Langworthy v Cameron - [2001] QDC 83

DISTRICT COURT OF QUEENSLAND

CITATION: Langworthy & Anor v. Cameron & Anor [2001] QDC 083

PARTIES: FREDERICK THOMAS LANGWORTHY (First Plaintiff)
And
LESLEY OLZARD (Second plaintiff)
v.
LANCE FREDERICK GEORGE CAMERON (First defendant)
And
KATHLEEN JOYCE CAMERON (Second defendant)

FILE NO/S: Plaint 121 of 1998

DIVISION:

PROCEEDING: Trial

ORIGINATING COURT: District Court Maryborough

DELIVERED ON: 2 May 2001

DELIVERED AT: Maryborough

HEARING DATE: 17, 18 August, 3, 6 October 2000

JUDGE: McGill DCJ

ORDER: Judgment that the defendants pay the plaintiffs the sum of $23,794.68 together with interest

CATCHWORDS:
TRADE PRACTICES – Misleading and deceptive conduct – lease of hotel – representations as to turnover – whether misleading – remedies

LANDLORD AND TENANT – termination of tenancy – surrender – effect on obligation to pay rent – whether rent paid in advance recoverable

General Newspapers Pty Ltd v. Telstra Corporation Ltd (1993) 45 FCR 164 - applied
Henjo Investments Pty Ltd v. Collins Marrickville Pty Ltd (1988) 79 ALR 83 - applied
Haydon v. Jackson (1988) ATPR 40-845 - cited
D F Lyons Pty Ltd v. Commonwealth Bank of Australia (1991) 28 FCR 597 – applied
Krakowski v. Eurolynx Properties Ltd (1995) 183 CLR 563 – applied
Petera Pty Ltd v. EAJ Pty Ltd (1985) 7 FCR 375 – applied
Waltip Pty Ltd v. Capalaba Park Shopping Centre Pty Ltd (1989) ATPR 40-975 - considered
Progressive Mailing House Pty Ltd v. Tabali Pty Ltd (1985) 157 CLR 17 – applied
Hildebrand v. Lewis [1941] 2 KB 135 - followed
Marks v. GIO Australia Holdings Ltd (1998) 196 CLR 494 – applied
Aroutsidis v. Clayton (1990) 21 FCR 500 - cited
Mister Figgins Pty Ltd v. Centrepoint Freeholds Pty Ltd (1981) 36 ALR 23 - distinguished
Lezam Pty Ltd v. Seabridge Australia Pty Ltd (1992) 35 FCR 535 - cited
Levenspiel v. Eaton (Plaint 3115/97, Skoien DCJ, 17-8-99, unreported) - considered
Hoover v Remote Data Systems Pty Ltd (Southport Plaint 39/98, Brabazon DCJ, 6.5.99, unreported) - followed
I & L Securities Pty Ltd v. HTW Valuers (Brisbane) Pty Ltd [2000] QCA 383 - followed
Sellars v. Adelaide Petroleum NL (1994) 79 CLR 332 - cited

COUNSEL: R. W. Morgan for the plaintiffs
P. J. Goodwin for the defendants

SOLICITORS: Jeffery Cuddihy & Joyce for the plaintiffs
Carswell & Co for the defendants

Maryborough is a city which is blessed with a large number of heritage buildings, many of which are, or obviously used to be but are no longer, hotels. Indeed, the city appears to be fairly generously supplied with hotels. There are 11 in the central area, and at least another five in the suburbs and outskirts: p.40. This action concerns one of them, which was owned by the defendants, and on 15 January 1998, was leased to the plaintiffs for a term of 5 years: Exhibit 1. Subsequently the plaintiffs claimed that the lease had been induced by misrepresentation, and vacated the premises on 25 April 1998: p.33. By this action they seek damages for misrepresentation, breach of contract, or pursuant to the Fair Trading Act or the Trade Practices Act, and an order precluding enforcement of the lease. The defendants dispute any such entitlement, and counterclaim for damages for breach of contract and damages for conversion of certain chattels.

The plaint alleges that the following representations were made (amended plaint para. 5):

1. 8 kegs of beer per week were being sold;

2. 10 x 1125 ml of spirits per week were being sold;

3. $200.00 per week was being turned over from 3 pool tables;

4. about $450.00 per week was being taken in take-away liquor sales;

5. the first defendant could not give the first plaintiff details of banking for the last six months as he was putting some of the cash away;

6. soft drinks and top ups were resulting in a turnover of about $300.00 per week;

7. take-aways, beer, wine and spirits were turning over about $450.00 per week;

8. peanuts, chips and sundries were turning over $160 per week;

9. cigarette machine and tobacco sales turned over $100 per week;

10. following the representation referred to in (1) herein the first defendant for and on behalf of the second defendant represented to the first plaintiff that the sales of kegs had increased to 10 per week;

11. at 2.00 p.m. on one trading day the first defendant produced a till roll to the first plaintiff showing $1,012.00 and represented to the first plaintiff that the tape represented the trading figures to that time on that day;

12. that there were no requisitions from authorities on the Hotel;

13. the first defendant expressly represented that the Hotel’s nightclub had not been open which representation contained the implicit representation that if the plaintiffs opened the nightclub they could increase the turnover of the hotel;

14. the first defendant represented to the first plaintiff that the electricity bill for the hotel was $500 per month.

The defendants deny that these representations were made: defence, para. 5. There are a number of other matters raised by way of defence, but clearly the first issue is whether the representations were made at all.

The plaintiffs’ case is that all these representations except 14 were made orally by the first defendant to the first plaintiff. The first defendant in his evidence denied making the representations. The plaintiffs’ case depends entirely on the evidence of the first plaintiff. An assessment of the credibility of the first plaintiff and the first defendant is therefore of some importance.

Background to the Transaction

The defendants purchased this hotel in about 1996 as an investment: p.175, 316. According to the first defendant, at the time of the negotiations with the plaintiffs he had been operating the hotel for a fairly short time after the previous lessees had moved out, they having been operating the hotel for about 6 months: p.176. They moved out in early October 1997: p.317. At the time when the defendants had taken over there was not a lot of trade, but he said that they had built it up to the point where, for example, they would have been turning over 8 kegs per week: p.179.

The second plaintiff had previously been the licensee of a hotel at Gundiah (p.148) for about 3 years, which was managed by the plaintiffs: p.9. While they were running it it prospered, although they were considerably assisted in this by the circumstance that during that time there was a substantial amount of work upgrading the railway line in the vicinity: p.10, p.142. Ultimately the second plaintiff sold the lease at what was said to have been a good price: p.9. The plaintiffs subsequently heard that there was a lease available on the defendants’ hotel.

Even the circumstances under which the plaintiffs came to hear about the hotel are the subject of some difference in the evidence. The first plaintiff said that he heard of the hotel through a friend and as a result made contact with the defendants’ agent, a Mr. Slaughter: p.10. Mr. Slaughter said that his initial contact with the plaintiffs was as a result of a request by the second plaintiff to list for sale a property which they owned at Toogoom. He said that as a result he was speaking to them, and when he found out that they had recently ceased to operate a hotel, he suggested trading the house for the lease on this hotel: p.263. He said a couple of days later they rang about looking at the hotel and as a result he set up an appointment with the first defendant at the hotel: p.264.

Mr. Slaughter said he collected them and took them there shortly before 10 a.m. and they had a short look around, and, when the hotel opened, they began to share a few drinks: p.264. After about an hour Mr. Slaughter realised that what was happening was not particularly conducive to business, and he left. The first plaintiff on the other hand said that he obtained a phone number from Mr. Slaughter and as a result he spoke to the first defendant when there was a conversation about the financial position of the hotel: p.10. All he could say about when this occurred was that it was early November or early December, but Mr. Slaughter could not recall the date either: p.263. The second plaintiff gave a version which was less detailed but essentially consistent with the version of the first plaintiff: p.143.

The first defendant said he had heard about the plaintiffs from Mr. Slaughter, and his recollection was that Mr. Slaughter brought the first plaintiff out, which I take it meant to the hotel, to talk: p.177. The first defendant’s evidence was vague as to the circumstances, but he thought (p.216) there was some telephone contact from the first plaintiff before Mr. Slaughter brought the first plaintiff to see him at the hotel: p.177. The second defendant’s recollection, so far as it went, seemed to me to be essentially consistent with that of Mr. Slaughter, although she did not claim to have had much to do with the negotiations with the plaintiffs: p.324. On the whole, I prefer Mr. Slaughter’s account of the matter; he was the most impressive witness and his account also strikes me as inherently plausible.

Representations: the first plaintiff’s evidence

It is not at all clear from the first plaintiff’s evidence whether the first conversation he said he had with the first defendant (p.10) was in person or by telephone. The initial impression from his evidence at p.10 was that it was by telephone, but that was not quite clear and may not be right. At p.16, he referred to the first conversation being by telephone, but in context that may have been the first of the conversations when he was told things about the turnover. He did say under cross-examination that he went to the hotel on two occasions prior to Christmas 1997: p.37. On the other hand, the first defendant said that the first plaintiff was at the hotel quite often before the lease was signed: p.182. He said the second plaintiff was there on a couple of occasions: p.183. She said once: p.143. The second defendant said the plaintiffs were there fairly regularly (p.324) and Mr. Rossterollo, called by the defendants, said the same: p.274.

I found the first plaintiff’s evidence about these conversations somewhat difficult to follow, and he did not seem to have a clear recollection of when various things occurred prior to signing the lease, or even to have a clear recollection of the sequence of events. He said that in the first conversation he was told that the defendant had just come back into the hotel after six months so that he did not have any figures for that period, and that he was putting some money into his pocket: p.10. He was told that there would be no premium for the lease. He said that he needed to have some figures for his solicitor and for the bank to have a look at. He was subsequently asked what he was told about the turnover, and gave some details which I will come to in a moment, but that was obviously not at the first conversation (p.52) because he subsequently said that this was after there had been a joint inspection of the two houses owned by the second plaintiff: p.11, p.52-3. The first defendant agreed that he had gone to see the two houses offered in exchange, was not happy about the one at Gundiah, but eventually an arrangement was made involving the house at Toogoom: p.179.

The first plaintiff said that after this inspection the first defendant expressed some interest in the house at Toogoom, but the plaintiff had said that he needed figures, and said the first defendant telephoned that night and gave him various figures, and as a result he spoke to the bank manager: p.11. He also said that he spoke to the second defendant in relation to some of the outgoings: p.12. As a result he did some calculations, which were incorporated in a document which he provided to his bank: Exhibit 3, p.12. This was received by someone on 15 December 1997[1]. The first plaintiff also said that before he spoke to the bank he saw a solicitor who warned him about going into the hotel without getting any figures for it, and that after this he spoke again to the first defendant, who told him that he had no figures, and that he was putting some cash in his pocket: p.15. Such a warning was given in writing on 23 December 1997 (p.81) although that may have repeated an earlier warning. The first plaintiff maintained that the first defendant used to telephone him all the time: p.16.
[1]Comparison with the stamp on Exhibit 15 suggests it was received by the plaintiffs’ solicitors.

The first defendant said that the first plaintiff had asked what the business was taking, but denied that he had ever given any figures to him in relation to the business: p.177. He denied giving the first plaintiff the information in Exhibit 3: p.177. He said that the plaintiffs’ attitude was that they had run a hotel successfully before and they wanted to build their own business in this hotel: p.178. His attitude was that they could come and see how the hotel was trading and make their own assessment of its business: p.207. The first defendant denied that he made any representations to the plaintiffs about what the hotel could achieve: p.179. He said that if he had known that they were relying on something other than what was in the lease he would not have signed the lease: p.179.

The overall effect of the first plaintiff’s evidence is that there were two particular conversations when representations were made to him about the turnover in the hotel, both of which were telephone conversations. The second of these conversations occurred after the defendants had inspected the two houses, and expressed some interest in the property at Toogoom, and after the first plaintiff had spoken to the bank and to his solicitor and had been told by both of them that he should obtain some figures in relation to the turnover of the hotel. In the second telephone conversation he made notes of what he was told. He subsequently prepared a document which became Exhibit 3, which set out details of the income and expenditure, which he says was based on what he had been told by the defendants. The details of what the business was taking had been provided by the first defendant and details of expenses had been provided by the second defendant.

I think it more likely that, if things did occur in the way the first plaintiff described, Exhibit 3 was not the document actually created during the telephone conversation, but was a document created on the basis of notes made during that telephone conversation. Nevertheless, the first plaintiff’s evidence was that Exhibit 3 reflects what he was told by the first defendant during a telephone conversation. On the basis of the contents of Exhibit 3, and the evidence of the first plaintiff, the following representations were made by the first defendant: that the hotel had a turnover of approximately 8 kegs per week, and at least 10 x 1125 ml bottles of spirits, the takings from the pool tables[2] amounted to $200 per week and from the cigarette machine $100 per week, takeaway liquor was earning $432 per week, soft drinks $300 per week, chips etc $160 per week. He said that the second defendant represented that electricity cost $500 per month.
[2]There were three tables in the hotel which were coin operated and owned by someone else who split the takings with the hotel operator: p.21-2.

There was also evidence that the first defendant had said there were no requisitions on the hotel: p.19 (and see Exhibit 15). That issue is irrelevant because there is no evidence that at the time there were any requisitions on the hotel so there is no evidence that this representation was false. The second defendant said there were no requisitions then current: p.331. Exhibits 4, 5 and 6 all relate to different times. There was no evidence in support of representation 10 referred to earlier.

Similar Fact Evidence

The plaintiffs sought to rely on similar fact evidence in support of their case that representations were made by the first defendant. The admissibility of this was reserved: p.8. There was evidence from a Mr. Green that he worked at the hotel for 6 weeks from 21 October 1999 as manager for a company which was proposing to take a lease: p.132. He said that the first defendant in his presence told Mr. Drage, the person behind that company, that the hotel should be taking $8,000 per week: p.135. He was also definite that the first defendant had at one stage offered him a lease of the premises: p.135, 140. Ultimately, however, the lease in favour of the company was not signed: p.123. While he was operating the premises, the turnover declined from $4,100 to about $3,000 per week: p.134. The first defendant denied that he made this representation or made an offer of a lease to Mr. Green: p.197.

Mr. Dearn said that in about 1997 he was offered a lease of the defendant’s hotel on terms similar to those on which the premises were leased to the plaintiffs, and he worked there for two weeks: p.85. He said he was told by the first defendant that the turnover was approximately $7,500 per week, which seemed to be verified by a notebook shown to him by the second defendant: p.86. However, when he was operating it, the turnover was much less, $4,200 and $3,900: p.87. He admitted however, that he was also put off by a fight that had occurred on the premises one day: p.89. Ultimately, the defendants agreed to call off the proposed lease.

Whether evidence of representations to persons other than the plaintiff is admissible in the plaintiff’s case was considered by Gummow J in D F Pty Ltd v. Commonwealth Bank of Australia (1991) 28 FCR 597 where a number of authorities were reviewed commencing at p.603. In that case the applicants sought relief in relation to their loss as a consequence of borrowing money from the defendant when the loans were obtained in a foreign currency. It was alleged that an officer of the bank made certain representations, and the applicants sought to lead evidence of what the same bank officer had said to other people. His Honour concluded that it was necessary to establish that the evidence was relevant, that is that as a matter of ordinary experience and human behaviour, the occurrence of the facts sought to be proved in this way (the making of representations to the others) would tend to support a conclusion that the particular representations relied on had been made.

His Honour noted that it was necessary for this to be assessed in the light of the particular issue in the individual case; for example, evidence of a discussion between a particular party and other witnesses could be of some probative value as tending to establish the general tenor or thrust of discussions between that party and the other party, but might not be probative of the particular terms that the conversation took between them. His Honour in that case regarded the particular terms of the conversation between the bank officer and the applicant’s representative as being of crucial importance and held that the fact that another individual alleged that the same bank officer had said similar but different things about foreign currency loans was not probative of the particular matter in issue, which was exactly what the officer had said on this occasion. Obviously in that case it was common ground that there had been some discussion of foreign currency loans between the bank officer and the representative of the applicant, and the crucial issue was exactly what had been said. His Honour added that, apart from the consideration of the relevance, there was a discretion to exclude such evidence when the practical disadvantage of the introduction of additional issues outweighed the probative weight of the evidence. The approach and result were similar in Aroutsidis v. Clayton (1990) 21 FCR 500 at 509 per Hill J.

There are other cases where such evidence has been admitted. Perhaps the best example of its receipt would be a case where it was alleged that a real estate agent, when selling units in a particular block, had made particular representations to a prospective purchaser, and other prospective purchasers were called to say that the same agent had made the same representations to them: Mister Figgins Pty Ltd v. Centrepoint Freeholds Pty Ltd (1981) 36 ALR 23 at 30-1. In the present case, however, it is not alleged that what was represented by the first defendant on the other occasions was anything which was directly comparable with the representations alleged in the present case; rather, they were representations as to the dollar value of the turnover. The fact that the first defendant on other occasions was prepared to quote a dollar figure for the turnover to prospective lessees is not, I think, particularly probative of the proposition that on this occasion he gave details of the volume of turnover of the business to the first plaintiff.

In my opinion, in the present case there is an insufficient similarity with what was alleged to have been said to other prospective lessees or their representatives to make any such statements, if they were made, logically probative of the proposition that the first defendant made the statements alleged to the first plaintiff. The first defendant[3] admitted under cross-examination that others had tried but failed to operate this hotel successfully since it was purchased in 1996: p.209, 212. That, I think, is of some relevance in relation to an issue to which I shall return later, in that it logically supports the proposition (which is supported by other evidence) that the first defendant was particularly effective at operating this hotel successfully. In my opinion, the similar fact evidence sought to be led on behalf of the plaintiffs is not relevant and is excluded.
[3]See also the evidence of the second defendant p.316

There was also some similar fact evidence sought to be led on behalf of the defendants, that there were some arguments between the plaintiffs while they were operating the Gundiah Hotel. The admissibility of this was also reserved: p.46. There was evidence led on behalf of the defendants that there were occasions when there were heated arguments in front of patrons of the hotel in Maryborough, which were said to be a factor in the lack of success the plaintiffs had in operating the hotel. In addition, there was evidence from Mr. Gorst that he had seen the plaintiffs arguing at the Gundiah Hotel a couple of times (p.268) and there was evidence that there had been a complaint made to the licensing authorities about their fighting at the Gundiah Hotel (Exhibit 23) although the second plaintiffs said that this complaint came from a person associated with someone who was attempting to purchase the hotel at the time: p.163. The first plaintiff admitted that there had been a visit by someone representing the licensing authority at the time: p.44. The second plaintiff admitted that there was a bad patch in the relationship between the plaintiffs while they were at Gundiah, but said that as a result of some counselling, matters were resolved: p.147.

Again, it does not seem to me that this is logically probative of the real matter in issue, namely whether the lack of success of the plaintiffs in operating the defendants’ hotel was attributable to the problems with the hotel, or any deficiencies of the plaintiffs as hotel operators. I think it is of some significance that there was no evidence to contradict the plaintiffs’ assertion that the Gundiah Hotel was operated quite successfully by them, and indeed Mr. Gorst admitted that the atmosphere at that hotel while they were there was quite good: p.271. Even allowing for the lack of competition in Gundiah, it does not sound as though such disagreements as may have occurred there were of any real significance. In all the circumstances I think this evidence is also not sufficiently similar to the matter which is really in issue to be relevant and it is excluded.

Assessment of credibility

There are some aspects of the first plaintiff’s evidence which cause me to doubt his reliability. I have already mentioned the way in which he gave the evidence and some lack of internal consistency. He gave evidence about an occasion which he said was on a Tuesday in December 1997, prior to Christmas, when he was at the hotel and the first defendant pulled out a till tape and showed him that the amount which had been rung up on the till was about $1,200: p.16, p.37, p.44. He thought that this was a very, very good figure in the circumstances: p.17. However, the plaintiffs’ particulars allege that this event occurred on 6 January 1998: Exhibit 43. As well, the first plaintiff denied that he had told his solicitor that the incident had occurred on that date: p.64. I also thought that he and the second plaintiff were not entirely frank about the extent to which there had been public arguments between them while they were operating this hotel. There was a lot of evidence on this subject and I shall deal with it in more detail later.

The first plaintiff said that when they were moving out of the hotel the premises were locked up and Mr. Hunter, who was assisting them, had to jump over the gate to get out: p.76 (the evidence of the second plaintiff was to the same effect: p.146). On the other hand, Mr. Hunter, who was a reluctant witness (p.252) said that he was locked in but that he had been let out, and denied that he had to jump or climb over anything to get out: p.253. The first plaintiff denied knowing about the practice of offering $1 pots during happy hours at the hotel until after they took over (p.28). I will return to this, but accept that there were obvious signs about this at the hotel at the time. He gave three different figures for the takeaway turnover (p.11, p. 53), none of which matches that in Exhibit 3.

On the other hand, there is also reason for concern about aspects of the first defendant’s evidence. He was emphatic that he did not ever give the first plaintiff any figures in relation to the business, something he said a number of times during evidence in chief (p.177, 179) and cross-examination (p.216, 222) where he said he would not have given the first plaintiff any figures under any circumstances. However, the evidence of Mr. Slaughter, who was called on behalf of the defendants, was that in the course of the conversation when he first took the first plaintiff to visit the hotel the first defendant was asked something like “How many kegs does it do” and responded “Well, I couldn’t tell you because we haven’t got any figures, when I had it it was doing about 10”: p.264. This evidence, it seems to me, is plainly inconsistent with the proposition that the first defendant was careful not to say anything about the turnover of the hotel. On the contrary, it shows that the first defendant was quite willing to make statements about the turnover of the hotel. Mr. Slaughter confirmed that he had no figures for the hotel; that is, he had not been provided with any by the defendants.

Apart from this, it was clear from the course of cross-examination that the defendants had not made proper discovery. They had not disclosed any financial records relevant to the business: Exhibit 28. Indeed, the first defendant claimed that his solicitors did not ask him for financial records for the hotel: p.199. I find this very hard to believe. They admitted that while they were operating the hotel a day book[4] was kept: p.201, p.319. They could not explain why it was not discovered: p.202. The second defendant said it had been lost: p. 320. Accounts were prepared on a yearly basis (p.205) although the only annual accounts which were initially presented were the 1997-98 financial year: Exhibit 29. Later, the prior and following accounts emerged: Exhibit 40, 41. The first defendant doubted whether they still had the records associated with credit drinking: p.204. A bundle of these were later produced (p.332) and became Exhibit 35.
[4]A similar book kept at a different time became Exhibit 34, but it did not record till takings: p.321. Perhaps these were not regularly recorded, and the accounts were prepared on the basis of what money was banked.

He also said he had not told his solicitors that the hotel had been trading at the rate of 8 kegs per week: p.222. Again, this evidence is difficult to believe. The solicitors had at one point written to the plaintiffs’ solicitors asserting, among other things, that the defendants were selling 8 kegs per week by the time of the completion of the contracts: Exhibit 31. The defendants agreed that by that time they had built the turnover up to about 8 kegs per week: p.179, p.334. The first defendant denied that the first plaintiff even asked for figures to provide to the bank: p.219. That is very difficult to believe; apart from the fact that the bank would have been likely to want some figures, the first plaintiff was warned by his solicitors to try to get figures, and this reinforces the circumstance that it would be perfectly natural for a person in his position to be asking for figures. The first defendant also denied that there was out of hours drinking at the hotel “to any great extent” p.181. I will deal with the evidence about this in more detail later, but I am satisfied that there was a good deal of out of hours drinking, although the first defendant’s reticence on this subject is, in the circumstances, not surprising.

Apart from these matters, my assessment of the first defendant, from the evidence of other witnesses and from seeing him in the witness box, is that he is the sort of person who would be readily talking about how well his hotel was doing, rather than a person who would be careful about what he said, or to avoid saying very much at all. He was described as popular with his customers, someone who enjoyed drinking and talking with them: p.105, 284. I would assess him as someone proud of how well he was running this hotel.

There was one other matter which I should mention, although I do not put much weight on it. When the plaintiffs’ solicitors first wrote complaining about misrepresentations, the defendants’ solicitors in their reply did not deny that representations had been made: Exhibit 31. However, the letter did not admit that representations had been made, and I am wary about reading too much into the absence of an express denial.

There is also the consideration that the hotel was apparently turning over about 8 kegs per week at this time, so that this is the figure that should have been given if the first defendant had been asked for one and decided to give one. I think there is some significance in the fact that the figure used by the first plaintiff in Exhibit 3 for the number of kegs per week was apparently accurate. I do not think the first plaintiff was in a position to make an accurate assessment of the turnover on the basis of his own observation, so either he was told this figure by the first defendant or it is a lucky guess. On the other hand, it seems clear that some of the other figures in Exhibit 3 are quite inaccurate, the figures for the takings on the pool table and commission from the cigarette machine. These are matters with which the first defendant would be unfamiliar[5] and would be unable to give accurate figures off the top of his head.
[5]According to the second defendant, she looked after the financial matters and he just filled the glasses: p. 335.

Findings as to representations

It is clear that in December 1997 the document, Exhibit 3, was prepared by the first plaintiff. Either the first plaintiff essentially guessed the figures himself to put in that document, or he used figures provided by the defendants. The second defendant said that she could have given him the figures for expenses, including $500 per month for electricity: p.326. She later said she gave him those figures at the hotel: p.339. I have to decide whether it is more likely than not that the latter occurred, and in all the circumstances I am persuaded it is. I find that the representations referred to in Exhibit 3 were made.

I am however wary about some of the other representations said to have been made by the first plaintiff. In circumstances where the first defendant would not provide any figures as to their earnings or profits, there was no point in saying that he was putting cash in his pocket from the business, and even if it had been said, it would have been of no significance in assessing the value of the business. Assuming it was believed, merely knowing that the business is to some extent doing better than would be shown by formal records is meaningless where there are no formal records. I cannot accept that this representation would have been relied on, and on the whole am not persuaded that it was made.

I accept that the second defendant provided a statement as to the electricity being $500 per month. The first plaintiff said that electricity turned out to be $650 per month (p.33 and see Exhibit 18), but later in the year the defendants were receiving electricity bills of about $300 per month for the hotel: Exhibit 36. I am not prepared to draw the inference that the amount in fact paid by the defendants for electricity was sufficiently different from $500 per month for this statement to be in context misleading and deceptive, or fraudulent.

With regard to the question of whether the disco was said to be operating, consistent with my conclusion in relation to representations about turnover, I am prepared to find that this representation was made, and if so, it was a misrepresentation. The first defendant admitted it was operating: p.181. When the plaintiffs tried to operate the disco, it was not particularly successful (p.11, p.128), and my assessment of the position is that for the defendants the nightclub was an excuse to keep the hotel open as long as possible rather than something which was being seriously operated as a disco. In addition, I do not consider that the proposition that the nightclub had not been open contains an implicit representation, that if it were opened or operated, that would increase the turnover of the hotel, as alleged in the amended Plaint. I would regard a statement that the disco was not operating as leading to the inference that experience had shown that it was not worth operating. I do not regard this misrepresentation as of any significance.

There was an issue as to whether there was a misrepresentation by the production of a till tape with about $1,200 rung up on it. I am wary about this evidence, particularly because of the discrepancy between the first plaintiff’s evidence as to when it occurred and what was said in the pleadings. In addition, the account given by the first plaintiff, that one day the till was specially rung off and produced a figure of about $1,200 (p.16), seems to me inconsistent with the evidence about the way in which the hotel was operated. A more plausible explanation is that a till tape which had been generated on a particularly busy night (perhaps New Years Eve) was kept and shown to the plaintiff later, but that explanation is not consistent with the first plaintiff’s evidence and I think would be speculation. In all the circumstances I am not persuaded that there was any such representation made.

Were they misrepresentations?

As to whether the representations as to turnover were false, I am not persuaded that the representation about selling approximately 8 kegs per week was false at the time that it was made. That was the evidence of both defendants (p.179, 334) and was supported by calculations made on the basis of such purchase records as they had, by the plaintiffs, Exhibit 8, and by the defendants: Exhibit 37. If the 27 kegs sold as part of the stock to the plaintiffs (Exhibit 20) are deducted from the figure in Exhibit 37 (p.356) and the remainder divided by 15.5, the average in 8.4. The plaintiffs’ turnover was lower, an average of 4½ kegs a week (p.22) but in all the circumstances I do not regard this as a reliable guide to the defendants’ actual turnover.

With regard to the representation as to the turnover of spirits, calculations prepared by the first plaintiff on material discovered by the defendants showed an average of 8.36 such bottles being used per week during the period the defendants were operating the hotel (p.23, Exhibit 7), but if the defendants had been building up the turnover over this period, as the first defendant said they had (p.176), one would expect the turnover towards the end of the period, at about the time when the representation was made, to be higher. The second defendant’s Exhibit 37 has spirits expressed in mls (if one ignores the decimal point). Subtracting 17 litres for the spirits in the stock sold (Exhibit 20) and dividing by 15.5 produces an average of 8.868 x 1125 ml bottles per week. I do not regard the level of sales by the plaintiffs (Exhibit 11) as a good indicator of the level of sales by the defendants. Under the circumstances the representation should not be interpreted as a precise statement; it should be regarded as an approximate figure, and I am not persuaded that as an approximate figure it was sufficiently erroneous to be a misrepresentation

The first plaintiff said that after they took over the hotel he found an old till tape which showed that a total of $53.90 had been taken when the till was rung off: Exhibit 13, p.31. The tape was dated 12 September 1997, and the defendants’ evidence is that they were not at the time operating the hotel (p.183) and I do not think that this tape is of any significance.

There was no clear evidence that the sales of takeaway liquor, soft drinks and chips were exaggerated by the defendants. I am however satisfied that the figures given by the first defendant for the turnover on the pool tables and cigarette machine were exaggerated. The payments to the defendants from the pool tables from 21 September to 14 December 1997 averaged $70 per week (Exhibit 12) and the commission from sale of cigarettes averaged about $20 per week: Exhibit 10. It follows that these two figures were misrepresented by the first defendant.

Undisclosed qualification – Out of hours trading

With regard to the question of turnover, although I am not persuaded that the figures given were false, they may still be misleading or deceptive, if there were circumstances which required explanation by way of justification or qualification of those figures, and that explanation was not given. That explanation is that the defendants were achieving that turnover by routinely trading outside the permitted hours, and by unusual generosity in allowing credit to patrons. The defendants had a licence which permitted some extended trading hours: the general licence issued to them on 18 November 1997 permitted trading to midnight on Sunday, 1.00 a.m. Monday to Wednesday, and 3.00 a.m. Thursday to Saturday, although on its face permission to trade after 1.00 a.m. expired on 3 January 1997: Exhibit 24. In addition, there was a letter, Exhibit 25, which refers to the first defendant being granted a “special arrangement … because of his present financial difficulties which we understand were brought about by the alleged activities of the previous operator of the hotel” . The letter goes on to allow an extension of time within which security cameras could be installed and to allow the hotel to trade to 3.00 a.m. once they were installed, but the premises had to close at 2.00 a.m. in the meantime. The invoice for the supply and installation of the VCR to be used in connection with the security camera is dated 10 January 1998: Exhibit 27. This suggests that the security cameras were not installed and operating prior to that date[6], which suggests that the hotel was not permitted to trade until 3.00 a.m. for any significant period.
[6]See also second defendant p.352: “We had just put it in.”

The first defendant spoke as if the hotel always had a 3 a.m. licence (p.180) and the second defendant said the hotel had a 3 a.m. licence when they purchased it: p.330. Exhibit 25 suggests that at some point after the defendants began to operate the hotel, in place of the former lessees, they were given as a special arrangement some extended trading hours and that may well have been the extension reflected in the licence, Exhibit 24. Exhibit 26 supports a conclusion that at no time prior to February 1998 did the licence allow trading to 3 a.m. These exhibits seem to me to be inconsistent with the proposition that the hotel always had a 3 a.m. licence. I am not persuaded that it did.

What is clear is that there was no entitlement to trade before 10.00 a.m.; the defendants had applied for permission to trade from 8.00 a.m. but this had been refused: p.193. The first plaintiff agreed that he had been told about the idea of applying for an 8.00 a.m. licence (p.65) but did not do so and the plaintiffs did not trade early: p.148. There was a good deal of evidence about earlier trading by the defendants. Both plaintiffs said that before the hotel was handed over, the first defendant said that they could make $200-$300 by opening early: p.18, p.144. The first defendant denied that he made this statement (p.193) but I prefer the plaintiffs’ evidence on this. They also both said that after they took over people would regularly knock on the side door of a morning before opening time, from as early as 6.00 a.m.: p.19, p.145.

Mr. Kennedy, who worked as a cleaner at the hotel and lived there while it was being operated by the defendants, said that there were people there every day drinking early (p.105, 110) and that there could be six to 10 people in the bar at 8.30 or 9.00 a.m.: p.112. Ms. Du’Pelle said that drinks were served to herself and others in the bar prior to 10.00 a.m.: p.93. She was vague about just when this occurred, but it occurred when the defendants were operating the hotel and she said it was before the plaintiffs took over (p.100) and I accept that she was speaking of the time when the defendants were operating the hotel in late 1997. Although she did not say she was there every day, the tenor of her evidence was that the hotel could be expected to be available for the purchase of alcohol prior to 10.00 a.m. Mr. Rossterollo[7] said he had seen early drinking there (p.278) and there was some similar but vague evidence from Mr. Hodson: p.281. The first defendant did not clearly deny this (p.181) and the second defendant, although she denied it (p.340), said that most hotels around Maryborough provided this service to good patrons: p.342.
[7]He was called by the defendants and overall impressed me as trying to help them to the point where his evidence was unreliable, but that consideration does not apply to this evidence.

With regard to closing time, Mr. Kennedy said that he would regularly see people drinking at the hotel at 3.00 a.m.: p.104. As well, Mr. McAuliffe, who used to work at another hotel until 2.00 a.m., said that on a few occasions (p.126) he went after work to the defendants’ hotel while they were operating it, and before the plaintiffs were there, to drink: p.125. He said there was one occasion when a small group of people were there until the following morning, and outlasted the first defendant: p.125. The first defendant denied that this had occurred (p.180) and I would not doubt that it would not occur regularly, but Mr. McAuliffe only spoke of this having occurred once, and I accept that it did on that occasion. One incident in itself is of no great significance, but Mr. McAuliffe’s evidence suggested a general pattern of trading as long as there were customers who were drinking. The second defendant admitted that at times the first defendant was under the weather, that is, became intoxicated, but claimed that on those occasions she closed the bar: p.340.

Overall, I am prepared to find that there was regular out of hours drinking, and that this was a factor which contributed to the level of turnover at the hotel. My overall impression of the evidence, particularly having seen a number of regular customers of the hotel called as witnesses in the course of the trial, was that under the defendants the hotel tended to cater for what used to be described as “serious drinkers[8]”. Such people had a wide choice of establishments to patronise in Maryborough, but it would be plausible to expect that if they started at a particular hotel they would be likely to stay there, and being available earlier than the competition would be one means of encouraging them to stay at this particular hotel. Although there is of course no evidence to quantify the effect of this factor, I do not regard it as insignificant.
[8]See also the evidence of the second defendant at p.330, p.341.

Provision of credit

It is clear that there were a significant number of customers who were regularly provided with credit by the defendants at this hotel. The second defendant spoke of this practice as an important part of developing a relationship between regular drinkers and the hotel, as a means of building up the trade: p.330. She accepted that this would cost them something in bad debts, but treated that as being an acceptable promotional expense. In effect, the defendants were subsidising the credit drinkers. The system which was used involved noting amounts booked up in a till book or day book which was kept beside the cash register (p.320); this information was then recorded on cards kept for each customer for whom credit was extended: p.321. When the plaintiffs took over the hotel, these cards were left at the hotel and the plaintiffs were asked to collect any money which came in: p.18. A small amount of money did come in, and ultimately it was handed over. The first plaintiff said that the first defendant had told him that there was $9,500 outstanding (p.18) but the first defendant denied this: p.139. The second plaintiff’s evidence was to the same effect: p.144.

Towards the end of the trial the second defendant produced a bundle of cards which she said represented the cards which had been collected from the hotel and which she had only recently found: Exhibit 35, p.322. She said that the amount shown as still owing on them was $3,927. The second defendant was quite firm that she was the one who was responsible for bookkeeping and it is quite possible that the first defendant had no idea how much money was outstanding at that time. The practice of the defendants’ giving credit in this way must have been unusually generous, because the first plaintiff said that, when he had been making some inquiries before entering into the lease, some people had warned him to watch the amount of credit that he gave: p.38. The inference from the second defendant’s evidence was that the provision of credit on this scale was unusual for Maryborough.

Ms. Du’Pelle said that on one occasion the first defendant had told her that he had $10,000 outstanding as credit for drinks: p.95. The first defendant denied this: p.182. Nevertheless, I prefer Ms. Du’Pelle’s evidence. She impressed me as honest, and her account of the incident sounded plausible: she was in the hotel and told the first defendant that she had been successful in collecting some money that was owed to her, and he responded that he should get her to collect his debts because this amount was outstanding. I find this plausible in the light of my assessment of the first defendant, and bearing in mind the evidence that it was his practice to drink with his customers, so he may well have been affected by alcohol at the time when this was said. However, for reasons I have given I do not regard this as reliable evidence of the amount of outstanding credit.

Plainly, the second defendant thought that providing credit in this way was helpful for getting in custom, but there is no independent evidence on this matter. One effect it would have would be to boost turnover. The plaintiffs said that they were not advised of the extent to which drinks were provided on credit by the defendants prior to their taking over the hotel, and there was no evidence from the defendants that they were told of the details of this, so that is probably true. It follows that the qualification that the turnover was achieved in part by this unusual means was also not disclosed.

Analysis of liability under statute

In my opinion, making a representation as to turnover in terms of the quantity of liquor actually sold without disclosing that this was being achieved by trading (illegally) for extended hours and providing unusually generous credit amounts to misleading and deceptive conduct. There are cases where it has been held that it is misleading or deceptive to say something which is literally true, but which is in context misleading or deceptive because of a failure to add a qualification or explanation: General Newspapers Pty Ltd v. Telstra Corporation Ltd (1993) 45 FCR 164; Henjo Investments Pty Ltd v. Collins Marrickville Pty Ltd (1988) 79 ALR 83. The first plaintiff said that the representations were relied on (p.15), and this is confirmed by the document’s being shown to the bank and the solicitors. The plaintiffs rely on the extended operation of the Trade Practices Act provided for by s.6(3) in circumstances where the statements as to turnover are said to have occurred in the course of telephone conversations. Individuals can be liable under the Act in respect of misrepresentations made over the telephone: Haydon v. Jackson (1988) ATPR 40-845. It was conceded that whatever occurred, occurred in trade or commerce. This court has jurisdiction in proceedings with respect to breach of s.52 of the Act to give remedies of a kind it can ordinarily give: s.86(2). That includes damages under s.82 or damages or some other appropriate remedy under s.87.

The plaintiffs relied in the alternative on s.49(2) of the Fair Trading Act 1989. Section 49(2) is the equivalent of s.59(2) of the Trade Practices Act. The plaintiffs did not rely on a breach of s.38, which is the equivalent of s.52 of the Trade Practices Act because of the terms of s.99(3) and 100(6).

I am not aware of any cases under s.49 of the State Act. The cases on s.59(2) are generally concerned with sales of business franchises, although a breach of this subsection was admitted in Wilde v. Menville Pty Ltd (1981) 50 FLR 380[9] when a second hand truck dealer sold trucks by falsely representing that purchasers could obtain employment from a particular source. If a person selling a vehicle for use for commercial purposes can be said to have invited the purchaser to engage in a business activity, offering a lease of business premises would also amount to inviting the proposed lessee to engage in a business activity. Obviously, operating a business in the premises requires the performance of work, but it may be a limitation of the subsection that it only operates where the arrangement is one under which the work to be performed is required to be performed by the person to whom the invitation was made.
[9]There was a plea of guilty to a charge of breaching s.59(2), so there was no judicial determination of a dispute as to whether the sub-section applied.

The lease, Exhibit 1, required the lessee to open and close the premises as required by the Licensing Commission from time to time (clause 2.08(b)) and clause 4.02(b) required the lessee to conduct the business in a proper and reputable manner so as to ensure the goodwill of the business was not prejudiced; however there does not appear to be anything in Exhibit 1 which required the plaintiffs to work in the business personally. It is difficult to imagine a form of business activity which did not require the performance of work by someone, so the limitation “requiring the performance by the other person of work” suggests to me that the provision does have this limitation. That was not the case with the present lease, so it follows, in my opinion, that s.49(2) does not apply to a situation such as the present, and there was no actionable breach of the section.

Deceit

With regard to the question of whether there is liability in deceit, a representation of something which is literally true without setting out relevant qualifications can equally found a finding of common law fraud: Krakowski v. Eurolynx Properties Ltd (1995) 183 CLR 563. The first defendant knew the true situation, and knew that he was not disclosing this qualification, so the representation that he did make, characterised as I did earlier, was in my opinion made fraudulently. With regard to the representations about the level of the takings on the pool table and commission from the cigarette machine, I am not satisfied that the first defendant knew that the figures he was giving were false, but I am satisfied, particularly in the light of the evidence of the second defendant, that the first defendant must have known that he did not know what these figures really were, and must have known that the figures that he was giving were essentially guesses. In these circumstances he was acting with reckless indifference as to whether they were true or false, and that was also fraudulent.

Liability of the second defendant

With regard to the liability of the second defendant, she denied that the first defendant had made any representations, and I think that amounts to a denial of any knowledge of any representations made by him, or any specific authority to him to make such representations. There is no evidence that as between the two of them she left it to him to negotiate the transaction. However, the defendants were partners (Exhibit 41) and the hotel was acquired by them for the purposes of the partnership, for the purposes of investment, that is, to enable it to be leased out to generate income by way of rent: p.175, 316. Accordingly, it was part of the ordinary business of the partnership for the hotel to be leased to tenants, and thus part of the ordinary business of the partnership to negotiate for such a lease.

Pursuant to s.8 of the Partnership Act 1891, the first defendant was the agent of the second defendant for the purpose of the business of the partnership, and his acts for carrying on in the usual way a business of the kind carried on by the partnership bind the second defendant. In my opinion, the effect of this section in the circumstances is to give each of the defendants authority to act on behalf of the other for the purpose of making representations in the course of negotiating a lease of the hotel, and accordingly, the representations made by the first defendant were made by him also as agent for the second defendant, so she is also liable for any misrepresentation made by him. She is not liable under s.75B of the trade practices Act, but because the representations were made by her agent in the course of his agency it is as if they had been made by her. The liability of both defendants on this basis is therefore the same.

Was liability excluded by the lease?

The lease, Exhibit 1, provided in clause 14.01 that no representation had been given by the lessor in respect of the suitability of the demised premises for any business to be carried on therein or as to any other business to be carried on in an adjoining or neighbouring premises, and that the lessee had in entering into the lease relied on a satisfactory personal inspection of the demised premises. It also provided that it was agreed that the lease was the whole of the agreement between the parties. The first defendant said that he would not have signed the lease if he had known that the plaintiffs were relying on any representation as to turnover: p.179. Clause 13 provided that the lessees acknowledged that they were not induced to accept the lease by any representation by the lessors not included in the lease. In view of these provisions, the plaintiffs cannot recover damages for breach of contract.

In my opinion, however, the plaintiffs are not estopped from relying on such misrepresentations as I have found. In my opinion, the misrepresentations that I have found are not within the terms of clause 14.01. In any case, it is clearly established that such provisions are not an answer to a claim for relief based on misleading or deceptive conduct under the Trade Practices Act or indeed a claim for damages for fraud. The essential question always remained whether any particular loss or damage was in fact caused by the misleading or deceptive conduct. See Petera Pty Ltd v. EAJ Pty Ltd (1985) 7 FCR 375 at 377-8; Tantipech v. IOOF Aust. Trustees (NSW) Ltd (1998) ATPR 41-614. Accordingly, in my opinion, this defence is not made out.

Sequence of events

In the light of my finding about credibility, I should say something more about the sequence of events. I am satisfied that there were two telephone conversations in which the first defendant made some representations about the turnover. The first was probably at a fairly early stage, but is not important because I do not rely on anything said then which was not repeated in the second. At some stage the plaintiffs made clear that they were interested in swapping a house for the lease, and the defendants went to see the two houses; they were not interested in the one at Gundiah, but were interested in the one at Toogoom. The defendants were not seeking a premium on the lease, so the house could be swapped for stock plus rent in advance.

There was evidence about some discussion between the parties at a meeting at the Anchorage Caravan Park, where a Mr. Rohan was also present. According to the first defendant, the purpose of that meeting was to see whether the plaintiffs were going to be able to operate the business successfully: p.178. He said there was no discussion about figures during the meeting but he had said the business was fair and that they were building it up. According to Mr. Rohan, the first defendant warned the plaintiffs that it was a tough hotel to run (p.259) because of the risk of fighting: p.261. The plaintiffs however seemed keen on the hotel, and the first defendant appeared to be satisfied with them: p.259. The second plaintiff had spoken of developing a bistro with the assistance of a family member: p.259. The second defendant in her evidence of this occasion said there was some concern about the unsuitability of the first plaintiff, but the plaintiffs seemed confident: p.325. They also spoke of having a social club and a seafood smorgasbord. Both plaintiffs denied that they had said this, or been warned that the hotel was going to be hard work: p.56, p.154.

The Toogoom property was mortgaged to the ANZ Bank, and when the bank was consulted, it required $20,000 to be paid off the mortgage before the property would be released: p.11. The bank also wanted some information about the proposed business, hence the preparation of Exhibit 3. I accept that the first plaintiff also spoke to his solicitor at about this stage, and the solicitor advised him that he should obtain some figures: p.15. Because of these two factors, there was a further telephone conversation in which the first defendant provided the information which found its way into Exhibit 3, and at some time the second defendant provided the information about expenses. With that information the first plaintiff prepared Exhibit 3 which he provided to the bank. The bank was willing to go ahead (p.14), and the lease and the contract were prepared. There was some delay in obtaining a transfer of the licence to the second plaintiff, and the first defendant undertook a certain amount of chasing up about this: p.62, 144. Eventually with his assistance, the transfer came through.

The plaintiffs took over the hotel on 16 January 1998: p.24. The day before, a stock take was undertaken by the second plaintiff and the second defendant: p.144, Exhibit 20. Apart from the stock, that document records that an allowance was made for the cash floats in the hotel (p.351) for some beer tickets which had been issued as prizes by a machine operated by a charity in the hotel and redeemed, which could be used to claim reimbursement from the charity, some money from a competition operated by the defendants at the hotel called “Jolly Joker”[10], some allowance for pro-rata payments of outgoings which the second defendant worked out (p.324) and the purchase price of the video recorder which had only recently been put into the hotel: p.352. All these were taken into account as part of the purchase price paid by the defendants for the house.
[10]Explained by the first defendant at p.184.

The lease was signed by the plaintiffs on 14 January 1998 and by the defendants the following day: Exhibit 1. There was also executed a contract for the sale by the second plaintiff to the defendants of the land at Toogoom, which is undated: Exhibit 2. This provides for a purchase price of $75,000. That purchase price was said to be paid as to $15,129 for the stock in trade for the hotel, $2,607 as rates and insurance payments pursuant to the lease agreement for the hotel, and $37,264 by way of rent in advance for the hotel under the lease: special condition 3. The figures in Exhibit 2 do not correspond with the figures in Exhibit 20, but the second defendant said that the latter amounts were taken into account by being set off against the purchase price of the house: p.351. I think I should proceed on the basis that the notes written in handwriting in Exhibit 20 represent the correct figures and these figures were used to set off against the price of the house rather than the figures in Exhibit 2.

The evidence was that the sum actually paid to the plaintiffs’ bank was $20,000 (p.58, p.346) and I will assume that the balance of $75,000, after making the adjustments referred to in writing in Exhibit 20, was applied as rent in advance. Exhibit 15 refers to two adjustments, presumably relating to the settlement of the land, one of which is ticked and one of which has a cross over it, but there was no other evidence as to what adjustments, if any, were made on settlement. It follows that the amount applied as rent in advance was $35,394.68[11]. Under Exhibit 1, rent for the first year was $57,000 payable calendar monthly in advance: clause 1.02. Rent was therefore $4,750 per month (or above $1,100 per week), so the rent from the proceeds of the house was for a period of 7.43 months.
[11]$75,000 less adjustment $39.20 less mortgage payment $20,000 less adjustments in handwriting on Exhibit 20 $19,664.12 = $35,294.68

On Saturday 17 January there was an event to mark the handover by the defendants to the plaintiffs. This involved a good deal of hospitality on the part of the first defendant; he was shouting drinks for various customers, and at one stage borrowed $300 (Exhibit 16) which he subsequently repaid: p.184, 186. The first plaintiff said that an event of this nature was usual in such circumstances: p.66. On this occasion, a number of the customers were apparently placing bets using the first defendant’s TAB account, a service which he had routinely provided to his patrons (p.185) and which the second defendant described as an important part of their business: p.328. Mr. Hodson, one of the defendants’ good customers, spoke of there being a punters club there on a Saturday: p.287.

It was evidently quite busy at the hotel that Saturday, and at one stage the first defendant went behind the bar to help serve drinks (p.155), but the second plaintiff said she did not want him there: p.184. She said that she told the first defendant that the plaintiffs could handle things: p.156. I accept that she did not want the first defendant behind the bar. However, the first defendant alleges that on this occasion she was quite intoxicated and she swore at him: p.186. In this he was supported by the evidence of Mr. Rossterollo (p.274-5), although that witness said that as a result the first defendant left the hotel, but came back later. The first defendant said that he remained at the hotel at that stage: p.186.

The second defendant said that on the Friday she took the first plaintiff to the TAB so that he could open an account but that he was not able to do so because he did not have the required identification and suggested that the second plaintiff would open it: p.328. The first plaintiff’s evidence was not very different from this (p.67) and the second plaintiff agreed that she said she did not want to open a TAB account, and one was not operated: p.153.

The second defendant said that in the afternoon after she had been shopping with a friend, she came to the hotel and the second plaintiff, who was then somewhat distressed, asked her to take the first plaintiff home because he was making her cry: p.328. In this she was supported by evidence of Ms. Svenson, the friend: p.295. I am wary about this evidence and do not think ultimately that anything turns on this, but on the whole I think it more likely that the second plaintiff was somewhat upset about the presence of the first defendant on that occasion and did tell him not to be behind the bar and later asked that he be taken away, and I think it also likely that the second plaintiff was affected by alcohol on that occasion. Certainly after this day the defendants generally stayed away from the hotel, although it was common ground that on one occasion the second defendant did return and collect the cards which had been kept at the hotel to record the provision of credit to customers.

Plaintiffs’ operation of hotel

After the plaintiffs took over, they cut back on credit quite a bit: p.38, p.149. There were some other changes made to the way in which the business was conducted. The plaintiffs said, and I accept, that they did not trade before 10 a.m. and it seems that, although the disco was operated at times, it was not particularly successful and the hotel generally closed at 10 p.m.: p.158. On some occasions the hotel would close earlier if there was no business available: p.83, p.156. Normally it traded 7 days a week (p.70), although the second plaintiff admitted that there was one occasion when it closed on a Sunday because she went on an outing with a social club associated with another hotel: p.157. The plaintiffs had (with the consent of the defendants) allowed two women to operate the bistro, for which they were paying some rent, but they left after three weeks because of lack of custom: p.28. Thereafter, the second plaintiff prepared meals, dropping the prices as low as $2.95: p.149. On these prices they made no money out of it (p.74) and she did not think it was particularly helpful in encouraging business. The “Jolly Joker” competition was discontinued (p.79); the second plaintiff said that no one was interested in it (p.155) although it may be that the people who had been interested in it were no longer frequenting the hotel because the first defendant was no longer there.

Another change made by the plaintiffs was to increase the price of beer during the “happy hour” operated at the hotel. The defendants had such periods when drinks were sold cheaply, particularly beer which was sold for $1 a pot: p.194. According to the second defendant, this was an effective marketing technique, because people would continue to drink after the price went up: p. 329. Mr. Kennedy also thought that this attracted customers: p.109. I expect it would have been a popular attraction for the hotel and would have encouraged patronage, and helped to build turnover, although whether it would have ultimately produced increased profits is not clear. The first plaintiff said that he considered that this price was too low, and increased it to $1.50 per pot: p.28. He said that was the price charged by other hotels during their happy hour, although Mr. Gorst, who was at the time working at another hotel, said that the happy hour price there was $1.30 per pot: p.271.

The defendants maintained that they had signs up outside advertising the happy hours (p.195, 329) but the first plaintiff claimed that he did not see any signs and did not realise that this was the practice until after he took over the hotel: p.74-5. I find the defendants’ evidence plausible; there is no point in selling beer cheaply to get customers in if you do not advertise the fact that you are doing so. Increasing the price in this way would have been another matter which would have led some of the defendants’ regulars to drift away from this hotel after the plaintiffs took over.

The defendants appear to be particularly good at operating this hotel. Mr. Kennedy, who worked there for them, said the first defendant was popular with the customers (p.185) and other good customers of the defendants who were called spoke highly of the first defendants’ qualities as a publican[12] and said that trade dropped off after the plaintiffs took over[13]. The latter is confirmed by the plaintiffs’ figures for turnover: p.70-1. According to the first plaintiff, average turnover per day in their first month of operation was $437.58, in their second month $447.49, in the third month $409.61 and during the last two weeks before they left the hotel $304.58. As well, the drop in pool table takings by about two-thirds (Exhibit 12) suggests that the hotel was a lot less busy.
[12]Mr. Rossterollo at p.284; Mr. Wise at p.359 “Haven’t met a better one”; Mr. Hodson at p.287: “Best hotel in town” while the defendants were running it.
[13]Mr. Gorst p.269; Mr. Magarry p.286; Mr. Hodson p.289; Mr. Rossterollo p.276; Ms. Frampton P.301.

According to the defendants, another reason for the decline in trade was that the plaintiffs used to argue between themselves in front of their customers. Both plaintiffs denied that this occurred: p.48, p.146-7. Mr. Gorst said that one day he saw the plaintiffs arguing in the bar and someone threw an ashtray, although he does not recall who: p.269. Mr. Magarry also said that on one occasion at the hotel he saw the plaintiffs continually arguing with each other: p.285. Ms. Frampton said that the plaintiffs would regularly argue in front of people at the hotel (p.301) as did Ms. Densen (p.306), and Mr. Wise said that he saw the plaintiffs arguing once: p.360. These witnesses were all called on behalf of the defendants and were obviously people who were on good terms with the defendants and might well have been disposed to colour their evidence, but I do not think they were all just inventing this.

On the other hand, I was less confident of the evidence of Mr. Rossterollo who said that he saw an argument between them on the first Saturday after they took over the hotel during which the second plaintiff threw something, although he was not sure what, at the first plaintiff: p.275. I thought Mr. Rossterollo the least impressive of the defendants’ witnesses and I would not place any reliance on this evidence. On the other hand, Mr. Kennedy, called on behalf of the plaintiffs, said that while he was at the hotel the plaintiffs would have only the odd small argument (p.110) although he was not there for long after they took over: p.119. On the whole, I think it more probable than not that there were arguments between the plaintiffs in front of customers after they took over this hotel, probably more towards the latter period when they were having difficulties anyway, a situation which might well produce some tensions in any relationship. I am however wary about the reliability of the evidence as to the extent of the arguing, or some of the more colourful details about it. I have a suspicion that some of the customers who were missing the defendants for other reasons might have seized upon any incident of public disagreement between the plaintiffs as an excuse for lamenting the change in regime.

There was also some adverse comment from the defendants’ witnesses about the second plaintiff’s dog. The first plaintiff said they had two dogs, although he said the big one was locked up and the smaller one was usually outside: p.49. He denied that he handled either of them while he was behind the bar: p.50. Mr. Hunter said that the second plaintiff had a little dog: p.257, apparently a little white dog seen in or behind the bar, and there was similar evidence from Mr. Gorst (p.269), Mr. Rossterollo (p.276) and Ms. Frampton: p.207. Mr. Hodson saw two dogs (p.289) but I am not persuaded that there was more than one dog frequenting the interior of the hotel. I am satisfied there was one that was often there, although again I suspect that this in itself would not have had much effect on trade. I do not think that it would have caused the business any harm if the first defendant had kept a small dog in this way. Again, I suspect the real problem was that the new regime was less congenial to many of the good customers than were the defendants.

The dispute

Ultimately the plaintiffs came to the conclusion that the hotel was not a viable business due to the amount of rent being paid: p.81. They had evidently at some earlier time made some complaint about misrepresentations as to the hotel’s performance. The whole of the correspondence between the solicitors for the parties was not put in evidence, but there was a letter from the plaintiffs’ solicitors as early as 20 February 1998[14]. The earliest letter I have is 24 February 1998 from the plaintiffs’ solicitors which refers to misrepresentations about turnover and quotes figures of 8 kegs of beer per week and pool table commission of not less than $200 per week.
[14]This date is mentioned in their subsequent letter of 24 February 1998: Exhibit 30

The reply on 6 March 1998 (Exhibit 31) denied that any misrepresentations were made but did allege that their clients were selling 8 kegs a week by the time of completion of the contract. Evidently there had been in an earlier letter some request to be let out of the lease, because this letter concludes:

“Our clients are not willing to negotiate an early release of your clients from the obligations under the lease agreement. If your clients wish to surrender the lease, then our clients may consider accepting that on the basis that there be no refund to them of rental and outgoings paid by them to date. However this is a matter for your clients.”

Ultimately, however, there was an agreement between the solicitors for the plaintiffs to be let out of the lease. This was referred to in the evidence of the second defendant at p.332, which is consistent with the evidence of the first plaintiff, although there is less detail given by him. Unfortunately, there was no evidence as to whether the terms sought by the defendants in Exhibit 31 were ultimately incorporated in that agreement, although the first plaintiff said that they had sought the balance of the rent on the hotel and had not been paid: p.116. The fact that this action was pursued indicates that the parties reserved their rights to some extent, and the evidence does not permit a conclusion that this agreement was anything other than an agreement to surrender the lease on 26 or 27 April 1998: p.34. I will therefore proceed on the basis that there was no further agreement, for example, like the terms sought by the defendants in Exhibit 31.

The plaintiffs move out

In fact, the plaintiffs decided to move out of the hotel on Anzac Day. The stock was either sold or removed by the plaintiffs, so that no stock was left in the hotel: p.115. The second plaintiff said that the premises were left secure with the equipment there and clean: p.146, 161. Mr. Hunter said that he helped to clean various parts of the premises, including the kitchen, before the plaintiffs moved out, and that the premises were locked up because ultimately he was locked in and the key had to be passed in so that he could get out: p.253.

On Sunday 26 April the second defendant went to the hotel with a friend, Ms. Svenson, and they were unable to get in: p.296, 322[15]. This confirms that the hotel had been left secured. On Monday 27 April the plaintiffs returned the keys to the defendants’ solicitors (p.323, 332) and when the defendants went to the premises with the keys they found the front door unlocked: p.332. According to the first defendant they did not go in until they had a witness (p.187); he also claimed that the front door was ajar (p.187) which is contrary to the evidence of the second defendant at p.332. In any case, Mr. Rossterollo said that he was telephoned by the first defendant (p.203) and subsequently went to the hotel where he went in with them: p.276.
[15]While they were there they were seen by a Mr. Townsend, who said that they were there for some time and appeared unhappy about the situation: p.130-1.

The first defendant described the premises as being pretty grubby, with dog fur everywhere and some dog droppings: p.190. Mr. Rossterollo agreed that it was all dirty inside and was a shambles (p.276) and Ms. Svenson said that she was there the following day to help clean up and described the place as very dirty with dog droppings on the floor and rotten meat in the oven: p.296. The second defendant also said that the premises were dirty (p.332) and that it took them a few days to clean up: p.333.

Conversion of equipment

The defendants also said that the VCR associated with the security system was missing when they came to the premises (p.188, 323) as well as some of the disco equipment. The plaintiffs denied that they had taken this and said it was still there when they left: p.34, 146. The VCR had been purchased for $1,450 (Exhibit 27) and the first defendant paid $2,000 for the disco equipment (p.189). The defendants allege that this equipment was taken by the plaintiffs and seek damages for conversion of it.

It seems clear that the premises were secured when the plaintiffs left them on Saturday, since the second defendant was unable to get in the following day. The plaintiff still had the keys at that stage, so they could have gone back subsequently and taken this equipment, leaving the premises open to make it look like they had been broken into. On the other hand, the defendants could have done something similar after they recovered the keys, or if they had spare keys. The third possible explanation however is, I think, probably the most plausible; at some stage someone else broke into the hotel and took this equipment and left, leaving it open. This is the sort of equipment which would be likely to be attractive to a casual burglar, probably disappointed by the absence of stock in the hotel.

It would have been obvious enough on the Sunday that the hotel had been vacated, and it might well have presented a tempting target to some of the less law abiding residents of Maryborough. I think this is the most plausible explanation for the disappearance of this equipment and the state of the hotel, and I am not persuaded that the equipment was in fact converted by the plaintiffs. In any case, the plaintiffs had in effect paid for the VCR when allowance was made for it on settlement: p.375. They were therefore entitled to take it when they left. Damages for conversion would be limited to the value of the disco equipment, but for the reasons I have given, the claim of conversion fails. There was no claim pleaded or advanced on the basis that by vacating the premises early the plaintiffs were liable for any loss suffered by the defendants through the disco equipment being stolen.

Damages for breach of contract

The other matter raised by the defendants in the counterclaim was damages for breach of contract, on the basis that the plaintiffs were liable for loss caused by their vacating the premises prior to the expiration of the lease. Damages for loss of benefit of the lease can only be recovered where the lessee has repudiated the lease before the termination of the term: Progressive Mailing House Pty Ltd v. Tabali Pty Ltd (1985) 157 CLR 17. It was submitted on behalf of the defendants that the plaintiffs had repudiated the lease by vacating the premises and returning the keys, but that is contrary to the evidence of the second defendant, that there was an agreement to let them out of the lease: p.332. If they vacated the premises by agreement, then there was no repudiation in the form of abandoning the premises, and there is no evidence that the plaintiffs had, prior to that, said or done anything which amounted to repudiation of the lease. The assertion that there was some repudiation by the plaintiffs is therefore not made out.

Apart from this, there was, in my opinion, really no evidence on which I could find that the defendant had suffered any particular loss as a result of the termination of the lease. After the lease was terminated, they went back into possession and began to operate the hotel themselves. They would have been put to some expense, but there is no evidence to quantify it. They said they cleaned up the hotel. Counsel for the defendants conceded that he was unable to prove the cost of the cleaning. The first defendant also said that the post mix machine was removed by the supplier just after they moved back in: p.192. As I understand the position, this is a machine which can dispense various drink mixers at the end of a nozzle. Presumably property in the machine was retained by the distributor of the concentrate from which these mixers are produced. The first plaintiff denied that there was any money unpaid to that supplier: p.60. There was no evidence from the defendant that they incurred any particular expense as a result of this.

They would have been put to some expense restocking the hotel, but that is not something recoverable by way of damages since that was something they would have had to do anyway whenever the lease ended, possibly by purchasing the stock which was left in the hotel by the lessees. Counsel for the defendants in his submissions conceded that the 1998 year figures (Exhibit 29) were of little assistance in establishing any loss; they show a profit after cost of sales of $104,647.42 for the financial year to 30 June 1998, and a profit after adding “other income”, presumably rent received from the plaintiffs and others, and deducting expenses, of $44,878.34, but it is impossible to determine from this what the trading result was for the period from whenever they began to operate the hotel again until 30 June 1998.

In any case, I note that the figures for the 1998 financial year in Exhibit 29 differ from the figures given for the 1998 financial year in Exhibit 41; this is the profit and loss account following the financial year, but it also shows for comparison the 1998 year figures. The figures are not entirely different; the cost of sales figures are the same, as are most of the expenses, the exception being the figure for rates and taxes, but the gross sales income and other income figures are quite different, as are the figures for net profit. The matter is further complicated by the fact that the defendants have other business activities apart from this hotel: p.197-8. In my opinion, the onus was on the defendants to prove that they were worse off financially as a result of going back into possession of the hotel and operating it as a hotel than they would have been if the lease had continued, and they have not done so. It was submitted that I should assess damages at the amount of the rent which had been paid in advance, but in my opinion there is no legal justification for that approach. It follows that the counter claim fails and is dismissed.

Recovery of rent

If the lease was surrendered by agreement, then the obligation to pay rent came to an end: Progressive Mailing House Pty Ltd v. Tabali Pty Ltd (supra) at p.59. Where under a lease rent is payable in advance for a particular period and during that period the lease is surrendered, the lessee is not entitled to recover an apportioned part of the rent paid in respect of that part of the period after the surrender: Hildebrand v. Lewis [1941] 2 KB 135; Duncan & Vann “Property Law and Practice” #17.60.

Under the lease rent was payable calendar monthly in advance (Exhibit 1, clause 1.02), that is, on the 14^th of each month, so that rent became payable under the lease for the months of January, February, March and April before the lease was surrendered. This was a total of $19,000 (at $4,750 per month). Under clause 1.03, additional rent by way of operating expenses was also payable but there was no evidence to quantify the amount of any liability to pay such operating expenses which had accrued prior to the surrender of the lease. It follows that the plaintiffs are, in my opinion, entitled to recover from the defendants the balance of the amount from the sale of the house which was treated as rent to be payable in advance under the lease, the sum of $16,294.68. This is not within the principle in Hildebrand because it was payable in advance under the contract, Exhibit 2, rather than under the lease, Exhibit 1. In my opinion therefore it is recoverable as money paid for a consideration which has wholly failed.

Assessment of Damages

Had the lease not been surrendered I would have given the plaintiffs relief from it under s.87, but that is not necessary. The appropriate remedy for breach of s.52 is damages. It was submitted on behalf of the plaintiff that damages should be assessed under the Trade Practices Act on a basis equivalent to the assessment of damages for breach of contract, that is, that the plaintiffs should be compensated for the difference between the results actually achieved and the results that would have been achieved if the trade of the hotel had been as good as it was represented to be. The plaintiffs put forward calculations based on Exhibit 3 and Exhibit 9, from which it was submitted that the plaintiffs could have reasonably expected, on the position as misrepresented, to make a profit of $25,242 over the 14 week period during which the lease actually ran. It was submitted on behalf of the plaintiffs that the effect of the High Court decision in Marks v. GIO Australia Holdings Ltd (1998) 196 CLR 494 was that, once causation was established, neither the amount recoverable under s.82 or the orders that might be made under s.87 were limited by analogy with breach of contract, tort or equitable remedies. Nevertheless, that decision is a useful reminder that the statutory remedies are limited by considerations of causation.

In that case, there was a representation that interest would be charged on borrowings would be at a specified base rate plus a fixed margin, when in fact the terms of the contract entitled the lender to vary the margin on 90 days notice. The lender did so, and the borrowers sought in effect to enforce the representation, either by awarding damages under s.82 or by requiring the lender to make good the representation under s.87. However, the borrowers were not being held to the transaction by the lender, and had continued in the arrangement because the facility was more beneficial than any other available. It was held by a majority of the High Court that in these circumstances the borrowers had suffered no loss or damage as a result of the breach of s.52, nor was it appropriate to give relief under s.87. Plainly, in that case, relief was not granted by treating the lender as if the misrepresentation had been a contractual warranty.

McHugh, Hayne, Callinan JJ in a joint judgment said at p.512:

“A comparison must be made between the position in which the party that allegedly had suffered loss or damages is and the position in which that party would have been but for the contravening conduct. And even this enquiry may not conclude the question. Analysing the question of causation only by reference to what is, in essence, a “but for” test has been found wanting in other contexts, and it may well be that it is not an exclusive test of causation in this area either. But that is not a question which we need to consider in this case. For the moment it is enough to say that s.82 requires identification of a causal link between loss or damage and conduct done on contravention of the act.”

At p.514, their Honours said:
“A party that is misled suffers no prejudice or disadvantage unless it is shown that that party could have acted in some way (or refrained from acting in some way) which would have been of greater benefit or less detriment to it than the course in fact adopted. Thus, the party that is misled would have suffered loss if a chose in action which was acquired was worth less than the amount paid for it. There may well be other ways in which it might suffer loss or damage. For example, consequential loss may be suffered. But no loss of that kind was alleged in this case and, putting that kind of loss to one side, we focus only on loss said to be suffered by the making of the contract. It is necessary, then, to determine whether the value of what was acquired is less than what was paid. How is value to be assessed? It is to be assessed objectively, not according to what either or both the parties to the contract believed that it would obtain from the contract. That is, the value of what in fact was acquired is to be identified according to what price freely contracting, fully informed parties would have offered and accepted for it. It is only by comparison with the value assessed in this way that there can be an assessment of whether the party that is misled could have obtained some greater benefit or incurred less detriment. What is important is what that party could have done, not what it might have hoped for or expected.”

There is nothing in these passages which suggest that this decision is authority for awarding compensation in the present circumstances based on expectation loss under s.82 or s.87. Indeed, it seems to me to be clear authority to the contrary.

An alternative method of assessing damages is to assess them as if damages were being assessed in deceit, that is by calculating how much worse off the plaintiffs were than if they had not entered into this transaction. This is the usual approach adopted when a breach of s.52 has induced the plaintiff to enter into a lease; see for example Lezam Pty Ltd v. Seabridge Australia Pty Ltd (1992) 35 FCR 535 at 549. In the circumstances of that case, that was identified as the amount by which the plaintiff would have paid less rent had the misrepresentation not been made. No attempt was made in this case to prove the value of a lease of the hotel if it had the turnover that the defendants’ hotel would have had if the defendants had confined its operation to lawful hours, and had not engaged in unusual provision of credit to patrons. These features in themselves would have had some effect on the turnover, but that is difficult to quantify; it would not have been limited to the value of alcohol in fact sold outside normal trading hours, or the value of drinks provided on credit. Apart from the other features to which I have referred, there is the feature that anything which gets customers into the hotel will make the hotel busier and more popular, and that in itself is a feature which I would expect would (up to a point) tend to attract customers.

In view of these difficulties, and in the absence of any evidence directed to this issue, or any attempt on the part of the plaintiffs to rely on this, I do not think it is appropriate for me to attempt to assess what the proper market value of a lease of the hotel was at this time, and allow damages based on the difference between that sum and the amount actually paid by the plaintiffs.

In other cases where a plaintiff has been induced to enter into a lease by misrepresentations in breach of s.52, the approach has been similar. In Waltip Pty Ltd v. Capalaba Park Shopping Centre Pty Ltd (1989) ATPR 40-975, Pincus J refused to give expectation damages but allowed the financial losses suffered by the plaintiff as a result of entering into the lease, including the trading loss and a loss on equipment which had been leased and installed in the premises, and later had to be removed. In Levenspiel v. Eaton (Plaint 3115/97, Skoien DCJ, 17-8-99, unreported), damages included the trading loss and the legal fees on the purchase, as well as an amount paid for goodwill of the business, which is not applicable here because there was no premium paid for entering into the lease. There was also some allowance made for the personal labour of the plaintiff, but in that case there was evidence to support the value of this amount, which is not the case here.

In Hoover v Remote Data Systems Pty Ltd (Southport Plaint 39/98, Brabazon DCJ, 6.5.99, unreported) the plaintiffs had purchased franchise rights, which proved to be worthless, as a result of conduct by the defendants in breach of s.52 of the Trade Practices Act. Damages consisted of the payments for the rights, expenses incurred in acquiring them and in borrowing money, and expenses incurred in trying to operate the businesses, which generated no income. As well two of the plaintiffs led evidence that, but for their involvement in this business, they would have been able to earn money in other ways, and they were held to be entitled to be compensated for the lost opportunity to earn income elsewhere. However, the other three plaintiffs, who did not lead evidence that the loss of that opportunity was of some value, did not receive any compensation on that basis. That approach appears to me, with respect, to be correct. In the present case there was no evidence to support the proposition that, but for their involvement with this hotel, the plaintiffs would have earned any and what income elsewhere. They had already sold the business at Gundiah: p.263. Accordingly I cannot allow the plaintiffs any damages on this basis.

In my opinion, this transaction can be isolated from the contract to sell the house; it was not suggested that the value of the house sold under Exhibit 2 was artificial, or other than market value. So far as the sale proceeds were used to reduce the debt to the bank or pay for stock, there was no suggestion that the plaintiffs did not get proper value, and so far as the sale proceeds were applied to the payment of rent in advance, I have to some extent already dealt with that matter, and allowance can be made for the cost of such rent as was paid in assessing damages.

The matter is complicated by the fact that, even if the hotel was run at a loss, that was not caused only by the removal of the features which had been the subject of the implied misrepresentation, that is the out of hours trading and the excessive credit. I accept that the first defendant was particularly good at maximising the business of this hotel, at least in terms of the customers the hotel then had. It may be that given time someone else could have developed a different sort of custom, and might have made the hotel successful in a way different from the way adopted by the defendants. But the difficulty is that someone doing this would be likely to lose those who had liked the hotel the way the defendants were running it well before the new custom was built up, and building up new custom in the face of the extensive competition available in Maryborough was always going to be difficult. The people who patronised the defendants’ hotel while they were operating it were different from the sort of customers the plaintiffs had attracted at Gundiah: p.148. In addition, I accept that there was some arguing in public and this would have had some effect on trade, principally, I suspect, in the absence of a friendly and welcoming environment.

In my opinion, therefore, to some extent the decline in trade after the plaintiffs took over was caused by the difference between the plaintiffs and the defendants and the difference between the ways in which they ran the hotel, not just because of differences in trading hours and the provision of credit.

It is by no means clear what the financial outcome of the operation of this hotel by the plaintiffs was. There is evidence that their takings totalled $39,681.98 (Exhibit 19), to which should be added the sublease rent of $750 (Exhibit 19), the pool table commission of $269 (Exhibit 12) and the cigarette commission of $112: Exhibit 10, as it is not clear that the earlier figure includes this income. These total $40,812.98. There is no clear evidence of how much was spent in total by the plaintiffs during this period on purchases or expenses. There is evidence in Exhibit 20 that stock was purchased from the first defendants for $15,422.71, and Exhibit 17 shows other purchases totalling $9,629.94. It appears that some of this was sold or retained by the plaintiffs when they left the hotel: p.115. There was no evidence to quantify this, but if it is ignored and the figures in Exhibit 20 and Exhibit 17 are added together and then subtracted from the total income, there was a gross profit before expenses of $15,760.33.

The only expenses proved were electricity charges totalling $1,547.05 (Exhibit 18), the amount attributed to “pro rata” and security on the commencement of the lease of $3,350.41 (Exhibit 20), stamp duty on the lease of $997.50 (Exhibit 1), the defendants’ legal expenses in connection with entering into the lease of $2,686, and the plaintiff’s legal expenses in connection with entering into the lease of $750: Exhibit 44, p.363. In addition, the plaintiff paid four months rent, as explained earlier, which came to $19,000: Exhibit 1. The takings recorded in Exhibit 19 are derived by adding back “till pay outs”, that is, money paid in cash out of the till. Some information about the content of this is given in Exhibit 16, but some are obviously not trading expenses and there does not appear to be any proper dissection of them. However, some do appear to be trading expenses, so I will allow half of the total, $3,108.62. These expenses total $31,439.58, and when subtracted from the gross profit, indicate a loss over the whole period of $15,679.25.

I am however wary about that figure because of the various uncertainties involved in the calculation, and because there was no direct attempt at the trial to prove the trading loss. In these circumstances, I think I should be cautious about it, but overall I think the evidence to which I have referred suggests that there was a trading loss of this order over this period. Any deficiency in proof of the plaintiffs’ loss should operate to the advantage of the defendants, since the plaintiffs carry the onus. In all the circumstances, I think that the appropriate course is to round the loss down to $15,000.

There is now authority that a court can, at least when awarding damages under s.87 of the Trade Practices Act, apportion the amount of loss of which the defendants’ misleading or deceptive conduct was a cause, but not the sole cause, on the basis of the extent to which that conduct was a cause of that loss: I & L Securities Pty Ltd v. HTW Valuers (Brisbane) Pty Ltd [2000] QCA 383. The court then also expressed the view that once a proceeding of the kind mentioned in s.87 is before a court, it has all the powers s.87 encompasses whether or not the plaintiff presses for an order under that section, so that the court may mould the relief granted in such a way as to achieve a fair result for both sides. Accordingly, when the loss suffered by the plaintiffs in operating this hotel was caused in part by their having entered into the lease (as a result of the misrepresentation) and in part by the way in which they operated the hotel after they took over, that loss can be apportioned between those two causes.

I have already dealt with the relevant facts. The difficulty in making an apportionment on the basis of causation is that the two separate causes are quite different. Ultimately, the matter will be very much one of impression, and overall my impression is that appropriate allowance will be made for all the relevant considerations by apportioning the loss equally between the two causes. On that basis the indicated loss should be halved, to $7,500.

There is a further complicating factor, in that it is not entirely clear on the evidence that, if the misrepresentations had not been made, the plaintiffs would not have entered into the lease anyway. As I have mentioned earlier, there was evidence that they were at the time enthusiastic about taking over this hotel, and it may be that they would not have been deterred even if the first defendant had been frank about the situation. It may well be that the lease would not have eventuated if the defendants had simply refused to provide any figures for turnover, but if they had provided accurate figures instead of those which were shown to be inaccurate, the financial analysis in Exhibit 3 would not have been all that different, and it may be that if the disclosure about trading out of hours and the extent of credit had been made before the contract was signed, the plaintiffs might have gone ahead anyway. The thrust of the plaintiffs’ complaint was that the turnover was being exaggerated, and in relation to the principal aspect of the turnover, the sales of draught beer and spirits, I am not satisfied that that was the case.

In many cases of this nature it will be clear that, but for the misrepresentation, the transaction would not have proceeded, but if the position that would have prevailed but for the misrepresentation is uncertain, the appropriate approach is to assess damages on a basis which takes into account the probability of avoiding the loss had the misrepresentation not been made: Sellars v. Adelaide Petroleum NL (1994) 79 CLR 332. This is not an issue which was specifically averted to during the trial, but on the other hand, there was no evidence to support the proposition that, but for the misrepresentations I have found, the lease would not have been entered into. Admittedly this may have been difficult since a large number of misrepresentations were pleaded, and it would not have been easy to lead evidence in relation to all of the various permutations and combinations which might have been available. However, I will not further reduce the damages because of this consideration, as it was not a matter raised at the trial.

Before this transaction, the second plaintiff used to earn rent from a house at Toogoom of $100 per week; after the transaction that rent was lost but, because they were living at the hotel, they were able to rent the house at Gundiah at the same rate: p.36. The evidence of the first plaintiff suggested that there was less rent during the relevant period than would otherwise have been obtained, but the evidence does not enable this to be quantified. Accordingly, no consequential loss on this basis is shown.

Therefore the damages (under s.87 of the Trade Practices Act) will be $7,500. Another way of approaching the assessment is that used in Lezam (supra); how much would the plaintiffs have saved in rent if the lease had been negotiated without the misrepresentations? There was no evidence as to the true market rent of this hotel, but the difficulty the defendants have had in trying to lease it for $1,000 per week suggests that it is less than that sum. If it were two-thirds of the rent in Exhibit 1, the damages would have been one-third of the rent paid by the plaintiffs, or $6,333.33. I could not assess damages on this basis, because the proposition that the market rent is two-thirds of the rent sought by the defendants is speculation, but, to the extent that that figure is plausible, it shows that the assessment I have made is broadly appropriate.

The plaintiffs are therefore entitled to recover a total of $23,794.68. They are also entitled to recover interest; this was not the subject of submissions but subject to anything further which may be said when the judgment is delivered, I will allow interest at 8% per annum from 27 April 1998 to the date of the judgment. I will also hear submissions in relation to costs.

CITATION:	Langworthy & Anor v. Cameron & Anor [2001] QDC 083
PARTIES:	FREDERICK THOMAS LANGWORTHY (First Plaintiff) And LESLEY OLZARD (Second plaintiff) v. LANCE FREDERICK GEORGE CAMERON (First defendant) And KATHLEEN JOYCE CAMERON (Second defendant)
FILE NO/S:	Plaint 121 of 1998
DIVISION:
PROCEEDING:	Trial
ORIGINATING COURT:	District Court Maryborough
DELIVERED ON:	2 May 2001
DELIVERED AT:	Maryborough
HEARING DATE:	17, 18 August, 3, 6 October 2000
JUDGE:	McGill DCJ
ORDER:	Judgment that the defendants pay the plaintiffs the sum of $23,794.68 together with interest
CATCHWORDS:	TRADE PRACTICES – Misleading and deceptive conduct – lease of hotel – representations as to turnover – whether misleading – remedies LANDLORD AND TENANT – termination of tenancy – surrender – effect on obligation to pay rent – whether rent paid in advance recoverable General Newspapers Pty Ltd v. Telstra Corporation Ltd (1993) 45 FCR 164 - applied Henjo Investments Pty Ltd v. Collins Marrickville Pty Ltd (1988) 79 ALR 83 - applied Haydon v. Jackson (1988) ATPR 40-845 - cited D F Lyons Pty Ltd v. Commonwealth Bank of Australia (1991) 28 FCR 597 – applied Krakowski v. Eurolynx Properties Ltd (1995) 183 CLR 563 – applied Petera Pty Ltd v. EAJ Pty Ltd (1985) 7 FCR 375 – applied Waltip Pty Ltd v. Capalaba Park Shopping Centre Pty Ltd (1989) ATPR 40-975 - considered Progressive Mailing House Pty Ltd v. Tabali Pty Ltd (1985) 157 CLR 17 – applied Hildebrand v. Lewis [1941] 2 KB 135 - followed Marks v. GIO Australia Holdings Ltd (1998) 196 CLR 494 – applied Aroutsidis v. Clayton (1990) 21 FCR 500 - cited Mister Figgins Pty Ltd v. Centrepoint Freeholds Pty Ltd (1981) 36 ALR 23 - distinguished Lezam Pty Ltd v. Seabridge Australia Pty Ltd (1992) 35 FCR 535 - cited Levenspiel v. Eaton (Plaint 3115/97, Skoien DCJ, 17-8-99, unreported) - considered Hoover v Remote Data Systems Pty Ltd (Southport Plaint 39/98, Brabazon DCJ, 6.5.99, unreported) - followed I & L Securities Pty Ltd v. HTW Valuers (Brisbane) Pty Ltd [2000] QCA 383 - followed Sellars v. Adelaide Petroleum NL (1994) 79 CLR 332 - cited
COUNSEL:	R. W. Morgan for the plaintiffs P. J. Goodwin for the defendants
SOLICITORS:	Jeffery Cuddihy & Joyce for the plaintiffs Carswell & Co for the defendants