Silver Fox Company Pty Ltd & Ors v Lenards Pty Ltd & Ors

[2006] HCATrans 54

[2006] HCATrans 054

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Adelaide  No A39 of 2005

B e t w e e n -

THE SILVER FOX COMPANY PTY LTD AS TRUSTEE FOR THE BAKER FAMILY TRUST

First Applicant

BRYAN WILLIAM BAKER

Second Applicant

BEVERLY ANN BAKER

Third Applicant

and

LENARDS PTY LTD

First Respondent

POULET FRAIS PTY LTD

Second Respondent

RICHARD HAMOOD

Third Respondent

Application for special leave to appeal

GUMMOW J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

FROM ADELAIDE BY VIDEO LINK TO CANBERRA

ON FRIDAY, 10 FEBRUARY 2006, AT 12.19 PM

Copyright in the High Court of Australia

__________________

MR B.W. WALKER, SC:   May it please the Court, I appear with my learned friend, MR P.A. HEYWOOD-SMITH, QC, for the applicants.  (instructed by Lisacek & Co)

MR J.V. NICHOLAS, SC:   May it please the court, I appear with my learned friend, MR A.E. LYONS, for the first respondent.  (instructed by Phillips Fox)

MR S.H. MILAZZO:   If it please the Court, I appear for the second and third respondents.  (instructed by DMAW Lawyers)

GUMMOW J:   Yes, Mr Walker.

MR WALKER:   If it please your Honours.  In our submission, this is a case where careful and contextual findings by the trial judge have been overturned as to their conclusion concerning contravention of section 52 of the Trade Practices Act without the demonstration of error which, in our submission, the better course of authority in the Federal Court concerning the appeal to the Full Court should have required.  It therefore raises, first of all, an issue concerning the perceptions by their Honours of how these facts fitted within section 52, the substantive question of what might be called the disclaimers and anti-reliance provisions which dominate their Honours’ reasoning to which I will come in a moment.  The second issue is an important issue, perhaps procedural in nature, concerning the jurisdiction, the power, the duty of the Full Court in light of the principles, particularly discussed by Justice Allsop in his reasons in Branir. 

Could I go to the substantive matter first.  It is clear that this Court in Butcher made plain, if it had not been sufficiently plain beforehand, that the whole which is to be viewed in relation to the conduct under section 52, when contravention is in question, will include what in that case was called the disclaimers in question. If one looks at the report at 218 CLR 592 at 605, paragraphs 38 to 40, commencing with the citation from Yorke v Lucas, it is also clear that looking at the whole was not intended by the members of the majority in Butcher in any way to carry with it a dispensing or immunising character by reason of a disclaimer or anti-reliance provision in favour of the person who had extracted that or who had stated that.

In particular, when one looks at the facts both of Butcher and of the situation being hypothesised in the Yorke v Lucas passage being quoted, it is clear just how distant the case that was before the Full Court in these proceedings was from Butcher, for example.  Thus, in Butcher, it was considered apposite to quote the hypothetical case in Yorke v Lucas where somebody had expressly or impliedly disclaimed any belief in the truth or falsity of what was being said, merely passing it on for what it was worth.  Nothing, of course, could be further from the situation that obtained in this dealing between parties involving relatively elaborate written material, as well as conversations which are no longer germane and which no longer complicate the case as a factual matter fit for consideration by this Court.

In those documents which fall to be analysed by the Full Court in the passage commencing at page 138 of the application book, there is material which might be thought to be in the nature of disclaimer or anti-reliance.  Can I, however, touch upon some of the matters which, though set out in the Full Court’s reasons, in our submission ‑ ‑ ‑

GUMMOW J:   Am I right in thinking the relevant representations here were in writing?

MR WALKER:   The relevant ones were made by the written material.  Of course, the effect is not to be found verbatim in any of the material, nor should it be.

GUMMOW J:   No, I understand that.  Nevertheless, it is not a “He said, I said” case.

MR WALKER:   It was, it is not any more.  That enhances rather than detracts from it as a vehicle for consideration of the important question.  When you look at the whole, and it includes disclaimers and anti-reliance provisions, are you, in effect, dispensing somebody so that they can, in effect, say and persuade using information or statements of opinion which will be free of any examination under section 51A and will not contravene section 52 because, in effect, the recipient of the information is told, “You’re on your own”?  In our submission, common sense says that cannot be right.  When somebody is told, “You must evaluate this risk for yourself, you must assess your chances yourself.  This is an important decision in your interests; you are about to go into business”, those are not words which are apt to say, “And ignore everything I have told you in selling you this opportunity”.  Indeed, the evaluation naturally will include taking into account the information supplied by the person spruiking the opportunity, no doubt taken back to one’s own advisers for consideration.  But certainly it does not dispense the spruiker from the obligation not to be misleading or deceptive.

Butcher’s Case is where there is no imprimatur or ownership of the information or statements by the person putting them forward.  In this case, it is put ‑ ‑ ‑

GUMMOW J:   Did the applicants have solicitors?

MR WALKER:   Yes, they did.

GUMMOW J:   Did they take these matters up with the solicitor?

MR WALKER:   I do not think there is no evidence they took these matters of likely minimum revenue and profit, no, your Honour, and certainly there is no evidence ‑ ‑ ‑

GUMMOW J:   Did the solicitors go through these documents with them?

MR WALKER:   I think the evidence is, in compendious terms, yes.  We do have that advice having been sought.  If one goes to page 138, for example, paragraph 55 under the heading, “The Lenard’s Advantage”, that is obviously selling the franchise opportunity in the information pack, Poulet Frais made representations, among other things, by this written material:

The viability of Lenard’s Poultry Shops ‑ ‑ ‑

that talks about your financial prospects ‑ ‑ ‑

can be attributed to a number of key factors . . . Lenard’s choose shop locations carefully -

That is later said by the Full Court to be the kind of statement which certainly would not have been the subject of any suggestion by any of the anti-reliance provisions that it could not be taken into account and it was, on its face, intended to be taken into account. 

On page 139, one of the anti-reliance provisions, about line 20 on that page:

nor is it intended that a Franchisee should rely on them as a projection.

Line 15 or so:

There is no guarantee -

However, this is in relation to something that is called written financial information.  This is not the passing on of someone else’s survey plan for what it may be worth without any expression of truth or falsity, as in Butcher.  This is written financial information.  “You’re not to treat it as a guarantee”, and nor do we, “and you should not rely on them as a projection”.  However, what they convey, and our representations are slightly different, of course, from simply projections, is it clearly intended to contribute to the assessment of the risk-taking venture in hand. 

One sees, at page 139, line 24, of course, the caution:

this disclosure document should help you make up your mind.

Quite so.  Page 141, paragraph 61, becomes the acknowledgment, No 3, about line 23:

have not relied and will not rely upon this material.

Taken as a whole the question is, what does that say about the respondents’ conduct?

CRENNAN J:   Just going back a moment, if I may.  There were 14 factors identified above paragraph 61, as part of paragraph 60, which seem to be matters going to qualifying gross sales and profitability.  Did that include matters such as competition factors or prevailing market factors or pricing strategies, matters of that kind?

MR WALKER:   “Prevailing market” is a difficult expression because it will include everything which affects your capacity to sell and at what price.  I think it is only in that general sense, but fairly important sense, that it could be seen that the 14 factors which you find on page 13 of the application book, there are matters there that are clearly related to market and they clearly are either affected by or are themselves aspects of competitiveness.  Some of them have to do with pricing strategies, see No 3, so it is not as if the 14 exclude the so-called other factors that are referred to on page 141, line 10.

CRENNAN J:   We should in any event look at the disclaimer in the context of those 14 factors.

MR WALKER:   Yes, they were listed out very directly and are set out, as I say, on page 13.

On page 143, paragraph 69, we then come to that upon which a lot of weight was laid, namely, clause 26.4.  At about line 20 there is this acknowledgment, in what has become a quite common form after the fairly odd statement that there had been no representations made, that they have: 

relied on its own personal assessments and enquiries with respect to the Agreement and the business proposed.

Our point is simply this on the substantive matter, that a statement of that kind contains no dispensing or immunising effect in favour of the person I will call the representor because relying on own personal assessments and inquiries was intended always to include a consideration of all the information, knowing that there were not warranties or guarantees.  That there are no warranties or guarantees only, of course, exacerbates the need to consider all the information and nowhere is there any explanation by their Honours below as to how one is to understand the commercial conduct of somebody who seeks to persuade another to an opportunity by information which later in court they say should not have been used for any purpose or, as their Honours concluded, no reasonable person would have relied on it.

To the contrary, in our submission, it is supplied so as to provide the material to adapt to their own language, to enable somebody to make up their own mind.  These dispensing or disclaimer anti-reliance language, in our submission, fall to be considered in the whole context.  The whole context includes a selling opportunity that Justice Mansfield very carefully considered and analysed in the trial judgment and there is not insufficient but there is no consideration by their Honours in the Full Court as to what it was that showed error either in process of reasoning or in final conclusion when his Honour below at first instance held that in the circumstances of this opportunity being presented, this was not information which either failed to convey the representations pleaded or upon which no reasonable person could have relied, those questions having been somewhat rolled up together at various stages.

It is for those reasons, in our submission, that when one comes to the actual reasoning in the Full Court, first, one can see there is no attempt to identify error; all there is is a different approach being taken.  We go further and say that it is informed by an erroneous over-reading of Butcher, then recent.  Butcher simply did not say these are clauses that mean no reasonable person can rely on this information.  You asked about the whole of the conduct, which will include the written material and the context, the relationship, in which it was set and then asked whether 51A or 52, reasonable basis or misleading and deceptive, and Justice Mansfield did all of that.

When one then goes to the passages particularly starting at 147 in the application book, paragraph 82, that substantive error, in our submission ‑ ‑ ‑

GUMMOW J:   Before you do that, Mr Walker, what do you say about the point made by Mr Nicholas on page 193, paragraph 7?  Would not we get involved in causal connection questions?

MR WALKER:   The causal connection questions 7(b) and (c) really are aspects of the same matters.  In our submission, they require consideration of the passage at paragraph 152 in particular.  In relation to reliance, I think, your Honours, it is correct to say that it is the fact that no reasonable person could have relied, which is the ground upon which we lost on that part of the case, and the emphasis on what a reasonable person would or would not have done is to be ‑ ‑ ‑

GUMMOW J:   What did the primary judge find on this?

MR WALKER:   The primary judge found reliance.

GUMMOW J:   All I am wondering is whether there would be a notice of contention.

MR WALKER:   It may be, I fear to say, that is how your Honours should understand the passage in the submissions to which you have drawn my attention.  The finding as to reliance is at page 52 of the application book, paragraph 166.  I will stand corrected if I am wrong; I hope I am not.  There is not a direct, let alone explained, refutation of that factual finding by the Full Court.  It seems to be bottomed, as I say, on what no reasonable person ‑ ‑ ‑

GUMMOW J:   Was that finding challenged in the notice of appeal to the Full Court?

MR WALKER:   I think it is safe to say yes.

GUMMOW J:   So it is still out there.

MR WALKER:   I cannot say it is not.  There has not been a reference to a contention by the other side but the passage to which you have drawn attention in the written submission I would be bound to say would portend one.

GUMMOW J:   Yes, sorry, I took you off your course.

MR WALKER:   No, not at all, your Honour.  Could I then go, as I say, to a critical passage which shows error.  At paragraph 82, about line 7 or so, there is a reference to the first instance observation that:

notwithstanding the ‘strictures’ in the documents provided to Mr and Mrs Baker, the information in the documents must have been conveyed to them for the purposes of informing them.

That is, of course, our very point about the context.  His Honour, with respect, is plainly right.

As mentioned above, if that information was not what it purported to be –

That is, as it were, a Butcher’s Case approach, entirely inappropriate here.  Information can be misleading and deceptive though it is exactly what it purports to be.  Not being what it purports to be is not the only way in which information can be misleading.

Then when one goes on to the further points that the information must have been provided as information upon which the financial adviser could place weight, in our submission, one can be seen that we here have a decision about the lack of misleading and deceptive conduct in commercial life coming about, notwithstanding information based upon, we submit, where appropriately found by the trial judge to be inadequate research about a new kind of opportunity, clearly misled our clients and there is no contravention of section 52 because of these disclaimers which, in our submission, are simply part of the whole conduct.  There is certainly an insufficient explanation of any error by the trial judge.

That brings me, very briefly, to the second point we wanted to raise, which is not, in our submission, to be minimised in its importance by calling it procedural.  There was noted an argument below by the present second and third respondents that there was to be perceived a difference in the statements of principle by members of the various Full Courts of the Federal Court concerning the need for the identification of error going beyond simple disagreement. 

GUMMOW J:   It comes to paragraph 46, does it not, on page 136?  Does that not encapsulate what is said to be the proper approach?

MR WALKER:   It does, and, in our submission, that paragraph, which, with great respect, has no more merit and may not have as much merit as the discussion by Justice Allsop, which has been accepted by other members of the court, in paragraph 46, particularly about line 17 or so, there is, in our submission, an insufficient recognition of the danger that formulation has, that you simply say, “If you do disagree, then your disagreement will have demonstrated error”, whereas what I will call the alternative vein which ought to now be pronounced upon by this Court says is that you need to do more than simply say “disagree”, either only one possible view or that there has been some error of approach.  That did not happen in this case and it is an important and practical question with the administration of justice/access to justice implications that we refer to in writing.  May it please the Court.

GUMMOW J:   Thank you, Mr Walker.  We do not need to call on you, Mr Nicholas and Mr Milazzo.

Given the particular circumstances and the representations relied on in this case, there are insufficient prospects of success to warrant a grant of special leave to disturb the conclusions of the Full Court.  Given also the circumstances of the case, this is not an appropriate occasion to consider any challenge to the reasoning, if it needed be erroneous, in paragraph 46 of the reasons for decision of the Full Court.

Accordingly, special leave is refused with costs.

AT 12.42 PM THE MATTER WAS CONCLUDED