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Mikkelsen v Li

Mikkelsen v Li

Case [2023] VSCA 255 26 October 2023

Misleading or Deceptive Conduct

Misrepresentation

Negligent Misstatement

Reliance

Contributory Negligence

Quantum of Damages

Appeal

Consumer Law

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SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2022 0022
S EAPCI 2022 0029

ZOEY MIKKELSEN & ANOR (ACCORDING TO THE ATTACHED SCHEDULE)	Applicants/Cross-Respondents
v
ZHIREN LI & ANOR (ACCORDING TO THE ATTACHED SCHEDULE)	Respondents/Cross-Applicants

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JUDGES:	FERGUSON CJ, BEACH and McLEISH JJA
WHERE HELD:	Melbourne
DATE OF HEARING:	18 April 2023, 10 August 2023
DATE OF JUDGMENT:	26 October 2023
MEDIUM NEUTRAL CITATION:	[2023] VSCA 255
JUDGMENT APPEALED FROM:	[2021] VCC 2027 (Judge Burchell)

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CONSUMER LAW – Share sale agreement – Misleading or deceptive conduct – Negligent misstatement – Applicable law – Australian Consumer Law (‘ACL’) as law of Commonwealth inapplicable in respect of sale of shares – Trial judge erred in applying ACL as law of Commonwealth – No contributory negligence reduction available under ACL as law of Victoria – Both parties at fault for failing to plead specific provisions – Leave to cross-appeal granted – Cross-appeal allowed – ACL as law of Victoria applies – Contributory negligence available for negligent misstatement claim only.

CONSUMER LAW – Reliance – Misrepresentations regarding net profit of business – Prima facie inference of reliance where representations objectively likely to induce entry into contract – Representees relied on misrepresentations – Failure of representees to undertake due diligence not breaking chain of causation – Leave to appeal refused.

CONSUMER LAW – Negligent misstatement – Contributory negligence – Reduction of damages for contributory negligence of 15 per cent – Failure by trial judge to evaluate relative culpability of parties – Failure by trial judge to consider causal link between failure to take reasonable care and loss or damage – Repeated and unequivocal false representations – Highly misleading documents falsely represented as authoritative – Negligible causal link between failure to undertake due diligence and entry into contract – Leave to cross-appeal granted – Cross-appeal allowed – No reduction of damages for contributory negligence.

CONSUMER LAW – Sale of shares – Misleading or deceptive conduct – Quantum of damages – Respondent retains shares and awarded damages for the purchase price – Whether respondent over-compensated – Finding at trial that shares had no value – Leave to appeal refused – Order for return of shares made by consent.

PRACTICE AND PROCEDURE – Appeal – Bare terms of exclusion clause pleaded – No specific claim pleaded – Ground not pursued at trial – Point properly considered abandoned – Leave to appeal refused.

WORDS AND PHRASES – ‘financial product’, ‘financial service’.

Competition and Consumer Act 2010 (Cth) ss 130, 131, 131A, 137B, sch 2 ss 236, 237, 242; Australian Consumer Law and Fair Trading Act 2012, ss 7, 8; Wrongs Act 1958, ss 25, 26; Australian Securities and Investments Commissions Act 2001 (Cth) ss 12BAA, 12BAB, 12DA; Corporations Act 2001 (Cth) ss 761A, 764A, 766C, 1041H, 1041I, referred to.

Banque Commerciale SA (in liq) v Akhil Holdings Ltd (1990) 169 CLR 279, distinguished – Stav Investments Pty Ltd v Taylor [2022] NSWSC 208; Viterra Malt Pty Ltd v Cargill Australia Ltd [2023] VSCA 157,…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

AGLC: Mikkelsen v Li [2023] VSCA 255
Case: [2023] VSCA 255
Decision Date: 26 October 2023

CaseChat Overview and Summary

The case of Mikkelsen v Li involved a dispute over a share sale agreement, where the plaintiff, Mikkelsen, sought damages for misleading and deceptive conduct and negligent misstatement by the defendant, Li. The matter was heard in the Supreme Court of Victoria. Mikkelsen alleged that Li provided misleading information about the net profit of the business and made false representations, which induced him to enter into the share sale agreement. The primary judge ruled in favor of Mikkelsen, awarding him the purchase price of the shares and additional damages for negligent misstatement.

The legal issues before the court included whether the Australian Consumer Law (ACL) applied as the law of the Commonwealth or Victoria, the availability of contributory negligence reduction under the ACL, and the appropriate quantum of damages. The court had to determine whether the trial judge erred in applying the ACL as the law of the Commonwealth and whether the plaintiff's failure to undertake due diligence broke the chain of causation. The court also needed to assess the relative culpability of the parties in terms of contributory negligence and the causal link between the failure to take reasonable care and the loss or damage.

The court found that the trial judge erred in applying the ACL as the law of the Commonwealth, instead, the ACL as the law of Victoria was applicable. The court allowed the cross-appeal and held that contributory negligence was available for the negligent misstatement claim only. The court determined that the plaintiff's failure to undertake due diligence did not break the chain of causation, as the representations were highly misleading. The court also noted that there was a negligible causal link between the failure to undertake due diligence and the entry into the contract. The court allowed the cross-appeal and found that there should be no reduction of damages for contributory negligence. The court found that the plaintiff was not over-compensated and refused the leave to appeal on the quantum of damages. The parties consented to an order for the return of shares.

Orders