Menmel Pty Limited v The Great Australian Bite Pty Limited

[1997] FCA 180

CATCHWORDS

TRADE PRACTICES - purchase of restaurant and licence of premises - findings that lessor represented that premises could be used as a nightclub and that representation had induced the purchase and lease - whether it was open to trial Judge to make the findings.

NEGLIGENCE - solicitor acts for purchaser of business and lessee of premises - finding that solicitor breached his duty by failing to ascertain whether the premises could be used as a nightclub - whether finding open - significance of solicitor's failure to peruse inventory and equipment leases.

DAMAGES - mitigation - whether purchaser and lessee had acted reasonably in insisting that entertainment authority be in its name.

DAMAGES - assessment - whether case involved loss of commercial opportunity - effect of double counting of heads of damage.

Trade Practices Act 1974 (Cth), s 52, s 87

Abalos v Australian Postal Commission (1990) 171 CLR 167
Devries v Australian National Railways Commission (1993) 177 CLR 472
Gould v Vaggelas (1985) 157 CLR 215
Malec v J C Hutton Pty Ltd (1990) 169 CLR 638
Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332

MENMEL PTY LIMITED & ANOR v THE GREAT AUSTRALIAN BITE PTY LIMITED & ORS
NG 609 of 1996

FINKELSTEIN & ANOR v THE GREAT AUSTRALIAN BITE PTY LIMITED & ORS
NG 611 of 1996

Davies, Lee, Sackville JJ
Sydney
18 March, 1997

IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY )   
GENERAL DIVISION                 )

MATTER NO. NG 609 of 1996

BETWEEN:

MENMEL PTY LIMITED

SYDNEY LESLIE GRIFF

Appellants

AND:

THE GREAT AUSTRALIAN BITE PTY LIMITED

DENISE ERICA WINTERS

AILEEN DAWN PIPER

First Respondents

DAVID NATHAN FINKELSTEIN

LESLIE MICHAEL STEVEN POZNIAK

Second Respondents

MATTER NO. NG 611 of 1996

BETWEEN:

DAVID NATHAN FINKELSTEIN
  LESLIE MICHAEL STEVEN POZNIAK
  Appellants

AND:

THE GREAT AUSTRALIAN BITE PTY LIMITED

DENISE ERICA WINTERS

AILEEN DAWN PIPER

First Respondents

MENMEL PTY LIMITED

SYDNEY GRIFF

Second Respondents

Coram:    Davies, Lee, Sackville JJ
Place:    Sydney
Date:     18 March, 1997

MINUTES OF ORDER

THE COURT ORDERS THAT:

1.The appeals be allowed in part.

2.Order 4 of the orders made by the trial Judge on 5 July 1996 be set aside and in lieu thereof judgment be entered in favour of the first applicant (The Great Australian Bite Pty Limited) against the first respondent (Menmel Pty Limited), the second respondent (Sydney Griff) and the fifth respondent (David Nathan Finkelstein and Leslie Michael Steven Pozniak) for the sum of $758,881 plus interest to the date of these orders.

3.The first respondents to each appeal file and serve within seven days a memorandum calculating the interest payable pursuant to Order 2.  In the event of disagreement between the first respondents and the appellants in each appeal as to the appropriate calculations, the appellants should file a memorandum within seven days of the filing of the first respondents' memorandum specifying the calculations they consider appropriate, and the reasons therefor.

4.The appeals otherwise be dismissed.

5.The cross appeal be dismissed.

6.The appellants pay the respondents 80% of the respondents' costs of the appeals.

7.The cross-appellants pay the cross-respondents' costs of the cross appeal.

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

IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY )    No. NG 609 of 1996
GENERAL DIVISION                 )    No. NG 611 of 1996

MATTER NO. NG 609 of 1996

BETWEEN:

MENMEL PTY LIMITED

SYDNEY LESLIE GRIFF

Appellants

AND:

THE GREAT AUSTRALIAN BITE PTY LIMITED

DENISE ERICA WINTERS

AILEEN DAWN PIPER

First Respondents

DAVID NATHAN FINKELSTEIN

LESLIE MICHAEL STEVEN POZNIAK

Second Respondents

MATTER NO. NG 611 of 1996

BETWEEN:

DAVID NATHAN FINKELSTEIN
  LESLIE MICHAEL STEVEN POZNIAK
  Appellants

AND:

THE GREAT AUSTRALIAN BITE PTY LIMITED

DENISE ERICA WINTER

AILEEN DAWN PIPER

First Respondents

MENMEL PTY LIMITED

SYDNEY GRIFF

Second Respondents

Coram:    Davies, Lee, Sackville JJ
Place:    Sydney
Date:     18 March, 1997

REASONS FOR JUDGMENT

THE COURT:
Introduction
These are two appeals and a cross appeal from orders made by a Judge of the Court in favour of The Great Australian Bite Pty Ltd ("GAB"), Mrs Denise Winters and Ms Aileen Piper, who were the applicants in the proceedings below.  The trial Judge made orders

•pursuant to s.87 of the Trade Practices Act 1974 (Cth) ("TP Act"), that a lease dated 20 November 1990 between Menmel Pty Ltd ("Menmel"), as lessor, and GAB, as lessee, of premises at 36-38 Bayswater Road, Kings Cross ("the Premises"), be set aside as from 31 December 1992;

•pursuant to s.87 of the TP Act, that a guarantee of Mrs Winters and Ms Piper contained in the lease be varied so as not to require payment of any moneys that might become due or owing by GAB after 31 December 1992; and

•that there be judgment in favour of GAB against Menmel, Mr Sydney Griff (a director of Menmel) and Mr David Finkelstein and Mr Leslie Pozniak (partners in the firm of Pozniak & Mane, GAB's previous solicitors) for $1,309,969.45, comprising damages of $884,551 plus interest.

The award of damages against Menmel was made pursuant to s.82 of the TP Act.  The award was based on a finding that Menmel had induced GAB, by misleading or deceptive conduct, to purchase the assets of a business previously carried on at the Premises under the name of "Cafe Royale" and to enter the lease.  The misleading or deceptive conduct was constituted, in substance, by Menmel's conduct in conveying to Mrs Winters and her brother, Mr Piper, a false representation that the Premises could lawfully be used as a night club, where liquor could be served otherwise than as ancillary to a meal.  Mr Griff's liability to pay damages rested on a finding that he was knowingly concerned in Menmel's contraventions of the TP Act.

The award of damages against the solicitors was based on a finding that Mr Pozniak had breached the duty of care he owed to Menmel when acting as its solicitor in connection with the purchase of the business and the lease of the Premises.  The trial Judge was not asked to and did not apportion responsibility for damages between Menmel, Mr Griff and the solicitors.

The first appeal is brought by Menmel and Mr Griff (to whom we shall collectively refer as the "first appellants") and names GAB, Mrs Winters and Ms Piper as the first respondents and the solicitors as the second respondents.  Menmel and Mr Griff challenge many of the findings made by the trial Judge and, in the event that their liability to pay damages is upheld, they challenge his Honour's  conclusions relating to the assessment of damages.  In the course of the appeal, Mr Ireland QC, who appeared with Ms Rana for the first appellants, raised for the first time a contention that the orders should apportion damages between the first appellants (whose liability, if any, arose under the TP Act) and the solicitors (whose liability, if any, arose by virtue of a breach of duty).

The second appeal is brought by the solicitors.  It names GAB, Mrs Winters and Ms Piper as the first respondents and Menmel and Mr Griff as second respondents.  The second appeal challenges, inter alia, the finding that Mr Pozniak breached his duty of care to Menmel and also challenges the trial Judge's conclusions on damages.

The cross appeal is brought by GAB, Mrs Winters and Ms Piper (to whom we shall collectively refer as the "first respondents").  The cross appeal contends that the trial Judge erred in discounting the damages award by approximately $270,000 and seeks orders increasing the damages by that amount.

The trial took place over seven hearing days.  Much of the judgment consists of the trial Judge's resolution of factual disputes, primarily between Mrs Winters and her brother, Mr Richard Piper, on the one hand, and Mr Griff and (although his interests were not identical with Mr Griff's) Mr Pozniak, on the other.  In resolving these disputes, the trial Judge, while finding that the evidence of Mrs Winters and Mr Piper was unreliable in certain respects, generally preferred their evidence on critical issues.  Of course in doing so, his Honour had the advantage of seeing the witnesses and considering their demeanour, a factor which plainly weighed heavily, in particular, in his assessment of Mr Griff's likely conduct in certain hypothetical situations (such as what he would have done if Mrs Winters had required the lease to be conditional on obtaining an entertainment authority from the Liquor Administration Board).  The appellants face the formidable difficulty that it is not open to an appellate court to overturn findings of fact based on the credit of witnesses unless the conclusions are "glaringly improbable" or "inconsistent with facts incontrovertibly established by the evidence": Brunskill v Sovereign Marine & General Insurance Co Ltd (1985) 59 ALJR 842, at 844; Devries v Australian National Railways Commission (1993) 177 CLR 472, at 479; Abalos v Australian Postal Commission (1990) 171 CLR 167.

The Case Pleaded
The first respondents, who of course were the applicants below, joined five parties as respondents to the proceedings determined by the trial Judge.  These were, respectively, Menmel, Mr Griff, Tibiki Pty Ltd ("Tibiki"), Mr Alan Hill (a director of Tibiki) and the solicitors.  Prior to GAB taking possession of the Premises, Tibiki was in occupation pursuant to a lease from Menmel, the owner of the Premises.  The pleaded claims against Tibiki, which had since been dissolved, and Mr Hill, were not pursued at the hearing.  Nonetheless, the pleaded allegations against them played some part in the argument on the appeal.

The first respondents pleaded that GAB had conducted a restaurant business known as the Great Australian Bite at the Premises, from 16 October 1990 until January 1993, when GAB vacated the Premises.  By a written agreement dated 30 August 1990, Tibiki had agreed to sell to GAB the restaurant, bar and night club business conducted by it from the Premises.  The consideration for the sale was $120,000, comprising $88,500 as the price for the business and $31,500, being rent for the months of August and September 1990 paid by GAB to Menmel.  By a lease dated 20 November 1990, Menmel leased the Premises to GAB for five years commencing on 1 August 1990 for the purpose of GAB conducting the restaurant, bar and night club business which it had agreed to purchase from Tibiki.  Mrs Winters and Ms Piper guaranteed GAB's obligations under the lease.

The first respondents alleged GAB had been induced to enter the agreement for the sale of the business and the lease by representations, inter alia, to the following effect:

•that GAB could conduct the restaurant, bar and night club business from the Premises;

•that the business conducted from the Premises turned over $20,000 on Friday and Saturday nights; and

•that there was no legal impediment to GAB conducting the restaurant, bar and nightclub business from the Premises.

It was alleged that the same representations had induced the guarantors to execute the guarantees in the lease.

The representations were said to have been made at three meetings.  The first was in July 1990, and was attended by Mrs Winters and Mr Piper for GAB, and a Mr Pascoe, an estate agent acting on behalf of Menmel and Tibiki.  The second meeting was held in the same month and the persons present were Mrs Winters, Mr Piper, Mr Pascoe and Mr Griff.  The third meeting occurred later in July 1990 and on this occasion Mrs Winters, Mr Piper, Mr Pascoe and Mr Hill were in attendance. 

The statement of claim alleged that the representations at the first meeting were made by  Mr Pascoe; those at the second meeting by Mr Griff; and those at the third by Mr Hill.  In each case it was also alleged that the other persons at the meeting failed to advise Mrs Winters or Mr Piper that the Premises did not have the entertainment licence which was necessary if the restaurant, bar and night club business was to be conducted legally.  The significance of this omission was said to be that when each meeting took place the Premises were fitted out as a restaurant, bar and night club.

The first respondents alleged that the representations were misleading or deceptive because neither Menmel or Tibiki held an "entertainment licence" in respect of the Premises and that no such licence could be obtained unless expensive alterations were carried out to the Premises.  In consequence of the evidence of the respondents, GAB was said to have lost the sum of $120,000 paid to acquire Tibiki's business; $164,557 in renovation costs; and trading losses incurred until the Premises were vacated.  It was alleged that, until 28 February 1991, when South Sydney Council notified GAB that it was prohibited from conducting public entertainment on the Premises in the absence of a licence, the business was open between 6 pm and 3 am seven nights per week, for dinner, bar and night club trading.  Thereafter, the business was operated only as a restaurant and liquor was served only as ancillary to a meal.

The statement of claim went on to allege that GAB retained Mr Pozniak to act on its behalf in connection with the purchase of Tibiki's business and the lease from Menmel.  It was alleged that Mr Pozniak breached his duty to GAB, by failing to advise that the premises could not be used as a night club without an entertainment licence, and that in consequence GAB had suffered the same losses particularised in the claim based on the TP Act.

The Trial Judge's Findings
At the trial, the first respondents and the solicitors were represented by counsel.  Menmel and Mr Griff were not legally represented until the last two days of the hearing.  Mrs Winters and Mr Piper were extensively cross-examined by counsel for the solicitors, as were Mr Griff and Mr Pozniak by counsel for the first respondents.  The following are the facts as found by the trial Judge, having regard to the sharply conflicting evidence given by the various witnesses.

In 1990 Mrs Winters was a very experienced and successful restaurateur.  However, while she had conducted a number of licensed restaurants, she had no experience in the conduct of a night club or of a bar supplying liquor not associated with the provision of a meal.

From 1986 to 1987, a company of which Mr Griff and his son, Mr Robert Griff, were co-directors, conducted a bar and night club on the Premises under the name of Il Fiasco.  Il Fiasco had applied for an entertainment licence in March 1986, but that application was ultimately refused by the Liquor Administration Board on 28 June 1990.  During the period Il Fiasco was operating, as Mr Griff knew, there were many breaches of its licence.  In 1987, the business was sold to Tibiki, which conducted a bar and night club on the Premises under the name "Cafe Royale".  In late 1988, Mr Griff declined to consent to a proposed development application to South Sydney Council by Tibiki, seeking approval to provide live entertainment in conjunction with an existing restaurant.

Mrs Winters and Mr Piper had both visited Il Fiasco and Cafe Royale prior to July 1990 and on those occasions had observed that the Premises had been operated as a bar and night club, involving a disc jockey, music and dancing.

In July 1990, Mrs Winters inspected the Premises.  The trial Judge accepted Mrs Winters' evidence that what she saw was a    restaurant and associated areas on three levels.  The upper level comprised dining rooms, bars, a kitchen and terraces.  The lowest floor, also known as the Ward Avenue level, included a large bar, toilets, a dance floor (measuring about six metres by six metres) constructed of jarrah and complete with special lighting, disc jockey box with twin turntables, amplifiers, control deck, strobe lighting and numerous speakers and television sets.  This equipment was much the same as had been in place when Il Fiasco was operating as a restaurant and night club.  The trial Judge made no findings as to what, if anything, was said to Mrs Winters on this occasion.

Shortly after the first inspection, Mrs Winters again inspected the Premises with Mr Piper, Mr Pascoe and Mr Griff.  Mr Griff said that the rent would be $189,000 per annum plus outgoings of $12,000 per annum.  Mrs Winters responded that this was "too much rent for a restaurant".  Mr Griff then said:

"This place has been successfully operating as a nightclub for the past six years.  With your experience in restaurants you should do O.K.".

He also said:

"When we ran the place as Fiasco, the turnover in the bar on Friday and Saturday nights alone was in excess of $8,000-00 per night."

A reference was made in the conversation to a sign indicating that Menmel had taken over the premises from Tibiki, as owner in possession, for non-payment of rent.  Mr Griff said:

"I am having a disagreement with the tenant and I have taken over the premises.  I can therefore give you a new lease, and any equipment I will sort out with you later on."

Nothing was said to Mrs Winters or Mr Piper to suggest that they would not be able to carry on the activities for which the equipment was plainly designed.  In the event, within a short time, a deposit was paid to Mr Pascoe as agent for Tibiki and Mr Griff handed the keys to the Premises to Mr Piper.

The trial Judge found that the absence of a warning to Mrs Winters and Mr Piper, to the effect that GAB would not be able to carry on the activities for which the furnishing and equipment of the Premises were "plainly designed", was "persuasively misleading".  Moreover, the comments made by Mr Griff, quite apart from his express reference to a night club, implied that what had previously been done in the Premises could be revived.  In addition, his Honour found that Mr Griff must have been conscious of the businesses previously conducted on the Premises since he had been involved in the operations of Il Fiasco and was aware of Tibiki's development application.  It was beyond question that Mr Griff

"must have appreciated the likelihood that Mrs Winters, having regard to the manner in which the restaurant had been conducted in the past, and having regard to the way it was set up at the time of her inspection, would in all likelihood have assumed that an integral part of the functioning of a restaurant at those premises was the entertainment area and bar at the Ward Avenue level....

[Mr Griff] knew that a restaurateur of Mrs Winter's experience would have known of Il Fiasco, and would have been likely to have thought its success could be restored and continued.  But it was not legal to do so.  (There were said to have been special reasons, personal to the operators, for the failure of Cafe Royale.)"

After paying the deposit to the agent, GAB instructed Mr Pozniak to act as its solicitor in relation to the purchase and the lease.  Mr Pozniak was very experienced in licensing matters and had previously acted for Mrs Winters and her companies.  A draft lease was received from Mr Griff's solicitors on 20 August 1990.  This provided that the permitted use of the Premises was "as a Restaurant" and Mr Pozniak so advised Mrs Winters in writing, on 22 August 1990.  The trial Judge, however, rejected the contention that this must have alerted her to the fact that she would not be able to conduct a night club or discotheque in conjunction with the restaurant.  It was clear that Mr Griff thought the business could be sufficiently described as a "restaurant" even if entertainment and liquor without meals were also to be provided.  On 30 August 1990, Mr Pozniak had a detailed conference with Mrs Winters during which it was agreed that the lease would have to be made conditional on the transfer of the liquor licence within three months.

In the meantime, an agreement for sale of Tibiki's business, dated 30 August 1990, was executed by the parties.   The purchase price was $88,000.  The business sold included "the goodwill and all plant, fittings, chattels and fixtures used by the vendor in connection therewith as set out in the Inventory".  It also included the existing On-Licence (Restaurant) in respect of the Premises.

The agreement provided for GAB to take over the benefit of Tibiki's equipment lease agreements as set out in a schedule.  Tibiki agreed to indemnify GAB in respect of all liabilities arising under the equipment lease agreements.  Annexure A to the agreement listed five leases, showing amounts financed totalling approximately $192,000.  Copies of the leases were attached to the agreement for sale.  On the face of those documents, the equipment to be acquired included many items not ordinarily found in a restaurant, but which would ordinarily be found in a night club or discotheque, such as a "disco-console", speakers and amplifiers and an item described as a "2 x Speaker Dance Floor".

The inventory was divided into sections, such as "RECEPTION", "DINING ROOMS", "DISCOTHEQUE".  Under the last heading were shown a number of items, such as amplifiers, strobe lights and sound mixers, which suggested that the Premises would have been used for dancing to recorded music.

The trial Judge noted that Mr Pozniak denied reading the inventory, saying that equipment was an issue left to the parties.  Although implying that he viewed Mr Pozniak's denial somewhat sceptically, the trial Judge did not make a finding that Mr Pozniak had read the inventory.  His Honour rather found that, had Mr Pozniak read the relevant parts of the agreement for sale and annexures, he must have appreciated that there was at least the possibility that the Premises had been set up not merely as a restaurant but also for entertainment.  His Honour continued:

"Nor was it the point put against Mr Pozniak that it automatically followed the place was going to be a nightclub or a discotheque; simply that a question was raised which a prudent solicitor was bound to clarify.  Any question in relation to this transaction required to be clarified with special care because of the warning received from Mr Pozniak's partner.  And it was not true that there was no dancing or live entertainment at the Cafe Royale.  In fact, on the evidence which I accept, there was.  The one accurate statement, that Mrs Winters had had a history of restaurants only, should have caused Mr Pozniak to appreciate that she might have need of full and proper legal advice if this transaction involved premises where entertainment was provided."

The trial Judge noted that it was not in dispute that if the restaurant operated in conjunction with a bar and discotheque, where liquor was supplied otherwise than as incidental to a meal, a restaurant licence would be insufficient.  Until 1 September 1990, the Liquor Administration Board had the power to grant the holder of a restaurant licence an authority to use an area on the premises for entertainment, including dancing.  After 1 September 1990, by reason of amendments to the governing legislation, South Sydney Council became the authority responsible for authorising entertainment in relation to the Premises.

The trial Judge found that, if Mr Pozniak had acted with reasonable care as solicitor for GAB and Ms Winter, he would have examined the inventory and equipment leases and would have become aware that there was a "real possibility of illegality being involved in the conduct of the restaurant in the manner contemplated by Mrs Winters, unless the required authorisation could be obtained".  His Honour also found that, had Mrs Winters been advised of the true position, she would have insisted upon an appropriate condition being inserted in the purchase agreement and the lease.  In the light of his finding that Mr Griff was likely to have acted in a "dilatory and obstructive" manner, his Honour concluded that the likelihood was that the lease would never have been entered into.  In the event, Mr Pozniak gave no consideration to the question of an entertainment endorsement on the restaurant licence.  The purchase was completed and the lease was ultimately executed on 20 November 1990, but backdated to 1 August 1990.  GAB opened the restaurant on 16 October 1990 under the name of "The Great Australian Bite", having entered possession earlier in order to fit out the Premises.

The trial Judge found that, although GAB did not actively promote the discotheque, a discotheque did operate from the Premises almost from the beginning.  In early 1991, Mrs Winters decided to present the discotheque in a "more polished" manner.  However, on 28 February 1991, South Sydney Council sent a letter addressed to the proprietor of the Cafe Royale restaurant, containing the following:

"Arising from the introduction of new statutory legislation on 1st September, 1990, Local Councils are now responsible for the assessment and determination of applications for authorisation of places of public entertainment pursuant to the requirements of Part 62 of Ordinance No. 70.

Accordingly, I have to advise that it has come to the Council's attention that the subject premises is currently being used/proposed to be used as a place of public entertainment.

In accordance with the above you are now required to complete a Building Application form and an application form for Places of Public Entertainment (copies enclosed) and submit them to Council with the prescribed fee.

Relevant application forms for lodgement with Council are enclosed herewith.

You are further advised that under Section 317JG of the Local Government Act, 1919, you are prohibited from conducting public entertainment within your premises unless authorised to do so by Council. In view of the above it would be in your own best interest to lodge the attached applications if you do intend to conduct public entertainment on your premises."

His Honour found that, in view of this letter, "it is clear that [GAB] had no alternative but to cease the then current night club promotion".

Following receipt of the letters from South Sydney Council, Mrs Winters promptly sought Mr Griff's consent to an application for an entertainment approval.  At this stage (early to mid 1991), the parties were in dispute about a number of matters connected with the lease.  Mr Griff's response, after some discussions between himself and Mrs Winters, was to tell her that she would have to carry out and pay for all necessary building work and that he wanted "to control" the licence.  Mr Griff also sought to have variations to the lease made as a condition of his consent.  Mrs Winters advised Mr Griff that she would pay for the necessary work provided the licence was issued in her name.  Mr Griff replied that he would not consent unless the licence was in his name.

In June 1991, Mrs Winters broke her leg and was incapacitated for some months.  However, during this time she had a number of telephone conversations with Mr Griff, in which she again requested his consent to an application for entertainment approval.  Mr Griff consistently refused to consent unless the applicant paid all the expenses and he retained "complete control".

His Honour addressed an argument that Mrs Winters had acted unreasonably in not accepting these conditions:

"The onus in respect of the mitigation of damages rests, it is recognized, on the respondents [in the proceedings below].  I am neither satisfied that Mrs Winters acted unreasonably, nor that if she had acceded to Mr Griff's demands the problem would have been solved.  I do not accept that Mr Griff's word is to be relied on.  One of his concerns was that the operation of a nightclub in the premises might affect his ability to let the upper floors of the building (which had remained vacant for between six and eight years); and I am not satisfied that, while ever the rent was paid, he was prepared to be other than obstructive in respect of any application to the South Sydney Council.  I do not think, in the circumstances, that it was less than entirely reasonable of Mrs Winters to wish to have the protection of a licence in her own name if the applicant was to bear all the expense."

His Honour found that, despite the lack of an entertainment authority, during 1991 and 1992 "sporadic attempts" had been made to run a  discotheque or night club illegally in the Ward Avenue portion of the Premises.  His Honour acknowledged that Mrs Winters and Mr Piper had given misleading or inaccurate answers about these activities and to that extent their credit was affected.  He took this into account in determining whether their evidence on other issues should be accepted.

From early 1992, GAB made unsuccessful attempts to sell the business.  Both in 1991 and in 1992, very substantial losses were suffered.  Finally, at the end of December 1992, the applicant abandoned the premises.  Eventually, but only after a considerable delay and the carrying out of work to enable an entertainment authority to be obtained, Menmel relet the premises. 

His Honour summarised the position as follows:

•Menmel had contravened the provisions of s.52 of the TP Act and Mr Griff was a knowing and intentional participant in those contraventions.

•GAB, through Mrs Winters and Mr Piper, relied on the express representations of Mr Griff and on the implied representations arising, in the absence of any corrective statement, out of the state of the Premises when inspected by them in Mr Griff's company, and arising out of a history of the Premises, which was known to them.

•GAB relied on the representations in entering into the purchase of Cafe Royale's business and the lease. 

•On the balance of probabilities, if the misleading conduct had not occurred, GAB would not have entered into the purchase agreement or the lease.

•It followed that all expenses incurred by GAB and the losses sustained by it flowed from Menmel's misleading conduct.

•Mr Pozniak failed to exercise due care in and about the transaction.

•If he had exercised due care the probabilities are that the misleading conduct would have been revealed.

•The solicitors were therefore also liable for GAB's losses.

The trial Judge considered it appropriate, in the exercise of his discretion under s.87 of the TP Act, to order that the lease be set aside as at and from 31 December 1992.  In assessing damages, GAB was entitled to be reimbursed the sum of $164,551, which it had expended on repair and renovation of the premises, and the sum of $120,000 paid under the purchase agreement.  A small allowance was to be made for the residual value of any such equipment.  That was best dealt with by making an allowance for contingencies.  His Honour dealt separately with the trading losses.

On the question of mitigation, in addition to the findings already made, the trial Judge concluded that GAB had pursued the restaurant business for substantially longer than would have been justified, had it been reasonably practicable simply to wind up the business.  But it was not reasonably practical to do so, having regard to the five year lease at a "prohibitive rental".  GAB had not acted unreasonably by continuing the finally unavailing struggle to maintain the restaurant.

The trial Judge rejected an argument that, because the restaurant had always been unprofitable, it followed that GAB's inability to operate a discotheque openly and without fear of prosecution after March 1991 could not have affected its profitability.  His Honour accepted evidence that the directors expected to incur a loss during the period of building up the new business.  In any event, the issue was irrelevant in view of the finding that the company would not have entered into the transactions of purchase and lease if the misleading conduct had not occurred, or if Mr Pozniak had not been negligent.  It followed that the assessment of damages was not limited to losses that flowed from the inability to operate a discotheque in the optimum manner, but should include all losses that reasonably and naturally flowed from the transaction.  The losses, in the circumstances of the case, were to be regarded as inherent in the business undertaking on which GAB had embarked by reason of Menmel's misrepresentations and Mr Pozniak's breach of duty.

The trading losses totalled $870,200.  There was evidence that the profit margin of the restaurant was lower than would have been expected.  Although rejecting the possibility that the proprietors had extracted some part of the takings in cash, his Honour noted that the explanation for the lower margin could involve contingencies, such as gross mismanagement of pricing or thefts by employees, for which the respondents should not be held liable.  The allowance for contingencies should also cover the notorious "volatility" of the restaurant trade and the location of the restaurant.

Having regard to all these matters, his Honour concluded that a fair amount to award in respect of the trading losses sustained by GAB was $600,000.  To that amount was to be added the other sums claimed by GAB, totalling $284,551, and an appropriate figure for interest.  The damages awarded were therefore $884,551, to which interest of $425,418.40 was added, producing a judgment in favour of GAB of $1,309,969.45.

Challenges to Factual Findings
Mr Ireland challenged a number of findings made by the trial Judge that were adverse to Menmel and Mr Griff.  Mr Pembroke, on behalf of the solicitors, also challenged certain of these findings.  In this section we shall deal with Mr Ireland's arguments and, to the extent they overlapped, Mr Pembroke's contentions.  We shall consider later the question of mitigation and damages and the separate question raised by Mr Pembroke.

First, Mr Ireland submitted that the representations found to have been made by Mr Griff, when considered in context, were not misleading or deceptive.  However, the context, as the trial Judge found, included the fact that the representations were made in the course of an inspection that revealed equipment clearly indicating that the Premises had previously been used as a night club or discotheque.  The context also included Mr Griff's knowledge of the fact that use of the Premises as a night club in the past had been unlawful.  To say, in these circumstances, that the place had been successfully operating as a night club for six years and that, with Mrs Winter's experience in restaurants, she "should be OK", could hardly be interpreted as anything other than a representation that the Premises had been and could continue to be lawfully used as a night club, where liquor was sold otherwise than as ancillary to meals.

Mr Ireland suggested that Mr Griff's reference to Mrs Winter's "experience in restaurants" was intended to distinguish between experience as a night club operator and experience as a restaurateur.  But, as the expert evidence accepted by his Honour made clear, an entertainment authority granted by the Liquor Administration Board was endorsed on the relevant On-Licence (Restaurant).  To suggest that a reference in those circumstances to a "restaurant" was incapable of including a restaurant also operating a night club or bar is to create a false dichotomy.  It was clearly open to his Honour to find that the words used by Mr Griff conveyed the representation already identified.

It is true, as Mr Ireland pointed out, that his Honour did not expressly find that Mrs Winters had communicated to Mr Griff her intention to use the Premises as a night club in conjunction with the restaurant.  There is nothing to suggest that his Honour rejected Mrs Winter's evidence that she communicated her intention; the point is merely not addressed by the findings.  But even if Mrs Winters did not tell Mr Griff that she intended to conduct a night club, fact would not alter the meaning of the representation made expressly or impliedly on behalf of Menmel.  The trial Judge specifically found that Mr Griff must have appreciated that Mrs Winters would assume that the entertainment area and bar was an integral part of the restaurant.  He also found that Mr Griff knew that Mrs Winter would have known of Il Fiasco and would have been likely to have thought its success would be restored and continued.  In these circumstances, the failure of Mrs Winters to communicate her intention (if, indeed, that was the case) could not alter the meaning of the representations as communicated to her.

Mr Ireland also submitted that his Honour's finding was somehow weakened by the fact that he had adopted Mr Piper's account of events, rather than Mrs Winters' slightly different account.  However, it was clearly open to his Honour to accept Mr Piper's account.  More importantly, there was no significant inconsistency between Mr Piper's version and that put forward by Mrs Winters.  The trial Judge's acceptance of Mr Piper's version of the conversations does not imply rejection of the substance of Mrs Winters' evidence.

Secondly, Mr Ireland challenged the finding that GAB relied on the express or implied representations to enter into the purchase agreement and the lease.  His principal contention was that his Honour had made no finding as to the representations, if any, made to Mrs Winter and Mr Piper in the two conversations alleged in the statement of claim that took place in July 1990 but did not involve Mr Griff.  It will be recalled that the statement of claim pleaded that Mr Pascoe was the agent of Menmel and that misleading representations had been made by Mr Pascoe at the first meeting and by Mr Hill, in Mr Pascoe's presence, at the final meeting.

Mr Ireland acknowledged that it was never put to Mrs Winters in cross-examination that she did not rely on any misleading representation made by Mr Griff or on behalf of Menmel, because she relied only on what she was told by Mr Pascoe or Mr Hill.  Nor was any such submission put to the trial Judge.  Moreover, neither Tibiki nor Mr Hill participated in the trial.  It is therefore not surprising that the trial Judge did not specifically refer to the respective effects of each of the representations on Mrs Winters' decision to enter the purchase agreement and lease.

The general principle is that a representation which is calculated to induce the representee to enter into a contract need not be the sole inducement.  It is sufficient so long as the representation plays a part, even if only a minor part, in contributing to the formation of the contract: Gould v Vaggelas (1985) 157 CLR 215, at 236. On the evidence it was clearly open to the trial Judge to conclude that the misrepresentations made by or on behalf of Menmel induced GAB to enter the purchase agreement and the lease, in the sense required by Gould v Vaggelas.  There is no reason to think that, because his Honour did not make findings about the other conversations (except to find that she had visited the Premises on more than one occasion), he failed to consider the whole of the evidence of Mrs Winters and Mr Piper in reaching the conclusions he did.  Indeed, given his Honour's findings as to Mr Griff's statements and his awareness of Mrs Winters' likely state of mind, it would be very surprising if a finding could have been made that Mrs Winters and Mr Piper did not even place minor reliance on Menmel's misleading conduct in deciding to enter the purchase agreement and lease.

Thirdly, Mr Ireland and Mr Pembroke submitted that his Honour erred in finding that, as at July 1990, Mrs Winters intended to use the Premises as both a night club and a restaurant.  It was said that the evidence indicated that Mrs Winters had not given any instructions to Mr Pozniak that she wished to carry on a night club in conjunction with the restaurant.  Further, the advertising of the restaurant during the period from October 1990 to February 1991 did not mention a night club.  Moreover, there was evidence that no night club business was conducted on the Premises at all during that period.  It was submitted that this error affected the trial Judge's finding that GAB had relied on the representations to enter into the purchase agreement and the lease.  The error was said also to affect his Honour's conclusion that, but for Menmel's misleading conduct and Mr Pozniak's breach of duty, GAB would not have purchased the business or entered into the lease.

The trial Judge had to take into account a considerable volume of conflicting evidence on this issue.  Mrs Winters herself gave evidence that she had told Mr Griff in July 1990 that she wanted the place as a restaurant and a night club.  The matters referred to in argument doubtless provided fertile opportunities for cross examination.  Certainly it was put to Mrs Winters that no night club was in operation before March 1991 and that she had no intention of conducting one on the premises.  In the end, the trial Judge chose to believe Mrs Winters' explanations for circumstances apparently telling against her version of events.  For example, Mrs Winters explained the absence of any reference in the advertising material to the operations of a night club on the premises on the ground that she had formed the view that it was the restaurant portion of the business that needed building up and not the night club, despite the closure of Cafe Royale.  Again, Mrs Winters acknowledged that she had received an On-Licence (Restaurant) from the Liquor Administration Board in her name, and that this contained no reference to an entertainment authority.  However, she also said in her evidence that she did not receive the licence until April 1991, after she had received a letter from South Sydney Council advising her that entertainment was not permitted on the premises without an appropriate authority.

Much of the argument put forward on this question on behalf of the appellants appeared to assume that the only finding open to his Honour was that no night club had been conducted on the Premises during the period from October 1990 to March 1991.  Yet the trial Judge specifically accepted the evidence of two independent witnesses who said that, during that period, the Premises had been set up as a night club and had actually been run as a night club.  Plainly it was open to his Honour to accept this evidence, which provided powerful confirmation of Mrs Winters' evidence as to her intentions in relation to the Premises in July 1990.  The submission that it was not open to his Honour to find that Mrs Winters intended from the outset to operate both a night club and restaurant therefore fails.

Fourthly, Mr Ireland submitted that the trial Judge had erred in finding that Mr Griff must have appreciated the likelihood that Mrs Winters would assume that the successful night club operations on the Premises could be restored and continued.  The submission was not developed.  It is enough to say that having regard to the equipment located on the Premises, Mr Griff's knowledge of the operations of Il Fiasco and Cafe Royale, Mr Griff's express reference to successful night club operations and the trial Judge's assessment of Mr Griff as a witness, the finding made by his Honour was clearly open.

Fifthly, Mr Ireland contended that the trial Judge should have found that Mrs Winters was aware at the relevant time that a night club could not be conducted on the premises, and liquor could not be sold otherwise than as ancillary to meals, without an entertainment authority.  It was not made clear in argument why such a finding would be relevant to any of the critical issues in the case affecting the first appellants.  The representation that his Honour found had been made was, in substance, that it was lawful to conduct a night club on the Premises in conjunction with a restaurant.  It is consistent with the falsity of such a representation, and with Mrs Winters having relied on the representation, that she was aware that an entertainment authority was necessary for the conduct of a night club and the sale of liquor otherwise than as ancillary to a meal.  In short, the trial Judge's findings, insofar as they concern the first appellants, are not inconsistent with Mrs Winters being aware, at all material times, that a separate authority or endorsement was needed to conduct entertainment on the Premises.  The fact that the trial Judge did not make an express finding on this issue does not disclose any error.

Sixthly, both Mr Ireland and Mr Pembroke challenged the finding that, had the first respondents known that there was no entertainment authority in place for the Premises, they would not have completed either the purchase agreement with Tibiki or the lease with Menmel.  Mr Ireland was concerned to argue that if Mrs Winters and Mr Piper had become aware of the true position prior to completion, they would nonetheless have proceeded to purchase Tibiki's assets and to have entered the lease.  Mr Pembroke was concerned to argue that, even if Mr Pozniak had advised Mrs Winters that there was no current entertainment authority, the transactions would have proceeded.  While their concerns were somewhat different, they relied on similar arguments on this issue.

It was said that there were many considerations which showed that Mrs Winters would have gone ahead regardless of the absence of an entertainment authority.  For example, the very name of her business - The Great Australian Bite - showed that she intended to operate a restaurant, rather than a night club.  Mrs Winters did not complain either to Mr Griff or to Mr Pozniak that she had been misled, even after the letter of 28 February 1991 from South Sydney Council.  Mr Pozniak did not become aware that Mrs Winters wanted an entertainment authority until January 1992, and did not know that a claim might be made against him until late 1993.  Mrs Winters' failure to complain showed that the existence of the entertainment authority was of little importance to her.

Again, the flaw in these submissions is that they overlook evidence which his Honour was entitled to and did take into account.  In particular, after receiving the letter from South Sydney Council, she told Mr Griff and sought his consent to obtaining an entertainment approval.  A fax dated 5 March 1991 from Mr Piper to Mr Griff asked why he and Mrs Winters had not been told that an entertainment authority was necessary for the continued use of the night club.  Mr Griff's assertion that the question of the entertainment authority had not been raised until mid-1991 or even later was specifically rejected by the trial Judge.

Mrs Winters also gave evidence that shortly after receiving the letter from South Sydney Council she asked Mr Pozniak why he had not confirmed that there was an entertainment authority in place before completion of the transaction.  The trial Judge made no express finding about Mrs Winters' account of the conversation, which Mr Pozniak denied.  However, the trial Judge preferred Mrs Winters' evidence to that of Mr Pozniak on other issues and it was open to him to have regard to Mrs Winters' evidence that she had complained to Mr Pozniak in determining whether she would have proceeded with the transaction in any event.  At the very least, the question cannot simply be approached on the assumption that Mrs Winters made no complaint to Mr Pozniak.

It is also necessary to take into account the trial Judge's reasoning on this issue.  He asked himself what Mrs Winters would have done had she been advised of the true position by Mr Pozniak.  The trial Judge accepted her evidence that she would have insisted upon the insertion in both the purchase agreement and the lease of an appropriate condition, making the transaction contingent upon obtaining an entertainment authority.  His Honour then found that the likelihood was that, had such a condition been insisted upon, Mr Griff would have proved dilatory and obstructive and that the transactions would never have proceeded.

This reasoning was open to his Honour.  He was entitled to accept Mrs Winters' evidence.  He was also entitled to take account of his impression of Mr Griff, both from observing him as a witness and from a consideration of his previous conduct.  Mr Griff's conduct included his refusal to consent to Mr Hill's application for an entertainment authority and his resources to Mrs Winters when she raised the absence of an entertainment authority.  Accordingly, this submission also fails.

Mr Pozniak's Breach of Duty
Mr Pembroke submitted that the trial Judge was not entitled to find that Mr Pozniak had breached his duty to GAB.  Mr Pembroke pointed out that the trial Judge made no finding that Mrs Winters had told Mr Pozniak that she intended to use the Premises for any other purpose.  In those circumstances, Mr Pozniak was entitled to assume that Mrs Winters knew of the requirement for an entertainment authority for a night club and was aware that the restaurant licence in respect of the Premises did not permit the operation of a night club.  Accordingly, Mr Pozniak was entitled to act on the basis that Mrs Winters intended to conduct only a restaurant on the Premises and did not intend to sell liquor expect as ancillary to a meal.  He was therefore not obliged to warn Mrs Winter that no entertainment authority was in force in respect of the Premises.

The trial Judge's finding that Mr Pozniak breached his duty of care to GAB did not depend on Mrs Winters having expressly communicated to him her intention to conduct a night club on the Premises.  Rather, his Honour found that Mr Pozniak should have realised that Mr Winters might have been contemplating using the Premises for a night club and that there was a real possibility that use as a night club would be illegal in the absence of an entertainment authority.  Mr Pozniak's breach of duty consisted in the failure to make the necessary inquiries to ascertain whether Mrs Winters' contemplated use of the Premises was the subject of an authority and to warn her that no such authority had been added to the licence.

It was common ground that Mr Pozniak was very experienced in licensing matters.  On Mr Pozniak's account of events, Mrs Winters told him in July 1990 that she and Mr Piper had "just taken the Cafe Royale site".  Mr Pozniak said that he immediately identified the Premises as the "old Il Fiasco" and commented that he remembered "spending many a great time there".   Mr Pozniak also accepted in his evidence that he was instructed by Mrs Winters to make sure that the liquor licence was on foot.  He had assured her that he would make the appropriate searches.

It follows from Mr Pozniak's account that he was aware that the Premises, at least at the time Il Fiasco was operating, had been used as a night club.  He accepted that he had been to Cafe Royale, but claimed it functioned only as a restaurant on the occasions he was present.  The trial Judge found that Cafe Royale had operated as a night club, but did not make an express finding that Mr Pozniak was aware of that fact.  (It is conceivable that the night club was not operating on the particular occasions Mr Pozniak patronised Cafe Royale.)  In any event, Mr Pozniak was aware that the Premises had previously been used as a night club.

The equipment leases and inventory annexed to the purchase agreement would have clearly indicated to Mr Pozniak that Mrs Winters was acquiring equipment suitable for a discotheque.  In his evidence, Mr Pozniak acknowledged that, had he seen the word "discotheque" as a heading on the two page inventory, alarm bells might have rung.  In other words, the inventory would have suggested to him that Mrs Winters might have contemplated a use for the Premises that would require an entertainment authority.

His Honour made no finding as to whether or not Mr Pozniak actually read the inventory, although his Honour was clearly sceptical of Mr Pozniak's claim that he had not done so.  His Honour, for example, referred to a letter, in which Mr Pozniak forwarded the draft inventory to Tibiki's solicitors, as normally implying that he was aware of the terms of the inventory.  Mr Pozniak had also sent a letter requiring the addition of two further specific items to the inventory, adding force to the normal inference.  Mr Pozniak's claim was that he left the parties to work out the contents of the inventory (and Mrs Winters acknowledged that she had not asked Mr Pozniak to check the items on the inventory) and that he had simply annexed it to the contract without reading it.  Had Mr Pozniak read the inventory, his own evidence makes it clear that he should then have realised that an entertainment authority might have been required for GAB's intended use of the Premises.

In any event, as his Honour found, it was clear to Mr Pozniak that Mrs Winters was concerned to obtain a good title to the equipment covered by the equipment leases, as well as to the items in the inventory.  The schedule of equipment leases, which Mr Pozniak read, revealed that the amount financed under the five leases was substantial, totalling some $192,000.  Had Mr Pozniak glanced at the leases, which were the subject of specific provisions in the purchase agreement, he would have seen items clearly indicating that Mrs Winters must have been contemplating at least the possibility of a night club.  It is clear that Mr Pozniak regarded the contractual arrangements as unusual and important, because he went to the trouble of confirming in writing to Mrs Winters that

"this transaction is most unusual in that you have in effect agreed to buy equipment which is not owned by the vendor at this stage".

It is difficult to understand how Mr Pozniak could have drafted or agreed to the provisions of the purchase agreement relating to the equipment leases without perusing the leases to ascertain their subject matter and the terms with which the vendors were required to comply.  If, as he claimed, Mr Pozniak did not peruse the equipment leases, his failure is hardly consistent with the exercise of reasonable care to protect the interests of his clients.

We think that, in the unusual circumstances of the present case, it was open to his Honour to find that Mr Pozniak should have made further inquiries to establish the intended use of the Premises and whether an authority was required.  He made no specific inquiry of Mrs Winters as to her intentions, simply assuming that she contemplated carrying on a restaurant as she had at other locations.  Had Mr Pozniak made such an inquiry - on what, after all, was a fundamental issue - he would have realised that the question of an entertainment authority had to be addressed.  It did not compensate for the absence of an inquiry to advise Mrs Winters that the permitted use of the Premises was as a "restaurant".  That expression, as the trial Judge found, was ambiguous and did not rule out the conduct of a night club in association with a restaurant.

Enough was known to Mr Pozniak to require him to take the very simple steps required to satisfy himself that Mrs Winters' intended use of the Premises could lawfully be carried on.  His knowledge of both the previous use of the Premises and the fact that Mrs Winters was acquiring a large volume of equipment should have suggested that there was at least a realistic possibility that the intended use included a night club.  The very substantial rental to be paid by GAB, if anything, would have reinforced the need for inquiry as to what use was contemplated.  Apart from asking Mrs Winters, the most obvious inquiry was to peruse the inventory and equipment leases, a task which, at least in the case of the equipment leases, should have been undertaken in any event.  Had that simple inquiry been made, the potential difficulty (that the necessary authority may not have been obtained) would have been immediately revealed.

We should add that Mr Pembroke submitted that on 10 October 1990, Mr Pozniak had forwarded to Mrs Winters the full details of a search at the Liquor Administration Board of the history of the licensing of the Premises.  There would seem to be no doubt that a computer print-out of some sort was sent to Mrs Winters on that date.  But neither the computer print out nor any copy was in evidence.  It was therefore not clear on the evidence what information was contained in the computer print out, nor how the information was presented.  In these circumstances, his Honour was clearly not bound to conclude that Mrs Winters became aware, upon receipt of the letter, that the Premises lacked the necessary entertainment authority.

Mitigation
Both Mr Ireland and Mr Pembroke challenged the trial Judge's finding that GAB, through Mrs Winters, had not acted unreasonably after March 1991 and had not failed to take reasonable steps to mitigate the loss caused, respectively, by the first appellants' misleading conduct and by the solicitors' breach of duty.  There was no dispute between the parties that GAB was obliged to take reasonable steps to mitigate its losses consequent upon the appellants' conduct: Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274 (FCA/FC), at 287. Nor was there any dispute that the onus rested on the appellants to establish that GAB had failed to take reasonable care to mitigate its losses. The appellants focussed on what was said to be Mrs Winters' unreasonable failure to take the relatively simple steps necessary to obtain an entertainment authority in respect of the Premises on behalf of GAB. Had she done so, the losses incurred by GAB would have been reduced.

The main point relied on by the appellants was that the trial Judge had failed to appreciate that it did not matter whether an application for an entertainment authority was lodged in the name of an owner or lessee.  This was said to be significant because Mrs Winters had refused to apply for an authority unless it was in the name of GAB.  It was not suggested that Mrs Winters did not believe it was important to obtain a licence or authority in GAB's name.   Rather, it was contended that she had acted unreasonably in insisting on the requirement.

The expert evidence of Mr Schwartz was to the effect that an entertainment authority, once granted by a Council, subsists for the benefit of the person using the premises provided it remains in force.  Ordinarily it remains in force if fire safety requirements and other conditions are adhered to.  Mr Schwartz said that either the owner or the tenant could lodge an application but that, if a tenant applied, the consent of the owner was required.  The evidence also suggested that the entertainment authority was distinct from the liquor licence, so that the authority could subsist even if the licence lapsed.

It is by no means clear that this evidence establishes that it makes no difference whether an application is lodged in the name of the owner or the tenant.  This issue does not seem to have been directly addressed by the expert evidence and it is quite possible that the identity of the applicant could be of some significance.  Presumably, for example, an applicant owner could withdraw an application or decide to proceed with it at a leisurely pace, thereby prejudicing the position of a tenant whose activities are dependent on the issue of the authority.  However, we are content to proceed on the assumption that it makes little practical difference in whose name an application for an entertainment authority is made.  On this basis, some further factual background is necessary.

His Honour found that Mrs Winters advised Mr Griff promptly of the need for an entertainment authority.  Mr Griff initially dismissed the complaint as being a matter for Mrs Winters to resolve herself.  Subsequently, Mrs Winters asked Mr Griff to consent to an application to Council for the authority.  Mr Griff's response was to say that GAB would have to pay for any building work and that Menmel would require the licence in its own name.  In the light of the expert evidence, it may be that Mr Griff did not fully understand the way in which the entertainment authority worked.  In any event, as the trial Judge found, he insisted on "control" of the application.

Mrs Winters was concerned about Mr Griff's approach, but obtained an architect to consider what building would be required for an authority.  She told Mr Griff that she was prepared to pay the estimated cost of about $20,000, but she wanted the licence in her name.  Mr Griff again insisted on the licence being in his name.  Mr Griff also took the occasion to make demands for changes to the lease adverse to GAB.

Mrs Winters, in a conversation in early June 1991, rejected Mr Griff's demands to amend the lease.  On 10 June 1991, Mr Piper sent a fax to Mr Griff stating, inter alia:

"We intend to apply for an entertainment endorsement for our current liquor licence in respect of [the Premises], and to this end it will require some works to be carried out.  I can only hope for your unconditional approval of the application."

This elicited a reply from Mr Griff on 13 June 1991, in which he no longer pressed for changes to the lease.  Paragraph 1 of the letter read as follows:

"This licence will be granted by South Sydney Council; not by the Liquor Board.  Menmel P/L will be the applicant and, if approved, will be granted to Menmel P/L."

The letter enclosed application forms for an entertainment authority and building approval, with the name of the applicant shown as Menmel Pty Ltd.  A handwritten note on Mr Griff's letter said:

"FORMS ENCLOSED

MENMEL P/L TO SIGN AND LODGE,

AT YOUR REQUEST."

Between June 1991 and December 1991, Mrs Winters repeatedly pressed Mr Griff to sign an application for an "entertainment licence".  Mr Griff repeatedly refused, unless the licence was in his name.

In January 1992, the solicitors for Mr Griff offered in writing to apply for an entertainment licence in Menmel's name, with "no objection to the transfer of the entertainment licence to an approved and responsible transferee".  Mr Pozniak responded  on 31 January 1992 on behalf of GAB, accepting all items in the letter, except that the "Entertainment Licence is to be obtained in our client's name".  On 3 March 1992, Mr Griff's solicitors responded by advising that their clients had withdrawn their consideration of the application for an entertainment licence.  On 9 April 1992, Mr Pozniak wrote a letter of demand on behalf of GAB complaining of the misrepresentations made on behalf of Menmel in July 1990 and threatening the proceedings which were ultimately instituted.  The letter contained the following passages:

"It is our view, that your clients should now do everything possible to mitigate their potential damages.  Most importantly they should co-operate fully with our clients in doing everything necessary to obtain an Entertainment Licence for the premises in our client's name.

We request that you treat this suggestion with the utmost urgency, as our client's damages are continuing to accumulate every week that the premises do not have an Entertainment Licence."

It is striking, in view of the argument put by Mr Pembroke and adopted by Mr Ireland, that the correspondence shows that neither Menmel's solicitors nor Mr Pozniak himself appeared to appreciate that it may not have mattered who applied for the entertainment authority.  Mrs Winters was criticised for failing to seek Mr Pozniak's assistance earlier than April 1992 in connection with the entertainment authority.  Whatever difficulties that failure posed for Mrs Winters' credit on other issues, there is nothing to suggest that, had she done so, the confusion surrounding the requirements for an application would have been clarified by Mr Pozniak.  Had Mr Pozniak appreciated that the debate about the identity of the applicant was or might have been largely irrelevant, he would hardly have stressed, as he did in the letter of 9 April 1992, that Menmel and Mr Griff should  co-operate in obtaining an "Entertainment Licence" in GAB's name.

The trial Judge's conclusion that it was "entirely reasonable" for Mrs Winters to wish to have the protection of a licence in GAB's own name rested on the history of the dealings between the parties and his Honour's assessment of Mr Griff as someone who was prepared to be obstructive and dilatory in relation to the application.  That assessment cannot be successfully challenged on appeal, since it was based on the trial Judge's observations of Mr Griff as a witness.  In substance, the only criticism of his Honour's reasoning is that he paid insufficient attention to the contention that Mrs Winters acted unreasonably in failing to appreciate that it may not have been necessary to insist on a licence in GAB's name.  Yet, if Mrs Winters was in error, it was an error shared by the first appellant's solicitors and, more significantly, by Mr Pozniak himself.  In these circumstances, it cannot be said that his Honour's conclusion on mitigation of loss was not open to him.

Damages
On the assumption that liability was established, neither Mr Pembroke nor Mr Ireland disputed that some consequential losses, in the form of trading losses, were recoverable by GAB, in addition to moneys paid in respect of the acquisition of the business from Tibiki.  However, the following submissions were made on damages:

•GAB's damages should have been discounted, to take account of the possibility (although it was less than a 50% chance) that GAB, through Mrs Winters, would have gone ahead with the relevant transactions even if she had known that no entertainment authority was in place;

•the fact that a night club operated, at least part of the time after March 1991, should have reduced damages; and

•there was some double counting in the trial Judge's calculations.

These defects were said cumulatively to warrant a new trial on the question of damages.

In Australia, the question of causation is governed by the general standard of proof in civil actions.  This is stated in a well-known passage in the joint judgment in Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, at 355:

"On the other hand, the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage.  Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage.  However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities.  It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable."

As the passage indicates, if what has been lost is a commercial opportunity of some value, damages are assessed by ascertaining the value of the opportunity by reference to the degree of probabilities or possibilities: Malec v J C Hutton Pty Ltd (1990) 169 CLR 638, at 643.

Here the question of causation - that is, whether the misleading conduct or breach of duty that caused GAB to sustain any loss or damage - was to be determined on the balance of probabilities.  It was so determined by his Honour's finding that, had Menmel's misleading conduct not occurred and had Mr Pozniak not breached his duty, GAB would neither have acquired the assets of Tibiki's business, nor entered into the lease with Menmel.  It is true that, at one point, his Honour referred to GAB having lost the opportunity to secure a better deal or to avoid the transaction altogether.  Nonetheless, his Honour correctly considered the question to be whether the misleading conduct by Menmel, or the breach of duty by Mr Pozniak, had caused GAB to sustain any loss or damage, and that that question was to be answered by determining, on the balance of probabilities, what GAB would have done had the misleading conduct or breach of duty not taken place.

Once this finding was made, damages were to be assessed on the basis that GAB would not have entered into the relevant transactions.  In The Commonwealth v Ammann Aviation Pty Ltd (1991) 174 CLR 64, where reliance damages were in issue, Mason CJ and Dawson J said (at 97-8):

"...we are not persuaded that the Full Court was wrong in either its estimate (of a 20% chance of cancellation) or its conclusion that the amount of damages to be awarded should not be discounted on account of an event which was unlikely to occur."

Gaudron J, at 158, spoke to the same effect.

On the assessment of damages, no issue arose as to the loss of any commercial opportunity on the part of GAB.  The issue was which of the losses which had in fact been sustained by GAB were recoverable as damages from the appellant.  Accordingly, his Honour did not err in failing to discount the damages by the chance that GAB might have entered into the purchase agreement and the lease in any event.

We do not think that there is any basis for altering the assessment of damages because of the fact that a night club operated on the Premises after March 1991.  The trial Judge accepted that the night club operated sporadically after that date.  However, he approached the assessment of damages by allowing all trading losses, subject to a discount for a variety of factors that he identified.  The finding that justified this approach was that GAB would not have entered into the transactions at all, had the misleading conduct and the breach of duty not taken place.  His Honour made a further important finding that the losses incurred by GAB were inherent in the business undertaking that it entered into by reason of the misleading conduct and the breach of duty.  There is therefore no occasion to alter the assessment of damages on this ground.

At the hearing of the appeal, the parties indicated that they wished to consider further whether the trial Judge's calculations had involved some double counting.  Accordingly, the parties were directed to file further written submissions on the "double counting" issue.

GAB's written submissions acknowledged that there had been double counting in respect of two matters.  First, depreciation was included in the damages awarded for the sum of $120,000 paid by GAB under the purchase agreement and the sum of $164,551 which GAB had expended on repair and renovation of the premises.  Accordingly, GAB accepted that the depreciation components of trading losses should be excluded from damages calculations.  These were as follows:

Depreciation%

Year ended 30 June 1991             26,578.04
     Year ended 30 June 1992             36,909.36
     Year ended 31 June 1993             15,816.00
  79,303.40

Secondly, GAB conceded that the sum allowed in respect of the disposal of assets ($103,578) should also be excluded from the damages awarded.

It will be recalled that the trial Judge discounted the trading losses of $870,000 to $600,000 in order to allow for contingencies.  This is a reduction of approximately 31%.  When allowance is made for the double counting conceded by GAB, the trading losses of $870,000 should be adjusted to $687,119.  After reducing that figure by 31% the damages awarded in respect of trading losses, after discounting for contingencies, should be adjusted to $474,112.

Both GAB and the solicitors submitted that the appropriate way to deal with the double counting is to reduce the damages awarded in respect of trading losses (after allowing for contingencies) by 31%, from $687,119 to $474,112.  The first respondents submitted that, in view of the error involved in the double counting, the trial Judge's assessment of damages was vitiated and a new trial in damages should be ordered.

For the reasons we have given, except for the double counting, we do not think that the trial Judge erred in the assessment of damages.  Had his Honour adverted to the double counting question, it is very unlikely that he would have applied a discount factor to the trading losses greater than 31%.  Since GAB is content to adopt that figure, it is appropriate that the damages in respect of trading losses be reduced to $474,112, which should be rounded off to $474,000.  This would produce damages (before interest) of $758,551.  It is to be borne in mind that a new trial on damages would considerably extend what have already been protracted and doubtless expensive proceedings. 

Cross Appeal
The cross appeal can be disposed of briefly.  There was sufficient evidence before the trial Judge to justify the inference that a significant portion of the trading losses incurred by GAB was attributable to factors for which the appellants should not be held liable.  In particular, the evidence revealed that the profit margin for the business was significantly lower than might have been expected.  The primary records, some of which might have explained the lower profit margins, were not in evidence.  In these circumstances, it was open to the trial Judge to infer that the total amount of trading losses should be reduced in order to take into account the portion of losses attributable to events or conduct for which the appellants cannot be held liable.  In cases such as these, precise calculations are not always feasible.

Apportionment of Responsibility
The issue belatedly raised by Mr Ireland was not raised before the trial Judge.  Accordingly, no findings of fact necessary to an apportionment of damages (assuming that such a course was available) have been made.  It is not appropriate for this matter to be addressed for the first time on the appeal.  Among other difficulties, it is simply not possible to make findings as to what might have been said, for example, on behalf of Tibiki and what part these representations might have played in causing the losses incurred by GAB.

Conclusion
The appeals should each be allowed to the extent that the award of damages in favour of GAB against Menmel, Mr Griff and the solicitors, should be reduced to eliminate the double counting that GAB concedes took place in the assessment of damages by the trial Judge.  Otherwise the appeals should be dismissed.  Having regard to the limited success enjoyed by the first appellants and the solicitors, they should pay 80% of the first respondent's costs of each of the appeals.  The parties should endeavour to agree on the calculations of interest payable in respect of the damages of $758,551.  Failing agreement, the respondents should file a memorandum setting out their calculations of interest until the date of the orders disposing of the appeal.

The first respondents' cross appeal should be dismissed, with costs.

I certify that this and the preceding 48 pages are a true copy of the Reasons for Judgment of the Court

Associate:

Dated: 18 March, 1997

Heard:12-13 February 1997

Place:              Sydney

Decision:18 March, 1997

Appearances:Mr J Ireland Q C and Ms R Rana, instructed by Gye Associates Lawyers, appeared for the appellants.

Mr M Pembroke and Mr D Pritchard, instructed by Michael Conley Solicitors, appeared for the first respondent.

Mr D Officer Q C and Mr D Warren, instructed by Mallesons Stephen Jaques, Solicitors, appeared for the second respondents.