Pave Wealth Services Pty Ltd v Jones

[2021] WASCA 7

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT  :   THE COURT OF APPEAL (WA)

CITATION:   PAVE WEALTH SERVICES PTY LTD -v- DANIELLE JONES as executrix of the estate of THE LATE MICHAEL FREDERICK JONES [2021] WASCA 7

CORAM:   QUINLAN CJ

BUSS P

VAUGHAN JA

HEARD:   17 NOVEMBER 2020

DELIVERED          :   14 JANUARY 2021

FILE NO/S:   CACV 28 of 2020

BETWEEN:   PAVE WEALTH SERVICES PTY LTD

Appellant

AND

DANIELLE JONES as executrix of the estate of THE LATE MICHAEL FREDERICK JONES

First Respondent

WOTIF PTY LTD

Second Respondent

ON APPEAL FROM:

Jurisdiction              :   DISTRICT COURT OF WESTERN AUSTRALIA

Coram:   BRADDOCK DCJ

File Number            :   CIV 2379 of 2019

Catchwords:

Appeal - Purchase of client base - Second respondent corporation found liable for misleading or deceptive conduct pursuant to s 52 of the Trade Practices Act 1974 (Cth) - Relevant representation made by natural person sole director of the second respondent in capacity as director - Whether primary judge erred in law in finding that the natural person sole director of the second respondent could not be personally liable for that same conduct pursuant to s 10(1) of the Fair Trading Act 1987 (WA) - Turns on own facts

Cross-appeal - Whether primary judge failed to resolve the plaintiff's pleaded representation case - Whether primary judge made factual findings not open on the evidence or based on evidence that was inadmissible - Whether primary judge failed to give adequate reasons - Turns on own facts

Legislation:

Fair Trading Act 1987 (WA), s 10(1)
Trade Practices Act 1974 (Cth), s 52

Result:

Appeal allowed
Cross-appeal dismissed

Category:    B

Representation:

Counsel:

Appellant	:	G J Douglas
First Respondent	:	J C Yeldon
Second Respondent	:	J C Yeldon

Solicitors:

Appellant	:	Douglas Cheveralls Lawyers
First Respondent	:	Huggins Legal
Second Respondent	:	Huggins Legal

Case(s) referred to in decision(s):

Australian Securities & Investments Commission v Narain [2008] FCAFC 120; (2008) 169 FCR 211

Browne v Browne [2019] WASCA 1

Houghton v Arms [2006] HCA 59; (2006) 225 CLR 553

London Passenger Transport Board v Moscrop [1942] AC 332

Pave Wealth Services Pty Ltd v Jones [2020] WADC 16

Pave Wealth Services Pty Ltd v Jones [2020] WADC 16 (S)

Wilson v Arwon Finance Pty Ltd [2020] WASCA 137

JUDGMENT OF THE COURT:

Overview

1. The appellant, Pave Wealth Services Pty Ltd (Pave), brought proceedings in the District Court of Western Australia alleging misleading or deceptive conduct in trade or commerce on the part of the second respondent, Wotif Pty Ltd trading as 'Prosperity Partners' (Wotif) and the person who was formerly its sole director, Michael Jones.  The claim concerned alleged representations made in relation to the sale and purchase of a 'client base' by Wotif to Pave for an amount of $525,000.

2. At the time of trial, Mr Jones was deceased.  The first respondent, Mr Jones' spouse, was joined in her capacity as executor of Mr Jones' estate.

3. The primary judge (Braddock DCJ) upheld the claim against Wotif and awarded damages in an amount of $437,000.[1]  However, her Honour held that there was nothing in the evidence to support the proposition that Mr Jones acted in his personal capacity in making the false representation as found and dismissed the claim against the first respondent as Mr Jones' executor.  Pave appeals against that aspect of the judgment.  Pave says it does not matter whether Mr Jones was acting in his capacity as a director.  Pave relies on Houghton v Arms[2] and says that Mr Jones engaged in conduct in contravention of s 10(1) of the Fair Trading Act 1987 (WA) (FTA) so far as Mr Jones' conduct, as director for and on behalf of Wotif, grounded Wotif's contravention of s 52(l) of the Trade Practices Act 1974 (Cth) (TPA).

   [1] See Pave Wealth Services Pty Ltd v Jones [2020] WADC 16.

   [2] Houghton v Arms [2006] HCA 59; (2006) 225 CLR 553.

4. Wotif cross‑appeals.  The six grounds by way of cross-appeal raise various discrete allegations of legal and factual error.  In terms of alleged errors of law, Wotif claims that the primary judge did not resolve the pleaded case in finding that there was an actionable representation, made findings that were not open because they were based on inadmissible evidence or outside the pleaded case and, in one respect, failed to give adequate reasons.  The factual findings as impugned went, as to the first challenged finding, to the falsity of the representation and quantification of damages, and, as to the second challenged finding, the issue of reliance.

5. For the reasons that follow the cross‑appeal is entirely without merit and should be dismissed.  The appeal should be allowed.

Background facts

1. The respondents challenged certain aspects of the primary judge's fact finding.  In the main, however, the background facts are uncontroversial.  The broad summary that follows is drawn from the primary reasons and avoids reference to the matters that were in dispute on appeal.

2. In 2009 Paul Stojanovic was a financial advisor with experience in financial planning.  Mr Stojanovic is the sole director of Pave.  Pave was incorporated on 13 November 2009 following discussions between Mr Stojanovic and Mr Jones.  By 2009 Mr Stojanovic and Mr Jones had known each other for some years, having previously worked together.  Mr Stojanovic considered that Mr Jones ran a successful financial planning firm - the 'Prosperity Partners' business.  Mr Stojanovic decided that he wanted to move out of his then role, as a manager in an investment company, and set up his own financial planning business.  Mr Stojanovic viewed Mr Jones as something of a mentor.  Mr Stojanovic approached Mr Jones to discuss opportunities about acquiring the business of a retiring financial advisor.

3. Mr Jones suggested to Mr Stojanovic that there was an opportunity for Mr Stojanovic to acquire clients of Prosperity Partners and work within Prosperity Partners.

4. Eventually, Mr Jones and Mr Stojanovic came to an agreement whereby Wotif (by Mr Jones) would 'carve out' clients from its client list and transfer them to Pave for a fee.  A written agreement for the transfer and assignment of the client base was signed on 18 November 2009.  It provided for Pave to pay $525,000 for the client base.  Mr Stojanovic had to raise finance to enable Pave to pay the $525,000.  Mr Jones assisted Mr Stojanovic to secure the finance.  This took a few months.  The transaction settled on 29 April 2010.  However, Mr Stojanovic started working from Prosperity Partners' office as an authorised representative from December 2009.

5. The primary judge found that the arrangement 'did not go well'.[3]  Among other things, Mr Stojanovic did not receive the income he was led to believe would flow from the client base.  Mr Stojanovic left Prosperity Partners' office in 2011, took Pave's clients, and continued in business on his own account.

   [3] Primary reasons [9].

6. These proceedings were commenced on 29 June 2015.  Pave claimed damages for misleading conduct allegedly engaged in by Wotif and Mr Jones in relation to the agreement to purchase the client base.  At trial, among other things, Pave claimed that Mr Jones made a false representation to Mr Stojanovic to the effect that the client list comprised $150,000 of 'recurring' or 'ongoing' revenue.  Pave claimed to have suffered loss by paying more than the client base was worth.

The primary judge's reasons

1. The primary judge identified, correctly, that the relevant fair trading legislation was contained in the TPA and the FTA - the Australian Consumer Law not coming into effect until 1 January 2011 and the alleged misleading conduct having occurred between 13 November 2009 and April 2010.[4]

   [4] Primary reasons [16] - [18].

2. After summarising the background facts,[5] and identifying Pave's pleaded case in terms of alleged representations and falsification thereof as well as the respondents' defence,[6] the primary judge noted various matters in issue.[7]  Her Honour summarised some of the applicable legal principles on a misleading conduct claim, doing so in orthodox terms which require no repetition.[8]  The primary judge then listed the matters that Pave had to prove to succeed in the action.  These included that one or more of the alleged representations was made in trade or commerce, that the representation was misleading or deceptive, that the representation induced one or both of the agreement or the payment and that the representation thereby resulted in loss or damage.  Quantification of the loss was also in issue.[9]

   [5] Primary reasons [1] - [10].

   [6] Primary reasons [18] - [23].

   [7] Primary reasons [24] - [26].

   [8] Primary reasons [28] - [34].

   [9] Primary reasons [35].

3. The primary judge then turned to the evidence.  As well as documentary evidence,[10] this consisted of evidence from:

   1.Mr Stojanovic[11] - apart from the alleged representations, and his reliance thereon, Mr Stojanovic gave evidence about various entries on a client list comprised in commission statements which were provided by Wotif to Pave.  The client list designated, by blue highlighting, those clients who had been carved out and transferred to Pave as part of the transfer of the client base.[12]

   One column of the client list was headed 'Type' - referring to type of commission - and contained references to 'NEW', 'INS1', 'INS3', 'REN' and 'TRA'.  The primary judge referred to Mr Stojanovic's evidence that:

   NEW meant it was not re-occurring, it was not ongoing revenue because there was no guarantee that it would continue.  New business could generate high percentage commissions.  But they were not re-occurring.[13]

   2.Craig Read‑Smith - a software developer who re-packaged various financial data from commission statements for purposes of review and ease of access.[14]

   3.Charles Napoli - an accountant who gave expert evidence.[15]  Mr Napoli valued the client base as transferred at 29 April 2010 on the basis of ongoing revenue comprising of trail commissions or annual recurring revenue.  Mr Napoli applied the future maintainable earning method of valuation and, using a multiplier of '1', valued the client base at $80,000 - one year's worth of maintainable net earnings.[16]

   [10] Primary reasons [61] - [71].

   [11] See Primary reasons [36] - [53], [55] - [57].

   [12] See Exhibits 2 and 3 GAB 1 - 89.

   [13] Primary reasons [42]. An explanation of the latter codes was provided in Mr Napoli's expert report: Exhibit 27 GAB 194 - 195.

   [14] Primary reasons [52], [54].

   [15] Primary reasons [78] - [93].

   [16] Primary reasons [88]. See also: Primary reasons [83], [86]; Exhibit 27 GAB 188 - 204 (esp 194, 203).

4. The primary judge was 'confident in [her] assessment of Mr Stojanovic as a reliable witness of truth'.[17]  Importantly, in cross‑examination much of the critical evidence of Mr Stojanovic was not directly challenged.[18]  This included Mr Stojanovic's evidence as to the representations made and the circumstances surrounding entry into the agreement.[19]  Also, the primary judge observed that it was not suggested to Mr Stojanovic that:[20]

   1.all the clients carved out by Mr Jones, as highlighted in blue, were in fact recurring income producing clients; or

   2.the business defined as 'NEW' was a recurrent form of revenue.

   [17] Primary reasons [60].

   [18] Primary reasons [56], [58].

   [19] Primary reasons [56].

   [20] Primary reasons [56].

5. The primary judge expressly accepted Mr Stojanovic's evidence that the commissions in the 'NEW' category on the client list were not recurring commissions.[21]  Her Honour found that the 'NEW' commissions were not recurring income.[22]  No ground of cross-appeal relevantly challenges these specific findings.

   [21] Primary reasons [111]. See also [155].

   [22] Primary reasons [113].

6. The primary judge recorded that Mr Napoli's expert evidence was challenged on various admissibility grounds.[23]  The primary judge accepted that Mr Napoli had the necessary qualifications and experience to undertake a valuation of the client base as transferred.[24]  Her Honour noted that Mr Napoli was briefed on the basis that non-recurring income had been excluded.[25]  Ultimately, the primary judge accepted that Mr Napoli's evidence was relevant and admissible expert evidence as to method and calculation.[26]  Separately, it was significant, in her Honour's view, that no opposing evidence of value was called; nor was any alternative basis of approach suggested to Mr Napoli on behalf of the respondents.[27]

   [23] Primary reasons [74] - [77].

   [24] Primary reasons [81].

   [25] Primary reasons [90].

   [26] Primary reasons [91].

   [27] Primary reasons [92].

7. The primary judge accepted Mr Napoli's evidence in two material respects:

   1.First, her Honour accepted Mr Napoli's mathematical calculations insofar as Mr Napoli calculated the recurring income from the client base as transferred.  Mr Napoli calculated the recurring income for the year to the end of April 2010 to be in the order of $80,000.[28]  (The calculations were never seriously disputed: the primary judge recorded that it was not suggested to Mr Napoli in cross-examination that his calculations were mathematically flawed.[29])

   2.Second, her Honour, having reviewed Mr Napoli's reasoning, accepted Mr Napoli's opinion that a multiplier of '1' was appropriate in the circumstances - resulting in a valuation of the client base (as transferred on 29 April 2010) in an amount of $80,000 ex-GST ($88,000 GST inclusive for the purpose of the calculation of loss).[30]

   [28] Primary reasons [91]. See also [84] - [85], [89], [112], [155].

   [29] Primary reasons [85].

   [30] Primary reasons [161]. See also [154] - [160].

8. The primary reasons record that, after the conclusion of evidence and before closing submissions, the parties' respective counsel provided the court with a joint list of issues.[31]  This followed a request by the primary judge for such a list.[32]  The issues as identified included:

   [31] Primary reasons [94].

   [32] ts 547.

   1.Whether Michael Jones made representations to Paul Stojanovic that the client list comprised $150,000 of 'recurring' or 'ongoing' revenue and if he did whether he had reasonable grounds for the making of this representation or similar representations.

   …

   3.Whether Mr Stojanovic relied on those representations and caused the plaintiff to enter into the sale agreement.

   4.Whether the client list was comprised of $150,000 of recurring revenue.

   …

   6.If the answers to 4 and 5 is 'no', whether the plaintiff suffered a loss as a result.

   7.The quantum of the loss referred to in 6.

   8.Whether revenue identified as 'NEW' on the commission statements, should be excluded from any calculation of recurring or ongoing revenue.

   …

   10.Is Mr Napoli's evidence admissible and if it is what weight should be placed upon it.

   …

9. Assisted, no doubt, by such a concise joint list of issues, the primary judge proceeded to make the necessary findings.

10. We have already referred to the findings on issue 8 as to the 'NEW' revenue on the client list (see [16] above) and issue 10 as to Mr Napoli's evidence (see [17] - [18] above).  Otherwise, the primary judge held that:

    1.In terms of issue 1, a representation was made to Mr Stojanovic, by Mr Jones, that he (meaning Pave) was purchasing $150,000 of recurring income: the arrangement was for the purchase of $150,000 worth of recurring income.[33]  Thus a representation was made that the client base to be sold consisted of 'recurring' clients.[34]

    2.In terms of issue 4, the representation that the client base was $150,000 of recurring income was false and misleading.[35]  As calculated, the recurring income from the client base as transferred for the year to the end of April 2010 was $84,428.[36]  Further, the client base as transferred did not in fact generate $150,000 per annum post-settlement of the transaction.[37]

    3.In terms of issue 3, Mr Stojanovic (and thereby Pave) relied on the representation of recurring income of $150,000 in entering into the agreement to purchase the client base and paying the purchase price.[38]

    4.In terms of issues 6 and 7, Pave suffered a loss assessed in an amount of $437,000 being the difference between the price paid for the client base as transferred ($525,000) and Mr Napoli's valuation of the client base as transferred adjusted for GST ($88,000).[39]

    [33] Primary reasons [96], [98]. See also [105].

    [34] Primary reasons [99].

    [35] Primary reasons [115], [119]. See also [151].

    [36] Primary reasons [112]. See also [91], [115]. There is a minor error at [112]. The primary judge refers to the $84,428 as 'including GST'. Earlier her Honour had referred to Mr Napoli calculating the recurring income in an amount of $84,428 'net of GST': Primary reasons [84]. Mr Napoli's evidence was in terms of that figure being exclusive of GST (Exhibit 27 GAB 196) and this was the basis on which the primary judge assessed the damages (Primary reasons [161] - [162]). The error is inconsequential to the proper disposition of the appeal and the cross-appeal.

    [37] Primary reasons [106]. See also [155].

    [38] Primary reasons [118].

    [39] Primary reasons [151] - [162].

11. The primary judge also found that the representation as established was made in trade or commerce[40] and rejected a complaint made as to Pave's standing to sue.[41]  These findings sufficed to enter judgment against Wotif in favour of Pave for an amount of $437,000 on the basis that Pave's misleading conduct claim against Wotif succeeded.[42]

    [40] Primary reasons [132].

    [41] Primary reasons [133] - [139].  This complaint is not reagitated by the cross-appeal.

    [42] Primary reasons [163], [165].

12. However, the primary judge dismissed Pave's claim pursuant to s 10(1) of the FTA in relation to Mr Jones (necessarily brought against the first respondent as executor of Mr Jones' estate).[43]  Her Honour noted, correctly, that there was no accessorial liability claim.[44]  Her Honour then observed that there was nothing in the evidence to support the proposition that Mr Jones acted in his personal capacity and that the evidence strongly supported the contrary proposition.[45]

    [43] Primary reasons [164], [166].

    [44] Primary reasons [142], [146].

    [45] Primary reasons [142] - [143].

13. The primary judge resolved the issue of Mr Jones' liability on the following basis:

    [144]I am satisfied both men [ie Mr Stojanovic and Mr Jones] were acting and held themselves out as agents and directors within their corporate frameworks.

    [145]Unless it were pleaded and proved that Mr Jones was personally liable under the accessorial provisions of TPA, he is not liable personally for his actions as 'managing' director or agent of the company.

    …

    [147]The alternative claim pleaded in par 11 of the ASOC, against Mr Jones in his personal capacity, fails in the absence of any pleading that he was knowingly concerned in [Wotif's] conduct, due to my finding that he was at all times acting as agent for [Wotif].

14. After judgment was delivered, the primary judge heard argument as to costs.  Separate reasons were provided.[46] The primary judge ordered that Wotif pay two thirds of Pave's costs (such costs from 15 September 2016 to be on a solicitor and client basis). However, reflecting Pave's failure in relation to the s 10(1) FTA claim in relation to Mr Jones, it was ordered that Pave pay to the first respondent one third of the respondents' costs of the action and any costs exclusively incurred by the first respondent (but only on a party and party basis).[47]

    [46] Pave Wealth Services Pty Ltd v Jones [2020] WADC 16 (S).

    [47] BAB 2 - 3.

15. Pave, as part of the orders wanted on its appeal, seeks to set aside those costs orders in favour of orders that the respondents pay all its costs of the action (such costs from 15 September 2016 to be on a solicitor and client basis) on the basis that costs should follow the event.[48]

    [48] Appellant's submissions par 24 WAB 11; Orders wanted pars 4 - 6 WAB 14.

The appeal

1. Pave appealed on a single ground:

   Having found that certain false representations by the late Mr Jones constituted misleading or deceptive conduct on the part of [Wotif] (of which Mr Jones was the sole director), contrary to section 52 of the Trade Practices Act 1974 (Cth), the learned primary Judge erred in law in subsequently holding at paragraph 145 of the reasons for the primary Judge's decision, that Mr Jones (and so the first respondent), was not himself personally liable in respect of that same conduct pursuant to section 10 of the Fair Trading Act 1987 (WA).

2. Pave submitted that the primary judge was in error in refusing relief in relation to Mr Jones merely because no accessorial liability case was pleaded.  Pave referred to Houghton v Arms.[49]  Pave submitted that:

   1.By acting in the trade or commerce of Wotif, Mr Jones was within the ambit of the FTA and was fixed with the findings of the primary judge in respect of the conduct in which Mr Jones was found to have engaged as the director of Wotif.[50]

   2.A person who has directly engaged in misleading or deceptive conduct is personally liable for that contravention notwithstanding that he or she is acting in his or her capacity as a director or employee of a company.[51]

   [49] Appellant's submissions pars 16 - 20 WAB 9 - 11.

   [50] Appellant's submissions par 21 WAB 11.

   [51] Appellant's submissions par 22 WAB 11.

3. Houghton v Arms concerned a misleading conduct claim by Mr Arms. A company (WSA Online Pty Ltd) was engaged to advise on website design. Two employees of the company (Mr Houghton and Mr Student) made representations concerning the extent of the documentary obligations to be fulfilled by participants on the internet commerce website Mr Arms was setting up. The representations were found to be misleading or deceptive. Mr Arms relied on s 52(1) of the TPA and s 9(1) of the Fair Trading Act 1999 (Vic).

4. Section 9(1) of the Fair Trading Act 1999 was materially in the same terms as s 10(1) of the FTA:

   A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

5. It will be appreciated that both State provisions (ie the Victorian provision and s 10(1) of the FTA) essentially mirrored s 52(1) of the TPA save that s 52(1) referred to a 'corporation' rather than a 'person'. Also, for completeness, it ought to be noted that the Victorian statute put the statutory prohibition in terms of 'must not' whereas the Commonwealth and Western Australian statutes expressed it in terms of 'shall not'.

6. The term 'engaging in conduct' was defined in like terms in the three statutes.[52]

   [52] See: TPA s 4(2)(a); FTA s 5(4); Fair Trading Act 1999 s 3.

7. At trial, Mr Arms succeeded against the company but not the employees. The Full Court of the Federal Court of Australia allowed an appeal. That decision was upheld in the High Court of Australia. In a unanimous decision the High Court held it was not to the point that the employees were not business proprietors or that their activities were an aspect or element of the trade or commerce of the corporation. The employees were personally liable under s 9(1) of the Fair Trading Act 1999 notwithstanding that they had been acting in the trade or commerce of the corporation and not themselves.[53]

   [53] Houghton v Arms [35].

8. The High Court stated that:

   The appellants are fixed with the findings by the primary judge respecting the conduct in which they engaged, being certain acts and omissions. As indicated earlier in these reasons, these were 'in trade or commerce'. Why then are the appellants not persons who contravened the prohibition imposed by s 9 of the [Fair Trading Act 1999]? As a general proposition … in the world of tort the status of an individual as an employee does not divest that person of personal liability for wrongful acts committed while an employee. There is no good reason for treating the text of s 9 any differently and, in particular, for construing the section as if it read '[a] person, as principal, must not …'.[54]

   [54] Houghton v Arms [40].

9. The High Court concluded that, whether or not the acts of the employees were also in law the acts of the company, they were the conduct of persons which contravened the prohibition in s 9(1) of the Fair Trading Act 1999.[55]

   [55] Houghton v Arms [47].

10. The employees' liability in Houghton v Arms was not dependent on pleading and proving that the employees were personally liable under the accessorial liability provisions in the TPA. The reasoning and outcome in Houghton v Arms shows that the status of a person as a director or employee of a company does not divest him or her of a personal liability for wrongful acts committed in that capacity: a person may function in dual capacities.[56]  It is, however, necessary to demonstrate that the individual natural person himself or herself engaged in the impugned conduct.  It is always a question of fact whether the elements are made out.

    [56] Australian Securities & Investments Commission v Narain [2008] FCAFC 120; (2008) 169 FCR 211 [94] - [95].

11. The relevant question in Houghton v Arms was (and the question for this court on Pave's appeal is) whether the finding of conduct, as made by the primary judge, amounted to the making of the representation by the relevant natural person (ie the employees in Houghton v Arms and Mr Jones in the present case) as well as the relevant corporation (ie WSA Online Pty Ltd and Wotif respectively).

12. Personal liability for the individual director or employee does not automatically follow.  It may be, as explained in Australian Securities & Investments Commission v Narain, that the natural person individual:

    merely acted as a corporate organ, binding the company but not the person individually.[57]

    [57] Australian Securities & Investments Commission v Narain [96].

13. For example, acts which are simply 'ministerial' - such as a company secretary on-sending an announcement to the ASX at the direction of a director - will not be attributed to the individual.  Those were the facts in Australian Securities & Investments Commission v Narain.  The Full Court of the Federal Court of Australia held that the director was personally liable for the contravention, but suggested that the company secretary's act was as an organ of the company, or agent of the director, and was independent of any liability on his own behalf.[58]

    [58] Australian Securities & Investments Commission v Narain [98] - [100].

14. In written submissions the first respondent sought to raise various limitation issues in answer to the appeal.[59]  That was abandoned at the appeal hearing.[60]  Otherwise, in answering the appeal, the first respondent pointed to Pave's pleaded case.  It was said that par 11 of the statement of claim was pleaded to solely capture Wotif's representations, ie Pave failed to plead that Mr Jones had personally engaged in conduct contrary to the FTA.[61]  Counsel for the first respondent contended that the trial proceeded on the basis that Mr Jones was acting on behalf of Wotif.[62] By reference to the text of par 11 of the statement of claim, the first respondent submitted that an alternative case was being run - there was either a contravention of s 52 of the TPA or s 10 of the FTA but not both.[63] That submission was developed by reference to pars 11A and 11B of the statement of claim which only invoked s 51A of the TPA and were said to confine the general plea in par 11.[64]  The first respondent further submitted that the observations of the plurality in Houghton v Arms did not apply in the circumstances of Pave's pleaded case.[65]

    [59] First respondent's submissions par 6 WAB 17.

    [60] Appeal ts 8.

    [61] First respondent's submissions par 3(a) WAB 16; Appeal ts 4, 7.

    [62] Appeal ts 7.

    [63] Appeal ts 8 - 10.

    [64] Appeal ts 9.

    [65] First respondent's submissions par 4 WAB 16.

15. The submission as to Pave's pleaded case overlooks what was pleaded at par 7(b) of the statement of claim:

    Between 13 November 2009 and April 2010, the Deceased [ie Mr Jones] acting personally and/or on behalf of [Wotif] … made the following representations …

16. Accordingly, it was always pleaded that Mr Jones engaged personally in the impugned conduct.  Pave advanced a claim of primary liability in relation to Mr Jones' conduct and Wotif's conduct - that conduct being the making of the same alleged representations.

17. It is true that par 11 of the statement of claim pleads that the impugned representations were misleading contrary to s 52 of the TPA 'or' s 10 of the FTA. We do not accept, however, that this means that Pave was only setting up a case solely against Wotif pursuant to either s 52 of the TPA or s 10 of the FTA. Both respondents were joined as defendants. Relief was sought as against both respondents. The prayer for relief stated, relevantly, that 'in the premises the plaintiff claims' damages pursuant to s 82 of the TPA 'And, or in the alternative, damages pursuant to [s 10 of the FTA]'. There was no plea of accessorial liability. The claim against the first respondent could only have been advanced on the basis that Mr Jones was primarily liable for the conduct. That is what, in substance, was advanced in par 7 so far as it was said that Mr Jones was acting personally. The plea in par 11 in relation to s 10 of the FTA applied to both respondents. It is a little odd that pars 11A and 11B of the statement of claim only invoked s 51A of the TPA so far as there was said to be a future representation. But, as will be seen in addressing the cross-appeal, the case was decided on the basis that there was a false present representation rather than future representation made without reasonable grounds. The absence of a plea invoking s 9 of the FTA might have been something of moment had the actionable conduct as found by the primary judge concerned a future representation. But this is not the basis on which the claim against Wotif succeeded.

18. The first respondent's initial answer to the appeal fails.  Pave pursued a misleading conduct claim against the first respondent in her capacity as executor of Mr Jones' estate.  Pave asserted that, by his conduct, Mr Jones was personally liable pursuant to s 10(1) of the FTA for the same conduct that resulted in liability being visited on Wotif.

19. At the appeal hearing, counsel for the first respondent advanced a further submission. Counsel contended that there were no findings that Mr Jones engaged in conduct personally; it was thus submitted that there was no evidentiary foundation to enliven s 10(1) of the FTA.[66]  Counsel for the first respondent submitted that the primary judge resolved the case 'on the basis that Mr Jones had not engaged in any conduct for himself' (emphasis added).[67]

    [66] Appeal ts 15 - 18.

    [67] Appeal ts 15.

20. Strictly speaking, the latter submission is correct: the primary judge held that Mr Jones was acting as (and held himself out as) an agent and director of Wotif and was not acting in his personal capacity.[68]  But that, in our respectful opinion, misses the point of the outcome and reasoning in Houghton v Arms and illustrates the error on the part of the primary judge.  The question is not whether Mr Jones had engaged in the conduct for himself or as director or agent, but rather simply whether Mr Jones engaged in the conduct.  In short, did Mr Jones make the representation?  In submitting that Mr Jones had not engaged in any conduct for himself, however, it was implicit that the first respondent accepted that Mr Jones had relevantly engaged in the conduct.  Indeed, on the findings of the primary judge no other conclusion is open.  Her Honour found that Mr Jones made the representation which grounded the successful misleading conduct claim against Wotif.[69]

    [68] Primary reasons [142], [144], [147].

    [69] Primary reasons [96], [98] - [99], [105], [119].  See also at [108], [114], [120].

21. The submission that there was no evidentiary foundation to enliven s 10(1) of the FTA was misconceived. The same evidentiary material and factual findings that result in the claim succeeding against Wotif necessarily mean - assuming it is accepted that Mr Jones as a natural person individual engaged in the self-same conduct - that s 10(1) of the FTA was contravened by Mr Jones. The point may be illustrated by stepping out the elements of s 10(1). Counsel for the first respondent accepted that Mr Jones was a person.[70]  Counsel further accepted that there was conduct, in the form of the representation as found, on the part of Mr Jones.[71]  We will return to this in [49] below.  There was no dispute, on appeal, that the conduct was in trade or commerce.[72] And, subject to the matters raised in the cross‑appeal, there was no dispute in this court that the representation as found was false. That being so, subject to the attribution question, Mr Jones' contravention of s 10(1) of the FTA was made out by the same evidence and findings that established Wotif's contravention.

    [70] Appeal ts 19.  Later, however, counsel for the first respondent backtracked and submitted 'so he's not a person …' (Appeal ts 19).  There was no proper basis for that submission.  It is self-evident that Mr Jones was a person.  The initial concession was correct and should be accepted.

    [71] Appeal ts 17, 19.

    [72] Appeal ts 19.

22. While accepting that, in these respects, there were findings that satisfied the integers for liability under s 10(1) of the FTA, counsel for the first respondent contended that it was determinative that the primary judge had found that Mr Jones had acted in his directorial capacity.[73]  That submission pays no regard to the outcome and reasoning in Houghton v Arms.  The circumstance that a natural person individual is acting in a representative capacity (eg as a director, employee or agent) does not mean that he or she is not also himself or herself relevantly engaging in conduct in trade or commerce.

    [73] Appeal ts 18.

23. There was no contention on behalf of the first respondent that Mr Jones' actions were merely ministerial such that the relevant conduct ought only to be attributed to Wotif and not to Mr Jones personally.  It is, however, appropriate that any suggestion to this effect be dispelled.  We have previously observed that counsel for the respondents accepted that there was conduct, in the form of the representation as found, on the part of Mr Jones.  That concession was properly made.  On the findings made by the primary judge, Mr Jones made the relevant representation to Mr Stojanovic.  Mr Jones' actions in making the representation were not administrative or secretarial in nature such that it was open to conclude that his actions were only to be attributed to Wotif.  Mr Jones was in a position that was on all fours with that of the employees in Houghton v Arms rather than the company secretary in Australian Securities & Investments Commission v Narain.  Mr Jones made the representation himself and thereby himself engaged in the self-same conduct in trade or commerce as was engaged in on behalf of Wotif.

24. The appeal should be allowed. On the findings made by the primary judge Mr Jones contravened s 10(1) of the FTA by the very same conduct that meant that Wotif contravened s 52(1) of the TPA. This conclusion is, however, subject to the outcome of the cross-appeal. If the respondents are successful in the cross-appeal, Pave's success on the appeal is irrelevant. We thus turn to the cross-appeal.

The cross-appeal

1. Much of Wotif's cross‑appeal was based on a selective and tendentious reading of Pave's statement of claim and a misapprehension of the way in which the case was fought at trial and the substance of the primary judge's reasoning.  Accordingly, while reference has already been made to part of the pleaded case, it is now necessary to refer to more of Pave's statement of claim and to revisit the basis on which the claim succeeded as against Wotif.

2. After dealing with the relevant parties, the statement of claim referred to various alleged representations (par 7).  These included alleged representations, pleaded at par 7(b), in relation to the client base and its proposed sale:

   B.The Client Base consisted of recurring, secure clients who had engaged and were still engaging the Second Defendant on a 'fee for service' basis.

   …

   F.Once it acquired the Client Base, the Plaintiff would receive earnings of $150,000 per year each year just from the Client Base (as opposed to its own efforts in generating new business).

   G.The Plaintiff could walk in and receive those earnings without doing anything more than general client relationship management, and could start writing good business off that base with the potential to earn much more.  (emphasis added)

3. The alleged representation at par 7(b)B was a present representation.  It concerned the then characteristics of the client base being purchased.  The alleged representation at par 7(b)F was a future representation.  It concerned what Pave would receive, in the future, after settlement of the transaction.  The alleged representation at par 7(b)G was a future representation.  It concerned what Pave could expect in relation to the receipt of earnings from the client base upon the client base being transferred and assigned to Pave.

4. Pave pleaded that the representations were false and thereby misleading (par 11).  In relation to the representations in pars 7(b)B and 7(b)F, Pave pleaded at par 11(f):

   the Client Base did not generate $150,000 per year in earnings at the time the Representations were made.

5. Accordingly, as might be expected, the alleged present representation was said to be falsified by the then actual position. Separately, at pars 11A and 11B of the statement of claim, Pave invoked s 51A of the TPA in relation to the alleged future representations at pars 7(b)F and 7(b)G (but not the alleged representation at par 7(b)B). Pave pleaded that the par 7(b)F and par 7(b)G alleged representations were representations as to future matters made without reasonable grounds.

6. At trial, it was never contentious that the client base as transferred was to constitute revenue of $150,000 per annum.  In pre-trial written submissions, the respondents stated:

   The defendants deny that a representation was made in the terms that were pleaded [ie as to par 7(b)F of the statement of claim] but it is apparent that a representation was made to the effect that the Client Base would produce revenue of $150,000.[74]

   [74] Respondents' outline of submissions for trial dated 21 April 2019 par 19 BAB 83.

7. The concession as to the quantum of the revenue stream was inevitable given the documentary evidence.[75]  Accordingly, the true issue was whether there was a representation that the client base for transfer constituted $150,000 per annum in recurring or ongoing revenue.  That was reflected in issue 1 on the joint list of issues (see [19] above).

   [75] See eg Primary reasons [96].

8. Issue 1 was, in substance, a conflation of the alleged representations at pars 7(b)B and 7(b)F.  It raised whether there was a representation that the client base being acquired comprised $150,000 in recurring or ongoing income.  The $150,000 per annum figure (uncontentious in any event) had its provenance in par 7(b)F.  The nature of the income - recurring or ongoing - was a matter of present fact and had its provenance in the representation pleaded in par 7(b)B.  Issue 1 modified the pleaded case by tying the uncontentious quantum of $150,000 per annum to the alleged representation of present fact - raising the issue of whether Mr Jones made a representation as a matter of present fact that the client base comprised $150,000 per annum in recurring or ongoing revenue.  Issue 4 on the joint list of issues raised the plea in par 11(f) so far as Pave sought to falsify the alleged representation of present fact by proving that the client base was not comprised of $150,000 per annum in recurring revenue at the time of the representation.

1. However, issue 1 also acknowledged that there was potentially a different, albeit related, future representation as pleaded in par 7(b)F: was there - in the alternative or in addition to the alleged representation as a matter of present fact - a future representation that Pave would receive $150,000 per annum in recurring or ongoing revenue?  In that respect issue 1 also raised whether there were reasonable grounds for any such future representation.  This, third, aspect of issue 1 had its provenance in pars 11A and 11B of the statement of claim.

2. The primary judge resolved the case in terms of the alleged representation as a matter of present fact.  Her Honour accepted that a representation was made, by Mr Jones, to the effect that the client base being purchased comprised $150,000 per annum of recurring income.[76]  In so doing the primary judge expressly found that a representation was made in terms of par 7(b)B of the statement of claim.[77]  Her Honour expressly observed that her determination was not based on the future representations in pars 7(b)F or 7(b)G of the statement of claim.[78]

   [76] Primary reasons [95], [98], [105], [115]. See also [118], [119].

   [77] Primary reasons [99].

   [78] Primary reasons [101].

3. The basis on which the primary judge resolved the claim in favour of Pave is confirmed by how her Honour approached the question of whether the conduct was misleading or deceptive.

4. On the evidence the primary judge found that the client base did not comprise of recurring revenue of $150,000 per annum.  That was based on excluding the 'NEW' entries - found by her Honour not to be recurring commissions - and totalling the recurring revenue as represented by the client base as transferred.[79]  It is true that her Honour also referred to Mr Stojanovic's evidence of what then transpired in the 12 months post-settlement.  As will be seen, Mr Stojanovic gave evidence, which was accepted by the primary judge, that the client base as transferred produced about $95,000 in revenue in the first year post‑settlement.  But this simply provided a basis to infer what the position was as at the time the representation was made and was thus supportive of the finding in terms of issue 4 - that finding, in substance, being based on the matters referred to at [16] and [18.1] above.

   [79] Primary reasons [111] - [112], [115], [119].

5. Separately, her Honour made a finding that Mr Jones did not have a reasonable basis for his statements.[80]  But to accentuate that the claim was resolved on the alleged present representation, not the alleged future representation, the primary judge prefaced that observation by saying that 'if it were necessary' her Honour would have been satisfied that Mr Jones had no reasonable basis for his statements.[81]  It was not necessary to so conclude as the primary judge made findings in terms of the alleged present representation rather than the alleged future representation.

   [80] Primary reasons [113] - [114].

   [81] Primary reasons [114].

6. We must also elaborate on Pave's damages case.

7. The statement of claim advanced a claim for loss and damage on two distinct bases:

   1.Initially, on the basis that Pave paid more for the client base than it was worth (par 12(a)).

   2.Alternatively, on the basis that Pave's earnings were less than Mr Jones had represented they would be (par 12(b)).  It appears that this was advanced as loss of bargain damages.  In particulars Pave stated:

   The Plaintiff did not receive a base income of $150,000 per year from the Client Base, and instead received only an average of $126,000 per year comprised of earnings from the Client Base as well as earnings received as a result of Mr Stojanovic's own efforts and endeavours (par 12(b)(i)).

8. At the appeal hearing, counsel for the respondents refused to accept that the primary judge proceeded to assess damages by reference to par 12(a) of the statement of claim.[82]  Presumably this was because cross-appeal ground 2 expressly relied on par 12(b).  So too, in relation to cross-appeal grounds 3 and 4, it was integral to counsel for the respondents' argument that the pleaded case required - by par 12(b) of the statement of claim and other pleaded paragraphs - that the primary judge form a view on all earnings.[83]

   [82] Appeal ts 42.

   [83] Appeal ts 41 - 42.

9. The pleaded presence of par 12(b) of the statement of claim is an irrelevancy, both to the issues at trial and the proper disposition of the cross-appeal.  At trial Pave's claim was advanced solely in terms that it had paid more for the client base than it was worth (ie the basis advanced in par 12(a) of the statement of claim).  That was evident from Pave's substituted particulars of damage in which it was stated:

   The Plaintiff suffered loss and damage as pleaded in this action in the amount of $445,000 plus interest as follows:

   a.The Plaintiff paid $525,000 for the Client Base on 29 April 2010.

   b.The value of the client base Client Base on 29 April 2010 was $80,000.

   c.Interest is claimed at 6% per annum, simple interest, from 30 April 2010 until judgment on the damages.[84]

   [84] Appellant's substituted particulars of damage dated 27 March 2019 par 1 BAB 77.

10. In this respect the damages claim was supported by Mr Napoli's expert report dated 27 March 2019.[85]

    [85] GAB 188 - 249.

11. The primary judge accepted Pave's damages case as advanced in terms of par 12(a) of the statement of claim (see [21.4] above).  Counsel for the respondents' contention to the contrary was without any substance and was not grounded in either the evidence or the primary reasons.

Cross-appeal ground 1: Alleged failure to resolve the pleaded case

1. Cross-appeal ground 1 states:

   The learned Trial Judge erred in law by failing to resolve the plaintiff's pleaded representation case which had to be addressed in order to determine the case as follows:

   a.Paragraph 7(b)F of the RASOC[86]: 'Once it acquired the Client Base, the plaintiff would receive earnings of $150,000 per year each year just from the Client Base'.  The Trial Judge [101] said 'My judgment in this matter is not based upon the matters in paragraph 7(b)G or 7(b)F.'

   b.Paragraph 11(f) of the RASOC: 'the Client Base did not generate $150,000 per year in earnings at the time the representations were made'.  The Trial Judge's finding at [106]: 'I accept Mr Stojanovic's evidence that the Client Base did not generate $150,000 per annum', is not relevant to the plaintiff's pleaded case at paragraph 11(f) which is relevant to the time the representation was made.

   [86] Referring to Pave's statement of claim in its amended form as it existed at trial.

2. Ground 1(a) is premised on a misconception that the primary judge was obliged to make a finding in terms of par 7(b)F of the statement of claim as that was the case the respondents came to meet at trial.[87]  It was not necessary for the primary judge to resolve Pave's case as pleaded in par 7(b)F.  Pave advanced its misleading conduct claim in a number of ways.  Pave was not required to establish all of the alternative bases on which it contended that the respondents were liable to it.  It was open to the primary judge to determine the claim based on the pleaded representation in par 7(b)B of the statement of claim, as modified and understood by reference to issue 1 in the joint list of issues, rather than to make findings in terms of par 7(b)F of the statement of claim.

   [87] Cross-appellants' submissions par 3.

3. The respondents went on to submit that the primary judge resolved the case on the basis of a non-pleaded controversy.[88]  There is some grounding for that contention if par 7(b)B of the statement of claim is read alone and not in the context of issue 1 in the joint list of issues.  However, as is explained at [19] ‑ [21] and [52] ‑ [63] above, once regard is had to par 7(b)B of the statement of claim in the context of issue 1 in the joint list of issues, and the way in which the primary judge determined the case, it is obvious that her Honour resolved the case on the basis that it was fought before her Honour.  The primary judge determined that there was a false representation of present fact in terms of par 7(b)B of the statement of claim as modified by the more precise statement of the alleged representation as was restated by the parties' formulation of issue 1 in the joint list of issues.

   [88] Cross-appellants' submissions pars 2 - 3.

4. Counsel for the respondents said that it was very difficult to see how the list of issues corresponded with the pleaded case.[89]  We disagree.  The correspondence between issues 1 and 4 and the pleaded case in pars 7(b)B and 11(f) of the statement of claim is obvious - all the more so once the respondents' pre-trial concession is appreciated.  Counsel for the respondents accepted, nonetheless, that the primary judge determined the case by reference to the joint list of issues.[90]  Despite that acceptance it was contended that ground 1(a) had substance as the pleaded case 'trumped' the joint list of issues.[91]  Counsel contended that the primary judge had to resolve the case by the pleadings - and the pleadings alone - even though the parties had chosen to modify the battleground by adoption of the joint list of issues.[92]

   [89] Appeal ts 21.  See also Appeal ts 26 - 27 so far as counsel for the respondents suggested that the finding at Primary reasons [105] did not speak to the modification to the pleadings effected by issue 1.

   [90] Appeal ts 21.

   [91] Appeal ts 21.  Later, however, counsel for the respondents seemingly accepted that the parties modified the case by the list of issues: Appeal ts 26.

   [92] Appeal ts 22.

5. The reasons of the primary judge are usually the best indication of what matters were in issue between the parties at trial.  The present case, however, does not admit of any real debate as to the issues that were before the primary court for determination.  The parties identified the issues for determination by the joint list of issues.  To the limited extent that the issues - in particular issue 1 - departed from the pleaded case this is a case where the parties have chosen to disregard the pleadings and have refined the issues unconfined by the pleaded case through the joint list of issues as was presented to the primary judge for determination.  There was no appellable error by the primary judge in resolving the case on that basis.  It was the basis on which the case was fought and the basis on which the parties had sought that the case be resolved.

6. The only criticism that might be levelled is that the primary judge did not require appropriate amendment to the statement of claim.[93]  Doing so might have prevented the opportunistic contention that was ultimately advanced on the cross-appeal to this court despite the respondents having participated in the presentation of the joint list of issues.  That said, we do not wish to suggest that the primary judge ought to be criticised.  The primary judge, for good reason, probably considered that the joint list of issues put the matter beyond doubt and would have wished to avoid the parties incurring unnecessary costs.

   [93] Compare London Passenger Transport Board v Moscrop [1942] AC 332, 347.

7. Finally in relation to ground 1(a), the respondents sought to make something of the primary judge stating that her decision was not based on the matters pleaded in pars 7(b)F or 7(b)G of the statement of claim.[94]  However, when pressed, counsel for the respondents eventually accepted (as we have already explained) that the primary judge's finding of misleading conduct was in terms of the false present representation rather than any future representation made without reasonable grounds.[95]

   [94] Cross-appellants' submissions par 2; Appeal ts 22 - 25. See Primary reasons [101].

   [95] Appeal ts 27 - 28.

8. The circumstance that the primary judge did not rely on part of the pleaded case in resolving the action in Pave's favour does not demonstrate error in her Honour determining the case on an alternative basis that was open to ground liability.

9. By ground 1(b) the respondents contended that the primary judge did not make a finding concerning par 11(f) of the statement of claim at all.[96]  The ground is wholly misconceived.  The primary judge made a finding, in terms of par 11(f) of the statement of claim and issue 4 of the joint list of issues, that the representation that the client base comprised $150,000 in recurring income was false - and was false at the time it was made.[97]  Insofar as, as drafted, the ground points to another finding - concerned with what happened post-settlement - that additional finding does not detract from the finding of falsity of the representation as a matter of present fact that is obvious on the primary judge's reasons but which is said by ground 1(b), wrongly, not to have been made at all.

   [96] Cross-appellants' submissions par 4.

   [97] Primary reasons [115], [119].

10. Cross-appeal ground 1 should be dismissed.

Cross-appeal ground 2: Alleged failure to resolve the pleaded case on admissible evidence

1. Cross-appeal ground 2 states:

   The learned Trial Judge erred in law in failing to resolve the plaintiff's pleaded representation [sic - the plea was not a 'representation' but rather one of the ways in which Pave advanced its damages case] in paragraph 12(b)(i) of the RASOC upon admissible evidence: The allegation was: 'The plaintiff did not receive a base income of $150,000 per year from the Client Base, and instead received only an average of $126,000 per year comprised of earnings from the Client Base as well as earnings received as a result of Mr Stojanovic's own efforts and endeavours'.

   The finding at [106] is with respect flawed.  The Judge wrongly admitted and then relied upon oral 'approximate' evidence from Mr Stojanovic in re-examination, when no evidence had been led in-chief, nor cross-examined upon, concerning:

   a.the amount of base income received by the plaintiff per year from the Client Base; or

   b.the average of $126,000 received from the Client base and Mr Stojanovic's efforts.

2. As advanced in submissions, ground 2 contended that the primary judge erred in law by resolving Pave's damages case on inadmissible evidence, namely, evidence that was adduced in re-examination.[98]  Counsel for the respondents submitted that, apart from some evidence wrongly adduced in re-examination - there was simply no evidence on behalf of Pave that the earnings generated from the client base were not $150,000 per annum.[99]  The alleged error of law was put in terms of relying on the evidence when it was inadmissible.[100]  The evidence was plainly relevant.  The only basis for the suggested inadmissibility of the evidence was that it was adduced in re-examination.

   [98] Cross-appellants' submissions pars 5 - 9; Appeal ts 31 - 34.

   [99] Appeal ts 31.

   [100] Appeal ts 33.

3. Ground 2 is premised on two misconceptions:

   1.At trial, Pave's damages case was not advanced by reference to par 12(b) of the statement of claim. Rather, as explained at [64] - [69] above, Pave's damages case was put and upheld in terms of par 12(a) of Pave's pleaded case. That turned on the primary judge's finding as to the recurring income as at the time the client base was transferred rather than Mr Stojanovic's evidence as to what occurred post-settlement. However, as noted earlier, Mr Stojanovic's evidence was supportive of that finding and was referred to insofar as the primary judge found that the representation made was false.

   2.It is incorrect to suggest that, prior to re-examination, no evidence was adduced on the subject of the income that Pave had derived from the client base.  There was some evidence.  Mr Stojanovic referred to a shortfall in income and stated that he was not receiving the income he was expecting.[101]  That evidence alone justifies the finding in the first two sentences of [106] of the primary reasons (see [119] below).  The only part of [106] which remains open for challenge on the basis that the primary judge erred in law in admitting evidence in re‑examination is the last sentence in [106] where her Honour accepted Mr Stojanovic's evidence that he thought the client base produced about $95,000 in the first year.

   [101] ts 281. See also Primary reasons [51].

4. The passage in Mr Stojanovic's re-examination on which the primary judge relied, and which was complained of by ground 2, reads as follows:

   [Counsel for Pave]:  Do you recall, in [round] figures, how much revenue was derived from the client list you purchased in the first year of business? --- Less than $150,000.

   [Primary judge]:  Sorry, Mr Stojanovic, that’s not in round figures.  You can either put it in a round rough estimate, or not.  If you don’t remember, you can only say so? --- Approximately $95,000.

   [Counsel for Pave]:  Thank you.

   [Counsel for the respondents]:  Excuse me, your Honour.  But I didn’t - my recollection is I didn’t cross-examination about these matters - I - - -

   [Primary judge]:  Well, the cross-examination is looking at this statement [referring to a remittance advice on which there was cross-examination], so I don’t know quite where it’s going.  But we’ll see whether it’s got any relevance.  I’m not sure at the moment.  Mr Douglas [counsel for Pave], I take you have got purpose?

   [Counsel for Pave]:  That’s as far as I wanted to take it, your Honour.[102]

   [102] ts 502.

5. Two things are apparent in relation to the respondents' contention that the evidence was inadmissible and the primary judge erred in law in relying on inadmissible evidence.  First, if there was an objection, it was too late: the evidence had been adduced.  Second, in our view, even on the most favourable reading of the passage, there was no relevant objection to the evidence now sought to be challenged.  We do not apprehend the tepid statement on the part of then counsel for the respondents to constitute an objection to the admissibility of the evidence based on the fact that it was wrongly adduced in re‑examination.  If there was to be a formal objection - and occasion for the primary judge to rule on admissibility - the primary judge clearly suggested that the matter might be re-visited after the subject matter was exhausted.  Ultimately, despite that invitation, on counsel for Pave indicating that he was not taking the matter any further, there was no objection.  The evidence was received and, being so received, was part of the admitted evidence before the primary judge.

6. A further submission was advanced at the appeal hearing.  In the alternative, counsel for the respondents contended that it was not open to the primary judge to rely on evidence given in re-examination.[103]  No authority was cited for the proposition.  It is plainly wrong.  The fact that the evidence was adduced in re-examination rather than evidence‑in‑chief might have been material to its reliability and weight.  But it remained open to the primary judge to accept the evidence, particularly so given her Honour's general findings as to the reliability of Mr Stojanovic's evidence.

   [103] Appeal ts 33 - 34.

7. Cross-appeal ground 2 should be dismissed.

Cross-appeal ground 3: Alleged factual error as to finding relevant to falsity of representation and quantification of damages

1. Cross-appeal ground 3 states:

   The Learned Judge erred in fact in paragraph 155 of the Reasons.  The Judge accepted Mr Napoli's evidence (which was based on what Mr Stojanovic told him) and in doing so stated as part of her reasoning: 'there is no evidence to establish that the revenue from NEW clients was ongoing'.  This statement is wrong.  There was evidence that NEW coded clients were paying commissions on an ongoing basis - see Exhibits 2 & 3 and ts 394, 403 - 415, 428 - 430, 521 - 522.

2. The respondents advanced ground 3 as a challenge to a factual finding of the primary judge.  There was, however, no schedule filed in accordance with PD 7.4 of the Consolidated Practice Directions.  At the appeal hearing, counsel for the respondents stated that the only evidence pointed to in support of the ground were the exhibits and the transcript references referred to in the ground itself.[104]  That does not excuse the non-compliance with PD 7.4.  PD 7.4 applies to all civil appeals in which the court is required to undertake a review of the evidence including a civil appeal in which an appellant (or, in this case, a cross-appellant) challenges a finding of fact made by the primary court.

   [104] Appeal ts 41.

1. It is not enough for the respondents to say that they have, by ground 3, pointed to all the evidence that is against the finding.  Equally fundamental to the requirement of PD 7.4 is that the schedule prepared for the assistance of the court provide a summary of each piece of evidence before the primary court that supports the finding and the source of that evidence.[105]  The respondents have ignored that obligation altogether.

   [105] Consolidated Practice Directions PD 7.4 par 2(a)(ii).

2. The alleged factual error is that the primary judge was wrong to conclude, as her Honour did at [155] of the primary reasons, that there was no evidence that the revenue from the 'NEW' clients was ongoing.  That evidentiary finding was relied on in holding that the recurring income was in the order of $80,000 per annum - relevant to both falsification of the representation as found and the eventual quantification of damages.  The submission on the cross-appeal was that:[106]

   1.There was evidence that some of the commission payments associated with superannuation contributions - which was coded as 'NEW' - were in fact ongoing.

   2.That evidence was 'totally disregarded' by the primary judge without reference or explanation.

   [106] Cross-appellants' submissions pars 11 - 12 WAB 33 - 34.

3. We have considered the transcript references relied on by the respondents in support of ground 3.[107]  They consist of passages in which Mr Stojanovic was cross-examined on particular entries on a detailed remittance report rather than the entries of the report as a whole.[108]  The significance to be given to the passages relied upon is to be assessed having regard to the fact that, on a casual perusal of the client list, there are over 120 client entries highlighted in blue with the designation 'NEW' within the transferred client base.  So understood, only a minute fraction of the possible transactions were cross-examined on.  Indeed, the passages relied on in the cross-examination in support of ground 3 focussed on one particular client.[109]  Of those transactions cross-examined on, the only recurrent income identified was an amount of $13.22.[110]  And this, as we read the transcript, concerns a post‑settlement receipt - the remittance report on which the recurring income transaction appears being a commission statement for June 2010.[111]

   [107] ts 394, 403 - 415, 428 - 430, 521 - 522.

   [108] This was accepted by the respondents: Appeal ts 41.

   [109] See ts 406 - 409, 428 - 430.

   [110] ts 429 - 430.

   [111] ts 428.

4. Accordingly, at their highest, the cross-examination references relied on established one 'NEW' designated client generating apparently recurring income - in an amount of $13.22 - in a post-settlement transaction.

5. Paragraph [155] of the primary reasons, as is the subject of ground 3, provides:

   I accepted [sic] the evidence of Mr Stojanovic of the earnings in his first year from the Client Base, and the significance of the designation NEW in Mr Jones' selected clients' statements.  On that basis, the plaintiff briefed Mr Napoli who performed the calculations of the earnings from the Client Base, at the time of settlement.  I am satisfied that there is an established evidential basis for these calculations of Mr Napoli.  There was no evidence to establish that the revenue from NEW clients was ongoing.  (emphasis added)

6. Ground 3 challenged the italicised portion of the primary judge's factual findings in [93] above.

7. The finding as challenged spoke to the calculations of Mr Napoli.  In that sense, even having regard to the cross-examination references relied on in support of ground 3, there was no factual error on the part of primary judge.  Mr Napoli's calculations were as to the recurrent income from the client base in the 12 months pre-settlement.  The only transaction pointed to on the cross-appeal is in the period post‑settlement.  The respondents have not pointed to any evidence to establish that the revenue from NEW clients in the 12 months pre‑settlement - as was the subject of Mr Napoli's calculations - was ongoing.

8. Viewed in context, however, the important factual finding is not that there was no evidence to establish that the revenue from NEW clients was ongoing.  That was only an observation as to the state of the evidence.  The critical primary finding was that the recurring income to the end of April 2010 was in the order of $80,000 ex-GST per annum.[112]  This is not challenged by ground 3.  Nor, in our view, did ground 3 strike at the critical things relied on by the primary judge in support of that finding: (1) first, the evidence of Mr Stojanovic as to the nature of the 'NEW' commissions (see [16] above) and the income generated post-settlement (see [21.4] above); and (2) second, Mr Napoli's essentially unchallenged calculation evidence (see [18.1] above).

   [112] Primary reasons [91], [112], [115].

9. The matters raised in support of ground 3 provide no proper basis to challenge - let alone overturn - the critical factual finding of the primary judge.  To the contrary, the fact that on cross-examination the respondents were only able to point to a single instance of recurrent income post-settlement in an amount of $13.22 tends to support, rather than detract from, the correctness of the primary finding that the recurring income to the end of April 2010 was in the order of $80,000 ex-GST per annum.  It tends to confirm Mr Stojanovic's evidence, as accepted by the primary judge and unchallenged on the cross‑appeal, that the 'NEW' commissions were not recurring income.

10. Cross-appeal ground 3 should be dismissed.

Cross-appeal ground 4: Alleged error of law in accepting valuation evidence where not open on pleaded case

1. Cross-appeal ground 4 states:

   The learned Trial Judge erred in law in accepting the evidence of Charles Napoli to value the plaintiff's loss.  The learned Trial Judge ought to have resolved the plaintiff's pleaded case at paragraph 7(b)F and 12(b)F [sic - referring to 12(b) as there is no 12(b)F].  Mr Napoli's valuation had not valued all of the earnings of the plaintiff, as the plaintiff's pleaded case obviously required.

2. At the appeal hearing, counsel for the respondents put this ground in procedural fairness terms.  Counsel said that the basis on which the damages case was determined by the primary judge was a surprise at trial.[113]  Counsel argued that nowhere did the joint list of issues say that the 'NEW' commissions were to be excluded.[114]  The contention was that, on the pleaded case, it was not open to resolve the case as the primary judge had done on the basis of Mr Napoli's evidence.[115]  Evidently, by the ground, the respondents contended that the only basis on which the primary judge could have determined the case was by reference to the pleaded case comprised in pars 7(b)F and 12(b) of the statement of claim.

   [113] Appeal ts 43.

   [114] Appeal ts 43.

   [115] Appeal ts 44.

3. Accordingly, the ground must fail if it was open to resolve the damages case in the way that the primary judge proceeded to determine that aspect of the claim.

4. The ground is hopeless.  The damages case as propounded at trial was articulated well in advance of the trial by par 12(a) of the statement of claim, the substituted particulars of damage and Mr Napoli's expert report.  There was no 'surprise' at trial as contended for by counsel for the respondents in support of ground 4.  Indeed, even the joint list of issues identified, by issue 8, that one of the relevant questions was whether revenue identified as 'NEW' on the commission statements should be excluded from any calculation of recurring or ongoing income.  In coming to a conclusion on that latter issue, and then applying it to determine the value of the client base as transferred at 29 April 2010, the primary judge determined the case in accordance with the issues as they were presented to her Honour by the parties.  There was no need to resolve the case as pleaded at par 12(b) of the statement of claim.  That was not the damages claim that Pave pursued at trial.

5. Cross-appeal ground 4 should be dismissed.

Cross-appeal ground 5: Alleged factual error as to finding relevant to reliance

1. Cross-appeal ground 5 states:

   The Judge erred in fact when making the finding in paragraph 116 that Mr Stojanovic was not in a position to assess the Client List.  This contradicted the plaintiff's pleaded case that the Client List was provided to it [7(b)(i) RASOC].  Further, Mr Stojanovic gave evidence that he saw the Client List at the time and understood what the codes meant. ts 229, 231, 241 and 431.  This invokes real doubt as to whether Mr Stojanovic was in fact misled by Mr Jones about the Client List.

2. At the appeal hearing, counsel for the respondents informed the court that ground 5 should refer to par 7(b)(ii) of the statement of claim rather than par 7(b)(i).[116]  Paragraph 7(b)(ii) asserted that one of the contended for representations was made by Mr Jones providing Mr Stojanovic with the highlighted client list.

   [116] Appeal ts 45.

3. Ground 5 challenges a finding that, pre-settlement, Mr Stojanovic was not in a position to make an independent calculation of the revenue to be derived from the client base.[117]  This could have been a step along the way to challenging the primary judge's reliance finding.[118]  There is, however, no actual challenge to the reliance finding.  The ground says no more than that, if the primary judge was in error in finding that Mr Stojanovic was not in a position to assess the client list, there is 'real doubt' as to whether Mr Stojanovic was in fact misled.  Accordingly, it is difficult to see how success on this ground would result in the cross‑appeal being allowed.

   [117] Primary reasons [116].

   [118] Primary reasons [118].

4. In the passage as challenged by ground 5, the primary judge held:

   Mr Stojanovic had no opportunity to analyse or question the client list either when it was shown to him initially, in about October 2009, or before settlement.  He said and I accept that he did not receive a copy until after settlement.  Mr Stojanovic was impressed by Mr Jones and his business and he trusted him.  Mr Jones' confidence in the value of the Client Base was asserted, repeatedly, in his correspondence with CBA and St George Bank.  Mr Stojanovic was aware of this.  Whilst he knew the significance of the codes used in the commission statements, he was in no position to make an independent calculation of the revenue to be derived from them.[119]  (emphasis added)

   [119] Primary reasons [116].

5. Ground 5 only challenges the finding in the portion of that passage as italicised in [107] above.

6. The ground provides a good demonstration of why a PD 7.4 schedule must be provided where a party challenges a factual finding on the basis that the primary judge erred in fact.  Had such a schedule been prepared it is unlikely that the ground would have been pursued.  The evidence supported the primary judge's finding, unchallenged by ground 5, that Mr Stojanovic did not receive the highlighted copy of the client list until after settlement.  On an earlier occasion - identified as being in November 2009 - Mr Stojanovic was simply shown the documents with the highlighting to designate the clients that were to be carved off Wotif's client base and transferred under the proposed transaction.[120]

   [120] ts 233.

7. Mr Stojanovic's evidence was that:

   1.He was unable to check the client list and the designated client base for transfer until after the settlement.[121]

   2.He was unable to do any due diligence on the client list so far as it designated the client base to be transferred - he was not given the client list until 'quite later'.[122]

   3.Although he, Mr Stojanovic, asked for the client list, Mr Jones said: 'No' - not until everything was completed.[123]

   [121] ts 234.

   [122] ts 235.

   [123] ts 235.

8. None of those evidentiary references were referred to in the respondents' ground 5.  They should have been referred to in a PD 7.4 schedule.  There was no challenge to the primary judge's conclusion that Mr Stojanovic was a reliable witness of truth, no contradictory evidence and no direct challenge to the relevant evidence in cross‑examination.  Indeed, cross-examination proceeded on the basis that Mr Jones did no more than show Mr Stojanovic the client list.[124]  All that is said in support of the ground is that, by reference to other statements in his evidence, Mr Stojanovic knew what the reference to 'NEW' meant on the client list[125] (something that the primary judge evidently gave consideration to in coming to the impugned finding) and that on the pleaded case Mr Stojanovic was provided with the client list.[126]

   [124] ts 457.

   [125] Cross-appellants' submissions pars 18 - 19 WAB 35 (referring to ts 229, 231, 241, 431).

   [126] Cross-appellants' submissions pars 17 WAB 35.

9. The impugned finding is based, to a substantial degree, on the primary judge's assessment of Mr Stojanovic's credibility and reliability having seen and heard him give evidence.  Appellate intervention is only warranted if the finding is demonstrated to be wrong: (1) by reference to incontrovertible facts or uncontested testimony; (2) because the finding is glaringly improbable or contrary to compelling inferences; or (3) because the trial judge failed to use, or has palpably misused, his or her advantage as trial judge.  No such error has been demonstrated.

10. The reference in the pleaded case to Mr Stojanovic being provided with a copy of the client list is a long way short of a proper basis to contend that there was any such error.  Counsel for the respondents contended that Mr Stojanovic's evidence was contrary to the pleaded case.[127]  That is a bold submission where the evidence went unchallenged in cross-examination - no alleged inconsistency between the evidence and the pleaded case being put to Mr Stojanovic - and the evidence can be read comfortably with the pleaded case.  There is no relevant inconsistency between saying that the client list was provided to Mr Stojanovic (as pleaded) and shown to Mr Stojanovic but then returned without the opportunity to conduct due diligence (as stated in evidence).

    [127] Appeal ts 45.

11. Nor, in our opinion, is the factual finding susceptible to appellate intervention merely because Mr Stojanovic knew what the reference to 'NEW' meant. He was not given the client list with the blue highlighting to analyse and conduct due diligence. At the most Mr Stojanovic was shown the client list. The nature and extent of the client list is such that, without adequate time to review, consider and perform calculations, it cannot seriously be suggested that there was an opportunity to analyse or question or to be in a position to independently calculate the revenue to be derived from the client base. The finding as impugned by ground 5 must stand in the absence of any proper basis to gainsay the evidence summarised at [110] above.

12. Cross-appeal ground 5 should be dismissed.

Cross-appeal ground 6: Alleged failure to give adequate reasons

1. Cross-appeal ground 6 states:

   The learned Trial Judge erred in law in failing to give sufficient reasons for the finding at [119]. The paragraph numbers referred to do not accord with the finding.

2. The relevant passage within the primary reasons reads:

   On the findings I have made at par 78, par 88 and par 93 the Client Base did not generate $150,000 of recurring income, either at the time it was made or subsequently.[128]

   [128] Primary reasons [119].

3. Regrettably, it appears that the primary judge has made an inadvertent cross-referencing error in this passage.  The paragraphs of the primary reasons as referred to do not sustain the finding that the client base did not generate $150,000 of recurring income.  At [78] the primary judge recites Mr Napoli's background; [88] refers to Mr Napoli's evidence being supported, in part, by evidence of Mr Stojanovic and the basis for Mr Napoli adopting a multiplier of '1' in valuing the client base; [93] is simply an observation that the primary judge intended to return to the question of the appropriate multiplier and final valuation later.

4. There is, however, ample support for the primary judge's conclusory finding at [119] of the primary reasons, as challenged by ground 6, in the following passages of her Honour's reasons:

   [81]I accept that Mr Napoli has the necessary qualifications and experience to undertake a valuation of the Client Base.  This is because the process described by Mr Napoli is obviously applicable to various types of businesses that comprise clients whose business produces income and his general considerations of revenue stream capitalisation are transferrable between entities.

   [91]I find that Mr Napoli's evidence is relevant, admissible expert evidence as to method and calculations.  I accept his calculations of the 'recurring' income to April 2010 to be of the order of $80,000, subject to my findings below.

   [106]I accept Mr Stojanovic's evidence that the Client Base did not generate $150,000 per annum.  That shortfall became apparent quite quickly and he began to investigate.  His evidence was that he thought the Client Base produced about $95,000 in the first year.

5. Also relevant are these findings:

   [112]I accept the calculations of Mr Napoli, on the basis of the materials he was briefed with, that the total of other (not NEW) income for the period ending April 2010 was $84,428 including GST, not excluding clients who apparently 'ceased' within the period.

   [115]I am satisfied that the representation that the Client Base was $150,000 of recurring income was false and misleading, based upon Mr Napoli's calculations of the actual commissions of a repeating nature in the year prior to 29 April 2010 and Mr Stojanovic's evidence that there was a significant shortfall in receipts once he took over the Client Base.

6. It is unfortunate that the primary judge's reasons contain some cross-referencing errors.  It is the sort of mistake that is hopefully eliminated when proof reading.  Nevertheless, such mistakes happen - as the respondents' own grounds of cross-appeal demonstrate.  The making of a mere cross-referencing error does not mean that the primary judge erred in law in failing to provide adequate reasons.  The principles relevant to an evaluation of the adequacy of reasons are well‑established and need not be repeated.[129]  The critical question is whether the essential path of reasoning to the impugned conclusion is disclosed with sufficient detail and in sufficient certainty to meet the twin objects that: (1) the litigant knows why he or she was unsuccessful; and (2) an appeal court may determine whether the decision involved appellable error.[130]

   [129] See eg Browne v Browne [2019] WASCA 1 [80].

   [130] Browne v Browne [81]; [86]; Wilson v Arwon Finance Pty Ltd [2020] WASCA 137 [182].

7. Reading the primary reasons as a whole (an exercise which makes the inadvertent cross-referencing errors quite obvious) there is no doubt as to the basis on which the primary judge concluded that the client base did not generate $150,000 of recurring income - either at the time the representation was made or immediately thereafter.  Her Honour relied on Mr Napoli's evidence and Mr Stojanovic's evidence.  The primary judge accepted Mr Napoli's calculations of the recurring income in the period to 29 April 2010.[131]  The primary judge also accepted Mr Stojanovic's evidence that the 'NEW' commissions were not recurring commissions[132] and that the client base did not in fact generate $150,000 per annum - there being only about $95,000 in the first year.[133]  The available inference, implicitly accepted by her Honour and consistent with Mr Napoli's evidence, was that the lack of recurring income in the first year post-settlement was consistent with what the client base was generating at the time the representation was made.

   [131] Primary reasons [91], [112], [115].

   [132] Primary reasons [111].

   [133] Primary reason [106].

1. Her Honour gave adequate reasons for the factual finding at [119] of the primary reasons. That is particularly the case where the finding essentially repeats the finding made at [115], as to which there is no challenge as to the adequacy of the primary judge's reasons. The cross‑referencing errors simply mean that the relevant portion of her Honour's reasons have to be construed by reference to the paragraphs of the primary reasons where her Honour made findings which plainly support the conclusory finding made at [119].

2. Cross-appeal ground 6 should be dismissed.

Conclusion and orders

1. For these reasons the appeal should be allowed and the cross‑appeal should be dismissed.

2. As the appeal is to be allowed the consequential costs orders made by the primary judge should be set aside and there should be orders enabling Pave to recover all of its costs of the action.  There is no reason to disturb the primary judge's assessment that, as and from 15 September 2016, those costs ought to be on a solicitor and own client basis.

3. We would order that:

   1.The appeal in relation to the judgment and orders of the District Court of Western Australia made 7 February 2020 and 27 March 2020 in action CIV 2379 of 2015 is allowed.

   2.The cross-appeal in relation to the judgment and orders of the District Court of Western Australia made 7 February 2020 and 27 March 2020 in action CIV 2379 of 2015 is dismissed.

   3.Paragraphs 1 and 2 of the orders made 7 February 2020 in District Court of Western Australia action CIV 2379 of 2015 are set aside and the following is substituted:

   Judgment is entered for the plaintiff against the defendants, jointly and severally, in the amount of $437,000 plus interest in the amount of $256,453.15 being a total of $693,453.15.

   4.Paragraphs 1, 2 and 3 of the orders made 27 March 2020 in District Court of Western Australia action CIV 2379 of 2015 are set aside and the following is substituted:

   The defendants are jointly and severally liable to pay to the plaintiff the plaintiff's costs of the action, to be taxed if not agreed:

   (a)up to and including 14 September 2016 - on a party and party basis; and

   (b)from 15 September 2016 - on a solicitor and own client basis.

4. We would hear from counsel for the parties as to the costs of the appeal and the cross‑appeal.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

OE
Associate to the Honourable Justice Vaughan

14 JANUARY 2021