Spurfork, P/L v Fitline P/L

[1994] FCA 110

JUDGMENT No. ..... !.G ..... 1.22 ,,,,

IN THE FEDERAL COURT OF AUSTRALIA	)
1
NEW SOUTH WALES DISTRICT REGISTRY )	NG 688 of 1993

)

GENERAL DIVISION 1

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:  SPURFORK PTY LIMITED

First Appellant

JEROME LEONARD FERNANDEZ

Second Appellant

AND :	FITLINE PTY LIMITED
First Respondent GREGORY JAMES TAYLOR

Second Respondent

BRONWYN CHRISTINA TAYLOR

Third Respondent

AND BETWEEN:  FITLINE PTY LIMITED

First Cross Appellant

GREGORY JAMES TAYLOR

Second Cross Appellant

CORAM: Wilcox, Burchett and Whitlam JJ.
PLACE: Sydney
DATE : 1 March 1994

BRONWYN CHRISTINA TAYLOR

Third Cross Appellant

AND :  SPURFORK PTY LIMITED

First Cross Respondent

JEROME LEONARD FERNANDEZ

Second Cross Respondent

REASONS FOR JUDGMENT

BURCHETT J.:

In this matter, there are an appeal and a cross-appeal. They arise out of a claim, which was substantially based on S. 52 of the Trade Practices Act 1974 but in which fraud was also alleged, in relation to the sale of a business. The appeal, however, is limited to the issue of damages, the total amount of damages awarded having been $32,000. That sum included an amount of $19,000 representing the net value of award wages for two persons who were the corporators of the corporation which was the first applicant. They were also applicants.

The two persons mentioned worked in the business for a period of some eight weeks, receiving no remuneration. The learned trial judge took the view that the work was done on the faith of the representation, and was entirely thrown away. He held that this constituted a loss. On the appeal, counsel for the appellant said that he asked the Court to look at the situation as if the two employees in question, being the

individual applicants, and the incorporated applicant were one.

It seems to me that if the basis on which counsel for the

appellant himself puts it is accepted, then work and effort for a substantial period was put in by these two individuals, without any adequate return, and that those facts constitute a loss.

Alternatively, the matter could be looked at on the footing that, at any rate, the time and effort expended, without receipt of the normal reward for such expenditure of time and effort,

amounted to a loss by them as individuals. They were claimants, and it seems to me, contrary to a submission that was made, they clearly included in the statement of claim a claim for damages in terms apt to cover that loss on their part. However, there is no cross-appeal dealing with this particular topic of the claim made by the individual applicants, and in my view it is appropriate to accept the basis on which counsel for the appellant asks us to consider the matter. So considered, the allowance made by his Honour to the corporate applicant, the present respondent, is entirely appropriate. There was a very small sum of $500 referred to in the Notice of Appeal as being in dispute, but counsel at the hearing of the appeal indicated that this would not be pressed if the point with which I have just dealt failed.

That brings me to the cross-appeal. His Honour found that, as a result of the misrepresentation, the now respondent company entered into a deed under which licence fees were expressed to be payable. His Honour took the view that the parties both

accepted that this deed was no longer in existence, because, on the one hand, the applicant before him was asserting it had been	induced by the misrepresentation and ought to be set aside, and
on the other hand, the respondents before him were asserting that it had been repudiated by the other parties and that they had accepted the repudiation. On that footing, his Honour proceeded to deal with issues of damages without making any order in respect of the deed.
It seems to me that, however unlikely it may be that any further claim will be made on the deed, this was not strictly the correct approach; for the acceptance of a repudiation would not have brought the deed to an end ab initio and would not necessarily have released all obligations which may have arisen under it prior to the date of acceptance of the repudiation. Accordingly, I think the cross-appellant is right in contending that an order should have been made setting aside the deed ab ini tio.
There then arises the question of costs. Because the matter was seen as a very small clalm for damages, his Honour took the view that a special costs order should be made, and he allowed only one half of the applicants' costs on a party-and-party basis. By rule 36A of Order 62, specific provision is made in the Rules in respect of the costs of small claims for damages, but the rule does not apply to a case where declaratory relief is granted. As I think an order should be made in the terms I have already indicated, the rule clearly would not apply to produce a reduction of costs. A judge of the Court, when moved to do so on a date prior to the hearing, declined to make an order removing this matter to the District Court, and in all the
circumstances it seems to me that it is appropriate that the applicants should have their costs.
The final matter is whether those costs should be ordered to be paid on the normal party-and-party basis, or whether the applicants should have an order for indemnity costs. Their counsel urged that they should have the latter order on the footing that there was a fraud involved in this case, as well as a breach of S. 52. As for that, the trial judge declined to make a finding of fraud, and the cross-appellant asks us to make it on the basis of oral evidence given before his Honour. It would be very difficult for an appellate court to make such a finding, on such a basis, when the trial judge has declined to do so; but even if the finding were to be made, indemnity costs would not necessarily follow. In the particular circumstances of this case, I would not be prepared to make an order for the payment of indemnity costs, even if I thought the misrepresentation did involve fraud. That being so, there is no point in pursuing the matter further.
I would accordingly dismiss the appeal, allow the cross- appeal to the extent that I have indicated, and order the
appellants/cross-respondents to pay the costs of the appeal and
of the cross-appeal, except as to the issue of fraud.
WILCOX

J. : 

I agree with Burchett J. and I do not wish to add anything.

WHITLAM J.:

I also agree with the judgment of Burchett J.

WILCOX J . :

The orders of the court therefore will be as follows:

1.   The appeal be dismissed.

1. The cross-appeal be allowed.

3.    Order that the orders made by Einfeld J. on 9 June 1993, be amended by:

(a) omitting order 2 and substituting in lieu thereof an order in the following terms: "The deed of license made between Spurfork Limited and Fitline Pty Limited dated 19 July 1991 be set aside"; and

(b) amending order 3 so as to delete the words "one half".

4 .    Order that the appellants pay the respondents' costs of the appeal and cross-appeal, save that part of the cross-appeal that relates to the trial judge's failure to find fraud.

I certify that this and the preceding five (5) pages

are a true copy of the Reasons for Judgment herein of
the Court.

Associate: 

Date: 1 March 1994' '  F + m O / A 

Counsel for the Appellants:  Mr C.J. Bevan

Solicitors for the Appellants:	Messrs Malouf Solicitors
Counsel for the Respondents:	Mr V.R.W. Gray
Solicitors for the Respondents:	Messrs Werry Altobelli
Date of hearing:	1 March 1994