Pine River Pty Ltd v Scorda

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: PINE RIVER PTY LTD -v- SCORDA & ANOR [2001] WASC 105

CORAM: STEYTLER J

HEARD: 1 & 2, 5-8 FEBRUARY 2001

DELIVERED : 27 APRIL 2001

FILE NO/S: CIV 1833 of 1999

BETWEEN: PINE RIVER PTY LTD (ACN 061 926 592)
Plaintiff
AND
MICHAEL NATALE SCORDA
SILVANA SCORDA
Defendants

Catchwords:

Trade and commerce - Trade practices - Misleading or deceptive conduct - Purchase of business - Where plaintiff purchased chicken farming business from defendants - Representations made in relation to sale of business - Whether misleading representations made concerning the income of the business, the number of licensed chickens, the condition of fittings and fixtures, the purchase of new farm equipment prior to sale and the "relaxing lifestyle" which the farm was allegedly said to offer - Whether plaintiff relied on representations made - Fair Trading Act (WA) 1987 s 10

Trade and commerce - Trade practices - Misleading or deceptive conduct - Entitlement to damages - Quantification of damages by measuring difference between purchase price paid under contract and value of business at date of contract - Expert valuations provided - Whether interest on additional amount borrowed recoverable - Whether damages recoverable for trading losses where plaintiff elected to keep farm knowing income had been overstated - Where trading losses only incurred until 30 June 1994 - Whether plaintiff should be refunded for payment of excess stamp duty - Fair Trading Act (WA) 1987 s 72

Limitation of actions - Commencement of limitation period - Claim made within time - Fair Trading Act (WA) 1987 s 79(2)

Contract - Sale of farming business - Whether certain items of farm equipment to be transferred to plaintiff at time of sale - Whether items used in running the farm business - Effect of sale being made on "walk in-walk out" basis

Legislation:

Fair Trading Act (WA) 1987, s 10, s 79

Trade Practices Act 1974, s 52, s 82

Result:

Damages awarded in the sum of $223,102.75

Representation:

Counsel:

Plaintiff: Mr M H Zilko
Defendants: Mr K E Yin

Solicitors:

Plaintiff: Arns & Associates
Defendants: Murcia & Associates

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

Arcadi v Colonial Mutual Life Assurance Society Ltd (1984) ATPR 40‑473
Auyeung v Chan [1999] NSWCA 417
Bateman v Slatyer (1987) 71 ALR 553
Beach Petroleum NL v Johnson (1993) 115 ALR 411
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
De Leuil v Jeremy [1965] NSWR 1939
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
Downs v Chappell [1997] 1 WLR 426
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Franich v Swannell (1993) 10 WAR 459
Gould v Vaggelas (1985) 157 CLR 215
Hill v Tooth & Co Ltd (1998) ATPR 41‑649
Kabwand Pty Ltd v National Australia Bank Ltd (1989) ATPR 40‑950
Kadissi v Jankovic [1987] VR 255
Karedis Enterprises Pty Ltd v Antoniou (1995) 59 FCR 35
Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1985) 61 ALR 504
Killner v France [1946] 2 All ER 83
Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281
Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR 41‑601
Lewis v South Wales Railway Company [1852] 10 Hare 113
Lord Advocate v Caledonian Railway Company (1908) SC 566
Magman International Pty Ltd v Westpac Banking Corporation (1991) 100 ALR 575
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494
McAllister v Richmond Brewing Co (NSW) Pty Ltd (1942) 42 SR (NSW) 187
MGICA v Kenny & Good (1996) 140 ALR 313
Netaf Pty Ltd v Bikane Pty Ltd (1990) 92 ALR 490
Oddo v Watare Pty Ltd [1999] VSCA 124
Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25
Potts v Miller (1940) 64 CLR 282
Richards v Pryse [1927] 2 KB 76
Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd (1996) 22 ACSR 656
State of Western Australia v Wardley Australia Ltd (1991) 30 FCR 245
Sutton v Cary (1916) 16 SR (NSW) 254
T N Lucas Pty Ltd v Centrepoint Freeholds Pty Ltd [1984] ATPR 40‑440
Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514
Warner v Elders Rural Finance Ltd (1993) 113 ALR 517
Yenald Nominees Pty Ltd v Como Investments Pty Ltd (in liq) (1996) ATPR 41‑508

Case(s) also cited:

Allen v Carbone (1975) 132 CLR 528
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
Frith v Gold Coast Mineral Springs Pty Ltd (1983) 47 ALR 547
Hawkins v Clayton (1988) 164 CLR 539
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre (1978) 140 CLR 216
Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 109 ALR 638
Jones v Schiffmann (1971) 124 CLR 303
Munchies Management Pty Ltd v Belperio (1988) 84 ALR 700
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
Prenn v Simmonds [1971] 1 WLR 1381
Sanrod Pty Ltd v Dainford Ltd (1984) 54 ALR 179
Toteff v Antonas (1952) 87 CLR 647
Yorke v Ross Lucas Pty Ltd (1982) 45 ALR 299

STEYTLER J: This is an action for damages for misleading and deceptive conduct in breach of s 10 of the Fair Trading Act (WA) 1987, alternatively damages for negligent misrepresentation, and for damages for breach of contract.
The action arises out of the purchase by the plaintiff of a chicken farm. The plaintiff bought the farm from the defendants, Mr and Mrs Scorda. The farm, which was situated at 61 Mary Street, Wanneroo, comprised land, buildings, plant and equipment, the goodwill attaching to the farm business, a licence to keep chickens and, of course, the chickens themselves. The buildings comprised a private dwelling as well as various other structures used to house the chickens and for other purposes of the farm. The eggs produced at the farm were sold to an organisation known as Golden Egg Farms, although some sales of eggs (and chickens) were made from the farm direct to members of the public. The purchase price of the chicken farm was $724,000.
The purchase was effected by way of an agreement in writing dated 8 November 1993. When executed by the parties it contained no breakdown of the purchase price as between the land and other assets. Conditions 4 and 5 thereof read as follows:
"(4)This offer is on the basis of walk‑in walk‑out that is all the plant and equipment which is used to run the business will be included in the sale, excluding personal belongings, tools.
(5)All licenses and permits to be transferred to purchaser on or before settlement including all stock for which the existing number is 6,000 hens."
The words "tractor and mower" had been included immediately after the word "tools" at the end of condition 4 but were deleted.
On 24 November 1994 the parties executed a separate agreement described as an "Agreement to Purchase a Business". It contained a special condition as follows:
"This offer to purchase business forms part of O & A dated 8/11/93 in particular condition 4 to separate the value of the business to that of the land and the buildings thereon. Total consideration being $724,000."
This agreement described the business and assets to be purchased as being the goodwill of the farm, the "plant, furniture, fixtures, fittings and chattels ... specified in the Schedule" (although there was no schedule), the stock‑in‑trade of the business at the date on which possession of the premises was given to the purchaser and all licences connected with the business. The gross purchase price was said to be $364,300. This was broken down into figures of $20,000 for goodwill, $210,000 for the licence, $75,000 for the fixtures, $29,300 for moveable plant and equipment and $30,000 for "hens plus feed".

The plaintiff's claims

The plaintiff says that the whole of what it purchased was worth very much less than $724,000, in fact $526,200. It says that it made this bad bargain because of its reliance on misrepresentations made to it by Mr Scorda on behalf of the vendors. Some of these misrepresentations are said to have been express and some are said to have been implied. All of the misrepresentations are said to have been made to Mr Peter Zollo, a director of the plaintiff.
Mr Zollo, a real estate agent, had a client, Mr Nunzio Rossi, who was interested in buying a chicken farm. Mr Zollo told Mr Rossi about Mr and Mrs Scorda's farm, which was then for sale, and in late 1992 Mr Zollo, Mr Rossi and Mr Rossi's brother‑in‑law, Mr Vince Catelano, visited the farm. However Mr Rossi thereafter lost interest because, he said, the price (then $750,000) was too high. Mr Zollo himself then became interested in purchasing the farm and on 19 January 1993 he met with Mr Scorda at the farm. During the course of that meeting, he says, Mr Scorda told him that the farm was easy to run, that it provided a relaxing lifestyle and that Mr Zollo needed to work only three to four hours each day. This is the first of the express representations which is said to have been made.
The second express representation is said to have been made on about 8 March 1993.
Earlier, on 22 January 1993, Mr Zollo had asked Mr Scorda "for some tax figures". He was given two sheets of paper. The first of these carried two headings. Under the heading "Calculation of Egg Farn [sic] Income" it showed that the farm had, in 1992, made a net profit of $20,213 in accordance with unaudited financial statements but that when various items were added back this produced a "calculated business profit" of $78,637. Under the heading "Projected Return" the figure of $78,637 was described as the "Net 1992 Business Profit As Calculated Above". The "Total Asset Value" was then said to be $750,000 from which was deducted $125,000, said to be the value of the house, leaving a "Net Business Value" of $625,000. There then appeared the notation "calculated return on 1992 calculated result 12.58%". The second sheet of paper showed Mr and Mrs Scorda's trading account for the farm business for the years ended 30 June 1991 and 30 June 1992. The trading profit for the year ended 30 June 1992 was $76,514.
Mr Zollo later met with Mr Scorda, on 8 March 1993. He said that he told Mr Scorda that he had been told that, depending on door sales, the net profit to be expected from a chicken farm was between $10 and $12 per bird and that he asked Mr Scorda how much net profit he made per bird. He had, at an earlier meeting, been told by Mr Scorda that the farm had a licence for 7,000 chickens. He said that Mr Scorda responded by saying, "Because of my door sales I make $13 per bird on my licence". He calculated that this amounted to $91,000. However, he said, he told Mr Scorda that he thought it fair to expect a return of 15 to 15‑1/2 per cent on his investment (with which Mr Scorda agreed) and that, on the figure of $78,637 disclosed as the projected return in the documents earlier given to him, he would not pay more than $650,000 for the farm. He says that Mr Scorda responded by saying (and this is the second express representation to which I referred above) that, with cash money, the business income had actually been about $90,000 to $95,000 per annum. After some further discussion, Mr Zollo said, he asked Mr Scorda whether they could "agree on a figure of $90,000 for the sake of certainty" and Mr Scorda said that he could "live with that".
Mr Zollo also said that he then told Mr Scorda that he would pay the then asking price of $710,000 on the basis that the net income of the farm business was not less than $90,000 per annum and that Mr Scorda said, again, that he could "live with that".
However Mr and Mrs Scorda thereafter changed their minds about selling the farm and withdrew it from sale. Then, in mid October 1993, Mr Scorda telephoned Mr Zollo and told him that the farm was back on the market. He and Mr Zollo met on 1 November 1993. Mr Zollo says that Mr Scorda told him that the price had gone up to $724,000 because a new fogger (a water‑cooling device used on the chicken sheds) and patio had been installed. The alleged representation as to the installation of a new fogger is the third express representation relied upon by the plaintiff.
The plaintiff also relies upon what transpired at a meeting which took place at the farm between Mr Zollo, Mr Scorda and Mr Robert Bransby, then a branch manager employed by the National Australia Bank, on about 8 November 1993. Mr Zollo said that Mr Bransby asked him what the income of the farm business was and that he replied by saying that Mr Scorda had said that it was $90,000 per annum. He said that Mr Scorda, hearing this, remained silent.
Next, the plaintiff alleges that it was necessarily implicit in what had been said by Mr Scorda about the net income of the farm that that income was generated by the lawful operation of the farm in accordance with its licence and that the farm was in fact being lawfully operated.
Finally, the plaintiff contends that it was misled by the defendant's failure to disclose that not all fixtures and fittings used at the farm were in good working order. It says that the defendant's silence in this respect gave rise to a reasonable expectation on the part of the plaintiff that, if there were problems, these would be disclosed.
The plaintiff also says that each of the representations relied upon by it (and it is conceded that, if these representations were made, they were made in the course of trade or commerce) was false. It says that the operation of the farm required Mr Zollo to work eight to nine hours per day; that the business, "lawfully conducted in accordance with its licence", was incapable of generating an annual net income of $90,000; that the farm had in fact carried considerably more chickens than it had been licensed to do (which fact was not disclosed to the plaintiff); and that a new fogger system had not been installed on the farm in the period 8 March 1993 to 1 November 1993. The plaintiff also says that the fixtures and fittings of the farm were not, at settlement, in good working order. It says that there were problems with the cool room, the fogger system, the drinking system in a high‑rise shed, a freezer and the bore pump.
The loss and damage claimed by the plaintiff comprises six components. The first is the difference between the price paid ($724,000) and what is said to have been the true value of the land, buildings (including fixed plant and equipment) and business at settlement ($526,200), being $197,800. The second is what is said to be the difference between the value of the fixed plant and equipment, had it been in good working order (as, the plaintiff contends, the valuation of $526,200 assumes), and its true value, that difference amounting to $12,899. The third consists of trading losses of the farm business for the periods 1 February 1994 to 30 June 1994 ($12,346) and 1 July 1995 to 30 June 1996 ($12,353), the business having made a profit of $11,976 during the period 1 July 1994 to 30 June 1995. The fourth consists of interest paid on "additional" borrowings by the plaintiff to fund the purchase of the farm, which "excess" interest amounts, to date, to $141,933. This claim is made upon the basis that the plaintiff borrowed more than it need have done because it paid more for the business than it should have done. The fifth component comprises $7,607.75 in stamp duty said to represent the difference between the stamp duty paid and that which would have been paid had the plaintiff paid only what the farm was worth. The sixth component is an alternative claim for the "difference between income as represented and income achieved" over the period 1 February 1994 to 30 June 1999, amounting, in all, to $231,586.
As regards the alleged breach of contract the plaintiff makes two claims.
The first is that, in breach of the agreement made between the parties, the defendants removed from the farm, prior to settlement, a compressor, an egg grader and a Toyota Hilux dual cab motor vehicle which had been sold to the plaintiff (and which, being items of "loose" plant and equipment, are not included in the value of $526,200 referred to above). These are said to have been worth $300, $886 and $9,990 respectively. An additional claim for removal of a tractor and slasher was abandoned during the hearing.
The second (which is necessarily brought as an alternative to the tortious claim) is that, on the proper construction of condition 4 of the agreement, the plaintiff was entitled to receive from the defendants at settlement a licence to conduct the business pursuant to which the plaintiff could carry 6,000 hens but it in fact received a licence which entitled it to carry only 4,242 egg‑laying fowls in low season and no more than was provided for in a supplementary licence issued by the Egg Control Board on or about 1 January each year for what is known as "high season". As at the date of settlement, 1 February 1994, the farm had a supplementary licence which enabled it to carry an additional 600 egg‑laying fowls. The difference in value between a licence for 4,242 hens and one for 6,000 hens is said to be the sum of $72,500.
The defendants deny that they made any of the misrepresentations alleged and that they failed to make any relevant disclosure. They also plead in the alternative that, if any representations were made as alleged by the plaintiff, the plaintiff did not rely upon them. They deny that they breached the contract in the respects alleged.
I will deal first with the misleading and deceptive conduct claim (and the alternative claim for negligent misrepresentation) and then with the claims for breach of contract.

The tortious claims

The first question which arises as regards the tortious claims is that of whether the alleged misrepresentations were made. I will deal with each in turn.

"The Easy Life"

Mr Scorda denies that on 19 January 1993 he told Mr Zollo that the farm was easy to run and presented a relaxing lifestyle or that he said that Mr Zollo needed to work only three to four hours each day. Rather, he said, he told Mr Zollo only that it took him three to fours to collect the eggs, feed the chickens and check the sheds. It was Mr Zollo, he said, who said that the operation of the farm appeared to be "child's play" and that he was looking for a more relaxed lifestyle.
I preferred Mr Scorda's recollection to that of Mr Zollo in this respect and accept that he said only that it took him three to four hours to do the work to which he referred. It is difficult to understand why he should have said anything else when Mr Zollo could see for himself what tasks were to be performed and estimate how long they may take. I should mention, in this respect, that, during the period between 1 February 1994, when Mr and Mrs Zollo took possession of the farm, and 2 May 1994, when Mr and Mrs Scorda (who had, until then, remained in the house on the farm) departed from it, no complaint was made by Mr Zollo in this respect. Also, notwithstanding that Mr and Mrs Zollo wrote to Mr and Mrs Scorda on 21 April 1994 making a number of complaints, this was not one of them (although Mr and Mrs Zollo did say, in that letter, that there were "other things that ... [they] could bring up").
I should add that Mr Zollo said in evidence that the work involved in the operation of the farm was in fact easy, albeit it took a long time to perform.

The representations as to income

As to the representations with respect to income, I have no hesitation in preferring the evidence of Mr Zollo to that of Mr Scorda, at least in the specific respects to which I shall refer below.
This is so notwithstanding that I have reservations as regards the reliability of Mr Zollo's evidence in other respects. One of these relates to his evidence in respect of his belief, at the time of the agreement of sale, as to the number of chickens which the farm was licensed to carry, an aspect to which I shall return below. Another relates to a number of changes which Mr Zollo unilaterally made to the agreement of sale, after it was signed. These included the deletion, to which I have earlier referred, of the words "tractor and mower" in condition 4 in circumstances which were not satisfactorily explained by him, and the addition of a reference to "Annexure A for list of moveable plant" and of that annexure itself, which additions, too, were not, in my opinion, satisfactorily explained. Yet another relates to the many amendments which have been made to factual issues pleaded in the plaintiff's statement of claim, apparently on Mr Zollo's instructions, some of these being inconsistent with his evidence at the trial. There are also some inconsistencies between what has previously been said by solicitors engaged by the plaintiff, in correspondence with the defendants' solicitors, and evidence given by Mr Zollo at the trial. While these (and other) matters have caused me some concern I am, in the end, satisfied that I am able to accept as truthful and accurate Mr Zollo's evidence in respect of the representations made to him as regards the income of the farm (although the pleadings have shown some inconsistency as regards the date or dates upon which they were made), in particular as regards the fact that there was a cash income which was not disclosed in the defendants' accounts.

As will be apparent, Mr Zollo's evidence was to the effect that he was told by Mr Scorda on 8 March 1993, in effect, that the business income of the farm, including cash receipts, was between $90,000 and $95,000 per annum and that Mr Zollo repeated the lower of the two figures to Mr Bransby on about 8 November 1993, in Mr Scorda's presence, without objection from Mr Scorda.
I have said that on 22 January 1993 Mr Scorda gave to Mr Zollo figures which disclosed that, in the financial year which ended on 30 June 1992, the farm had made a net profit of $20,213 but that, when various expenses were "added back", this produced a "calculated business profit" of $78,637, not including the "cash money" to which Mr Scorda referred and which Mr Zollo took, in the light of Mr Scorda's comments about the total income of the farm, to be not less than $12,000 per annum.
There is other evidence which supports Mr Zollo's evidence as regards the making, by Mr Scorda, of a representation in respect of the existence of additional cash receipts.
Mr Rossi, in his evidence, said that in late 1992 he was given two sheets of paper which appear to have been similar to those given to Mr Zollo (although Mr Rossi no longer has them). He recollected that they showed a profit of between $60,000 and $65,000 per annum, figures which may well have related to the financial year which ended on 30 June 1991. Importantly, Mr Rossi said that he was told by Mr Scorda that he should add to that figure the further sum of about $700 per week in cash income. While Mr Rossi, who struck me as a patently honest witness, might have erred in his recollection of the precise figures given to him, I have no hesitation in accepting his evidence, notwithstanding Mr Scorda's denial of this, that he was told to add to the printed figures given to him a further significant sum in respect of cash receipts. The fact that he was told this lends support to Mr Zollo's evidence that he, too, was told to add a "cash" figure to the printed figures given to him.
I should add that Mr Scorda, when asked what record he kept of cash "coming out of ... [the defendants'] shop", said that he had no record of this and, at another point in his evidence, that he could not remember having kept a book in which shop sales receipts were recorded.
Next, Mr Zollo said in evidence that, at the time of his discussions with Mr Scorda on 8 March 1993, he made, on a sheet of paper bearing that date, various calculations as to the percentage return on his investment which would be generated by a pre‑tax income of $95,000 per annum. He was able to produce this sheet of paper in evidence. I am satisfied that the calculations were made on the date which the sheet bears.
While Mr Bransby, in his evidence, did not recall that Mr Zollo mentioned any income figure at the meeting on 8 November 1993, I am not prepared to place much reliance on his evidence in this respect. He had formerly been associated in business with Mr Scorda and I formed the impression that he was partisan in his evidence. He was prepared to say, in his written evidence‑in‑chief, that "Certainly Zollo has never discussed a figure of $90,000 or $95,000 as being the net income for the business at the time with me or in fact discussed any figure at all other than his proposed borrowing of $245,000". However it is difficult to understand how he could, without the benefit of any note, be so certain of his recollection after the lapse of seven years when the conversation presumably would not, at the time, have been of any personal significance to him.
Moreover, Mr Bransby's recollection was less than clear in other respects. One example of this was his inability to provide any satisfactory explanation for the fact that he had, when operating a chicken farm in partnership with Mr Scorda (at a time when he was also Mr Scorda's bank manager), written on the back of a cheque for $1,765.42, dated 1 December 1993 and made payable to M & S Scorda, the words "Please Pay to R Bransby". Those words were written above what Mr Bransby described as "just a squiggle" but appear to be someone's initials. Mr Scorda knew nothing of the endorsement and said that the "squiggle" was not his. It is also worth mentioning that, although Mr Bransby said, in his written evidence‑in‑chief, that, at the meeting with Mr Zollo and Mr Scorda at the farm, he "viewed the offer and acceptance which had already been signed by that time", when he came to be cross‑examined he could not say whether or not the offer and acceptance had been signed. Indeed, at one point in his evidence he appeared to be uncertain, even, whether he had seen a contract at all. He was asked, "Was there a contract there on the table in front of you?" and responded by saying, "There was something on the table, yes."
It is also significant that, in the letter dated 21 April 1994 from Mr and Mrs Zollo to Mr and Mrs Scorda, Mr Zollo said that Mr Scorda had "stated in front of Rob the bank manager that the business was making $90,000 PA." He went on to say, a little later, that:
"With the figures coming through to date the business does not have a chance in hell of making $90,000 PA not even 80, [sic] or 70,000 and even if you kept 6,000 hens which would be 1,758 over and above your base [sic] license I would doubt very much you could earn $90,000 PA."
While it was suggested by counsel for the defendants that it was not originally clear, on the plaintiff's statement of claim prior to its amendment in 1997, whether the representations relied upon by Mr Zollo related to the trading profit of the farm rather than its pre‑tax income, I am satisfied that the plaintiff's case has always been that the representation in question was one as to the pre‑tax income of the farm and it is, I think, to that income that the letter of 21 April 1994 refers.
Counsel for the defendants also pointed to the fact that Mr Scorda was unlikely to have said that the farm had earned $90,000 upon the basis of a return of $13 per bird when the multiplier of 7,000 used by Mr Zollo was, as I shall explain under the next heading, the amount allowed under the farm's base licence rather than that allowed under its current licence and accordingly not the number of hens permitted to be carried by the farm. Whatever may be the position in this respect, I am, as I have said, satisfied that Mr Scorda told Mr Zollo, at least, that the undisclosed cash income of the farm was sufficient, when added to the "calculated business profit" to which I have earlier referred, to bring that profit up to not less than $90,000 per annum, even if this did not happen precisely in the way in which Mr Zollo said it did.
Finally I should also mention that, amongst various documents produced under subpoena by Monte Paschi Australia Ltd, a financier to whom the plaintiff had applied for finance, was an undated document signed by its then State branch manager, Mr Frank Evangelista, setting out details of the proposed transaction. That document (tendered in evidence on behalf of the defendants), was, Mr Evangelista said in evidence, prepared on 6 January 1994. It recorded that the current annual income of the farm was approximately $70,000. However Mr Evangelista could not recall the content of any discussions which Mr Zollo might have had with him as regards the farm income and consequently could not say from whom he had got that figure, albeit he assumed, not surprisingly, that the figure would have been provided to him by Mr Zollo. It might consequently be the case that the figure was derived from the document setting out the projected return of the business which had been provided to Mr Zollo on 22 January 1993 or even that the figure was recorded in error. That being so, I am not prepared to place much reliance upon this evidence.
It follows from what I have said that, taking into account all of the evidence in this respect, I am satisfied that the effect of what Mr Zollo was told by Mr Scorda was that, in addition to the income set out in the document setting out the projected return of the farm business, that business had, in the 12 month period in question, earned a cash income, not disclosed in the written figures, which was sufficient to take the total profit, before tax, of the farm (when calculated in accordance with that document) to something in excess of $90,000.

The number of licensed chickens

That brings me, next, to the alleged implied representations (and there are two which have been pleaded in similar terms) to the effect that the net income of the farm business was generated by the lawful operation of the business in accordance with the terms of the licence which had been granted to it by the Egg Marketing Board. I have already mentioned that the licence was one for 4,242 egg‑laying fowls.
There arose, at the trial, an issue whether or not the plaintiff, by Mr Zollo, ever became aware, prior to executing the agreement of sale, of the terms of the licence which had been granted to Mr and Mrs Scorda. Mr Zollo, in his written evidence‑in‑chief, said that it did not and that he assumed, on behalf of the plaintiff, that the licence was one for 6,000 egg‑laying fowls, that being the number of hens sold to the plaintiff. Mr Scorda, on the other hand, said that he gave to Mr Zollo a document which identified the number of egg‑laying fowls licensed and said that, while he did not specifically draw that number to Mr Zollo's attention, he saw no reason to do so as Mr Zollo appeared to be familiar with the operation of the licensing system and he assumed that Mr Zollo would read the document given to him.
There is no dispute as regards the fact that, on about 1 November 1993, Mr Zollo was given by Mr Scorda a copy of an Egg Board Return dated 26 June 1993. This was a spreadsheet setting out the quantities and sizes of eggs sold to Golden Egg Farms in the preceding week, the prices achieved, various adjustments which had been made and year to date figures. It also showed that the farm then had a base licence for 7,000 hens, a current licence for 4,784 hens and some 5,440 hens in fact. Mr Zollo said in evidence that, although he had by then learned from his own enquiries of the distinction between a base licence and a current licence, he did not notice these figures and knew only what he had been told by Mr Scorda at the meeting on 19 January 1993, namely that "the property has a licence for 7,000 birds".
I am unable to accept Mr Zollo's evidence in this respect. While I am prepared to find that Mr Scorda told Mr Zollo that the farm had a licence for 7,000 birds, the evidence establishes that Mr Zollo knew that this was a reference to the farm's base licence. I have already said that Mr Zollo conceded that he knew, prior to settlement, of the distinction between a base licence and a current licence. The former is apparently the maximum number of chickens which might be run on the farm whereas the latter is the number of egg‑laying hens above the age of 26 weeks which might be kept on the farm. Mr Zollo had earlier said, in answer to interrogatories administered by the defendants, that he had understood, as early as January 1993, that there was a distinction between a base licence and a current licence, that he was aware that the base licence held by the defendants prior to settlement was 7,000 and that he believed that the current licence held by them as at the date of the contract was for 6,000 hens. He there said that the source of this last belief was the reference to 6,000 hens in the agreement of sale. It is, in my opinion, almost unthinkable that an experienced businessman, as Mr Zollo was, who knew of this distinction but did not know what was the extent of the current licence, would not at once have made an enquiry as regards so fundamental a matter and that he would, instead, merely have left this over to the time of contracting and then assumed that the number of hens sold was the number licensed under the current licence.
It is noteworthy, in this respect, that on 2 March 1993 Mr and Mrs Zollo wrote to the Wanneroo City Council making enquiries as regards such matters as the zoning of the land, whether there had been complaints from adjoining land owners, whether the maximum number of chickens that could be carried could be increased and whether the farm would be permitted to grow mushrooms and, if so, on what conditions. This demonstrates the caution with which Mr Zollo approached the purchase of the farm and the inherent improbability of his failing to make any enquiries at all as regards the extent of the farm's current licence.
The evidence of each of Mr Zollo, Mr Scorda and the experts respectively called by the parties disclosed that farms frequently hold more chickens than those the subject of a current licence. There will often be hens which are less than 26 weeks old and therefore not counted for the purposes of the current licence and occasionally there is (although there should not be) an overlap between the time at which young hens achieve the age of 26 weeks and that at which old, and no longer productive, hens are removed. The Egg Licensing Board also issues supplementary licences to meet market demand from time to time. It seems to me to be very probable that Mr Zollo would have discovered these things once his enquiries had led him to know of the distinction between a base licence and a current licence. I should mention, in this respect, that he had visited other chicken farms and, as I have said, on one of his visits to the defendants' farm he had been accompanied by Mr Vince Catelano, who was an experienced poultry farmer.
Moreover, it is difficult to accept that Mr Zollo did not read the whole of the spreadsheet dated 26 June 1993. Even if his evidence (which was disputed by Mr Scorda) is accepted that this was given to him by Mr Scorda in response to his request for "some up‑to‑date tax figures" (and the document provides no such thing), it seems to me to be very probable that Mr Zollo would have read the whole of that document (it is only one sheet), the references to the base licence, current licence and actual figures being reasonably prominent.
I should add that, in the letter dated 21 April 1994 to Mr and Mrs Scorda, Mr Zollo made no complaint as regards the fact that the farm had a current licence for less than 6,000 egg‑laying hens even though he undoubtedly then knew of that fact and even though he there complained that less than 6,000 chickens had been transferred to the plaintiff.
In all of these circumstances I find that Mr Zollo, and therefore the plaintiff, knew, at the time of executing the agreement of sale, that the farm had a current licence to run no more than 4,784 egg‑laying hens (including those the subject of a supplementary licence), albeit Mr Zollo also then knew that there were in fact some 6,000 hens on the farm. In these circumstances I am not prepared to find that there was any implied representation of the kind contended for, even if such an implication might otherwise have been open (and it might be a relevant consideration, in this last respect, that Mr Zollo was under the impression that Mr Scorda had been prepared to operate the farm unlawfully, at least insofar as disclosure of its true income was concerned, arising out of what had been said to him by Mr Scorda with respect to the cash income received but not disclosed in the defendants' accounts).
Before leaving this topic I should mention that there was a good deal of evidence led at the trial as regards the question whether the defendants in fact ran more chickens than they were licensed to do. While nothing seems to me to turn upon this in the light of the findings which I have made, I should say that I have no doubt that they did, notwithstanding Mr Scorda's denial of this.
Expert evidence was led, in this respect, from Mr Ian Claxon who has, for the last 18 years, been actively involved in poultry farming. He performed an analysis of the number of birds which must have been kept on the farm in 1991, 1992, 1993 and the early part of 1994 which was based primarily upon recorded feed deliveries to the farm. His conclusion was that the number of egg‑laying hens on the farm was, in the years which ended on 30 June 1991, 30 June 1992 and 30 June 1993, respectively 5,607, 6,440 and 7,944. He also concluded that the number of egg‑laying hens on the farm in the period 1 July 1993 to 1 February 1994 was 8,311. While some criticisms of Mr Claxon's analysis were offered by Mr Lindsay Bell, a man with over 35 years experience in the poultry industry, his criticisms seemed to me, with due respect, to have been relatively minor (and in some cases incorrect) and not such as to detract in any significant way from Mr Claxon's analysis.
Moreover, very powerful support was provided for Mr Claxon's evidence by Mr Don Holmes, formerly employed by the Egg Marketing Board as an inspector, who performed a number of inspections of the farm in the 18 months preceding its sale to the plaintiff. He said (and I accept) that the farm was "always over ... [its] license limit", sometimes very substantially so. Support for Mr Claxon's analysis was also provided by Mr Neil Ferguson, formerly a sales manager for Wesfeeds Pty Ltd, which was a supplier of poultry feed to the defendants. He, too, formed the opinion (which I accept) that the farm was carrying more hens than it was licensed to do, sometimes substantially so.
I have consequently no hesitation in accepting Mr Claxon's analysis as being substantially accurate.

"The new fogger"

That brings me to the fogger. I have mentioned that Mr Zollo said that on 1 November 1993 he was told by Mr Scorda that the price of the farm had gone up to $724,000 because a new fogger and patio had been installed. Mr Scorda denied this. He said in his written evidence‑in‑chief that, when Mr Zollo visited the farm with Mr Catelano in late 1992, he told the two men that he had installed "a new micromist fogging system not like the old one". He said that the two men were able to see the fogging system for themselves. In his oral evidence Mr Scorda was uncertain about dates and said that he also told Mr Zollo about the installation of the new system on an occasion even prior to his visit with Mr Catelano. However, in further and better particulars of their defence filed in July 1997, the defendants have said that the conversation about the fogger took place in early November 1993. That being so, it seems probable that a conversation of this kind did take place in early November 1993. However I am prepared to accept Mr Scorda's evidence that Mr Zollo was also told of the installation of the fogger on one of his earlier visits. The fogger had been installed in November 1990 and it would be surprising if it was not shown to Mr Zollo on one of his initial visits. It is, I think, unlikely that Mr Scorda would, in November 1993, have told Mr Zollo that the fogger had been newly installed when he knew that Mr Zollo might have been, and probably was, shown the fogger during an earlier visit.

Untruth of the representations as to income

Next, there is the question whether the representations as to income were untrue.
It is not suggested, on behalf of the plaintiff, that the net profit figures stated on the first of the two sheets of paper given to Mr Zollo on 22 January 1993 were false or that any of the details of the defendants' trading account for the years ended 30 June 1991 and 30 June 1992 were false. However the plaintiff contends that it was misleading to say, as the first sheet of paper did, that the projected return of the farm business was $78,637. This, it says, was because it was inappropriate to add back, in calculating a projected return, all of the items added back on that sheet of paper.
I will set out, in full, the typewritten contents of that sheet of paper, which had been prepared by the defendants' accountant, Mr Gioioso Schiavi. It reads as follows:
"  M & S SCORDA
CALCULATION OF EGG FARN [sic] INCOME:             1992         1991
Net Profit/(Loss) per Unaudited Financial Statements        20,213    (12,084)
ADD BACK:
Change in Stock Valuation  12,380             0
Accountancy            (say $1000)  1,950        1,950
Bank Charges          (say $ 600)  1,604          993
Borrowing Costs  4,220        3,024
Depreciation  4,833        4,804
Electricity & Gas  0        2,000
General Expenses  557          572
Interest  30,254      44,346
Motor Vehicle Expenses  921             0
Repairs & Maintenance (say $2000)  1,155        1,486
Telephone  550          361
  -------- ----------------
Total Add Backs   58,424      59,536
  -------- ----------------
CALCULATED BUSINESS PROFIT  $78,637     $47,452
  ===============

PROJECTED RETURN:
Net 1992 Business Profit As Calculated Above         $78,637.00
  ========
TOTAL ASSET VALUE  750,000
DEDUCT: House Value  125,000
  -------------
NET BUSINESS VALUE  625,000
  ========
CALCULATED RETURN ON 1992 CALCULATED RESULT 12.58%"

The plaintiff did not, in the end, dispute that it was appropriate to add back the figure of $12,380 in respect of a change in stock value or that of $4,833 in respect of depreciation. Nor did it dispute that the defendants had in fact incurred, in the year ended 30 June 1992, expenses of $2,950 for accounting services, $2,204 by way of bank charges, $3,155 in repairs and maintenance and each of the other expenses listed in the schedule. Nor did it lead any evidence to demonstrate that it could not in fact limit its accountancy costs to $1,000 and its bank charges to $600. That being so, it seems to me, it has failed to establish that any of these "add backs" was misleading.
While counsel for the plaintiff contended that every one of these "add backs", other than the figures of $12,380 and $4,833, was misleading because each was a genuine expense and therefore not something which could be brought back into any calculated profit figure, I am not at all persuaded that there is any substance to this submission. It must have been obvious to the plaintiff, by Mr Zollo (although he denied this), that all that was being done was to add, to a profit figure of $20,213, items of expenditure which might not be incurred by a prospective purchaser. That, in effect, was what the document spelled out. There was nothing at all misleading about that. It was plain to anyone who read it (and Mr Zollo, an experienced real estate agent, submitted it to his accountant for consideration, although no evidence was led from her at the trial) that the profit would only be increased if the costs added back were not to be incurred by a prospective purchaser. So, as regards borrowing costs and interest, these would only be saved if the purchaser did not need to borrow any part of the purchase price.
That leaves only the suggested savings of $557 in respect of general expenses (the document having shown that there would be no saving in electricity and gas), $921 in respect of motor vehicle expenses, $1,155 in respect of repairs and maintenance and $550 in respect of telephone charges. The profit and loss account for the year ended 30 June 1992 produced in evidence by the defendants (the accuracy of which was not disputed) shows that the defendants, in that year, incurred (unspecified) general expenses totalling $557, motor vehicle expenses totalling $922, $3,156 in respect of repairs and maintenance and $549 by way of telephone charges. It follows that the document to which I have referred suggested, in effect, that there should be no general expenses, no motor vehicle expenses, only $2,000 expended on repairs and maintenance and no telephone expenses incurred in the operation of the farm. This was plainly incorrect.
While it did not become apparent what general expenses were comprehended within the sum of $557, it must be assumed that there would be some expenses (as there obviously had been), as for example postage and stationery, not encompassed under other headings and there plainly would have been motor vehicle and telephone expenses incurred in the operation of the farm (as had been the case under Mr and Mrs Scorda's stewardship). Also, subsequent events demonstrated that significantly more than $2,000 per annum was expended in repairs and maintenance. I am satisfied, in this respect, that the evidence established (and there was no real contest in any of those respects) that the farm's cool room required replacement and that it was replaced by D & M Refrigeration Service in November 1994 at a cost of $5,000; that one of the farm's freezers was, in April or May 1994, leaking gas and required replacement and that it was replaced, in May 1994, at a cost of $1,170; and that the drinking system in the farm's high rise shed required repair and was repaired in October 1994 by W T V Downs & Co at a cost of $1,980. I am also satisfied that repairs to the fogger system and to the farm's bore pump were ultimately required and that these were carried out, respectively, on 14 February 1995, at a cost of $1,750, and on about 24 November 1996, at a cost of $2,169.
No reasonable basis, or indeed any basis at all, was offered to support the suggested saving in the respects to which I have referred. Mr and Mrs Scorda's profit and loss account for the year ended 30 June 1993, while showing no general expenses for that year, show motor vehicle expenses (apart from depreciation) of $629, repair and maintenance costs of $4,957 and telephone expenses of $732. The expenses in fact incurred by the plaintiff in the period of only five months which ended on 30 June 1994 show postage and stationery expenses of $107, travelling expenses of $750, telephone expenses of $495, and repair and maintenance costs of $1,490, a figure which must be seen in the light of the fact that those costs were substantially higher in the following year. In the financial year which ended on 30 June 1995 the plaintiff incurred postage and stationery costs of $425, motor vehicle expenses (other than depreciation) of $601, repair and maintenance costs of $7,069 and telephone expenses of $555.
It is consequently apparent that there was no basis at all for the suggestion that as much as $557 could be added back by way of general expenses or that motor vehicle expenses of $921, repair and maintenance costs of $1,155 and telephone costs of $550 could be added back. Indeed the evidence showed that the actual expenditure in respect of repair and maintenance and telephone costs could reasonably be expected to be repeated (or, indeed, exceeded) and that, while the general expenses and motor vehicle expenses seemed to be higher than might have been expected, this was only marginally so in the case of the motor vehicle expenses.
Next, and most importantly, Mr Scorda said in evidence that there were in fact no cash takings of the farm business which had not been included in the defendants' accounts. He said that the defendants' financial statements and taxation records were accurate and that the business earned no other income than what was there stated. That being so it follows inevitably, from the finding which I have earlier made as to the making of a representation as regards the existence of additional, undisclosed, cash, that the farm income was overstated to that extent, being an amount of not less than $12,000 per annum. If there is added to this an amount of, say, $2,000 per annum in expenses added back which should not have been so added back, there was a total overstatement of the farm income in an amount of around $14,000 per annum.

The fixtures and fittings

As to the alleged failure to disclose the condition of the fixtures and fittings, the plaintiff complains, as I have earlier mentioned, that there were problems with the cool room, the fogger system, the drinking system in a high rise shed on the farm, a freezer and the bore pump. It says that the defendants, by their silence, "gave rise to a reasonable expectation ... that if particular ... [problems existed] they would be disclosed" and that it was consequently misled as to the condition of these items.
Section 10 of the Fair Trading Act, as with s 52 of the Trade Practices Act 1974, does not of itself impose a duty to disclose information to another party in a transaction. The proper approach to be taken in determining questions of liability in circumstances in which silence is alleged to have constituted misleading or deceptive conduct was expressed by Gummow J, with whom Black CJ and Cooper J were in agreement, in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 41 as follows:
" ... consistently with regard to the natural meaning of the terms of s 52, the question is whether in the light of all relevant circumstances constituted by acts, omissions, statements or silence, there has been conduct which is or is likely to be misleading or deceptive. Conduct answering that description may not always involve misrepresentation."
Black CJ, in that case, observed (at 32) that:
"Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. To speak of 'mere silence' or of a duty of disclosure can divert attention from that primary question. Although 'mere silence' is a convenient was of describing some fact situations, there is in truth no such thing as 'mere silence' because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed."
(See also Warner v Elders Rural Finance Ltd (1993) 113 ALR 517; Beach Petroleum NL v Johnson (1993) 115 ALR 411; Franich v Swannell (1993) 10 WAR 459; Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25 at 26 and Kadissi v Jankovic [1987] VR 255.)
I am not prepared to accept evidence which was given by Mr Zollo to the effect that he was told by Mr Scorda that the plant and equipment, and especially the bore pump, were in good working order, and nor is any express representation pleaded as having been made in that respect. Rather, I find that, notwithstanding his inspections of the farm and the fact that the purchase was to be on a "walk in‑walk out" basis, Mr Zollo asked no questions and was consequently given no information about the plant and equipment other, of course, than by way of the suggestion that an allowance of only $2,000 need be made for repairs and maintenance, which suggestion was, as I have said, quite incorrect. However it is unnecessary for me to consider this issue further for the following reasons.
I have, below, accepted the valuation evidence of a licensed valuer, Mr Anthony Davies, who valued the farm, including its fixtures and fittings, on behalf of the plaintiff as at the date of the agreement of sale. Mr Davies, in his valuation report, makes it plain that he is aware of a number of "maintenance items and … improvements deemed necessary and carried out by the purchaser, for the farm's efficient running and management", including repairs to the fogger system, the installation of a new cool room (which he described as having had very poor cooling ability) and repairs to the drinking system (presumably in the high rise shed), although he does not refer to any repairs to the bore pump or the freezer (which was presumably regarded as an item of loose farm equipment and not valued). That being so it must be assumed that his valuation, which, as I have said, values the farm as at 8 November 1993, takes the condition of the items to which he referred into account. Consequently, any award of damages made in favour of the plaintiff in respect of the misrepresentations which I have already found to have been made, and which is based upon the difference between the price which was paid and the value of what was acquired by the plaintiff, would take into account deficiencies in the fogger system, cool room and drinking system.
As to the bore pump, this appears to have been repaired only on 24 November 1996, more than three years after the date of the contract of sale. I am consequently not prepared to find that there was, at the lastmentioned date, any deficiency in its condition such as should have been disclosed to the plaintiff by the defendants.
That leaves only one relatively minor item, being the freezer. Mr Zollo said in his evidence that, immediately after the contract of sale was signed, he obtained from Mr Scorda a list of values of various items of plant and equipment to be transferred, that he wrote them down in long hand and that he later had these typed up as Annexure "A" to the contract of sale for stamp duty purposes. The freezer in question was there valued at $1,000. There were, as I have previously mentioned, unsatisfactory elements to Mr Zollo's evidence in respect of changes which he appears unilaterally to have made, after the contract was signed, to the written terms thereof, including the addition of "annexure 'A' ". However I am, albeit with some hesitation, prepared to accept Mr Zollo's evidence to the effect that the various values which subsequently appeared in Annexure A were obtained by him from Mr Scorda and that they then appeared to him to be reasonable. It is difficult to see where else he might have obtained them from and Mr Scorda's denial that he ascribed these values to the various items of plant and equipment appeared to me not to have been very confidently expressed, unlike his denial that he had ever previously seen Annexure A to the agreement, in respect to which he was very confident indeed. Also, when asked whether or not he in fact agreed with the values which were there set out, Mr Scorda was somewhat equivocal in his response.
There was no dispute as to the fact that the freezer did need to be replaced. Rather, Mr Scorda said that it was, at the time of Mr Zollo's inspection, obviously not in working order and that he never suggested otherwise (even though, as I have found, he put a value of $1,000 on it). That being so, it seems to me, the freezer had no value at all at the date of the sale. However I shall take this into account below when I come to deal with the issue of the damages which flow from the misrepresentations which I have already found to have been made. It follows that there is no need to consider it further under this heading.

Reliance

That brings me to the question whether the plaintiff, by Mr Zollo, relied upon the representation which I have found to have been made in buying the chicken farm or, to put it more accurately, whether any loss suffered by it as a result of its purchase of the chicken farm was "by conduct of" Mr and Mrs Scorda (s 79 of the Fair Trading Act).
In the context of this case this comes down to the question whether the plaintiff was induced to buy the chicken farm by the representation (see for example Kabwand Pty Ltd v National Australia Bank Ltd (1989) ATPR 40‑950 at 50,378.) It is important to bear in mind, in this respect, that the misleading conduct need not be the only inducement and that it is sufficient if it plays a part in the plaintiff's loss or damage, in the sense that it was one of the real inducements to the plaintiff to do whatever caused its loss (Gould v Vaggelas (1985) 157 CLR 215 at 236, 251; Kabwand, above; Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR 41‑601).
It seems to me that the plaintiff, in deciding to buy the farm for $724,000, did rely upon the fact that the total income of the farm, when calculated in accordance with the list of "add backs" and taking into account undisclosed cash receipts, was about $90,000. It also seems to me to be quite plain, on the evidence, that the defendants would not have sold the farm to the plaintiff for less than $724,000.
As to the first of those propositions Mr Zollo said, in his evidence‑in‑chief, that he told Mr Scorda that, on the figures which showed $78,637 as the income of the farm for the year which ended on 30 June 1992, $650,000 was the most that the plaintiff was prepared to pay for the farm. He said that it was only when Mr Scorda told him of the additional cash income that he was prepared to increase the plaintiff's offer. He repeated this in the course of cross‑examination and said that it was because of this representation that he increased the offered price, on 8 March 1993, from $650,000 to $710,000, the later increase to $724,000 having, he said, been a product of further representations relating to the installation of the fogger and patio.
I am prepared to accept Mr Zollo's evidence to the effect that he was prepared to increase the plaintiff's offer by an amount of $60,000 in reliance upon what was said to him by Mr Scorda in respect of the undisclosed cash income of the business and that he would not otherwise have done so. His evidence in this respect is lent some support by the calculations, to which I have earlier referred, which Mr Zollo made on 8 March 1993 and which demonstrate that the percentage return on the plaintiff's investment was a matter of significance to him.
As to the second proposition, I accept Mr Zollo's evidence that on 8 March 1993 Mr Scorda told him that the defendants would not sell the farm for less than $710,000. I also accept Mr Zollo's evidence that Mr Scorda told him, in October 1993, that the defendants would not sell the farm for less than $724,000. That this was so, and that Mr Scorda meant what he said, is, I think, supported by Mr Scorda's own evidence‑in‑chief in the course of which he said that when Mr Zollo demonstrated, on behalf of the plaintiff, reluctance to pay $724,000 for the farm, Mr Scorda told him to go and buy "Treetops", another farm in which Mr Zollo had expressed interest.
It follows from these findings that I am satisfied that, were it not for Mr Zollo's reliance, on behalf of the plaintiff, on the representation with respect to the existence of undisclosed cash income, the plaintiff would not have bought the farm from the defendants.

The plaintiff's damages

The question what damages might be allowed under s 82 of the Trade Practices Act 1974 in cases of conduct contravening s 52 thereof (and therefor under s 10 and s 79 of the Fair Trading Act) was considered by the High Court (Brennan, Deane, Dawson, Gaudron and McHugh JJ) in Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281. At pages 290 ‑ 291 the Court said that (citations omitted):
"Actions based on s 52 are analogous to actions for torts. It follows that, in assessing damages under s 82 of the Act, the rules for assessing damages in tort, and not the rules for assessing damages in contract, are the appropriate guide in most, if not all, cases…
In an action for damages for deceit for inducing a person to enter a contract of purchase, which is an action that is closely analogous to an action for damages for breach of s 52, the courts have consistently held that the proper measure of damages is the difference between the real value of the thing acquired at the date of acquisition and the price paid for it… "
The question was recently re‑examined by the High Court in Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494. McHugh, Hayne and Callinan JJ said, in that case, at 512 ‑ 513:
"Very often, the amount of the loss or damage caused by a contravention of s 52 will coincide with what would have been allowed in an action for deceit. But that is because the inquiry in both cases is to find out what damage flowed from (in the sense of being caused by) the deceit or contravention. Leaving aside questions of remoteness of damages in assessing damages for deceit (a question that was left unresolved in Gould v Vaggelas (1985) 157 CLR 215 at 223 ‑ 224, per Gibbs CJ), the damages for deceit will be the sum representing the loss suffered by the plaintiff because the plaintiff altered its position in reliance on the defendant's misrepresentation (Holmes v Jones (1907) 4 CLR 1692 at 1709, per O'Connor J; Potts v Miller (1940) 64 CLR 282 at 297, per Dixon J; Toteff v Antonas (1952) 87 CLR 647 at 650, per Dixon J; Beim v Collins (1954) 28 ALJR 331 at 332, per Dixon CJ, Webb, McTiernan, Fullagar and Kitto JJ; Ted Brown Quarries Pty Ltd v General Quarries (Gilston) Pty Ltd (1977) 16 ALR 23 at 31; 138 CLR 645 (note), per Gibbs J; Gould v Vaggelas (1985) 157 CLR 215 at 220‑221, per Gibbs CJ). But the analogy cannot be pressed too far. It should not be pressed to the point of concluding that the only damages that may be allowed under s 82 are those that would be allowed in an action for deceit. The question presented by s 82 is not what would be allowed in deceit, it is what loss or damage has been caused by the conduct contravening the Act.
It follows, then, that a comparison must be made between the position in which the party that allegedly has suffered loss or damage is and the position in which that party would have been but for the contravening conduct. And even this inquiry may not conclude the question. Analysing the question of causation only by reference to what is, in essence, a 'but for' test has been found wanting in other contexts (see March v Stramare (E & M H) Pty Ltd (1991) 171 CLR 506) and it may well be that it is not an exclusive test of causation in this area either. But that is not a question which we need to consider in this case. For the moment it is enough to say that s 82 requires identification of a causal link between loss or damage and conduct done in contravention of the Act (Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525, per Mason CJ, Dawson, Gaudron and McHugh JJ)."

If a comparison of the kind referred to in Marks is made in this case it becomes apparent, first, that the plaintiff has exchanged $724,000 for assets which, on the evidence which I prefer, are not worth that much.
The farm was, as I have said, valued by Mr Anthony Davies. He is a licensed valuer who holds a diploma in agriculture and also one in valuation and farm management. It was also valued by Mr Robert Bracewell. He, too, is a licensed valuer.
Mr Davies valued the farm as at 8 November 1993 at a figure of $310,000. This valuation encompassed the land, buildings (including the various sheds) and various items of fixed plant and equipment. It did not include any item of "loose farm equipment". Nor did Mr Davies value the hens. I have earlier mentioned that his valuation took the deficient quality of the fogger system, cool room and drinking system into account.
Mr Davies valued the licence at $175,000 and said that it was inappropriate to allow any additional sum for goodwill, the goodwill effectively being included within the value of the licence.
Mr Bracewell, on the other hand, valued the land and buildings at $365,000, $55,000 more than the figure arrived at by Mr Davies. Mr Bracewell did not dispute Mr Davies' valuation of the licence although he suggested that a figure of $20,000 might be added in respect of goodwill.
I have, in the end, preferred the evidence of Mr Davies to that of Mr Bracewell for a number of reasons.
Mr Davies has, firstly, specialised as a valuer in rural properties, including egg and poultry farms. He said, and I accept, that only a relatively small proportion of qualified valuers have a similar rural background and hence expertise. He said that he believed that, over the last ten years, a total of only three valuers (and Mr Bracewell was not one of these) had consistently valued poultry farms.
Next, Mr Davies, unlike Mr Bracewell, considered that the potential of the area for development as residential land was, at best, medium to long term, notwithstanding that it fell within an area zoned "Future Urban". He had a number of reasons for arriving at this conclusion. One of these was the distance of the area from services which were situated some distance to the north. Another was that the farm was one of three poultry farms in the vicinity, making it unlikely that the Ministry of Planning would allow residential development around only one of them, bearing in mind that the Department of Environmental Protection has imposed a half kilometre buffer zone around poultry farms, prohibiting residential development because of noise, smell, dust pollution and the like. Other reasons were that the farm comprised sloping land, making it more expensive to build on, that it is situated above a major link road carrying a large amount of traffic and that it overlooks the Wangara industrial area.
I found Mr Davies' reasoning in these respects to be more compelling than that of Mr Bracewell. I should add that the land in the vicinity of the farm has not, in fact, been developed since the time of the plaintiff's acquisition of the farm.
Mr Davies also restricted his analysis of comparable sales to properties in the immediate vicinity of the farm whereas Mr Bracewell travelled a little more widely in the course of his analysis. Once again, I preferred Mr Davies' approach in this respect as I accept his evidence that the wider analysis took into account land which was either closer to services or in a vicinity which was, in material respects, dissimilar to that more proximate to the farm.
As to the issue of goodwill, Mr Davies, who has, as I have said, extensive experience in valuing farms of this kind, said that he had never known of a figure being paid for goodwill over and above the amount paid for the licence to keep livestock. He said that the value of goodwill forms part of the amount paid for the licence and that this was so regardless of whether or not a particular farm had shop sales. When told, in the course of cross‑examination, of one sale which reflected a separate component of the purchase price as goodwill, he said that he could only speculate that this had been done for tax purposes. Because of his greater experience in this area I prefer the evidence of Mr Davies to that of Mr Bracewell in this respect also.
It follows that I accept Mr Davies' valuation of the land, buildings, fixed plant and equipment and licence at a total figure of $485,000.
Next, I find that only around 4,878 hens were transferred at settlement (a figure which I have taken from Mr and Mrs Zollo's letter dated 21 April 1994 and which was not really contested by Mr Scorda), albeit 6,000 had been contracted for (and I should say that the plaintiff has elected not to bring a contractual claim in this respect). The value to be attributed to each hen was a matter in dispute between the parties.
Mr Noel Hummerston, a poultry consultant with Altona Hatchery Pty Ltd, gave evidence in this respect on behalf of the plaintiff. He has more than 30 years experience in the poultry industry and has considerable experience in buying, selling and valuing hens. He saw the hens which were acquired by the plaintiff from the defendants a few weeks after the plaintiff took over the operation of the farm. He said that he valued those hens at about $3 each, on average. Because the defendants were given only short notice of Mr Hummerston's evidence, they were given the opportunity of recalling him for cross‑examination once instructions as regards his evidence had been obtained. They chose not to avail themselves of this opportunity. Notwithstanding this, Mr Scorda himself gave evidence with respect to the value of the birds transferred to the plaintiff, putting this as high (at one point in his evidence) as $4.50 per hen. However I have no hesitation at all in preferring the evidence of Mr Hummerston who was independent and also considerably better qualified than Mr Scorda to make a valuation of this kind.
Accepting, then, that each hen was worth $3, a figure of $14,634 should be allowed as regards the value of the hens actually supplied. To this should be added feed transferred to the value of $800 (a figure which Mr Scorda acknowledged, in the course of his evidence, "would seem right"). The value of moveable plant and equipment should also be taken into account. The best that I am able to do in this respect (many items having since settlement been removed or replaced and there being no independent valuation of them) is to take the values which, I have found, were ascribed to these items by Mr Scorda and accepted by Mr Zollo (albeit he now says that they were too high) on the day upon which the agreement of sale was made, being the values which subsequently appeared in the document unilaterally prepared by Mr Zollo and described by him as Annexure A to the contract. If those values, not including the values there ascribed to the hens (which have been more reliably valued by Mr Hummerston) and the tractor and mower (which were not sold to the plaintiff), are added together they provide a total of $26,300. If there is deducted from this the sum of $1,000 ascribed to the 700 litre freezer, which proved, as I have earlier said, to be worthless, this leaves a total of $25,300. These figures of $485,000, $14,634, $800 and $25,300, when added together, give a total value of what was transferred of $525,734, an amount of $198,266 less than the price paid.
It seems to me that, on the findings which I have made, the plaintiff is entitled to this sum by way of damages and to interest thereon. Because no submissions have been addressed to me as regards the rate of any interest to be awarded or as regards the date from which it is to be awarded these will have to be left over for further submissions.
That brings me, next, to the plaintiff's claim for reimbursement of interest which it said was "paid on additional borrowings" based upon the plaintiff "taking borrowings for the sum of $250,000" when it need only have borrowed $50,000.
Counsel for the defendants raised only one objection to this claim, being that there was no proof that interest had in fact been paid by the plaintiff. That is plainly incorrect. Mr Zollo, in his evidence‑in‑chief, said that he borrowed (and this was obviously done on behalf of the plaintiff) the sum of $250,000 from Monte Paschi Australia Ltd. Moreover the plaintiff's financial statements, with which no issue was taken by the defendants, show that interest payments were made. I should add that the defendants were, prior to the making of the agreement of sale, aware that the plaintiff proposed to borrow a considerable sum of money to finance the purchase, having been present when this was discussed with Mr Bransby at the meeting on 8 November 1993. Mr Zollo said that a figure of $500,000 was then discussed by him with Mr Bransby although Mr Bransby said (and it is unnecessary to decide between these competing versions) that a figure of $245,000 was discussed.
It seems to me that the plaintiff is entitled to an award of damages in respect of this head of its claim (cf, in this respect, Oddo v Watare Pty Ltd [1999] VSCA 124.) Had it paid only what the farm was worth it would have paid approximately $200,000 less than the amount which it did pay and, on the evidence, it would then have needed to borrow only $50,000 (a submission with which the defendants took no issue). While it is true that the defendants would not have sold the farm for any less than the price in fact paid for it, this does not alter the fact that, because of its reliance on the defendants' misrepresentation, the plaintiff has borrowed considerably more than it would otherwise have been prepared to borrow and consequently paid more interest than it should have paid or would have paid had it bought a different but equivalent property. It accordingly seems to me that the plaintiff is entitled to be recompensed, at least for a period, for the difference between the interest paid by it and that which it would have paid had it borrowed only $50,000. I shall refer to this as the "interest differential".
The plaintiff has, in this respect, provided figures (with which no issue is taken by the defendants) which show what was the interest differential over a period of some five and a half years. This period seems to me to be remarkably optimistic. The plaintiff already knew, by 21 April 1994, that the income of the farm had been overstated. Mr Zollo had said as much, in plain language, in the letter of that date. By 31 January 1995, some nine months after the date of that letter and 12 months after the date of settlement, the plaintiff had had sufficient time to assess its position having regard for the true level of profitability of the farm. It had, by then, had a reasonable time within which to decide whether or not to rescind the contract, or sell the farm and pursue the defendants for any consequential loss or keep the farm and continue to operate it, as it has done to this day. It chose to keep the farm in the full knowledge of the interest payments which it was required to make. That being so, I consider that there should be an award of the interest differential only until 31 January 1995.
The plaintiff has calculated the interest differential for the five months which ended on 30 June 1994 as being $6,300. However that sum has been based upon the assumption that the total interest paid on its borrowings over that period was $7,875. In fact, its financial statements show that interest of only $7,721 was paid by it, with the balance of $154 being "borrowing expenses". That being so the differential is, by my calculations, $6,176.80. The plaintiff has also calculated the interest differential for the year which ended on 30 June 1995 as being $19,255 upon the assumption that the total interest paid on its borrowings was $24,069. However $369 of that sum is, once again, "borrowing expenses". The interest differential for that year is consequently $18,960. However, because I have concluded that the plaintiff should only be compensated for its loss in this respect up to 31 January 1995, I should allow only 7/12ths of that sum, which amounts to $11,060. I am consequently prepared to award to the plaintiff a total sum, under this head of damages, of $17,236.80 which I shall round off at $17,237.00.
Next, the plaintiff has suffered trading losses as a consequence of its acquisition and operation of the farm. It claims the recovery of its losses in respect of the farm operations for the period from 1 February 1994 to 30 June 1994 and for the period from 1 July 1995 to 30 June 1996, the plaintiff having, as I have said, earned a profit in the financial year which ended on 30 June 1995.
Jordan CJ in McAllister v Richmond Brewing Co (NSW) Pty Ltd (1942) 42 SR (NSW) 187, 192, has referred, in this respect, to a rule of practice which, he said, was well established, "that where a person complains that he has been induced by deceit to buy something and pay more for it than it was worth, the amount of damages which he is entitled to recover is restricted, prima facie at any rate, to the amount by which the price which he has paid exceeds the true value of the thing bought at the time when he bought it: Potts v Miller (1940) 64 CLR 282." His Honour went on to say that exceptional circumstances were necessary to justify an award of anything more by reference to the general principle although such circumstances might occur. He said (at 193):
"In order…that anything may be recovered over and above the price paid, less the value, if any, of the thing bought, it is necessary to show that it is a loss which is properly referrable to the deceit complained of and not to something else: Potts v Miller…at 362 ‑ 3. Where the thing bought is a business, and the buyer claims to recover also the amount of losses sustained in carrying it on before discovery of the fraud, it may not unfairly be said, if he elects to keep a business which he could have rejected by rescission, that if it had some value at the date of purchase, the probability of such losses must be taken to be allowed for in that value: Selman v Minogue 37 SR 280 at 285; Australian Digest (1934 ‑ 39) 903, whilst if it then had no value there is no reason why he should be compensated for losses which he could have thrown upon the seller by rescission and which were incidental to the carrying on and retention by him of a business which he has preferred to retain."
The rule to which Jordan CJ referred has since been said not to be as inflexible as Potts v Miller might suggest. In Gould v Vaggelas (1985) 157 CLR 215 at 221 ‑ 222, Gibbs CJ, after making a comment to that effect, said:
"There may be cases in which the purchaser continues to trade, either because he has no real alternative or because he has not become aware of the nature of the fraud, and in those circumstances incurs losses which are not represented by the difference between the price and value of the business. There is no reason in principle why the defrauded purchaser should not recover damages for all the loss that flowed directly from the fraudulent inducement (unless, possibly, the loss was not foreseeable). If the purchaser, besides paying more for the business than it was worth, has suffered additional losses which resulted directly from the fraud he ought to be compensated for them. Of course, the court must be satisfied that the loss did result directly from the fraud and not from some supervening cause such as the folly, error or misfortune of the purchaser himself, and must ensure that no additional compensation is given for losses when those losses, or the probability of their occurrence, has already been taken into account in determining the value of the business.
In accordance with the general principle, consequential losses have in a number of cases been allowed to a defrauded purchaser."
(See also, in that case, Brennan J at 255 and Dawson J at 266 and see, further, Kizbeau Pty Ltd v W G and B Pty Ltd, above, at 291; T N Lucas Pty Ltd v Centrepoint Freeholds Pty Ltd [1984] ATPR 40‑440 at 45,054; Netaf Pty Ltd v Bikane Pty Ltd (1990) 92 ALR 490 at 493 ‑ 494, 507; Bateman v Slatyer (1987) 71 ALR 553 at 564 ‑ 568; Downs v Chappell [1997] 1 WLR 426 at 443, 445; Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd (1996) 22 ACSR 656 at 661, 677 and Auyeung v Chan [1999] NSWCA 417.)
I am not persuaded that this is a case in which compensation for trading losses should be awarded. The farm was, as the various accounts demonstrate, capable of generating only a relatively small profit and the valuation upon which I have relied must be taken to reflect this. It is also important, once again, to bear in mind that this is a case in which, notwithstanding that the plaintiff soon came to realise that the farm income had been overstated, it elected to keep the farm.
It is true that the farm did generate a trading loss of $12,346 over its initial five months of operation by the plaintiff, albeit only after taking into account what is referred to in the financial statements as a "livestock trading loss" of $24,773 incurred as a consequence of the purchase of laying hens to a value of $38,839, that sum being greater, by an amount of $24,773, than the closing stock value of $14,066. However it is I think, somewhat artificial to award compensation in respect of a loss which is calculated over so brief a period. Rather, it seems to me to be more realistic to consider what took place over the period of 12 months which ended on 31 January 1995, by which time the plaintiff had had, as I have said, sufficient time to consider whether to rescind the agreement of sale, or to sell the farm and pursue the defendants for any consequential loss or to keep the farm. I should add that the evidence disclosed that Mr Zollo has, on a number of occasions, been approached by real estate agents expressing interest in listing the farm for sale.
I have earlier mentioned that, after making the initial loss of $12,346 in the period which ended on 30 June 1994, the farm returned a profit of $11,976 in the year which ended on 30 June 1995. That profit was calculated after taking into account salaries paid to associated persons (presumably Mr Zollo and, perhaps, Mrs Zollo) of $21,976. Also, interest payments which were made by the plaintiff on its borrowings have been taken into account by it in calculating its profit and loss over the two periods to which I have referred. It consequently seems to me to follow that, once the plaintiff is, as I have decided it should be, compensated for the interest differential which it has paid over the 12 month period following settlement (a total amount of $17,237), it cannot be said that it suffered any trading loss over that period which is, for the reasons which I have mentioned, the only relevant period.
In all of these circumstances I am satisfied that this is not a case in which there should be any compensation awarded under this head of the plaintiff's claim. I should add that this is also not a case in which it is suggested or in which there is any evidence that, had the plaintiff not invested in the farm, it would have earned a greater return by way of some other investment.
Finally, there is the claim for a refund of stamp duty which is made upon the basis that, because the plaintiff paid more for the farm than it should have, it paid more stamp duty than it should have. The plaintiff paid $23,774.75 by way of stamp duty. It says that, had it bought the farm for its true value, it would have paid a lesser sum by way of stamp duty. If the true value of the assets purchased is, as I have found, $525,734, this would give rise to a dutiable sum of $485,000 (after deducting the value of the moveable plant and equipment, being $25,300, the value of the hens, being $14,634, and the value of the feed, being $800). Using rates provided by counsel for the plaintiff and not contested by counsel for the defendants, this would give rise to a total stamp duty of $16,175, being $7,599.75 less than that in fact paid. The plaintiff claims that it is entitled to compensation in an amount equal to this sum upon the basis that it has incurred this expense for no return.

It seems to me that this claim, in respect of which counsel for the defendants made no submissions, has substance and is supported by authority (see, in this respect, Hill v Tooth & Co Ltd (1998) ATPR 41‑649 and Yenald Nominees Pty Ltd v Como Investments Pty Ltd (in liq) (1996) ATPR 41‑508 at 42,362 ‑ 364). I consequently propose to award to the plaintiff the sum of $7,599,75.
I have mentioned that the plaintiff brought a claim, in the alternative, for the "difference between income as represented and income achieved". However that claim was not pursued with any vigour and no adequate basis has been made out for an award of damages of that kind, there being no plea (or submission) that any promissory statement was made as to the level of income which would be achieved by the farm (as opposed to a representation as regards the income which it had achieved) in respect of any period at all let alone the period of five and a half years the subject of that claim.
Before leaving the plaintiff's tortious claim I should mention that counsel for the defendants, in the course of his opening submissions, raised, somewhat half‑heartedly, a limitation point in answer to it.
Under s 79(2) of the Fair Trading Act, any action brought under s 79(1) thereof must be commenced within three years after the date on which the cause of action accrued. The cause of action established by s 79 has two elements - relevantly the contravention of a provision of Part II and the suffering of loss or damage as a result of such contravention. Accordingly, a cause of action under the section accrues, not when a breach of Part II occurs, but when loss or damage is suffered as a result of such breach (see Arcadi v Colonial Mutual Life Assurance Society Ltd (1984) ATPR 40‑473 per Toohey J). In this case the writ was issued by the plaintiff on 31 January 1997. Settlement of the contract of sale took place on 1 February 1994, just under three years earlier, on which date the major part of the purchase price was paid, with the balance of the purchase price having been paid on 2 May 1994. While acknowledging that the writ was issued inside the three year period if the date of settlement, or that of payment of the purchase price, is the date upon which the cause of action accrued, the defendants relied upon the authority of Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1985) 61 ALR 504 in support of their proposition that the cause of action accrued when the plaintiff entered into the agreement of sale on 8 November 1993. No oral submissions were addressed to me by counsel for the defendants in that respect and nor was I referred to any subsequent authority. However it seems as though the reasoning in Keen Mar has not been followed in subsequent cases (see, in particular, Magman International Pty Ltd v Westpac Banking Corporation (1991) 100 ALR 575 at 9 and after; Karedis Enterprises Pty Ltd v Antoniou (1995) 59 FCR 35 at 42 ‑ 43; and MGICA v Kenny & Good (1996) 140 ALR 313 at 377).
Moreover in State of Western Australia v Wardley Australia Ltd (1991) 30 FCR 245, the Full Court of the Federal Court (Spender, Gummow and Lee JJ) said that, in a case in which an applicant was misled into purchasing property, the true value of which at the time of the transaction was less than the price paid, the applicant "has suffered loss or damage forthwith upon completion of the sale, because what has been acquired is, to put it colloquially, 'a lemon' ". I take the reference, there, to "completion" to encompass at least the payment of the purchase price. (See Richards v Pryse [1927] 2 KB 76 at 88, 89; Killner v France [1946] 2 All ER 83 at 86; Lewis v South Wales Railway Company [1852] 10 Hare 113 at 119, 120; Lord Advocate v Caledonian Railway Company (1908) SC 566 at 575; Sutton v Cary (1916) 16 SR (NSW) 254 at 257, 258 and De Leuil v Jeremy [1964‑5] NSWR 1939 at 1953.)
The High Court, on the appeal, in Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514 said, at 525 (per Mason CJ and Dawson, Gaudron and McHugh JJ), that because loss or damage is the gist of the statutory cause of action, that cause of action does not accrue until actual loss or damage is sustained. Their Honours went on to say (at 527):
"When a plaintiff is induced by a misrepresentation to enter into an agreement which is, or proves to be, to his or her disadvantage, the plaintiff sustains a detriment in a general sense on entry into the agreement. That is because the agreement subjects the plaintiff to obligations and liabilities which exceed the value or worth of the rights and benefits which it confers upon the plaintiff. But, as will appear shortly, detriment in this general sense has not universally been equated with the legal concept of 'loss or damage'. And that is just as well. In many instances the disadvantageous character or effect of the agreement cannot be ascertained until some future date when its impact upon events as they unfold becomes known or apparent and, by then, the relevant limitation period may have expired. To compel a plaintiff to institute proceedings before the existence of his or her loss is ascertained or ascertainable would be unjust."
While the law, in circumstances such as those presently before me, is not as clear as it might be (see Karedis Enterprises, above, at 40, per Burchett and Hill JJ), it seems to me that I should, on the present state of authority, proceed upon the basis that time did not begin to run as regards any aspect of the plaintiff's claim until "completion" of the contract of sale, when the plaintiff paid the purchase price. That being so, the limitation point fails.
I should say in any event that, even if the statutory claim should have been found to be time barred, I am satisfied that a like claim for damages at common law has been made out (albeit the pleading of the plaintiff's claim in this respect is, to say the least, somewhat abbreviated). There is no dispute as regards the proposition that, if the misrepresentations which I have found to have been made out were in fact made, and relied upon, thereby causing the plaintiff loss, this gave rise to a similar cause of action leading to a like award of damages under the common law. No limitation point has been, or could be, raised in respect of this claim.

The claims for breach of contract

So far as the claims for breach of contract are concerned the plaintiff first claims, in its statement of claim, that the defendants removed items of equipment which, under the sale agreement, were to be transferred to the plaintiff, these being a compressor, an egg grader and a Toyota Hilux dual cab motor vehicle.
The basis for this claim rests in the fact that these items are shown in the defendants' accounts as having been used in the running of the farm business and the plaintiff consequently assumed that they were part of the business assets acquired by it.
It seems to me that, the sale having been made on a "walk in - walk out" basis, any items of farm equipment that were present at the time of the sale were sold.
As to the compressor, Mr Zollo said in evidence that he had instructed his solicitors to remove this item from the plaintiff's statement of claim and that claim is consequently not now pursued. I have already mentioned that the plaintiff's statement of claim has, over its comparatively long life, seen a number of amendments, some of these demonstrating a somewhat inconsistent pattern.
As to the egg grader, it seems that the plaintiff received only one but that there had, as the defendants' depreciation schedule demonstrates, originally been two. However Mr Scorda's uncontradicted evidence was that the second egg grader was sold before the contract with the plaintiff was entered into. Moreover Mr Zollo himself said in evidence that he never saw the second egg grader on the property. In these circumstances the claim in this regard has no substance.
As to the Toyota motor vehicle, Mr Scorda said in his evidence‑in‑chief that, although the vehicle did figure in the defendants' farm accounts, it was in fact a personal vehicle. He consequently never intended that the vehicle should be transferred. He repeated, in the course of cross‑examination, that the vehicle was used for family purposes albeit he added that it was also "used to pick up the odd V‑belt that would break down". Mr Zollo, in the course of his evidence, likewise said that he had assumed that the vehicle was a personal vehicle of the defendants and, as such, not included in the sale. He only reconsidered the position when he saw the vehicle listed in the defendants' depreciation schedule.
It seems to me, in the light of this evidence, that the mere fact that the vehicle figured in the defendants' depreciation schedule cannot turn it into a farm vehicle (if a vehicle of that kind can properly be categorised as plant and equipment) if that was not, in truth, the case. This is especially so in circumstances in which there was, as is conceded, a mutual common and continuing assumption, at the time of the making of the agreement for sale, that the vehicle was not included in the items of plant and equipment sold as, indeed, was borne out by the schedule which was thereafter prepared.
I should say, however, that Mr Scorda also admitted, in the course of cross‑examination on this point, that he had earlier said that his taxation returns were truthful. The following exchange then occurred:
"So if you claimed it in your depreciation schedule in the tax return can this court assume you did so because you truthfully knew the Toyota Hilux was used for the purposes of running the farm and you were entitled to a depreciation sum for it?---Yes.
You didn't claim only part of your depreciation on that because the family used it to go to the movies or something, did you? You claimed the whole depreciation entitlement, didn't you?---Yes.
So I will ask you again, was the Toyota Hilux used entirely to operate the farm business and treated as such, perhaps that's a better way?---Yes.
Thank you. You would agree with me that that should have been transferred across to Pine River when the transfer of a business went through, shouldn't it?---When I look at it now, yes."
While Mr Scorda's evidence in respect of the use of the vehicle was somewhat equivocal, it seemed to me, particularly in the light of his earlier evidence, that he meant to say no more than that the vehicle had, to some extent at least, been used for the purposes of the farm albeit it had been treated in the depreciation schedule as if it had been used exclusively for that purpose. His answer to the penultimate question put to him in the above extract seemed to me to have been addressed only to the second part of the question asked of him. The last question seemed to me, as I said at the time (albeit there was no objection), to have been one which was directed at Mr Scorda's obligations on the proper construction of the sale agreement and I am consequently not disposed to pay any regard to his answer to it.
In all of these circumstances it seems to me that this claim has not been made out.
I should add in any event that, if I had decided to award any damages under this head of claim, these would have had to have been deducted from the damages awarded to the plaintiff in respect of its tortious claim. The vehicle would, in that event, have been one of the assets to which the plaintiff became entitled pursuant to the terms of the agreement for sale and its value would consequently have had to have been taken into account in fixing the value of the assets acquired.
While there was, as I have earlier mentioned, also a claim for removal of a tractor and slasher, the evidence established, beyond doubt, that this claim had no basis and it was properly abandoned.
Finally, there is the alternative claim for breach of what was said to be a condition of the contract to the effect that the farm was licensed to carry 6,000 egg‑laying fowls. The condition is said to arise on the proper construction of condition 5 of the agreement. However it will be apparent from what I have already said that that condition provides no more than that all licences and permits will be transferred to the purchaser and that all stock will also be transferred, the existing number of which is 6,000. The condition says nothing of the number of hens which were licensed, least of all when regard is had to the objective background or factual matrix and the common assumptions of the parties (as to which see DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 429 and Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352) which, on the findings which I have made, encompass the fact that both parties knew, at the time of contracting, of the number of hens that were in fact licensed. I am consequently not persuaded that there has been any breach of contract in this respect.

Conclusion

In summary, then, I find that the plaintiff's tortious claim is made out in the respects to which I have referred. It is, in relation to that claim, entitled to damages in the sum of $223,102.75 ($198,266 plus $17,237 and $7,599.75) plus interest at a rate and from a time still to be determined. The plaintiff's claim for damages for breach of contract should be dismissed.

[2001] WASC 105

27 APRIL 2001

Key Legal Topics

Areas of Law

Consumer Law

Commercial Law

Legal Concepts

Misleading or Deceptive Conduct

Breach of Contract

Reliance on Representations

Limitation Periods

Compensatory Damages

Expert Evidence