Kaldover Pty Ltd v Maher, C.M

[1988] FCA 69

IN THE FEDERAL COURT OF AUSTRALIA	)
9UEENSLAND DISTRICT RCGISTRY	) QLD G76 of L987
GENERAL DIVISION	)

BETWEEN: KALDOVER PTY LTD

Applicant

AND: CLAIR MARGARET MAHER and

JOAN PATRICIA FRIEL MAHER

First Respondents

AND: PATTEN TREWIN

Second Respondent

MINUTES OF OREER

JUDGE MAKING OREW.:  PINCUS J

DATE OF O?.DE?:  9 MARCH 1988

=DE tW3E: SRISSANE

THE COURT ORDERS THAT.

1.    the appllcatlon for securlty for c o s r s by t h e flrst respondents Se dlsrnlssed;

2 . the costs of the appllcatlon be the appllcant's

costs In the proceedings.

m:	Settlement and entry of orders 1 s dedit wlth I n
Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA	)
QUEENSLAND DISTRICT REGISTRY	) QLD G76 of 1987

DIVISION GENERAL )

BETWEEN: KALDOVER PTY LTD

Appllcant

AND: CLAIR MARGARET MAHER and

JOAN PATRICIA FRIEL MAHER

First Respondents

AND: PATTEN TREWIN

Second Respondent

PINCUS J . 9 MARCH 1988

REASONS FOR JUDGMENT

I have before me an appllcatlon for securlty by the

flrst respondents ;n	thls claln, whlch	IS broughr; under 5 . 5 2 of
the Trade Practlces Act 1974. It concerns a purchase	of a	hotel
lease.

I heard a prevlous appllcatlon for securlty on 20 July

1987 and made an order for securlty In favour of the second

respondent in the sum of $15,000, payable as set out In the order.

The order for securlty in favour of the second

respondent has not been complied	wlth and the evldence is that	if
a simllar order	1 s made in favour	of the first respondents, the

>~

case wlll be at an end. The applicant is insolvent and Mr and Mrs

Baker, Its directors, have no slgnificant funds.

The contention advanced on behalf of the appllcant In

resistance to this second appllcation for security is that the

material presently before the Court, and in partlcular some

documentary material, shows that	the applicant has a strong case
which should not be stifled.

It is clear enough that the materlal placed before the

Court on behalf of the applicant on thls occasion makes a stronger

case than that prevlously before me; whether It 1 s strong enough

to defeat this second appllcation for securlty is another

question.

111 its present form, the statement of clalm alleges an

agreement made in January 1987 between the ap2llcant and the first

respcndents whereby the appllcant agreed to take a lease of the

Palace Hotel at Nanango, Queensland. It says that the aqreement

was ln<uceo oy various misrepresentations:-

(1) That the average weekly takings of the hotel were

$8,000 or $8,400.

(11)	That the gross margin	was $6,960 less expenses of
$ 2 , 2 0 0 .

(lii)   That "Fourex" brand draught beer was not sold at the hotel.

That the average weekly taklngs were $8,000 to

$8,500.

That the lessee was removing between $1,000 and

$1,500 per week from the takings "resultmg in

average weekly takings being currently recorded	as
lower than the aforesaid sum".

Then the statement of clalm says, of course, that the

takings were In fact much lower than represented.

It has to be conceded that there 1 s substantlal evldence

of a documentary klnd In support of the appllcant's case

concernlnq the representatlon as to taklngs. The appllcant has

produced a photocopy of	a detalled note taken by lts accounmnt,
who obtalned Information from the second respondent wlth a	vlew to

maklng a jubmlsslon to the Licrns1r.q Commis-Ion. The purpose nf

that submlsslon was to obtaln consent to the then proposed

transfer of the llquor llcence.

The accountant's note purports to record beer purchases

of $4,300 per week and other Items (presumably sales) totalling

$3,800 per week - maklnq a total of $8,100 per week. Further, the

appllcant's olicitor has been in touch wlth the former

proprletor, a Mr Warner, who says in effect that the takings were

about $5,000 per week during the last six months	of his operatlon
of the hotel.

In the reasons I gave In the first application for

security, I referred to the then statement of claim which made

slmllar allegations and said that the correspondence before me:

' I . . . shows that complaints of a slmllar klnd were

raised by letter of 17 February 1987 from

solicltors acting for the purchaser. In that

letter they purported to rescind, and they said

that the takings of the hotel were sald to be

$8,000 per week and that inquiries had shown that

they were less than	$6,000."
The	reasons went on to say that on the same day the

solicitors for the vendor wrote back to say that the taklngs were

about $6,000 per week, that a variatlon of the contract was

proposed on 15 February and apparently accepted, the contract

belng settled on 25 February 1587.

In the affldavlt made by the dlrectors of the appllcant,

Mr and Mrs Baker, some detall 1 s given as to the clrrumstances

they clalm surrounded thls resclslon. Mr Baker says he went to

the hotel on 9 February 1387 and later telephoned the second

respondent (the broker) and told h l m there was only one person In

the publlc bar at about 4 p.m.; the second respondent attevpted

to reassure Mr Baker.	A week later, on	16 February, Mr and Mrs
Baker went to see	a Mr Jeffrey, a broker actlng for	a flnance

company whlch was then	proposing to, and In fact dld, advance
money towards the purchase of the lease. Mr. Jeffrey sald he	had
seen the books for	18 weeks, includlng the Christmas trade perlod,

and the average was $5,800 per week. The Bakers then went to see

the second respondent and reported Jeffrey's findlng.

.

The second respondent, according to the affidavit, sald

in effect that the prevlous llcensee had been taking cash from the

till representing the difference between the amount shown in the

records and the $8,000 or so represented.

The second respondent then telephoned "Mrs Maher", who

may or may not be one of the flrst respondents, and she told Mr

Baker, according to	hlm, that the hotel was taklng	$8,400 per week
and that its then llcensee was taking	$1,000 to $1,500 "off	the
top".

The affidavlt then attempts to glve an explanation of

the reason for the	resc1sslon referred to above; the	explanatlon
1 s not one I follow.

On the appllcant's case, Mr Baker put hls "head In a

noose", to use the xpresslon ln the Bakers' zffldavlt,

prlnclpally on the basls of an assurance that the exlstmg

llcensee was not showlng hls full tahngs In the records of the

buslness - an assurance, be ~t noted, not comlng from the llcensee

hlmself but from the vendors or thelr representatlve. Further,

the flgures glven by "Mrs Maher" just referred to - removal of

$1,000 to $1,500 per week from taklngs	of $8,400 per week - would
not, of course, produce the amount shown In the records	($5,800).

In the circumstances, It 1 s hard to credlt that the applicant

flnally decided to purchase the business on the strength of the

representations made as to takings.

On the other hand, it now seems to be accepted that mere

foolishness or excessive credullty does not necessarily defeat a

claim under 5.52 of the Trade Practices Act. Further, the

applicant has another string to Its bow.

This is the story that the applicant was decelved into

thinking that the flgures represented were achleved without

selling "Fourex" draught beer.	Agam, It 1 s hard to believe that
any purchaser of a country hotel In Queensland would not	have the

gumption to ascertaln for hmself or herself whether the hotel was

selllng, or was able to sell, "Fourex" draught beer, but the

Bakers say that thelr lnvestlgations failed to ascertaln that.

I have in the end declded not to order securlty. It

seems to me	an unsound practlce to refuse an order for securlty
for the reason that otherwlse proceedlngs	rnlght be "stlfled"; the
adoption	of that practlce Involves one In prellminary trials of

the Issues in the case. Where, however, ~t appears that

documents exlst whlch glve prlna facle support	to a	case	of
mlsrepresentatlon, the Court may, In	my	vlew, be ~ust~fied	In

refuslng to order securlty That 1 s so here: the accountant's

notes, to whlch I have referred, provlde solld evldence of what

representations were made as to the taklngs, and It seems not to be dlsputed that the books showed much less. What the case 1s

about ( s o far as the taklngs are concerned) 1 s how that gap, the

existence of whlch was ascertained before settlement, was brldged.

The applicant has put forward	an explanation of that and the
respondents have supplied none.

.

The application for securlty wlll be dismlssed and the

costs will be the appllcant's costs in the proceedlngs.

I propose to hear the partles as to further directions.

; c e r t l f y tba+ + I Z and rhe	6	preced,n:
FZ;GS	2 r 2 J truz ccpy of h	rezssns for

IL1,!g'7vnt hctc.17 of Xis Honour

. I . '