Pratten v Johns

[2010] NSWSC 327

CITATION:	Pratten v Johns [2010] NSWSC 327
HEARING DATE(S):	7 April 2010
JUDGMENT DATE :	23 April 2010
JUDGMENT OF:	R A Hulme J
DECISION:	Leave to appeal is refused. The applicant is to pay the respondent's costs.
CATCHWORDS:	APPEAL - issues of mixed law and fact - appeal from findings of Local Court pursuant to s 40(1) of Local Court Act 2007 - PLEADINGS - purpose and function of pleadings - necessity of pleading material facts - TRADE AND COMMERCE - other regulation of trade or commerce - misleading and deceptive conduct - breach of s 42 of Fair Trading Act 1987
LEGISLATION CITED:	Local Court Act 2007 Fair Trading Act 1987 Uniform Civil Procedure Rules 2005 Trade Practices Act 1974 (Cth)
CATEGORY:	Principal judgment
CASES CITED:	Ashi Pty Limited v Karasco Investments Pty Limited [2009] NSWSC 780 Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR Chapmans Ltd v Yandell [1999] NSWCA 361 Coulter v R (1987) 164 CLR 350 Dare v Pulham [1982] HCA 70; 148 CLR 658 Dean v Stockland Property Management Pty Limited & Anor [2010] NSWCA 66 Gould v Vaggelas (1983) 157 CLR 215 Henjo Investments Pty Ltd & ors v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546 Mifsud v Campbell (1991) 21 NSWLR 725 New South Wales Insurance Ministerial Corporation (formerly GIO of NSW) v Mesiti (Court of Appeal, 1 December 1994, unreported) Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110 Saggers v Yaghoubpour & anor [2009] NSWSC 983 Sutton v AJ Thompson Pty Ltd (in liq) (1987) 73 ALR 233
PARTIES:	Charles Pratten (Plaintiff) Malcolm Nelson Johns (Defendant)
FILE NUMBER(S):	SC 2009/297369
COUNSEL:	Ms G Ramensky (Solicitor) for the Plaintiff Mr E A J Hyde for the Defendant
SOLICITORS:	Ramensky Lawyers Malcolm Johns & Company
LOWER COURT JURISDICTION:	Local Court
LOWER COURT FILE NUMBER(S):	6077/2007
LOWER COURT JUDICIAL OFFICER :	Huber LCM
LOWER COURT DATE OF DECISION:	19 November 2009

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

R A Hulme J

23 April 2010

2009/297369 Charles PRATTEN v Malcolm Nelson JOHNS

JUDGMENT

1 HIS HONOUR: This is an application for leave to appeal from the Local Court in proceedings arising from a contractual dispute. The appeal is concerned with grounds of mixed law and fact. Leave is required pursuant to s 40(1) of the Local Court Act 2007.

2 The applicant, Charles Pratten, and the respondent, Malcolm Nelson Johns, entered into an agreement whereby Mr Pratten agreed to pay Mr Johns a specified sum of money.

3 Mr Johns is the principal solicitor of a legal practice, Malcolm Johns and Company.

4 Rural and General Insurance Limited (Rural and General) had engaged Malcolm Johns and Company to act for it in relation to Federal Court proceedings involving the Australian Prudential Regulation Authority.

5 Mr Pratten controlled a company that was the majority shareholder of Rural and General.

6 Rural and General accumulated a debt owing to Malcolm Johns and Company in relation to work performed in the Federal Court proceedings.

7 On or about 12 February 2004, Geoffrey McDonald of Hall Chadwick was appointed as voluntary administrator of Rural and General.

8 Between 18 February and 10 August 2004 Mr Johns submitted to Hall Chadwick three formal proofs of debt. The first was for the sum of $201,378.95. An amended proof of debt was for $171,353.07. A further amended proof of debt was for $158,001.95. The amount contained within the third proof of debt is central to these proceedings (hereafter “the amount owing”).

9 A written agreement dated 13 September 2004 was entered into between Mr Johns and Mr Pratten. The essence of that agreement was that Mr Johns would receive payment in the amount of $110,000.00 from the administrator and the balance of $48,001.95 from Mr Pratten in full acquittance of any money owed by Rural and General to Malcolm Johns and Company. The terms of that agreement were subsequently varied such that Mr Johns would receive $120,000.00 from the administrator and $38,00.1.95 from Mr Pratten. The fact that an agreement was reached based on the above terms was found to exist by Huber LCM and has not been challenged on appeal. (Hereafter “the agreement”).

10 In September 2005, Mr Johns received from the administrator $120,000.00 plus interest.

11 Mr Pratten paid to Mr Johns $20,000.00 pursuant to the agreement. He did not make any further payments. Mr Johns commenced proceedings at the Local Court.

The proceedings in the Local Court

12 Mr Johns sued for the outstanding balance of $18,001.95.

13 Mr Pratten filed and relied upon numerous grounds of defence, including a claim of misleading and deceptive conduct in breach of s 42 of the Fair Trading Act 1987. A cross-claim was also filed, essentially seeking repayment of the $20,000.00 paid by Mr Pratten to Mr Johns.

14 It is important to distil the precise content of the misleading and deceptive conduct relied upon by Mr Pratten. In the defence to the further amended statement of claim filed in the Local Court on 19 June 2008, Mr Pratten pleaded the following misleading representations (with emphasis added):

3.1 the Plaintiff prepared the “Agreement”.

3.2 the Agreement contains a representation that an alleged debt of $158,001.95 had been admitted by R & G. (“the representation”);

3.3 The representation was made by the Plaintiff in trade and commerce;

3.4 The conduct of the Plaintiff referred to in paragraphs 3.1 to 3.4 was in breach of s.42 of the Fair Trading Act 1987 (NSW)

…

7.1 The Plaintiff’s letter of 15 February 2005 referred to in paragraph 6 of the Further Amended Statement of Claim contains a representation that the Administrator had previously admitted the Plaintiff’s alleged debt (the “second representation”).

7.2 The second representation was made by the Plaintiff in trade and commerce;

7.3 The second representation was misleading and deceptive because the alleged debt had never been admitted by the Administrator in the sum of $158,001.98;

7.4 The conduct of the Plaintiff referred to in paragraphs 7.1 to 7.3 was in breach of s.42 pf the Fair Trading Act.

15 The ‘Agreement’ referred to in paragraph 3.1 is as follows:

TO: Malcolm Nelson Johns
Malcolm Johns and Company
Lawyers
GPO Box 4139
Sydney NSW 2001

In consideration of your agreeing to accept the sum of $110,000.00 from ACN 000 007 492 Limited (Deed Administrators Appointed) (formerly known as Rural and General Insurance Limited) (the “Company”) of which Company I am the majority shareholder in full acquittance of your Further Amended Proof of Debt admitted in the sum of $158,001.95 I TIMOTHY CHARLES PRATTEN, hereby personally agree and undertake to pay to you from my own funds the following:-

$15,000.00 on or before 5.00pm on Friday, 17 September 2004;
the balance of $33,001.95 by quarterly instalments of at least $5,000.00 each commencing on 17 December, 2004.

If I am more than 14 days late with any one instalment, the balance will become immediately due and payable and you will be at liberty to take proceedings without notice for recovery of that balance.

DATED: 13 September 2004

(signed Charles Pratten)

I, MALCOLM NELSON JOHNS, accept the above terms conditional upon the sum of $110,000.00 being paid to me in cleared funds no later than 5.00pm on Friday, 17 September, 2004

(signed Malcolm Nelson Johns)

16 The representations outlined in the pleadings were therefore:

a. The document recording the agreement of 13 September 2004 contained a representation that the debt of $158,001.95 had been “admitted” by the administrators of Rural and General, and

b. Mr Johns sent a letter to Mr Pratten dated 15 February 2005 which contained a representation that the debt of $158,001.95 had been “admitted” by the administrators of Rural and General.

17 During the course of the hearing before Huber LCM, Mr Pratten attempted to rely upon additional representations allegedly made by Mr Johns that were misleading and deceptive. It was submitted that Mr Johns incorrectly stated the amount owing and Mr Pratten relied on the correctness of that figure in entering any agreement with Mr Johns. The evidence in support included the cross-examination of Mr Johns and the tendering of account ledgers of Malcolm Johns and Company relating to Rural and General and the administrators.

18 The magistrate determined in favour of Mr Johns. In dealing with the allegations of misleading and deceptive conduct, her Honour stated:

[24] The particulars of the Cross –Claim are set out in the pleadings and it is not my intention to recite each one here.

[25] Having had the benefit of reading all the correspondence contained in the exhibits and listening to and watching the parties give evidence and be cross-examined, it is quite clear that Mr Pratten was and is experienced in the workings of the commercial world. The “proof of debt” was a matter between Mr Johns and the Administrator of the Company. The correspondence shows that the Administrator had reservations with respect to the amount sought by Mr Johns. The Administrator recommended to the Mr Pratten that Mr Johns’ costs be taxed. For whatever reason, it was decided by the Administrator of the Company not to tax Mr Johns’ costs.

[26] Having regard to the above, I am not satisfied that the conduct of Mr Johns breached section 42 of the Fair Trading Act.

Grounds of Appeal

19 The grounds of appeal set out in the amended summons seeking leave to appeal are:

1. The Magistrate erred in law in failing to properly conceptualise the nature of a proof of debt

2. The Magistrate failed to give any or any adequate reasons as to why she rejected the defendant’s contentions that the conduct of the plaintiff was misleading and deceptive in contravention of s42 Fair Trading Act and was relied on to enter into the contract referred to in the judgment.

3. The Magistrate’s (sic) erred in her application of s42 of the Fair Trading Act .

4. The Magistrate failed to deal with the evidence that the amount owing between ACN 000 007 42 Limited and the plaintiff at the time of the agreement dated 13th September 2004 was substantially less than the $158,001.95 recited in the agreement and made no finding about the amount owing and thus had no basis in law for rejecting the defendant’s allegation that the representation that an amount of $158,001.95 was owing to the plaintiff and had been admitted by the Administrator was misleading and deceptive.

5. The Magistrate’s finding that “ the Administrator had reservation with respect to the amount sought by Mr Johns ” was inconsistent with her finding that “ the conduct of Mr Johns (did not) breach section 42 of the Fair Trading Act ”.

20 On behalf of Mr Pratten it was submitted that fundamental to his case was the amount owing. It was contended that even though this had not been pleaded, it was an issue that had been distilled in opening submissions, cross-examination of Mr Johns and in closing submissions. Although the grounds of appeal have been variously expressed, there is no doubt as to Mr Pratten’s chief complaint before this Court which was that the magistrate had failed to consider the evidence concerning the accuracy of the amount claimed to have been owing. Had the magistrate engaged in such a task, it would have been apparent that the amount contained within the third proof of debt was overstated. It followed, so it was submitted, that Mr Pratten had been mislead and deceived about the true amount owing and had he known the correct amount he would not have entered into the agreement with Mr Johns. It was also contended, consistent with the pleadings that Mr Pratten had been mislead and deceived into entering into the contract by the misrepresentations outlined earlier.

21 In reply, counsel for Mr Johns first submitted that the magistrate did not need to consider whether the amount contained within the third proof of debt was correct. Mr Johns brought the proceedings on the basis of an agreement, which he sought to enforce, and this did not warrant consideration or analysis of the derivation of the amount owing. Secondly, even if the amount contained within the third proof of debt was incorrect, Mr Pratten failed to establish that he relied upon any representations made by Mr Johns. Thirdly, Mr Pratten did not plead the correctness of the amount contained within the third proof of debt as an issue in dispute and nor did Mr Johns acquiesce that it was in dispute. It was submitted that it had never been established conclusively that the amount that Mr Pratten contends to be the correct amount owing was less than that asserted in the third proof of debt. Without the acceptance of Mr Johns that the amount owing was overstated, there was insufficient evidence upon which the magistrate could draw some definitive conclusion as to how much was actually owing.

22 There are a number of problems with the proposed grounds of appeal but that matter may be put to one side because the submissions before this Court raise for determination three issues:

Whether leave to appeal should be granted pursuant to Section 40 of the Local Court Act 2007?

Did the magistrate err in failing to consider and determine the accuracy of the amount owing? If so, what was the correct amount owing?

Should her Honour have found in Mr Pratten’s favour on the Fair Trading Act issue?

Should leave to appeal should be granted

23 It was accepted on behalf of Mr Pratten that the appeal involved a question of mixed law and fact. Leave is therefore required pursuant to s 40 of the Local Court Act.

24 Mr Hyde referred to the decision of Ashi Pty Limited v Karasco Investments Pty Limited [2009] NSWSC 780 in which Davies J dealt with an application for leave pursuant to s 40. His Honour referred to Coulter v R (1987) 164 CLR 350 and Chapmans Ltd v Yandell [1999] NSWCA 361 before concluding that for leave to be granted an applicant needs to point to some matter over and above the suffering of detriment as a result of the decision in the court below.

25 Mr Hyde submitted that notwithstanding the factual differences between Ashi and the present case, the principles outlined by Davies J are relevant in that this case is concerned with a relatively small sum of money and the applicant has failed to identify some significant factor in addition to having suffered detriment by the orders made in the Local Court to justify leave being granted. When confronted with this question, Ms Ramensky’s response was, “it would be (a) travesty of justice if my client was ordered to pay yet more money to Mr Johns when he has already been overpaid and has received significantly more money than he was owed by the company”. This is not a factor over and above the detriment flowing from the adverse decision of the court below. I have examined the merits of the applicant’s case nonetheless.

Did the magistrate err in failing to consider and determine the amount owing?

26 It was submitted on behalf of Mr Pratten that the agreement was reached on the basis that Mr Johns represented that the correct amount owing was $158,001.95. Additionally, Mr Johns represented that the administrator had admitted the debt. This was the context in which Mr Pratten entered into the agreement whereby he undertook to pay the sum of $48,001.95 with the remaining $110,000.00 paid by the administrator. With this landscape, it was submitted that the magistrate erred in failing to consider the evidence as to whether the amount owing was indeed correct. If it is accepted that her Honour erred in this respect, the evidence, it was submitted, is uncontradicted in so far as the amount owing was not $158,001.95 as represented.

27 On behalf of Mr Johns it was submitted there was no merit in the above contention. The magistrate was not required to consider the correctness of the amount owing. The correctness of the amount owing was not an issue that was raised in the pleadings and Mr Johns did not acquiesce that it had become an issue in the proceedings. It was conceded that in the court below Mr Johns did not prove the amount of the debt. However, it was contended that he had no obligation to do so as it was not a fact in issue. Attention was invited to an early stage of the cross-examination of Mr Johns when his counsel objected to a line of questioning about the correctness of the amount owing on the grounds of relevance.

28 It is apparent from the judgement of the magistrate that she did not regard as relevant either the cross-examination of Mr Johns or the accounting records to the extent they may have called into question the correctness of the amount owing. She referred to the particulars of the cross-claim, which in turn referred to paragraphs 3 – 16 inclusive of the defence as the material allegations. Paragraphs 3 – 16 of the defence listed a number of grounds of the defence and provided detailed particulars. Those grounds include misleading and deceptive conduct, undue influence on the part of the plaintiff, lack of acceptance, lack of consideration and termination of contract. Importantly, at no point in the pleadings was the accuracy of the amount owed put into issue.

29 It was submitted on behalf of Mr Pratten that the question of imperfect pleadings is satisfactorily determined by reference to the way in which the case proceeded through the Local Court. The submission was to the effect that the cross-examination of Mr Johns, the tender of the accounting records and the submissions that were made combined to overcome the deficiency in the pleadings and thereby required the magistrate to deal with the question of the accuracy of the amount owing. Despite the abundance of evidence put before the Local Court by Mr Pratten, Mr Johns failed to adduce any evidence on this point.

30 I was taken to an earlier decision of mine of Saggers v Yaghoubpour & anor [2009] NSWSC 983 in support of the contention that despite the imperfect pleadings, the fundamental complaint of Mr Pratten before this Court is consistent with the way in which the matter proceeded at trial and does not raise any new issues. However, the present case can be distinguished from Saggers which concerned a question of a case being made on appeal that was not sought to be made in the court below. Here, the question is concerned with a case at trial departing from the pleaded issues. In any event, there is no suggestion of Mr Johns accepting Mr Pratten’s attempt to expand the issues beyond the pleadings. Indeed, the objection to the cross-examination concerning the amount owing indicates quite the contrary.

31 The importance of pleadings is trite law. In Dare v Pulham [1982] HCA 70; 148 CLR 658 the High Court said (at 664, citations omitted)

Pleadings and particulars have a number of functions: they furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it; they define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial; and they give a defendant an understanding of a plaintiff's claim in aid of the defendant's right to make a payment into court. Apart from cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial, the relief which may be granted to a party must be founded on the pleadings.

32 In Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 Mason CJ and Gaudron J stated (at 286-7, citations omitted):

The function of pleadings is to state with sufficient clarity the case that must be met. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party's right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities.

Ordinarily, the question whether the parties have chosen some issue different from that disclosed in the pleadings as the basis for the determination of their respective rights and liabilities is to be answered by inference from the way in which the trial was conducted. It may be that, in a clear case, mere acquiescence by one party in a course adopted by the other will be sufficient to ground such an inference.

33 The Uniform Civil Procedural Rules 2005, have adopted the common law approach to the purpose and function of pleadings. Rule 14.14(2) provides, relevantly:

(2) In a defence or subsequent pleading, a party must plead specifically any matter:
(a) that, if not pleaded specifically, may take the opposite party by surprise,

34 To a similar effect, r 15.1(1) provides:

(1) Subject to this Part, a pleading must give such particulars of any claim, defence or other matter pleaded by the party as are necessary to enable the opposite party to identify the case that the pleading requires him or her to meet.

35 In the present case, the alleged material fact that the amount owing was not that represented by Mr Johns was not pleaded. Moreover, it was clear from the way in which Mr Johns conducted his case that he deliberately confined the evidence to the pleadings and did not acquiesce in the course sought to be adopted by Mr Pratten. So much was clear in closing submissions before the magistrate.

36 The failure of Mr Pratten to properly plead, or indeed plead at all, facts which are now said to have been material made it permissible for her Honour to disregard the submissions and cross-examination concerning those matters in her judgement. Whilst it may have been desirable for her Honour to provide short reasons to that effect I am cognisant of the plethora of issues raised before her Honour and the general pressures under which magistrates of the Local Court are placed in dealing with the volume of cases before them. Such an approach is consistent with the principle that a trial judge need not refer to all the evidence led in proceedings or to indicate in relation to every single item of evidence and every single submission whether they are accepted or not and why. Accordingly, a failure to refer to some aspect of the evidence does not necessarily, whenever it occurs, indicate error on the part of a judge or magistrate, provided of course that the evidence is not relevant to the resolution of a point critical to the contest between the parties: see generally Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110 per McColl JA (Ipp JA and Bryson AJA agreeing) at [56] to [67], recently endorsed and adopted by Whealy J (with whom Giles JA and Handley AJA agreed) in Dean v Stockland Property Management Pty Limited & Anor [2010] NSWCA 66 at [52]. The manner in which the present case was conducted in the court below did not elevate the accuracy of the amount owing to the status of a point critical to the contest. Indeed, Mr Johns ignored it, and Mr Pratten failed to lead any probative evidence on the issue, a matter to which I shall return.

37 In Mifsud v Campbell (1991) 21 NSWLR 725, Samuels JA (with whom Clarke JA and Hope AJA agreed) determined an appeal concerning a motor vehicle accident claim where the trial judge failed to refer to important matters of evidence fundamental to the finding on liability. As those matters involved issues of credit, Samuels JA determined that a new trial was appropriate. Misfud is to be contrasted with New South Wales Insurance Ministerial Corporation (formerly GIO of NSW) v Mesiti (Court of Appeal, 1 December 1994, unreported) in which Sheller JA (with whom Handley JA agreed) held that a new trial is not ordered merely on the basis that the trial judge failed to give adequate reasons. What is required is “persuasive and critical contrary evidence” that would put into question the fundamental issues to be determined by the trial. In Mesiti consideration of the evidence lead to the conclusion that the findings of the lower court on that aspect of the case were the correct and the only findings available on the evidence: Mesiti (BC9403342 at 9). It follows that had I determined that Huber LCM erred in failing to provide reasons regarding, or indeed consider, the evidence seeking to prove that the amount owing was overstated, it would have been necessary to consider the affect, if any, that evidence would have had on the outcome of the proceedings.

38 Ms Ramensky sought to identify the evidence before the magistrate that tended to prove the amount owing was overstated. The submissions involved specific references to numerous sections of transcript and evidence, which became increasingly difficult to follow. I invited Ms Ramensky to send a document listing the references that were relevant to this aspect of the case. As a result, further written submissions containing those references were received.

39 In respect of the evidence regarding the correct amount owing, the following observations can be made. It was submitted on behalf of Mr Pratten that his evidence as to the correct amount owing was “uncontradicted”. It was uncontradicted as no evidence was brought to traverse the contentions made on behalf of Mr Pratten. Two things should be stated in this respect. First, Mr Johns did not concede that the amount owing in the third proof of debt was incorrect. He disagreed on quite a number of occasions through the course of cross-examination with a number of propositions put to him by counsel then appearing for Mr Pratten. Further, on a number of occasions he was unable to answer questions in relation to the accounting records, at times on the basis that he did not have access to other documents.

40 Secondly, issues regarding the correct amount owing were not raised until the commencement of the hearing and not explored until the cross-examination of Mr Johns. As a result, he could not have been expected to put into evidence matters contradicting the assertions made as it was not a matter that had been put in issue by the pleadings. It was however submitted that after the initial cross-examination, Mr Johns became aware of what he had been put to task on and he failed to adduce any contradictory evidence. Such a submission is misconceived. Apart from a failure to amend the pleadings, Mr Pratten himself did not lead any persuasive evidence as to the correct amount owing.

41 The evidence relevant to the correctness of the amount owing comprised raw accounting records and the cross-examination of Mr Johns. I have already commented regarding the cross-examination of Mr Johns. It is apparent that he did not make the concessions sought on behalf of Mr Pratten. Aside from the evidence of Mr Johns, all that was before the magistrate were submissions made on behalf of Mr Pratten concerning the raw accounting records. In this context, for her Honour to be able to draw definitive conclusions as to the correct amount owing would have required her to engage in an analysis of the accounting records for herself. Mr Pratten did not seek to place before the court any evidence or opinion by a relevantly qualified person concerning the records. The task of analysing these complicated accounting records could not realistically have been expected to befall the magistrate without any such assistance.

Section 42 of the Fair Trading Act

42 Section 42 provides:

(1) A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
(2) Nothing in this Part shall be taken as limiting by implication the generality of subsection (1).

43 It was submitted before me that the misleading and deceptive conduct consisted of representations about the actual amount owing and that the proof of debt had been admitted.

44 The issue of reliance as applicable to misleading and deceptive conduct was a matter of dispute between the parties and requires further exploration.

45 To recover under s 42 (or its equivalent s 52 of the Trade Practices Act 1974 (Cth)) it was for Mr Pratten to establish factual reliance upon the misleading and deceptive conduct, although that conduct need not be the only factor bearing upon his decision to enter into the agreement: Henjo Investments Pty Ltd and ors v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546 per Lockhart J (at 558-559)

46 In determining whether Mr Pratten could be said to have relied upon the representations, assistance is derived from the following principles distilled in Gould v Vaggelas (1983) 157 CLR 215 and as applied to s 52 in Sutton v AJ Thompson Pty Ltd(in liq) and ors (1987) 73 ALR 233 (at, 240):

(i) Notwithstanding that a representation is both false and fraudulent, if the representee does not rely upon it he has no case.

(ii) If a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract there arises a fair inference of fact that he was induced to do so by the representation.

(iii) The inference may be rebutted, for example, by showing that the representee, before he entered into the contract, either was possessed of actual knowledge of the true facts and knew them to be true or alternatively made it plain that whether he knew the true facts or not he did not rely on the representation.

(iv) The representation need not be the sole inducement. It is sufficient so long as it plays some part, even if only a minor part, in contributing to the formation of the contract.

47 Ms Ramensky submitted on behalf of Mr Pratten that, “I think it is as clear as day that he only entered into the specific agreement because there was a claim that the debt was $158,000.00”. Although not expressed in such terms, the submission in effect spoke to the second limb of the principles expounded by Wilson J in Gould, supra.

48 It was contended on behalf of Mr Johns that Mr Pratten had failed to prove, apart from stating that it was obvious, that he had actually relied upon any representation made by Mr Johns. This submission was directed to both representations, namely, the amount owing and the debt having being admitted. It was submitted that Mr Pratten knew the proof of debt had not been admitted and it was without doubt that he did not accept the correctness of the claim for $158,001.95. Nevertheless, for some reason, he choose to enter the agreement regardless. The magistrate’s finding that, “it is quite clear that Mr Pratten was and is experienced in the workings of the commercial world” is pertinent.

49 In my view there was simply no evidence before the magistrate upon which she could have found that Mr Pratten relied upon any representations made by Mr Johns. Whilst I do not intend to repeat all of the evidence here, I will give some examples.

50 In an affidavit of 25 October 2007, Mr Pratten stated that he only entered the agreement “because of the threats the Plaintiff had made” and “I only signed it because I was afraid of the damage the Plaintiff could do to me or R & G or both”. The effect of this evidence is that he entered into the agreement out of fear and intimidation.

51 In an affidavit of 10 October 2008, he stated that he objected strenuously to the various proofs of debt lodged by Mr Johns and repeatedly relayed his concerns to the administrator. Again, he confirmed that he was induced into entering into the agreement by John’s threatening conduct. I am unable to detect any evidence in either affidavit suggestive of Mr Pratten relying upon the representations as to the amount owing and that the debt had been admitted by the administrator. Consistent throughout the affidavits, although rejected by the magistrate, is the contention that he was threatened by Mr Johns and accordingly induced into entering the agreement.

52 Other items of evidence militating against a finding in Mr Pratten’s favour under s 42 include a letter from Mr Pratten to the administrator of 30 August 2004. Clearly, Mr Pratten expressed concern about the amount asserted to be owing in the proof of debt and was well aware that the debt had not been admitted. In a letter to Mr Pratten from the administrator of 2 September 2004 it is made obvious that the proof of debt had not yet been admitted.

53 As a consequence, there is no basis for concluding that it was not open to the magistrate to find against the applicant on the s 42 Fair Trading Act issue.

Conclusion

54 None of the points sought to be raised on appeal have merit. In that circumstance, leave to appeal should be refused.

Orders

55 I make the following orders:

1. Leave to appeal is refused.

2. The applicant is to pay the respondent’s costs.

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