Lam & Anor. v Margiotta
[2002] NSWCA 233
•15 July 2002
CITATION: Lam & Anor. v. Margiotta & Anor. [2002] NSWCA 233 FILE NUMBER(S): CA 40746/01 HEARING DATE(S): 15 July 2002 JUDGMENT DATE:
15 July 2002PARTIES :
Buu Bieu Lam and Anor. - appellant
Vincent Margiotta & Anor. - respondentsJUDGMENT OF: Giles JA at 1, 57-62, 65-68; Hodgson JA at 2-56; Davies AJA at 63
LOWER COURT JURISDICTION : District Court LOWER COURT
FILE NUMBER(S) :DC9013/95 LOWER COURT
JUDICIAL OFFICER :Sidis DCJ
COUNSEL: Mr. M. Broun QC for appellants
Mr. J. Stevenson for respondentsSOLICITORS: William Chan & Co. for appellants
Blake Dawson Waldron for respondentsCATCHWORDS: LEGAL PRACTITIONERS - Solicitors - Negligence advice - Whether causative of loss - Whether error by primary judge shown. ND. CASES CITED: Berry v. Kanakis [2002] NSWCA 68
Rosenberg v. Perciva (2001) 178 ALR 57
State Rail Authority (NSW) v. Earthline Constructions Pty. Ltd. (1999) 73 ALJR 306DECISION: Appeal dismissed with costs.
CA 40746/01
DC 9013/95Monday 15 July 2002GILES JA
HODGSON JA
DAVIES AJA
1 GILES JA: As foreshadowed before lunch, we are in a position to deal with the matter immediately and I would ask Hodgson JA to give the first reasons.
2 HODGSON JA: On 5-9 and 21 March 2001, Sidis DCJ heard proceedings in which the appellants, Mr Buu Bieu Lam and Ms Luk Muoi Ly, claimed damages against the first respondent, Vincent Margiotta, a solicitor, and the second respondents, Margiotta Solicitors, who were employers of the first respondent for breaches of contract, negligence and misrepresentations in connection with the purchase by the appellants of a bakery business at Woy Woy.
3 On 6 September 2001, Sidis DCJ gave judgment in the proceedings and ordered that there be a verdict for the respondents and that the appellants pay the respondents’ costs. The appellants appeal from those orders.
4 I will begin with an outline of the factual circumstances.
5 Mr Lam was born in Cambodia and Ms Ly was born in Vietnam. They each came to Australia in 1979. They met in Australia and were married in 1985.
6 On 12 July 1990 Mr Lam saw an advertisement in the Sydney Morning Herald advertising a bread and cake shop at Woy Woy for a price of $117,000, also stating “$$7500 T/O, long lease, $2000 net profit, no opposition”. Ms Ly obtained the telephone number of one of the proprietors, Peter Nugent, and telephoned him on 13 July and arranged to meet him that day.
7 At the meeting, Mr Nugent wrote and signed a document which read as follows:
Average weekly takings for the past 6 months for Deepwater Hot Bake = $7814.75
Weekly wages average over this period $1427.75 (including casuals)
Accountants figures will be available at the end of next week.Deepwater Hot Bake
Woy Woy
13/7/90
8 On 14 July the appellants visited the shop, which was in Deepwater Plaza at Woy Woy, the managers of that centre being Byvan Management NSW Pty Limited (Byvan). They were taken through the shop by Mr Nugent and they met the co-owner, Ms Neilsen.
9 On 16 July the appellants went with Mr Nugent to the office of his solicitor, Mr Hopper, at Dee Why and they picked up the contract for sale of the business. The same afternoon Mr Lam, perhaps also Ms Ly, met Mr Margiotta at the Cabramatta office of Margiotta Solicitors, together with Mr Lam’s cousin, Mr Tran. Mr Margiotta accepted instructions to act on behalf of the appellants in connection with the purchase of the bakery business. Mr Lam took the draft contract to the meeting and also Mr Nugent’s handwritten note.
10 The contract contained a copy of the lease of the premises, being a five year lease from 1 December 1989 to 30 November 1994 with no option. It stated a minimum rent of $39,800 and stated that the contribution of operating expenses would be 2.83 per cent. Many of the terms of the lease were contained in a separate document, registered at the Land Titles Office, and referred to as Memorandum T703455. That Memorandum was not with the contract documents.
11 It appears that Mr Margiotta telephoned Mr Hopper on that day, because there is a note by Mr Margiotta of that date of such a phone conversation reading “will send me a memo of lease in DX”.
12 On 17 July 1990 Mr Margiotta sent a facsimile to Mr Hopper requesting certain amendments to the contract, including “Clause V warranty $7814.75 for period from January 1990 to July 1990”. In fact, that was included in the lease, with the qualification that this was plus or minus five per cent.
13 On 18 July 1990 the appellants and Mr Tran attended Mr Margiotta’s office with a cheque for the ten per cent deposit, and it appears that they signed the contract on that occasion. The cheque and the contract were then handed to Mr Tran for delivery to the vendor’s solicitor by way of exchange of contracts.
14 On 19 July Mr Margiotta sent some requisitions to Mr Hopper, and also on that day the Commonwealth Bank of Australia approved a small business loan of $70,000 to the appellants to assist with the purchase.
15 On 20 July 1990 Mr Hopper sent a letter to Mr Margiotta referring to “our telephone conversation with you” and enclosing a copy of the memorandum T703445. One of the terms of that memorandum was a requirement for the furnishing of monthly statements of sales or turnover to Byvan. There was in evidence at the hearing figures given by these statements that showed the statements supplied by the vendor between January 1990 and July 1990 averaged about $5700 per week.
16 The contract provided for a period of seven days in which the appellants were to be permitted to observe the business and receive tuition. They attended at the business during about the last week of July. They had some concerns about that experience. According to the appellants, they went to see Mr Margiotta on 26 July. There is in evidence a note of Mr Margiotta of 3 August about the concerns of the appellants, particularly in not being permitted to see what money was going into and being taken out of the till.
17 There was exchange of letters between the solicitors on 10 August. The vendors’ solicitor in his letter set out complaints by the vendors about the appellants’ conduct during the tuition attendance, and there was a response to this in Mr Margiotta’s letter.
18 There was also a note of Mr Margiotta of 10 August of a telephone conversation with Mr Hopper stating “Agreed to a reduction of price by $2500 provided we settle on Monday”.
19 Settlement of the purchase took place on 13 August, and the appellants then took over the business. There was after settlement some ongoing contact between the appellants and Mr Margiotta. The appellants expressed concern that the takings were “nothing like $7800”.
20 On 30 October 1990 there was a meeting between Mr Margiotta and Mr Lam, and Mr Margiotta took a file note purporting to show takings reported to him by Mr Lam as follows:
- 13/8/90 – 19/8/90 $5,033.00
20/8/90 – 26/8/90 $4,930.00
27/8/90 – 2/9/90 $5,150.00
3/9/90 – 9/9/90 $4,718.97
10/9/90 – 16/9/90 $4,736.56
17/9/90 – 21/9/90 $4,665.70
week ending 7/10/90 $5,356.82
21 At that meeting, Mr Margiotta said he would try to locate the vendors and that if he did so he would brief a barrister for advice on the prospects of litigation. He asked Mr Lam if he wished to engage a private investigator to find the vendors and Mr Lam declined because of the expense.
22 On 7 December 1990 Mr Margiotta wrote to the appellants advising that he had not located the vendors.
23 The business proved unsuccessful, and after the expiry of the lease in 1994 a further lease was not granted. The appellants sued the respondents for damages, essentially claiming under three categories as set out in the primary judge’s judgment as follows:
- (a) prior to exchange of contracts
(i) failing to explain the terms of the contract;
(ii) falling to advise on the means of checking the turnover representation;
(iii) failing to secure a warranty as to future turnover;
(iv) failing to attend to matters arising out of the lease namely:
§ explanation of the terms of the lease generally;
§ advice that the lease contained no option to re-new at the end of the term;
§ negotiation of an option to renew at the end of the term;
§ negotiation of a term under which the lessor agreed not to lease any other premises within the Centre for the purposes of a bakery.
(c) after completion
(b) between contract and settlement
(i) inadequate explanation of the tuition period provided for in the contract;
(ii) failing to advise. adequately on the plaintiffs’ rights of rescission;
(iii) advising the plaintiffs to complete in circumstances of doubt concerning the takings of the business.
(i) failing to take effective recovery action.
24 In her judgment, the primary judge first made a finding that the appellants were not witnesses of credit and that where their evidence conflicted with Mr Margiotta’s evidence the primary judge accepted Mr Margiotta’s version. However, the primary judge did find that Mr Margiotta did not have the Memorandum T703445 before the exchange of contract so as to be able to advise the appellants fully as to the terms of the lease before exchange of contract. However, she accepted that Mr Margiotta explained the terms of the contract and the lease otherwise at the meetings of 16 and 18 July 1990, that the appellants instructed Mr Margiotta to proceed to exchange contracts notwithstanding that the appellants had not received accounting figures from the vendors, and that the appellants did so because they wished to proceed with haste by reason of pressure from the vendors and because they were satisfied from their own observations of the business that they should proceed.
25 The primary judge accepted that Mr Margiotta consulted with the appellants concerning their difficulties during the tuition period; and also that he advised that in order to get out of the contract it would be necessary to have proof of misrepresentation by the vendors, that recision could lead to extensive and expensive litigation, and that if the misrepresentations were not proved, the vendors might forfeit the deposit and recover damages.
26 However, the primary judge did find that Mr Margiotta was negligent in two respects as follows:
- (1) This evidence and that contained in Mr Margiotta’s statement, in my view satisfactorily responds to the plaintiffs’ claims as set out in paragraph 3.1 of these reasons, with the following exceptions:
(a) I do not accept that the provisions of Memorandum T703445 were explained to the plaintiffs prior to exchange of contracts. I therefore accept their evidence that, at that stage, they were unaware of the provisions of clause 29 of that document relating to the provision of the monthly Byvan figures.
(b) I agree with Mr Cornelius that in a case of a cash business, both the real turnover and the costs of operating the business can be difficult to quantify. It is therefore most important that intending purchasers be aware of the risk of proceeding without full and proper inquiry. If they decide to proceed in the absence of appropriate inquiry, it is also important that attempts be made to provide them with some protection between exchange of contracts and settlement.
Mr Margiotta's advice concerning rights of rescission after exchange of contracts did not provide this protection to the plaintiffs.
(2) I find that the defendants' legal service to the plaintiffs in these respects was inadequate to the point where breach of the contract of retainer and negligence is established.
27 Despite those findings, the primary judge found against the appellants, essentially on the basis that she was not satisfied that they suffered any loss as a result of the negligence. The primary judge’s reasons in this regard were as follows:
At the meeting on 16 July 1990, Mr Lam was advised by Mr Margiotta to obtain the tax returns for the business for the prior two years and to take them to his accountants. Notwithstanding Mr Tran’s statement that these records would not reflect the true takings of the cash business, Mr Margiotta advised that the accountant would he able, on viewing the returns, to advise on the cost of operating the business. This advice not followed.
At the meeting with Mr Margiotta on 18 July 1990, the day on which contracts were exchanged, the plaintiffs expressly. rejected Mr Margiotta’s suggestion that they defer exchange of contracts until they had seen the vendors' books. They instructed Mr Margiotta that they did not wish to wait for the accounts that Mr Nugent had told them would he available within a week after 13 July 1990. They told Mr Margiotta that they were satisfied from their observations of the business that the turnover was as represented by Mr Nugent.
Taking this evidence into account with the evidence that the vendors were placing pressure on the plaintiffs to commit to the purchase of the business, I am not persuaded that the plaintiffs would have heeded advice from Mr Margiotta to undertake a full investigation of the accounting records of the business or to negotiate an amendment to the contract to provide for a right of rescission in the event that investigations after exchange of contracts were unsatisfactory.
The result is that I find that the deficiencies in the legal service provided by the defendants were not causative of the plaintiffs’ loss and damage.I have concluded for the same reasons that it would have been unlikely that the plaintiffs would have paid attention to the Byvan figures. Further, the parties agreed that the Byvan figures would have been unreliable since they appeared to be largely the figure the tenant decided to present without reference to the true turnover situation.
28 In addition, the primary judge, having considered evidence from a financial analyst, Mr Thurtell, called for the appellants and an accounting expert called by the respondents, found that the appellants had not established in any event that the vendors’ representations as to takings were false.
29 In this Court, the appellants relied on the following grounds of appeal:
1. The trial judge's conclusions as to the credit of the Plaintiffs was not soundly based in that the trial judge took matters discreditable to the Plaintiffs in their actions other than towards the defendants as a basis for discounting or not accepting their evidence relevant to the case against the Defendants.
2. In coming to a conclusion on the question of credit, the trial judge did not make any due or proper allowance for the difficulties the Plaintiffs had by reason of English not being their native language.
3. The trial judge erred in reasoning that it did not matter that the Defendants had given inadequate advice because the Plaintiffs would not have followed the advice anyway. The Appellants were entitled to receive adequate advice and to consider it.
4. The trial judge erred in not concluding that the Defendants' advice was inadequate in relation to the terms of the lease.
5. The trial judge erred in holding that the vendors had not given any warranty or actionable representation as to the takings of the business in view of the oral and written representations as to the takings.
6. The trial judge attached undue significance to the inquiries and investigations that the Appellants had personally carried out in discounting the absence of adequate advice by the defendants.
7. The trial judge erred in attaching significance to the instructions by the Appellants to the Defendants to try to negotiate a reduced price by the waiver of the warranty when in fact the warranty was not waived and the reduction negotiated was of a minimal kind.
8. The trial judge erred in concluding that the representation of the vendors as to takings were true and in attaching significance to that conclusion on the issue between the Plaintiffs and the Defendants.
9. The trial judge erred in rejecting the evidence of the business valuer called for the Plaintiffs.
11. The trial judge ought to have concluded that the Plaintiffs' claim against the Defendants was made out.10. The trial judge erred in attaching significance to evidence as to the inadequate skill and inadequate management of the business by the Plaintiffs.
30 The respondents relied on a notice of contention as follows:
- The trial judge erred in finding that:
(a) the first respondent was under a duty:
- (i) to explain the risks of proceeding to exchange of contracts without a full and proper inquiry into the accounting records of the business;
(ii) if the appellants decided to proceed to exchange in the absence of appropriate inquiry, to attempt to negotiate an amendment to the contract to provide the appellants with some protection in the event that investigations after exchange of contracts were unsatisfactory;
2. In circumstances where she found that the first respondent advised the appellants, or at least Mr Lam, before exchange:(b) the first respondent's advice concerning rights of rescission after exchange of contracts was inadequate to the point where breach of the contract of retainer and negligence is established.
(a) to seek advice from their accountant regarding the financial aspects of the transaction; and
(b) if, between exchange and settlement, the appellants could prove the warranty was false, they could rescind the contract, but:
- (i) the vendors would not willingly refund the deposit;
(ii) the appellants would have to be prepared to go to Court;
(iii) the appellants would need proof of the breach of warranty;
(iv) the vendors could allege that the appellants breached the contract by refusing to pay the balance of the purchase price and could sue the appellants;
the trial judge erred in failing to find that by giving this advice, the first respondent made it clear that there may be difficulties if the appellants sought to rescind the contract after exchange and thereby made clear to the appellants the risks of proceeding to exchange without a full and proper inquiry into the accounting records of the business.
3. The trial judge erred in finding that the first respondent did not attempt to negotiate an amendment to the contract to provide for a right of rescission in the event that investigations after exchange of contracts were unsatisfactory in circumstances where there was evidence that the first respondent had prepared a document which purported to give the appellants a right of rescission in the event that it was established prior to or after completion that the takings of the business were less than the amount warranted (exhibit N.154).
5. The trial judge should also have found that had the Appellants availed themselves of the opportunity to inspect the vendors' records, they would have been shown the trading and profit and loss account for the year ended 28 February 1990 (2 Blue 414) (which showed average weekly sales of $8,408.00 for the period 4 December 1989 to 28 February 1990) or other like documents tending to corroborate the assertion as to weekly takings made by the vendors orally (1 Blue 10T and 1 Blue 118R) and in writing (2 Blue 427) that the average weekly takings for the six months period to 13 July 1990 was $7,814.75 or more.4. The trial judge erred in finding that:
(a) the first respondent did not have a copy of that Memorandum T703445 in his possession prior to exchange of contracts; and
(b) therefore that, contrary to his usual practice, he did not explain the provisions of that Memorandum to the appellants prior to exchange of contracts, including the requirement to provide monthly figures to Byvan;
in circumstances where a copy of Memorandum T703445 was available from a source other than the vendor's solicitor, namely the Land Titles Office.
31 The grounds of appeal can conveniently be considered in relation to the following five matters.
32 Firstly, questions of credit (appeal grounds 1 and 2); secondly, questions of causation (appeal grounds 3, 6 and 7); thirdly, two sundry grounds (4 and 5); fourthly, grounds relating to the falsity of the vendors’ representation (grounds 8, 9 and 10); and finally grounds alleging failure to assist in seeking relief against the vendors (ground 11).
33 In relation to credit, Mr Broun QC for the appellants submitted that the primary judge was wrong to rely on discreditable acts by the appellants towards others as a basis for rejecting their evidence, and that she failed to make proper allowance for the difficulties of the appellants by reason of English not being their native language.
34 In my opinion, the primary judge’s findings on credit were justified by full and careful reasoning by the primary judge, and I can discern no error in that reasoning which could be addressed by this Court.
35 In relation to causation, Mr Broun submitted that there were serious deficiencies in the advice and conduct of Mr Margiotta. The appellants did not know the full terms of the lease, and had no protection in relation to the period between exchange and settlement concerning any divergence that might appear between the takings as represented and the takings as they appeared during the time between exchange and settlement.
36 The appellants were inexperienced, unlike the purchasers discussed in the case of Berry v Kanakis [2002] NSWCA 68.
37 In relation to the question of causation, Mr Broun also referred to the case of Rosenberg v Percival (2001) 178 ALR 57.
38 Mr Broun conceded that the appellants carried the onus of proof of causation but he submitted that, having found negligence and damages, the Court should quite readily infer causation. The primary judge had put the barriers too high, he submitted, and she had also relied on illogical reasons. Accordingly, there were deficiencies which could be overturned by an appellate court. He referred to State Rail Authority (NSW) v Earthline Constructions Pty Limited (1999) 73 ALJR 306.
39 Mr Broun submitted that the primary judge was illogical in some of the factors she relied on. One matter she relied on, he submitted, was that the appellants had made their own observations by watching people going in and out. This Mr Broun submitted was a result of strange advice given by Mr Margiotta himself, and did not indicate either enthusiasm for the purchase or any independent ability of the appellants to assess for themselves the merits of the business, but on the contrary showed a willingness to follow even strange advice.
40 Mr Broun submitted that the primary judge relied also on the circumstance that Mr Margiotta sought a reduction of price from the vendor in return for a release of any warranty as to takings. Mr Broun submitted that there was no evidence that this was in fact passed on, but in any event showed rather that the appellants considered that a warranty as to takings was of value.
41 Mr Broun submitted that, having found that Mr Margiotta had been negligent in not suggesting that the appellants try to get a term into the contract to give a right to investigate the turnover and to rescind if the warranted turnover was not substantiated, the primary judge should have considered what would have happened had such advice been given. Mr Broun submitted that it was highly probable that the appellants would have accepted that advice and, having accepted that advice, the approach would have been made to the vendors. If the vendors had refused to agree to such a term, then it is highly probable that the matter would not have gone further, that the contract would not have gone ahead. If the vendors had agreed, then the appellants would have had ample opportunity to get out of the contract and in all probability would have done so.
42 In dealing with this ground, it is appropriate first to mention that the respondents in their notice of contention have challenged the findings of negligence to which I have referred. Having regard to the view that I take on causation, it is not necessary for this Court to decide whether the findings of negligence are in any way appealable and the judgment will proceed on the basis that the findings of negligence are not overturned.
43 I have set out earlier in the judgment the principal grounds given by the primary judge in relation to causation, relying in particular on the appellants’ rejection of the advice given by Mr Margiotta that they obtain taxation records for the business and receive advice from their accountant before proceeding to exchange.
44 That finding was plainly open to her Honour on the material before her, and in the light of that finding and the primary judge’s findings as to the credibility of the appellants’ evidence, in my opinion it was open to her Honour to make the findings which she did as to causation. One of those findings as to causation was that her Honour was not persuaded that the appellants would have heeded advice from Mr Margiotta to negotiate an amendment to the contract to provide for a right of recision in the event that investigations after exchange of contracts were unsatisfactory. It is likely that such negotiations would have involved some time, and having regard to the anxiety of the appellants, as found by her Honour, to proceed to exchange, I do not think that the matters advanced by Mr Broun are sufficient to justify any interference by this Court with her Honour’s findings.
45 Turning to ground 4 of the grounds of appeal, namely that the trial judge erred in not concluding that the respondent’s advice was inadequate in relation to the terms of the lease, it seems clear to me that her Honour did in fact find that the advice was inadequate to the extent that the advice did not deal with the terms of the Memorandum. However, that finding as to negligence does not assist the appellants unless they can overcome the findings as to causation. In relation to causation, there was nothing in the Memorandum that can be suggested to be relevant to causation, except the requirement in the Memorandum for the submission of monthly takings figures. In relation to that, her Honour made the finding, essentially for the same reasons as the other findings to which I have referred that it would have been unlikely that the plaintiffs would have paid attention to the Byvan figures. Her Honour went on to note that the parties agreed that the figures would have been unreliable, since they appeared to be largely the figure the tenant decided to present.
46 Turning to ground 5, namely that the trial judge erred in holding that the vendors had not given any warranty as to the takings of the business, in my opinion it is clear that insofar as her Honour found that there was no warranty as to future takings such a finding was correct. Her Honour did not find that there was no warranty as to past takings, and that warranty was a warranty that could have given rise to relief to the appellants against the vendors if they had been able to prove that warranty to be false.
47 So again in my opinion there is no error shown in relation to the judgment on that matter.
48 Turning to the question of falsity of the vendors’ representations and/or warranty dealt with in grounds 8, 9 and 10, there was certainly evidence before the primary judge which could have based a finding that the representations and warranty were false. There was evidence of early complaints by the appellants to Mr Margiotta, evidence in the note taken by Mr Margiotta on 3 October suggesting receipts of about $5000 per week, and there is the figure of around $5700 per week suggested by the Byvan figures provided by the vendors.
49 In addition, Mr Broun submitted that the approach of the appellants’ valuer based on flour purchases was a reasonable one; and he submitted further that it was wrong to rely on subsequent decline in the appellants’ takings in support of any view that there had been an immediate decline when they took over the business which could explain the very large discrepancy between the receipts when they first took over the business and the warranted figure of $7800.
50 In my opinion, these considerations might have justified a different finding by her Honour. However, her Honour’s findings on the credit of the appellants affects the weight to be given to their early complaints as well as to other aspects of their evidence. The evidence does clearly show that the takings did fall markedly during the time when the appellants conducted the business, and it is certainly possible that there may have been quite a quick early fall when they took over. The Byvan figures provided by the vendors may have been depressed, perhaps to ensure consistency with figures provided by the vendors for taxation purposes.
51 When one has regard to all these considerations, in my opinion the finding which her Honour made that the evidence was not sufficient to satisfy her that the representation and warranty was false is not affected by error to which this Court could pay regard.
52 The final aspect argued concerned the alleged failure of Mr Margiotta to take appropriate steps to secure a remedy for the appellants against the vendors.
53 Mr Broun submitted that Mr Margiotta gave clearly wrong advice to the effect that unless the vendors were located they could not be sued. He submitted that the attempts made by Mr Margiotta to locate the vendors were unsatisfactory. There was not even an attempt to try to locate them through the telephone services. Proceedings could have been commenced and if the vendors could not be located, then there could have been an appropriate application for substituted service.
54 The primary judge did not make any finding of negligence against Mr Margiotta in this respect, and in my opinion the material does not justify this Court in making such a finding. It was not in my opinion an unreasonable approach to attempt to locate the vendors before commencing court proceedings, and there is significance in the finding of the primary judge that the appellants in effect told Mr Margiotta they did not want to incur the expense of a private investigator to try to locate the vendors.
55 In any event, the finding of the primary judge that she was not satisfied of the falsity of the representation and warranty by the vendors as to the takings means that there could have been no damages proved against the respondents on this matter.
56 For those reasons, my opinion is that this appeal should be dismissed with costs.
57 GILES JA: I agree.
58 As to advice when instructed in relation to purchasing the business, the appellants had declined the advice to obtain the vendors’ financial statements and when giving instructions for exchange, the first appellant said that he had had someone sitting outside the business and was happy with the number of customers who bought things, that he did not need to see the books of account before signing the contract, that Mr Nugent said that the deal would be off if there was not an exchange that day and that he had resigned from his job and had been idle for some time so he wanted to purchase the business as soon as possible. All this was accepted.
59 It is true that doubt was expressed as to the financial statements reflecting takings from a cash business but it would be expected that they would show expenses, as Mr Margiotta pointed out. Expenses are something from which turnover in a business such as this could be estimated.
60 The appellants had been willing to bargain away the warranty as to past takings for a reduction in price. They were aware of grounds for uncertainty in the represented takings, as much as was Mr Margiotta, but nonetheless in the terms that I have earlier set out, they wanted to go ahead. I do not think it can be said that her Honour’s conclusion that the appellants would have gone ahead even if there had been the further advice that she found was wanting can successfully be challenged on appeal.
61 As to advice when Mr Margiotta was instructed in relation to a remedy from the vendors, there is nothing that I would wish to add to what has been said by Hodgson JA.
62 I agree with the orders his Honour proposes.
63 DAVIES AJA: I agree with Hodgson JA and the additional comments of Giles JA.
64 GILES JA: That will be the order. The appeal is dismissed with costs.
- [Mr. Stevenson applied for a special order for costs arising out of the delivery of a Calderbank letter].
65 GILES JA: We do not think that we should make a special order for indemnity costs from 19 April 2002.
66 The application was made relying on a letter dated 9 April 2002 which made a Calderbank offer to remain open until 19 April 2002. The offer was that the appellants consent to judgment on the appeal on the basis that the appeal be dismissed with no order as to costs and the appellants pay the respondents $230,000 in respect of the costs of the trial at first instance. It was said that the respondents’ costs to date were well in excess of $300,000 and that the offer was therefore a substantial discount, especially in the light of the order for indemnity costs plus interest on costs made at the trial.
67 It was a significant decision for the appellants to make, and they had only ten days to make it. They had to assess, quite apart from their view of the prospects of their success in the appeal, the likely costs to which the respondents would be entitled under the order for indemnity costs and interest made at the trial. That was not a small exercise, and it was something which it was asking a lot for the appellants to undertake and come to a conclusion about within the ten days. In those circumstances, we do not think that it has been shown to have been unreasonable for the appellants not to have accepted the offer, being as it was an offer open only for ten days.
68 We will therefore not amend the order as to costs which we pronounced a short while ago.
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