Lindsay Gordon Bown v The Commonwealth Bank of Australia

Re: LINDSAY GORDON BOWN and CHRISTINE ANN BOWN
And: THE COMMONWEALTH BANK OF AUSTRALIA and CHRISTOPHER PARKER
No. S G127 of 1990
FED No. 422
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIAN DISTRICT REGISTRY
GENERAL DIVISION
Von Doussa J.(1)

CATCHWORDS

Trade Practices - misleading and deceptive conduct - negligent mis-statement - purchase of a small business - intending purchasers seeking loan from the respondent bank - whether a loans officer of the bank gave information or advice about the merits of the business - whether the bank came under a duty of care - whether breach of fiduciary duty - whether the purchasers relied on information given to them.

Trade Practices Act 1974, ss.52, 75B, 82

HEARING

ADELAIDE

#DATE 19:6:1992

Counsel for the applicants: Mr R.W. Sallis

Solicitor for the applicants: Poveys

Counsel for the respondents: Mr J.E. Lunn

Solicitor for the respondents: N.P. Anderson

ORDER

THE COURT ORDERS THAT:

1. Judgment be entered for the applicants against the respondents for

$109,000.

2. The respondents pay the applicants' costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

The applicants claim damages for loss arising out of their purchase of a small leasehold business known as "Prices Wallaroo Bakery" ("the business") at Wallaroo in 1987. The turnover and profits of the business were not as they expected, and the business was sold at a substantial loss less than a year later. The applicants allege that they were induced to purchase the business by representations as to its value and earning potential made by the second respondent ("Mr Parker") who was a loans officer with the first respondent ("the CBA") at its Kadina Branch in South Australia. It is alleged that the representations mis-stated the true position, were negligently made, and were misleading and deceptive. A contravention of s.52 of the Trade Practices Act 1974 ("the TPA Act") is alleged against the first respondent, and it is further alleged that Mr Parker was knowingly concerned in that contravention. Insofar as the representations made by Mr Parker concerned the future profitability of the business the applicants rely on s.51A of the TPA Act. Other causes of action, including breach of fiduciary duty, are also pleaded. The respondents deny liability.

Wallaroo is a seaside township about 140 kms north-west of Adelaide. It is close to the townships of Kadina and Moonta. These three towns form the "Copper Triangle" which was settled by Cornish miners last Century. Prices Bakery in Kadina has a long historical connection with the area, and one of its specialities is Cornish pasties. Prices Wallaroo Bakery was at one time owned by the Price family and provided an outlet for its products in Wallaroo. In more recent times the business has been operated by an independent owner who leases the premises from members of the Price family. The business is a retail outlet for cakes, pies, pasties and bread from Prices Bakery, and in addition sells cigarettes, soft drinks and snack foods. The shop from which the business is conducted is well situated in the main street of Wallaroo, but competes with eight other outlets in the town selling bread and snack foods.
In 1987 the first applicant, Mr Bown, was aged 45 and the second applicant, Mrs Bown, 35. Between them they have seven children from their former marriages. Mr Bown had left school at age 14 and pursued a variety of unskilled and semi-skilled occupations. At different times he operated milk rounds, a concrete truck, worked as a sub-contractor for a swimming pool plasterer, and for a messenger service. In some of these pursuits he maintained elementary accounting records. Mrs Bown left school at age 15 and worked in factories and as a shop assistant. Neither of them had previously run a business like Prices Wallaroo Bakery. They had little experience in commercial matters. They had moved to Wallaroo in 1982. Mr Bown purchased five acres of land on the outskirts of Wallaroo on which he built their family home during periods of unemployment. In Wallaroo Mr Bown had worked as a labourer on the wharf, for the Barley Board, and as a bricklayer, when work could be found in the district. He spent some months each year on unemployment benefits. In September 1987 Mr and Mrs Bown were both unemployed.
In mid-September 1987 Mrs Bown ascertained from Mr and Mrs Lewis, the then owners of the business, that they proposed to sell. Mrs Lewis' brother had married Mr Bown's step-sister, but the two families were not close. Mr and Mrs Lewis had owned the Bakery only since 30 March 1987. Mr Lewis said his father had died and the family wished to move back to Adelaide. The business was described in glowing terms. Mrs Bown expressed interest in purchasing it. Later she discussed that possibility with Mr Bown and he too became interested. They apparently acted on impulse as neither of them had been contemplating a change in their lifestyle. The prospect of owning the business was appealing as it would provide employment for them, and for Mrs Bown's eldest daughter who was about to leave school.
The applicants were referred by Mr Lewis to Mr John Ball, a business salesman with a local business agent. They attended on Mr Ball at his office. Neither of them had made any enquiries about the business. Mr Bown had only been into the shop once, some months before. It seems that at this time they were influenced by the description given to them by Mr and Mrs Lewis.
Mr Ball informed the applicants that the business was for sale at $44,500. Mr Bown said that was "too much". In evidence he said he had no idea of the value of the business, but always said that something was too much when negotiating a purchase. The applicants were told the price could not be lowered as it included $7,000 for stock. Mr Bown asked for a Form 6, that is a statutory form required to be given by a vendor under the Land Agents, Brokers and Valuers Act 1973 (SA) in connection with the sale of a small business. Mr Bown says he had no idea what a Form 6 was, and had never seen one, but by chance he had heard Mr Lewis some months before talking in the hotel about the need for a purchaser to get a Form 6. Mr Ball said there would be some delay. There must have been some conversation about Mr Bown's ability to pay for the business as Mr Bown informed Mr Ball that his house property would be used as security and he would need to borrow the whole purchase price. Mr Ball suggested that the house property could be worth $120,000. Mr Bown said he wanted a loan from the National Australia Bank as that bank had a mortgage on the property to secure a $20,000 loan made to Mr Bown's daughter. The house property was otherwise unencumbered.
Two days later Mr Ball telephoned Mr Bown to advise that the Form 6 was available. Mr Bown attended Mr Ball's office. He was given two documents - Mr Ball's card with the name "Phil Packer" written on the reverse side, and a single sheet of paper which Mr Bown understood to be the Form 6. Mr Ball said that he had got $2,000 off the asking price which was now $42,500.Mr Ball informed him that an appointment had been made with Mr Packer, the Branch Manager of the National Australia Bank at Kadina, and he was told to give the two documents to Mr Packer.
The statutory Form 6 is a document comprising several pages containing many particulars about the business including a statement of goodwill, stock, plant, furniture and fittings included in the asking price which must also be stated. The final section contains a statement to be completed by a practising public accountant, registered tax agent or solicitor which sets out in three parts financial information about the business including, in part C, a trading statement for the last three financial years. The single sheet given to Mr Bown comprised only Part C of the Form 6. Although headed "Part C Trading Statement for Last Three Financial Years", it contained financial information for two periods, 30 March 1987 to 30 June 1987 and 1 July 1987 to 31 August 1987. This covered the period during which the business had been owned by Mr and Mrs Lewis. It contained no information about the earlier trading periods. The following information was given:

"PART C

TRADING STATEMENT FOR LAST THREE FINANCIAL YEARS Period

30/3/1987 1/7/1987 to 30/6/1987 to 31/8/87 Gross Takings

32268 17390 OPENING STOCK $ 5000 5800 Plus: Purchases $22166 11772 $17166 17572 Less: Closing Stock $ 5800 7000 Less: Cost of Goods sold $21366 21366 10772 10772 Gross Profit 10902 6818 Less Expenses

Bank Charges (Excluding 36

Interest)

Depreciation 1480 558 Insurance 888

Light and Power 155 1029 Motor Vehicle Expenses 1294 318 Rates and Taxes 34

Rent 1020 628 Repairs and Maintenance 147

Telephone 297

Wages (Excluding Proprietors) 3039 2047 Sundries 437 40 Total Expenses $8770 4584 Less: Personal rent, light, and

power $

Less: Total overhead trading

expenses $8827 4620 Nett Trading Profit $

Plus: Goods own use $

Nett Profit $2075 2198"

The applicants kept the appointment with Mr Packer. They told him the asking price. They gave him the single sheet of information from the Form 6 ("the Form 6 trading statement"). They said they wanted advice on a loan. Mr Packer informed them that there was a typographical error in the figures in the third entry in the left hand column which was of no consequence, that the trading period covered by the figures was too short, and that the figures were inadequate. Nevertheless the business did not appear to be viable; on those figures they would not make any money if they bought it. The bank would not make them a loan.
The applicants decided against proceeding further with the purchase of the business. They attended the office of Mr Ball, returned the Form 6 trading statement, and told the receptionist that they had no further interest in the business. They then went to the shop and informed Mr and Mrs Lewis to the same effect.
At about 6.30 to 7.00 p.m. Mr Ball arrived uninvited at the applicants' home. He apparently questioned Mr Packer's advice, and informed the applicants that the CBA would consider lending the money. The applicants said they were not interested. Mr Ball said he had made an appointment for them to see Mr Parker at the CBA, and, "well at least go and see him". The applicants agreed, and kept the appointment at 2.00 p.m. the following day at the Kadina branch of the CBA.
The applicants had two small bank accounts with the ANZ Bank. They had never banked with the CBA. They did not know Mr Parker.
Mr Parker knew nothing of Mr and Mrs Bown, nor had he met Mr Ball prior to Mr Ball calling on him the preceding day and requesting that he interview the applicants and consider lending them the purchase price for the business. Mr Ball informed Mr Parker that the National Australia Bank had refused them a loan. Mr Ball gave Mr Parker a complete copy of the Form 6. He drew attention to the typing error in the stock figures in the trading statement. He also gave him seven photostat pages from a twelve column cash book, and informed him that they comprised a copy of the vendors' cash book. On the morning of 23 September 1987 Mr Parker looked briefly at these papers to acquaint himself with the topic for the proposed interview. He noted that the Form 6 trading statement showed a net profit. He understood that the trading statement should reflect the information in the cash book, but he did not study the cash book.
Many of the events so far recited are taken from the applicants' evidence. Their account of the meeting at the National Australia Bank is borne out by the evidence of Mr Packer which I accept. Mr and Mrs Lewis, and Mr Ball, were not called as witnesses by either side. Whilst the respondents challenge the accuracy, even the veracity, of the applicants' evidence about later events, to this point there is no real dispute. The outcome of the proceedings turns on the meeting with Mr Parker, and here the cases of the parties differ significantly.
I shall summarise the evidence of the applicants about the meeting, and complete the narrative of relevant events before considering Mr Parker's evidence.
Mr and Mrs Bown give an almost identical description of the meeting with Mr Parker. They say that after introductions, they entered Mr Parker's office. There were a variety of papers on his desk including a yellow exercise book, a green exercise book and a pay-in book similar to the financial records kept by Mr Lewis which Mr Bown had seen at the shop the preceding day. Mr Bown asked where Mr Parker got those papers from. This question was not directly answered but Mr Parker said he had been through all the books and papers, and pointed to his desk. Mrs Bown gave the following evidence as to the conversation which followed:

"Then what happened?---Gordon (Bown) said, 'Well, we went to the National Bank. We were told that we couldn't make any money.'... Chris Parker then said, 'I'm an accountant. Phil Packer is only the manager of the bank. He wouldn't know what he's bloody talking about.' I then said to Chris Parker, 'Joe and Janet

(Lewis) ... had told us that we could make $26,000 a year plus Joe takes out $60 a week for Cross-lotto, which is $3000 a year after paying all expenses and paying our loan. Chris Parker then said, 'Yes, that would be right.' Then Gordon said to Chris Parker, 'Joe said last night he takes $200 out for his wife. He pays Julie Kuhndt $200. He takes $100 out for himself and he also takes out $60 a week for Cross-lotto.' Chris Parker said, 'There'll be no worries about that.' Gordon then said to Chris Parker, 'What are you saying, Chris?' and Chris said, 'I'm saying it's a good little business. Go for it.' Then Gordon said to Chris, 'Is the business worth $38,000?' and Chris Parker said, 'Yes.' We then talked about the loan and Chris Parker told us that the loan would be 15 per cent which was very good. Gordon said, 'We want to keep the business for four years, pay the loan off and be able to sell the business. We need - because we want security. There's nothing left in the building game.' Chris Parker said there'd be no worries. Then he talked about a $38,000 loan and a $4000 overdraft.

Did he mention anything about interest rates for the overdraft of $4000?---No. He told us that we would be paying approximately $648 back a month.

Were there any other matters that were discussed between you and your husband and Mr Parker?---I said to Chris Parker, 'That means there'll be plenty of money left over for us.' He said, 'There'll be no worries about that.' Then I said to Chris Parker, 'Do you think we'll get the loan?' and he said he couldn't see any problem with it, that they would have to ring the National Bank at Port Adelaide and someone would have to come out and value our house."

Mr Bown's evidence was very similar. The representations pleaded in the amended Statement of Claim, at para.10, reflect the allegations made in the above passage of evidence.
The meeting lasted 30 to 45 minutes. The applicants say they went to the CBA for advice because they had been asked to go, and not for a loan. During the interview, Mr Parker made no notes and he asked few questions about their assets and liabilities. He appeared to know about Mr Bown's ownership of his house property and the fact that it was subject to a mortgage of $20,000 to the National Australia Bank. The trading figures attached to the Form 6 were not the subject of close discussion, and both Mr and Mrs Bown, when directly asked, were inclined to deny that Mr Parker had gone through the figures with them or that he explained calculations which he was making to show the expected profitability of the business. The applicants say that Mr Parker said that Mr and Mrs Lewis banked with the CBA and that "we know what they bank".
The applicants say that they relied on Mr Parker's advice that the business was worth what was being asked for it, and on his statements as to the profit that would be made. They decided to proceed with the purchase.
The applicants went immediately to Mr Ball's office in Kadina. They were informed that he was in the Wallaroo office. They drove to Wallaroo. When they arrived Mr Ball was on the telephone. They say they were with him for a few minutes only. Mr Ball had a form of contract mostly filled out. They did not read the document but understood that it was a contract for them to purchase the business subject to obtaining the loan from the CBA. They say Mr Ball asked no questions about the outcome of their interview with Mr Parker. Mr Ball referred them to one page of the printed proforma contract on which particulars of the business and the purchase price had been written in by hand. The purchase price had been recorded at $36,000 plus stock. Mr Ball said there had been a mistake, the price should be $38,000, and he amended the document. There was some discussion about stock. Mr Ball wrote in "stock to be set at $4,500 value". The applicants each signed the document and paid a deposit of $500. They were not aware that stock was usually valued at the date of settlement. They did not check the inventory of vendor's fixtures, fittings, plant and equipment attached to the contract, nor did they know what items were in the business.
On 24 September 1987 Mr Ball telephoned Mr Bown and asked him to collect another document about the business. Mr Bown collected a Form 19, another statutory schedule required to be given to a purchaser of a small business. This document set out particulars of the business, and contained a statement of the "cooling off" rights of purchasers. The document also contained financial information about past trading. Mr Bown says that he did not read the document until after settlement, and Mrs Bown says she did not see it at the time.
The loan which had been discussed with Mr Parker was formally approved by the CBA in the weeks that followed. The CBA agreed to make to the applicants a Small Business Loan for $38,000 at 15.75 per cent repayable over 10 years by monthly payments of $626. In addition a $6,000 overdraft facility was available. The loans were secured by a registered second mortgage over Mr Bown's house property. No security was taken over the business.
Settlement occurred on 19 October 1987 and the lease was assigned to the applicants. By the end of the first week the applicants realised the takings were less than they anticipated. At that point Mr Bown read more closely the Form 19 which stated that the average weekly takings of the business in the period from 30 March 1987 to 30 June 1987 were $2,689, and in the subsequent period from 1 July 1987 to 31 August 1987 were $2,173. In contrast, the first week's takings after settlement were $1,563.61. In the second week $1,890.43 was taken. In the following weeks until Christmas the amounts varied between about $1,300 and $1,760. The applicants had difficulty making ends meet. After the first week or so Mr Bown spoke to Mr Lewis, then to suppliers and Mr Price endeavouring to identify the reason for the apparent drop in sales. Mr Bown spoke to a former owner of the business Mr Griffits, who had sold it to Mr and Mrs Lewis, seeking his advice as to how the business should be run. In December 1987 he sought advice from his accountants Messrs Giles and Giles who suggested that the business should be sold. Mr Bown consulted Mr Parker. Over the Christmas period, with tourists in the district, the turnover picked up considerably but by the end of January it dropped back to around $1,600 to $1,700 gross per week. Mr Bown asked Mrs Price if the Price family would take back the business. They declined. There were discussions with the CBA in March 1988 when the applicants were urged to sell the business. The applicants instructed agents to do so in late April or early May, and the business was formally listed for sale through Versace Shaw Jones Pty Ltd on 27 May 1988. On advice of the agents the business was initially put up for sale at $17,000 plus stock at valuation, but could not be sold at that price. On 20 July 1988 a contract of sale at $12,000 plus stock at valuation was signed. The contract was conditional on the sale of the purchaser's property. Settlement under that contract occurred on 28 September 1988. The stock was valued at $2,100.44.

The sale price of $12,000 represented the depreciated value of plant and equipment. There was no payment for goodwill. Trading figures prepared by the applicants' accountants show that the business ran at a loss during the time that the applicants owned it.
At trial it was put to the applicants that the lack of success in the business was due to their management, and to changes which they made. It was also suggested that not all the takings were recorded through the till. I reject these suggestions. They are not borne out by the evidence. I accept the applicants' evidence that they made no changes in the style of the business operation, save to attempt to introduce hamburgers and steak sandwiches to increase turnover. I accept the evidence of Mrs Kuhndt who was a patently honest witness. She worked as an assistant in the business for Mr and Mrs Lewis from May 1987 until settlement, and for a month after the applicants took over. She said the business was run by the applicants in precisely the same way as by Mr and Mr Lewis. She left the business as the applicants were no longer able to pay her wage. Although the financial records kept by Mr Bown were primitive, they are comprehensive and are backed up with primary records. There is nothing about the records, or in the other evidence, to suggest that cash receipts were not recorded.
The inference from the finding that the business was conducted by the applicants in the same way as before is that statements made by Mr and Mrs Lewis about the turnover and profit of the business in the Form 6 trading statement, and orally to Mr and Mrs Bown, were false. Further, that conclusion is borne out by a consideration of the cash book maintained by Mr Lewis, a copy of which had been given to Mr Parker. The applicants did not see that document until March 1988 when a copy was given to them by Mr Parker. The evidence of the applicants leaves little doubt, and I so find, that Mr and Mrs Lewis told them, in effect, that after expenses, other than the wage to Mrs Kuhndt, the business was earning income at the rate of about $29,000 per annum. This information was given as part of the picture which Mr and Mrs Lewis painted of the business being "the best little business in town". Whether this information was actually passed on to Mr Parker is a question still to be considered. He denies that it was.
The Court was urged to accept without qualification the evidence of the applicants, and in particular their description of the meeting with Mr Parker. To the extent that Mr Parker denied the applicants' allegations it was contended that, on the ground of credit, his evidence should be rejected. I do not find the case so easy to resolve. I do not reject the evidence of Mr Parker on the ground of credit. I considered him to be a fair and frank witness who endeavoured truthfully to recount what he recollected of events which occurred years ago. On some matters of detail his evidence may not be reliable, and things may have happened about which he now has no recollection. This much he conceded in his evidence. He said he was having difficulty at times distinguishing old memory from matters that he had recently read and heard. By the time he gave evidence he had been sitting in Court for many days listening to the applicants' evidence.
I am also unable to accept the contention of counsel for the respondents that I should reject out of hand the evidence of the applicants. I have reached the conclusion that in many respects their evidence is unreliable but I consider that each of them endeavoured to give an honest account of what had happened. Unfortunately with the passage of time, and perhaps from emotional pressures caused by the collapse of the business and ill-health in the family, they now have a picture of events which includes reconstruction. I am satisfied that their evidence is wrong on some important details. I indicate a number of reasons for that conclusion in the discussion which follows.
I generally prefer the evidence of Mr Parker about the meeting on 23 September 1987 to that of the applicants, but there is a measure of common ground on some issues, on some Mr Parker has no recollection, and on others I accept the applicants' evidence.
Mr Parker had joined the Commonwealth Bank in 1977. He had just left school part-way through year 12. He had worked as a teller, a loans officer and a relieving officer until he was transferred to the Kadina branch as a loans officer in 1986. In the order of hierarchy in the branch, he was responsible to a senior loans officer and to the manager. He had no formal qualifications in banking or accountancy.
Mr Parker agrees that the meeting commenced in the way which the applicants describe. He denies that he was in possession of a yellow and a green exercise book or pay-in books for the business. I find that the only papers on his desk were those given to him by Mr Ball, along with a pad, a calculator and a bank manual. The meeting commenced with a general discussion about the applicants' interest in purchasing the business. The purchase price was mentioned. He understood that the applicants were seeking a loan. They said that they had been refused a loan by the National Australia Bank. Mr Parker then produced a double-leaf bank form entitled Preliminary Application for Advance, and commenced to fill in particulars as he asked the applicants questions. The information in that form (Exhibit R4) is such that it could not have been carried in Mr Parker's head for the duration of the interview and the form completed later. The overwhelming probability is that the form was filled out by Mr Parker, as he says, during the interview. I so find. It follows that the applicants are mistaken in saying that no notes were made by Mr Parker, and no form filled out in their presence.
I reject the innuendo which emerged from the applicants' case from time to time during the trial that there was some collusion between the CBA, Mr Parker and Mr Ball in the course of which Mr Parker was given the personal information about the applicants now appearing in Exhibit 4 by Mr Ball in advance of the meeting. The evidence is against this possibility.
It is apparent from Exhibit R4 that it was filled out on the footing that the proposed purchase price was $36,000 with stock at $4,000, and, correspondingly, there would be a Small Business Loan of $36,000 with an overdraft account of $6,000 - sufficient to cover the stock, estimated expenses on the purchase of $1,500, and a small margin for working capital. In their presence Mr Parker used the bank manual to ascertain from amortisation tables that a Small Business Loan of $36,000 would require payments of $593 per month over ten years, and that figure was recorded in the application form. The exhibit now shows that the figure of $36,000 as it originally appeared was later struck out in a different pen and the figure of $38,000 substituted. The figure of $4,000 for stock recorded in the form was also struck out and the figure of $4,500 inserted. There was a corresponding amendment to the amount required to be borrowed and to the proposed monthly repayment of the Small Business Loan which increased to $626 per month. Mr Parker cannot remember the circumstances in which these amendments were made, but as the effect of the amendments was not carried through to calculations now shown on the fourth page of the exhibit it seems that they were made after the meeting concluded. The explanation for the amendment to the purchase price in Exhibit R4 and in the contract of sale was not disclosed by the evidence, but in my view it is clear that initially the price being discussed with Mr Parker was $36,000, and that the same price was at one point discussed between Mr Ball and the applicants. The price was later changed, perhaps because an offer by the applicants of $36,000 was rejected and a counter offer made by Mr and Mrs Lewis. The explanation is not critical to the outcome of the case, but the fact that the lower price was discussed with Mr Parker indicates that the applicants' evidence is wrong in so far as they assert that an asking price of $38,000 was discussed throughout the meeting. The fact that Mr Parker has no recollection of the circumstances which led to the amendments is one of the reasons why I am unable to accept his evidence without qualification. Another is that I consider it is probable, contrary to his evidence, that after the meeting he spoke with Mr Ball, first to give details of the bank's proposed loan which are reflected in the finance clause in the contract of sale, and later about the need to amend the amount of the loan to accommodate an increase in the purchase price.
Whilst giving examples of aspects of the applicants' evidence which I consider to be unreliable I refer to two other aspects of their evidence. An example of reconstruction concerns events in March 1988. The CBA sent two letters to the applicants. The first requested a meeting. Mr Bown is now adamant that the meeting which followed was with Mr Clarke. The second letter suggested that the applicants look for a buyer for the business. Both letters were signed by Mr Clarke. However it is clear from Mr Parker's evidence, and from a diary note prepared by him at the time, that Mr Bown met with Mr Parker, not Mr Clarke. It would appear that Mr Bown's present recollection is based on reconstruction from the signatures on the letters.
Another example concerns the applicants' assertion that Mr Parker quoted an interest rate of 15.25 per cent per annum and repayments would be $648 per month. Mr Parker has no recollection of mentioning an interest rate for the Small Business Loan to the applicants, although he does not deny that he may have done so. A schedule of prevailing interest rates would have been readily available to him. Had he referred to the schedule he would have found the rate was 15.75 per cent on the day of the interview. However the monthly repayment figures shown on the application form of, first, $593, and then $626, reflect an interest rate of 15.50 per cent. As Mr Parker used a rate of 15.50 per cent for these calculations it is improbable that he quoted a rate of 15.25 per cent to the applicants. A monthly repayment of $648 cannot be explained by using any of these interest rates. When the bank wrote confirming the loan on 30 September 1987 an interest rate of 15.75 per cent was stated. Had the rate of 15.25 per cent been quoted on 23 September 1987 a protest from Mr and Mrs Bown could have been expected. Yet none was made. Moreover when the bank wrote to the applicants on 19 October 1987 again confirming the terms of the Small Business Loan it was stated that repayments were to be made over a ten year period. Again no protest was made by the applicants. I am sure one would have been made had Mr Parker told the applicants that the loan would to be repaid over four years as they say. I also find it difficult to accept that prior to settlement the applicants did not realise that monthly payments at the rate of $626 over four years would fall far short of repaying the principal, let alone interest.
I return to the meeting on 23 September 1987. After recording the applicants' personal details, Mr Parker says he turned to the Form 6 trading statement, and on his notepad proceeded to record steps in a calculation designed to establish the profitability of the business. I accept his evidence that this occurred, and about the discussion which took place concerning his calculations.
Mr Parker explained in evidence that when considering a loan the bank would look at security and serviceability. Security was not a problem here so long as Mr Bown's estimate that his house property was worth $120,000 was confirmed on valuation. Serviceability was the question, and this was the purpose of undertaking calculations based on the Form 6 trading statement. The exercise, he said, was done "jointly" in the sense that he explained each step to the applicants so that they would understand the calculation and know what they could expect to earn from the business. He wished to satisfy himself, from the bank's viewpoint, that the business could generate enough income to repay the bank and leave a margin for the Bowns on which they could live. It was for the Bowns to decide whether the margin shown by his calculation would be sufficient for their purposes. After the meeting these calculations were transferred by Mr Parker on to page 4 of Exhibit R4 which now records:

"Income 30/3 to 31/8

Nett Profit 4273

Add Back - Wages 5086

- Car Lease Payments 1115

- Depreciation 2038

$12512

= $2502 pm $30024 p.a. Less repayments 7116 - Int on A/A 960 $21948 Turnover $9930 pm

Purchases $6788 pm"

The calculation proceeded in the following way. The net profit figure of $4,273 was taken from the Form 6 trading statement. The applicants had informed Mr Parker that their daughter would be assisting them in the business. There would be no need for them to employ a shop assistant, so the wages (shown in the Form 6 trading statement as $5,086) should be added back. The applicants said they owned a car. The business would not be required to meet lease payments on a vehicle. Lease payments were not separately shown as part of the motor vehicle expenses in the Form 6 trading statement so Mr Parker referred to Mr and Mrs Lewis' cash book. He noted that there had been four monthly payments of $278.97 so $1,115 could be added back. In looking at the cash book Mr Parker noted that although the period covered by the Form 6 statement was five months, only four lease payments had been made. Then to produce a cash position, Mr Parker explained that the depreciation on the Form 6 trading statement should be added back. (His calculation made no corresponding provision for wear and tear and the need periodically to replace plant and equipment or for depreciation on Mr Bown's motor vehicle).
The calculation produced an adjusted cash return for the five month period to 31 August 1987 of $12,512. From this a yearly figure of $30,024 was extrapolated. From the yearly figure Mr Parker deducted 12 monthly payments at $593 per month (i.e. the monthly payment on a loan of $36,000), and interest on the overdraft assuming it was fully drawn. After these deductions the calculation showed that the business would return $21,948 per annum. At this point Mr Parker says that "I would have said it appears as though it's a good business, good little business or whatever". He does not concede that he added "Go for it", but he does not deny the possibility that he did so with the same degree of assurance that he denied the possibility that several other statements were made.
Having completed the exercise based on the Form 6 trading statement, and having made statements about the business, the applicants then asked whether the bank would grant them the loan. Mr Parker had no authority to approve a loan. Contrary to the applicants' evidence I find that Mr Parker, as he says, left his office briefly taking with him the partly completed application form, his calculations, and the Form 6 trading statement. He conferred with the manager, who within a minute or so approved the loan. Mr Parker returned and informed the applicants that subject to a satisfactory valuation of Mr Bown's house property, and to the consent of the National Australia Bank to a second mortgage, the loan would be granted.
Mr Parker does not recollect being told why the National Australia Bank declined the loan but concedes it is likely that he would have asked the reason as it was important to his consideration. He concedes it would have been a matter of concern had he been told that the other bank considered that the business could not make money. As a matter of probability I find that Mr Parker was given that reason. He also realised that Mr and Mrs Lewis had only been in the business for a short time, and that their early sale was a matter which raised a question about the viability of the business. Mr Parker realised in the course of his discussion with the applicants that they had no idea of the expenses that would be involved in the purchase of the business, and he found it necessary also to explain that they would have to pay income tax on their net receipts.
I find that Mr Parker realised that the applicants did not have commercial experience in running a business like that which they were contemplating purchasing. I do not accept Mr Parker's evidence that Mrs Bown told him that she had been working in the business with Mr and Mrs Lewis. I think this is a mistaken recollection on his part, perhaps based on the fact that she told him that she had at some earlier stage in life worked as a shop assistant (a fact which Mr Parker recorded on Exhibit R4). It is against this background that Mr Parker undertook the task of painstakingly explaining his calculations based on the Form 6. He must have realised that the applicants would be influenced by what he said, and would rely on his statements. Indeed, the effect of his evidence is that he expected the applicants to make a judgment whether they would proceed or not according to whether they were satisfied with the level of return after bank repayments, indicated by his calculations, viz. $21,948 a year.
Mr Parker acknowledges that he said that Mr and Mrs Lewis banked with the CBA. He says he gave the applicants no information about their banking business, but the mere statement that the CBA were their bankers, taken in conjunction with the statement that "it's a good little business", was likely to give a measure of added assurance to the applicants.
It is not clear whether Mr Parker used the precise words "go for it" after making the statement that "it's a good little business", but whether he said those words or not, it seems that at the time he was expressing confidence about the business which would justify the applicants having gained the impression that he was recommending the business to them. One indication of his confidence is the speed with which his presentation of the applicants' application to the manager produced an affirmative response. Another comes from a note made by Mr Parker following the meeting. In completing Exhibit 4, he recorded under the heading COLLATERAL ADVANTAGES "Retention of proven commercial connection" (referring to the business), and as a general comment "The Prices Wallaroo Bakery has been a corporate customer for some time and a consistent turnover has been demonstrated". Mr Parker says that he was not aware of the state of Mr and Mrs Lewis's account at the bank at the time but he knew they had not been causing "trouble", as he would have become aware of any problems as the bank officer responsible for chasing up overdue accounts had their account gone outside limits.
I am not satisfied on the balance of probabilities that at any stage in the interview did Mr Parker say expressly that the business was worth a particular sum, either $38,000 or $36,000, the latter being the figure which I think was discussed at the meeting. However, Mr Parker had been told the asking price of the business, and he knew the amount which the applicants were seeking to borrow. In that context, to say "it's a good little business", and to convey a favourable impression about its purchase, was to convey that the asking price was not inappropriate.
The undoubted fact is that the business was not a good little business at the time in that it was not capable of producing sufficient profit to cover borrowing costs and to leave a margin for the proprietors. This was apparent even from the figures in the Form 6. This is borne out by the opinion of Mr Packer and the evidence of Mr Ian Sach, a valuer and property consultant, whose evidence I generally accept. Even on the Form 6 trading figures Mr Sach is of the opinion that the business had no goodwill value in September 1987. Evidence was led by the respondents that Mr Griffits had bought the business for $30,000 plus stock at valuation, and later sold it in March 1987 to Mr and Mrs Lewis for $32,000 plus stock at valuation. I do not consider this evidence establishes that the business had goodwill of value in September 1987. The evidence is silent about the break-up in those prices between goodwill and chattels. There is no evidence about the turnover of the business at the time of either of the earlier sales. Quite possibly it was then much higher and had fallen away subsequently. Possibly the business was grossly overpriced on both occasions. Neither Mr Parker nor Mr and Mrs Bown were aware of the prices paid on either occasion.

The statements made by Parker were not expressed to be an opinion based solely on the Form 6 trading statement. His statement that "it's a good little business" was an assertion of fact, and, as such, was wrong. Subsequent events, and the cash book kept by Mr and Mrs Lewis, establish on the balance of probabilities that the Form 6 trading statement falsely exaggerated the takings. For the bank, by its servant, to make the unqualified statement that "it's a good little business" was for the bank to engage in conduct that was misleading and deceptive. It is not disputed that Mr Parker at the time was acting in the course of his employment and that his statements were made within the scope of his apparent authority. Further it is not disputed that the statements were made on behalf of the bank in trade or commerce.
Insofar as Mr Parker's statements involved a prediction about future profits, I accept that he believed the accuracy of what he said. However it is not his belief which is important, but whether there were reasonable grounds for the prediction made about future matters. In part his belief was based on his own calculations from the Form 6 trading statement, and in part on the fact that because he had not been asked to follow up an overdue account in the name of Mr and Mrs Lewis, he assumed the account of the business under their proprietorship had given no trouble. Mr Parker readily concedes that he did not have the expertise to analyse a statement of trading results and to pass an opinion as to the merits of a business based on such a statement. Although he understood that the Form 6 figures before him should have reflected the cash book figures, he did not check them. He referred to the cash book for the purposes of ascertaining the leasing expenses of a motor car. If he had spent even a few minutes looking at the cash book he would have noted a number of disturbing things. He would have noted that the omission to pay one lease payment, in August, was not an isolated failure to make payments regularly required to be made. He would have noted that no wages had been paid to the shop assistant, and no proprietors drawings had been made since 17 July 1987. These omissions were readily apparent from the layout of the cash book. He would also have noted a surprising disparity between the total of expenses each month and the total of income received. Although on the first page of the cash book receipts are recorded under the heading "banked" in all subsequent months the corresponding column is headed "income". The cash book records no cash payments and there is nothing apparent from the cash book to suggest that the moneys banked did not include the total takings. The monthly expenses and income are totalled at the foot of each page. A comparison of the totals shows that expenses in each month exceeded income, as follows:

Month Expenses Income April $10,169 $8,880 May 10,730 9,960 June 8,731 6,511 July 8,979 7,128 August 7,130 4,516

The difference in the disclosed takings between the cash book and the Form 6 for the five month period is $12,663. On this basis the net profit of $4,273 from which Mr Parker commenced his calculations would have become a net loss of $8,390, and his add backs would produce a line ball result leaving no income to meet borrowings or to provide a return to the proprietors.
At first sight the expenses recorded in the cash book roughly correspond with the Form 6 trading statement, but a consideration of the cash book itself shows that outgoings which had previously been paid on a regular basis were not being paid from mid-July 1987.
Calculations based on the information before Mr Parker could provide no reasonable ground for making the statements which he did about the business.
Insofar as Mr Parker's belief rested on his understanding that the trading account of Mr and Mrs Lewis for the business had caused no trouble, elementary enquiry on his part would have served only to confirm that the business was running at a loss. Mr Parker quite correctly stressed when giving evidence that any information in the possession of the bank relating to Mr and Mrs Lewis was confidential information which he should not and would not disclose to the applicants. But before he relied on a belief based on the state of the account of Mr and Mrs Lewis, as he did, he should at least have checked that his belief was justified. It would have been an easy step for him to do so as the records were readily available. Had he looked at them, the correspondence between entries on the bank statements and the cash book would have been apparent. The bank statements confirmed the declining fortunes of the business. On 30 March 1987, after settlement, Mr and Mrs Lewis had a credit balance of over $9,000. In the following months there was a clearly apparent downward trend in the balance. By 31 July 1987 the balance stood at just under $2,000. By mid-September 1987 the account was in debit to the extent of $2,780.
In my opinion a contravention by the bank of s.52 of the TPA Act has been established, and Mr Parker was a person knowingly involved in that contravention within the meaning of s.75B. Pursuant to s.82, the applicants, upon proof that they suffered loss or damage "by" that conduct of the respondents, are entitled to recover the amount of the loss and damage. The respondents deny that the applicants suffered loss or damage "by" their conduct. It is contended that the applicants have not proved that they relied on Mr Parker's statements. It is submitted that, on the contrary, they had accepted the statements made by Mr and Mrs Lewis, and had decided to buy the business before they attended the CBA. I am unable to accept this contention. It seems that the applicants initially accepted without question the statements of Mr and Mrs Lewis that the business was the best little business in town and that it would return in the order of $29,000 per annum after the payment of expenses. However their enthusiasm for the transaction was destroyed by Mr Packer's advice. I accept the applicants' evidence that they did not intend to buy the business when they went into Mr Parker's office. The events which then transpired changed their minds. The applicants may not have initially volunteered to Mr Parker that Mr and Mrs Lewis had told them that they would receive $29,000 per annum, but I think it is probable that they did say so at some stage in the meeting. When Mr Parker explained his calculations showing a closely similar return, ($30,024), if they had not already referred to the vendors' estimates, it is likely that they would have done so then. Mr Parker's calculations would have served to revive the applicants' enthusiasm and to displace the dampening influence of Mr Packer's advice. In my opinion the evidence clearly establishes that the statements of Mr Parker were an important causal factor in the applicants' decision to purchase the business, and they are entitled to recover the loss and damage which flowed from that purchase.
It is not necessary that the respondents' conduct be the sole cause of the applicants' loss and damage: Elna Australia Pty Ltd v International Computers (Aust.) Pty Ltd (No.2) (1987) 16 FCR 410 at 419. Moreover, the chain of causation is not broken by the fact that the applicants may have failed to exercise all reasonable care of their own interests by making independent enquiry and more closely examining the paperwork which passed through their hands before settlement: Neilsen v Hempston Holdings Pty Ltd and Another (1986) 65 ALR 302 at 309 and Henjo Investments Pty Ltd and Others v Collins Marrickville Pty Ltd (1988) 79 ALR 83 at 96.
The applicants also base their claim in negligence. The respondents deny that they were under any duty of care to the applicants. It is contended that the applicants came to the CBA as borrowers. In deciding whether or not to make a loan to them the bank was acting in furtherance of its own interests and owed no duty of care to them as customers. Counsel referred to helpful passages in the judgment of Macrossan C.J. in Westpac Banking Corporation v Potts and Another, Full Court of Queensland, Judgment 16 April 1992 as yet unreported. In that case, in an action for negligent mis-statement the trial Judge had found that the appellant bank owed a duty of care to its customers. The learned Chief Justice, after noting that the relevant statements of principle are to be found in Australian cases such as Mutual Life and Citizens' Assurance Co. Limited and Another v Evatt (1968) 122 CLR 556, L. Shaddock and Associates Proprietary Limited and Another v The Council of the City of Parramatta (No.1) (1981-82) 150 CLR 225 and San Sebastian Proprietary Limited and Another v Minister Administering the Environmental Planning and Assessment Act 1979 and Another (1986) 162 CLR 340, said (at pp 4-6):

"It is necessary for an appropriate proximity to exist between the one who provides the information and advice and the one who acts upon it if a duty of care is to arise. The supplier of information must be in a situation where it should be concluded that he has accepted responsibility in respect of it and there must be a dependence or reliance upon him by the party who is advised such as will be apparent to the advisor. There must exist a relationship between the two parties which can be described as 'special' and it has been said that there is an element of trust at the heart of this relationship which gives rise to a duty of care. If the relationship exists, there will be a duty to exercise reasonable care in respect of the information or advice supplied and the duty will be breached if reasonable care is not taken and damage results to the party who acts in reliance. The duty to which reference has been made is not restricted to a limited number of existing relationships (see e.g. per Mason J. in Shaddock, supra, at 250). There is no reason to doubt that the duty can exist in the case of dealings between a banker and customer.

It will not be characteristic of dealings between a banker and customer that there will be actively in operation a duty of the kind described since such parties deal frequently in a relationship of buyer and seller of the services which banks usually provide. In the world of commerce vendors are not thought of as advisors to the purchasers who negotiate with them. The phrase caveat emptor, or buyer beware, is there to remind us of this fact. But this more usual banker-customer stance should not be permitted to obscure the fact that, in a particular case, these parties may stand aside from their customary roles and, knowingly on each side, deal with one another on the basis of a relationship which has a higher degree of trust and reliance in respect of the information or advice which is passed between them. Banks may not be under any obligation to assume the role of advisor but the finding of the trial judge in this case is that the defendant bank here chose to do so."

In the present case there was no pre-existing relationship between the parties which would have entitled the applicants to expect to receive advice from the bank on the merits of them purchasing the business, or which would have created a special relationship giving rise to a duty of care. Had Mr Parker and the bank merely considered the information provided by Mr Ball and the applicants, and then approved the loan, the bank would have come under no duty to provide information and advice about the wisdom of the transaction. However, this is not what happened. Mr Parker, probably because he realised that the applicants were lacking in commercial experience and understanding, and were in need of assistance, offered information and advice about the business. He did so in circumstances where he not only realised, but intended, that the applicants would treat it seriously and form a judgment on whether the amount that they would receive from the business after repaying the bank, as revealed by Mr Parker's calculations, was satisfactory to them. It was foreseeable that if information or advice given by Mr Parker, on which the applicants relied, was erroneous, the applicants would be likely to suffer loss. In the particular circumstances of this case, the steps taken by Mr Parker created a special relationship between the CBA and the applicants which gave rise to a duty to exercise reasonable care and skill in the provision of information and advice being proffered. In my opinion the applicants have made out their action for negligent mis-statement against the CBA.
A further cause of action for breach of fiduciary duty is also pleaded. In Commonwealth Bank of Australia and Another v Smith and Another (1991) 102 ALR 453 at 476 a Full Court of this Court observed:

"In many cases, and the present is one of them, the bank as financier will have a manifest personal interest of its own in the matter. The question then becomes one of ascertaining when, given the apparent commercial self interest of the bank, the bank also may be taken to have assumed a fiduciary responsibility towards the customer in question. It was upon the answer to similar questions, but in very different factual settings, that the High Court was divided in Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41; 55 ALR 417 but unanimous in United Dominions Corp Ltd v Brian Pty Ltd (1985) 157 CLR 1; 60 ALR 741.

A bank may be expected to act in its own interests in ensuring the security of its position as lender to its customer but it may have created in the customer the expectation that nevertheless it will advise in the customer's interests as to the wisdom of a proposed investment. This may be the case where the customer may fairly take it that to a significant extent his interest is consistent with that of the bank in financing the customer for a prudent business venture. In such a way the bank may become a fiduciary and occupy the position of what Brennan J has called 'an investment adviser': Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 at 384-5; 65 ALR 193."

In the present case I consider Mr Parker's conduct created in the applicants the expectation that the bank would advise them, and was in fact advising them, on the merits of the purchase of the business. In this respect I consider the applicants also have made out their cause of action based on fiduciary duty. However I do not accept the further submission that Mr Parker placed the bank in a position of actual conflict of interest by inducing the applicants to become the purchasers of the business. He was unaware of any conflicting interest which the bank may have had in respect of the accounts of Mr and Mrs Lewis, and there is no evidence to suggest that the bank, through other officers, had any reason to suspect that Mr and Mrs Lewis would not meet their obligations to the bank unless the business could be sold on favourable terms.
Other causes of action pleaded include undue influence and unconscionable conduct by the respondents towards the applicants. In my view these causes of action are misconceived. It is also alleged that the misrepresentations of Mr Parker which induced the applicants to enter into the contract to purchase the business are actionable as innocent misrepresentations under s.7 of the Misrepresentation Act 1971 (SA). This cause of action is also misconceived. At best s.7 of the Misrepresentation Act would enable the applicants to claim damages flowing from their entry into the agreement to borrow money from the bank, but then a real question would arise whether it was the contract of loan with the bank, or the purchase of the business which was the cause of the loss. As the applicants have made out their primary grounds of claim I do not propose to pursue this question.
Before turning to the question of damages, there is one further aspect of the evidence of Mr and Mrs Bown which requires comment. Mr Parker denies that he said he was an accountant. He did not fill the position of the accountant in the bank in 1987. I think it is improbable that he would have so described himself, and it is even more improbable that he would have said of Mr Packer, a senior banking colleague in the town, that he "wouldn't bloody know". Maybe Mr Ball made that remark on the evening of 22 September 1987, and Mr and Mrs Bown have a mistaken recollection. After March 1988 Mr Parker did fulfil the position of accountant in the Kadina branch of the CBA. Later in 1988 Mr Bown probably had dealings with him, around the time when the business was sold. He may have learned of Mr Parker's role at that time and has mistakenly assumed that he held the role at an earlier time. This is speculation proffered merely to explain why I am not prepared to treat the applicants' evidence in this respect as deliberate fabrication.
The applicants claim damages for the following heads of loss:

1. The difference between the sum paid and the true value of the business, being the difference between $38,000 and $12,000, namely $26,000.

2. Interest paid to the bank on the sum of $44,000 (being the Small Business Loan of $38,000 and the overdraft which had a notional limit of $6,000) borrowed for the purchase price, stock and purchase costs.

3. An amount equal to the remuneration and income which the applicants would have received from other sources had they not been occupied in the business from 19 October 1987 to 28 September 1988, and compound interest thereon.

4. Consequential losses including purchase expenses, sale expenses, and trading losses incurred in running the business from 19 October 1987 to 28 September 1988, together with compound interest thereon.

5. Bank charges and bank fees (other than interest) in connection with the loans, and compound interest thereon.

Counsel for the applicants submitted various schedules of interest payments and bank fees which were extracted from the bank's statements for the Small Business Loan and the overdraft account, the tax returns of the applicants, and other records of expenses, but unfortunately no calculations were submitted which attempted to assess the losses claimed in a way which reflects the above heads of damage. In this case the task of assessing damages is not an easy one. There are various credits which have to be given under one or more of the heads of loss to avoid overlapping areas of loss, and double counting. The computation of compound interest where there are changing interest rates and fluctuating balances is not easy.
At the conclusion of these reasons I set out a table summarising the calculations I have made. This table gives the appearance that damages are a matter of mathematical precision. Of course they are not. In a case like this there are many variables and the award finally entered is a matter of judgment which broadly reflects all the variables. I have set out this table as indicating the approach which I have adopted as a guide. It may be possible to argue that a particular calculation is too high or too low, or could be differently done. But on the state of the evidence, this is inevitable. In the end, the uncertainties which lie behind the calculations have to be brought to account in arriving at a global figure which represents fair compensation for all the losses suffered by the applicants.

The sum of $12,000 recovered by the applicants on the sale of the business was the depreciated value of the plant and equipment. Stock transferred to the purchaser was sold at valuation for $2,100. I accept the evidence of Mr Sach that the sale price was reasonable. It is necessary however to add a sum of $215 for a microwave oven which the applicants did not transfer to the purchaser. The respondents point out that the depreciated value of the property would be less at the time of sale than when the applicants acquired it. Mr Sach was inclined to doubt this, but the reality is that the applicants disclosed the value of the stock as at the date of purchase in their taxation returns at $16,174. In my view that is the figure which should be used in assessing the damages under the first head of damages, although it is to be noted that the difference in value of the plant and equipment (apart from the microwave) is claimed as an item of depreciation in the profit and loss statements, and is therefore reflected in the consequential loss claim. The difference in value between what was paid for the business and what it was worth in September 1987 was therefore $21,826. Interest, correctly, is not claimed on this item of loss, as to do so would double up on the claim under the second head of loss for the interest paid on the borrowings from the bank.
The borrowings from the bank on the Small Business Loan were $38,000. Only two repayments were made each of $626 on 24 November and 21 December 1987. Thereafter the account has continued to attract debits for bank fees and interest and presently stands at more than $90,000. I have taken this figure from page 11 of the relevant bank statement, amended to 1 April 1992, which was forwarded to the Court by the respondents' solicitor under cover of a letter dated 30 April 1992. It was suggested on the applicants' behalf that the whole of this amount should be included in the damages. However this contention fails to give credit for the price received for the business when it was sold. Had that purchase price been applied to the Small Business Loan, the balance presently outstanding would be much less. It also fails to take into account the two repayments, although their effect on the interest calculation would not be great. The settlement statement on the sale of the business shows that after payment of various outgoings, including overdue rent and stock supplied by Prices Bakery, the applicants received little more than $6,000. However the various outgoings are otherwise accounted for in the claim for consequential loss and in my opinion credit must be given for the receipt of $12,000 plus the stock and the notional value of the microwave as at 28 September 1988. Subject thereto, in my opinion the applicants are entitled to recover the interest which has accrued at compound rates on the Small Business Loan.
In calculating the credit to be given for the sale price, and in calculating compound interest on other heads of damage, from 28 September 1988 I have added a factor of 1.13. This is a broad estimate based on a schedule of interest rates submitted by the bank with its letter of 30 April 1992.
The claim for interest and other charges on the overdraft account cannot be allowed in full. Although the overdraft has been fully drawn (or overdrawn) at almost every stage, part of the borrowings cannot be attributed to the wrong of the respondents. For example the overdraft was used to pay for stock at $4,500. This value was agreed by the applicants at the suggestion of Mr Ball, but it seems the stock was worth much less. I have assumed that it was worth what the stock was valued at when the business was sold, that is $2,100. The respondents should bear the costs associated with borrowings on the overdraft of $2,100 until 28 September 1988, and of the purchase costs, stamp duty and mortgage registration fees which were funded from that source. As a broad brush approach I propose to allow one half the interest and various bank fees charged on the overdraft account, and to make no separate allowance for compound interest on the purchase costs, stamp duty and registration fees.
I reject the respondents' suggestion that the applicants failed to mitigate their losses by delaying the sale of the business. Perhaps they could have put it on the market a few months sooner than they did, but it was reasonable that they should trade over Christmas to ascertain if the trading figures would lift the business into profit. For a time this happened, and the good trading figures over January could have assisted in reselling the business. Over that period no loss was suffered. Once the Christmas boom subsided, the applicants took steps to quit the business, and followed the advice which was given to them to this end.
In dealing with the trading loss it is necessary to eliminate deductions for interest and bank fees to avoid double counting.
Whilst the applicants were operating the business both of them worked almost full-time in it. Mrs Bown drew $150 most weeks, and $200 in others. Mr Bown made no drawings. The drawings are not included in the trading figures as an expense. The drawings were funded in part from the overdraft until January 1988, and the source of cash thereafter was found by not paying Prices Bakery and other suppliers of goods and services until the business was sold. Then these expenses were paid from the sale price. In reality Mr and Mrs Bown have received nothing for the time they worked in the business. Had they provided staff to run the shop the cost of wages would be recoverable as part of the consequential loss. Had Mr and Mrs Bown purchased the business through a family company in which they were the shareholders, wages paid to them by the company would be recoverable by the company. I consider the applicants are entitled to be compensated for the time they committed to the business.
As a matter of probability had the business not been purchased Mr Bown would have continued to work on the wharf, for the Barley Board, and as a bricklayer, and to have received unemployment benefits when no paid work was available. His commitment to the business prevented him obtaining money from these sources. Mrs Bown would also have been free to work if casual employment had become available. Damages under this head can only be assessed broadly. I propose to allow them $300 per week.
The foregoing comments provide an explanation for the following table:

Difference between price paid and real value $21,826 Purchase costs 1,396 Stamp duty and registration of mortgage 237 Selling costs 2,522 Trading loss in business

Tax figure $7,348

Add back: interest $4,593

borrowing exp 131

bank charges 151 4,875 2,473 Return to proprietors

(49.6 weeks at $300) 14,880 Borrowing expenses to CBA

Small Business Loan

Various fees 1,228

Interest - charged 52,970

- from 1.4.92 (say) 2,400

Less interest on

12,215 from 28.9.88 (13,800) 42,798 Overdraft

Various fees 2,480

Interest - charged 9,910

- from 1.4.92 (say) 470

12,860

Allow 50% 6,430 Interest on Selling costs (compound) from 28.9.88 2,850 Interest on Trading loss (compound) from 28.9.88 2,794 Interest on return to proprietors (simple interest) from 28.9.88 10,340 $108,546

It is probable that in my concern to avoid double counting, I may have left out of account altogether some minor bank fees. I am also left with the impression that the profit and loss statements do not fully record expenses - probably because the cost of the exercise was not warranted as the applicants already had a tax loss. For these reasons I think the result of the above table, which I stress is only intended as a guide, should be rounded upwards to $109,000.
There will be judgment for the applicants for $109,000 against both respondents.

[1992] FCA 422

19 JUNE 1992