Milner v Delita Pty Ltd
[1985] FCA 478
•19 SEPTEMBER 1985
Re: BRYAN JOHN MILNER and ORS.
And: DELITA PTY. LIMITED; ROGER McMILLAN GLASSON; MORRIS WALTER LEWIN; ROBERT
CHARLES GOOCH MORRISON and JOHN CHRISTOPHER BENNETT
Re: ALLAN JAMES GILL and ORS.
And: DELITA PTY. LIMITED; ROGER McMILLAN GLASSON; MORRIS WALTER LEWIN; ROBERT
CHARLES GOOCH MORRISON and JOHN CHRISTOPHER BENNETT
Nos. G164 of 1982 and G85 of 1983
Trade Practices
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart J.
CATCHWORDS
Trade Practices - consumer protection - alleged misrepresentations made in relation to the promotion of guava growing and marketing schemes - orders sought under ss. 82 and 87 Trade Practices Act - whether misleading or deceptive conduct - whether contravention of s. 52 Trade Practices Act - whether directors were persons involved in contravention by company - damages - whether applicants induced to invest by misleading conduct - whether tax savings should be taken into account in mitigation of loss - whether interest should be awarded by way of damages.
Trade Practices Act 1974: ss. 52, 75B, 82, 87.
Judiciary Act 1903: s. 79.
Federal Court of Australia Act 1976: s. 51A.
Supreme Court Act 1958 (Vic): ss. 60, 79A.
Supreme Court Act, 1970 (N.S.W.): S. 94.
Supreme Court Act, 1935 (S.A.): S. 30C.
HEARING
SYDNEY
#DATE 19:9:1985
ORDER
THE COURT ORDERS THAT the applicants bring in Short Minutes of Order to give effect to these reasons for judgment.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
This case concerns guavas. In 1980 four people, Roger Glasson, Morris Lewin, Robert Morrison and John Bennett decided to promote a scheme for the growing and processing of guavas in the far north coast of New South Wales and for the marketing of guava puree. Guavas had not been grown previously in this country on any large scale. The scheme which they promoted involved approaching people to contribute funds to the scheme for the purpose of establishing and maintaining guava plantations.
Each trust venture was to be divided into two parts. First, a unit trust in respect of which a company would act as trustee. The trust was to purchase the land. Each investor was to acquire a beneficial interest in the totality of the land equivalent to his share. For example, in Guava Property Trust No. 3 each investor would have a share equivalent to 5.7 acres, 5 acres of which were to be planted and .7 acres of which was river. In other cases, the investor's share of the plantation was a five acre participation. No separate titles were to be offered to each investor. It was envisaged that in the third year the crop would return more than sufficient to cover expenses; in the fifth year the plantation would be properly established, yielding a steady income for the investors. Second, a partnership was to be formed by the participants to lease the property from the trustee of the property trust and to undertake the development of the plantation. The partnership would pay all development expenses. Tax losses, if any, in the formative years would be allocated to the partners in proportion to their interests in the partnership. The person who required the tax deduction was to be the partner. The units in the guava property trust would be held by that same person or his family or family company or trust. All land, trees and improvements were to be totally owned by the investors.
"Australian Plantations" is a trust which supplied the trees; when the plantation was established its role was to take over the total maintenance and care of the plantation as manager and pursuant to an agreement with the partnership. It was envisaged that there would be one document governing the terms upon which the investors would become owners of units in the property trusts and another document being the partnership agreement between themselves and their fellow investors. The terms under which Australian Plantations would act as manager were to be and in fact were set out in a separate document. The processing and marketing of the guavas was proposed to be done by a firm "Ballina Plantations" which had four principals namely, Messrs. Glasson, Lewin, Morrison and Bennett.
It was intended by the promoters that Ballina Plantations would purchase the guava fruit at prevailing world prices. Ballina Plantations also would undertake the initial cultivation and preparation of the land.
It is convenient to say something about the four promoters themselves. Mr. Glasson has grown avocados, guavas, lychees and macadamias and conducts a nursery business on the far north coast of New South Wales. He is a former president of the Richmond Avocado Growers Association and a member of the Avocado Marketing and Promotion Board. Dr. Lewin is a medical practitioner: a gynaecologist with an extensive practice in the Lismore district. He is an experienced financial entrepreneur and has other business activities. Mr. Morrison, is an investment adviser and chief consultant to a newsletter called the "Investment Advisor". Mr. Bennett, who manages and owns his own marketing research company, is an expert in the marketing field.
Delita Pty. Limited ("Delita") was incorporated in June 1979. Its shareholders and directors at all material times have been Lewin and Glasson. Delita was the proprietor of the firm "Australian Plantations".
Glasson has been associated with the tropical fruit industry in Australia since 1972. He became interested in guava production in about 1976. He visited Hawaii in 1977 and there met Harold Quinton, Chairman of Lifesavers Limited and they discussed the prospects of successfully growing and marketing guavas in Australia. Subsequently Lifesavers decided to create a commercial plantation for guavas in Australia and Glasson entered into a contract with Lifesavers to manage its plantation, at least so far as horticultural matters were concerned.
Later, Glasson was approached by Lewin about the growing of guavas and they assert that at this time (1978) their intention was to use their own money and borrow funds to engage in the growing of guavas. But before committing themselves to the investment they decided to travel to Hawaii to evaluate the guava industry. They assert that they made various enquiries there of different persons and institutions and obtained copies of relevant documents. They also visited Hawaii in 1980.
In 1980 the respondents invited persons to participate in the project of growing and processing guava fruit. Brochures and other written materials were sent or handed to prospective investors or otherwise came to their attention, including the applicants in these two sets of proceedings which are being heard together by consent. The applicants rely on the statements contained in this written material to found their case in this Court, alleging that it contained representations which were made to them by the respondents and which are said to be false and to constitute misleading and deceptive conduct, or conduct that is likely to mislead or deceive within s. 52 of the Trade Practices Act 1974 ("the Act"). The applicants claim damages and other relief against the respondents. Each of the applicants asserts that he, she or it invested substantial sums of money in the guava projects, that they made these investments by reason of the representations made to them by the respondents and in the result suffered loss and damage. The documents which were received by the applicants, and upon which they primarily found their case of misleading conduct emanated from a business investment advisory firm known as Messrs. Robert Morrison & Associates. Morrison is a principal of that firm and it is alleged by the applicants that those documents were distributed by Robert Morrison & Associates as servant or agent of the respondents or with the consent of the respondents.
There are over 50 applicants. They are the persons or companies who invested funds in the guava ventures either as members of the property trusts or as partners in the development of the plantations. The applicants are resident in various States and Territories of Australia. They follow a wide variety of vocations and include a solicitor, medical practitioners, accountants, engineers, a grazier, a pharmacist, a psychologist, hairdressers, retired business men, a senior officer of a statutory authority, trustees of a religious order, together with the wives of some of those persons. Not only do the participants follow a wide variety of vocations but they had varied reasons for entering the schemes including the securing of a source of income for their retirement, a means of minimising income tax, a source of capital growth for their investments, or a combination of these various elements.
There were four guava property trusts established. The trustee of Guava Property Trust No. 1 was Novera Pty. Limited. The trustee of Guava Property Trust No. 2 was Natran Pty. Limited. The trustee of Guava Property Trust No. 3 was Metral Pty. Limited. The trustee of Guava Property Trust No. 4 was Hevilla Pty. Limited. Various brochures were issued in respect of the property trusts, but the contents of each brochure are not materially different. I will refer to differences where appropriate throughout these reasons. Some people who became members of a particular property trust in fact received a brochure referable to another property trust other than the one to which they ultimately subscribed. Other documents in the form of newsletters or otherwise were from time to time issued to various applicants.
The guava is a large shrub or small tree native to tropical America. It was first introduced into the Hawaiian islands in the early 19th Century by Don Francisco de Paula Marin, a Spanish horticulturalist. The guava fruit is round to pear-shaped and its interior flesh ranges from white to cream and from pink to salmon-red in colour. The fruit has an acid pulp within which is a juicer pulp full of small hard kidney-shaped seeds. The guava raw or processed is a valuable source of nourishment. Its vitamin C content considerably exceeds that of oranges; it is also rich in vitamins A and B and contains fair amounts of calcium and phospherous and some iron thiamine and niacin. Guavas are processed into nectars, juices, jams, jellies, preserves, sherbert and baked products. Fruits preferred for processing are those with a thick cuter flesh and a small seed cavity. The fruit of the guava tree has a rough exterior texture and measures up to 3 inches in diameter. The guava grows wild in many parts of the Hawaiian islands and it is only in comparatively recent years that it has been grown commercially in plantations. In 1970 5.1 million pounds of guava fruit were processed in Hawaii, of which only 635,000 pounds (12.5%) were derived from 70 cultivated acres. This may be contrasted with the position in 1979, when of the 6.5 million pounds of guava fruit processed in Hawaii, 4.5 million pounds (70%) were derived from 940 cultivated acres. The guava is also produced in large quantities in South Africa, Brazil, and Mexico, all of which grow both the white and pink fleshed varieties.
The case was the subject of many directions hearings and evidence was taken by me in Hawaii as a Commissioner appointed by this Court for the taking of evidence from residents of Hawaii in June 1984. The trial itself occupied 44 days. Evidence was taken from witnesses, most of whom had sworn affidavits. The exhibits are voluminous. Although all matters were heard together, they are in fact separate from each other because each applicant sues in his own capacity and different considerations apply to each applicant although there are many points of commonality between the applicants. Counsel and solicitors for the parties are to be commended for their efforts in seeking to shorten the proceedings and confine their disputes to matters that were really in issue rather than merely technically in dispute. Were it not for their efforts the trial would have taken a great deal longer than it did.
The respondents are Delita, Glasson and Lewin. They had earlier cross-claimed against Morrison and Bennett who in turn cross-claimed against Glasson and Lewin. The cross-claims were later not pressed because the parties to them resolved their differences, a matter to which I shall refer later.
I propose to divide my treatment of the case into two broad divisions. First I will deal with questions that are common to all of the applicants or many of them; then I will turn to the case of each applicant in so far as it raises issues other than common issues.
Issues
The applicants allege in paragraph 6 of their amended statements of claim that Delita, by Glasson and Lewin acting as its directors and agents, engaged in conduct that is misleading or deceptive or likely to mislead or deceive in contravention of s. 52 of the Act by making the following representations:
(a) The respondents, through an entity, Australian Plantations, had carefully monitored the development of a guava fruit growing and processing industry in Hawaii.
(b) That there existed a substantial demand on the Mainland of the United States of America and in Japan for the products of the guava fruit growing and processing industry and that the extent of such demand was known to the respondents.
(c) That there existed in Hawaii a lack of production to cater for local demand and that Hawaiian processors would take all of the guava puree which could be supplied by guava plantations as projected by or on behalf of the respondents and that the extent of such demand was known to the respondents.
(d) That a guava fruit growing and processing industry in Australia was commercially viable both domestically and in export terms in 1980 and thereafter.
(e) That the respondents had during 1980 a first-class management team in relation to the growing and processing of guava fruit.
(f) That returns on overseas and local experience available to the respondents in relation to the growing and processing of guava fruit showed a lucrative early return, rising to an anticipated $5,000.00 per acre in Year 5 from planting.
(g) That the costs of growing and processing guava fruit as projected by or on behalf of the respondents were a true and accurate representation of such costs.
(h) That the costs and expenses of growing and marketing guava fruit as projected by or on behalf of the respondents represented a reasonable and proper charge in respect of such costs.
(i) That the Department of Primary Industry through its Research Station at Nambour in Queensland had made certain data available to the respondents in relation to the growing of guava fruit.
(j) That the New South Wales Department of Agriculture had made certain statements to the respondents, repeated by the respondents as having allegedly been made by the New South Wales Department of Agriculture as to the acreage requirements to meet the Australian demand for guava fruit."
I propose to make my findings of fact referable to these representations as a whole rather than to take each representation separately and to make separate findings of fact. The reason for taking this course is because, obviously, there is considerable overlap between the representations.
In paragraphs 7, 8 and 9 of the statements of claim the applicants allege that Delita, by Glasson and Lewin acting as its directors and agents, engaged in conduct that is misleading or deceptive or likely to mislead or deceive in contravention of s.52 of the Act "namely the distribution and the dissemination by themselves their servants or agents or with their consent by a business investment advisory firm known as Robert Morrison & Associates of a document entitled "Reasons for Recommending the Guava Property Trust" (paragraph 7) and a brochure related to the establishment of Guava Property Trusts including "Reasons for Recommending the Guava Property Trust" (paragraph 8) and of a Progress Report (paragraph 9).
The applicants then allege that:-
- During 1980 they paid sums of money representing deposits on account of units and partnership shares (capital) in relation to Guava Property Trusts Nos. 1, 2, 3 and 4.
- On 11 November 1980 the Guava Property Partnerships Nos. 1, 2, 3 and 4 of which the various classes of applicants are members, entered into written contracts with Delita.
- During 1980 the applicants received summaries and unit certificates in respect of their interest in the Guava Property Trusts and Partnerships from a firm of solicitors, Messrs. Stone and Poulos.
- During 1981, 1982 and 1983 the applicants made further payments in respect of the Guava Property Partnerships of which they were members.
- On 2 July 1982 the applicants instructed Delita to undertake no further work on behalf of the partnerships.
- On 27 July 1982 demands were made on behalf of Delita upon the applicants requiring payment of certain moneys.
- On 9 September 1982 Delita, through its solicitors, purported to accept repudiation of the agreement between Delita and the various Guava Property Partnerships of which the applicants are members.
- The conduct of Delita mentioned above is in contravention of s. 52 of the Act.
- Glasson and Lewin aided, abetted, counselled or procured the said contravention or induced it or were directly or indirectly knowingly concerned in or a party to it.
The applicants claim:
- Declarations that Delita has engaged in misleading or deceptive conduct or conduct that is likely to mislead or deceive in contravention of s. 52 and declarations that Glasson and Lewin have aided, abetted, counselled or procured or induced or have been directly or indirectly knowingly concerned in or party to the contraventions.
- A Declaration that the agreements of 11 November 1980 between Delita and the applicants are void and of no effect, and an injunction restraining Delita from taking any proceedings to enforce any of the four agreements of 11 November 1980.
- Orders declaring the four agreements of 11 November 1980 to be void ab initio and directing Delita to refund to the applicants all moneys paid by them pursuant to the agreements and to pay to the applicants any loss or damage sustained by them as a result of the alleged contraventions, and orders directing Glasson and Lewin to pay to the applicants any such loss or damage.
Claims are also made generally for damages, interest and costs.
In their defences the respondents answer the allegations made in paragraph 6 of the statements of claim by:
- not admitting the making and implementation of invitations to persons to participate in the investment in the growing and processing of guavas and the establishment of the Guava Property Trusts;
- denying that Delita (by Glasson and Lewin acting as its directors and agents) engaged in misleading or deceptive conduct or conduct that was likely to be misleading or deceptive in contravention of s. 52;
- not admitting that the respondents made the representations alleged in paragraph 6 of the statements of claim; and
- saying that if the respondents did make any of those representations nevertheless the representations did not constitute misleading or deceptive conduct in contravention of s. 52 (paragraph 3 of the defence).
In paragraphs 4, 5 and 6 of their defences the respondents answered the allegations made in paragraphs 7, 8 and 9 respectively of the statements of claim. Those three paragraphs are in all material respects the same although each relates to the different document the subject of the allegations in paragraphs 7, 8 and 9 of the statements of claim. It is sufficient therefore to summarise paragraph 4 of the defences which is in answer to paragraph 7 of the statements of claim. In paragraph 4 the respondents state that:
- they do not admit making and implementing the invitations as alleged in paragraph 7 of the statements of claim;
- they deny that Delita (by Glasson and Lewin acting as its directors and agents) engaged in conduct that was misleading or deceptive or was likely to be misleading or deceptive in contravention of s. 52 as alleged in paragraph 7 of the statements of claim or at all; and
- they deny that they or any one acting for or on their behalf or with their consent distributed or disseminated the particular document referred to in paragraph 7 of the statements of claim.
Submissions on the pleadings
Counsel for the applicants submitted that the respondents had not denied in their defences that the three documents, the distribution and dissemination of which was alleged by the applicants to constitute misleading or deceptive conduct, were misleading or deceptive and therefore must be taken to have admitted that they were misleading or deceptive. Counsel relied in particular upon a comparison between paragraph 3 of the defences on the one hand with paragraphs 4, 5 and 6 of the defences on the other other. He stressed that in paragraph 3 the respondents specifically allege that if they did make any of the alleged representations nevertheless those representations did not constitute misleading or deceptive conduct in contravention of s. 52. Counsel for the applicants emphasised that there was no corresponding allegation in paragraphs 4, 5 and 6 of the defences.
The submission is unsound. In each of paragraphs 3, 4, 5 and 6 of the defences the respondents denied that the conduct alleged by the applicants in the statements of claim to constitute misleading or deceptive conduct in contravention of s. 52 was misleading or deceptive. The applicants did not allege in their statements of claim that the three documents specified in paragraphs 7, 8 and 9 were misleading or deceptive: the allegation is that the misleading or deceptive conduct was constituted by the distribution and dissemination of those documents. Doubtless there is inherent in that allegation either an implied statement or an assumption that the documents are themselves untrue or misleading or deceptive; but the applicants cannot complain if the respondents take the statements of claim as they find them and answer the allegations made therein and not other allegations which rest on assumptions or implications in the pleadings.
The case was fought throughout on the basis that the parties were at issue on the question of whether the three documents were untrue or misleading or deceptive and the question whether distribution or dissemination of them, assuming the relevant statements made therein were untrue, was misleading or deceptive conduct. If I had upheld the pleading points taken in final address by counsel for the applicants I would have granted leave to the respondents to amend their defences to remedy the defects and I would not have imposed any terms or conditions upon the respondents in granting that application save the usual term that the respondents pay the applicants' costs of and incidental to the amendment, a purely formal order with minimum costs involved.
The case against Glasson and Lewin was based on s. 75B of the Act, namely that they were persons said to be involved in the contraventions of s. 52 by Delita. In summary, paragraphs 24 to 29 of the statements of claim, echoing the language of paragraphs (a), (b) and (c) of s. 75B, allege that Glasson and Lewin each aided abetted counselled or procured the contravention, induced the contravention, was directly or indirectly knowingly concerned in or a party to the contravention. Counsel for the respondents submitted that the statements of claim were defective in that paragraphs 24 to 29 do not allege the material facts supporting the allegations made in them, in particular the existence of knowledge by Glasson and Lewin of the essential elements of the alleged contravention. In my opinion there is no substance in this submission. As the complaint of the respondents is essentially one of absence of particularity, it does not, in my opinion, vitiate the pleading itself. Further, an application was made by the respondents well before the commencement of the hearing of this matter to another Judge of this Court to strike out the statements of claim, but the application was refused. Finally, the case was fought throughout on the basis that the parties were squarely at issue on all relevant questions of fact and law relating to the alleged involvement of Glasson and Lewin in the contraventions of Delita. Hence if any amendment was necessary I would have taken the same course I mentioned above in relation to the challenge by the applicants to the defences.
Counsel for the respondents made a further challenge to the statements of claim, namely, that paragraphs 7, 8 and 9 were said to be defective in that the only material allegation made in them is that the conduct alleged to be misleading or deceptive is the distribution of the three specified documents. Counsel submitted that the mere act of distribution of the documents cannot constitute misleading or deceptive conduct. The making of representations that are misleading or deceptive may constitute such conduct; also the distribution of a document which itself contains false statements, may constitute misleading conduct, but neither of these latter matters is alleged in paragraphs 7, 8 or 9. I reject the submission as unsound. The three paragraphs in question, when read in conjunction with paragraph 23 which asserts that Delita's conduct contravened s. 52, do not particularise the respects in which distribution of the documents is said to be misleading or deceptive; for example, whether they contain materially false statements or not. However, again this is essentially a complaint of absence of particularity; the absence of the particular respects in which the conduct is said to have contravened s. 52 does not vitiate the pleadings. It will be recalled that the earlier application by the respondents to strike out the statement of claim was unsuccessful and that the case was fought throughout on the basis that the conduct of Delita which was said to be misleading or deceptive was the distribution of the relevant documents each of which contained materially false statements inducing the applicants to invest in the guava projects. I say again that I would have allowed the applicants to amend the statements of claim to overcome the defects asserted by counsel for the respondents if I had found that they existed.
Although the allegations made in paragraphs 7, 8 and 9 of the statements of claim refer to the distribution and dissemination of the relevant documents the word dissemination adds nothing to distribution. Also, although the relevant paragraphs of the statement of claim refer to relevant conduct as being misleading or deceptive or likely to mislead or deceive I shall throughout my reasons simply refer to allegations of misleading or deceptive conduct. This should be taken as incorporating in those references a reference also to conduct that is likely to mislead or deceive.
What were the representations and how and by whom were they made?
Neither Glasson nor Lewin was called by the respondents to give evidence. Nor was Morrison or Bennett called as a witness by any party. A document was tendered in evidence, being a deed dated 24 September 1984 whereby Delita, Glasson, Lewin, Morrison and Bennett agreed to resolve the differences between them relating to the questions involved in this case. In brief, the deed provided that (i) Morrison and Bennett indemnified Delita, Glasson and Lewin as to one-third of the monetary value of any judgment which the applicants may obtain against Delita, Glasson and Lewin in this or other proceedings based on the same, or substantially the same facts; (ii) Delita, Glasson and Lewin indemnified Morrison and Bennett as to two-thirds of the monetary value of any judgment which the applicants may obtain in any proceeding against Morrison and Bennett; (iii) the parties would share the costs of these and any other proceedings in certain agreed proportions; (iv) Morrison and Bennett, Delita, Glasson and Lewin would pay certain sums of money to each other in consideration of the discontinuance of their respective cross-claims.
A considerable body of evidence was tendered in this case concerning various companies, the trusts of which they were trustees and their interlocking relationships. The companies included Danille Pty. Limited, Ferric Pty. Limited, Renwell Projects Pty. Limited, Bennett Research Pty. Limited and Quialo Pty. Limited. In the end I do not think this evidence matters very much or at all. Ultimately the relevant facts are fairly simple and in a rather narrow compass. I see no point in traversing the whole of the evidence in the case. I have considered it all and intend to state my conclusions.
On 7 September 1979 a letter was written to Mr. F. Stein, one of the investors and an applicant, on the letterhead of Australian Plantations and signed by Lewin. Stein received the letter in mid September 1979. Various statements which were made to investors in the documents sent to them by or on behalf of Robert Morrison & Associates are echoed in this letter. The letter was sent to Morrison by Stein on 10 April 1980.
In 1979 and 1980 Mr. Oswald Blake conducted a real estate agency in Alstonville on the north coast of New South Wales. He knew both Lewin and Glasson. Morrison telephoned Blake early in 1980 saying that he intended to visit the north coast with Bennett to look at a macadamia nut plantation with a view to purchasing one. Blake told Glasson of Morrison's intentions and Glasson asked Blake to arrange for Morrison to have a talk with Glasson and Lewin about guavas. A letter dated 21 January 1980 was sent by Australian Plantations and signed by Glasson to Blake giving "an appraisal" of the present and future prospects of the guava industry in Australia. Again various statements made in this letter are reflected or echoed in the documents sent to the investors. On 2 February 1980 Morrison and Bennett travelled to the north coast and met Blake. Blake introduced them to Glasson and Lewin. Morrison, Bennett, Glasson and Lewin, in the presence of Blake, discussed guavas generally as well as other matters. It is plain that both Glasson and Lewin sought to interest Morrison and Bennett in the promotion of the guava industry. It is also plain that the letter of 21 January 1980 was sent to Blake at least for the purpose of his giving it to Morrison. After the visit of 2 February 1980 Glasson told Blake:
"He had been to Sydney and met Robert Morrison and was getting on very well with him and that I (Blake) did him (Glasson) a damn good turn in introducing him."
He (Glasson) then said:
"Look, the avocado plantation, the syndication by Robert Morrison seems to be going well and if that is finalised there will be $10,000 in your pocket"
He then went on to say that:
"The guava situation was at its early stage but that if that one was syndicated as well, there would be $20,000 in my pocket."
Glasson, Lewin, Morrison and Bennett met again on the weekend of of 23-24 February 1980 and correspondence passed between them in late February 1980. Glasson and Lewin said "the spirit of co-operation with which we are entering into the arrangement has been accepted by us all". Glasson and Lewin agreed with Morrison and Bennett to maintain a guava plantation for them for a special rate of $750 per acre provided Morrison and Bennett syndicated 200 acres and ensured that Delita was the manager "at our usual rates" namely $1,200 per acre. By late March 1980 negotiations were well in train for the purchase of a number of properties to be used for the syndication of the guava property trusts and instructions were given to a firm of solicitors in Lismore, Messrs. Stone & Poulos, to act in relevant transactions.
On 28 April 1980 Glasson and Lewin visited Hawaii. They returned on 12 May 1980. On 5 May 1980 Lewin saw a draft of one of the brochures or other documents issued in mid 1980 by Robert Morrison & Associates to the investors. Glasson saw a draft of one such document on 12 May 1980.
Various drafts of the relevant document were prepared from time to time. It was submitted by counsel for the applicants that Lewin substantially drafted or at least approved the pink edition of the No. 1 Guava Property Trust brochure. The later editions contained relatively minor changes so far as matters material to this case are concerned. Although I recognise some force in this submission I do not think that it was established.
The relevant documents seen by the investors were a brochure relating to the No. 1 Trust (pink), another brochure relating to the same trust (yellow), a brochure relating to No. 2 Trust, and a brochure relating to No. 3 Trust. There were also some three versions of the document styled "Reasons for Recommending the Guava Property Trust".
It is clear, with perhaps some exceptions to which I shall refer later, that all applicants received or saw copies of the relevant brochures and that most received copies of the document "Reasons for Recommending the Guava Property Trust". I will refer to the position of individual investors later. None of the brochures or the document "Reasons for Recommending the Guava Property Trust" were sent to investors by any of the respondents. They were all sent by Robert Morrison & Associates. The relevant statements contained in those documents in substance reproduce the statements made in the two letters to which I have referred namely, the letter to Stein of 7 September 1979 and the letter to Blake of 21 January 1980, (the "Stein" and "Blake" letters) both from Australian Plantations. It is clear that there was reasonably frequent communication between Lewin and Glasson on the one hand and Morrison and Bennett on the other from February 1980 onward.
On 14 June 1980 Glasson, Lewin, Morrison and Bennett met in Sydney and had dinner together. They discussed the syndication of the guava property trusts and various questions relating thereto including the question of Morrison's commission. Mr. Stone of Stone & Poulos, solicitor, had sent one of the brochures relating to the Guava Property Trust No. 1 to Morrison on 9 June 1980, having previously expressed considerable concern about a draft of it to Lewin.
I referred in the opening part of my reasons for judgment to the establishment of the relevant property trusts and partnerships and the involvement of the respondents in it. I need not repeat what I said except to say that those statements also represent my findings of fact. In the early part of 1980, probably on or about 23-24 February 1980, Glasson, Lewin, Morrison and Bennett decided to promote the scheme for growing and processing guavas the subject of this case. Delita was a party to the joint enterprise; it was the proprietor of Australian Plantations which itself was to act as the manager of the relevant plantations. Each of Glasson, Lewin, Morrison and Bennett was to bring his own particular expertise to bear in the promotion and establishment of the property trusts and partnerships. Although the relevant documents upon which reliance is placed in this case were distributed by Robert Morrison & Associates and not by Glasson, Lewin or Delita it is plain that Lewin, Glasson and Delita were aware of the contents of the documents, of the fact that they were being distributed to potential investors for the purpose of involving them in a scheme for growing and processing guavas and that the distribution of the documents to potential investors fell within the tasks allotted to Morrison and Bennett. The evidence is not precisely clear as to whether there was any line of demarcation drawn between the activities required or expected of each of the participants in the joint enterprise, although some correspondence between the four tends to suggest that this was at least partly the case.
In a letter of 29 February 1980 from Morrison and Bennett to Lewin and Glasson the four are referred to as offering a "powerful combination which should cover all aspects of the guava project". Morrison described his role in the venture as to help in the formation and marketing of the syndicate formation components of our plan". The letter continues:-
"I (Morrison) also see my role as one of assisting John (Bennett) in the formation of marketing ideas and no doubt all our roles will overlap to a certain degree. . . . I see John's role as one of holding the responsibility of marketing guava puree, be it to distributors or direct to the market place . . . John is of course the most able to provide the market research necessary to establish and prove potential markets, and to market in the most appropriate manner."
That all four benefited from the arrangements and received profits from the venture is evident in the letter of 25 February 1981 from Australian Plantations to Morrison:
"Australian Plantations has received equal land profits as members of Ballina Plantations as well as acting as the principal contractors for the Trustees. John Bennett has also received approximately one hundred thousand dollars from the profits of the land sales and preparation as you have, and like Australian Plantations he has not received any commissions."
The statements made to investors in the documents distributed by Morrison & Associates or made orally by or on behalf of Morrison were all made within the scope of the authority given to Robert Morrison & Associates by Delita, Glasson and Lewin. Indeed, the objectives of the persons concerned could not have been fulfilled without this involvement by Robert Morrison & Associates. It was an integral part of the arrangement.
Other companies, some of which I have mentioned earlier, performed roles in the establishment and furtherance of the guava growing project but nothing turns on this for presently relevant purposes.
In my opinion the relevant representations which are the subject of this case were made by Delita. They were conveyed by Robert Morrison & Associates within the scope of authority given to Morrison and Bennett by the consortium which included Delita. Throughout the relevant conduct, Robert Morrison & Associates, in making representations to the investors, plainly acted for the benefit of Delita and Delita plainly ratified its conduct and derived benefit from it.
Was the conduct misleading or deceptive?
Each of the applicants sues the respondents for damages said to arise from materially false statements in the documents emanating from Robert Morrison & Associates and upon which they claim to have relied when investing funds in the guava projects. There are four guava property syndicates and partnerships mirrored in the grouping of the applicants into four sections in the statements of claim. The documents which came to the attention of the investors varied from syndicate to syndicate and to some extent from investor to investor within each syndicate. But the essential statements on which the applicants rely to establish their case and on which the proceedings turn are substantially the same in each of the brochures read by the investors in all four syndicates and, although in condensed form, in the document "Reasons for Recommending the Guava Property Trust". They fall conveniently into statements relating to the following six broad categories:-
1. The overseas market for guava puree and guava products;
2. The Australian or the domestic market for guava puree and guava products;
3. The costs of growing, processing and marketing guavas and guava products;
4. The profits from the guava syndicates and the viability of the guava projects;
5. The respondents' knowledge of overseas and domestic markets and of the guava industry generally; and
6. Miscellaneous.
I see no purpose in analysing every relevant statement in each of the brochures and other documents relied on by the applicants. It is sufficient if I take one brochure as a fair sample, a course followed by the parties themselves before me in evidence and address and which is the only practicable course to follow. I take the first brochure (called because of its colour the pink brochure) relating to Guava Property Trust No. 1 as a fair sample, although some of the statements made in it were not repeated in any of the other documents. It was the brochure to which most attention was devoted by the parties in the case as representing a reasonable sample. A copy of this brochure is attached to these reasons for judgment as a schedule. Before referring to the particular statements made in this brochure it is important to say that each document must be read as a whole. The impression which I gained from my first reading of the documents and indeed from all subsequent readings, an impression shared by the investors who gave evidence before me, was that the guava growing, processing and marketing projects were represented in glowing terms as safe, exciting and lucrative investments with excellent long term prospects providing safe and high yielding superannuation and income benefits and probable tax deductions. The existence of markets for Australian grown guavas and their products was obviously fundamental to the success of the venture and to inducing people to invest in it. The documents painted a picture of excellent potential both here and abroad for the marketing of guavas and guava products. The evidence from investors before me confirms that they regarded the statements in the documents relating to markets both here and overseas as vital in deciding whether or not to invest money in the guava projects.
The various statements are summarised in paragraph 6 of the statements of claim and the schedule thereto and may be conveniently grouped as follows (my references hereunder are to the matters pleaded in the statements of claim (para. 6) and my references to sub-paragraphs are to the sub-paragraph of paragraph 6 of the statements of claim).
1. Overseas Markets
(b) "that there existed a substantial demand on the mainland of the United States of America and in Japan for the products of guava fruit growing and processing industry . . ."
(c) "that there existed in Hawaii a lack of production to cater for local demand, that Hawaiian processors would take all of the guava puree which could be supplied by guava plantations as projected by or on behalf of the respondents . . ."
(d) "that a guava fruit growing and processing industry in Australia was commercially viable, both domestically and in export terms in 1980 and thereafter."
2. Domestic or Australian Market
(d) "that a guava fruit growing and processing industry in Australia was commercially viable, both domestically and in export terms in 1980 and thereafter."
3. Costs of Growing and Processing Guavas and their products and marketing them
(g) "that the costs of growing and processing guava fruit as projected by or on behalf of the respondents were a true and accurate representation of such costs."
(h) "that the costs and expenses of growing and marketing guava fruit as projected by or on behalf of the respondents represented a reasonable and proper charge in respect of such costs."
4. Profitability and Viability of Guava Ventures
(d) "that a guava fruit growing and processing industry in Australia was commercially viable, both domestically and in export terms in 1980 and thereafter."
(f) "that, based on overseas and local experience available to the respondents, returns in relation to the growing and processing of guava fruit showed a lucrative early return, rising to an anticipated $5,000 per acre in Year 5 from planting.
5. The Respondent's Knowledge of Markets Both Overseas and Domestic and of the Guava Industry Generally and their endorsement of statements made in the documents relating to those matters.
(a) "The respondents, through an entity Australian Plantations, had carefully monitored the development of a guava fruit growing and processing industry in Hawaii."
(b) "That there existed a substantial demand on the mainland of the United States of America and in Japan for the products of guava fruit growing and processing industry and that the extent of such demand was known to the respondents."
(c) "That there existed in Hawaii a lack of production to cater for local demand, that Hawaiian processors would take all of the guava puree which could be supplied by guava plantations as projected by or on behalf of the respondents and that the extent of such demand was known to the respondents."
6. Miscellaneous
(j) "That the New South Wales Department of Agriculture had made certain statements to the respondents, repeated by them as having allegedly been made by that Department as to the acreage requirements to meet the Australian demand for guava fruit."
Turning to the pink brochure, the relevant statements appearing therein may be broadly classified as follows:-
1. OVERSEAS MARKETS - "The drink has also been promoted in Hawaii, Japan and America, and the demand is so strong that it outstrips production."
"The guava can produce up to 500lbs per tree. There are approximately 500 acres of guava trees planted, or planned to be planted in Australia. Over 80% of this is under our management. Within four years this will produce around 8,000 tons of puree, sufficient for 40 million litres of guava drin."
"THE MARKET" - "As mentioned, an extensive export market exists for our puree,. . . A recent trip to Hawaii has confirmed reports that Hawaiian processors will take all the puree we can give them. They do not have enough production to cater for their local demand, let alone to supply the rest of America or the Japanese market.
In other words, it appears our total production could be sold to export markets."
"As mentioned we have ourselves fully covered with an eager domestic and overseas market. . . . To be conservative, we have deliberatley kept the number of acres under plantation down, and have established export markets prior to further planting. We are neither solely dependent upon the export market nor the domestic market to sell our produce." (These last mentioned statements were not repeated in the other documents.)
2. DOMESTIC MARKETS
"The guava can produce up to 500lbs per tree. There are approximately 500 acres of guava trees planted, or planned to be planted in Australia. Over 80% of this is under our management. Within four years this will produce around 8,000 tons of puree, sufficient for 40 million litres of guava drink."
". . . it appears our total production could be sold to export markets. This is not the intention, as the domestic fruit juice market will be promoted with some fruit juice distributors offering large promotional budgets in return for the supply of initial puree."
"As mentioned, we have ourselves fully covered with an eager domestic and overseas market. . . . To be conservative, we have deliberately kept the number of acres under plantation down, and have established export markets prior to further planting. We are neither solely dependent upon the export market nor the domestic market to sell our produce." (These last mentioned statements were not repeated in the other documents.)
3. COSTS OF GROWING AND PROCESSING GUAVAS AND THEIR PRODUCTS AND MARKETING THEM
Various references in the brochures including the pink brochure, to land cost or land preparation costs and other related matters which I will for convenience not mention here but refer to later when considering this particular subject matter.
4. PROFITABILITY AND VIABILITY OF GUAVA VENTURES
"Developing plantations makes a lot of investment sense, especially for those in need of a tax shelter."
"An excellent superannuation, or income protection assurance."
On page 2 of the brochure reference is made to Options I and II, and reliance is placed by the applicants under this head on all the statements made on that page.
"Participation in this venture must be viewed as more of a business undertaking than an investment with accurate and defined performance estimates."
"The guava can produce up to 500lbs per tree. There are approximately 500 acres of guava trees planted, or planned to be planted in Australia. Over 80% of this is under our management. Within four years this will produce around 8,000 tons of puree, sufficient for 40 million litres of guava drink."
"6. Plantations do not have the traditionally uncertain nature of general farming. Plantations are enormously capital intensive, and the use of irrigation and modern science removes the reliance upon the whims of Mother Nature. Plantations are more a manufacturing business than a farm."
"7. Be it boom or bust, future security must be in the production of food. Further, Australia is predicted to become the "Feeder of the World", as the world's growing population restricts the amount of arable land in the Northern Hemisphere."
"In the income earning years, liquidity would increase and significant capital gains are likely to result."
There are six paragraphs on page 7 under the head "Capital Gain Potential" all of which are relied upon by the applicants under this head.
"As we see it, the risks are not so much in the growing of the guava but in the marketing. As mentioned, we have ourselves fully covered with an eager domestic and overseas market. . . . To be conservative, we have deliberately kept the number of acres under plantation down, and have established export markets prior to further planting. We are neither solely dependent upon the export market nor the domestic market to sell our produce." (These last mentioned statements were not repeated in the other documents.)
The appendix to the brochure contains detailed figures with respect to both Options I and II. All of this material is relied on by the applicant under this head.
5. THE RESPONDENTS' KNOWLEDGE OF MARKETS BOTH OVERSEAS AND DOMESTIC AND OF THE GUAVA INDUSTRY GENERALLY AND THEIR ENDORSEMENT OF STATEMENTS MADE IN THE DOCUMENTS RELATING TO THOSE MATTERS.
The applicants rely upon the whole of the document and the particular statements made in it which directly relate to the knowledge of the respondents of these matters including the following:
"The guava can produce up to 500lbs per tree. There are approximately 500 acres of guava trees planted, or planned to be planted in Australia. Over 80% of this is under our management. Within four years this will produce around 8,000 tons of puree, sufficient for 40 million litres of guava drink."
"As mentioned, an extensive export market exists for our puree, . . . A recent trip to Hawaii has confirmed reports that Hawaiian processors will take all the puree we can give them. They do not have enough production to cater for their local demand, let alone to supply the rest of America or the Japanese market.
In other words, it appears our total production could be sold to export markets. This is not the intention, as the domestic fruit juice market will be promoted with some fruit juice distributors offering large promotional budgets in return for the supply of initial puree."
"As we see it, the risks are not so much in the growing of the guava but in the marketing. As mentioned, we have ourselves fully covered with an eager domestic and overseas market. . . . To be conservative, we have deliberately kept the number of acres under plantation down, and have established export markets prior to further planting. We are neither solely dependent upon the export market nor the domestic market to sell our produce."
6. MISCELLANEOUS
No part of the pink brochure is relied on under this head but the applicants rely upon statements in the Blake and Stein letters to the effect that agricultural officials have estimated 500 acres will be needed to satisfy 5% of the Australian fruit juice market. In a sense this is reflected in the brochures in statements which were made to the effect that Australian Plantations expected 500 acres to produce 8,000 tons of fruit sufficient for 40 million litres of guava drink.
For convenience I shall discuss the statements made in the docuements under the headings mentioned above:
1. OVERSEAS MARKETS
Most of the evidence concerning this issue was given by witnesses in Hawaii before the Commission which was held there in June 1984 and from documents tendered there. In the main this evidence was admitted without objection at the final hearing. The witnesses who gave evidence before the Commission included the following:-
Dr. Frank Scott, a highly qualified agricultural economist whose speciality is market potential and market development of various tropical products including guavas. He has been continuously involved since 1954 in tropical crops in Hawaii including guavas. In June 1984 he was Professor of Agriculture and Research Economics at the University of Hawaii. He was head of the Department of Agricultural Economics for 11 years. He is a highly qualified expert witness. I accept the substance of his evidence.
Mr. Kanai, the Secretary and Treasurer of Suisan Company Limited and Suisan Fruit Processing Co. Inc. The latter is a wholly owned subsidiary of Suisan Company Limited and is one of the major fruit processing companies in Hawaii. I accept the substance of his evidence.
Professor Gordon Shigeura, a highly qualified horticulturalist especially in fields of tropical fruits including guavas. In June 1984 he held the rank of Emeritus Horticulturalist in the College of Tropical Agriculture, University of Hawaii. From its inception he has served on the Guava Industry Analysis Group of the Department of Planning and Economic Development, Hawaii. Although Professor Shigeura's qualifications were primarily in the field of horticulture, he had a real knowledge of the guava industry in Hawaii including matters relating to markets. I accept the substance of his evidence.
Mr. Farais, an agricultural consultant with high qualifications and one time Chairman of the Board and director of the Hawaiian Department of Agriculture. He was also a member of the Governors Agricultural Co-ordinating Committee (1976-1981) and President of the Western Association of State Departments of Agriculture (1979) and director of the National Association of State Departments of Agriculture (1979-1980). He was an impressive witness and again highly qualified. I accept the substance of his evidence.
Mr. Putnam Clark, a witness called by the respondents. He was a Master of Business Administration (University of New York) with a major in corporate finance. Between 1979 and 1980 he was the Director of the New Product Development Division of C. Brewer and Company in Honolulu, Hawaii with responsibilities specifically in the area of guava market development. I accept Mr. Putnam Clark as a truthful witness, although on some relevant issues his evidence differed from the evidence of other witnesses. Where their evidence conflicts I prefer the evidence of the other witnesses. I do not intend to derogate from the evidence of Mr. Clark, but he did not have the expertise and qualifications in relevant fields to the same extent as did some other witnesses.
The Hawaiian exhibits were numerous and diverse in character. They included various publications of persons expert in the growing, processing and marketing of guavas including some of the persons who gave evidence on the Commission, statistics of the Hawaiian Department of Agriculture, analyses of the agricultural industry with specific reference to guavas, analyses of consumer demand for guavas in Hawaii and production figures for guavas.
Other evidence given before the Court at the final hearing also touched this question of overseas markets.
The evidence establishes the following:
In and about 1980 the Hawaiian market was saturated with guavas and guava puree and there was no reason to support the view that any change or upsurge in market potential was likely. However, some people in Hawaii including some experts were giving encouragment to farmers and to others to enter into guava production and to produce more guavas, thus reflecting the fact that there was a mood of optimism amongst some people in the relevant field in Hawaii as to the future of guavas there, including its export potential to the mainland of the United States and to other countries. This optimistic view was, however, against the preponderance of informed opinion. Although there was a large increase in and about 1980 in the production of guavas in Hawaii this reflected heavy plantings that had been in existence for the preceding three years or so and did not reflect any rapid escalation in the demand for guavas or guava products. There was no shortage of suitable land in Hawaii for the growing of guavas, but the problem was one of marketing. Guava juice is produced as the result of the processing of the guava puree which in turn results from the initial processing of the guava fruit itself. There is a very high yield of pulp and of juice from the guava fruit. On the supermarket shelves (supermarkets being the primary outlet for guava juice and for frozen guava nectar and many other guava products) guava must compete with other well established juices, particularly orange and apple juice. Guava simply could not compete at the relevant times with these juices because they held most of the market share in Hawaii and Mainland U.S.A.
There was some importation of guava puree into Hawaii in the period 1977 to 1982, but it was essentially to meet an immediate need. Generally speaking the production of guavas in Hawaii from those grown wild or cultivated by farmers exceeded the demand for guavas and guava products.
It was not feasible for guava puree to be imported into Hawaii from Australia at any relevant time including approximately May 1980. Two factors which militated strongly against the feasibility of guava puree being imported into Hawaii from Australia were (i) local supply was plentiful and (ii) the U.S. government's policy in relation to imports.
From 1979 to at least 1980-1981 there was a general over-supply of guava puree from local production in Hawaii. Also, it was reasonably foreseeable in 1980 that Australia would not be able to compete with South American countries in the production of guavas as they were able to supply guava puree at much lower prices because of lower costs, including lower production and freight costs.
In my opinion the statements made in the documents relating to the overseas markets for guava puree had no factual foundation to support them at the time they were made or at any other relevant time. Although they may have been made at a time of some optimism about the guava industry in this country and elsewhere the evidence points overwhelmingly to the conclusion that the statements were unrealistic and incorrect.
2. DOMESTIC OR AUSTRALIAN MARKETS
Evidence of the actual and potential domestic market for guava and for guava puree and guava products in and about 1980 and subsequent years in Australia was given by a number of witnesses including the following:-
* Russell Norman Phillips, the General Manager of Southern Cross Beverages Pty. Limited, a witness of considerable experience over many years in the fruit juice processing industries. He is also experienced in relation to matters of sales and marketing. He was an impressive witness and I accept the substance of his evidence especially with respect to domestic markets.
* Peter Holdsworth, Director of Mangrove Mountain Fruits Pty. Limited and also Mangrove Mountain Fruit Juices Pty. Limited and a Fijian company, Southern Pacific Foods Pty. Limited. He is a witness with experience in the production and marketing of fruit juices and their products at relevant times. He too was an impressive witness. I accept the substance of his evidence.
* Dr. Cyril Maxwell Martin, regional chief executive of Fielder Gillespie Davis Pty. Limited, a highly qualified food technologist with experience and qualifications essentially in the field of product technology in the food industry involving the extension of old products to new products and the development of new products especially in the fruit juice industry. He is also a man of considerable experience in the field of developing and marketing tropical fruits. For a period of 5 years he served as a senior technical adviser to the United Nations Food and Agricultural Organisation. Although counsel cross-examined this witness for the purpose of establishing that, while highly qualified and experienced in the field of food technology, he was without qualification or experience in relation to marketing, the attempt failed. The positions (including managerial positions) held by the witness over the years in various companies show to my mind that he had considerable experience and knowledge in relation to the marketing of fruits and fruit products, including guava. Dr. Martin's marketing knowledge is essentially based on experience through his business activities. I accept the substance of his evidence including his evidence in the field of marketing. Even if I were to ignore his evidence in relation to marketing, however, there is a considerable body of other evidence which supports the substance of the conclusions which he drew.
* Peter Lewis, manager in charge of technical development at Percentum Products Pty. Limited, a qualified industrial chemist and an associate of both the Royal Association of Chemical Institutes and the Australian Association of Food Science and Technology. He is an expert in research and development of fruit juices and fruit products. His evidence with respect to matters of marketing was very limited, but I accept it to the extent that it concerned the real issues in the case.
* Richard Moran, Managing Director of Tweed Valley Fruit Processors Pty. Limited, the largest processor of minor fruits in Australia including guavas. He was basically a reliable witness and I accept the substance of his evidence.
The conclusions which I draw with respect to matters relevant to the domestic market so far as the statements in the documents are concerned are as follows:
* There has never been a significant domestic market in Australia for guavas or their products. In 1979 or 1980 and at no other material time was there any sign of any significant domestic market in existence or developing within a reasonable time thereafter or within the period of years contemplated by the brochures.
* In 1979 and 1980 there were no indications of the development in the future of a market for anything of the order of 500 tons of guava puree in 1983 and beyond.
* In 1980 sensibly based predictions would have concluded that the 1983 or 1984 domestic consumption market for guava puree would be not more than 100 tons. In 1979 and 1980 there was very little guava juice or guava product sold on the Australian market. In 1980 the prospects of the domestic market absorbing the then domestic production of guavas and guava products were dim and the prospects of selling the product overseas were even poorer.
* In 1979 and 1980 there were no signs of any real improvement in the Australian market for guava puree or guava products.
In my opinion the statements made in the documents relating to the domestic market which plainly convey the impression to the reader that there will be large, developing and buoyant domestic market for guava products including guava juice are entirely untenable.
I have made allowance for the fact that one must not look back upon the events of 1980 with the wisdom of hindsight and for the further fact that there was some degree of optimism both here and abroad with respect to guavas at or about that time.
3. PROFITABILITY AND VIABILITY OF GUAVA VENTURES
4. COSTS OF GROWING AND PROCESSING GUAVAS AND THEIR PRODUCTS AND MARKETING THEM
Statements in the documents relating to costs of the guava projects are most easily and conveniently considered together with the statements relating to profitability and vialbility.
The documents contained detailed figures, cashflow statements, costs relating to purchase of land and trees, costs involved in land preparation and maintenance, tax deductions, projected income and profits and other matters of this kind. The figures were all based on the critical assumption that there would be a market for the produce, that is for the guava fruit. To the extent that this assumption is, as I have found it to be, false, then the assessments and estimates of costs and returns must also be false in consequence. But the applicants challenged many of the statements and figures in the documents relating directly to questions of costs and profits independently of their incorrectness in consequence of the falsity of the representations relating to markets.
The matters challenged by the applicants included:-
Estimates of picking costs which were said to be unreasonably low.
Statements of estimated costs of processing and of freight rates to and from Australia.
Land costs and the availability and value of land for resale purposes (for example the following statements on page 7 of the pink brochure):
"Capital Gain Potential
Each five acre syndicate, on the fifth year, would, at today's prices, sell conservatively for $50,000.
This would assume our budgeted production, income, and a very conservative yield to buyer.
For the invester who paid cash for his land, this would represent a 120% capital gain on net invested cash.
For the invester who borrowed, the capital gain would be 230% on net invested cash.
Expressed as a percentage of the initial cost of the land plus the initial preparation necessary for planting, of $3,500 per acre, the eventual selling price of $10,000 per acre represents 185% capital gain.
These figures are likely only if the plantation is sold as an income earning business. We would expect it would take longer for the land to be worth $10,000 an acre in its own right. It would certainly be worth more than $3,500 an acre."
Attacks were made on similar statements in the other documents. The assessments of land preparation costs and tree purchase costs appearing in the brochures are also said to be unreasonably high.
The figures in the brochures and other documents leading to the suggested returns are said to be false.
I have carefully considered the evidence and the submissions made with reference to these matters and, though I recognise in some instances, force in the submissions of counsel for the applicants, I do not think that the applicants have established that any of the specific statements made in the documents relating to this head of complaint have been shown to be false or capable of being misleading or deceptive independently of their incorrectness in consequence of the falsity of the representations relating to markets.
Implicit in the submissions of counsel for the applicants was the suggestion (on occasions it was an express submission) that the respondents had promoted the four property trusts and partnerships solely, or at least primarily, for the purpose of gaining substantial remuneration and profits for themselves and for Morrison and Bennett at the expense of the applicants. Indeed, it was submitted that the respondents deliberately inflated the items of expenditure in the relevant documents, especially those the benefit of which would pass through to the respondents, Morrison or Bennett or their trusts or companies.
There is no doubt on the evidence that substantial moneys were received by Australian Plantations (Delita) for its charges in relation to the sale of trees and the maintenance of trees. Indeed, some of the evidence suggests that receipts by Australian Plantations totalled $54,000 for the year ended 30 June 1980, $328,476 for the year ended 30 June 1981 and $238,003 for the year ended 30 June 1982. Also the applicants provided Australian Plantations with some 21% of its gross income in the year ended 30 June 1980, 70% of that income in the following year and 69% in the year ended 30 June 1982.
This case has been pleaded and conducted throughout on the basis that the statements made in the various documents are said to be false and the making of them is said to constitute misleading or deceptive conduct. It is not a case that is pleaded or based in fraud on the part of the respondents. Nor have Glasson, Lewin, Morrison or Bennett given evidence. Counsel for the respondents vigorously denied that there was any impropriety on the part of the respondents, Morrison or Bennett, in relation to any of their activities concerning the guava projects. As these considerations were not issues in the case I do not propose to say anything about them except that I have formed a firm view that the documents were drafted and designed to paint the rosiest picture possible of the prospective guava ventures. Also, there is no doubt that, although Glasson, Lewin, Morrison and Bennett may themselves have expended their money or the money of those whom they controlled in and about the establishment and development of the projects, nevertheless at least Australian Plantations, (i.e. Delita controlled by Glasson and Lewin) derived substantial receipts from the establishment and conduct of the ventures and it was the applicants who provided those moneys. I say nothing about any fraudulent intent on anyone's part because this is not a question that it is necessary for the Court to consider. However, in my opinion the conduct of the respondents, as parties to a scheme to raise money from the investors by means of documents such as the brochures in this case, does them little credit. In particular, the statements in relation to overseas and domestic markets which were so vital to the picture painted by the documents and which, obviously, played a very large role in leading the investors to contribute their funds, were so far removed from the facts as to be extravagant, reflecting a degree of optimism that no rational view of the situation in 1980 could support.
The statements in the pink brochure, most of which are mirrored in the other documents upon which the applicants base their case, which are false and the making of which constitutes misleading or deceptive conduct are the statements previously mentioned by me in respect of overseas and domestic markets (see the headings "Overseas Markets" and "Domestic Markets"). To the extent that those statements underlie other statements in the documents about costs of growing and processing guavas and their products and about profitability and viability of the guava ventures, those other statements are also false and the making of them constitutes misleading or deceptive conduct. It must be remembered that the documents should be read as a whole and their overall impression borne in mind.
5. THE RESPONDENTS' KNOWLEDGE OF MARKETS BOTH OVERSEAS AND DOMESTIC AND OF THE GUAVA INDUSTRY GENERALLY AND THEIR ENDORSEMENT OF STATEMENTS MADE IN THE DOCUMENTS RELATING TO THESE MATTERS.
Plainly Glasson, Lewin, Morrison and Bennett were fully aware of the contents of all the relevant documents that found their way one way or another to the investors. Indeed, obviously they adopted the statements. The statements in the pink brochure convey the plain impression that each of the four persons concerned with the venture (Glasson, Lewin, Morrison and Bennett) had brought his particular expertise to it. Glasson is the proven grower of guavas, former president of the Richmond Avocado Growers Association and presently on the Avocado Marketing and Promotion Board and described in the brochures as "Mr. Guava" of Australia, "having pioneered the commercial growing of the fruit in this country with the assistance of the Department of Agriculture". Lewin is described as "the entrepreneur". Morrison is described as "the investment advisor" and "Australia's leading authority on property trusts and syndicates". He is also said to have a marketing background. Bennett is described as "the marketing expert". All four men are said to be "competent and successful business men in their own right and have a lot at stake in the success of the guava industry. They all have plantations of their own, and will be investing in and will be involved in the processing of the industry's output. This heavy commitment will ensure every effort is made for the industry's success". With reference to markets, the pink brochure states that Morrison recently returned from Hong Kong where he was given every encouragement by the Hong Kong Soya Bean Company. The brochure states that "a recent trip to Hawaii has confirmed reports that Hawaiian processors will take all the puree we can give them". Reference is made to the "intention" not to sell all the production to export markets because the domestic fruit juice market will be promoted also.
In other words these statements are all plainly designed to impress the potential investors not only with statistics but with facts that would lead them to believe that the four experts involved in the scheme and who would guide its destiny, were people who had satisfied themselves that matters as important as export and domestic markets were assured. Obviously the draftsmen of the brochures realised that it was not enough to merely state bare statistics to attract money from investors, but that what ultimately mattered to people before they invested their money, was that those behind the project in whom they reposed their trust and confidence, whose judgment they respected, would vouch for the accuracy of the statements made in the soliciting documents. This is what happened here.
The particular relevance of these last mentioned considerations is that once it is established that critical statements relating to markets are shown to be false (as they have been) and materially false at that, it would be sufficient to establish misleading or deceptive conduct by Delita; but when one adds to this the backing given to the statements by the four individuals concerned, then it emphasises even more strongly the misleading and deceptive nature of the statements themselves. It also has relevance to the question which I will consider later, of inducement, or, expressed another way, whether the statements made in the brochures caused the applicants to invest their money in the projects.
6. MISCELLANEOUS
Reference is made in some of the documents to the role of the New South Wales Department of Agriculture. For example, in the pink brochure a statement is made that Glasson pioneered the commercial growing of the fruit in Australia "with the assistance of the Department of Agriculture". In other documents, namely the "Stein" and "Blake" letters to which I have already referred, it was stated that agricultural officials had estimated that 1,600 acres will be needed to satisfy the Australian market alone, and alternatively, that 500 acres will be needed to satisfy 5% of the Australian fruit juice market.
Dr. Batten gave evidence in the case. He is a research horticulturalist and has been located at the Alstonville Research Station since August 1976. He denied that agricultural officials estimated 500 acres would be needed to satisfy 5% of the Australian fruit juice market and denied that Glasson was ever involved in the research work of the Department but he did concede that he, Batten, was in close contact with Glasson about it.
I am satisfied that Glasson was in fairly frequent touch with officers of the Department of Agriculture and had access to documents produced by it or made available by it and that Dr. Batten was one of those officers. There is documentary evidence showing that some officers of the Department held rather optimistic views about the future of guavas in Australia in or about 1979 and 1980. I do not think that any of the statements in the brochures falling under this head are shown to be false, misleading or deceptive.
Did Delita contravene s. 52 of the Act?
The statements made in the documents to which I referred in the last section of my reasons for judgment were false and they related to important matters especially markets here and abroad for guavas, guava puree and other guava products.
I have already found that Delita was responsible for the statements in the sense that they were made in documents distributed by or under the authority of Robert Morrison and Associates to the knowledge and with the approval and consent of Delita. The distribution was an essential part of the arrangement between Glasson, Lewin, Morrison and Bennett to raise funds for the guava project. In my opinion Delita engaged in misleading or deceptive conduct or conduct likely to mislead or deceive and therefore contravened s. 52.
Were Glasson and Lewin persons involved in the contravention by Delita of s. 52?
Section 75B of the Act provides:
"75B. A reference in this Part to a person involved in a contravention of a provision of Part IV or V shall be read as a reference to a person who -
(a) has aided, abetted, counselled or procured the contravention;
(b) has induced, whether by threats or promises or otherwise, the contravention;
(c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or
(d) has conspired with others to effect the contravention."
Glasson, Lewin, Morrison and Bennett were the persons principally involved in raising funds from the applicants for the purposes of the guava venture. Glasson and Lewin were the shareholders and directors of Delita. They controlled its affairs. I am satisfied that Glasson and Lewin knew of all relevant conduct of Delita and of Morrison and Bennett and of Robert Morrison and Associates relating to the raising of funds and the establishment and running of the guava projects including facts bearing on the issue of the documents and the falsity of their contents. Knowledge is an essential ingredient in establishing that Glasson and Lewin aided and abetted the principal offence: Yorke v. Lucas (1983) 49 A.L.R. 672.
The requisite knowledge of Glasson and Lewin existed.
Were the applicants induced to become investors and to invest their funds in the guava ventures (property, trusts and partnerships) by the misleading conduct of Delita?
The applicants' claims for damages are based on s. 82 of the Act which provides:
"82.(1) A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV or V may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.
(2) An action under sub-section(1) may be commenced at any time within 3 years after the date on which the cause of action accrued."
It is necessary that there be some causal connection between the loss or damage suffered by the applicants and the conduct in contravention of s. 52: Brown v. Jam Factory Pty. Limited (1981) 35 A.L.R. 79 at p. 88; (1981) 53 F.L.R. 340 at 350-351; Smolonogov v. O'Brien (1982) 44 A.L.R. 347 and on appeal (1983) 53 A.L.R. 107.
It is not necessary that the conduct in question be the only factor which influenced the applicants to invest their funds in the guava projects: Mr. Figgins Pty. Limited v. Centrepoint Freeholds Pty. Limited (1981) 36 A.L.R. 23 at p. 57; the Smolonogov's Case (supra) and Capelvenere v. Omega Developments Corporation Pty. Limited (1983) A.T.P.R. 40-386; (1983) 1 I.P.R. 456.
It is not necessary that I analyse the nature of the requisite causal connection or the varying theories of causation in this branch of the law because of the view of the facts which I have formed.
Affidavits were sworn by all applicants or, if they were companies or trusts or estates, by those responsible for the conduct of their affairs or administration. Fifteen of them were cross-examined.
During the course of the trial the parties by their counsel reached an agreement in the following terms:
(i) There shall be read on behalf of the applicants the balance of the applicants' affidavits
(ii) Either party may tender such income tax returns, assessments, other financial records and documents from applicants' individual files or produced as on subpoena as seems appropriate and relevant without any necessity of formal proof.
(iii) The court shall be at liberty to draw inferences from such documents in the applicants' possession thereof.
(iv) The respondents will waive cross-examination of the balance of the applicants. This waiver shall not amount to acceptance by the respondents of the accuracy of the affidavits or other evidence referred to above.
(v) The court shall be at liberty to infer that under cross-examination an applicant would or might have given evidence corresponding with that given by one or more of the applicants who have been cross-examined. Either party shall be at liberty to argue, on the basis of the material referred to in paragraphs (i), (ii) and (iii) above what inferences, if any, should be drawn in a particular case.
(vi) Either party shall be at liberty on reasonable notice prior to the end of the applicants' case to call or require calling of a particular applicant by way of exception to above.
(vii) If at any time prior to the delivery of his Honour's reasons for judgment on the issues in the trial it becomes apparent that this agreement creates or has created difficulties for his Honour, either party shall be at liberty, subject to his Honour's leave and on such terms as his Honour may impose, to resile from this agreement."
The parties, their counsel and solicitors are to be commended for reaching this sensible arrangement. It saved many days of hearing and therefore considerable costs and has not resulted in injustice to anybody. I did not find that any difficulties arose of the kind envisaged in (vii).
I should say at this stage that in cross-examination of some of the applicants attempts were made by counsel for the respondents to lay the ground for a submission that the applicants or some of them had not taken steps to mitigate their loss after it became apparent that the guava ventures were in serious financial difficulties and that the markets for the sale of guavas, guava puree and their products did not exist or at least did not exist except to a small degree. But no submissions were finally made to me on this question, so I do not propose to consider it except to say that it would have been in my view impossible for a submission along these lines to have succeeded.
It was common ground that the proper approach to the question of damages should be that adopted by Fox J. in Brown v. Jam Factory Pty. Limited (supra) and by Fitzgerald J. in Frith v. Gold Coast Mineral Springs Pty. Limited (1983) 47 A.L.R. 547, that is, that damages should be assessed as on an action for deceit. Hence I approach the assessment of damages on this footing.
The issues between the parties on the question of damages are in respect of the following matters:
(a) Whether tax savings of partners resulting from claims to deduct losses should be taken into account in mitigation of their loss. Some applicants made claims to the Commissioner for Taxation for contributions made by them to the partnership trusts to be treated as allowable deductions. Some of the claims were allowed, others were disallowed but objected to. In some cases the objections have not been determined by the Commissioner, while in others they have been determined adversely to the taxpayers but are awaiting determinations before Boards of Review. It is not disputed that the partnerships carried on the business of primary production for the purposes of the Income Tax and Social Services Contribution Assessment Act 1936. In my opinion the tax savings, if any, by the applicants should not be taken into account in reduction of their claims under s. 82 against the respondents. The monies contributed by the applicants to the partnerships were applied for the purposes of those partnerships. Although it was envisaged by the brochures that tax losses could be claimed by the taxpayers it seems to me to be an irrelevant consideration in deciding the question presently before me. I do not see that there is any relevant nexus between the contraventions of the Act by Delita and any benefit gained by applicants by reason of the allowability of the claimed losses. See Simpson Limited v. Hubbards Pty. Limited (1982) 44 A.L.R. 695.
(b) The applicants claim that they should be awarded a sum by way of damages in the nature of interest for the loss of the money which they contributed to the property trusts and partnership trusts and of which they have been deprived in the meantime. They place reliance upon the decision of Morling J. in Gilchrist v. ATS Amusements Pty. Limited (1982) 41 A.L.R. 558; and a decision of a Full Bench of this Court (Sweeney and Woodward JJ., Neaves J. dissenting) in Centrepoint Freeholds Pty. Limited v. T.N. Lucas Pty. Limited, unreported, 22 April 1985 which concerned a claim for damages for contraventions of the Trade Practices Act and damages at common law in the exercise of this Court's accrued jurisdiction. The causes od action arose before s. 51A of the Federal Court of Australia Act came into operation on 22 November 1984. The applicants claim that s. 94 of the Supreme Court Act 1970 (N.S.W.) is available.
Any discussion of this question must commence with s. 79 of the Judiciary Act 1903 which provides:
"The laws of each State or Territory including the laws relating to procedure evidence and the competency of witnesses shall except as otherwise provided by the Constitution or the laws of the Commonwealth be binding on all Courts exercising federal jurisdiction in that State or Territory in all cases to which they are applicable."
The majority of the Court (Sweeney and Woodward JJ.) in Centrepoint Freeholds held that s. 79 of the Judiciary Act picked up s. 79A(1) of the Supreme Court Act 1958 (Vic) which reads as follows:-
"(1) The Judge upon application shall in all actions for the recovery of debt or damages give damages in the nature of interest at such rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 as he thinks fit from the commencement of the action until the entry of the judgment unless good cause is shown to the contrary over and above the debt or damages awarded by the court or jury."
Sweeney and Woodward JJ. said, at p. 17 of their joint reasons for judgment:-
"In the present case, the award of damages in favour of the applicant was based upon findings in favour of the applicant on the cause of action arising under s. 52(1) of the Act, and causes of action arising under the common law in the exercise of the accrued jurisdiction of the court. These latter causes of action would otherwise have been tried in the courts of the State of Victoria and judgments upon them could have included damages by way of interest in accordance with s. 79A.
Section 79 of the Judiciary Act is not limited to laws relating to procedure and evidence and the competency of witnesses but includes them in the laws of the State which subject to the exceptions set out in the section are binding on all courts exercising federal jurisdiction in that State. The policy of that section is that except as otherwise provided by the Constitution or the laws of the Commonwealth there should be uniformity in the law applicable to the resolution of a matter whether it is tried in a federal court in that State or by a court of that State. On principle, it seems that this policy should apply in a case such as the present to a judgment based upon the law of the State."
Their Honours noted the judgment of Mason J. in Australian National Airlines Commission v. The Commonwealth (1975) 49 A.L.J.R. 338 where his Honour characterised s. 94 of the Supreme Court Act 1970 (N.S.W.), which gave the Supreme Court of New South Wales power to award interest in respect of damages as part of the judgment, in these terms at p. 340:
"However, it is my view that s. 79 does not operate to pick up and apply in proceedings in the High Court a provision such as s. 94 which is contained in a statute designed to define and regulate the powers and procedure of the Supreme Court and which confers power on that Court to order interest on damages in judgments entered by that Court in proceedings before it. No matter how widely it may travel in some respects s. 79 does not in my view pick up and apply in this Court a provision which empowers a particular court of a State to make orders and enter judgments in proceedings in that court. The relevant powers of this Court are conferred by the Judiciary Act and the High Court Procedure Act 1903-1966, as amended; as I see it they are not to be supplemented by the operation of s. 79 of the Judiciary Act in the manner suggested. Section 26A of the High Court Procedure Act, which provides that judgments of the Court shall carry interest, should be regarded as a comprehensive expression of the entitlement in this Court of a litigant to interest on damages to the exclusion of any provision in State law which would otherwise be made applicable by virtue of s. 79."
The opinion expressed by Mason J. was adopted by me in Hubbards Pty. Ltd. v. Simpson (1982) 41 A.L.R. 509 at pp. 525-6 with respect to s. 30C of the Supreme Court Act 1935 (S.A.), a provision comparable to s. 94 of the Supreme Court Act of New South Wales in its application to this Court.
It should be noted that s. 79A of the Supreme Court Act of Victoria differs from s. 94 of the Supreme Court Act of New South Wales and s. 30C of the Supreme Court Act of South Australia in that the former requires the Supreme Court of Victoria to award damages in the nature of interest unless good cause is shown to the contrary, whilst the latter provisions confer a power upon the Supreme Court to award interest in respect of damages up to judgment.
In Centrepoint Freeholds Sweeney and Woodward JJ. differed from the opinion expressed by Mason J. in Australian National Airlines Commission and said that s. 79A of the Supreme Court Act of Victoria is not so much concerned with the definition and regulation of the powers and procedures of the Supreme Court as it is with conferring upon a successful plaintiff and additional right to receive damages by way of interest unless good cause is shown to the contrary. Their Honours sought to distinguish Mason J's observations on the ground that the Supreme Court Act of Victoria contained in the same Part (Part VII) of that Act both ss. 79A and 60, the latter having no counterpart in the Supreme Court Act of New South Wales with which Mason J. was concerned. Section 60 provides:
"The several rules of law enacted by Part VII of this Act shall unless express provision is otherwise made be in force and receive effect in all courts whatsoever so far as the matters to which such rules relate shall be respectively cognizable by such courts."
Their Honours said (at p. 23) that: "The language of s. 60, when it speaks of 'all courts whatsoever' is wide enough to apply to the Federal Court of Australia". The majority overruled the judgment of the learned trial Judge in Centrepoint Freeholds (Jenkinson J. whose judgment is reported in (1984) 52 A.L.R. 467 at pp. 506-514) on this question of damages in the nature of interest.
Neaves J. differed from Sweeney and Woodward JJ. on this question of interest. His Honour agreed with Jenkinson J. that the language of those provisions (ss. 82 and 87 of the Act):
". . . is not apt to require or authorise an award of damages by way of interest to recoup a loss due entirely to delay in the payment of the money ultimately held to be due. Such loss is not, in my view, properly described as loss suffered by reason of conduct in contravention of a provision of Part IV or V of the Act."
Neaves J. also concluded that:
"Section 79A of the Supreme Court Act 1958 does not enact a statutory cause of action enforceable in any court possessing the appropriate jurisdiction. It does not create a right to interest but confers a discretion upon the judge of the Supreme Court, albeit a discretion which must be exercised in favour of a successful plaintiff in the absence of good cause being shown to the contrary. The judge must exercise a judicial discretion both in determining the rate of interest and in calculating the amount to be allowed in addition to the debt or damages awarded by the court or jury. The power which the section confers is one exerciseable only in proceedings of the kind to which the section refers: the benefit which it confers cannot be the subject of separate proceedings. The section postulates that the plaintiff has established in the Supreme Court a cause of action sounding in debt or damages and that the monetary amount recoverable under that cause of action has been ascertained. The provision is, in form and in substance, a command directed to the judge as to how he is to act in ascertaining the amount to be added to the monetary sum awarded in respect of the cause of action in order to arrive at the sum for which judgment is to be entered. The nature of the provision, which is within Part VII of the statute, does not, in my opinion, take on a different character by reason of the provisions of section 60 of the Act. That section provides:
'60. The several rules of law enacted by Part VII of this Act shall unless express provision is otherwise made be in force and receive effect in all Courts whatsoever so far as the matters to which such rules relate shall be respectively cognisable by such Courts.
The effect of that provision is simply to direct a similar command to a judge of any other court of the State of Victoria determining an action of the kind mentioned in section 79A.
It may be accepted as the received opinion that, subject to a qualification to be mentioned, section 79 of the Judiciary Act 1903 does not enable a court exercising federal jurisdiction to give an altered meaning to a State statute which it is required to apply. The qualification to the general principle is that a State law may in some circumstances be rendered applicable by section 79 to a court exercising federal jurisdiction which is not a State court notwithstanding that the law according to its own terms is limited in its application to the courts of the State: see Maquire v. Simpson (1977) 130 (sic) C.L.R. 362 at p. 376 per Gibbs J. (as the Chief Justice then was). That qualification derives from what was said by the High Court in John Robertson & Co. Ltd. v. Ferguson Transformers Pty. Ltd. (1973) 129 C.L.R. 65."
Later in his reasons for judgment, Neaves J. said:
"Section 79A of the Supreme Court Act 1958 is not, in my view, adequately described as a law 'relating to procedure' within the meaning of that expression in section 79 of the Judiciary Act 1903. It partakes of the character of a substantive provision which will, in the cases to which it applies, operate to increase the amount awarded by way of damages to a successful plaintiff. Thus, the consideration which Mason J. regarded as decisive in the passage cited, namely the express inclusion in section 79 of a reference to the laws relating to procedure evidence and the competency of witnesses will not, of itself, provide a sufficient basis for holding that section 79 operates to make applicable in this Court section 79A of the Supreme Court Act 1958.
In my opinion, to conclude that section 79A was, by virtue of section 79 of the Judiciary Act 1903, made binding on the learned primary judge when determining the amount for which judgment was to be entered in this case would not simply be giving to that provision an operation which its language is wide enough to encompass but would be giving it a different meaning from that which it bears as an enactment of the State of Victoria. It would involve converting it into a provision requiring a judge of this Court to carry out the function which by its terms it confers on a judge of the Supreme Court of Victoria when hearing and determining an action of the kind to which it refers. This, in my view, it is not permissible to do."
Centrepoint Freeholds is distinguishable from the present case on this question of interest in the nature of damages. It was concerned with ss. 79A and 60 of the Supreme Court Act of Victoria. This case concerns s. 94 of the Supreme Court Act of New South Wales, a provision which differs from s. 79A in the respects mentioned earlier. Also, s. 60 of the Supreme Court Act of Victoria has no counterpart in the Supreme Court Act of New South Wales, a point emphasised by the majority in Centrepoint Freeholds. Mason J.'s observations are in point here because they concern the very same section (s. 94) which applies in the present case. More importantly, however, Sweeney and Woodward JJ., held that s. 79A applied where this Court, in the exercise of its accrued jurisdiction, awarded damages on the common law cause of action of fraudulent misrepresentation. I agree with the observation of Toohey J. in Nella, Brown v. Kingia Pty. Limited, unreported, 6 August 1985 (at p. 7) that Sweeney and Woodward JJ. did not hold that in the case of a judgment of damages for contravention of a section of the Trade Practices Act a similar conclusion necessarily applies.
I am free therefore to choose for myself the particular path that should be followed in this case. I propose to reaffirm the views expressed by me in Hubbards Pty. Limited. v. Simpson Limited, thereby agreeing with the approach of Mason J. in Australian National Airlines Commission and of Jenkinson J. and Neaves J. in Centrepoint Freeholds.
The second basis on which the applicants claim what is in essence interest in the nature of damages is the Act itself: ss. 82 and 87. This is a question on which differing views have been expressed by Judges of this Court. Jenkinson J. said in Centrepoint Freeholds at p. 512:
"The rationale of the common law denial of interest on damages for tort was stated by Latham CJ (70 CLR at 525) in terms which were adopted by the Court of Appeal in Simonius Vischer and Co. v. Holt and Thompson: 'The loss of the use of the money ultimately awarded as damages is not part of the loss occasioned by the tort or breach of contract. It is a loss due entirely to delay in the payment of money ultimately held to be due, and is not recoverable as part of the damages.' The verbiage in which causation of damage is expressed in ss. 82(1) and 87 - 'suffers loss or damage by conduct' - does not suggest to me a conception of causality inconsistent with the conclusion reached by the Court of Appeal. I do not think that either of those provisions authorizes the allowance of the interest claimed."
Neaves J. said in Centrepoint Freeholds that the language of ss. 82 and 87 is not apt to authorise an award of damages by way of interest to recoup loss due entirely to delay in the payment of money ultimately held to be due, and that it is not therefore loss suffered by reason of conduct in contravention of a provision of Part V of the Act.
Sweeney and Woodward JJ. did not find it necessary to consider this question in Centrepoint Freeholds.
These views may be contrasted with what Fitzgerald J. said in Frith v. Gold Coast Mineral Springs Pty. Limited (1983) 47 A.L.R. 547. His Honour said at pp. 565-566:
"The broad statement of the appropriate measure of damages in deceit which was adopted in Dolby's case, supra, accords with the statutory test, if, as I think, applicants who establish a cause of action under the Act are entitled to those losses which are the immediate result of the offending conduct and also to consequential losses if sufficiently direct. It is on that footing that I proceed in this case.
There is a further matter to be kept in mind in some cases, and this is one, in which damages are sought under the Act. A purchase of property may be one element in a course of conduct which is embarked upon in reliance on conduct which is misleading or deceptive or likely to mislead or deceive. The statutory entitlement to compensation is not restricted to losses involved in the single element constituted by the transaction of purchase. Applicants for relief under the Act are entitled to have each act or omission shown to have been taken in reliance upon offending conduct considered for the purpose of a determination of whether they thereby suffered loss or damage."
Fitzgerald J. said at p. 572:
"As a matter of principle, if borrowing or the termination of an investment occurs in reliance upon misrepresentations, I cannot perceive why the cost of those steps to the injured party ought not be recoverable."
Fitzgerald J. adhered to these views in Sanrod v. Dainford (1984) 54 A.L.R. 179 at p. 191.
More recent attention has been given to this question by Burchett J. in Geale v. Glenhoun Holdings Pty. Ltd. (In Liquidation). unreported, 23 August 1985 and by Beaumont J. in Fenech v. Sterling, unreported, 12 September 1985. Their Honours expressed views substantially in accord with those of Fitzgerald J..
I find myself in agreement with the approach of Fitzgerald J., Burchett J. and Beaumont J. on this question. In my opinion when money has been paid in consequence of misleading or deceptive conduct, the loss suffered as a direct consequence of that conduct may include the cost of borrowing that money or the costs of terminating an earlier investment and, perhaps, other loss. It must depend on the circumstances of the case and this requires that evidence be led to support any claim of this nature. I also agree, however, with the proposition, accepted by Jenkinson J. and Neaves J., that loss suffered solely because of delay in the payment of money ultimately held to be due is not recoverable pursuant to ss. 82 and 87 of the Act. I see no inconsistency between that proposition and the other views which I accept.
Section 87
It was common ground that the agreements of 11 November 1980 relating to payments made to Australian Plantations by the applicants should be set aside ab initio if I am otherwise in favour of the case for the applicants because monies still remain outstanding under them by the applicants and they are the subject of proceedings in the Supreme Court of New South Wales. It follows that the agreements should be set aside and declared void ab initio.
Costs
The costs of the applicants of the proceeding including any reserved costs should be paid by the respondents. This order for costs will encompass the costs of the Commission for the taking of evidence in Hawaii because the order of the Court relating to that Commission was that the costs and expenses of and incidental to the examination of witnesses in Hawaii shall be costs in the cause. The costs of that examination which shall be paid by the respondents are to include those referred to in orders 8 and 9 of the Court's order relating to the examination made on 19 March 1984.
Conclusion
I consider that the appropriate course for me to take is to adjourn the case for the purpose of hearing any further argument on the question of damages in the light of the findings which I have made. I have in mind especially that the detailed schedules prepared by the applicants may need further consideration in the light of my findings. So far as it is possible to do so, I request counsel and solicitors for the parties to agree on all matters of damages and in particular the calculations relevant thereto.
I shall defer making any formal orders at this stage until the parties and their counsel and solicitors have had an opportunity to consider my reasons for judgment. I direct the applicants to bring in short minutes of order to give effect to my reasons for judgment. The matter shall be adjourned to a date to be fixed.
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