Tag Pacific Ltd v McSweeney, B.A - [1992] FCA 81

Re: TAG PACIFIC LIMITED and TOIKAN HOLDINGS PTY. LIMITED (formerly KELSO PTY.
LIMITED)
And: BRIAN ALBERT McSWEENEY and BRUCE WILLIAM PHILLIPS
No. N G38 of 1990
FED No 81
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Olney J.(1)

CATCHWORDS

Trade Practices - misleading and deceptive conduct - acquisition of interest in insurance broking business - preliminary balance sheets of broking companies supplied to purchaser of interest by vendor's accountants - balance sheets prepared on the basis that unpresented cheques had been duly presented and paid - knowledge of purpose for which balance sheets were required by purchaser - failure to disclose substantial non-compliance with regulatory legislation - effect of accountants' disclaimer

Trade Practices Act 1974 (Cth) ss. 6(3), 52, 82

Fair Trading Act 1987 (NSW) ss. 42, 68

Insurance (Agents and Brokers) Act 1984 (Cth) ss. 26, 27

Smolonogov v O'Brien 67 FLR 311

Yorke v Lucas 158 CLR 661

Gardam v George Wills and Co. Ltd. (1988) ATPR 40-884

M.K. Hutchence and Others v South Sea Bubble Co. Pty. Ltd. (1986) ATPR 40-667

Abundant Earth Pty. Ltd. v R.C. Products Pty. Ltd. 59 ALR 211

Collins Marrackville Pty. Ltd. v Henjo Investments Pty. Ltd. 72 ALR 601

HEARING

MELBOURNE (heard in Sydney)

#DATE 28:2:1992

Counsel for the applicants: Mr S.D. Robb with Mr J. Bartos

Solicitors for the applicants: Rosenblum and Associates

Counsel for the respondents: Mr T. Simos QC with Mr P. Blackburn-Hart

Solicitors for the respondents: Tress Cocks and Maddox

ORDER

That judgment be entered for the applicants against the respondents for damages to be assessed;

That the settlement of the Court's order, including any order in relation to costs and to the further conduct of the proceedings be referred to a directions hearing at Sydney on Friday, 27 March 1992 at 2.15 p.m.

JUDGE1

The first applicant is a company duly incorporated in the State of Tasmania.

The second applicant is a company duly incorporated in the Northern Territory of Australia and is a wholly-owned subsidiary of the first applicant.
For the purpose of these proceedings there is no need to distinguish between the two applicants.
At all relevant times the respondents carried on in partnership the business of certified practising accountants under the name and style Phillips McSweeney (PMS).
2. THE CAUSES OF ACTION
The applicants claim that the respondents engaged in misleading and deceptive conduct or conduct likely to mislead or deceive them in contravention of section 52 of the Trade Practices Act 1974 (Commonwealth) or section 42 of the Fair Trading Act 1987 (NSW) and that as result they suffered loss or damage which they seek to recover in these proceedings.
As the respondents are individuals, the applicants rely primarily on section 42 of the Fair Trading Act (NSW). Certain of the representations said to constitute the conduct complained of were made in Sydney and in respect of those representations the applicants rely only on the NSW Act. Other of the representations…

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.

Continue reading Tag Pacific Ltd v McSweeney, B.A

Details

AGLC: TAG Pacific Ltd & anor v McSweeney, B.A. & anor [1992] FCA 81
Case: [1992] FCA 81
Decision Date: 28 FEBRUARY 1992

CaseChat Overview and Summary

Tag Pacific Ltd and another sought damages from McSweeney and others for misleading and deceptive conduct. The Federal Court was tasked with determining whether the supply of preliminary balance sheets by the vendor’s accountants to the purchaser of an interest in an insurance broking business constituted misleading or deceptive conduct. The balance sheets were prepared on the assumption that unpresented cheques had been duly presented and paid, despite substantial non-compliance with regulatory legislation. The court considered whether the failure to disclose this non-compliance amounted to misleading or deceptive conduct, particularly given the accountants' disclaimer and the purchaser's knowledge of the purpose for which the balance sheets were required.

The central legal issue was whether the supply of the misleading balance sheets constituted misleading or deceptive conduct under the Trade Practices Act. The court examined whether the accountants owed a duty of disclosure to the purchaser and whether the failure to disclose the substantial non-compliance with regulatory legislation was material. It also assessed the effect of the disclaimer provided by the accountants and the knowledge the purchaser had of the purpose for which the balance sheets were required.

The court concluded that the supply of the misleading balance sheets did constitute misleading or deceptive conduct. The court found that the accountants owed a duty of disclosure to the purchaser and that the failure to disclose the non-compliance was material. The disclaimer did not negate the misleading or deceptive nature of the conduct, as the disclaimer did not address the material non-compliance. The purchaser's knowledge of the purpose for which the balance sheets were required did not absolve the vendor of the duty to disclose the non-compliance.

The court ordered judgment in favour of the applicants for damages to be assessed. It also referred the settlement of the court's order, including any order in relation to costs and the further conduct of the proceedings, to a directions hearing at Sydney on Friday, 27 March 1992 at 2.15 p.m.

Orders

Orders of the court

That judgment be entered for the applicants against the respondents for damages to be assessed;

That the settlement of the Court's order, including any order in relation to costs and to the further conduct of the proceedings be referred to a directions hearing at Sydney on Friday, 27 March 1992 at 2.15 p.m.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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