Manicured Muttz v Roycar Investments
[2019] VCC 64
•7 February 2019
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. 18-02211
| MANICURED MUTTZ PTY LTD | Plaintiff |
| v | |
| ROYCAR INVESTMENTS PTY LTD | First Defendant |
| and | |
| ROY SMITH | Second Defendant |
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JUDGE: | HER HONOUR JUDGE MARKS | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 5, 7 and 12 December 2018 | |
DATE OF JUDGMENT: | 7 February 2019 | |
CASE MAY BE CITED AS: | Manicured Muttz v Roycar Investments & Anor | |
MEDIUM NEUTRAL CITATION: | [2019] VCC 64 | |
REASONS FOR JUDGMENT
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CONTRACT – Purchaser agreed to buy a business on terms contained in a written agreement – Purchaser walked away from the business when money was still owing to the vendor under the agreement – Purchaser offered to vary the agreement on terms such that purchaser would no longer owe any money under the agreement – Whether variation offer was accepted by the conduct of the vendor – whether objective bystander would conclude from vendor’s conduct that it had accepted the variation offer, and conveyed that acceptance to purchaser – Held: Offer not accepted.
MISLEADING AND DECEPTIVE CONDUCT - Whether vendor misrepresented the profitability of the business to the purchaser and this induced the purchaser to buy the business – Held: No.
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APPEARANCES: | Counsel | Solicitors |
| For the plaintiff | Mr J Rudd | DSA Law |
| For the first and second defendants | Ms M Paszkiewicz | Phaedonos Law |
Contents
Background to dispute
Summary of decision
Witnesses
What happened?
Analysis
Unsigned February agreement not accepted by conduct
Alleged oral representation not made
Alleged written representation did not induce entry into contract
No Australian Consumer Law breach
Conclusion
Background to dispute
Manicured Muttz Pty Ltd (Muttz) ran a small pet shop called Petorium in the Victorian seaside suburb of Mornington from 2009 until October 2015. Petorium sold items people needed for their pets such as dog bowls, food, and fish aquariums. It also provided dog grooming services.
Roycar Investments Pty Ltd (Roycar) purchased Petorium in September 2015. Roycar and Muttz executed a sale of business contract.
Roycar agreed to buy the business for $75,000, payable by instalments of $500 per week over two years – a total of $52,000 – with a final payment of $23,000. Roycar’s obligations under the contract were guaranteed by Roy Smith - Roycar’s sole director and shareholder.
Over the next year or so, Roycar made some of the agreed weekly payments to Muttz, but the payments became infrequent and eventually stopped.
In early 2016, Roy told Michelle Morris – the sole director and shareholder of Muttz – that he had run out of money, and that he was walking away from the business.
The parties agree that Roycar repudiated the sale of business contract (though they disagree as to the precise date that repudiation occurred).
Muttz sues Roycar and Roy for the unpaid payments due under the contract.
In defence, Roycar and Roy say that the parties entered into a further contract around February 2017 – effectively, a variation of the original contract - by which Muttz accepted Roycar’s repudiation of the sale of business contract on terms such that Roycar no longer owed Muttz anything.
They also plead by way of defence, and counterclaim, that Roycar was induced to purchase the business as a result of misrepresentations about the profitability of the business amounting to misleading and deceptive conduct by Muttz. They say Roycar relied on both oral and written representations, which were allegedly untrue, and that as a result the contract was voidable. Roycar claims approximately $170,000 as its losses arising from the misleading and deceptive conduct.
10.Muttz denies making the representations and says that, even if they were made, they did not induce Roycar to buy the business.
Summary of decision
I am not satisfied that the parties agreed to vary the contract, in or about February 2017 or at all. I am not satisfied that Muttz made either the oral or the written representation alleged. Nor am I satisfied that Roycar was induced to purchase the business as a result of any representation made.
The defence and counterclaim is not made out. Accordingly, Roycar and Roy owe Muttz the amounts still outstanding under that contract: $69,415 plus interest.
Witnesses
Michelle Morris gave evidence for Muttz. I found her consistent, direct and truthful. Important aspects of her evidence were supported by contemporaneous diary notes she had made. She was not challenged about the truthfulness of those diary notes in cross examination.
Roy Smith gave evidence for Roycar and himself. His evidence was general and vague about key points, and inconsistent at times.
I am not satisfied on the balance of probabilities that he remembered the conversations in September 2015, in which he said the oral representation was made repeatedly by Michelle to him. He had not made any contemporaneous record of the conversations. He did not mention the alleged representation to Michelle at any time afterwards, despite working with her most days at Petorium. It was not until September 2017, when the defence and counterclaim was filed – months after the conversations allegedly occurred – that Roy alleged that Michelle had made the alleged oral representations.
His evidence as to when, and over what period of time, Michelle said the alleged representation to him varied. He finally admitted in cross examination that he was reconstructing his evidence about how often it was said to him.
What happened?
Muttz decided to sell Petorium. Its director, Michelle, listed the sale with Tony Latessa, a real estate agent in Frankston. The business was advertised for sale in the local paper.
Roy Smith, who owned a successful pet shop in Cranbourne which he had been running for years, became interested in it.
Around 15 September 2015, Roy contacted Tony Latessa and asked about the business records for Petorium. He was emailed a document titled ‘Petorium Interim Profit and Loss Statement for the period 1 July 2014 to 30 March 2015’. It is this document that the defendants say contained the written misrepresentation they allege.
The parties disagreed in their evidence as to when Roy first discussed the business with Michelle.
I am satisfied that on 21 September 2015, Roy Smith went to Petorium and made an offer to Michelle to buy the Petorium business for $75,000. He had more stock than he needed at Cranbourne, and thought that by putting some money and some of his Cranbourne stock and ideas into Petorium he could ‘make a motza’. He wanted to expand it a bit, wanted to do something different, and thought he could work one place off the other.
That same day, Roy registered Roycar Investments Pty Ltd to be the corporate vehicle to buy and run the business.
Michelle made a note on 21 September 2015 in her diary where she recorded various business matters:
Roy Smith came in re shop said Wife had been into check it out offer $500 – wk for 2 yr balance paid then $75,000.
You keep your stock a [sic] sell it as there isn’t much stock I said no haven’t been able to afford it.
I said I will talk to my husband [and] get back to him.
Roy gave evidence that he had met Michelle some weeks before he made the offer. However, his evidence about when he had met her varied and I do not accept it. I prefer Michelle’s evidence which is supported by a contemporary diary note. The fact that this first mention of Roy in her diary mentions his surname, unlike the later mentions of him in her diary, supports the inference that it was the first time Michelle had met him.
Two days later, on 23 September, Michelle says she called Roy to accept his offer. This is supported by another diary note where she wrote:
Rang Roy to accept offer, he had gone to Latessa re business get all paperwork etc.
At 12.37pm that day, Tony Latessa sent an email to Roy attaching a draft contract:
Attached is Contract of Sale of Business plus leasing documentation as supplied to us by the Vendor. Note that you have all other supporting documents already emailed to you.
Please email us as a matter of urgency any amendments to this Contract.
One amendment was notified later that day. At 5.11pm, Jen from Aquariums & Reptiles at Cranbourne - Roy’s business - sent an email to Jackie Morrison-Woolcock, a licensed estate agent working with Tony Latessa. Jen wrote:
I have spoken to Tony could you please alter Sale of Contract from
Roy Car Investments Pty Ltd. to Roycar Investments Pty Ltd.
The next day, 24 September, Roy returned to Petorium. He brought some stock, and a cash register, and met with a sales representative from Showmaster who he arranged to look at the shop. Michelle made a diary note:
Roy over with stock.
C/Reg + money
Scott /S /Master.
At 10.49am that day, Jackie sent an email back to Jen attaching the sale of business contract with the amendment requested of the correct name for Roycar.
Michelle’s diary note of 29 September states:
Roy here with stock 12.00 till 5
Tony 5.00 To sign contract
The contract is undated. Roy did not know the precise date he signed the contract. Given Michelle’s diary note, I am satisfied that the contract was signed on 29 September.
The assets sold under the contract included the plant and equipment listed in Schedule 1 to the contract.
The stock was not transferred. Special condition 4 stated:
The Purchaser agrees to allow the Vendor to sell off the stock as currently held on the premises with 100% of the proceeds to belong to the Vendor after Possession Date.
Roycar started to operate the business from October 2015.
Roy was still busy with his Cranbourne business, and he kept Michelle on to run the Petorium shop. She continued doing what she had done before in terms of managing the business – but now Roycar, rather than Muttz, was paying the bills, including wages, electricity and gas. The same employees and contractor who had been working for Muttz were kept on. Michelle started being paid wages as a full time employee.
36.Michelle maintained two separate cash registers and EFTPOS machines at Petorium. Different coloured stickers were put on Muttz’ stock, and Roycar’s stock. When Muttz’ stock was sold the proceeds were paid into one register When Roycar’s stock was sold, the proceeds went into another register.
37.Roycar added aquarium products to the mix of those sold: medication, chemicals, and ornaments. A lot of the items it added had not been stocked before.
38.On 25 November 2015, Roycar and Muttz executed a Transfer of Lease for the business premises, with a transfer date of 12 October 2015.
Roycar made some instalment payments. However, by December 2016, Roycar was no longer making any instalment payments.
On 12 December 2016, Roy went to Petorium and told Michelle he had no money, but would see if he could get a loan.
Michelle gave evidence about the conversation:
I said, ‘I need some money. I can't keep going like this. I've got a loan to pay and tax’. He said, ‘I have no money. I don't know what I can do. I will see if I can get a loan’. As he left the store, he came back and said, ‘Take out $300 a week out of the takings and I'll see what I can do’.
…
He came in on December 12 to bring some stock and I asked if I could speak to him in my office, and I broke down and said, ‘I can’t keep going without any money that you are to be paying me, because it’. He said, ‘I haven’t got any money’, and we discussed – I said to him I had slept at the shop the night before because I was in such a state. I couldn’t go home and tell my husband that I had not been receiving the money and that I was in debt with my loan. And he said to me, ‘I haven't got any money. I can’t pay you’. He then proceeded, after a little bit, going down to the shop. When he got to the front door of the shop, he came back in and he said, ‘Take $300 out of the till each week and I'll see what I can do – if I can borrow some’. And I said to him, ‘I thank you for your help’.
In her diary note that day, Michelle wrote:
Spoke to Roy re money Billy
Tax
Loan
don’t know what I am do I said I have to have money
said take $300 week I will see if I can borrow some.
No evidence was given as to what the reference to ‘Billy’ meant.
Michelle gave evidence that from then until February 2017, she took $300 a week from the cash takings, if there was enough cash to cover the amount. If there was not, Michelle said she would wait for ‘when cash came in, maybe the next day or something, to balance it up to the 300’. She was still being paid by Roycar as an employee as well.
Roy rang Michelle on 26 January 2017. Michelle gave evidence that:
He said he wanted to send his office lady over to pick up some till receipts and money. … So I said I would go to work and meet her there to give her the things which he'd forgotten to take back to the Cranbourne store, which I met her there. She brought some stock. I gave her the money and the till receipts and she said to me about money that Roy had owed me, and I said, ‘I cannot keep doing this. I have bills to pay’, and she said, ‘Well, I can tell you, he's got no money. I know everything about him’. And I said, ‘If you had a bank loan, you can't just say, “I'm not paying it”, and we left it at that.
She said the ‘office lady’ was called Kim. She was an employee of Roy’s Cranbourne store, who sometimes worked Saturdays and Sundays at Petorium.
The next day Roy came over with some stock. Michelle gave evidence:
… And when he came, he said about the money, again, ‘I have got no money and I can't pay you’.
Michelle gave evidence that on about 29 January 2017, Roy visited the shop again and told her:
I’ll close the doors. You can close the doors and keep everything. I just can’t do it
…
Put everything in your name. Gas, electricity, phone.
Michelle gave evidence she did not say anything in response.
On 8 February 2017, Michelle said that Roy came into the shop and said:
I’ve had enough. I can’t do it anymore. I’ll go in and tell the groomer that I’m here no longer and I don’t care what you do. I’m – you can close the doors. You can do whatever. The stock that is here of mine, you can keep. I’m going to go to my solicitor and have a document drawn up for you to sign to say I’m not paying you any more money”.
Michelle was asked what she said in response and she replied:
I didn't say anything to – in response of money or the solicitor's letter. I discussed the groomer … about speaking to the groomer and that was it.
Roy’s evidence of what he said was:
…I approached Mrs Morris and said I – I can't do this anymore. I can't borrow any more money. I've sold everything I've got. Cranbourne is suffering because of the amount of money I'm taking out of it. If you would like to sign this and – and nullify our agreement you're quite welcome to keep the stock. I will pay the rent till December, so you can stay here rent-free, sell my stock and hopefully that should benefit you a – a – a tad from not being able to keep up with the agreement.
…
Actually, my words were, "If you would like to have somebody have a look at this you might decide you would like to sign it and we will go from there".
After this conversation, Michelle said ‘the business just kept running as normal’.
Two weeks later, on about 24 February 2017, Roy went to see Michelle at Petorium, and gave her a copy of a draft agreement his solicitors had prepared.
55.A later version of the agreement with just one change to the 24 February document – correcting Petorium’s address - was put into evidence. It provides:
THIS AGREEMENT is made the day of 2017
BETWEEN:
ROYCAR INVESTMENTS PTY LTD (ACN 608 386 830) Registered Office situate at 358 Main Street, MORNINGTON VIC 3931 ("Roycar")
And
MANICURED MUTTZ PTY LTD (ACN 140 588 174) of Unit 5, 175-179 Mornington-Tyabb Road, MORNINGTON VIC 3931 ("Manicured Muttz")
"The Parties"
WHEREAS:
A. The parties entered into a Contract of Sale of Business wherein Roycar purchased the business known as Petorium (hereinafter referred to as "the business") from Manicured Muttz for the sum of $75,000.00 (hereinafter referred to as "the purchase price").
B. The parties agreed that Roycar would pay the purchase price by way of an initial sum of $500.00 on the signing of the Contract and then $500.00 per week thereafter for a period of two (2) years from the date of the Contract with a single final payment of $23,000.00 for the balance to Manicured Muttz.
C. Roycar claims that Manicured Muttz misrepresented the true status of the goodwill of the business together with the weekly turnover as a result of which Roycar has and continues to suffer loss which claim is denied by Manicured Muttz.
D. In the interests of fairness and to avoid protracted and costly litigation the parties have agreed to sever their business relationship and wish to record their agreement in the terms below.
NOW THIS AGREEMENT WITNESSETH:
1. The parties agree that the signing of this Agreement will nullify and make void the Contract of Sale of Business previously entered into by the parties.
2. Roycar will surrender the business and such stock as may be in possession of the business situate at the premises of Unit 5, 175- 179 Mornington-Tyabb Road, Mornington to Manicured Muttz as at 8 February 2017.
3. Roycar agrees to pay all
(i) employee wages and entitlements;
(ii) creditors and suppliers; and
(iii) outgoings
up to and including 8 February 2017 after which time Manicured Muttz will become responsible for such expenses and outgoings and Manicured Muttz hereby indemnifies Roycar against all future claims, actions, proceedings, suits, costs, interest or demands whatsoever that may arise as a result of Manicured Muttz's failure to pay such expenses and outgoings as and from 9 February 2017.
4. Roycar will pay the rental due by the business for the premises up to December 2017 after which time Manicured Muttz will then become responsible for the rental and Manicured Muttz hereby indemnifies Roycar against all future claims, actions, proceedings, suits, costs, interest or demands whatsoever that may arise as a result of Manicured Muttz's failure to pay such rental as and from 9 February 2017.
5. The parties shall sign, execute and deliver all such documents, instruments and writings and shall do all such other acts and things as may be necessary or desirable to transfer the registration of the business name and the Lease of the premises to Manicured Muttz.
6. No variation, modification or waiver of any provisions of this Agreement nor consent to any departure by any party therefrom shall in any event be of any force or effect unless same shall be confirmed in writing signed by all parties and then such variation, modification, waiver or consent shall be effective only to the extent for which it may be made or given.
7. No failure, delay, relaxation or indulgence on the part of the party in exercising any power or right conferred upon such party in terms of this Agreement shall operate as a waiver of such.
Michelle gave evidence that on 24 February, Roy:
…came in with a document for me to sign and it had the wrong address of the shop, and I said, ‘They've got the wrong address of the shop’. He said, ‘No. No’, and we looked at it and it had the wrong address, and he said, ‘I'll ring them’, and he rang them there and then and said, ‘You've got the wrong details’, which they fixed up and sent the – resent the document.
Michelle gave evidence that the draft contract in evidence was then emailed to her that afternoon or the next day.
Michelle was cross examined about the conversation that occurred on 24 February: -
When Mr Smith brought in this document that looked very similar to this except for the address ‑ ‑ ‑?‑‑‑Yes.
‑ ‑ ‑ he'll give evidence that he had a discussion with you about the document. In particular, Mr Smith will say that he told you he couldn't run the business anymore – Petorium anymore?‑‑‑Yes.
What do you have to say about that?‑‑‑Yes. Yes.
He did say that?‑‑‑Yes.
And Mr Smith will say that he said that he would pay the rent for Petorium until Christmas of 2017?‑‑‑Yes.
Mr Smith will say that he told you to keep all of the stock in Petorium and sell it?‑‑‑No, his words were, "I don't care what you do. You can close the doors. You can keep the stock, all my stock, and do whatever you like. I'm out of here. I don't care what you do."
Mr Smith will give evidence that he said that money in the till is yours?‑‑‑As of that day?
As of that day?‑‑‑As of that day it was and then everything was finished. As of 8 February.
Okay?‑‑‑As of today, he said. Which was 8 February.
And you didn't really give any response to Mr Smith providing you with the document at court book 64, or a similar document?‑‑‑No, he said to me was that do you want to sign it now and I said, No, because it had the wrong address. And I will have to get it checked, you know, get it looked at.
Roy’s evidence about this conversation was that he told Michelle:
Actually, my words were, ‘If you would like to have somebody have a look at this you might decide you would like to sign it and we will go from there’.
When asked to clarify whether he had handed Michelle the document in evidence or another version of it, Roy said that he had given Michelle the document in evidence. However, he was not asked about an address being incorrect in an initial version.
I am satisfied that there was an initial version with the incorrect address.
62.Neither party executed any version of the draft release agreement.
63.No further discussion occurred about it.
After 8 February, Roycar – and Roy – stopped having anything to do with the business (other than to pay rent). After that Michelle kept managing the business, but now with Muttz once again paying wages and sub-contractors (to those it could afford to keep on), and paying for supplies and outgoings.
From 8 February, Michelle was no longer paid a wage by Roycar.
Roycar kept paying the rent until its lease expired in around December 2017.
67.One and a half months after he went to see Michelle with the draft agreement, Muttz’ lawyers sent a letter to Roycar. The 10 April 2017 letter stated:
Sale of Petorium – Pet and Aquarium Supplies
Our client: Michelle Morris
We refer to the above matter and to the Sale of Business Contract entered into between the parties.
We refer you to Schedule 7 of the Contract and, in particular, Special Condition 6. We note that you are in breach of Special Condition 6 in that you have failed to make weekly payments of $500.00. As of the date of this letter, the amount outstanding is $72,957.45 calculated as follows:
Balance of Purchase Price - $75,000.00
Less, payments totalling - $6,085.00
$68,915.00
Plus, payments made by our client:
·Water rates (October to December) - $390.61
·Owners Corporation (October to December) - $995.70
·Owners Corporation (January to March) - $995.70
·Council Rates - $1,471.94
·Rent review adjustments - $188.50 $4,042.45
Total:
$72,957.45
Furthermore, your behaviour since the beginning of this year has been tantamount to repudiation of the Contract. Specifically, we advise as follows:
1. On 27 January 2017, you attended the business premises and told our client that “I have no money, that I cannot keep doing it”. That she will have to forget the original contract and that you will walk away unless she was prepared to take over the business.
2. On 8 February 2017, you attended the premises and told our client “I am out of here as of now and all the wages, electricity and phones are your concern and all my stock in the shop is yours”.
3. On 24 February 2017, you produced a “letter” from your solicitors containing an agreement and demanded that our client sign it. We have reviewed the agreement and advised our client not to sign the same.
The above behaviour and the ongoing demands that have been made by you to our client that she takes over the business and that you intend to “walk away” is evidence that you do not wish to be bound by the essential terms of the Contract of Sale of Business. In those circumstances, you have repudiated the Contract of Sale, as you do not intend to honour any of your obligations under that document.
We now place you on notice that our client accepts your repudiation of the Contract and demands immediate payment of all monies due under the Contract.
Our client demands the payment of $72,957.45. If the payment is not received within 14 days of this letter, our client has provided us with instructions to issue Court proceedings without further notice.
In the meantime, our client seeks your cooperation in preserving what business assets remain, in particular, any goodwill that the business may have including in respect of the dog grooming clients. Our client asks that you cooperate in servicing those customers, until such time as the business is on sold or closed in an orderly fashion.
It is not our client’s responsibility to ensure that the business assets are preserved.
However, we bring to your attention that our client has an obligation to mitigate any loss and in those circumstances is prepared to work with you to run the business until such time as you decide whether to sell or close the business, bearing in mind the obligations to various customers and suppliers. This is a matter for you to address.
We look forward to receiving the payment by 24 April 2017.
Initially, Roy gave evidence that he did not remember if he had received this letter, but he then agreed that he was sent it. It was sent to his email address and I am satisfied that he received it.
The lease ended in December 2017. (Roy had been required under the lease to pay the landlord the lease payments under it until 30 October 2016. He gave evidence that he agreed to an extension to the lease which then continued to December 2017).
Michelle gave evidence that she received a call from an agent to see if she wanted to renew the lease because the lease was running out. She said no. She was told she needed to be out by 31 December.
Michelle gave evidence that Muttz left the premises by 28 or 29 December. She said:
I took all my stock, left Roy's stock. I left shelving, all the fish tanks. I took some shelving. There was three lots of shelving that I had. I took that. I left office furniture, bits and pieces in the kitchen - - -stock of Roy’s.
Later, Kim from Roy’s Cranbourne shop came to collect Roy’s stock.
Analysis
Unsigned February agreement not accepted by conduct
73.Muttz says that Roycar repudiated the contract, and that it accepted Roycar’s repudiation, by sending the letter of demand on 10 April 2017.
74.Roycar says that before the letter of demand was sent, Roycar had made an offer to vary the contract in the terms of the unsigned agreement Roy gave Michelle on 24 February 2017 – including terms that Roycar would no longer owe Muttz anything. And that Muttz accepted that offer by its conduct, so nothing is owing to Muttz.
75.I am not satisfied that Muttz accepted Roycar’s offer on 24 February 2017 by its conduct.
76.I apply the objective bystander test. An inference that the offer was accepted by conduct will only be drawn if it can be said that an objective bystander would conclude from Muttz’ conduct that it had accepted the offer, and conveyed that acceptance to Roycar: P’Auer AG v Polybuild Technologies International Pty Ltd [2015] VSCA 42 at [9].
77.I am not satisfied that an objective bystander would conclude Muttz had accepted Roycar’s offer, or that its actions conveyed any acceptance to Roycar. I am not satisfied that Muttz acted in a way that unambiguously indicated acceptance of the terms of the draft document.
78.On 8 February, Roy said to Michelle ‘I’m out of here’ in relation to Petorium. Other than continuing to paying the rent to the end of the lease - which it was obliged to do under the lease - Roycar had nothing more to do with the business after that.
79.Two weeks later, on 24 February, Roy came into Petorium and saw Michelle with the draft document that his solicitors had drawn up. If it had been agreed to, that document would have released Roycar from further liability.
80.Roy’s evidence about the conversation they had when he gave her the document makes it clear that he was suggesting she have somebody look at it, and sign it if she agreed to it:
If you would like to sign this and – and nullify our agreement you're quite welcome to keep the stock. I will pay the rent till December, so you can stay here rent-free, sell my stock and hopefully that should benefit you a – a – a tad from not being able to keep up with the agreement.
…
Actually, my words were, "If you would like to have somebody have a look at this you might decide you would like to sign it and we will go from there".
81.Michelle’s evidence was that she looked at it, pointed out the address was wrong, but otherwise did not say anything about it.
82.A version correcting the address of Petorium was sent to Michelle a little later.
83.She never signed it. She never said she agreed to it.
84.About six weeks later, Muttz’ solicitors sent Roycar and Roy the letter of demand for the balance of the unpaid purchase money due under the sale contract – a clear rejection of the offer Roycar had made.
85.The fact that Muttz paid Petorium’s outgoings from 13 February 2017 is relied on by Roycar and Roy as a factor indicating acceptance of the draft document. However, the payment of outgoings is consistent with Roy having told Michelle he was not having any more to do with the business on 8 February. It is not evidence of acceptance of an offer she received on 24 February.
86.Roycar continuing to pay rent until the lease finished is also relied on by Roycar and Roy. But Roycar was obliged to pay the rent under its lease in any event.
Alleged oral representation not made
Roy and Roycar plead that around two to three weeks prior to entering the contract, Roy asked Michelle ‘at least twice a week’, words to the effect of whether she was sure the income from dog-grooming covered the wages and rent expenses of the business, and she answered in the affirmative.
I am not satisfied on the balance of probability that the oral representation alleged was made.
Other than Roy’s evidence of his recollection of what was said – which I do not accept for the reasons given above - there is no evidence of this representation having been made.
Roy gave evidence that he paid many thousands of dollars into Petorium to keep it afloat, commencing when Roycar purchased it. Throughout the time that Roycar was losing money through its involvement with Petorium, Roy was working part of most days alongside Michelle at Petorium. At no time during this period did Roy tell Michelle that she had misled him, even when he said he could not put any more money into the business and was walking away from it.
91.The unsigned draft agreement – drafted around February 2017 – mentions an allegation that the goodwill and weekly earnings were not ‘as put’. This is different to the representation now pleaded.
The first time Roycar alleged to Muttz that this representation had been made was when the defence was filed in this proceeding, in September 2017. That was some two years after the conversations in which the representations were said to have been made.
Alleged written representation did not induce entry into contract
Roycar says that the written representation was contained in the profit and loss statement for Muttz for the period 1 July 2014 to 30 March 2015, which Roy saw before Roycar executed the agreement to buy the business.
Although Roy initially argued that Roycar was induced to purchase the business by the alleged written representation, subsequently in cross-examination he expressly admitted he did not rely on the profit and loss statement:
Okay. Yes. So you didn't rely on that document? ---No.
Counsel for Roycar argued that I should accept Roy’s initial evidence as being the truth, and not his subsequent admission.
However, I am satisfied that the answer he gave, on reflection, in cross-examination is the truth of the matter. He was not induced to enter the contract by the alleged written representation.
No Australian Consumer Law breach
The defendants pleaded Australian Consumer Law (ACL) claims they said arose from the misrepresentations, in the alternative. By the end of trial, only s18 of the ACL was relied on. As I have found that no misrepresentation was made, it follows that s18 of the ACL was not breached.
Conclusion
Muttz has established its case against Roycar and Roy. They have not established their defence and counterclaim against Muttz.
I will order the defendants pay the plaintiff the sum of $69,415 together with interest.
I direct the parties to consider the orders that should be made as a result of these reasons – including as to interest and costs. If the proposed orders are not agreed, submissions as to the proposed orders should also be provided by each party. If a hearing is required on these matters, it will then be listed.
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Certificate
I certify that these 19 pages are a true copy of the reasons for judgment of Her Honour Judge Marks, delivered on 7 February 2019.
Dated: 7 February 2019
Zeinab Ali
Associate to Her Honour Judge Marks
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