] SADC 43.
[133] Ibid, [23].
[134] Ibid, [26].
This process of reasoning was upheld on appeal in Slinger v Southern White Pty Ltd,[135] on the basis that the proven conduct was capable of misleading and deceiving,[136] and on the basis of an ‘obligation to update the figures’.[137]
[135] (2005) 92 SASR 303.
[136] Ibid [64].
[137] Ibid [66].
Causation and reliance
It was put on behalf of the plaintiff that there was an absence of evidence of reliance upon any representation.[138] The evidence of Mrs Geard does however present a different picture. During the course of a long passage early in her evidence she told the court:[139]
Based on what we saw as the figures on p.65 at the meeting we very wrongly took that to assume that that's the kind of turnover that the Motel was currently seeing.
Taken under cross-examination to a letter penned by Mr Honner on 2 August 2017, she responded rhetorically:[140]
So how can you now say that he was not portraying that we would be producing 50% and that the Motel was capable of doing 50% occupancy which is what he sold at the interview, and one of the key statements he made at the interview more than once was when the Motel is run well it will easily achieve 60% occupancy.
[138] T204.33-205.2, T206.1-.3, T211.37-212.14.
[139] T122.4-.7.
[140] Exhibit P3, pp 400-402, T161.38-162.9.
Under later cross-examination on this topic her evidence continued:[141]
[141] T182.1-.34.
Q.Your pleaded case relies on representations being made and today in your evidence you walked away from three of five of these representations. You accept, don't you, that your representations that you rely on in your pleaded case aren't strictly speaking correct.
A.No, I don't. What are you talking about?
Q.If you look at 4.2.
A.No, because I don't agree with you.
HIS HONOUR: I think it's matter for argument.
A.Because you're just nitpicking about what was actually said whereas the paragraph says 'Words to the effect that'. It does not say that I claim that he said that word-for-word.
XXN
Q.… It's the case, isn't it, that you were keen to undertake a sea change and to operate this Motel at Stansbury, weren't you.
A.Yes, based on what we had been told and shown in the interview.
Q.By that time you'd been shown a one-page document.
A.We had been shown that. We had walked through the Motel. We had looked at the location, yes.
Q.I put it to you that the matters which you have pleaded in this case were not the reason that you wished to enter into this agreement.
A.What matters?
Q.The representations that you pleaded, they weren't the reason you wished to enter into the Motel agreement.
A.So I didn't enter into it because we wanted to earn a decent living or drive a successful business?
Q.It's your case to answer.
A.No, I disagree with that.
During her closing address Mrs Geard repeated that, ‘There is no way that we would have accepted the position had Mr Honner been transparent with the turnover’, and that as Mr Geard ‘was in full employment prior to accepting the position … earning $70,000 per year so it was deemed to not be a very smart decision to take a pay drop of over half of that’.[142]
[142] T218.18-.29.
Despite the misgivings about her reliability as a witness expressed earlier in these reasons, these aspects of her evidence can be accepted as they make sense. Once it is accepted that occupancy was consistently below 40 per cent it is a small step to accept that the situation was an uneconomic and therefore unattractive one.
A related criticism of the Geards was directed to continuing with the arrangement after the first year failed to realise an occupancy rates of 50 per cent, thus triggering the non-renewal provision in the Motel Agreement. On this issue Mr Honner gave evidence to the effect that he consented to that course:[143]
[143] T34.36-35.11.
Q.In respect of the operation of the Motel can you recall how the Geards succeeded in terms of occupancy in the first full financial year, which I will prompt you by saying was 2014-2015.
A.    The first year was not good.
Q.    Was it your understanding that they were under the 50% level.
A.    Yes.
Q.    Notwithstanding that you continued on past year one, is that right.
A.    Yes, they were doing a good job.
Q.    When you say 'a good job' what do you mean by that.
A.Well, they had the potential to move the Motel higher, and cleanliness was good and so forth.
This evidence rather suggests it was of no surprise to him at all that occupancy rates were well below 40 per cent after the Geards became the operator. He later challenged Mrs Geard during her questioning of him:[144]
Now you stayed there for three years and you want to go for a fourth year. You could have left. It's a rolling annual financial year agreement. You could have left at any stage in that three or four years whatever it was. If you didn't like it you did not have to stay there.
[144] T94.31-.36.
Mrs Geard explained the reasons for continuing with the arrangement in this way:[145]
[145] T130.9-.16.
We did carry on. It was a reluctance to leave really after we had put in so much work into the Motel because we could see that things were slowly turning around. So it's quite hard to walk away from that when you have landscaped the whole section, done a lot of upgrading, put a lot of time into customer service, to walk away and not reap the rewards from that.
Soon after this evidence she was questioned by counsel again on this topic:[146]
[146] T135.6-.22.
Q.… If you look at the year 2014/2015 you see the occupancy rate there the total is 23.4%.
A.That's correct.
Q.Do you accept the occupancy year was, for that year that you traded the Motel, 23.4%.
A.Yes it was.
Q.Therefore you understood, didn't you, at that stage that the Honners could have terminated the agreement at that stage.
A.Yes, they could of.
Q.And at that stage you didn't seek to withdraw from the agreement, did you.
A.No we did not as we had put in a substantial amount of work to bring the Motel up to a reasonable standard. And you can see the following year that that was evident by occupancy going up.
These extracts of the evidence clearly demonstrate that the Geards relied on, and were induced to enter into the Motel Agreement on the footing that it was then achieving a 40 per cent occupancy rate. Once again it makes a good deal of common sense because it accords with what a reasonable person in their position would do in the circumstances. Notwithstanding that the first year proved disappointing, their decision to remain was reasonably based and it was in any event a reasonable decision in mitigation of loss. Importantly, there is no allegation of mismanagement on their part. Furthermore, affirmation under general law is no defence to a claim for damages, as affirmation only affects the right of rescission: Myers v Transpacific Pastoral Co Pty Ltd.[147]
[147] (1986) ATPR 40-673, 47,423-47,424.
Another consideration is that Mrs Geard told the court she asked Mr Honner twice to produce the occupancy figures, which he did not provide.[148] She was not challenged on this assertion under cross-examination and Mr Honner did not refute it in the course of his evidence either.
[148] T130.6-.9, T135.34-136.10.
Misrepresentation Act
A secondary cause of action is brought under the Misrepresentation Act, of which s 7 provides in material part:[149]
[149] Assented to on 30/4/87 to come into effect on 26/10/87.
7—Damages for misrepresentation
(1)     Where a contracting party is induced to enter into a contract by a misrepresentation made—
(a)     by another party to the contract; or
(b)     by a person acting for, or on behalf of, another party to the contract; or
(c)by a person who receives any direct or indirect consideration or material advantage as a result of the formation of the contract,
and any person (whether or not he or she is the person by whom the misrepresentation was made) would, if the misrepresentation had been made fraudulently, be liable for damages in tort to the contracting party subjected to the misrepresentation in respect of loss suffered by him or her as a result of the formation of the contract, that person is, subject to subsection (2), so liable to that contracting party, in all respects as if the misrepresentation had been made fraudulently and were actionable in tort.
(2)     It is a defence to an action under subsection (1)—
(a)that the person by whom the representation was made had reasonable grounds to believe, and did believe, that the representation was true; or
(b)that the defendant was not the person by whom the representation was made and did not know, and could not reasonably be expected to have known, that the representation had been made, or that it was untrue.
This section requires proof of an inducement to enter into a contract acting under misrepresentation (s 7(1)). Section 4(4) of the Misrepresentation Act provides that ‘a representation constitutes a misrepresentation if it is false in any material particular’.
The case for the defendants here essentially rests on misrepresentations contained in the handwritten note and the failure to disabuse them of the occupancy rates contained therein. For the same reasons giving rise to the conclusion that misleading and deceptive conduct is proven, this separate statutory cause of action must equally succeed.
The claims for damages
The plaintiff claims damages for breach of contract amounting to $156,882. The basis upon which this sum is calculated is not disputed.[150] There is however a claim to set-off for ‘loss and damage suffered by the defendants being the value of their labour expended in the Stansbury Holiday Motel in reliance upon the representations … .’[151]
[150] T43.14-.25, T148.35-.38, T155.19-.23.
[151] Defence para 12.
The defendants put no evidence at all before the court quantifying this claim. Even as unrepresented litigants, they were remiss in their failure to disclose primary financial records that might support this aspect of their cross-claim, despite the encouragement of Masters of the court to do so. The court is simply in no position to assess what their loss or damage was. No wages or time records are produced. No award or industry standards for the payment of wages in these circumstances were identified. No primary or secondary records of income or expenditure were disclosed. Despite the admonition of the High Court in Commonwealth v Amann Aviation Pty Ltd,[152] requiring trial courts to do the best they can with such material as is available, there is no material at all to even begin a principled assessment. This aspect of the defence case must fail accordingly.
[152] (1991) 174 CLR 64, 83, 125.

On the other hand, it was clear that Mrs Geard was contending during the course of the trial that the Motel Agreement was invalid on account of misrepresentation. Although not pleaded as such, the defence did assert that the ‘Plaintiff is not entitled to the sum of $156,882 or any part thereof’, that they ‘rely upon section 236 of the Australian Consumer Law’, and that ‘it would be unconscionable for the Plaintiff to maintain this claim’.[153]
[153] Defence paras 11, and 13.
This action was called on following the trial in order for the plaintiff to deal specifically with the alternative remedies that might be available to the defendants. In this stage of the proceedings, no claim was made that the plaintiff would have conducted its case any differently had this issue more clearly arisen during the trial. In any case, pleadings ‘cannot require a judge to decide a case otherwise than in accordance with the law’: Nescor Industries Group Pty Ltd v Miba Pty Ltd.[154]
[154] (1997) 150 ALR 633, 639.
Section 243(a)(ii) of the Australian Consumer Law permits the court to ‘void abinitio or void at all times’ contracts or arrangements if it thinks fit. Section 243(c) thereof empowers the court to refuse to enforce a contract or arrangement. No other remedial option under s 243 is efficacious to give due effect to the above conclusions. The powers to avoid or refuse to enforce contracts induced by false and misleading conduct are of course discretionary, and as stated in AWAD v Twin Creeks Properties Pty Ltd,[155] are:
… apt to be employed in a manner conformable with the just … protection of the representee … and the evaluative assessment of what is the appropriate relief … to prevent the likely suffering of, loss or damage “by” the conduct.
[155] [2012] NSWCA 200, [43].
In light of the conclusions reached earlier that false and misleading conduct is proven, and given that the defendants are in no position to prove loss or damage, the most fitting course is to declare the Motel Agreement unenforceable at the hands of the plaintiff. No such discretionary powers are available under the Misrepresentation Act.
Conclusion and orders
For the reasons articulated above, the defendants demonstrate that misleading and deceptive conduct in the nature of misrepresentations were made to them, to the effect that the Stansbury Holiday Motel enjoyed a 40 per cent occupancy rate as at mid to late February 2014. There was an additional misrepresentation in failing to correct that misunderstanding. Breaches of s 18(1) of the Australian Consumer Law and s 7 of the Misrepresentation Act are therefore proven, whereas consequential loss or damage is not. The combined circumstances are such that the interests of justice dictate that the most appropriate order is one declaring the Motel Agreement unenforceable in the hands of the plaintiff.
As a consequence, the formal orders of the court are:
1Dismiss the plaintiff’s claim for judgment in the sum of $156,882;
2Dismiss the defendants’ claim to set-off.
3Declare the Motel Agreement counter-signed by Mr Honner on 24 February 2014 is unenforceable at the instance of Honner Nominees Pty Ltd, pursuant to s 243(c) of the Australian Consumer Law;
The parties are entitled to be heard on the question of costs.