Ward, S. & S.P. v Premier Ice Skating Rink Pty Ltd
[1986] FCA 83
•13 MARCH 1986
Re: SELWYN WARD and SHARON PATRICIA WARD
And: PREMIER ICE SKATING RINK PTY LTD; LIONEL FINKELSTEIN; WILLIAM MOSER and
DESMOND FIRMAN
No. WA G58 of 1983
Trade Practices - Practice and Procedure
COURT
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIAN DISTRICT REGISTRY
GENERAL DIVISION
Muirhead J.
CATCHWORDS
Trade Practices - claim under s.52 - misleading or deceptive conduct - sale of ice-skating rink business - conduct of business Agent - newspaper advertisement a material factor - advertisement specified turnover and overheads - profit potential misleading - meaning of "overhead" - reliance on advertisement - damages claimed under s.82 - lease obligation consequent on purchase - lessor claiming arrears of rent in separate action - damages claimed for loss of capital, acquisition expenses, interest.
Practice and Procedure - damages claimed for loss incurred as a result of lessor enforcing lease obligation on purchaser - separate legal action continuing - consideration of claim for damages based on applicants' liability to landlord (if any) adjourned.
Cases referred to:
Trade Practices Act 1974 s.52(1), s.75B and s.82(1)
Smolonogov v. O'Brien (1982-1983) 44 ALR 347 at 363
Brown v. The Jam Factory Pty Ltd (1981) 53 FLR 340 at 348 and 349
Yorke and Another v. Ross Lucas Pty Ltd and Others (1982-1983) 45 ALR 299
Yorke and Another v. Lucas (1983) 49 ALR 672 and 682 Corbridge v. The Bakery Fun Factory Fun Shop Pty Ltd and Others (1984) ATPR 45, 677 at 45, 688
HEARING
PERTH
#DATE 13:3:1986
ORDER
Declaration:
(a) that the third respondent was directly concerned in the first respondent's contravention of s.52 and as a person directly concerned is liable to pay the applicants the loss or damages they thereby sustained.
(b) that liability against the fourth respondent has not been established.
2. Declaration (without entering judgment for those amounts) that the applicants have suffered damages as follows:-
(a) loss of capital - $25,000.00
(b) acquisition expenses - $1,493.00
(c) interest on overdraft - $880.00
3. Declaration that the applicants are entitled to interest (payable by the third respondent) at the rate of 12% per annum on loss of capital and acquisition expenses from 31 March 1981 until date of judgement.
4. Further consideration of the claim for damages resulting from the applicants' liability (if any) to the landlord of the premises pursuant to lease dated 28 April 1981 with liberty to the applicants and the third respondent to tender further evidence and argument on this issue.
5. Application adjourned generally with liberty to the parties to apply upon 14 days notice.
Costs reserved.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
The applicants claim damages arising out of their purchase of an ice skating rink business in Perth in March 1981. The first respondent was the vendor of the business, the second respondent its director. The third respondent (Moser) was the business agent advertising the business on instructions from the vendor. He was the employer of the fourth respondent (Firmin) who was a salesman. During the time which has elapsed since the sale was negotiated, almost five years, the second respondent (Finkelstein) died and the vendor company (of which he was manager) has apparently become defunct. Prior to the hearing the applicants recovered $5000 in settlement of the action against Finkelstein or his estate, and the action proceeded against Moser and Firmin. No issue has been raised concerning the settlement of the action against the two first named respondents save that it is agreed that if judgment is to be given against Moser and or Firmin, a credit of $5000 is to be allowed in reduction of damages.
The applicant Selwyn Ward (Ward) essentially conducted the purchase. It was he who carried on the business after the purchase, and the evidence of his wife, also an applicant, was relevant only to a few aspects of the negotiations. The time which elapsed since the sale, naturally enough, did not assist the witnesses in their recollection of events. I found the applicants to be honest and objective witnesses. I make no criticism of Moser's essential integrity but his objectivity was a little distorted by his own interpretation as to what was required of him as business agent. Firmin was in poor health by the time of trial but I essentially accept his evidence as to the part he played in the negotiations.
I refer briefly to events leading to sale. Ward left school when he was young. He had been a jack-of-all-trades from an early age but he turned to butchering, a trade he pursued with success. He conducted his own business as a butcher, and not long before the sale he had sold a butchering business at modest profit. After a holiday, he looked to the future and he was interested in purchasing another business. He had very little appreciation of accounting procedures, and I accept that interpretation of company trading figures, of profit and loss accounts and the like was beyond him. Mrs Ward had four children including a very young child at the time of sale. She was then, and after, fully engaged in caring for the family. At no time did she show the enthusiasm which was engendered in her husband's mind for the new venture. In fact it is fair to say he agreed to purchase it despite her reluctance, a measure perhaps of the impact which the advertisement I refer to shortly, and subsequent events prior to sale, made upon him. The business concerned was an ice skating rink, conducted in an old picture theatre in Perth. Finkelstein had effectively been the proprietor of this business for many years. Shortly before sale a new skating rink had been established at Fremantle which inevitably introduced some competition in this field. I heard evidence from one Lawrence, a member of a syndicate which conducted the Fremantle business which was set up early in 1979. Upon that evidence I am satisfied that in 1980 there was a sudden growth in the popularity of roller skating in Perth and this resulted in proliferation of such rinks. This had an early and adverse impact upon Lawrence's business which thereafter traded at loss until it closed. I am satisfied that it had the same impact upon Finkelstein's business which I find was not operating profitably at the time of the sale to Ward. Finkelstein decided to sell and engaged Moser to effect a sale. Finkelstein and Moser were social acquaintances - no more - and Moser had no previous experience of such rinks nor of the fortunes of the rink in question.
Moser in accordance with his practice arranged for a salesman - Wellman - to call on Finkelstein. Wellman thereafter completed a form entitled "Statement of Particulars in Respect of the Sale of a Business" (Exhibit R.19) and this document received Moser's consideration. On the same occasion Finkelstein made available his company's trading figures for the financial years ended 30 June 1978, 1979 and 1980. He also advised Wellman that income for the period of 32 weeks prior to sale was $79,984, an average of approximately $2500 per week, which was recorded as "worst part of the year". Particulars of expenditure were set out which left an "estimated surplus before providing for principals' salaries, interest on loans or repayments of loans - if any" of $220 per week. The form also shows that Finkelstein advised Wellman that the "opening of Fremantle rink and roller rink" were "circumstances adversely affecting the business ..... during the last twelve month period". This was recorded on the Statement of Particulars - it was information in Moser's hands but was not passed on to Ward at any stage. It was for internal use only.
In "The West Australian" of Friday March 20 1981 the following advertisement appeared:
W. MOSER
2722855
"THE ONLY BUSINESS OF IT'S KIND IN PERTH. SIT. NEAR CITY. T/O $2500 PW AT PRESENT OFF SEASON AVERAGE $3000 PW OVERHEAD $1600 PW. EASY TO OPERATE COULD SUIT INVESTOR. SAME OWNER FOR 18 YEARS WILL SELL FOR $28,000 WIWO AND VENDOR WILL CARRY HALF FOR 2 YEARS AT BANK INTEREST FOR SUITABLE APPLICANT. SOLE SELLING AGENT W. MOSER 63 RAILWAY PDE MT LAWLEY 362 1570 AND 342 6476".
Ward's interest was attracted by the advertisment and what occurred later that day further excited that interest. His interpretation of the information set out in the advertisement was that the advertised business would return a profit of up to $1200 a week. ' Turnover', he interpreted as monies received, 'overhead' as business expenses or total costs. At no stage did he then appreciate that overhead may be interpreted as fixed expenses as opposed to business expenses such as wages or stock purchases. He telephoned Moser and in company with his wife attended Moser's office shortly after. A general conversation ensued, in the course of which Ward was shown what he understood to be a profit and loss account. He said, and this I accept, it meant nothing to him. He accompanied Firmin to visit the skating rink. En route to the premises Firmin voiced the opinion that the business was worth far more than the asking price. I find that Firmin told him that he considered the business was worth $36,000. Ward found the premises to be run down, far from clean and in a poor state of repair. He was introduced to Finkelstein and in the course of conversation he asked Finkelstein whether he had declared "everything in cash". The latter replied that he was in fact "putting aside $200 a week in the pocket" and giving a full time employee Ben Succi $10 a week which was not recorded in the company accounts. Ward interpreted this as indicating the profitability was even higher than he had calculated from the advertisement. There was no further discussion concerning takings and expenses. Ward, to use his words, relied "exclusively on the ad.". He decided that the business and the premises needed a lot of work but with this in mind he anticipated a big profit, i.e. he considered his efforts would increase the profitability already established in his mind at up to $1200 per week. Mrs Ward was far from impressed by the neglected premises and she told her husband, upon their arrival back at Moser's office, that she did not wish to buy. Following this conversation Ward went into Moser's office, his wife remaining outside to care for a child. Further discussion ensued. During the conversation I find that Firmin, or another of Moser's staff told Ward that they had a fellow in an adjoining room "interested in the business". This may have been true but it added to the impact the advertisement had made on Ward. He decided he "had to be quick about it" and agreed to purchase the business for the asking price. Ward was also informed that a partner of Moser's was interested in acquiring the business. He and his wife thereupon signed the agreement to purchase in the form of an offer (Ex.A.4) which was accepted by the vendor. The same day, the applicant again attended the ice-skating premises to make a list of stock and the necessary arrangements were made with the landlord who agreed to grant a four year lease. Ward sought a lease of three years with an option to renew for three years, but the owner of the premises required a four year term. This was agreed upon at a substantial rental subject to adjustments based on consumer price index reviews (Ex.A.7).
The full purchase price and incidental charges were paid and Ward entered into possession and commenced to carry it on with enthusiasm.
There is no need to deal in great detail with events which followed. I find Ward devoted considerable efforts to run the business successfully. He did what was within his power to clean up and improve the premises and to increase patronage. He worked long hours. He soon appreciated his problems and his expectations and assumptions as to the essential profitability of the venture were not realised. His own accounts were badly kept as he used money from the till for housekeeping and payment of recurring expenses, such as mortgage payments, not associated with the business. He had obtained an initial overdraft advance of about $8,400 and injected further monies from his own resources. After realising, to use his words, that he had been 'conned' he had discussions with the respondent Moser and with Finkelstein. Finkelstein was not prepared to assist. Ward explored the possibilities of buying the freehold and developing the site and he explored alternative uses of the premises. His efforts came to nought. At the end of February 1982, about eleven months after purchase he "closed the doors and just walked out". He paid the rent for a further 3 months. The owner refused to accept surrender of the lease and the applicants are currently being sued for rental arrears which accumulated during the balance of the term.
I have in evidence (Ex.A.12) reconstructed accounts prepared by the applicant Ward with the help of his advisers designed to illustrate the financial fortunes of the business from the end of March 1981 when the applicants took over until closure in February 1982. I do not accept such figures as precisely accurate but they are sufficient to enable a finding to be made, after deducting drawings of $250 per week extracted by the applicants, that the profit over the entire period was marginal (about $750). During the financial year ending the 30 June 1982 the business was running at a loss and the takings progressively diminished despite his efforts to boost patronage.
I refer at this stage to the evidence of Michael Leslie, an experienced Chartered Accountant called on behalf of the applicant. His evidence was not really challenged. He analysed the balance sheets prepared by the first and second respondents for the financial year ended 30 June 1978, 1979 and 1980 and 1981, which were those supplied to Moser's employee, Wellman. I accept his evidence "that the adjusted results show there was a declining profitability of the Premier Ice Skating Rink, starting off with a $26,000 profit in 1978, resulting in a loss in 1981 (until the end of March) of $4,149". (Ex.A.18). He also ventured the opinion that as the value of goodwill is basically dependent on expectation of future profitability (which must be governed to a large extent by past profitability) there was no goodwill attaching to the respondent company's ice-skating rink at the time of purchase. If support is required to evidence the declining fortunes of the respondent company it is to be found in the Directors' statutory report for the year ended 30 June 1981 (Ex.A.16) which included the following statement: "During the financial year the Company's business became unprofitable due to intense competition and therefore on 30 March 1981, the business conducted as an Ice Rink was sold". There was no evidence that Moser or Firmin had knowledge of or access to this document, but it formed the basis of the notation on Exhibit R.19 (Statement of Particulars in respect of the sale of a business) which was in Moser's possession to the effect that the opening of the Fremantle rink and roller rink were circumstances adversely affecting the business.
I have also paid regard to Leslie's evidence as to the 'overheads'. He said that to accountants they are generally regarded as fixed costs, as opposed to operating or variable business costs. But he stated that even amongst business people there is no unanimity in understanding of the expenses which the term embraces. He was asked "Would it be wrong to use - well would it be unconventional, say, to use the word overhead as a general term for all the outgoings of the business"? Answer. "No, it would not be wrong"".
I set out my findings of fact.
(1) The advertisement (Ex.A.3) was checked and authorised by Moser. At the time this was done Moser was in possession of material which indicated the business had recently been affected by adverse circumstances.
(2) The material supplied by Finkelstein did not upon analysis justify the assertion that current average turnover was $3,000 per week.
(3) The assertion of "overhead $1,800 p.w." in the entire context was likely to lead persons reading the advertisement, unversed in accountancy terms, to the conclusion that overheads meant 'expenses'. This was the intention of the advertisement - it was an eye-catcher and led the applicants to believe that current weekly profits from the business would be the difference between turnover and overhead. If this was not the intention of the advertisement the reference to 'overhead' would have been meaningless and without purpose.
(4) Moser knew upon his firm's own analysis that current surpluses more closely approximated $220 per week before providing for principals salaries, interests on loans and the like.
(5) The advertisement attracted wide interest. To use Moser's words, his office was swamped with inquiries. It is probable that many people interpreted the advertisement in the same manner as Ward who was entirely misled as to the potential profitability of the business. Unfortunately Ward was the early bird who caught a very expensive worm.
(6) Ward's interest was maintained by Firmin's expression of opinion that the business was worth $36,000, the advice that Moser's partner was interested in the business and Finkelstein's information that all takings were not credited on his trading accounts, which Ward assumed formed the basis of the advertisement. Be that as it may the advertisement was the material factor, which induced the applicants to purchase the business. To create liability under Part V of the Trade Practices Act 1974 it is not necessary that it should be the sole inducement (Smolonogov v. O'Brien (1982-1983) 44 ALR 347 at 363. But in my view the advertisement here was the only material factor.
(7) The advertisement represented that the present turnover in off-season was $2,500, that turnover averaged $3,000 per week, that overheads were $1,800. It impliedly represented average profits at the time to be far in excess of the true position revealed by the accounts and the information in Moser's possession when he approved the advertisement.
(8) The advertisement was misleading and framed so as to be likely to mislead as it represented a distorted financial picture, which Ward in good faith relied upon and which induced him promptly to purchase the business.
(9) The contents of documents provided to the Wards and referred to in paragraphs 6, 8 and 9 of the Statement of Claim (being statement of income and expenditure and annual profit and loss accounts) were not read by either Mr or Mrs Ward and played no part in their decision to purchase. I am unable to make precise findings as to the accuracy or otherwise of those figures, summarised in Ex.R.19, but I observe that assuming their accuracy they did not justify the form of the advertisement approved by Moser when coupled with the information he had of recent adverse circumstances affecting the business.
Thus I find that Premier Ice Skating Rink Pty Ltd, a corporation within the meaning of the Act by reason of the advertisement prepared and inserted by its agent Moser engaged in conduct in trade and commerce that was actually misleading and likely to mislead within the meaning of Section 52(1). Moser was the corporation's agent for the purposes of the sale of the business. Ward formed part of an 'audience' likely to be misled and truly misled by the advertisement (Brown v. The Jam Factory Pty Ltd (1981) 53 FLR 340 at 348 and 349). I find that Moser was, at the least, knowingly concerned in the contravention within the meaning of s.75B, and the applicants have established their cause of action against him pursuant to s.82(1) he being a person involved in the contravention.
I am not persuaded that Firmin was knowingly concerned in, or a party to the contraventions. I have found that en route to the inspection of the skating rink he ventured the opinion to the applicants that the business was worth more than the asking price, in his view, $36,000. This, as I have said, served to maintain the applicants' interest. Whilst Firmin had prior access to the Statement of Particulars (Ex.R.19), I am not satisfied he did other than scan the figures set out in it and I am not persuaded he was aware of what I have found was the important endorsement relating to adverse circumstances affecting the business. Caution must be exercised in analysis of Firmin's evidence. He is now an invalid pensioner, he did not appear well at the hearing and clearly his memory of what documents he had seen before meeting the applicants was hazy. On some aspects he was firm but in respect of others he was in doubt, but not prepared to deny circumstances put to him in cross-examination. He very much drew on his recollection of his practices at the time. The sale of the business was not his 'listing'. He became involved because Wellman was apparently otherwise occupied. He conceded he had 'probably' seen the advertisement. He did not appear to have recollection of so doing and I believe that concession was based on the premise that it was inserted by the firm by whom he was employed. Having considered his evidence and taking into account his limited concessions in cross-examination, I am left in some doubt as to whether he was aware of the wording of the advertisement. Nor am I satisfied that he was aware of the endorsement on Exhibit R.19 to the effect that adverse circumstances had been experienced in the business. Firmin held, in my view, the genuine belief, albeit mistakenly, that the business was worth at least $28,000. This was probably based on a cursory examination of the trading figures for previous years.
In Yorke and Another v. Lucas (1983) 49 ALR 672 at 682 the court stated "The words 'party to the contravention' necessarily connote, in our view, that a person assents to or concurs in the conduct which constitutes the contravention. He must therefore know or be aware of the essential facts or matters which must be proved to establish the contravention.... To our minds, it is not sufficient to render an individual liable if he is shown to be aware of some only of those elements. Where the contravention in question relates to engaging in trade or commerce in conduct that is misleading, one of the elements involved is that the conduct is misleading. If a person sued under s.82 for damages as a person involved in the contravention is unaware of the essential facts and matters constituting the contravention, then he lacks knowledge of an essential element of the contravention. He cannot in our view, in those circumstances, be regarded as a party to the contravention". I am not persuaded in these circumstances that Firmin consciously misled the applicants. The advertisement had already done so and his discussion with them, and the opinions he expressed in good faith, served only to maintain that interest for the short period prior to the sale. His liability to the applicants either under the Act or at common law has not been established.
The applicants are entitled to judgment against Moser for their assessed loss and damages under s.82. The applicants' entitlement includes, in a case of this nature, "losses which are the immediate result of the offending conduct and also consequential losses if sufficiently direct". (Woodward J. in Corbidge v. The Bakery Fun Factory Fun Shop Pty. Ltd. and Others (1984) ATPR 45, 677 AT 45, 688).
In approaching damages I am satisfied that had the true circumstances of the business been known to Ward he would not have entered into the contract - he was induced to do so by the misrepresentation inherent in the advertisement. It was some time before he became aware that the business was virtually unprofitable and as I have prefaced he made strenuous efforts to run it successfully. I also accept the evidence of the witness Leslie that the 'goodwill' of the business had in fact no value. The applicant persevered in his efforts to conduct the business from 31 March 1981 until 28 February 1982 when he closed the doors. He paid rent for three months after that date. I find on the evidence that Ward did instruct Firmin to attempt to sell the busines when well aware it could not be conducted successfully and that in fact Firman obtained an offer of about $35,000, which Ward refused to accept. I accept Ward's evidence that he refused to accept the offer because he knew if all facts were revealed that the goodwill had no true value and he was not prepared to allow another to enter upon a transaction which would involve the prospective purchaser in loss and worry of the nature he himself had experienced. It was not strenuously contended, nor could it be, that the applicant should have mitigated his loss, or attempted to do so, on a basis that may in itself have involved an infringement on his part of the provisions of the Act.
I turn to the questions of damages. In Yorke and Another v. Ross Lucas Pty. Ltd. and Others (1982-1983) 45 ALR 299, Fisher J. considered in some detail the question of damages in a claim such as this and he basically followed the approach of Fox J. in Brown v. Jam Factory Pty. Ltd (1981) 35 ALR 79 at 88. In Yorke v. Lucas (supra), Fisher J. broadly adopted the measure of damages as being 'analagous' to a claim in tort. He commented, on the facts before him, that there was "not anything promissory in the statements" there relied upon by the applicants and that is really the position here. In allowing the amount paid by the applicants to the landlord prior to reletting His Honour commented (at p.321) that the assignment of the tenancy agreement was a term of purchase. Here a new lease was a condition of purchase. His Honour also considered a claim under the head of loss of wages, which were not allowed, and the matters he there considered were not dissimilar to those with which I am confronted. I respectfully adopt Fisher J's approach in principle although all cases must be considered on their own facts.
The applicants claim damages under the following heads:
(a) Capital loss
(b) Lease obligations
(c) Costs of acquisition of business
(d) Loss of earnings
(e) Interest on overdraft
I deal first with (a) and (c).
I accept the fact that the goodwill, if the true facts were known, had no value. The business was inevitably a losing one in the hands of Ward who did all reasonably within his power to make it a success. Of the sum of $28,000 I find (as there is some dispute) the amount of $3,000, was allocated to stock at the time the bargain was made. The applicants'subsequent experience indicated the stock may have been over-valued and he subsequently disposed of his then stock for far less. I allow $25,000 under this head.
As to '(c)', the costs of acquisition are claimed at $2,193.55. These are based on the settlement statements (Ex. A.10) in which the following expenses appear:
Settlement fee 118.00
Stamp Duty 297.50
Registration - Business 15.00 Act
Registration - Shops and 10.00 Factories
Legal Fees on Lease 255.00
Commission on Lease 746.00
Adjustment Shire Rates 295.32
Water Rates 456.73
$2,193.55
But the final settlement statement shows the applicant was granted an allowance of $700 under the heading "Less agreed 22.1/2% of $28,000 - $700". I heard no evidence on this but it appears to be an allowance of $700 on commission debited. I will allow such acquisition expenses at $1,493.55.
I turn now to '(d)' the claim for Loss of Earnings. This is claimed under two heads, the loss of earnings on capital employed in the business and secondly, the loss of actual earnings which accrued by reason of the purchase of the business, the loss being based on the premise that had the applicant obtained salaried employment during the period in question this would have returned $300 per week gross over the entire period. I have difficulties in assessing this loss. I would be prepared to find on the probabilities that had the applicant worked as an employee in his trade during the period he ran the skating rink, he would have earned $300 per week. But by reason of the inadequacies of his own book-keeping I am not able to assess with confidence a loss under this head, if indeed there was a loss. I accept that the reconstructed record of his takings (Ex.A.12) was probably heavily weighed in favour of the defendant in striking 'estimated drawings' at $250 per week. Having heard Ward's evidence I think they were probably far less. But from the business accounts substantial payments were made to meet obligations under the mortgage on the family home and on a personal loan. If accurate analysis was possible such a loss might not emerge. Over the entire period the reconstructed figures show a net trading profit of $759, which was reached after taking into account, and crediting to sales, all the plaintiff's drawings for his own ends. To deduct from an income of $300 per week over the period a net profit of $759 would do injustice to the respondent Moser in that it would not be an accurate measure of loss. Damages on this basis are not proved. I have reached the conclusion that under this broad heading the applicant is entitled to interest on his initial capital outlay, which after taking into account his initial acquisition expenses I assess (in round figures) at $29,490. I would allow interest on this amount at 12% from the date of settlement, 31 March 1981, until judgment.
As to '(e)' the applicant claims interest on overdraft, accommodation he obtained whilst running the business. In round figures and from the bank statements it appears that the applicant was granted an overdraft of about $8,000 in March 1981 at the inception of the business, for which he paid $26,000 in cash. On 27 November he injected $13,915 from the sale of a property at Mandurah in the business account but this basically covered an earlier outlay of $13,230 on his overdrawn account and used by the applicant to purchase a vehicle, not necessary for this business, which was later resold at a profit.
I am satisfied that the initial overdraft of $8,000 was borrowed and used for business expenses. There were fluctuations, as set out above, but at the date he gave up the business at the end of February 1982 the overdraft was at similar level, $8,491. The interest paid to the bank in the interim must have included a component of the car purchase and so interest payments to the bank would not be a fair measure. I consider justice will be done if I allow the applicant interest at 12% per annum upon $8,000 for 11 months and I allow $880 under this head of claim.
I finally turn to the applicant's major claim for damages, the prospective loss suffered by reason of his lease obligations, a major component of the claim.
This is claimed as follows:
"(a) $58,158.24 being rental claimed pursuant to the lease of the premises until expiration on 31st March 1984.
(b) $5,000.00 being estimated legal costs of Applicants in resisting landlord's claims.
(c) $6,000.00 being estimated legal costs of landlord to date.
(d) $31,293.00 being damages for alleged breaches of covenants to repair."
I am satisfied that as a direct consequence of the agreement for sale and purchase the applicants leased the premises from Premier Nominees Pty Ltd, the Lessor. The agreement was in fact subject to the granting of a lease. The lease (Ex.A.7) is in evidence and there is no purpose to be served in referring to its terms save to mention that it expired on 31 March 1985. Apparently the applicant paid the rent whilst he was in occupation and for some months after. Payments ceased and by Writ issued out of the District Court in October 1982 the Lessor claimed outstanding arrears. By virtue of amendments to pleadings and the effluxion of time the applicants are now defending a claim for rent, other outgoings and damages allegedly payable pursuant to that lease for the entire period of the lease. A file of the District Court proceedings is in evidence (Ex.A.15). The applicants have entered a defence and that action, which has been the subject of various interlocutory applications, proceeds at measured pace. It would be entirely inappropriate for me at this stage to either make a declaration as to the applicants' entitlement to recover by way of damages or loss his ultimate liability in respect of the landlords's claims, let alone to assess damages under this head. Difficult questions of law may arise which could involve the applicants' duty to mitigate, as they have raised the landlord's failure to mitigate in the District Court proceedings. Woodward J. in Corbidge v. The Bakery Fun Factory Shop Pty Ltd.,(supra.) assessed the applicants' damages on the basis of rental obligations then unpaid, but he there referred to the fact that the applicant was facing "an unanswerable action by the landlord for breach of contract". That may indeed be the case here but the amount involved is very substantial and the matter is the subject of litigation elsewhere. I have not sufficient material to decide the issue or to predict the outcome especially as a question as to the landlord's re-entry early in the term has been raised.
Whilst it is important to achieve finality I am unable to do so. It is not a situation where an order varying the terms of the agreement can assist, nor am I prepared to enter judgment for damages to be assessed. The matter was not the subject of much evidence during the hearing, the landlord is not a party and I would not wish to make a declaration on the issue or an order for indemnity without giving the respondent Moser further opportunity to be heard. It is, after all, the major component of the applicants' claims. To make an order at this stage that Moser is liable to indemnify the applicants in respect of their legal liabiliy for rent and other payments due under the lease could reap injustice. I have also decided that it would be inappropriate to enter judgment for those damages and the interest of which I am satisfied and leave the rent issue in abeyance.
I therefore order in the following terms:
1. I declare that the third respondent was directly
concerned in the first respondent's contravention of s.52 and as a person directly concerned is liable to pay the applicants the loss or damages they thereby sustained. I further declare that liability against the fourth respondent has not been established.
I declare (without entering judgment for those
amounts) that the applicants have suffered damages as follows:-
(a) loss of capital - $25,000.00
(b) acquisition expenses - $1,493.00
(c) interest on overdraft - $880.00
I declare the applicants are entitled to interest
(payable by the third respondent) at the rate of 12% per annum on loss of capital and acquisition expenses from 31 March 1981 until date of judgement.
I adjourn further consideration of the claim for
damages resulting from the applicants' liability (if any) to the landlord of the premises pursuant to lease dated 28 April 1981 with liberty to the applicants and the third respondent to tender further evidence and argument on this issue.
The application is adjourned generally with liberty
to the parties to apply upon 14 days notice.
Costs reserved.
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