Piantadosi & Piantadosi v Tang No. Scciv-01-488

[2001] SASC 251
PIANTADOSI & PIANTADOSI V TANG
Magistrates Appeal (Civil)

LANDER J. The appellants were the defendants in an action brought by the respondent/plaintiff in the Magistrates Court in which a Magistrate gave judgment for the respondent in the sum of $26,500 in interests and costs.
The respondent claimed damages arising out of the purchase by the respondent of the appellant’s business.
The respondent claims that in about mid October 1998 she responded to an advertisement in the Advertiser and spoke to the second appellant. As a result of which the respondent attended at the premises leased by the appellants and met with them.
The plaintiff claimed that during that meeting the second appellant made a number of representations to the respondent in the presence of the first appellant.
It was the respondent’s case that she acted upon the second appellant’s representations as a result of which she agreed to purchase the business conducted by the appellants together with stock owned by the appellants.
In due course she entered into an agreement dated 2 November 1998 which provided for the purchase of the business in the sum of $20,000 and stock. Moreover she accepted the assignment of the lease of the premises upon which the business was conducted and undertook to pay the outgoings associated therewith.
In due course she paid the further sum of $4,000 in cash to represent the value of the stock which passed in the agreement of 2 November 1998.
The respondent’s claim was that in due course it was established that the representations made by the second appellant were false and as a result of which she has suffered loss and damage.
She also complained that the appellant’s failed to comply with s 8 of the Land and Business (Sale and Conveyancing) Act 1994 (SA) in that the appellants did not serve her with a statement in the form required by regulation. She complained that the failure to provide that statement (vendors statement) meant that the appellants were also in breach of s 10 of that Act. She sought relief in respect of that aspect of a claim under s 15(2) of that Act.
The appellants filed a defence in which they denied making the representations claimed. They admitted providing a document to the respondent which they say included trading figures which represented a reasonable estimate of the business’s then current performance.
Moreover they denied that the respondent was in any way induced by or acted upon any representations made by the appellants.
Further they denied any representations made by the appellants were false.
The appellants admitted that they failed to provide the respondent with a vendors statement as required by the Land and Business (Sale And Conveyancing) Act but they claimed that the respondent was not prejudiced thereby and their failure to provide such statements was unintentional and did not occur by reason of their own negligence.
The trial was a little unusual. The respondent gave evidence but the appellants did not.
The learned Magistrate accepted the respondent as a witness of truth and was prepared to rely upon her evidence which he found to be credible and reliable. The respondent called in support of her case her friend Ms Teng. The Magistrate also accepted her evidence.
He found that the appellants and in particular the second appellant had been guilty of misleading and deceptive conduct as a result of which the respondent had suffered loss.
He found that the value of the business was considerably less than the $20,000 paid by the plaintiff and accepted the expert evidence of Mr De Pizzol that the approximate value at the time of purchase was $5,000.
He awarded the respondent the difference between those two figures. He concluded that there was an overvaluation of the stock by $1,500 and awarded the respondent damages in that respect.
He then assessed the respondent’s losses over the period she operated the business namely two years. He assessed the respondent’s loss in that regard at $10,000. In that way he reached a judgment of $26,500.
The learned Magistrate made no findings in respect of that aspect of the respondent’s claim which relied upon the Land and Business (Sale and Conveyancing) Act 1994.
The grounds of appeal relied on by the appellants are:
1.The Learned Magistrate erred in finding that the appellants or either of them made misrepresentations to the respondent.
2.The Learned Magistrate erred in finding that if any misrepresentations were made, the respondent relied upon those misrepresentations.
3.The Learned Magistrate erred in finding that the appellants or either of them engaged in misleading or deceptive conduct.
4.That the Learned Magistrate erred in finding that the conduct of the appellants was fraudulent.
5.The Learned Magistrate erred in allowing the respondent to give hearsay evidence.
6.The Learned Magistrate erred in allowing the witness Winter to give hearsay and/or expert evidence.
7.The Learned Magistrate erred in the assessment of the damages of the respondent.
8.The Learned Magistrate erred in deeming that the conduct of the second appellant must be adopted by the first appellant.
9.Extension of Time
The respondent had the onus, of course, of establishing her case on the balance of probabilities. Because her case depended upon oral representations it was necessary that she be accepted as a witness who could be relied upon to establish that the representations were made. It was also necessary that her evidence was sufficiently reliable for a finding that the representations were false. The respondent’s case also relied upon her evidence to establish that she relied upon the representations.
There is no doubt that the learned Magistrate was satisfied that the evidence of the respondent and the evidence of Ms Teng insofar as it bore upon those issues was reliable and could be acted upon.
The appellants argued, on this appeal, that the respondent’s evidence should not be accepted. It was put that the learned Magistrate had found that her evidence in part was “vague and non-persuasive” and in those circumstances her evidence should have been rejected. I was taken to her evidence and a number of submissions were made which were said showed the unreliability of that evidence.
I do not agree. It is clear that in some respects, as the Magistrate has found, the respondent was vague. However I agree with the learned Magistrate that they are in matters which were peripheral to the main issues. On the main issues she was adamant that she was misled by the female appellant to believe that she was a person called Julianne Bowden, and that the documentation which was produced to Ms Tang by the female appellant was that of the business during the time that the appellant had conducted the business.
Of course he had no other evidence. The appellants declined to give evidence. Their failure to give evidence allowed the Magistrate, in my opinion, to more readily raise inferences adverse to the appellants: Jones v Dunkel (1959) 101 CLR 298.
However, in one respect, the respondent’s case did not rely upon her evidence. The respondent claimed, and the appellants admitted, that the respondent had not been supplied with a vendor’s statement under s 8 of the Land and Business (Sale and Conveyancing) Act.
A vendor’s statement under that section must include, in the case of a small business, which does not include the sale of land (a) the rights of a purchaser under s 5 of the Act (the cooling off rights) and (b) the prescribed particulars in relation to the business: s 8(1).
The statement must also have endorsed on it or attached to it a certificate in the form required by regulation signed by or on behalf of a qualified accountant, not being the vendor certifying, (a) that the accountant or person acting on behalf of the accountant has examined the accounts of the business and (b) and that the financial particulars disclosed appear to be in conformity with the accounts: s 8(2).
In this case the respondent received no financial information in relation to the sale of the business. She did receive details of the business which had been conducted by the predecessor to the appellants but she was not given any information in relation to the appellants’ own business.
Section 15 of the Land and Business (Sale and Conveyancing) Act 1994 provides:
“15.(1)    Where a vendor’s statement is not given or certified as required by this Part, or the statement given is defective, the purchaser may apply to a court of competent jurisdiction for an order under this section.
(2)On the hearing of an application under subsection (1) the Court may, if satisfied that the purchaser has been prejudiced by the failure to comply with this Part, exercise any one or more of the following powers:
(a)avoid the contract and make such other orders as the Court thinks necessary or desirable to restore the parties to the contract to their respective positions before entering into the contract;
(b)award such damages as may, in the opinion of the Court, be necessary to compensate loss arising from the non-compliance;
(c)make such other orders as may be just in the circumstances.
(3)    Damages may be awarded under subsection (2)(b) against -
(a)     the vendor;
(b)if it appears that the purchaser has been prejudiced by a failure on the part of an agent to carry out duties imposed by this Part - the agent,
or both.”
It was put by the appellants that the respondent had not proved that she had been prejudiced by the failure to comply with s 8 of the Act. In those circumstances it was submitted the respondent was not entitled to any damages or any other form of relief under s 15 of the Act.
There is no doubt, in my opinion, that the purchaser of the business who has received no financial information in relation to the business has suffered prejudice. In this case there is simply no doubt that the respondent was prejudiced by the failure of the appellants to comply with their obligations under s 8.
In those circumstances the Magistrate would have been entitled, without further consideration to make an order under s 15(2)(a) and award such damages as he thought necessary to compensate the loss arising from the non-compliance under s 15(2)(b), subject, of course, to the statutory defence which was available to the appellants under s 16 of the Act.
Section 16 of the Act provides:
“16.It is a defence to a charge of an offence, or to civil proceedings, under this Part arising from an alleged contravention or non-compliance with a requirement of this Part if the defendant proves -
(a)that the alleged contravention or non-compliance was unintentional and did not occur by reason of the defendant’s negligence or the negligence of an officer, employee or agent of the defendant; or
(b)that the alleged contravention or non-compliance was due to reliance on information provided by a person or body to which an inquiry to obtain the information is, in accordance with the regulations, required to be made; or
(c)that -
(i)the purchaser received independent advice from a legal practitioner in relation to waiving compliance with that requirement; and
(ii)the legal practitioner signed a certificate in the form required by regulation as to the giving of that advice; and
(iii)the purchaser waived compliance with that requirement by signing an instrument of waiver in the form required by regulation.”
In this case the appellants pleaded that the non-compliance was unintentional and did not occur by reason of their negligence. In that respect they relied upon the defence given in s 16(a). Clearly the defences under paras (b) or (c) were not available to them.
However, the appellants did not make out that statutory defence. The onus lay upon the appellants to establish that their non-compliance with their obligations under s 8 was unintentional and did not occur by reason of their negligence. They gave no evidence. They did not discharge their onus.
In those circumstances the respondent was clearly entitled to the orders under s 15(2)(a) and (b).
Mr Coppola, counsel for the appellant argued that the respondent was not entitled to orders under s 15(2)(a) and (b) because this case was fought at trial as a claim in misrepresentation. It is true, as I have said, that the learned Magistrate did not decide the case under the provisions of the Land and Business (Sale and Conveyancing) 1994. However, in my opinion, that does not preclude the respondent relying upon that claim on this appeal. The claim was pleaded and was responded to. Indeed it was the respondent’s contention that the cause of action was referred to in opening.
She was also, of course, entitled to relief under the Fair Trading Act 1987 (SA) and Trade Practices Act 1974 (Cth) if she was able to make out that the representations which have been made to her were false and amounted to misleading and deceptive conduct.
The respondent’s pleadings do not make it easy to understand exactly what representations she claims were made by the appellant, those which were false and those which induced her to enter into the contract for purchase of the business. That is because the pleadings refer to representations which are not later claimed to be false.
I think the representations which the respondent pleaded and relied on as being false were:
1The female appellant’s claim that she was expecting a baby and was six weeks pregnant.
2That the appellants had been in the business for two and a half years.
3The business had always been busy.
4That there had been two girls working for the female appellant but she was not happy with the way they were working.
5That the appellants were very lucky in selling businesses; always sold good businesses to anyone.
The respondent also alleged that the appellants had passed off documentation as their own which was in fact documentation which had been provided to the appellants by the previous proprietor.
It was also part of the respondent’s claim for the statutory breaches that the appellants failed to provide financial statements for the period 1 February 1998 to October 1998.
I think there is with respect, in the respondent’s pleading, a good deal of confusion which unfortunately carried into the trial itself.
The Magistrate did not address the pleaded representations but dealt with representations at large.
First he found that the female appellant, Julie Piantadosi, represented herself as Julianne Bowden. Julianne Bowden was in fact a person who had owned the business and operated it for a period of two to three years prior to the discussions between the appellants and the respondent. Next he found that the female appellant had represented that documentation relating to the takings for Julianne Bowden were those of the business under her operation.
In my opinion those findings were open to the learned Magistrate. There was clear evidence that the female appellant had represented herself to be Julianne Bowden and had allowed the respondent to believe that documentation prepared for Julianne Bowden at the time that she sold the business to the appellants.
The respondent claimed that the provision by the female appellant to the respondent of the documentation which had been previously prepared for Julianne Bowden was of itself enough to establish the falsity of that representation.
The learned Magistrate not only found that there had been misrepresentations, he also found that the appellants had been guilty of fraudulent conduct. In that respect, in my opinion, he was in error. There was no plea of fraud and no finding should have been made.
There were two representations which the respondent referred to a number of times in her evidence. That was her claim that the female appellant told her that the business was making $1,800 per week. Moreover, she said the female appellant told her that the business was actually making much more because there was cash money that did not go into the books.
Those representations were not pleaded. Objection was taken in the respondent’s evidence in chief to that evidence on the ground that it was not relevant. The evidence was allowed. No application was made by the appellants for an adjournment and the matter thereafter proceeded upon the basis that the respondent’s case was that those representations had been made.
It would have been better if the Magistrate had required the respondent to amend her pleadings to plead those two further representations. However, the failure to do so did not, in the circumstances of this case, cause any miscarriage of justice. The appellants were content to proceed even though the pleadings did not refer to those two representations.
The appellants’ counsel on appeal sought to demonstrate, as he put it, that the respondent’s evidence was “palpable nonsense”. He argued that the representation that the business made $1,800 per week could not have been made because the financial documents which were provided by the female appellant to the respondent showed that the turnover never exceeded $1,600.
In my opinion that submission has to be rejected. Whether those representations were made depended upon a finding as to the credibility of the respondent. It may be that no-one could have sensibly acted upon the representations because they were inconsistent with other information provided at the same time, but that is a different matter. That does not mean that the representations were not made. It is impossible, in my opinion, for the appellants to argue on appeal in the absence of giving evidence themselves in the trial that the respondent’s evidence should be rejected in respect of this matter.
That, however, is not an end of the matter.
The difficulty with the Magistrate’s findings is that he did not identify, in his findings, the representations which he found to have been made by the appellants. Nor did he determine which of those representations were false. He did not make any finding that those false representations induced the respondent to enter into the contract.
Whether or not the female appellant passed herself off as Julianne Bowden is not relevant unless the false representation induced the respondent to act to her detriment by entering into this contract. If the second appellant had provided misleading documentation, the Magistrate was obliged to make a finding whether the provision of the documentation to the respondent induced the respondent to enter into the contract. Moreover in respect of the claim that the business was making $1,800 per week and cash money was not being brought to the books, it was necessary to make a finding whether those matters induced the respondent to enter into the contract to purchase the business.
I accept the appellants’ argument that there are insufficient findings upon which to base a verdict under the Trade Practices Act 1974 or the Fair Trading Act 1987 or indeed misrepresentation. However, as I pointed out to the appellants’ counsel during the argument, the respondent had made out the statutory cause of action because the appellants had not discharged their onus in respect of the statutory defence available under the Act.
In those circumstances it was somewhat academic whether the plaintiffs had made out any other causes of action.
If the appellants had complied with the Land And Business (Sale And Conveyancing) Act 1994 they would have served a vendor’s statement which would have contained the prescribed particulars in relation to the business. The statement would have had endorsed on it or attached to it a certificate in the form required by regulation signed by a qualified accountant certifying that the financial particulars disclosed appeared to be in conformity with the accounts.
The Land and Business (Sale and Conveyancing) Regulations 1995, provide that a statement is in the required form for the purpose of s 8 if it comprises Parts A, B, C and D of Form 2, and Schedule 1 of Form 2: Reg 9.

Regulation 10 provides that for the purposes of s 8(1)(b) of the Act the prescribed particulars are those set out in Form 2 Schedules 1 and, if appropriate, Form 2, Schedule 2, Division 2 of the Regulations. The accountant’s certificate is provided for in Regulation 11.
Schedule 1 provides for trading statements setting out the average weekly sales, gross income per annum per week, overhead costs per annum per week, net profit per annum per week for the last three financial years.
The Regulations require the vendor to provide details of gross takings, and profits from sales and expenses. Schedule 1 Division 2 provides that the vendor must give information relating to the length of time that the business has been carried on for, the location of the business and the lease/tenancy agreements in place.
The Regulations provide for the provision of detailed information relating to the conduct of the business over the last three years prior to the prospective sale. The Regulations provide for the certification of that information by a qualified accountant.
The respondent was entitled to damages “as may be necessary to compensate for the loss arising from the non compliance” with giving the vendor’s statement.
In assessing those damages where no vendor’s statement has been given it would be appropriate to assume that the loss arising from the non compliance is a loss arising from the failure to give a vendor’s statement which truthfully reflected the financial health of the business.
As I have already determined, in my opinion, there was a failure by the appellants to provide any of the information required under the Act and Regulations.
None of that information was provided to the respondent. In those circumstances it follows, in my opinion, that the respondent has been prejudiced by the absence of that information.
The learned Magistrate assessed damages under three heads. First he awarded damages for the difference in value between what was paid for the business and the value of the business as at the date of purchase. Secondly he awarded an amount for, I think, an over valuation of stock. Thirdly he awarded the respondent damages for trading losses after purchase. He awarded $15,000, $1,500 and $10,000 respectively for each of those heads of damage.
On this appeal the appellants claimed that the respondent had not made out any entitlement to damages at all. In the alternative, it was argued that the Magistrate’s assessment reflected an over compensation of the respondent’s loss.
I shall deal with the matter of stock first. It was the respondent’s case that on settlement she paid $1,500 for stock in accordance with a settlement statement drawn by solicitors. She said, however, she was persuaded to pay a further $4,000 by the second appellant by way of cash. The learned Magistrate, I think, appears to have accepted that such a payment was made although his finding is a little vague. The sum of $4,000 was paid in cash because it “would be better for them” meaning the appellants. It was the respondent’s evidence that she paid what she did for the stock because she had been told by the second appellant that the stock was worth $9,000.
It was the respondent’s case that when she took over the business she found that there was a sum of about $2,000-$3,000 worth of stock not present.
In that regard the learned Magistrate found:
“I have already found there was fraudulent behaviour in relation to the takings. Although the plaintiff could be criticised for not having protected herself, concerning the stock, in my opinion it can be found, and I proceed to do so, that there was also some dishonesty by the defendants as to that aspect. I cannot do other than, however, use a broad-axe approach. I will award the plaintiff $1,500 under this heading.”
The appellants’ counsel criticised his Honour’s assessment in that regard. He pointed to inconsistencies in the respondent’s evidence and her pleading. He also criticised the respondent for failing to keep accurate records of her loss.
The appellants’ submission suffers from the failure of being able to point to any other evidence apart from the respondent’s. That evidence has been accepted by the Magistrate.
The appellants did not deny that they had been paid $1,500 by way of cheque and a further $4,000 by way of cash. They did not deny that the second appellant had represented that the value of the stock was $9,000. They did not deny that $2,000 to $3,000 worth of stock was missing when the respondent took over the business.
In those circumstances they cannot complain of the finding by the learned Magistrate that the respondent suffered a loss of $1,500 in respect of stock. It would have been open to the Magistrate to find for the respondent for a higher amount. However, his conclusion is not criticised by the respondent.
In my opinion that part of the award must stand.
I turn to the first head of damages. The respondent was provided with a document which the previous proprietor had herself supplied to the appellants when the appellants purchased the business. That disclosed gross takings of a sum in excess of $1,700 in respect of the periods 1 July 1995 to 30 June 1996, 1 July 1996 to 30 June 1997 and the period 1 July 1997 to 31 January 1998. [P2]
The respondent relied on a report of Mr De Pizzol [P11] to prove the respondent’s other heads of damage. He assumed that Ms Bowden had conducted the business from 1 July 1995 to 1 February 1998 and thereafter the business had been conducted by the appellants. For the period of two and a half years to January 1998 he found that the average gross income of the business was $1,535 per week.
Initially he was not able to make any finding in relation to the income of the business between January and June of 1998. Acting on information provided to him by the appellants, he found that the appellants’ income was $2,053 per week for the period June 1998 to November 1998. He, however, reviewed the bank records from the period from July 1998 to November 1998 which showed that the total bankings were $24,000 which reflected an income of $1,100 per week rather than the $2,051 per week claimed by the appellants.
At some time Mr De Pizzol must have been provided with further information. In a third report he offered the opinion that takings for the first five months, i.e. between January and June of 1998, were $425 per week.
He offered the opinion that the amount banked was significantly less than claimed income.
Of course it was in the appellants’ interest to claim income significantly higher than the $1,800 which had been represented to be the income of the business and higher than the income of the business when it was conducted by Ms Bowden. If the appellants could convince the Court that their income was of that kind then it was open to the appellants to claim that the representation made was not false.
This, of course, demonstrates, in my opinion, the prejudice which has been suffered by the respondent in the appellants failing to give the respondents the required Form 2 under the Regulations. If the appellants had complied with their statutory obligations the respondent would have been entitled to information which would have allowed her to make a proper assessment of the value of the business and of the true takings.
In a third report Mr De Pizzol offered the opinion that in the first five months of the business the appellants average sales were $425 per week, average expenses $160 per week and an average profit of $265 per week.
Mr De Pizzol draw the following conclusions from the records:
1During the period when the business was conducted by Julianne Bowden average sales were $1,535 per week, average expenses were $945 per week and average profit was $590 per week.
2During the first five months that the appellants owned and operated the same business between February 1998 and June 1998 average sales were $425 per week, average expenses were $160 per week and average profit was $265 per week.
3During the next five months the appellants operated the business between July 1998 and November 1998 the average sales reported were $2,050 per week, average expenses of $1,120 per week and average profit of $930 per week.
As I have already pointed out the average sales in that second five months did not result in corresponding bankings.
Mr De Pizzol offered the opinion that if the business had sales, expenses and profit of the order that Ms Bowden experienced then a figure of $20,000 plus stock of valuation “would be a fair and reasonable price.”
Mr De Pizzol was called and his reports were tendered during his examination in chief. [P11]
Mr De Pizzol was approached by the respondent’s solicitors and was provided with a number of financial documents upon which he was asked to base his opinions. Exhibit P10 shows that he was provided with:
“1     Income tax return for Mr Piantadosi - 98/99.
2      Income tax return for Mrs Piantadosi - 98/99.
3      Income tax return for Mickjule Family Trust - 97/98.
4      Income tax return for Mr Piantadosi - 97/98.
5      Income tax return for Mrs Piantadosi - 97/98.
6      Income tax return for Mickjule Family Trust 98/99.
7      Trial balance Mickjule Family Trust to 30.6.99.
8      The Mickjule Family Trust - Discretionary Trust Deed.
9      Bundle of bank statements for Mickjule Family Trust.
10     Schedule of National Australia Bank cheque butts and deposit slips.
11     Photocopies of various receipts.
12     Photocopies of various credit card vouchers.
13     Bundle of Council, Telstra, ETSA and accounts for hair supplies.”
None of those documents were tendered during the trial. It appears obvious from Mr De Pizzol’s report, however, that he relied upon the source information in those documents for the purpose of expressing the opinions in his reports.
The respondent did tender exhibit P2 which was the document which had been supplied to the respondent by the second appellant at the time of their first meeting. That document did contain the financial records relating to the business during the time that Ms Bowden owned the business.
Mr De Pizzol also had regard to the respondent’s books of account. He concluded that in the first seven months that the respondent owned and operated the business, namely between December 1998 and June 1999 the average sales in the business were $750 per week, average expenses were $805 per week and the average loss was $55 per week.
The respondent tendered a copy of her cash book [P7] and four taxation returns [P8] being the respondent’s taxation returns, for the periods July 1998 to June 1999 and July 1999 to June 2000 and her Family Trust’s taxation returns for the same period.
It was Mr De Pizzol’s opinion that those figures showed that either previous figures had been overstated or the clients had been otherwise drawn away from the business after the sale.
It was Mr De Pizzol’s opinion, on the basis of the financial details provided by the respondent since her purchase of the business that a more accurate value of the business would be $5,000 plus stock at valuation.
The respondent therefore tendered the evidence upon which Mr De Pizzol relied for the purpose of offering his opinion on the takings, expenses and profit for the period when Ms Bowden conducted the business. There was also evidence before the Court which allowed him to express an opinion that the respondent had conducted the business at a loss after she went into occupation.
The appellants criticised Mr De Pizzol’s evidence and reports in two respects. It was claimed that he was not an expert because he had never given expert evidence before. There is nothing in that point. A more significant criticism was that his opinion was based upon assumptions that were not separately proved.
There was no evidence to support the assumptions upon which Mr De Pizzol relied for the purpose of expressing the opinion of the takings, expenses and profits for the two five month periods to which I have referred when the appellants conducted the business.
There is an obligation upon a party who relies upon expert evidence to prove by admissible evidence the assumptions upon which the expert has relied for offering his or her opinion: Ramsay v Watson (1961) 108 CLR 642 at 649 and Paric v John Holland (Constructions) Pty Ltd (1985) 62 ALR 85 at 87.
The expert is usually not in a position to prove the assumptions upon which he or she has relied. In this case Mr De Pizzol was not in a position to prove, either in his oral evidence or by the provision of a report, any of the assumptions upon which he relied.
The respondent’s case therefore was deficient in that there was no proof of the assumptions upon which Mr De Pizzol relied for the purpose of expressing his opinions in relation to the income expense and profits during the ownership of the appellants.
The respondent did prove the necessary assumptions for Mr De Pizzol’s opinion that on the profit Ms Bowden experienced when she was in occupation a figure of $20,000 for the business “would be a fair and reasonable price”. Moreover the respondent proved the assumptions upon which Mr De Pizzol acted his opinion that the business only had a value of $5,000 during the time that the respondent operated the business.
However, the obligation on the respondent was to prove the value of the business at the time purchase. The respondent has not proved that value. Mr De Pizzol did not give an opinion as to the value of the business at that time. Indeed no evidence was tendered upon which an expert could make assumptions to give an opinion of the value of the business at that time.
Whilst I have no doubt that the value of the business was less than that which the respondent paid, in my opinion, the respondent failed to establish the lower value by admissible evidence. In those circumstances I am obliged to agree with the submission made by the appellants that the respondent did not prove the facts necessary to demonstrate that loss. There can be no award of damages under that head.
That leaves a consideration of the third head of damages.
Apparently the respondent did not wind up the business or sell it but continued to operate the business until the lease expired.
Mr De Pizzol’s opinion was that the respondent had suffered a loss of profits over the time which she conducted the business in the sum of $30,000. However his report merely asserts that figure without explanation. He gave no oral evidence. Indeed his oral evidence in chief was limited to acknowledging authorship of the respondent’s tax returns [P8] and his reports [P11]. The cross examiner did not elicit any further information. Mr De Pizzol said an alternative view of the respondent’s loss could be demonstrated by reference to gainful employment the respondent might have obtained as a qualified hairdresser.
He said in his report:
“An alternative view to the loss noted above is that had Laura Tang not acquired the business she could have obtained gainful employment as a qualified hairdresser and her opportunity cost savings may be quantified as follows:
Wage Income  $35,000
Capital and Finance Costs Saved          $2,000
Total Savings  $37,000 ”
Again he gave no further evidence in relation to that opinion in his oral evidence.
No attempt was made to prove the wages available to a qualified hairdresser or the capital and finance costs that might have been saved.
The learned Magistrate was not satisfied that he had sufficient detail to assess that loss. He was not satisfied that the tax returns had sufficient detail to reach definite conclusions.
In considering this aspect of the respondent’s claim he had regard to the evidence of a Mr Winter who was a customer of the respondent and who had some knowledge as to the viability of the business. His knowledge had been gained in discussions with Ms Bowden when he had acted for her as her business broker. Indeed he was the person who advised Ms Bowden to have a Form 2 prepared which was ultimately the Form 2 which the second appellant provided to the respondent.
He gave evidence of conversations he had had with Ms Bowden about her business which, in my opinion, was hearsay and inadmissible. He gave evidence of conversations he had with the appellants and said that it was his recollection that the second appellant was not happy with her employee’s performance and she had let them go. He also gave evidence of a conversation he had with the respondent. That evidence was also inadmissible.
The respondent’s counsel also led evidence from Mr Winter about his experience with businesses after they had been sold. Again, in my opinion, that evidence was inadmissible. Even if it was admissible opinion evidence the respondent had failed to give the appellants notice of such evidence and the evidence should not have been allowed in the absence of the appellants being provided with a written statement of the opinion and the appellants being allowed the opportunity to take instructions from both their clients and an expert.
In my opinion most of Mr Winter’s evidence was inadmissible and should not have been admitted. However, I think, Mr Winter’s evidence was used in the end adversely to the respondent so that the appellants were not disadvantaged by that evidence. Indeed the learned Magistrate used the evidence to conclude that the respondent did not take all reasonable steps to mitigate her loss when she discovered “the fraudulent situation”.
The learned Magistrate rejected the respondent’s claim of $30,000 for loss of profits. He rejected the alternative claim for wages she could have earned in the sum of $35,000.
In my opinion, the Magistrate was bound to reject the respondent’s claim as formulated. There is no evidence to support either formulation. Again the respondent failed to prove the facts which Mr De Pizzol assumed for the purpose of expressing his opinion.
The Magistrate concluded that she conducted the business for too long a period. He found that she should have wound up the business by about June of 1999.
The Magistrate assessed damages under this head upon the basis of the appellants’ profits during the period to June 1994. He allowed damages upon the basis that the respondent had had a profit of $265 per week over that period. He calculated that loss to be $14,000 and reduced it to $10,000 to allow for contingencies. That was an inappropriate method for two reasons. First that profit was not proved. As I have already said the financial details relating to the period of the appellant’s ownership were not proved. Secondly, even if proved, that basis was unfair to the respondent. She should not have her losses assessed by reference to the appellants’ trading figures for only part of the period during which the appellant conducted the business.
In my opinion, an appropriate method of assessment in respect of the losses occasioned by the respondent would have been to compare the losses which she incurred against the profits represented by the appellants. The profit represented by the appellants was not the figure of $265 relied upon by the learned Magistrate, but indeed Julianne Bowden’s profits which amounted to $590 per week.
The respondent’s losses under this head could be measured by taking the loss of profits of $590 per week and adding to that the actual loss of $55 per week.
As it happens both of those figures were established by the tender of exhibits P2, P7 and P8.
Accepting the Magistrate’s findings that the business should have been wound up by June of 1999 the appellants’ loss during that period was a weekly loss of $645 per week for a period of about 32 weeks. That calculates to a figure of a little over $20,000. Some regard has to be had for contingencies as the learned Magistrate said, and I would deduct from that figure a figure of $5,000 and allow under this head the sum of $15,000.
To arrive at that result is to have regard to matters favourable to the appellants. It does not take into account, for example, the respondent’s obligation under the lease which had been assigned to her. The respondent may have had to pay a penalty to extricate herself from that lease which was not due to expire until September 2000. However again there was no evidence of that and therefore no allowance can be made for it.

In the end result therefore, in my opinion, the respondent was entitled, on the evidence which was tendered, to damages of $16,500.
The appeal therefore must be allowed and the judgment of the learned Magistrate set aside.
In lieu thereof there should be judgment for the respondent in the sum of $16,500.
The respondent would be entitled to interest for the period between June 1999 when the loss crystallised and judgment in January 2001, say for a period of 18 months, at ordinary commercial rates. I would allow interest by way of a lump sum of $2,000.
The orders will be therefore:
1 Appeal allowed.
2 The judgment of the learned Magistrate set aside.
3In lieu thereof there be judgment for the respondent against the appellants in the sum of $16,500 and interest of $2,000.
I will hear the parties as to whether or not the Magistrate’s order for costs should stand.
I shall also hear the parties on the costs of the appeal.

[2001] SASC 251

27 July 2001