Scoway Pty Ltd v Faxon Pty Ltd - [2004] FCA 249

FEDERAL COURT OF AUSTRALIA
Scoway Pty Ltd v Faxon Pty Ltd [2004] FCA 249
PRACTICE AND PROCEDURE – whether proof of service on absent respondents required before affidavits can be read – leave required to read affidavits without service – leave granted
TRADE AND COMMERCE – misleading and deceptive conduct – where the making of a contract containing warranties which are false constitutes misleading and deceptive conduct – degree to which indemnity may be given to a person who is a conduit for misleading or deceptive information – entitlement to indemnity is for the whole of the loss claimed – damages awarded
Federal Court Rules O 32 r 2(1)(d), O 14 r 7, O 1 r 8, O 32 r 2
Federal Court of Australia Act 1976 (Cth) s 51A
Supreme Court Rules1970 (NSW) Schedule J
Trade Practices Act1974 (Cth) s 82
Fair Trading Act1987 (NSW) s 68
Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 applied
Cockburn v GIO Finance Ltd (No 2) (2001) 51 NSWLR 624 applied
McCormick v Riverwood International (Australia) Pty Ltd [2000] FCA 32 applied
Pantalone v Alaouie (1989) 18 NSWLR 119 applied
SCOWAY PTY LTD v FAXON PTY LTD & ORS
N 1370 OF 2002
HELY J
19 MARCH 2004
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 1370 OF 2002

BETWEEN:

SCOWAY PTY LTD
ACN 003 476 239
APPLICANT

AND:

FAXON PTY LTD
ACN 091 404 125
FIRST RESPONDENT

DENIS CHRISTOPHER BARRY
SECOND RESPONDENT

ROBIN HENRY HARRISON
THIRD RESPONDENT

JOHN PATRICK GERAGHTY
FOURTH RESPONDENT

DATAGEM PTY LTD
ACN 010 989 394
FIFTH RESPONDENT

BETWEEN:

DATAGEM PTY LTD
ACN 010 989 394
FIRST CROSS CLAIMANT

AND:

JOHN PATRICK GERAGHTY
CROSS RESPONDENT TO FIRST CROSS CLAIM

BETWEEN:

ROBIN HENRY HARRISON
SECOND CROSS CLAIMANT

AND:

DATAGEM PTY LTD
ACN 010 989 394
FIRST CROSS RESPONDENT TO SECOND CROSS CLAIM

DENIS CHRISTOPHER BARRY

SECOND CROSS RESPONDENT TO SECOND CROSS CLAIM

JOHN PATRICK GERAGHTY

THIRD CROSS RESPONDENT TO SECOND CROSS CLAIM

BETWEEN:

JOHN PATRICK GERAGHTY
THIRD CROSS CLAIMANT

AND:

FAXON PTY LTD
ACN 091 404 125
FIRST CROSS RESPONDENT TO THIRD CROSS CLAIM

DENIS CHRISTOPHER BARRY
SECOND CROSS RESPONDENT TO THIRD CROSS CLAIM

ROBIN HENRY HARRISON
THIRD CROSS RESPONDENT TO THIRD CROSS CLAIM

DATE OF ORDER:

19 MARCH 2004

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1.Judgment be entered in favour of the applicant against the first, second, third and fourth respondents in the sum of $639,538.87.
2.By consent, direct the entry of judgment in favour of the applicant against the fifth respondent in the sum of $639,538.87.
3.The respondents pay the applicant’s costs of the proceedings.
4.Judgment be entered in favour of the fifth respondent on its cross claim against the fourth respondent in the sum of $200,000.00.
5.The fourth respondent pay the fifth respondent’s costs of that cross claim.
6.The cross claim by the third respondent against the second, fourth and fifth respondents be dismissed with costs.
7.The cross claim by the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2004] FCA 249
Decision Date: 19 MARCH 2004

CaseChat Overview and Summary

Scoway Pty Ltd brought an action against Faxon Pty Ltd and others, seeking damages for misleading and deceptive conduct under the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (NSW). The plaintiff, Scoway, had purchased a business known as 'McGinty’s Irish Bar and Restaurant' based on representations made by the defendants that were later found to be false. The defendants failed to adequately respond to the claims, leading to findings of liability in favour of the plaintiff. The primary legal issue was whether the defendants' conduct constituted misleading and deceptive conduct under the relevant legislation. The court found that the defendants' false representations constituted misleading and deceptive conduct, as established in the case of Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd. The court further found that the plaintiff was entitled to damages of $586,321.00, as supported by expert evidence.

The court determined that the plaintiff acted reasonably in continuing to operate the business until it could be sold, mitigating potential greater losses. The defendants' failure to contest the evidence or appear at the hearing resulted in the court accepting the plaintiff's claimed loss. The court also considered ancillary issues such as costs and cross-claims between the respondents, ultimately dismissing most cross-claims and awarding costs accordingly.

In conclusion, judgment was entered in favour of the plaintiff against all respondents for $639,538.87 in damages, with costs awarded against the defendants. Additionally, the fifth respondent was awarded $200,000.00 against the fourth respondent, with the fourth respondent to bear the costs of that cross-claim. The cross-claims by the third and fourth respondents were dismissed with costs. This decision comprehensively addressed the primary claims and ancillary matters, providing a clear resolution to the litigation.

Orders

Orders of the court

1. Judgment be entered in favour of the applicant against the first, second, third and fourth respondents in the sum of $639,538.87.

2. By consent, direct the entry of judgment in favour of the applicant against the fifth respondent in the sum of $639,538.87.

3. The respondents pay the applicant’s costs of the proceedings.

4. Judgment be entered in favour of the fifth respondent on its cross claim against the fourth respondent in the sum of $200,000.00.

5. The fourth respondent pay the fifth respondent’s costs of that cross claim.

6. The cross claim by the third respondent against the second, fourth and fifth respondents be dismissed with costs.

7. The cross claim by the fourth respondent against the first, second and third respondents be dismissed with costs.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

HELY J

An appearance and a defence have been filed on behalf of the third and fourth respondents. I am satisfied that the affidavits read by the applicant have been served on those respondents or their former solicitors. I am also satisfied that letters were sent by the applicant’s solicitors to the third and fourth respondents confirming that the matter has been listed for hearing to commence on 1 March 2004. On 5 February 2004 the fourth respondent wrote to the Registrar of the Court advising that it was not possible for him to travel to Sydney for the hearing, or to employ legal representation, because he was experiencing considerable financial difficulties.Decision Counsel for the applicant, Mr Insall SC, helpfully prepared a document styled ‘Applicant’s Outline of Submissions’ which I have had marked as filed in Court. It will therefore remain with the papers. That document identifies the misleading and deceptive conduct which is the subject of the claims under s 82 of the Trade Practices Act1974 (Cth) (‘the Trade Practices Act’) and s 68 of the Fair Trading Act 1987 (NSW) (‘the Fair Trading Act’). The document also indicates where the evidence as to the making of the pleaded representations and their falsity is to be found. I have read that evidence. For the reasons contained in the outline of submissions I find that the pleaded representations were made, and that the applicant entered into the contract to purchase the business known as ‘McGinty’s Irish Bar and Restaurant’ in reliance upon those representations. I also find that the representations were false in the respects outlined in the submission, and that the respondents engaged in misleading and deceptive conduct in contravention of the Trade Practices Act, and the Fair Trading Act in making the representations in question: Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470. That case establishes the principle that a corporation, by making a contract containing warranties which are false, may by that conduct alone be held to have engaged in misleading and deceptive conduct. The statement of claim also includes claims for breach of warranty and negligence. Paragraph 32 of the applicant’s written outline contains a submission that the same damages would be recoverable whether the action is under the Trade Practices Act, or for breach of warranty, or for breach of duty of care. In principle, I doubt that this is so. However, I need not pursue this aspect of the matter further as counsel for the applicant, in oral submissions, confined the applicant’s claim to one based upon misleading and deceptive conduct. The loss or damage which the applicant claims in that regard is $586,321.00. There is evidence from a suitably qualified expert, Daryl Peter Holland, which quantifies the applicant’s loss in this amount. The respondents have not sought to answer that evidence, or to appear at the hearing for the purpose of testing it. I accept the applicant’s submission that it acted reasonably in continuing to conduct the business until it managed to effect a sale on 4 April 2003 for settlement on 24 June 2003, and as a consequence sustained losses in the sum claimed. A critical factor in coming to this conclusion is that if the applicant closed down the business earlier than it did, without effecting a sale of that business, then the potential losses may have been greater, having regard to the applicant’s continuing liability under the lease of the wine bar premises.

Ratio Decidendi

Legal Principle Established

Established by: HELY J

Full text does not contain this section.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1370 OF 2002

BETWEEN:	SCOWAY PTY LTD ACN 003 476 239 APPLICANT
AND:	FAXON PTY LTD ACN 091 404 125 FIRST RESPONDENT DENIS CHRISTOPHER BARRY SECOND RESPONDENT ROBIN HENRY HARRISON THIRD RESPONDENT JOHN PATRICK GERAGHTY FOURTH RESPONDENT DATAGEM PTY LTD ACN 010 989 394 FIFTH RESPONDENT
BETWEEN:	DATAGEM PTY LTD ACN 010 989 394 FIRST CROSS CLAIMANT
AND:	JOHN PATRICK GERAGHTY CROSS RESPONDENT TO FIRST CROSS CLAIM
BETWEEN:	ROBIN HENRY HARRISON SECOND CROSS CLAIMANT
AND:	DATAGEM PTY LTD ACN 010 989 394 FIRST CROSS RESPONDENT TO SECOND CROSS CLAIM
DENIS CHRISTOPHER BARRY SECOND CROSS RESPONDENT TO SECOND CROSS CLAIM
JOHN PATRICK GERAGHTY THIRD CROSS RESPONDENT TO SECOND CROSS CLAIM
BETWEEN:	JOHN PATRICK GERAGHTY THIRD CROSS CLAIMANT
AND:	FAXON PTY LTD ACN 091 404 125 FIRST CROSS RESPONDENT TO THIRD CROSS CLAIM
DENIS CHRISTOPHER BARRY SECOND CROSS RESPONDENT TO THIRD CROSS CLAIM
ROBIN HENRY HARRISON THIRD CROSS RESPONDENT TO THIRD CROSS CLAIM
DATE OF ORDER:	19 MARCH 2004
WHERE MADE:	SYDNEY