Taylor, John Donald Stirling v Bazza Investments Pty Ltd & Anor Bazza Investments Pty Ltd & Anor v Innovation Management Pty Ltd & Anor De Porteous, Karl Martin v Bazza Investments Pty Ltd
[1996] FCA 752
•28 Aug 1996
LIMITED DISTRIBUTION
CATCHWORDS
TRADE PRACTICES - misleading and deceptive conduct - whether publication of "Interest Document" claiming readiness for manufacture and production misleading - whether disclaimer warning reader that document should not be used as information for making an investment decision precludes finding that representations were misleading - conduct to be viewed as a whole
TRADE PRACTICES - misleading and deceptive conduct - whether publication of "Interest Document" claiming readiness for manufacture and production misleading - whether director of investing company should have been held liable - no involvement in preparation or distribution of document - no knowledge that document inaccurate or misleading - whether consent to name being placed in document endorses representations contained therein
Parkdale Custom Built Furniture Pty. Ltd. v Puxu Pty. Ltd. (1982) 149 CLR 191 considered
Clark Equipment Australia Ltd. v Covcat Pty. Ltd. (1987) 71 ALR 367 considered
TRADE PRACTICES - misleading and deceptive conduct - liability of corporate entities - managing director held individually liable - director's actions made on corporation's behalf - corporation aware that managing director represented to be acting on its behalf - commercial involvement in enterprise giving rise to misleading conduct
TRADE PRACTICES - misleading and deceptive conduct - reliance - representee investing by payment of instalments - several instalments paif with knowledge that representations false - whether instalments would have been paid "but for" initial representations - whether payment of instalments made by way of discharging duty to mitigate one's loss
PRACTICE AND PROCEDURE - pleadings - requirement to provide particulars of special damage - degree of particularity required - argument in mitigation of loss not pleaded at first instance - brief reference made in written submissions to trial Judge - submission not advanced orally
2.
Banque Commerciale SA en Liquidation v Akhil Holdings Ltd. (1990) 169 CLR 279 considered
Trade Practices Act (Cth) s.52
Fair Trading Act (SA) s.56
Misrepresentation Act (SA)
No. SG114 of 1995
JOHN DONALD STIRLING TAYLOR (Appellant) v BAZZA INVESTMENTS PTY LTD & ANOR. (Respondents
BAZZA INVESTMENTS PTY LTD & ANOR (Cross-appellants) v INNOVATION MANAGEMENT PTY LTD & ANOR (Cross-respondents)
No. SG9 of 1996
KARL MARTIN DE PORTEOUS v BAZZA INVESTMENTS PTY LTD & ANOR.
BEAUMONT, SPENDER AND BRANSON JJ.
SYDNEY (HEARD IN ADELAIDE)
28 AUGUST 1996
IN THE FEDERAL COURT OF AUSTRALIA )
SOUTH AUSTRALIA DISTRICT REGISTRY )
GENERAL DIVISION )
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT
OF AUSTRALIA
No. SG114 of 1995
BETWEEN:JOHN DONALD STIRLING TAYLOR
Appellant
AND:BAZZA INVESTMENTS PTY LTD and DAVID JOHN BARRATT
Respondents
AND BETWEEN: BAZZA INVESTMENTS PTY LTD and DAVID JOHN BARRATT
Cross-appellants
AND:INNOVATION MANAGEMENT PTY LTD
First cross-respondent
JOHN DONALD STIRLING TAYLOR
Second cross-respondent
No. SG9 of 1996
BETWEEN:KARL MARTIN DE PORTEOUS
Appellant
AND:BAZZA INVESTMENTS PTY LTD
and DAVID JOHN BARRATT
Respondents
CORAM: BEAUMONT, SPENDER AND BRANSON JJ.
PLACE: SYDNEY (HEARD IN ADELAIDE)
DATE: 28 AUGUST 1996
MINUTES OF ORDER
THE COURT ORDERS:
Appeals dismissed, with costs.
Cross-appeal allowed in part. Set aside the orders made at first instance on 12 December 1995, other than orders
2.
2 and 4 (with respect to indemnity). In lieu thereof, order that judgment be entered in favour of the first cross-appellant against the first cross-respondent, the second cross-respondent, the second appellant and Michael Lawton Harrington South in the sum of $700,000, inclusive of pre-judgment interest, together with the costs of the proceedings at first instance. Cross-appeal otherwise dismissed. Make no order for the costs of the cross-appeal.
Reserve to the first cross-respondent liberty to apply to a single Judge of the Court, if so advised, for indemnity or contribution in respect of its liability under the judgment against it in 2, above.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JOHN DONALD STIRLING TAYLOR & ANOR v
BAZZA INVESTMENTS PTY. LTD. & ANOR
(No. SG 114 of 1995
No. SG 9 of 1996)
I N D E X
INTRODUCTION 1
THE CASE PLEADED AT FIRST INSTANCE BY BAZZA
AND MR. BARRATT 4
THE FINDINGS AND CONCLUSIONS OF THE PRIMARY JUDGE 14
THE GROUNDS OF MR. TAYLOR'S APPEAL 28
THE GROUNDS OF MR. DE PORTEOUS'S APPEAL 29
THE GROUNDS OF THE CROSS-APPEAL BY BAZZA AND MR. BARRATT 29
CONCLUSIONS ON THE APPEALS AND CROSS-APPEALS 29
(a) The first question: Were the written
representations misleading? 29
(i)The submissions made on behalf of the
appellants 29
(ii)Conclusions on the first issue 35
(b)The second question: Should his Honour's
findings on the other causes of action
alleged be set aside? 46
(c) The third question: Was Mr. Taylor liable
for the misleading conduct? 47
(i) The argument advanced for Mr. Taylor 47
(ii) Conclusions on the third question 49
(d) The fourth question: Should Messrs. De Porteous
and Taylor be held liable for amounts paid
by Bazza after the initial instalment of
$100,000 on 3 December 1990? 53
(i) Mr. Taylor's contentions 53
(ii) Submissions made on behalf of Bazza
and Mr. Barratt on the fourth question 57
(iii) Conclusions on the fourth question 59
(A)Liability for loss suffered before
August 1991 59
2.
(B) Liability for losses suffered
from and after August 1991 70
(e)The fifth question: should Innovation
also have been held liable? 77
A CLAIM BY INNOVATION FOR INDEMNITY OR CONTRIBUTION? 80
COSTS 80
ORDERS 81
IN THE FEDERAL COURT OF AUSTRALIA )
SOUTH AUSTRALIA DISTRICT REGISTRY )
GENERAL DIVISION )
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT
OF AUSTRALIA
No. SG114 of 1995
BETWEEN:JOHN DONALD STIRLING TAYLOR
Appellant
AND:BAZZA INVESTMENTS PTY LTD and DAVID JOHN BARRATT
Respondents
AND BETWEEN: BAZZA INVESTMENTS PTY LTD and DAVID JOHN BARRATT
Cross-appellants
AND:INNOVATION MANAGEMENT PTY LTD
First cross-respondent
JOHN DONALD STIRLING TAYLOR
Second cross-respondent
No. SG9 of 1996
BETWEEN:KARL MARTIN DE PORTEOUS
Appellant
AND:BAZZA INVESTMENTS PTY LTD
and DAVID JOHN BARRATT
Respondents
CORAM: BEAUMONT, SPENDER AND BRANSON JJ.
DATE: 28 AUGUST 1996
REASONS FOR JUDGMENT
BEAUMONT J.
INTRODUCTION
Bazza Investments Pty. Ltd. ("Bazza"), and David John Barratt, a director and the controller of Bazza, sued Innovation Management Pty. Ltd. ("Innovation"), and three of its directors, John Donald Stirling Taylor, Karl Martin De Porteous and Michael Lawton Harrington South, seeking from this Court the following, amongst other, relief: (1) A declaration that Innovation had engaged in conduct that was, or was likely to be, misleading or deceptive in contravention of s.52 of the Trade Practices Act 1974. (2) A declaration that Messrs. Taylor, De Porteous and South were, within the meaning of s.75B of the Trade Practices Act, involved in the contravention alleged. (3) Damages against Innovation and Messrs. Taylor, De Porteous and South pursuant to s.82 of the Trade Practices Act. Alternatively, damages were sought: (1) at common law in tort for negligence; (2) under the South Australian Fair Trading Act, (3) under s.7 of the South Australian Misrepresentation Act; and (4) under the prospectus provision, s.107 of the Companies (South Australia) Code 1989. Innovation and Messrs. Taylor, De Porteous and South made cross-claims against each other, seeking indemnity or contribution.
After a trial lasting some 16 days, a Judge of the Court (O'Loughlin J.), for reasons to be considered below, made these orders: (1) Judgment for Bazza against Messrs. Taylor, De Porteous and South in the sum of $700,000, inclusive of interest, with costs. (2) Judgment for Mr. Taylor against Messrs. De Porteous and South by way of indemnity in respect of the liability of Mr. Taylor to Bazza
in the sum of $700,000. (3) As to costs: (i) Messrs. Taylor, De Porteous and South were ordered to pay Bazza's costs; (ii) Messrs. De Porteous and South were directed to indemnify Mr. Taylor in respect of those costs; and (iii) Bazza and Mr. Barratt were ordered to pay to Innovation 30% of the joint costs of Innovation and Mr. Taylor.
Mr. Taylor and Mr. De Porteous now appeal from that part of the judgment that found them liable to Bazza.
Bazza and Mr. Barratt now cross-appeal from so much of the judgment as found (a) that Innovation was not liable to them; and (b) that they were not entitled to recover the sum of $75,000 paid by them to Ophir Australian Marketing Pty. Ltd. ("Ophir") on 6 September 1991. Bazza and Mr. Barratt now seek a judgment against Innovation in the sum of $700,000 and interest. They further seek an order increasing the amount of their judgment against Mr. Taylor by the sum of $75,000, together with interest.
In order to understand the issues arising on the appeals and the cross-appeal, it will be necessary to describe the essential allegations in the case sought to be made by Bazza and Mr. Barratt at the trial, before going to his Honour's findings and conclusions.
THE CASE PLEADED AT FIRST INSTANCE BY BAZZA AND MR. BARRATT
The essential allegations made by Bazza and Mr. Barratt in their statement of claim in its ultimate form were as follows:
(1) In October 1990, Mr. Barratt telephoned the office of Innovation to obtain advice on investment matters. In a telephone discussion, Mr. Taylor then made, in trade or commerce, a series of representations to Mr. Barratt with respect to an investment project involving the manufacture and sale of a special type of "Australian Bush Babies" toy doll ("the initial representations").
(2) Mr. Taylor knew, or ought to have known, that Mr. Barratt, acting on behalf of Bazza, would rely on the initial representations; it was reasonable for Mr. Barratt to do so; accordingly, Mr. Taylor and Innovation owed Bazza and Mr. Barratt a duty of care in making the initial representations.
(3) In November 1990, Innovation and Messrs. Taylor, De Porteous and South verbally invited Mr. Barratt, acting on behalf of Bazza, to acquire 350,000 $1.00 ordinary shares in the capital of Ophir ("the Ophir shares"). The invitation was extended in a series of meetings between the parties, at which Mr. Barratt was provided with a document, prepared by Innovation and Messrs. Taylor, De Porteous and South, entitled "Australian Bush Babies Come to Life Ophir Australian Marketing Pty Ltd Interest Documentation" ("the Interest Document"). The following representations ("the written representations") were made, in trade or commerce, in the Interest Document:
"(a)That Ophir was seeking additional funds of $350,000.00 by the issue of $1.00 ordinary shares at par;
(b)That the additional funds would enable Ophir to commence the manufacture and marketing of 40 cm dolls and accessories based on the May Gibbs theme, Australian Bush Babies;
(c)That Ophir was ready to commission production tooling, engage manufacturers and produce dolls for product release in April 1991.
(d)That all research and development was complete.
(e)That manufacturing prices had been obtained.
(f)That the additional funds would fund production tooling and operations through to July 1991 when Ophir was projected to assume positive operational cash flow.
(g)That Ophir had spent a period of 4 years on research and development and that it was ready to commence manufacturing the product at low cost.
(h)That the dolls would be manufactured in Hong Kong at quoted prices."
(4) Innovation and Messrs. Taylor, De Porteous and South knew, or ought to have known, that Mr. Barratt, acting for Bazza, would rely on the written representations and it was reasonable for Mr. Barratt to do so; accordingly, they owed Bazza and Mr. Barratt a duty of care in making the written representations.
(5) The Interest Document also contained the following
written projections ("the written projections"):
"(a)Sales in Australia in the first three year period commencing April 1991 are expected to exceed 850,000 units and result in company profit to June 1994 of $8.78 million.
(b)Export sales of consequence could increase the profits by as much as $100 million dollars or more."
Reliance and the existence of a duty of care were also pleaded, as were oral representations ("the oral projections") to the same effect as the written version of the projections.
(6) In November 1990, in reliance on all of these representations and projections, Bazza entered into an agreement ("the Agreement") with Ophir (a) to subscribe for the Ophir shares; and (b) to provide a guarantee or security in the amount of $150,000 to Ophir's bank, the Commonwealth Bank of Australia, ("the Bank"), so as to enable Ophir to obtain a loan facility ("the loan facility") in that amount.
(7) In performance of the Agreement, Bazza paid Ophir the sum of $350,000 to subscribe for the Ophir shares by instalments as follows:
"PARTICULARS OF INSTALMENTS
(i)December 3rd 1990 payment made $100,000.00 shares issued 100,000 shares;
(ii)January 10 1991 payment made $100,000.00
shares issued 100,000;
(iii)March 18 1991 payment made $50,000.00
shares issued 50,000 shares;
(iv)April 10 1991 payment made $50,000.00
shares issued 50,000 shares;
(v)May 1 1991 payment made $50,000.00
shares issued 50,000 shares."
(8) In further performance of the agreement, on 10 January 1991, Bazza deposited the sum of $150,000 by way of security for the loan facility. On 14 May 1991, Bazza executed a guarantee in favour of the Bank.
(9) In January, February and March 1991, Innovation and Messrs. Taylor, De Porteous and South made, in trade or commerce, the following oral representations ("the further representations") to Mr. Barratt:
"(a)That the Hong Kong Manufacturer had pulled out of the project and would not be manufacturing the dolls;
(b)That [Mr. De Porteous] and [Mr. South] would arrange for the dolls to be manufactured in Adelaide by an Adelaide manufacturer;
(c)That the change in the manufacturing arrangements were only a minor set back and would only cause a slight delay in the release of the dolls on the market.
(d)That as soon as alternative manufacturing arrangements were made manufacturing and sale of the dolls could be commenced immediately on a large scale;
(e)Save for the qualifications referred to in paragraphs (a) to (d) inclusive hereof [Innovation and Messrs. Taylor, De Porteous and South] confirmed to [Mr.] Barratt the written representations and projections."
Reliance, in the form of continuing to perform and to complete the Agreement, and the existence of a duty of care, were also pleaded.
(10) In August 1991, Innovation and Messrs. Taylor, De Porteous and South made, in trade or commerce, the following further representations to Mr. Barratt ("the August representations"):
"(a)That Ophir was seeking a further loan from [Mr.] Barratt of $100,000.00;
(b)That the further loan was required by Ophir to fund the purchase of a Gusmer Delta rim 80 moulding machine and accessories which had been purchased by Ophir to enable manufacturing of the dolls to be carried out in Adelaide by an Adelaide Manufacturer namely Brian Brandenburg Moulding Pty Ltd.
(c)Save as is otherwise qualified by the matters referred to in paragraphs (a) and (b) hereof [Innovation and Messrs. Taylor, De Porteous and South] confirmed to [Mr.] Barratt the written representations and projections."
Reliance and a duty of care were also pleaded.
(11) In September 1991, relying on the August representations, Bazza, by its agent Mr. Barratt, provided Ophir with a loan of $100,000; alternatively, Mr. Barratt himself did so. The loan was not repaid, except to the extent of a payment of $25,000 paid in March 1993 on the sale of the Gusmer machine.
(12) Between September 1991 and September 1992, Ophir experienced substantial problems with respect to manufacturing the dolls, and with respect to their design, function, appearance and marketing; Ophir incurred substantial financial losses and in October 1992 was ordered to be wound up.
(13) The initial representations were untrue in that:
(a) The investment project was not a financially sound investment in that: (i) research and development had not been completed; (ii) the manufacturing technique and process had not been completed; (iii) manufacturing by the Hong Kong or Malaysian manufacturers had not been agreed to formally by those manufacturers, and there were no formal agreements or arrangements in place for the manufacture of the dolls;
(b)The investment project would not provide investors with great financial rewards;
(c)There had not been extensive research and development carried out and completed with respect to the dolls.
(d)The dolls were not ready to be manufactured and sold on a large scale.
(e)Additional capital would not enable the
manufacturing of the dolls to be commenced immediately.
(14) The initial misrepresentations were: (i) made negligently in that Mr. Taylor failed to take reasonable steps to ensure their accuracy; (ii) made fraudulently in that Mr. Taylor and Innovation had no honest belief in their truth; (iii) misleading and deceptive, and, in the case of Innovation, contrary to s.52 of the Trade Practices Act; and (iv) representations as to future matters made without reasonable grounds and thus, in the case of Innovation, contrary to s.52.
(15) Mr. Taylor aided and abetted, or was knowingly concerned in, the contravention of s.52 by Innovation.
(16) Further, in making the initial representations, Innovation and Mr. Taylor contravened s.56 of the Fair Trading Act.
(17) The written representations, and the oral representations confirming them, were untrue, given the inadequacies of research and development previously pleaded, in that, at the time -
(a)The additional funds of $350,000 would not enable Ophir to commence the manufacture and marketing of
40 cm dolls and accessories;(b)Ophir was not ready to commission production tooling, engage manufacturers and produce dolls for product release in April 1991;
(c)Research and development was incomplete;
(d)Manufacturing prices had not been obtained;
(e)The additional funds would not fund production tooling and operations through to July 1991, when Ophir was projected to assume positive operation[al]...cash flow;
(f)Ophir was not ready to commence manufacturing the product at low cost.
(18) The written and oral representations were: (i) made negligently in that Innovation and Messrs. Taylor, De Porteous and South failed to take reasonable steps to ascertain their accuracy; (ii) misleading and made as to future matters without reasonable grounds and thus, in the case of Innovation, contrary to s.52; and (iii) misleading and, in the case of Innovation and Messrs. Taylor, De Porteous and South, contrary to s.56 of the Fair Trading Act.
(19) Messrs. Taylor, De Porteous and South aided and abetted, or were knowingly concerned in, Innovation's contravention of s.52.
(20) Ophir did not achieve the written or the oral
projections, none of which was reasonably made; accordingly, Innovation and Messrs. Taylor, De Porteous and South were negligent in failing to take any reasonable steps to ascertain whether they were achievable.
(21) The written and oral projections were misleading and deceptive, and equivalent contraventions of s.52 and of s.56 were again alleged, as was the aiding and abetting of Innovation's contravention of s.52.
(22) The further representations were untrue at the time in that:
(a)The change in manufacturing arrangements was such that it would cause a major delay in the release of the dolls on the market;
(b)Given the inadequacies of research and development, manufacturing and sale of the dolls could not be commenced immediately on a large scale as soon as alternative manufacturing arrangements were made.
(23) The further misrepresentations were made negligently in that Innovation and Messrs. Taylor, De Porteous and South failed to take any reasonable steps to ascertain their accuracy; and Messrs. Taylor, De Porteous and South were in breach of their fiduciary duties to Bazza and Mr. Barratt accordingly.
(24) Equivalent contraventions, of s.52 and of s.56, including involvement therein by the individual respondents were alleged in respect of the further misrepresentations.
(25) Relying on the representations and projections made at that time, Bazza was induced to enter into (i) the Agreement in November 1990; and (ii) the deed of guarantee with the Bank in the sum of $150,000 in May 1991; and thus suffered loss and damage for the purposes of the Misrepresentation Act.
(26) The August representations were untrue, negligently made, misleading and deceptive, and made without reasonable grounds.
(27) By reason of and in reliance on the foregoing representations and projections, Bazza, by its agent Mr. Barratt, was induced to advance to Ophir the sum of $100,000 in September 1991, and thereby suffered further loss and damage within the meaning of the Misrepresentation Act.
(28) The Interest Document, which was a prospectus for the purposes of the Companies Code, contained untrue statements and did not disclose material matters known to be material, as previously alleged; accordingly, since they provided the Interest Document, or authorised its provision, to Mr. Barratt for and on behalf of Bazza, Innovation and Messrs. Taylor, De Porteous and South were liable to pay compensation to Bazza
pursuant to s.107 of the Code.
(29) Bazza lost:
(i)the sum of $500,000 it invested with Ophir; and
(ii)the sum of $75,000, being (a) the amount of $100,000 advanced to Ophir in September 1991, less (b) the sum of $25,000 received in March 1993 by Mr. Barratt on behalf of Bazza on the sale of the Gusmer machine in the enforcement of security held by Bazza (in the form of a finance agreement and debenture held between Ophir and Bazza dated 6 September 1991); alternatively, Mr. Barratt lost this sum of $75,000.
(30) Relief to the effect previously stated was sought.
THE FINDINGS AND CONCLUSIONS OF THE PRIMARY JUDGE
The relevant findings and conclusions of the learned primary Judge may be stated, in their chronological sequence, as follows:
(1) Having invented a method of manufacture of the "Bush Baby" toy doll, Mr. De Porteous secured (in 1987) from the owners of the intellectual property in the works of the late May Gibbs, a licence to produce 40 cm toy dolls which would harmonise with her famous "Bush Baby" characters. The basic doll was "a first", consisting of a skeleton within a "foamed" body form over which there was a durable skin, which gave a
remarkable "feel", and allowed the body to assume human "poses" and to show skin area wrinkles etc.
(2) Needing finance to develop his project, Mr. De Porteous approached Mr. Taylor, as managing director of Innovation (in late 1987). The business of Innovation, which was beneficially owned and financed by the South Australian Government, was to assess and foster the commercialisation of new technology; on occasions, it would invest in projects and nominate a board representative. Having decided, in principle, to "foster" the invention, Mr. Taylor introduced Mr. South to Mr. De Porteous in early 1988, with a view to Mr. South's appointment as a management consultant to the project, in particular, with respect to its development and marketing. As part of its involvement in the project, Innovation appointed Mr. Taylor to Ophir's board in March 1988, under an arrangement in which Innovation subscribed for 500 shares in the capital of Ophir; and Ophir agreed to pay Innovation a royalty of three per cent of the net sales of the doll. Innovation had previously given Ophir financial aid and provided other assistance in the preparation of patent applications.
(3) Mr. Taylor was instrumental in introducing Mr. Barratt to Messrs. De Porteous and South in 1990. Mr. Barratt, and his family, controlled a group of companies (including Bazza), one of which had disposed of a rural property in 1990;
consequently, the Barratt group had surplus funds to invest. In October 1990, Mr. Barratt, who had had no experience in manufacturing, contacted Mr. Taylor by telephone. At that stage, Innovation had invested approximately $75,000 in Ophir and the invention.
(4) Although Mr. Taylor and Mr. Barratt gave different versions of their initial telephone conversation, the minutes of Ophir's board meeting held on 24 October 1990 recorded that Mr. Taylor then "informed that Board that Barry Barratt is a possible new investor. Discussions have yet to be held to establish the level of his financial interest". Mr. Taylor accepted the accuracy of the minutes. His evidence was that Mr. Barratt inquired about investing in a boat project and that he suggested that Mr. Barratt might like to consider the Bush Baby doll project. Mr. Barratt's version, on the other hand, included a reference to both projects but, significantly, included statements by Mr. Taylor, in effect, endorsing Ophir's project as an "outstanding investment". In considering this conflict in the evidence, it should be borne in mind that Mr. Taylor acknowledged in his testimony that, in October 1990, he had a belief in the potential of the project and enthusiastically supported it. A year before, in November 1989, Mr. Taylor had reported to Innovation's board that it might receive as much as $120,000 p.a. by way of royalties (i.e. on gross sales of $4m. p.a.) if Ophir's expectation became a reality. But (his Honour found) Mr. Barratt's memory
let him down in giving his evidence. Accordingly, he failed to discharge the onus of proving that the initial conversation with Mr. Barratt went beyond a mere introductory inquiry and a general referral to a potential investment. It followed that Bazza and Mr. Barratt had not made out any cause of action as a consequence of this initial discussion.
(5) Mr. Taylor and Mr. Barratt next met on 14 November 1990, in the office of Mr. Barratt's accountant, Mr. Hudson. In the meantime, on 31 October and 7 and 12 November 1990, Mr. Barratt had met with Messrs. De Porteous and South, and discussed the project with them. Messrs. De Porteous and South reported to Mr. Taylor on progress at these meetings, at the first of which the Interest Document, or a draft version of it, was given to Mr. Barratt. Mr. Taylor first saw that document on 6 November 1990, when he circulated it to Innovation's board. He was not consulted about any aspect of the document other than to consent to his name being inserted in the document as a source of further information.
(6) The title page of the Interest Document reads:
"AUSTRALIAN
BUSH BABIES
COME TO LIFE
OPHIR AUSTRALIAN MARKETING PTY LIMITED
INTEREST DOCUMENTATION
Prepared by M.L.H. SOUTH & CO.
in cooperation with the Company
OCTOBER 1990
Disclaimer:
This document is prepared to supply some information on the
background and activities of
OPHIR AUSTRALIAN MARKETING PTY. LIMITED
It is available only on direct request to the company and should not be construed as supplying appropriate information
to enable an investment decision."
(7) The first page of the Interest Document reads:
"SUMMARY:
Adelaide based, Ophir Australian Marketing Pty. Limited is seeking additional funds of $350,000 by the issue of $1 Ordinary F.P. shares at par. The new issue will represent approximately 40% of the expanded capital.
These monies will enable the company to commence the manufacture and marketing of 40 cm Dolls and accessories, based on the May Gibbs theme: Australian Bush Babies. [Emphasis added]
This marketing theme is secured by an exclusive world wide licence granted by the Spastic Centre of New South Wales and the New South Wales Society for Crippled Children. Both will benefit by way of royalties.
Launching in Australia in April 1991 expected sales in Australia alone in the first three year period are expected to exceed 850,000 and result in company profit to June 1994 of $8.78M. On this basis, and over the same period: a dividend return of 720% on the investment is indicated. This is coupled with a residual value (asset backing), in terms of cash reserves alone, of $5.86 for each $1 share on issue.
Export sales of consequence could increase these profits by as much as $100M or more.
Protected by patents, advanced manufacturing developed by Ophir and an associated company, Moulding Technologies Pty Ltd, enable the company to produce at low cost, the articulated character doll suited to the 3 - 12 year old market. Other toy products, mannequins and prosthetic articles will be developed within the planning period. [Emphasis added]
Manufacture will occur in Hong Kong, by subcontract and only on a pre-sold basis.
Moulding Technologies has appointed Ophir its worldwide agent to market and licence these patented production methods which are seen to have application in industries involved in: latex, foaming and moulding, and including the motor vehicle, bedding and seating, furniture, latex forming industries. The low cost and speedy die-cloning processes are particularly appropriate to consumer articles in niche markets.
[Emphasis added]
Further information can be obtained by contacting any of the following:
Mr Karl De Porteous, Managing Director
Ophir Australian Marketing Pty Limited
Phone (08) 364 2180 Fax (08) 364 1043
orMr John Taylor, Manager
Innovation Management Pty Limited
Phone (08) 260 8222 Fax (08) 349 2436
[Emphasis added]
or Mr Michael L.H. South,
M.L.H. South & Co.
Phone (08) 388 5379 Fax (08) 364 0735"
The "offer" was described in the Interest Document as follows:
"1.ON OFFER:
1.1Share Issue
Ophir Australian Marketing Pty Limited will issue, at par, a total of a further 350,000 of its ordinary $1 fully paid shares to an investor(s), in order to fund production tooling and operations through to July 1991, when the company is projected to assume positive operational cash flow. The new issue will represent approximately 41% of the ordinary shares then on issue. [Emphasis added]
1.2Line of Credit
Investor(s) will on allocation of the shares be required to provide, to the company a line of credit equal to 50% of the allocation value of shares issued to them. These monies will be used as contingency funding only and do not form part of the projected cash flow requirements." [Emphasis added]
The Interest Document described Ophir's operations to date in these terms:
"4.OPHIR, OPERATIONS TO DATE:
Founded by Karl De Porteous in 1985 and incorporated in 1988.
Karl, having a background as a toy buyer, recognised the need for a doll to fill the void left by the demise in popularity of the Cabbage Patch Kids. He saw the real possibility of the May Gibbs' `Bush Babies' filling that void, both in Australia, and with the high profile of `Australiana', in export markets as well.
Initial Models of the intended product, and associated artwork were produced and presented with sales projections to the May Gibbs copyright holders. This resulted in Ophir being granted an exclusive licence to use the May Gibbs characters for 40 cm dolls.
It was recognised that in today's competitive market, to increase the chances of commercial success, the product should: by reference to Cabbage Patch: be of superior quality and play value, at the same or at a lower retail price.
After four years of research and development, funded largely by Karl with the assistance of capital and loan funds from the South Australian Government and Innovation Management Pty Ltd, the company has achieved these aims. It has now in hand, the product and the innovative manufacturing methods that achieve that product at low cost.
The company is now ready to commission production tooling, engage manufacturers, and to produce the dolls for product release in April 1991. All R & D is complete and manufacturing prices have been obtained." [Emphasis added]
(8) On 16 November 1990, Mr. Barratt, on behalf of Bazza (then known as Canad Marketing Pty. Ltd.), wrote to Ophir a letter, composed by his accountant, Mr. Hudson, setting out the investment to be made by Bazza in Ophir, as follows:
"EQUITY PARTICIPATION
This sets out the investment to be made by [Bazza Investments] Pty Ltd, a company controlled by Mr D.J. Barratt and his family in Ophir Australian Marketing Pty Ltd (`the company').
An equity position has been offered by the company for Mr Barratt and his family to subscribe at par for share capital of 350,000 $1.00 ordinary shares in the company which possesses the rights to production and marketing of polyurethane dolls in the style of author/authoress May Gibbs' `Australian Bush Babies'.
It is understood that the issue price of $350,000 will be called up over a period of time being:-
3rd December 1990 (issue date) $100,000
(i.e. $0.2857 per share)
10 January 1991 $100,000
1st March 1991 $ 50,000
1st April 1991 $ 50,000
1st May 1991 $ 50,000
In addition to share capital the company requires an effective guarantee to its bankers by the investor, limited to $150,000 which will expire on the 31st December 1991. A guarantee fee of 6% of the face value of the guarantee will be payable by the company to the investor for this facility on 31st December 1991. It is acknowledged that this guarantee is a commitment which will be effective from the 10th January 1991. The investor's guarantee will allow the company to borrow, if required, new funds from its bankers, at commercial rates, with a debenture over the company's assets, but without guarantees from the other investors or directors.
It is understood that the directors of the company to take effect 3rd December 1990 will be and remain:-
Mr M L H South (Chairman)
Mr K M De Porteous (Executive Director & Secretary)
Mr J D S Taylor
Mr D J Barratt
It is further understood that the shareholders at the 3rd December 1990 will be:-
K M De Porteous 500,002 Shares
[Bazza Investments] Pty Ltd 350,000 Shares
M Panozzo 10,000 Shares
Innovative Management Pty Ltd 500 Shares
Precise Plastics Pty Ltd 1,800 Shares
Barry James Engineering Pty Ltd 1,200 Shares
T J Hilbig 4,447 Shares
Total 867,949 Shares
It is further acknowledged that the accountants but not auditors for the company will be Pannell Kerr Forster [Mr. Hudson's firm] and that the registered office of the company will be transferred to:-
C/- Pannell Kerr Forster
4th Floor
190 Flinders Street
ADELAIDE SA 5000
It is acknowledged that financial statements of the company for the financial year ended 30 June 1990 have been received and it is my understanding as confirmed by yourself, that the financial position of the company has not changed in any material way since that date nor will the position alter up until 3rd December 1990.
Please acknowledge receipt of this letter by signing the attached copy and returning it to me C/- Pannell Kerr Forster GPO Box 1969 Adelaide SA 5000."
(9) In due course, the Ophir shares were issued to Bazza, which paid Ophir the total sum of $350,000 by instalments (at or about the due dates). In addition, on 11 January 1991, Bazza deposited the sum of $150,000 with the Bank. On 14 May 1991, Bazza executed a Bank guarantee in that amount, which was called up in December 1991. The Barratt group also lent Ophir a further amount of $100,000 in September 1991. In March 1993, $25,000 was repaid, but the earlier investment of $350,000, the payment of $150,000 under the guarantee, and the $75,000, a total of $575,000, were irretrievably lost when the project collapsed. Ophir went into liquidation in November 1992.
(10) (As has been noted) Bazza failed to discharge its onus of establishing that anything said by Mr. Taylor in October 1990 ("the initial representations" pleaded) constituted any cause of action.
(11) Three representations in the Interest Document (described in the pleadings, as has been said, as "the written representations"), were, it will be recalled, relevantly in these terms:
After four years of research and development, funded largely by Karl with the assistance of capital and loan funds from the South Australian Government and Innovation Management Pty Ltd, the company has achieved these aims. It has now in hand, the product and the innovative manufacturing methods that achieve that product at low cost.
The company is now ready to commission production tooling, engage manufacturers, and to produce the dolls for product release in April 1991.
All R & D is complete and manufacturing prices have been obtained."
These three statements were assertions of existing facts and the reader was entitled to assume that the innovative manufacturing methods were then operational; that Ophir was ready to engage manufacturers; and that all R & D had been completed.
Each of these assertions was false since:
(a) An investor such as Mr. Barratt, who could not be expected to have technical and scientific knowledge on these subjects, was entitled to assume, in a common sense way from the language used, that completion of research and development meant that the necessary preliminary experimental work preparatory to actual manufacture had been successfully completed.
(b) But these assertions were inaccurate: A successful manufacturing technique had not been established even by November 1992, notwithstanding the statement that the dolls would be ready for release in April 1991. Contrary to the written representations, innovative manufacturing methods had not been achieved; Ophir was not ready to engage manufacturers; and research and development was not then completed.
(12) The disclaimer on the title page was no answer to the material misstatements: a potential investor was entitled to rely on the contents of the document so far as they related to, or constituted, statements of existing facts (his Honour referred to the observations of Sheppard J. in Clark Equipment Australia Ltd. v Covcat Pty. Ltd. (1987) 71 ALR 367 at 371).
(13) Ophir, through the agency of Messrs. Taylor, De Porteous and South, intended Bazza and Mr. Barratt to rely upon these representations. In making its investment, Bazza did so rely.
Although Mr. Hudson also advised Mr. Barratt, his involvement was not a matter of great weight in this context.
(14) Although none of Messrs. Taylor, De Porteous or South knowingly inserted false information in the Interest Document, their extreme optimism and confidence was such reckless indifference to the truth as to amount to negligence; and it was reasonably foreseeable that Bazza and Mr. Barratt were likely to suffer loss if the information were incorrect.
(15) The disclaimer did, however, have a material effect upon the "written projections". It was evident from the Interest Document that it related to a new, untried product in a new market, that is, an unproven project, as yet undeveloped, which had to be classified as an obvious "high risk". Having regard to this factor, to Mr. Barratt's general business experience and to the presence and assistance of Mr. Hudson as a financial adviser, inducement, or reliance, was not established in this respect.
(16) The "oral representations", which were made along the lines of the statements in the Interest Document, were similarly actionable. But the "oral projections" were not actionable because the written projections disclosed no cause of action.
(17) None of the "further representations" alleged was
actionable: either the statements were accurate, or if not, Mr. Barratt knew the true position, and was not misled.
(18) None of the August misrepresentations was actionable. By that time, Mr. Barratt, as a director of Ophir, knew of the actual delays and disappointing aspects of the project. It followed that no claim was open to recover the balance of the loan of $100,000 made at this time by Bazza to Ophir, along with a similar advance by Innovation, to purchase the Gusmer machine.
(19) No case had been made against Innovation until the decision in September 1991 by Mr. Barratt, made on behalf of Bazza, to lend Ophir the sum of $100,000. Mr. Taylor's connection with Bazza and Mr. Barratt was exclusively in his capacity as a director of Ophir. That is, Innovation, whose name did not appear on the Interest Document, was not materially involved.
(20) Messrs. Taylor, De Porteous and South engaged, in trade or commerce, in misleading conduct within s.56 of the Fair Trading Act by the delivery of the Interest Document to Mr. Barratt. Although Mr. Taylor did not have the same degree of knowledge of these matters as Mr. De Porteous or Mr. South, he was willing to accept the statements in the Interest Document as accurate; he knew that its primary objective was to attract investors; and he held himself out as associated with its
contents.
(21) Innovation was not liable under s.107 of the Companies Code. Even if it be assumed that the Interest Document was a prospectus for this purpose, Innovation was not a promoter of Ophir, nor did it authorise the issue of the Interest Document within s.107(1)(c) or (d).
(22) No case of contributory negligence had been made against Bazza or Mr. Barrett, as it would have been extremely difficult for them to verify the statements made in the Interest Document.
(23) Although by May 1991 Mr. Barratt may possibly have known of the true position, it was unreasonable to expect Bazza then to repudiate the share subscription agreement by refusing to pay the final instalment then due. Bazza was thus entitled to judgment against Messrs. Taylor, De Porteous and South based on its losses of $350,000 and $150,000.
(24) To the judgment of $500,000 there should be added pre-judgment interest of $200,000 (applying a simple rate of 10%) that is, a total of $700,000.
(25) There was no case for indemnity or contribution as between Mr. De Porteous and Mr. South, since their liability was sourced in their involvement in the preparation of the
Interest Document. However, since Mr. Taylor played no part in this and was justified in relying on their judgment and advice, and had a genuine belief in the truth of their assertions, Messrs. De Porteous and South were jointly and severally liable to indemnify Mr. Taylor.
THE GROUNDS OF MR. TAYLOR'S APPEAL
The primary ground of Mr. Taylor's appeal is that, by virtue of his limited role in the affair, he should not have been held legally responsible at all. Alternatively, it is contended for Mr. Taylor that, given the knowledge subsequently required by Mr. Barratt by virtue of his directorship of Ophir, at least from disclosures of the project's problems made at the board meeting held on 10 January 1991, it should have been held that it was unreasonable for Bazza to conclude, that is, to continue to perform, its contractual commitments to Ophir. Accordingly, any liability of Mr. Taylor should not extend beyond the period ending 10 January 1991.
By an amendment made to his grounds of appeal at the commencement of the hearing before us, it is also contended for Mr. Taylor, as was always contended for Mr. De Porteous in his grounds of appeal, that the finding of misleading conduct, in the form of the three statements made in the Interest Document, should not have been made; it is said, for Mr. De Porteous, and for Mr. Taylor, that, when viewed in context,
these statements were not, in fact, misleading.
THE GROUNDS OF MR. DE PORTEOUS'S APPEAL
In addition to the grounds taken on behalf of Mr.
Taylor, it is contended for Mr. De Porteous that he owed no duty of care, and that, in any event, no duty of care, if owed, was breached; that there was no inducement for Bazza to invest. The disclaimer is also relied on, as is the involvement of Mr. Hudson in advising Bazza. Alternatively, it is said that liability should be limited to the period ending on 10 January 1991.
THE GROUNDS OF THE CROSS-APPEAL BY BAZZA AND MR. BARRATT
In their cross-appeal, Bazza and Mr. Barratt contend that it should have been found that Innovation was a party to the representations made, and that Innovation was vicariously liable for the negligence of Mr. Taylor. They further contend that it should have been held that they relied on the representations when the sum of $100,000 was paid to Ophir on 6 September 1991; and that the payment of that amount was a reasonable attempt by them to mitigate their loss.
CONCLUSIONS ON THE APPEALS AND CROSS-APPEALS
(a)The first question: Were the written representations misleading?
(i)The submissions made on behalf of the appellants
On behalf of the appellants, a substantial challenge is made to the finding of the learned primary Judge that the three representations in the Interest Document were false. The argument put for Mr. De Porteous, which was adopted by Mr. Wells Q.C. on behalf of Mr. Taylor, was, in outline, stated as follows:
•The truth or falsity of the representations stood to be tested against the facts and matters which existed in November 1990. Those representations were not said to carry any implication, or to permit the drawing of any inference, as to future matters (and were not so treated by the primary Judge). They were confined to matters which existed in November 1990.
•The statement in the Interest Document: "It has now in hand, the product and the innovative manufacturing methods that achieve that product at a low cost" cannot, and should not, entitle one to assume that the innovative manufacturing methods "were then operational". The words "innovative manufacturing methods", refer to the comment in the Summary of the Interest Document as follows: "Protected by patents, advanced manufacturing developed by Ophir...enable the company to produce" and, later, "these patented production methods". On its plain reading, the representation only speaks of Ophir having in hand the product (which it plainly did), and to the innovative manufacturing method. The method does not entail the means - the Oxford Dictionary defines "method" as "a procedure for obtaining an object" - the method is not a "goal" which Ophir intended to achieve; the method is but a milestone or step on the road to achieving the "goal", namely, production. That wrong construction was compounded by his Honour in the conclusion that "innovative manufacturing methods had not been achieved"; compare the written statement: "innovative operational methods that achieve". The written statement anticipates future matters, in addition to the existing, namely those that will permit Ophir to achieve its aims.
•The statement: "The company is now ready to commission production tooling, engage manufacturers, and to produce the dolls for product release..." clearly conveys a number of sequential steps, namely:
"The company is now ready:
(i)to commission production tooling (and when the production has been successfully commissioned then - and only then);
(ii)to engage manufacturers (and when that engagement has been successfully concluded, subject to all of the usual negotiations, then - and only then);
(iii)to produce the dolls for product release... ."
•Further, the finding as to the matters which anyone reading the Interest Document "was entitled to assume",
as his Honour put it, should not be limited to those matters, to the exclusion of all other assumptions. This representation is made upon a number of critical assumptions on the part of the representor (Mr. De Porteous) and must have been so understood by the representee (Mr. Barratt). Those assumptions are a normal incident of commercial ventures. The parties would have been entitled to assume a number of external contingencies. All investment involves commercial risk; the more complex and costly the product - the greater the risk. The comment from Mr. Barratt's own accountant witness, Mr. Hudson, that this was a "totally at risk venture" proves that the parties assumed the ordinary risks of a new commercial venture.
•The learned trial Judge wrongly selected the written representations as being words which, standing alone, would be likely to mislead. The words must be viewed in their context, both within the context of the Interest Document and within the conduct of the meetings attended by Mr. Barratt before his making the decision to invest. That other conduct included: (a) The arrangement of meetings with Mr. De Porteous; (b) Mr. Barratt's being told that the skeletons were to be made in Hong Kong and that the "foaming" would be done by members of Mr. Julian Leung's family in China - both future matters. Irrespective of what one was entitled to assume about the
written representations, Mr. Barratt was aware of the fact that production was not "then operational"; (c) Mr. Barratt's acceptance of Mr. Leung's advice, and what was otherwise told to him by Mr. Leung "on his word".
•The primary Judge wrongly treated the written representations as to existing facts as if they were promises as to future matters; and wrongly concluded that the assertions as to existing facts were false in a material particular by having regard only to "subsequent events" which, as he put it, "proved...that the assertions in the Interest Document were...inaccurate".
•A representation as to existing matters which induces a belief, or even aspirations and assumptions as to future matters and outcomes, must be qualified by events which may occur in the future, and which will affect the future matters and outcomes. The representator should not be held liable if those aspirations, assumptions and beliefs do not come true, or do not remain true.
•On a proper assessment of the evidence, the failure of Ophir to achieve full production of the dolls at an earlier date resulted from, and was caused by, subsequent events unrelated to the lack of readiness or lack of research and development as represented in the Interest Document. The Hong Kong manufacturer, Mr. Leung, withdrew
from his commitment (his legal entitlement to do so or not is irrelevant) in late 1990 or early 1991. That led to a "radical change" in the nature of the project Mr. Barratt had decided to invest in. The board of Ophir, of which Mr. Barratt was a member, resolved at its meeting on 10 January 1991 to bring manufacturing back into South Australia; to acquire critical, but untested, componentary in machines; and to appoint a new and untested manufacturer, Brian Brandenburg. The departure of Mr. Leung "represented a breakdown" in the manufacturing process.
•The finding by the learned trial Judge, that the words "all R & D is complete" entitled Mr. Barratt to assume, in a common sense manner, that the preliminary experimental work that was necessary and preparatory to actual manufacture had been successfully completed. This is not tantamount to an unqualified assertion that actual manufacture can proceed; nor is it a promise that actual manufacture will proceed. Completion of all "preliminary experimental work" was evidenced by the prototype which Mr. Barratt inspected at one or more of his preliminary meetings before 15 November 1990. The prototype is the extant, and indisputable, proof that the doll could be produced. But it does not follow, and could not mean, the doll is ready to be mass produced by the use of tooling yet to be commissioned, and by a manufacturing process
yet to be engaged. The term "R & D", even if it was a term of art, was not capable of being so understood by Mr. Barratt.
(ii) Conclusions on the first issue
I cannot accept that any of these arguments has any real force. In my opinion, his Honour's conclusion that the three statements in the Interest Document were misleading accorded with the evidence, was correct, and should not be disturbed.
It should be said at once that there is no need here to consider whether Mr. Taylor was "knowingly concerned" and thus "involved", as an accessory, in any corporate contravention (e.g. by Innovation) of s.52 of the Trade Practices Act. Mr. Taylor was sued as a principal under s.56 of the Fair Trading Act.
It may be accepted that the present question was to be determined as at November 1990 when the statements were made, but, as his Honour found, a successful manufacturing technique had not been established even by November 1992. There was ample evidence to justify that finding. To take but two of many illustrations in the evidence to justify this conclusion, the minutes of the meeting of the board of Ophir held as late as 3 August 1992, at which Messrs. Barratt, Taylor, South and De Porteous were present, record this:
"PRODUCTION
AGREED THAT R & D PHASE NOW COMPLETE & NOW ONLY A MATTER OF FINE TUNING, E.G. FINAL POLISHING OF H.P. TOOLS."
There was also evidence that even this view, expressed as late as it was, proved to be an optimistic appraisal.
Another piece of objective independent evidence is provided in a letter written to Ophir by a party at arms' length, Adelaide Injection Moulders Pty. Ltd. dated 4 September 1992, saying, inter alia:
"As you know we have over the past 12 months poured considerable time and monies into try outs and research and development." [Emphasis added]
It may also be accepted that the Interest Document should be read as a whole, including the disclaimer. But, putting the disclaimer aside for the moment, when the Interest Document is read as a whole, it does create a misleading impression as to the capacity of Ophir at that time in the three respects considered by his Honour to be misleading.
The context should also be considered. It will be recalled that it was stated in the initial "Summary" that the additional funds sought "will enable [Ophir] to commence the manufacture and marketing of [the] dolls... ."
The Summary went on, as has been noted, to state:
"Launching in Australia in April 1991, expected sales in Australia alone in the first three year period are expected to exceed 850,000 and result in company profit to June 1994 of $8.78m. On this basis, and over the same period: a dividend return of 720% on the investment is indicated. This is coupled with a residual value (asset backing), in terms of cash reserves alone, of $5.86 for each $1 share on issue.
Export sales of consequence could increase these profits by as much as $100M or more."
After reading this, a prospective investor would come, later in the document, to a description of "Ophir['s] operations to date" and to the three contentious statements. Whilst these statements should be read together so as to understand their overall impact, it will be convenient to consider their context and to analyse them in stages.
As to their context, it will be recalled that, in describing the "operations [of Ophir] to date", it had earlier been stated that -
"[Mr. De Porteous] recognised the need for a doll to fill the void left by the demise in popularity of the Cabbage Patch Kids... .
Initial Models of the intended product...were produced and presented with sales projections to the May Gibbs copyright holders... .
It was recognised that in today's competitive market, to increase the chances of commercial success, the product should: by reference to Cabbage Patch: be of superior quality and play value, at the same or at a lower retail price."
That is the setting for the three statements that follow thus:
First, (with underlining added):
"After four years of research and development, funded largely by [Mr. De Porteous] with the assistance of capital and loan funds from the South Australian Government and Innovation Management Pty. Ltd. the company has achieved these aims. It has now in hand, the product and the innovative manufacturing methods that achieve that product at low cost."
Given the overwhelming evidence of the lack of any existing capacity in Ophir to cope satisfactorily with the serious problems encountered to that point (and, as it happened, beyond then) with the method of production of the doll, these statements were at the very least, a half-truth; and thus capable of misleading. The statement "after four years of research and development..., the company has achieved these aims", suggests, without any hint of a qualification, that after four years' work, research and development had been successfully concluded and was under control. Clearly, on the evidence before his Honour, that was not the case.
It was equally misleading to proceed to reinforce the suggestion that Ophir "had achieved [its] aims", by then claiming that Ophir "has now in hand the product" and "the innovative manufacturing methods that achieve that product at low cost". (My emphasis)
The critical phrase here is "in hand". The primary (Macquarie) definition of "in hand" is "under control". But it must have been plain to those involved in the management of Ophir that in no sense could it be said that either the product or its methods of manufacture were under control. Many serious questions then needed to be squarely addressed. Their solutions, if ever achieved, were to be in the future.
Moreover, it was wrong, on the evidence before his Honour, to claim that Ophir had "in hand" arrangements with a manufacturer that "achieved" a cost that was "low". This sought to reinforce the statement in the Summary to the effect that Ophir then wished to commence to manufacture and market the dolls. But no firm "low cost" manufacturing arrangements were then in place. The evidence showed that Mr. Leung and Ophir's management had not then reached the stage of a definite commitment to one another on price.
It is true that there had been negotiations between Ophir and Mr. Leung over the previous 12 months. But nothing had been firmed up. As late as 18 October 1990, Mr. De Porteous wrote to Mr. Leung as follows:
"Dear Julian
I would like to extend to you an invitation to visit my company in Adelaide with the purpose of importing to you methodology in manufacturing processes with the view to setting up pilot plant in Hong Kong.
The Directors of OPHIR believe it is essential that you view the processes in Adelaide, as this will provide you with a full understanding of our requirements and assist greatly with your pricing.
We hope as a result of this forthcoming meeting AB3 Products will play a key part in manufacturing Toy products for OPHIR Australian Marketing Pty Ltd.
Would you please let me know your decision as soon
as possible."
Mr. Leung replied to Mr. De Porteous by letter dated 30 October 1990 (coinciding with the date of the provision of the Interest Document to Mr. Barratt) as follows:
"Dear Karl,
...please try to arrange appointments for me concerning our doll projects and some of the tooling works. And would like to meet Grant Tinney from Precise Tools and Orto-cat feeder people.
...
Please, let me know any information you need for the doll projects for example machines, rotation tools, possibility setting up factory plant in China or in Hong Kong. Costs of estimation of investments.
Karl, this is the time for us to achieve our goal!"
Moreover, Ophir's management knew that the final drawings for the frame were not completed until at least February 1991. By letter dated 5 February 1991, Mr. De Porteous wrote to Mr. Leung on the subject "final drawings for frame", saying, inter alia:
"I am very glad to say all the part drawings are complete for the doll frame tooling."
(2) The prospective investor then comes to this statement in the Interest Document:
"The company is now ready to commission production tooling, engage manufacturers, and to produce the dolls for product release in April 1991."
[My emphasis]
The explicit suggestion of the imminence of these activities was, on the evidence, for the reasons previously given, equally misleading.
(3) The false picture thus depicted was compounded by the next statement, that -
"All R & D is complete and manufacturing prices have been obtained". [My emphasis]
The use of present tense ("is complete") suggests, contrary to the real situation, that those actions had been concluded. From those words and from the other claims made in the Summary and elsewhere in the description of Ophir's operation to date, that all these activities had by then been successfully concluded, a false impression was created of Ophir's capacity at that time to proceed, effectively and immediately, to manufacture and then to achieve product release in the following April.
On the objective evidence available, and there was much of it, none of these statements could be justified at the time, or even considerably later.
As an illustration of the evidence of the absence of quoted prices at the time, reference may be made to Mr. South's letter to Mr. Leung dated 30 January 1991 as follows:
"Dear Julian,
Concerned that I have not received the information & prices requested or in fact any communication indicating the reason for this delay.
I am sure that you understood their importance and the need for them within time.
If you are concerned that PU foaming may not occur in China then you should talk to me about it.
The facts are that:
1.No decisions have been taken.
2.AB3 could not commit to the PU machine.
3.We are considering an offer by an Adelaide company to foam under contract. The machine would be theirs and be sited in Adelaide in their existing factory. Negotiations have not yet commenced.
4.To this time we have not been able to find an investor prepared to fund a PU machine to be sited in China.
5.We do not have the funds to purchase a machine in our own right and fund the additional working capital required in manufacture. Therefore the PU foaming will need to be carried out by subcontractors.
6.Suitable contractors have not been found in HK or China.
Julian, the information is essential and I need to know whether you are prepared to supply it and to continue to work with us. Please telephone me reverse charges on Adelaide 3885379 to discuss these matters.
(SGD.)MICHAEL SOUTH"
In another letter that day to Mr. Leung, Mr. South reiterated his concern and wrote as follows:
"...would you please confirm whether you are going to supply the prices and information requested and
if so when do you expect that reply to be."
It should be noted in the present connection generally that Mr. De Porteous elected not to give evidence, so that, in the absence of any good explanation why he was not called, it should be inferred that, if he had been called, his evidence would not have assisted his case.
In my opinion, the three statements, taken individually or collectively, were likely to mislead. Subject to the effect, if any, of the disclaimer, their publication amounted, in my view, to misleading conduct in trade or commerce.
Turning then to the disclaimer, it will be recalled that it was expressed in these terms:
"DISCLAIMER:
This document is prepared to supply some information on the background and activities of Ophir Australian Marketing Pty. Limited.
It is available only on direct request to the company and should not be construed as supplying appropriate information to enable an investment decision."
It is true that the disclaimer must be taken into account for present purposes as a part of the overall context. As Gibbs C.J. observed in Parkdale Custom Built Furniture Pty. Ltd. v Puxu Pty. Ltd. (1982) 149 CLR 191 (at 199): "The conduct of a defendant [in s.52 proceedings] must be viewed as a whole". But, for several reasons, the text of this disclaimer is not, I think, an answer to the present claim that the three statements were misleading.
In the first place, as O'Loughlin J. held and as Sheppard J. noted in Covcat, above, parties cannot, in effect, bargain away their statutory rights in this area through the medium of a purported general disclaimer of responsibility.
Secondly, in any event, the terms of the disclaimer would ordinarily be construed strictly against Ophir as the proponent of the disclaimer provision. By its own language, the provision distinguishes between the statement of "some information on the background and activities of Ophir...", on the one hand, and the statement that "the document...should not be construed as supplying appropriate information to enable an investment decision", on the other. It will be recalled that the statements found by his Honour to be misleading were located in that part of the Interest Document which dealt with the background and activities of Ophir. Moreover, as O'Loughlin J. held, the Summary contained estimates of projected profits which could fairly be described as material likely to be used in making an investment decision. It seems then that the disclaimer was directed towards this sort of material, that is, the projections, rather than specific background statements. (It will be remembered that his Honour was not persuaded that the
projections were misleading, and there is no appeal from this part of his judgment.) It follows, in my view, that on its true construction, the disclaimer did not operate on those parts of the Interest Document that were found to be misleading.
Thirdly, if it be necessary, I am also of the opinion that, as a matter of ordinary interpretation, the general words of the disclaimer should not be construed so as to read out of the document, in effect, the three specific representations made. Rather, it should be taken to be the intention of those drafting the Interest Document that, in the event of a potential situation arising from a contradiction of one part of the document (the specific description of Ophir's operations to date) by another, earlier part (the general disclaimer set out in the frontispiece), the later specific statement (the description of operations) was intended to prevail over the earlier general statement (the disclaimer).
In other words, the disclaimer does not invite the reader to ignore the three statements now in question.
In my opinion, the primary Judge was correct in approaching this question in the broad way he did. Looking from the point of view of a prospective investor, the three statements, taken in the context of the Interest Document as a whole, created a general impression, contrary to the facts, that the project had already been carried to an advanced stage
in the three respects stated. The evidence showed that such an impression was not justified, before August 1992, possibly even later. It is no answer to that case to seek to point to nuances and subtleties in the language used when, in all likelihood, a prospective investor would have failed even to notice them, let alone appreciate their significance.
(b)The second question: Should his Honour's findings on the other causes of action alleged be set aside?
As has been noted, other alleged causes of action were, in the alternative, relied on by Bazza and Mr. Barratt at first instance, specifically, negligence and a contravention of s.107 of the Companies Act. But, for practical reasons, it is not necessary for me to consider them. For all practical purposes, the measure of damages under the Trade Practices Act and under the Fair Trading Act is the same as the common law measure of damages in tort, whether in deceit or in negligence (see Wardley Australia Limited v Western Australia (1992) 175 CLR 514 at 526).
I would, however, add that, if I needed to address the issue of negligence as an alternative cause of action, I would not be persuaded that I should disturb his Honour's conclusion in this area. In particular, I do not think, as Mr. Wells contended, that Mr. Taylor should be exempt from liability to Bazza in negligence because his Honour was also of the view that Messrs. De Porteous and South should indemnify Mr. Taylor from liability because of their role in preparing the Interest Document. There was no contradiction in these separate conclusions. As has been noted, Mr. Taylor, who was Mr. Barratt's first point of contact in the affair, was well aware of the relevant terms of the Interest Document before Bazza decided to invest in reliance on the statements made in the document. Whatever may have been Mr. Taylor's actual state of knowledge of the truth or falsity of the three specific misrepresentations at the time, his Honour was justified in finding that Mr. Taylor failed to take reasonable steps to verify their accuracy. Nor, for the reasons already given, should the disclaimer assist Mr. Taylor.
I will return to aspects of this claim in negligence later, when dealing with the cross-appeal from the dismissal of the claim made by Bazza against Innovation.
(c)The third question: Was Mr. Taylor liable for the misleading conduct?
(i) The argument advanced for Mr. Taylor
Again, a substantial argument was advanced on behalf of Mr. Taylor. It was outlined to the following effect:
(1) The learned trial Judge held that the misleading and deceptive conduct engaged in "was the delivery to Mr Barratt of a copy of the Interest Document with its inaccurate statements" on 31 October 1990.
(2) Mr. Taylor represented an investor (Innovation) on the Board of Ophir. Ophir was not a respondent. Mr. Taylor did not prepare or contribute to the Interest Document. He did not authorise or cause the Interest Document to be issued. The Interest Document was prepared by Messrs. South and De Porteous. When Mr. Barratt spoke to Mr. Taylor about the project in October 1990, Mr. Taylor referred him to Mr. South. Mr. Taylor did not see the document before it was delivered to Mr. Barratt. Mr. Taylor did not refer to, or discuss, the document with Mr. Barratt or in his presence. Mr. Taylor was not present at any meeting when the document was discussed. Mr. Taylor did not know the Interest Document was inaccurate or misleading at any time before Mr. Barratt's decision to invest; and any inaccuracies thereafter were revealed equally to Mr. Barratt and Mr. Taylor. Mr. Barratt could not reasonably have understood the reference to Mr. Taylor in the Interest Document as anything more than a point of contact, which he did not use.
(3) The trial Judge could not have held Mr. Taylor liable for damages as an accessory, that is, as "a person involved" for the same reason that he rejected liability on that basis under the Trade Practices Act. Mr. Taylor was held liable as a principal in the first degree.
(4) Mr. Taylor did not authorise, prepare or deliver the Interest Document; the identity of the author of the Interest Document was fully disclosed to Mr. Barratt, and there were no other circumstances which could reasonably have indicated to Mr. Barratt that Mr. Taylor was "placing [himself] in the position of maker of the representation". Reliance is placed by Mr. Wells upon observations in Wilkinson v Katies Fashion (Aust) Pty Ltd (1986) 11 FCR 390; Gardam v George Wills & Co Ltd (No. 1 (1988) 82 ALR 415 at 427); and no question of joint conduct arises, Mr. Wells referring to Wilkinson v Katies Fashions, above, at 142 and to Barton v Croner Trading Pty Ltd (1984) 3 FCR 95).
(5) The "combination of factors" identified by the trial Judge fail to satisfy the statutory prescription ("...shall not...engage in conduct that is misleading..."); reference is made by Mr. Wells to s.46(3); Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477, per Bowen C.J. It is submitted that, in this area, silence on the part of the party charged with misleading conduct by virtue of a failure to act, requires a deliberate, conscious decision not to act by correcting a false impression otherwise created, before the existence of misleading conduct can be established.
(ii) Conclusions on the third question
I cannot accept that the foregoing analysis gives a full or fair view of the role actually played by Mr. Taylor in the affair. Once that role is appreciated, it must follow, I think, that O'Loughlin J. correctly held that Mr. Taylor had himself engaged in misleading conduct in trade or commerce, by reason of Mr. Taylor's involvement in the dealings that took place with Bazza and Mr. Barratt and, in particular, by virtue
of the publication to Mr. Barratt, and thus Bazza, of the three misleading statements.
Mr. Taylor, to whom Mr. Barratt first spoke in October 1990, consented to his name (as manager of Innovation) being placed on the Interest Document as a contact for further information. Before Mr. Barratt made his offer to invest in his letter dated 16 November 1990, Mr. Taylor knew that the Interest Document had been given to Mr. Barratt and that Mr. Barratt would rely on it. The conclusion was thus open on the evidence that Mr. Taylor's conduct misled Mr. Barratt when he allowed the Interest Document to be published to Mr. Barratt; so that in his dealings with Mr. Barratt, Mr. Taylor was, in effect, endorsing the project as being "in hand" in terms of the product and in terms of its method of manufacture; and thus (contrary to the facts) ripe for investment.
It is true that Mr. Taylor was not present at the early meetings between Messrs. De Porteous, South and Barratt. But Mr. Taylor was present at the meeting held on 14 November, that is, at a time before the decision was made by Bazza to offer to invest, made in the 16 November letter sent to Ophir by Mr. Barratt.
Moreover, there was ample evidence before his Honour that, although Mr. Taylor was not engaged in the day-to-day activities of Ophir, yet, as a non-executive director of
Ophir, he was, throughout 1990, well aware of what Ophir's management was doing to locate an investor.
As has been noted, it was Mr. Taylor, who had joined Ophir's board in March 1988, that arranged for Mr. South to be retained as management consultant to Ophir early in 1988.
The following minutes of the meetings of the board of Innovation which deal with Innovation's relationship with Ophir in 1990, indicate that Mr. Taylor (and Innovation itself - a matter to be considered later in dealing with the cross-claim) was well aware of Ophir's technical problems and delays, and of its need to attract an investor to the project:
•The minutes of the board meeting of Innovation held on 21 February 1990 stated that an investor from Hong Kong "has declined... .[and] $1m is required to get the project moving".
•The minutes for 28 March 1990 recorded that Ophir was "[c]ausing concern. ... Approximately $1M is required...Interest document is being prepared and will be heavily promoted".
•In the minutes for 27 April, it was stated that an "`interest document' is being finalised [by Ophir] for approaches to potential investors".
•Similar statements were made in the minutes for 30 May and 25 July 1990, indicating that Messrs. South and De
Porteous were involved in the preparation of the Interest Document.
•The minutes for the Innovation's board meeting on 29 August 1990 record that Ophir's "investment package...[was] still not complete".
As has been noted, the minutes of Ophir's board meeting on 24 October 1990 record that Mr. Taylor reported that Mr. Barratt was a "possible new investor".
In his evidence, Mr. Taylor said this: He received a final version of the Interest Document on 6 November 1990. Earlier, in a telephone conversation with Mr. South, he had agreed to his name, telephone number and address being stated in the document. On 7 November 1990, Mr. Taylor sent a copy of the Interest Document, without comment, to the other members of the board of Innovation. But before doing this, he had read it. (Importantly) when he met with Mr. Barratt on 14 November 1990, he assumed that Mr. Barratt had read the document.
In those circumstances, his Honour was, in my view, right to hold that the involvement of Mr. Taylor was, as a matter of fact, of a character that justified his being held jointly responsible, along with Messrs. De Porteous and South, for the three misleading statements made in the Interest
Document. In my opinion, the attempt by Mr. Taylor at the trial and before us to distance himself from the affair cannot be supported, even if his own evidence be accepted.
(d)The fourth question: Should Messrs. De Porteous and Taylor be held liable for amounts paid by Bazza after the initial instalment of $100,000 on 3 December 1990?
As has been noted, Bazza paid its initial instalment of $100,000 on 3 December 1990. It paid another instalment of $100,000 on 10 January 1991 and three instalments of $50,000 each on 18 March, 10 April and 1 May 1991. On 11 January 1991, Bazza deposited $150,000 with the Bank, to be later dealt with under the guarantee executed in May 1991. Further, in September 1991, Bazza advanced Ophir $100,000 to purchase the Gusmer machine.
(i) Mr. Taylor's contentions
The submissions made here on behalf of Mr. Taylor, and adopted on behalf of Mr. De Porteous, may be summarised as follows:
(1) Even if the actionable conduct caused Bazza to enter into a contract for the purchase of shares in Ophir, that conduct did not cause Bazza to perform that contract by paying the purchase price instalments between December 1990 and August 1991, and by providing a $150,000 guarantee.
(2) Mr. Barratt became a fee earning director of Ophir on 3
December 1990. Through his attendance at Board meetings and then his own involvement in the problems that beset this project, (details of which are mentioned below) he soon became fully aware that:
•Ophir was not ready, or was no longer ready, to commission production tooling, engage manufacturers or produce dolls for product release in April 1991.
•Ophir did not have in hand, or no longer had in hand, the product or the innovative manufacturing methods that achieved that product at low cost.
(3) When Mr. Barratt/Bazza came to make the March, April and May instalments of the purchase price and to give the $150,000 guarantee on 14 May 1991, the actionable representations were no longer effectively operating; further, or alternatively, Mr. Barratt had clear grounds (of which he had knowledge) for rescinding the share purchase contract. But he failed to seek legal advice and affirmed the contract by paying the instalments and giving the guarantee. His willingness to invest despite radical setbacks was wholly motivated by his enthusiasm for the innovative concept.
(4) The payment of those instalments and the giving of the guarantee could no longer be attributed to the conduct held by his Honour to be misleading, so that Bazza and Mr. Barratt
failed to act in reasonable mitigation of their losses.
(5) Details of the evidence relied on by Mr. Taylor here are as follows:
(A) Ophir was not ready, or was no longer ready, to commission production tooling, engage manufacturers or produce dolls for product release in April 1991; and Ophir did not have in hand, or no longer had in hand, the product or the innovative manufacturing methods to achieve that product at low cost.
(B) By 18 March 1991 (the date of payment of the third instalment, making a total of $250,000 paid to that date) Mr. Barratt had learned that:
•The high pressure plastics were still being developed.
•The dolls would not be fully manufactured in Hong Kong, because Mr. Leung (the proposed manufacturer in Hong Kong) would not purchase the necessary machinery.
•Ophir had been let down by Mr. Leung, a person upon whom Mr. Barratt had earlier placed great reliance.
•The proposal for total manufacture outside Australia and container lots to be brought into Australia was abandoned.
•There was trouble with manufacturing and everything was not set to go once money was obtained.
•A proposal had been sought and obtained from a prospective South Australian manufacturer (Mr. Brandenburg) who did not himself have expertise in the critical process (of "foaming") but proposed nevertheless to purchase the necessary machinery (including a Gusmer polyurethane high density dispenser).
•The proposal required Ophir to finance the initial purchase of machinery and underwrite initial production.
•Tools had not been produced.
•The proposal required Ophir to budget additional funds for premises and staff.
•There had thus been a radical change in manufacturing plans resulting, even then, in Ophir's focus changing from importing and marketing to financing an inexpert manufacturer in South Australia.
•Manufactured dolls would not be available for product release in April 1991. (Samples for a toy fair in April would require "foaming" to be carried out in Singapore).
•No dolls had been pre-sold.
(C) By 10 April 1991 and 1 May 1991 (the dates of payment of the next two instalments of purchase price of $50,000 each) Mr. Barratt had also learned that:
•Samples for the April toy fair had not been forthcoming.
•An order for the Gusmer machine had not yet been placed, and a machine tested by Mr. De Porteous in Singapore had
revealed problems in its application which needed consideration and adaption.
•No factory premises had been secured.
•The doll moulds were not suitable for latex foaming.
•The licensor had not yet approved final artwork, decoration/costumes and accessories.
•Uncertainty as to which organisations were responsible for which part of the production.
•There had been a change in projection from 30,000 units per month to 1000 units per month.
•There were new distribution costs.
•Trial chemical preparation was now required.
•Costs of production had increased.
(D) By 14 May 1991 (the date of execution of the $150,000 guarantee) Mr. Barratt had also learned that it was expected that Ophir would "be under pressure for funds" by August 1991 and September 1991.
(ii)Submissions made on behalf of Bazza and Mr. Barratt on the fourth question
On behalf of Bazza and Mr. Barratt, Mr. Morcombe Q.C. sought to support the conclusion of the primary Judge that Bazza should be compensated for losses suffered by it up to August 1991. However, as has been noted, Bazza has now cross-appealed from so much of his Honour's judgment as found
that Bazza should not be compensated for any loss suffered as a consequence of lending Ophir $100,000 in September 1991. The cross-appeal is advanced in two ways, one put on a "causation" basis, the other in terms of a "mitigation" argument, as follows.
With respect to the "causation" aspect, it is said that the payment of the further $100,000 by the cross-appellants in September 1991 was a natural consequence of being induced into the contract to purchase shares in November 1990; and that, "but for" the representation made in 1990, the cross-appellants would not have been in a position of needing to advance further monies.
With respect to the "mitigation" aspect, it is said that the cross-appellants had a duty to mitigate their loss in September 1991. The advance of a further sum of $100,000 was a reasonable step to take at that time. In September 1991 all parties to the litigation considered that such advance was necessary to retrieve Ophir's position. With hindsight, it was inevitable, given the real state of facts compared to the three relevant misrepresentations, that even after Mr. Barratt had put in $500,000, Ophir was going to run out of money. Mr. Taylor cannot now say the further advance of $100,000 by Mr. Barratt in August 1991 was unreasonable, when Mr. Taylor at the same time and on the same facts, was advising Innovation
to advance an identical sum. If Mr. Barratt had not advanced the further sum, the submission would have been put against him at the trial that he had failed to mitigate his loss.
In answer to the appellants' submission that at some time in 1991, Mr. Barratt knew that he had not been told the truth, liability should cease for further advances after that point, the cross-appellants say they were never told the truth about the substance of the misrepresentations, and were always told that the "then-current problem" was "fixable". In any event, that is not the test in mitigation. The correct question is: have the appellants discharged their onus of showing the actions of the cross-appellants were unreasonable?
(iii) Conclusions on the fourth question
It will be convenient to consider the position before, and after, August 1991 separately.
(A) Liability for loss suffered before August 1991
As has been noted, the appellants seek to make much of the circumstance that at an early stage, and no later than the Ophir board meeting held on 10 January 1991, Mr. Barratt came to know of the full extent of Ophir's difficulties by virtue of his appointment to the Ophir board.
The minutes of the Ophir board meeting held on 3 December 1990 recorded the appointment of Messrs. Barratt and
South as directors, and the allotment of the 350,000 shares to Bazza, payable by the instalments previously mentioned, the first instalment of $100,000 then being tendered.
The minutes also recorded the following about the progress of operations:
"CRITICAL PATH
SCHEDULE:IT WAS RESOLVED that Mr South and Mr DePorteous would attend, as a matter of priority, to the preparation of a critical path schedule of matters to be attended to from 3 December 1990 to the launch of the product on the market.
BUDGET:IT WAS RESOLVED that the Chairman review the budget and detail it in such a form in order that the company's actual performance be compared.
BUSINESS PLAN: It was acknowledged that the majority of work had been done on the information to be contained in a Business Plan. IT WAS RESOLVED that the Chairman would liaise with Mr Hudson in order to consider the appropriate format for a Business Plan.
...
TECHNICAL AND
MARKETING DIRECTORS
REPORT:Mr De Porteous advised the meeting that the NSW Society for Crippled Children and the Spastic Centre of NSW have approved the patents to be used for the doll production.
He also said that the display at Technology Park the previous weekend was successful and that the Business Review Weekly Magazine wished to write and publish an article about the company.
The high pressure plastics suitable for doll production were being developed at the moment."
Thus there was nothing in this record which should have indicated to Mr. Barratt that there were major operational problems at that stage.
The Ophir board minutes for the meeting held on 10 January 1991 (attended by Messrs. South (Chair), De Porteous, Barratt and Taylor) record that Mr. Barratt handed over (i) another cheque for $100,000 as the second instalment in the share subscription; and (ii) a cheque for $150,000, which was to be placed with the Bank as a term deposit, with a view, subject to what followed in the minutes (see below), to securing Bazza's guarantee to the Bank previously mentioned. The minutes went on to record the following discussion of Ophir's operations:
"BUSINESS PLAN: The Chairman advised that this had not been attended to, but he considered the information document contained a significant amount of the information.
...
CHAIRMAN'S OVERVIEW: The Chairman reported on his recent trip to Hong Kong and Malaysia with Mr DePorteous and advised that Latex negotiations were successful, however, they ran into some problem with the production side in Hong Kong, but he still considered them on track.
TECHNICAL REPORT: Mr. De Porteous tabled his report ... and spoke to it.
.He said he would pursue correspondence with Ansell regarding a licensing arrangement for them to use the company's technology for glove reproduction.
.He also commented that he did not see any reason why the samples would not be ready for the Sydney Toy Show in April. EURO TECH [i.e. Mr. Leung's company] had guaranteed completion of the revised hinge by 5 March 1991, and that there had been only a slight delay on producing drawings for the set up of the Tooling.
They also viewed a machine in Singapore `Gusmer' which was considered the most appropriate polyurethane high density dispenser. Mr. DePorteous reported that originally Julian Leung from EURO TECH had agreed that his company would purchase the machine to enable the units to be `foamed' in China. Now they would not make available the capital to do this, but suggested Ophir Australian Marketing
Pty Ltd own their own machine for this purpose.
...
EURO-TECH
HONG KONG: The Board expressed concern that Euro-Tech would not commit themselves to the polyurethane dispensing machine. Mr Barratt informed the meeting that what finally persuaded him to invest in the company was Julian Leung's assurance that the process would go ahead with no problems and that Mr DePorteous' association with him would assure this. Mr Taylor pointed out that the foaming was one of the most important aspects of the production process and that he would feel uncomfortable with someone who did not specialise in the foaming process.
Mr. Barratt advised the meeting that until this matter was resolved to his satisfaction he would not give the company his $150,000 guarantee.
...
NEXT MEETING: IT WAS RESOLVED that a special meeting would be convened within two weeks to discuss the polyurethane machine. The Chairman would set the date and advise as soon as the appropriate information is in hand."
It follows from this record, as O'Loughlin J. put it, that "[d]oubts about the progress of the project ... surfaced as early as that meeting". But I also agree with O'Loughlin J. that, at least at that stage (10 January 1991) it was reasonable for Bazza to continue to perform its contractual commitments. It is to be borne in mind, as his Honour observed, that it is a difficult task to repudiate, even lawfully, a contractual commitment; and it is even more difficult when (as here, examined as at 10 January 1991) "the climate is one of continuing enthusiasm and confidence from the main players".
Reference should next be made to subsequent developments.
Recorded in the minutes of the Ophir board meeting held on 21 February 1991 is the following:
"TECHNICAL & Report by DE PORTEOUS tabled with
MARKETING REPORT: copies for the Board and for the
Minute Book.
Sample Dolls for Toy for Toy Fair [Sydney April Toy Fair] to be foamed in Singapore. Critical is completion of HP tooling in Hong Kong. DE PORTEOUS expressed some concern that they may not be ready in time, even though J LEUNG has indicated they will be.
Production after the Toy Fair to meet orders is dependent on obtaining suitable polyurethane foaming contractor. ...
Promotion: Meeting to discuss general issues to be arranged with BARRATT, DE PORTEOUS, SOUTH, & ORIANA DE PORTEOUS at later date when pressure is off pre production tooling etc."
The technical and marketing director's report prepared by Mr. De Porteous stated:
"Sydney TOY FAIR APRIL 11th to 16th will be tight, however we will be there with pre-production samples, packaging and display material."
He also noted that the shape of the fingers had been improved in order to eliminate webbing between the doll's fingers and "will be ready for sample production before 15th March - all on schedule."
Mr. South also presented the schedule of component costing for the doll if it were to be manufactured in South Australia and Mr. Brandenburg's draft proposal prepared on 23 January 1991 regarding the purchase of the Gusmer machine.
The board of Ophir next convened on 6 March 1991. The minutes record that Mr. Brian Brandenburg was present and explained his intention to create a new company ("BBM"), in order to purchase the Gusmer machine. However, the board indicated its concern at Mr. Brandenburg's lack of expertise in polyurethane moulding and the minimal financial resources he was committing to BBM. Brandenburg assured the board that "by the time production occurred in earnest he would have the required expertise." It was agreed that Mr. South should advise Mr. Brandenburg of the board's "approval in principle" and that the appropriate documents be drafted.
At the Ophir board meeting held on 14 March 1991, Mr. South advised the board:
"... that preparations were on track for attendance at the Toy Fair. Samples would still be foamed in Singapore and that the HP plastic tooling looked as though it would be ready in time."
On 18 March 1991, Bazza forwarded a cheque for $50,000 to Ophir, being the third instalment of the subscription monies.
According to the minutes of the Ophir board meeting held on 10 April 1991, copies of the Agreement signed by the Brandenburgs were tabled and "it was RESOLVED that the agreement be executed by Ophir ...[and that] the S'Pore Gusmer machine be purchased." Mr. South also reported on the reasons why the company did not attend the Toy Fair and presented another schedule which "aimed at getting product into store in late June." It was also reported and recorded in the minutes that Mr. De Porteous had completed and lodged all patent requirements. Mr. Barratt reported on an idea for promoting the doll.
A further $50,000 representing the fourth instalment of the subscription monies was received at the meeting on 10 April from Bazza Investments.
A "Preliminary Technical Director's Report" was also tabled and spoken to by Mr. De Porteous. The document stated that communications and assistance from Julian Leung of EURO-TECH and A.B.3 Products is good and would be supporting Ophir in HP Plastics; moulding; costumes; packaging; and printing and that AB3 Products "will be responsible for coordinating
all the above components, assembly and consolidating ready for shipping to Australia." On the doll skins it reported the following:
"LATEX SKINS AND FORMERS
Production consideration and initial tests have been carried out to increase current 5,000 units per month to 1,000,000 plus, units per month. Tests were carried out with our formers mounted to a chain machine and preliminary tests proved satisfactory. Note: Problems were encount[er]ed prior to departure from Adelaide with former moulds - electroplating was no where near thick enough. Two Former moulds were made to ensure back up. Of the two we were left with One which was repaired and modified. This former was to be used here in SA using Netta as a sub-contractor to produce a sufficient quantity of formers to be used in Malaysia to produce sample skins. Netta at the last minute backed out of this agreement and let us down. Reasons for backing down still not clear. A back up to this problem was then put into place and the mould accompanied me to China to carry out moulding of PVC formers. The China factory using the mould found difficulties due to the thinness of plating and much time was spent varying temperatures and formulers [sic] to achieve a suitable result. End result - Formers were made but the PVC surfaces were still scorched and not suitable for Latex forming."
The report described the unsuccessful attempts of Skellerup to remove the damaged surfaces of the China produced formers and their attempt to use other experimental skins for further testing. It also provided an overview of the testing of the Gusmer machine in Singapore. After several attempts, "it was found that [they] had established a foundation formula provided by DOW CHEMICALS and foam flowed freely to the extremities of the mould." The Polyurethane machine also "tested satisfactor[ily]" for the moulding purposes although there were still some small problems. Mr. De Porteous concluded that they were not yet in a position to place an order for a polyurethane foaming machine; that an assessment of final specifications to HP Plastics tuning and stops had to be made; that the polyurethane foaming valve had to be remedied and the vacuum facility incorporated; and approval was still being sought for final artwork, decoration/costumes, and accessories from the licensors.
Despite missing the Sydney Toy Fair again that year, Mr. De Porteous expressed his opinion that the "BUSH BABIES [were] certainly still coming to Life and they will be impressive by work done to ensure their quality." On 16 April 1991, Mr. De Porteous wrote to Mr. Leung requiring some information on the moulds so as to enable him to complete their "final tuning".
On 1 May 1991, Mr. Barratt forwarded another cheque for $50,000 to Ophir which amount represented the final instalment of subscription monies.
In his oral evidence, Mr. Barratt stated at this stage that he believed that the production was on track. The trial Judge found that Mr. De Porteous had continuing faith in the program throughout 1991, a faith that his Honour found to be infectious and shared by Mr. Barratt.
At the Ophir board meeting held on 6 & 7 May 1991, as recorded in its minutes, Mr. South tabled the financial reports, and in the light of them, the board noted that "...in all scenarios the company would be under pressure for funds in at least August and September 1991." Mr. Barratt advised that now that "the South Austral[ia] matter was close to being resolved" he would make a $150,000 line of credit available to the company. According to the tabled draft cash flow statement, the incomings for Ophir were projected at $15,000 per month as of August 1991.
On 14 May 1991, Bazza executed the Deed of Guarantee in the amount of $150,000 in favour of the Bank. Exposure under that guarantee crystallised later when, as has been said, it was called up by the Bank in December 1991 and Bazza paid $150,000 in satisfaction of its obligation under it.
In my opinion, the appeal from this part of his Honour's judgment, that is in respect of losses suffered up to the middle of 1991, must fail.
The information recorded in these minutes of the Ophir board meetings in the final half of 1991 demonstrates that no black or white picture of Ophir's operations could have emerged from Mr. Barratt's point of view. From his angle of vision, what appeared must have seemed equivocal: On the one hand, there had been changes in direction, with Mr. Leung dropping out and other, yet unsolved, problems surfacing. On the other hand, management continued to express optimistic views. In that state of uncertainty, I agree with O'Loughlin J. that, to this point of time (that is, by the middle of May 1991), it was not reasonable to expect that Bazza should decide to withdraw its support for the project.
(B)Liability for losses suffered from and after August 1991
But, as we have seen, his Honour took a different view of Mr. Barratt's perspective of events as from August 1991. By then, significant financial pressures were building up on Ophir.
According to the minutes of the Ophir board held on 27 June 1991, the technical director's report predicted that sample dolls would be available from 15 July 1991; that it would be selling into stores from 29 July 1991; that the initial supply to stores would be from 26 August 1991; and that the public release would take place on 4 September 1991. However, it was also noted that these dates were contingent "on obtaining a suitable electroplated wax to serve as a master for skin former production".
The financial report then tabled by Mr. South revealed this:
"Current cash flow indicated that company may not need further injection of funds as had been predicted at last meeting. Incoming funds from the lease of the Gusmer machine was essential however."
The minutes went on to state that:
"Concerns were expressed about the ability of BBM [Mr. Brandenburg's company] to obtain the necessary funding.
Short term funding for working capital once sales are made could be by way of factoring individual invoices. Depending on circumstances Barratt could be interested in this.
Current Balances:
Commonwealth Current acct. ($70029)
Westpac Cash Mgt $1008
Foreign Exchange US$180"
The technical director's report tabled at the Ophir board meeting which convened on 8 August, adjourned, and then reconvened on 15 August 1991, stated that as regards the doll's production, there were "[n]o insurmountable problems envisaged." The revised estimate for the completion of sample dolls was "hopefully" by 23 August, selling by late September, with a release date about the second week of October 1991. A firm release date was not to be set until samples were in hand and production "assured".
On the question of finances, the minutes record the following discussion:
"Unlikely that Brandenburg will be able to obtain funding from outside sources, therefore creating severe cash flow shortage for Ophir. Commonwealth Bank had been approached for a leasing quote on behalf of Ophir but they would require Directors Guarantees and satisfactory security. RESOLVED that John Taylor approach his Board to ascertain whether they would advance approximately $100,000 against Convertible notes secured by Gusmer Machine and Barry Barratt to discuss with Bob Hudson the possibility of lending a similar amount secured in the same manner. Both parties to report at a reconvened meeting scheduled for 5pm in 7 days time, same venue. If monies were obtained then Ophir would enter into a lease with Brandenburg.
RESOLVED that a reasonable likelihood existed that the above monies would be advanced and management
was instructed to proceed with expenditure that would delay product launch but to delay non critical expenditure until matters resolved."
When the meeting reconvened the following week on 15 August, Mr. Taylor reported that Innovation was prepared to lend $100,000 subject to reasonable terms to be negotiated, and Mr. Barratt reported "that it was most likely that he would be in a position to advance similarly and that he would resolve his position on the next day." The minutes further record:
"RESOLVED that SOUTH & BARRATT negotiate with the Bank as necessary to achieve required funding... ."
As has been seen, in September 1991 Bazza and Innovation each lent Ophir a further $100,000, secured by charges over the Gusmer machine; and $25,000 of each amount was repaid in March 1993 on realisation of the security.
With respect to the August representations, O'Loughlin J. said:
"[Mr. Barrett] had seen the promises of production of the Bush Baby Doll come and go. By August 1991 he knew that the representations that had induced him to invest in November 1990 had been proved inaccurate; by August 1991 it was an entirely different situation. I have no doubt that Mr Barratt was prepared to invest a further $100,000 - as was Mr Taylor - because, notwithstanding the delays and disappointments, Mr Barratt had become as enthusiastic as Mr Taylor and the others about the project. He was not relying, in a meaningful sense, on anything said to him by any of the respondents when he made that decision to invest a further $100,000 into the venture. He was then still confident, as a result of his own knowledge, in the ultimate success of the venture. For example [in] his evidence-in-chief Mr Barratt said that in August 1991 he had no `significant doubts about the future of the project'. It would, in my opinion, be unreasonable to attach blame to any of the respondents and to hold them accountable for the applicants' lost $75,000."
It will be recalled that the cross-appellants sought to put their challenge to the conclusions of the primary Judge on two grounds: (a) a "causation" basis; and (b) a "mitigation" footing.
So far as the "causation" argument is concerned, the cross-appellants must confront the substantial barrier that, on the question of reliance by Bazza in August 1991 on what was said to Mr. Barratt in November 1990, his Honour has found in the above passage, as a matter of fact, that there was no reliance; that is to say, no relevant causal connection. There was, without doubt, some evidence upon which such a finding was open to his Honour. It is not, in my view, a finding which should be disturbed by an appellate court, given especially the advantage that the trial Judge enjoyed in seeing the witnesses, in particular Mr. Barratt. I also have taken into account the substantial amount of contemporary documentation that was in evidence, of the formidable problems faced by Ophir by August 1991, which material, in writing, must have been drawn to Mr. Barratt's attention as a director of Ophir, even if he was only a non-executive director.
Turning next to the "mitigation" argument, it will be remembered that, in this area, the case pleaded by the cross-appellants in their statement of claim was that the August (1991) representations, in confirming the earlier (November 1990) representations, were equally misleading. Significantly, this part of the case was not put on a "mitigation" footing. If it had been, there would have been a number of important consequences. For one thing, instead of pleading the August representations as a separate cause of action, as was done, the circumstances surrounding the making of the loan and its loss (except as to the sum of $25,000 recovered) would have featured in the cross-appellants' case, not as a free-standing cause of action, but something quite different, namely an element of damage flowing from the earlier representations.
The framing of a case in this way would have had important adjectival consequences for the parties. The onus of proof would have been different. In seeking to make on the August representations the case they did plead, the cross-appellants bore the onus of proof. But if the cross-appellants had also, perhaps in the alternative, sought to rely on the "mitigation" point, the onus of proof there would
have been reversed (assuming that the cross-appellants could make out a prima facie case of damage directly flowing from the original inducement which included the loss of the sum of $75,000). On the issue of mitigation, the onus would then have shifted to the other side to show that they should not be held responsible to that extent (see, e.g. Monroe Schneider Associates (Inc) v No. 1 Raberem Pty. Ltd. (1991) 33 FCR 1 per Burchett J. at 17).
As has been said, the "mitigation" point was not pleaded. Given its important adjectival consequences, at least in terms of the onus of proof, it should, in my view, have been specifically pleaded if it were to be relied on at first instance or before us. It was a "material fact" for the purposes of O.11 r.2(a) which should have been specifically stated in the cross-appellants' statement of claim. This was so for two reasons: (a) to provide the other side with the opportunity of meeting the case against them as a matter of procedural fairness; and (b) to define the issues for the benefit of the parties and the Court (see Banque Commerciale SA en Liquidation v Akhil Holdings Ltd. (1990) 169 CLR 279, per Mason C.J. and Gaudron J. at 286-7).
The general principles of pleading in this area are stated in Halsbury's Laws of England, Vol.12 (at 482-3) as follows:
"In his statement of claim the plaintiff must give
particulars of his special damage, but he need not give particulars of his general damage unless the damage is of a kind which is not the necessary and immediate consequence of the defendant's wrongful act. Thus if he proposes to allege that there are special circumstances whereby he has suffered damage which would not ordinarily flow from the defendant's wrongful act he must plead those circumstances so that the defendant is not taken by surprise."
...
Where a plaintiff is obliged to plead his damage, the degree of particularity required will depend upon the fact of each case. The object of pleading is to give the defendant notice of the case which he has to meet so that he can prepare for trial and if necessary make a payment into court. Although minute accuracy is not expected the pleading should make clear what measure of damage is relied on, and if the plaintiff is able to base his claim on a precise calculation he must give the defendant access to the facts which make that calculation possible."
As to making a "global" claim, see Wharf Properties Ltd. v Eric Cumine Associates (No. 2) [1991] 52 BLR 1 per Lord Oliver at 20-1, discussed by Dr. Peter MacMillan, "Pleading Causation and Damages" (1995) 13 Aust. Bar Rev 233 at 238; see also Scottish Pacific Business Finance Pty. Ltd. v Soundstage Australia Ltd. (1993) ATPR 41-273 per French J. at 41,677). See further, The Honourable Mr. Justice Byrne, "Total Costs and Global Claims" (1995) 11 BCL 397 (at 411-4); cf. Sew Hoy & Sons Ltd. v Coopers & Lybrand [1996] 1 NZLR 392. But no "global" claim was made in this connection.
It appears that, in a written submission provided by counsel for the cross-appellants to O'Loughlin J., a brief reference was made by the cross-appellants to the "mitigation" aspect, apparently as an alternative argument. But it does not appear that the submission was developed before his Honour, who did not deal with it in his reasons. In my opinion, if it were to be relied upon, it should have been pleaded. It would be unfair to allow it to be raised now. This part of the cross-appeal should be dismissed.
(e)The fifth question: should Innovation also have been held liable?
His Honour gave these reasons for holding that Innovation was not liable:
"In my opinion, the applicants have not made out a case against Innovation Management; its only connection to the applicants was through Mr Taylor. In October 1990, when Mr Taylor had the telephone conversation with Mr Barratt, he was speaking in his capacity as managing director of Innovation Management. But thereafter, and until the decision to lend money to Ophir in September 1991, Mr Taylor's connection as from 14 November 1990 with the applicants was exclusively in his capacity as a director of Ophir. The evidence is not sufficient to point to Mr Taylor involving Innovation Management in any of the representations subsequent to that first telephone conversation. The name of Innovation Management does not even appear in the Interest Document except as part of Mr Taylor's address."
With respect, I have difficulty accepting this analysis.
In the first place, in its defence, Innovation made the following admissions: (1) Mr. Taylor was Innovation's managing director; and at all material times, Mr. Taylor was acting for and on behalf of Innovation. (2) Innovation was aware, or ought to have been aware, that Mr. Taylor held himself out to Mr. Barratt as acting for and on behalf of Innovation. (3) Innovation was responsible for the acts of Mr. Taylor as subsequently alleged in the statement of claim.
These admissions accorded with the evidence. In my opinion, they were correctly made.
In my view, the following further factors were significant as indicating that Innovation was (a) primarily liable for its own conduct and (b) in any event, vicariously responsible for the acts of Mr. Taylor, whether under the general law, or by virtue of the operation of s.84(2) of the Trade Practices Act:-
•In the Interest Document, prospective investors were informed, with the consent of those involved, that one of the sources of further information was Mr. Taylor, who was then (accurately) described, not in any individual or personal capacity, but as "Manager Innovation Management Pty. Limited". (Emphasis added) The role of Innovation in the project was confirmed by the statement in the Interest Document describing Ophir's operations where, as has been noted, reference was made to the four years of R. and D., "funded largely by [Mr. De Porteous] with the assistance of capital and loan funds from the South Australian Government and Innovation Management Pty Ltd... ."
•Innovation was commercially involved in Ophir's venture and had a real interest in securing the introduction of another investor. Innovation had already committed $75,000 of its own funds to the project and was to commit another $100,000 in September 1991. Innovation was also entitled to a royalty on Ophir's sales and this provided a further incentive to it to achieve funding for Ophir.
•As his Honour found, Mr. Taylor represented Innovation on Ophir's board. In the case of a "representative" director, the law countenances the notion of "dual loyalty" (see Re Broadcasting Station 2GB Ltd. [1964-5] NSWR 1648; Ford's Principles of Corporation Law, 6th ed. (H.A.J. Ford and R.P. Austin) at 464). Thus Mr. Taylor owed loyalty to both Innovation and Ophir. He was, however, the managing director of Innovation with the authority of that office to bind Innovation. He was not, however, the chief executive of Ophir. In other words, Mr. Taylor's primary interests and responsibilities were with Innovation, rather than Ophir.
•The minutes of the meetings of the board of Innovation previously mentioned indicated that, before Bazza decided to invest, the board of Innovation knew of (a) the progress (or otherwise) of development of the doll; (b) the production of the Interest Document and its contents; and (c) the introduction of Mr. Barratt as a prospective
investor.
In those circumstances, in my view, it should be held that Innovation was either primarily or vicariously responsible for the misleading three statements made in the Interest Document and, for the reasons given in the case of Mr. Taylor, should it be necessary, also liable in negligence. As has been said, in the case of Messrs. De Porteous and Taylor, the measure of damages will be the same in tort as under the statute. To this extent, the cross-appeal should be allowed.
A CLAIM BY INNOVATION FOR INDEMNITY OR CONTRIBUTION?
As has been said, O'Loughlin J. held that Mr. Taylor was entitled to indemnity from Messrs. De Porteous and South. There is no appeal from this order. Since, in my view, Innovation should also be held liable to Bazza, liberty should also be reserved to Innovation, if so advised, to apply to a single Judge for indemnity or contribution.
COSTS
On the dismissal of the appeals, costs should follow the event.
On the allowance of the cross-appeal in part only, there should be no order for costs, so as to reflect the circumstances that each side succeeded, and failed, on one
issue.
ORDERS
I propose that the following orders be made:
Appeals dismissed, with costs.
Cross-appeal allowed in part. Set aside the orders made at first instance on 12 December 1995, other than orders 2 and 4 (with respect to indemnity). In lieu thereof, order that judgment be entered in favour of the first cross-appellant against the first cross-respondent, the second cross-respondent, the second appellant and Michael Lawton Harrington South in the sum of $700,000, inclusive of pre-judgment interest, together with the costs of the proceedings at first instance. Cross-appeal otherwise dismissed. Make no order for the costs of the cross-appeal.
Reserve to the first cross-respondent liberty to apply to a single Judge of the Court, if so advised, for indemnity or contribution in respect of its liability under the judgment against it in 2, above.
I certify that this and the preceding eighty (80) pages are a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Beaumont.
Associate
Dated: 28 August 1996
STATEMENT OF BEAUMONT J
(Nos. SG 114 of 1995; SG 9 of 1996)
Upon these matters being listed for delivery of judgment, the legal representatives of the parties indicated that they wished to be heard on interest and on costs. In the circumstances, I will direct that the orders of the Court not be formally entered until further order; and that the parties have liberty to make submissions in writing on the questions, if any, of interest and costs, within 28 days.
28 August 1996
IN THE FEDERAL COURT OF AUSTRALIA )
)
SOUTH AUSTRALIA DISTRICT REGISTRY )
)
GENERAL DIVISION )
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT
OF AUSTRALIA
No SG 114 of 1995 BETWEEN: JOHN DONALD STIRLING TAYLOR
Appellant
AND:BAZZA INVESTMENTS PTY LTD AND DAVID JOHN BARRATT
Respondents
AND BETWEEN: BAZZA INVESTMENTS PTY LTD AND DAVID JOHN BARRATT
Cross-appellants
AND:INNOVATION MANAGEMENT PTY LTD
First cross-respondent
JOHN DONALD STIRLING TAYLOR
Second cross-respondent
No SG 9 of 1996 BETWEEN: KARL MARTIN DE PORTEOUS
Appellant
AND:BAZZA INVESTMENTS PTY LTD
AND DAVID JOHN BARRATT
Respondents
Coram: Beaumont Spender and Branson JJ
Place: Sydney (heard in Adelaide)
Date: 28 August 1996
REASONS FOR JUDGMENT
SPENDER J.
I agree with the reasons for judgment of Beaumont J. and the
orders he proposes.
I certify that this and the preceding page is a true copy of the Reasons for Judgment of the Honourable Justice Spender.
Associate:
Dated: 28 August 1996
IN THE FEDERAL COURT OF AUSTRALIA )
)
SOUTH AUSTRALIA DISTRICT REGISTRY )
)
GENERAL DIVISION )
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT
OF AUSTRALIA
No SG 114 of 1995 BETWEEN: JOHN DONALD STIRLING TAYLOR
Appellant
AND:BAZZA INVESTMENTS PTY LTD AND DAVID JOHN BARRATT
Respondents
AND BETWEEN: BAZZA INVESTMENTS PTY LTD AND DAVID JOHN BARRATT
Cross-appellants
AND:INNOVATION MANAGEMENT PTY LTD
First cross-respondent
JOHN DONALD STIRLING TAYLOR
Second cross-respondent
No SG 9 of 1996 BETWEEN: KARL MARTIN DE PORTEOUS
Appellant
AND:BAZZA INVESTMENTS PTY LTD
AND DAVID JOHN BARRATT
Respondents
Coram: Beaumont Spender and Branson JJ
Place: Sydney (heard in Adelaide)
Date: 28 August 1996
REASONS FOR JUDGMENT
Branson J
I have read in draft form the reasons for judgment of
Beaumont J. I am in agreement with his Honour's reasons and proposed orders.
I certify that this and the preceding page is a true copy of the Reasons for Judgment of the Honourable Justice Branson.
Associate:
Dated: 26 August 1996
No SG 114 of 1995
Counsel for the appellant and the
cross-respondents : Mr J Wells QC with him Mr M Evans and Mr R Bonig
Solicitors for the appellant and
the cross-respondents : Fountain & Bonig
Counsel for the respondent and
the cross-appellant : Mr N Morcombe QC with him Mr J Watts
Solicitors for the respondent and
the cross-appellant : Phillips Fox
No SG 9 of 1996
Counsel for the appellant : Mr J Cudmore
Solicitors for the appellant : Ward & Partners
Counsel for the respondent : Mr J Morcombe QC with him Mr J Watts
Solicitors for the respondent : Phillips Fox
Hearing Date : 8,9 May 1996
Date of Judgment : 28 August 1996
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