Sibberas & Anor v Norris

[1989] HCATrans 231

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No M36 of 1989

B e t w e e n -

FRANK ANDREW SIBBERAS and

PATRICIA ANNA-MARIA SIBBERAS

Applicants

and

MAE NORRIS and ALEX

SCOTT & CO PTY LTD

First Respondents

and

JOHNS. BELL & CO (a firm)

Second Respondent

Application for special leave

to appeal

Sibberas

BRENNAN J
DAWSON J

TOOHEY J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 13 OCTOBER 1989, AT 12.47 PM

Copyright in the High Court of Australia

MlT 9/1/JM 1 13/10/89

MR R.M. ROBSON, QC: If the Court ~leases, I appear with

MR M.C. HINES on behalf of the applicants.

(instructed by Corrs)

MR N.A. MOSHINSKY, QC: If the Court pleases, I appear

with MR E.P. KENNON for the respondents.

(instructed by Godfrey Stewart & Co)

BRENNAN J:  Yes, Mr Robson?

MR ROBSON: If the Court Dleases, the special importance

of this case is whether an experienced agent

acting for the vendor of a small business is

negligent in enthusiastically advising a

notential buver who has little commercial

experience that in effect the business would be

flourishing and profitable when there was no

sufficient foundation for such an optimistic

forecast and a person acting reasonably in the

agent's position would not have made the

statements. The potential buyer was relying

on the agent's advice as the agent well knew.

In this case, Your Honours, the statements

which were made by the agent which carried, as

I said, the statement that in effect the business

would be flourishing and profitable, were that

the business was a once in a lifetime opportunity;

it had a year-round trade - it was a motel in the

country at Bonnie Doon - it will be a goldmine;

it had great potential; it was at bargain basement

price. The Full Court held that it was not

possible to say the statements were not true in
an absolute sense, that is that they could not

possibly eventuate, but we say a resonable person

would not have made them. The question is - - -

BRENNAN J: That is not relevant, is it, if they were true?

MR ROBSON:  This is the is sue. The issue and the law of Australia

is whether statements were not negligent because

they were not necessarily untrue, or is it the

law that the soundness or competency advice is the appropriate test. We are dealing here not

with statements relating to existing facts where

it is admitted that you first of all have to show

that the statements were false. In this case the

statements were in the nature of advice, forecasts

and opinions. They related to the future.

BRENNAN J: That means that it is a question of a false

warranty action.

MR ROBSON:  No, it is negligent advice, the advice relating

to the future prospects of the business and

the question is whether that opiniou has been given

with reasonable care. That is not tested by saying,
"Were the statements true or untrue in an absolute·

sense", that is that they could not possibly

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eventuate, but by asking whether that is advice

that would have been given by a person exercising

reasonable care.

DAWSON J:	But the estate agent was under no duty to advise
the purchaser.
MR ROBSON:	That was not an issue at the trial or in the

Full Court. It was admitted that the estate

agent did owe a duty and in this case the findings

were that the estate agent was in a different

position from a normal estate agent.. In particular,

this estate agent had befriended Mr and Mrs Sibberas

and the trial judge found - and the Full Court did

not disagree with it - that they looked upon

her as their confidante.

TOOHEY J:	Mr Robson, could I just interrupt you for a moment? We do not have the statement of claim, do we, in
the application book?
MR ROBSON:	No.
TOOHEY J:	Can you tell us the manner in which the matter was
pleaded? Was it on the basis of representations
falsely made; advice wrongly given, or what?
MR ROBSON:	Yes, I can. It was pleaded that:

Prior to the making of the Sale Agreement

and in order to induce Mr and Mrs Sibberas

to enter into the Sale Agreement

Mrs Norris -

who was the employee of the agent -

on behalf of Scott as agents for the

vendors represented and advised

Mr and Mrs Sibberas and each of them

that:

(a) the business had tremendous potential;

(b) the business was a gold-mine;

(c) the business had a good year round trade;

(d) the business was being sold at a bargain

price;

(e) the opportunity to purchase the business

was the chance of a lifetime;

!f) the reason the Vendors were selling the

business was the ill health of

Mr Holgate -

who was the vendor, which was not found to be false

at the trial -

(h)	that the expenses of the business were
at a level which would enable Mr and Mrs Sibberas to earn a substantial profit -

MlT9/3/PLC	3	13/10/89
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and such like. It was represented:

(m) that facts existed and were known to

Mrs Norris to exist from which each

of the representations referred to

above could be reasonably deduced and

from which each piece of advice
expressed or inherent in each of the

matters referred to above could be
reasonably supported:-

and finally:

(n) that Mrs Norris held the opinion that

each of the representations referred to

above was true and correct and that each

piece of advice expressed or inherent

from the matters referred to above was
sound.

BRENNAN J: Well, is that not a plea of, (a) that the opinion

was not held and, (b) that the opinion implied

underlying facts which were untrue?

MR ROBSON:  Yes, but the statement of claim went on and one

of the alternatives was:

13. In breach of such duty of care -

which had been pleaded -

the representations and advice were

made and given negligently.

And then the particulars were that she failed:

to exercise any or any proper care in making

the representations and giving the advice -

and referring back to that paragraph where all the

statements were set out.

DAWSON J:	But the word "advise" there adds nothing to the word "represented", does it?
MR ROBSON:	It does take the matter further in that they were

capable of being characterized as representations

of forecasts, future matters, and that the substance
of the statements constitute advice that this

would be a future representation, this would be a flourishing and profitable business. And the

case at the trial was run essentially on the basis

that Mrs Norris did not have reasonable grounds for

making such an optimistic unqualified forecast - call

it that - or opinion, or adyice. She certainly was

not making representations about the business at this stage. It had only been going for 11 weeks

and at the stage it was purchased it was not profitable.

MlT9/4/PLC	4	MR ROBSON,	13 /10 / 8'9
Sibberas

She was making representations about what it

would be for the purchasers. Now, it was found -

her defence was, "Yes, I said these things but

I qualified them by saying, 'You'll need to work
hard' and this and that and the other thing."

The trial judge found, and this was not disagreed

with by the Full Court, that the statements and

forecasts were not qualified so that she made

unqualified forecasts and in the context where
the purchasers had never bought a business before,

they were relying on her, that, "This business

will be a floushing business and profitable for

you.''

BRENNAN J: What was your cause of action?

MR ROBSON:	The cause of action was in negligence.
BRENNAN J:	I appreciate that but what were the elements of

your cause of action?

MR ROBSON:  That M:i:sNorris, the agent, owed a duty of care

in making statements and giving advice to

Mr and Mrs Sibberas with reasonable care; that

she made these forecasts and opinions without

exercising reasonable care, there was no reasonable
foundation for them, and as a result of that

advice, and relying on that advice,

Mr and Mrs Sibberas purchased the motel and

suffered loss and damage.

DAWSON J:	But it could not have been advice in the ordinary
sense.  I mean, if the agent had said, "Look, if
you want my advice, I'd advise you to snap this business up". There would be no liability - - -

MR ROBSON: Well, Your Honour is correct in that the word -

it was not established that she said, "I'm giving

you advice" but that cannot be the test.

DAWSON J:  But even if she were, it did not matter. She was

under no duty of care in relation to advice.

She may have been under a duty of care not to

negligently misrepresent the situation.

MR ROBSON:  Your Honour, we are not complaining about the

Full Court's decision there because they found, for the relevant purpose, she did owe a duty of care to give advice. What the Full Court

then looked at -

BRENNAN J: To give advice? Owed a duty of care to give

advice?

MR ROBSON:  Yes, to take reasonable care in givir.g a.d,7ice.

BRENNAN J: Where did the Full Court say that?

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Sibberas
MR ROBSON:	At page 25, Your Honours, at the top of the page,

and this is after the court had set out the evidence

of what was said, they say, at about point 1:

The statements attributed to Mrs Norris standing alone (that is, without those attributed to Bell and the plaintiffs

evidence of reliance on Bell) might be
taken to constitute advice and prediction

about the venture as a whole without

qualification as regards detailed

financial advice.

And then further on down the page at about point 6,

the court was here talking about the danger of
accepting Mrs Norris' evidence on one aspect in view

of the fact that the trial judge had accepted the

evidence of Bell:

Accordingly, there was a danger that the

learned judge found that in relying

alone on what Mrs Norris said before

signing the contract he found the

plaintiffs relied on the kind of

advice from her which they said they

received from Bell.

Now, the error which the court fell into can be seen in the very next line:

In my opinion, it was necessary that the learned judge decide what Mrs Norris

said which was wrong -

and this is picked up later on.	They elsewhere
dealt with advice - - -

BRENNAN J: You were going to show us where it was that they

expressed the duty of care. There is a passage at

the top of page 36. Is there some other passage?

MR ROBSON:  At page 36, at the top, correct, Your Honour,

they do refer to advice and at page 39 at about po:int 2,
the sentence beginning:

What was left was the mere statement of a prediction dependent on the fulfilment

of unstated contingencies -

there they are characterizing it as a prediction.

And then page 40, Your Honours, at about point 1:

I think this statement did not amount to information or prediction or advice. If

it did, it we.snot proved to have been

false.

MlT9/6/PLC	6
Sibberas

And this is the error we say the Full Court fell into, is that -

BRENNAN J: Well, just before you get into that error, can we just identify the duty. Now, is the duty

that the Full Court expressed at page 36 a

statement of the duty with which you seek to

join issue?

DAWSON J:	And in looking at that you might look at the middle paragraph on the page.
MR ROBSON:	They look to see whether the predictions made

were wrong and negligently wrong, that is in the

middle of the page. The Full Court do lay

down the test which they say is applicable and

that is at the bottom of page 26.	They say,
Your Honours, that:

the learned judge failed to apply the correct test in deciding the issue of

negligence. In his reasons his Honour

said:

"In this case I am satisfied that the

statements and forecasts made by Mrs Norris

were made without sufficient foundation.

In making them in the circumstances in

which she placed herself, vis-a-vis the

plaintiffs, she acted in breach of a

duty to take reasonable care not to

make statements and forecasts for which

there was no sufficient foundation."

So, the learned trial judge looked at the

statements as forecasts and tested whether
Mrs Norris' forecast, that is, that, it will be

a gold-mine, it will be flourishing", whether

there is a reasonable foundation for those forecasts

and said there was not and therefore she had not

exercised reasonable care.

Now, the issue in this case is this, that

the Full Court said that is the incorrect test.

The correct test is to, first of all, identify

whether the statements were made - I will read
what they said - "In my opinion, the relevant
questions were: whether the plaintiffs established
that particular statements which His Honour did not

in this passage clearly identify were made;

whether they were incorrect, and; if so, whether,

in making them, Mrs Norris had failed to take

reasonable care to ensure they were not incorrect."

Now, what the court then did with forecasts,

and the forecast being "this business will be

flourishing and profitable", to test whether it

was incorrect or not, they sought to establish

MlT9/7/PLC	7
Sibberas

that that was a forecast that could not eventuate,

that is, that that could not possibly turn out to

be correct, and because the plaintiffs did not

establish that that forecast could not eventuate

they had not shown the statement was incorrect.

Now, there are statements in the Court of

Appeal and one made by Your Honour and logic would tend to dictate - that the

appropriate test when one is looking at "advice"

which covers things in the future and opinions
where it is not possible to say it is true or false,

the appropriate test is whether it is sound and
the courts say, "What does 'sound' mean?" And

the question - "sound is" - "Did the advisor

exercise reasonable care?" Now, the Privy Council

in MLC V EVATT said that this can be tested by

saying, "Would a person exercising reasonable

care have given that advice?"

If one makes a forecast, "This will be a

flourishing and profitable business", it is not

possible to say whether that is true or false

unless one can say, "Well., look, in no circumstances

could it become true" and therefore you can prove

it is false. But that is - - -

TOOHEY J:	Why do you call that advice?
MR ROBSON:	I call it advice because these statements were

being made in the nature of advice. The trial judge

found that Mrs Norris held herself out as the

adviser of Mr and Mrs Sibberas and the purpose of

making these statements was to assist them to make

a decision whether to buy the business or not.

So, she makes a forecast, "This will be a flourishing

and profitable business for you", it is in the

nature - well, that is what she is advising them.

DAWSON J: But she could not be an adviser though, could she,

in that sense? There is a complete conflict of

interest.

MR ROBSON:  She held herself out and the trial judge found

this and it wasnot disagreed with by the Full Court

that she was an adviser. She went to their home;

she said, "I will advise you and help you, I've

had experience with motels. I've owned one" and

these other people - never been in business before.

That was not disputed that she was in a special

relationship with the potential purchasers. The

trial judge says that, I think, on the very first

page of his judgment.

DAWSON J:	She would be the agent for the vendor.
MR ROBSON:	I realize that, Your Honour, I realize that she

acted for the vendor.

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Sibberas
DAWSON J:	Who was at arm's length.
MR ROBSON:	The trial judge found:

Mrs Norris dealt with the plaintiffs as

a confidante. She spent much time with

them.

This is at the bottom of page 1 of the application

book. Perhaps it would be more appropriate to

start with "Mrs Norris" at about point 6:

Mrs Norris, who was employed by

Alex Scott and Co. Pty Ltd, dealt with

the plaintiffs. She is an agent who

had and who represented herself to the

plaintiffs as having knowledge and

experience of the motel business and

the running of motels.

So, it went beyond an experienced agent. She

said she had experience in running motels.

The plaintiffs have no such knowledge

or expertise and were undertaking their

first business venture. Mrs Norris

dealt with the plaintiffs as a confidante.

She spent much time with them. They

visited each others' homes and she offered

her advice, help and support. In her

answers to the plaintiffs' interrogatories
and in evidence before me Mrs Norris agreed

that she made a number of statements and

forecasts as to the business, albeit with

some qualifications. She represented

that the business was a gold-mine with a
tremendous potential for all year round

trade and that the purchase was a chance
of a lifetime. Mrs Norris qualified those

statements on the basis that success would

depend on diligence and hard work as well

as good management by the operators.

Now, that was rejected by the trial judge. The plaintiffs' evidence went further.

They said that the representations were not

qualified in the sense that success

depended on hard work, initiative and good

management. They claim, in effect, that

Mrs Norris convinced them of her knowledge

of the motel business and specific

knowledge of the Bonnie Doon area. She then

made the representations based on her
knowledge and expertise that the business
was a great opportunity at a bargain price

and that it was a gold-mine with a good

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all year round trade.	The plaintiffs
said that they relied on	those
representations and were	prepared to go
ahead on that basis.

Now, Your Honour, asked me, I think, why do I call

this advice, and at the trial - and this shows in

Mr Justice Hampel's decision - they were characterized

as forecasts.	The forecasts were in the nature
of advice.

Now, in the cases, the distinction is drawn between "statements and representations of existing

fact' and "advice." Other times you will see references

to "forecasts", "predictions", "opinions" and "advice"

but Mr Justice Toohey, I submit it does not make a

difference whether we characterize "advice", "a
forecast" or "opinion" or "predictions". The

question - - -

TOOHEY J: It may do, Mr Robson, I am not sure. You can advise

somebody to put their money into a particular form

of investment and be held negligent for having

advised them to do so but the difficulty, it seems

to me, here is that on the issue of financial

viability of the business, the plaintiffs sought

advice from an accountant albeit, it appears,

that advice was sought after they had agreed to

purchase the business.

MR ROBSON: After they had signed the contract.

TOOHEY J:	But nevertheless, that is where they went for their
advice on financial viability. You are left with

RB	an area of statements made by Mrs Norris, all of which appear to relate to the future and all of
which appear to be qualified in some way, that if
things work out, if you work hard, and this sort of thing, and in respect of all of those matters the Full Court said that none of them had been
demonstrated to be, as it were, without foundation.

MR ROBSON:  Can I just take the last point first. It was

rejected by the trial judge that they were

qualified and the Full Court did not quibble with

that. So that in summation, the facts that were

found were we had unqualified prediction that this

business would be a success because this woman knew

about motels, she had run them, she knew the area;

she was predicting it would be a success. It was

a forecast, an opinion, and it was one which was

relied upon by the plaintiffs to the knowledge of

Mrs Norris. She knew that they were relying upon

her.

Now, as to the matter about the accountant, it

was found by the trial judge that the accountant

only prepared figures on profitability on the basis

MlT9/10/RB	10
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of assumed occupancy levels, that if you get

50 per cent, you are doing this well; if you get

40 per cent, you will be some other level.	But
the essential advice was that it would be a

flourishing business with a good all year round

trade. It was a gold mine.

BRENNAN J:  We understand that, Mr Robson, but can you

identify the elements of the cause of action which

you say the Full Court has not acknowledged?

MR ROBSON:  Yes. We say that she had a duty of care - in the

circumstances of this case she had a duty of care

to the potential purchasers and that she gave

advice which was unsound in the sense that she did

not exercise reasonable care in giving it, that

unsound advice was relied upon and, as a result,

the plaintiffs suffered loss and damage.

Now, the difference between my test and the Full Court's test is the Full Court put an extra

link in the chain and this is a link which is

inapplicable when one is dealing with forecast

opinions or advice or things relating to the future.

They put the link in that you have to establish that

the thing that was said was false or wrong. They

used three different words in this case: they used

the word incorrect, they used the word wrong and

they used the word false. So they are not just

concerned "incorrect" in the sense it was improper;

they are using the word "incorrect" in the sense

that the statement was false.

The way they test that raises - - -

BRENNAN J:  We understand that that is the distinction. Now,

is there anything in any of the cases to support

a cause of action along the lines which you say is

the correct cause of action?

MR ROBSON:  I sent into the Court yesterday - and I do not know

if it made its way to Your Honours - a document

headed "Applicant's outline of argument". If it

has not, I can hand up another copy.	I will hand
another one up.	I also sent a copy to my learned

friend. It tends to repeat, in the first

paragraph, I have already mentioned that, how

Mrs Norris was in a special position towards the

plaintiffs. It is not proper to look at this case

as just a simple agent acting for a vendor dealing

with a purchaser.

Now, the Full Court recognized that the

statements made by Mrs Norris to Mrs Sibberas

including the statement that the business would be

a gold-mine,et cetera, and we say that constituted

advice or, if Your Honours please, that could also

MlT9/ll/RB	11
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be characterised as a forecast, an opinion, a

prediction. The Full Court said the appropriate

test of liability was to ask whether the

plaintiffs established that particular statements

were made, whether they were incorrect, in the sense
that they were false, and if so whether in making

them Mrs Norris had failed to take reasonable care

to ensure they were not incorrect.

Now, consistently with the test, the Full

Court asked whether Mr and Mrs Sibberas had proved

that the statements were wrong, ie that is false.

The Full Court failed to appreciate that in such a

case advice is not capable of being categorized as -

I have there "correct or incorrect", we can put false or not - but only as sound or unsound in the

sense that it was or was not made with reasonable

care and skill.

The matter was recognized by Lord Denning in

ESSO PETROLEUM V MARDON. It is a very short

passage and I may, Your Honours, read it to you, but

Your Honours may recollect that in ESSO V MARDON

Esso had represently or forecast that the turnover

of the service station they were going to lease to

Mr Mardon was 200,000 gallons a month or per period of time and that was based upon an earlier forecast,

but since the forecast was done inside the company
the planning laws had changed and you could not see

the pumps from the street. But they did not change

their forecast. They told Mr Mardon our forecast

was 200,000 per month.

Now, Mr Mardon took proceedings against Esso

and relied upon collateral warranties and also
relied upon negligence. At page 820 Lord Denning

said, between line Band C:

It seems to me that HEDLEY BYRNE & CO LTD

V HELLER & PARTNERS LTD (1964) ACT 465,

proposition: if a man, who has or professes

properly understood, covers this particular

to have special knowledge or skill, makes
a representation by virtue thereof to

another - be it advice, information or
opinion - with the intention of inducing

him to enter into a contract with him, he

is under a duty to use reasonable care to

that the representation is correct, and that the advice, information or opinion

is reliable.

Now, to understand what is meant by "reliable",

if Your Honours would turn back to page 118 at - - -

BRENNAN J:  But the relevant question here is the meaning of

"representation" is correct.

MlT9/12/PLC	12
Sibberas
MR ROBSON:	But he also goes on to distinguish it from

"advice, information or opinion". He says the

correct test there is whether that is reliable.

BRENNAN J:  I think I am not making myself clear, Mr Robson.

The proposition that Lord Denning advances here

is that if he makes a representation in one of

three ways then:  now the question is, has he

made the representation? It matters not in

which way he has made it. Now, the problem that

you face is was any representation made? Not

whether advice was given but, whether, in giving

advice, a representation was made.

MR ROBSON:  Yes. Well, the representation was that those

individual matters, on summarizing them all up,

that the business will be flourishing and profitable.

BRENNAN J: Well, the question is whether that amounts to a

representation.

DAWSON J: Taking into account at the same time that the

plaintiffs placed no reliance in Mrs Norris in

relation to the profitability of the business

vis-a-vis the capital outlay that they were going

to incur.

MR ROBSON:  Yes. Could I, perhaps, just deal with that in a

moment because there is an answer to that?	I
will just finish off this point about what -
reliable and then I will answer Your Honour's
question.

If you go back to page 818B - and this is

dealing with a warranty - it throws some light

on what is meant by "reliable".

It seems to me that if such a person makes

a forecast, intending that the other should

act upon it - and he does act upon it, it

can well be interpreted as a warranty that

the forecast is sound and reliable in the

sense that they made it with reasonable care

and skill.

BRENNAN J: That is dealing with "warranty" and the next

subheading is "Negligent misrepresentation".

MR ROBSON: True, but -

BRENNAN J:	You are not suing in warranty as I understand it.
MR ROBSON:	No, I accept that but I  am putting forward the

proposition that whether	an advice or an opinion is
reliable or sound means	whether it was given
with reasonable care and	skill.

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In ESSO PETROLEUM V MARDON there was a prediction

of what the throughput would be. It related to a

future matter. It was not a matter that one could

say at the moment was true or false. It was not

possible to say it was true or false about what

was going to happen in the future. One could

either say that the prediction was soundly based,

that it was made with reasonable care, or was

unsoundly based.

Now, Your Honour, in a passage in

SAN SEBASTIAN, we submit, makes the relevant

distinction as well.

(Continued on page 15)

MlT9/14/PLC	14
Sibberas

MR ROBSON (continuing): In SAN SEBASTIAN Your Honour said at

page 372- - -

BRENNAN J:	Do you have copies available?
MR ROBSON:	Yes, we do, and I will hand those up, Your Honour.

At page 372, at about point 7:

First (corresponding with the first condition

expressed by Barwick C.J.), if the

representor realizes or ought to realise

that the representee will trust in his especial

competence to give that information or advice;

second (corresponding with the third condition),

if it would be reasonable for the representee

to accept and rely on that information or

advice and third (applying the underlying

principle of the law of negligence), if it is

reasonably foreseeable that the representee
is likely to suffer loss should the information

turn out to be incorrect or the advice turn out

to be unsound.

And therefore Your Honour rightly draws the distinction

between representations of existing fact and

representations of future matters. Your Honours will

be aware that in the misleading and deceptive conduct

sphere this distinction was made very early in the

piece, that if you made a promise it could not be

said in itself to be misleading and deceptive conduct

and the only way it could be misleading a

representation of existing fact was, (a), it carried

with it the representation that you intended to keep
the promise, and it also may in certain circumstances

carry with it the representation he had reasonable

grounds for making it.

That has now been enshrined in the TRADE PRACTICES

ACT, that if you make a statement with respect to a

future matter, the onus is now on the person who made

it to show that he had reasonable grounds for making

that forecast. So in the case of negligent advice.

One cannot say whether it is true or false; one can say whether it was soundly given.

Take this case: she forecast this would be a

flourishing and profitable business. The facts were

that it had only been going for 11 weeks; it was an

untested motel; His Honour found that though there

was passing traffic one never knew whether one would

pick it up; it was an industry where there was

tremendous risk associated whether business would be

successful or not; it was chancy passing traffic and

there was nothing in relation to existing motels in

the town which existed that it would be successful.

Now, she said "This will be successful".	She did not
say - qualify it- - -

MlTl0/1/RB	15	13/10/89
Sibberas

BRENNAN J:  We appreciate that. Back again on the question of

representation, looking at the passage that you

referred to from my judgment in SAN SEBASTIAN seems
to be related to the circumstances in which a

representation made by a person will be actionable.

This again seems to come back to the question of

whether there is a representation and unless you can

overcome that, we are not really advancing the

argument much to consider the factual circumstances

of the present case.

MR ROBSON:  We say the representation in this case is the

forecast, but it carries with it that there were

reasonable grounds for the forecast. That is an

existing fact.

BRENNAN J: And it is those grounds which the court found not

to have been falsely made.

MR ROBSON:  No, no, it did not. What the Full Court did was

look to see whether the forecast was false or not

and they came to the conclusion that the plaintiffs

had not established that the business had no

potential to flourish or no potential to be successful. judge did, and we said correctly, and it is quite a

simple point, that if one makes a prediction,

specially an unqualified prediction, one is entitled

to say, "Were there reasonable grounds for it?" The

trial judge found there were no reasonable grounds.

That was his finding, that this prediction was made

without foundation. There was nothing in the motel

statistics in the area, there was nothing which gave

rise to such an unqualified optimistic prediction.

Now, this is where the Full Court were in error .

They said, at the top of page 38:

The evidence did not justify a finding

that the business had no potential to flourish.

.. ... Generally speaking, it could not be said

that the business had no potential to succeed.

Now, that means that they applying the test that

one must show in an absolute sense that it was

impossible for the prediction to be achieved; if

it was possible to be achieved, then they said you
have not shown the statement was false and there is

no need then to go on to the third leg to establish

whether it was given with reasonable care.

Your Honours, the Full Court basic examination

of facts is to establish whether the representation

was implicit or the statements were false. The

· FuTL Court did not address the question whether they

were given with - whether the forecast was made with

reasonable care. They looked to see whether the

MlTl0/2/RB	16	13/10/89
Sibberas

plaintiffs had established that there was no basis

for the business to flourish. Now, we say that is
not the correct test. If someone predicts a

business will flourish, the test is has that prediction

been given with reasonable care. Should it have been

qualified? Would a person exercising reasonble care

have given that prediction without qualification? And

one does not need to go to the next leg and show

that in no circumstances could the prediction have

come to eventuality. That is not the test.

The test is not whether there were any

circumstances or not whether the business could

flourish. The question was where in the

circumstances there was no foundation for the

forecast, no reasonable foundation for the forecast,

it was exercising reasonable care to predict in an

unqualified way or forecast in an unqualified way

this business will be a success.

It is interesting to note that in MLC V EVATT,

which I think is the only case dealing with advice
which has been dealt with by the High Court and went

on to the Privy Council, we had judgments from many
judges, there was a pleadings summons, if one looks

at it nowhere is it stated that what was said was

false. Nowhere do any of the judges say - it was

not set out in the pleadings as part of the cause of action. It was a pleading summons. The case turned

upon whether there was a special relationship. Two

of Their Lordships in the Privy Council said that

the matter could be tested by asking whether an

adviser exercising reasonable care would have given

the same advice that was given to Mr Evatt. They did

not say, "Well, first of all you have to show

whether the advice was false.", because one cannot

do that with advice.

The same with a forecast. One cannot show a

forecast is false only in the sense that you can

show, well, in no circumstances could that forecast
come about.	Then you could show it is false, but
one does not need to go that far.	One only needs to

show that a person exercising reasonable care would

not have made an unqualified forecast.

Now, we say that is an issue of special

importance because the Full Court relied upon - they
quoted what Lord Denning had said, but they quoted

what Chief Justice Gibbs had said in SHADDOCK's case

in a line where he was not specially dealing with

advice, but he said the issue was whether the advice

was correct or not. We say that that is not the

appropriate test when one fs dea.ling with non-factual

representations. When one is dealing with non-factual

representations, such as predictions, opinion and

advice, the question is whether reasonable care was given.

MlTl0/3/RB	17	13/10/89
Sibberas

In this case it is whether there were

reasonable grounds for the forecast. Now, the Full Court misstated the test and then spent the bulk of

their judgment saying that Mr and Mrs Sibberas had

not established that there was no potential to

flourish and then said that, therefore, they had not

satisfied the second leg of their test.

Now, there is another ground upon which we

also seek special leave, if the Court wishes me to

go to the next ground.

BRENNAN J: You go to whichever ground you wish to advance,

Mr Robson.

MR ROBSON:  I was just asking whether there was any further

elaboration the Court wants me to make on the first

ground.

BRENNAN J:	Have you said all you wish to say about it?
MR ROBSON:	Yes, Your Honour.

The second ground was that the Full Court

ignored the basic principles in appeals in interfering

with the trial judge's decisions of fact. Now, we

accept that an appellate court is entitled to draw
its own inferences from the primary facts which are

inconsistent with those drawn by the trial judge.

That has been established. It is the appellate court

cannot interfere with the primary findings of fact

without special circumstances.

In this case the Full Court drew inferences or

conclusions contrary to the trial judge about whether

the business had any real potential of becoming

profitable. The trial judge had accepted the evidence

of Mr Rowan which was at pages 3 and 4 of the

application book.	At the bottom of page 3, last
paragraph:

In my opinion the failure of the business

was most probably due substantially to

circumstances beyond the control of the

plaintiffs. It stemmed largely from lack of

custom in what is a notoriously precarious

business which depended on seasonal factors

and a chancy passing trade. I accept the

evidence of Mr Rowan, the accountant, who in

effect got the plaintiffs out of the

disastrous situation which was facing them.

He was of the view that undercapitalisation was

not the problem and that the business was a

failure because it had no real potential and

t.v ·way of becoming profitable.

Now, what the Full Court did was that it looked

at evidence, ignored entirely the evidence of

MlTl0/4/RB	18 MR ROBSON, QC	13/10/89
Sibberas

Mr Rowan and drew an inference which was inconsistent

with the trial judge's, in that they found on

page 38:

The evidence did not justify a finding

that the business had no potential to flourish.

And that was contrary to what Mr Rowan had given

evidence of and the trial judge had accepted.	The
Full Court said:

The evidence did not justify a finding that

the business had no potential to flourish.

Now, one could not quibble with that if the Full

Court had referred to Mr Rowan's evidence along with

the rest and said that well, we draw a different

inference from the primary facts than the trial judge
did. What the Full Court did was draw inferences
from facts contrary to the inference of the trial

judge but in doing so, overlooed the basic piece of

evidence that the trial judge took into account in

drawing the inference.

So the special issue is whether an appellate

court is entitled to draw inferences contrary to the

trial judge if it ignores the trial judge's primary

findings of fact which formed the basis in whole or

part for the inference of the trial judge. It is

like a denial of natural justice, where the appeal

court draws an inference and completely ignores the

evidence which the trial judge relied upon in drawing

the contrary evidence.

We accept that appellate courts are entitled to

draw their own inferences, but it can only be if they
take into account all the relevant material. If they

leave out of their considerations the very evidence

that the trial judge relied upon, which I have quoted

to you, we say that they have misconceived the

appellate process.	Now, this is a point of
fundamental importance in Victoria and generally. It

is now recognised in New South Wales and Victoria

that appellate courts can substitute their own

inferences, and that has now been enshrined in the

Victorian rules which were introduced several years

ago. But we say it is of inportance generally for the

administration of justice that this aspect be made

clear, that an appellate court cannot draw contrary

inferences unless it takes into account the primary
facts which the trial judge did when he drew his

inference which the appellate court disagreed with.

IP this case it turned out to be funda.menta.l

because if they had accepted the trial judge's

findings, they would have then, even on their very

high test, been able to say the forecast was false

MlTl0/5/RB	19	13/10/89
Sibberas

in that it could not have been achieved if they

had not disagreed with the trial judge and the
inference he bought, so on their too high test it

would have been satisfied, so it was of critical

importance in this case that they misapplied the

role of the appellate court.

Now, there are many examples in this judgment -

it is a very long judgment. It sets out quite a lot

of facts where they have just gone the other way

from His Honour. But there is no need to trouble

you with them because I can give that one as the

clearest example, where they did not even refer to

the evidence of Mr Rowan, which was the basis of the

trial judge's decision, that there was no potential. that there was no potential, therefore you have not

shown that the forecast was incorrect. You have not

shown it was false, which we say is the wrong test
anyway.

So for that ground also we say that special leave should be given. That is a matter of

fundamental importance. If the Court pleases.

BRENNAN J:  We need not trouble you, Mr Moshinsky.

This case turns entirely on its own facts. The

respective roles of Mrs Norris and of the accountants,

John S. Bell and Co, were necessarily examined to

determine whether the statements made by Mrs Norris
amounted to a representation which, if false and

negligently made, would found an action for negligence
sounding in damages for the loss suffered by the
plaintiffs in consequence of their reliance upon the

representation.

In the findings made by the Full Court,

Mrs Norris made no false representation for which she

might be held responsible. If that finding is

correct, the appellant cannot succeed. If it be

incorrect, the incorrectness must be demonstrated

by examining the facts of the case. That would not

justify the grant of special leave.

There is no issue of principle which is

reasonably arguable to show that the Full Court was

wrong in its analysis of the issues arising on the

pleadin~ in this case. The case thus raises no

question of general public importance and special

leave should be refused.

MR MOSHINSKY:	If Your Honours please, I seek an order for costs.
MR ROBSON:	I cannot resist that.

BRENNAN J: It will be refused with costs.

AT 1.36 PM THE MATTER WAS ADJOURNED SINE DIE

MlTl0/6/RB	13/10/89
Sibberas	20