Willmott, R.G. v Dora Banks Pty Ltd

CATCHWORDS

Trade practices

- misleading and deceptive conduct

- attached

causes of action based on fraud, negligent statement and breach

of collateral warranty	- analysis of complex	of evidence - no
question of principle.

Trade Practices, Act

1974, ss. 52, 53 and 59

Interest - claim for interest on moneys owing by purchaser to

vendor for unpaid purchase money

- contract of sale providing

for

payment of balance

on day certain

- interest payable on that

sum

between date

of completion of contract and due date

for payment

of moneys - claim for interest from due date to date of judgment.

RICHARD GEORGE WILLMOTT and ELIZABETH	M Y	WILLMOTT v. DORA BANKS
PTY LIMITED and ANOR.
No. G 267 of 1983

Coram: Sheppard

Date: 29 April 1985

Place:

Sydney

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY	No. G 267 of 1983
GENEFiAL DIVISION

BETWEEN:

RICHARD GEORGE

WILLMOTT and

ELIZABETH MARY WILLMOTT

Applicants

DORA BANKS PTY LIMITED and

ANOR.

Respondents

CORAM:

SHEPPARD J .

m: 29 APRIL 1985

PLACE:

SYDNEY

MINUTE OF ORDER OF THE COURT

THE COURT ORDERS THAT:

L T h e

application be dismissed.

L T h e applicants pay the first respondent‘s costs thereof. L T h e r e be judgment for the first respondent on its cross-claim

in the sum

of $36,402.74.

L T h e

applicants pay the first respondent’s costs

f the

cross-claim.

(Settlement and entry of order	is dealt with by	0.36 of the
Federal Court Rules.)

IN THE FEDERAL COURT OF AUSTRALIA 1

)

NEW SOUTH WALES DISTRICT REGISTRY	)	No. G267 of 1983
)
GENERAL DIVISION	)

RICHARD GEORGE

WILLMOTT and

ELIZABEIY MARY WILLMO'IT

Applic

,ant

DORA BANKS PTY LIMITED and

ANOR.

Respondents

m: SHEPPARD J.

m: 29 APRIL 1985

REASONS FOR JUDGMENT

In respondent ("the respondent")

this

action

the applicants

sue the first

HIS

HONOUR:

for

damages

under

the

Trade

Practices Act 1974, ss. 52, 53 and 59, and for damages in respect

a number

of common law causes

of action. They also seek

relief pursuant to

S . 87

of the Trade Practices Act. Originally

they sued the second respondent, James Thomas Hickey, but did not

proceed against

him because he is an undischarged bankrupt. It

may be that they could have proceeded

on the causes

of action

relied upon,

or most of them, without

the leave of the Court, but

in the result the action against

Mr. Hickey was abandoned. He

did not appear in the proceedings except as a witness on behalf

of the respondent.

In a breach of an agreement for the sale

cross-claim the respondent has sued the applicants

for

of a business.

Until some time

the month of March

1983

the respondent

carried on a business in the Gold Coast area of Queensland. The

business consisted of placing

a number of video games in various

locations in the area. There were

30 games in all. At the time

of the negotiations which

I am about to recount 11 of these were

in what is known

as Putt Putt which is

a miniature golf links at

Mermaid Beach. Others were in various places of amusement, fast food shops, milk bars and the like. The respondent had no firm arrangement with any of the proprietors of the businesses where

the machines were placed as to the length of time the machines

might remain with the result that any proprietor could require

the removal of

a machine on short notice.

The machines were

operated

customers

of the

various

businesses

where

the

machines were. In order to play a game

a customer inserted the

requisite number of coins into a slot.

At regular intervals Mr.

Hickey or his son collected the proceeds and divided them equally between the proprietor of the business and the respondent.

The business of the respondent began when a number

machines were purchased from

a Mr. Finnemore about the end

1981.

Mr.

Hickey was then at Moama in south-west New South

Wales and the business was operated by

Mr. Hickey ~unior. These

3 .

arrangements continued until about the middle of 1982

when Mr.

Hickey came to the Gold Coast to manage it. He said that he did

so because his son had

a full time job and running the business

as well

was t o o much for him. About this time,

so the Hickeys

said, they had

a burglary in the flat

which they occupied.

Records of the business which had been kept up to that time were

either destroyed or damaged. This was why,	so the Hickeys said,
,

no records were available prior to August

1982.

Thereafter Mr.

Hickey senior kept a record in a diary.

The

record consists of a note of the takings from each machine each

week. It commences on

21 August 1982 and concludes on 10 March

1983 when the business was sold. It is common ground that the

record shows that takings over the period August

1982 to March

1983 averaged $750 per week. It is

also conceded by counsel for

the applicants that the takings for that period did

fact

average $750 per week. Counsel made the concession because of some independent evidence from the company operating Putt Putt

which confirmed the takings recorded

in Mr. Hickey's record.

There are no other records available.

books of account

were kept.

No fornal accounts were prepared and

no income tax

disclosing the receipt

the moneys appear to have been lodged.

I should say in passing that because there appears to have been a

flagrant breach of the respondent's obligations under the Income

Tax Assessment Act 1936, a copy of this judgment will be sent to

the Commissioner of Taxation and his attention drawn to this

4 .

matter.

The other activity of the respondent is the carrying on of

property in

the Moama district. Mr. Hickey said that

his wife

became ill whilst

he was away in Surfers Paradise and that it was

for that reason that he decided that either thk property should

be sold

or that the business should be sold. According to his

evidence both were put on the market. When the business was

sold, the property was

withdrawn from sale and he returned to

Moama to be with his wife. That explanation for the sale of the

business is not accepted by counsel

for the applicants.

The Willmott saw an

applicants became interested in the business when

Mr.

advertisement in a newspaper and called on Raine

& Horne,

estate

agents,

Tweed

Heads.

That

occurred

February 1983. He there met

Mr. Cotterlll, who managed the

business of Raine accompanied by Mrs. Willmott. Amongst other things Mr. Willmott

& Horne, and Mr. Hickey. Mr. Willmott was

said that Mr. Hickey said to him, "You will get

$750 a week the

, year round from the machines and all that is required is a day

and a half

a week to get that".

Mr. Hickey said that maintaining

the machines was not difficult.

He also said, "We operate

universal harness which means that

you can just change boards to

alter the mechanism which enables games to be changed from one machine to

games".

The

universal

harness

apparently

another or

new games substituted for old

or out of date games

without the need to engage in any complex operation.

There was further discussion to which it is unnecessary to refer but which apparently took place in the presence of	Mr.
Cotterill.

After the conversation Mr. Willmott accompanied Mr. Hickey on

a visit to a number of the sites where the machines were. During

these visits Mr. Willmott said that

he was again told that

would receive $750

a week.

He said that he said to Mr. Hickey,

"Well, the time factor is important. You said that

you would

only work a day to

day and a half per week to do your round,

and the machines have all been upgraded, the latest games are

them, and

you won't have to touch

any of them for twelve months."

Mr. Hickey apparently assented to the fact that	he had said words
to this effect.

Mr. Willmott described the visit to various sites. Whilst

they were at one site known

as the Snack Shack

Mr. Willmott said

that he asked

Mr.

Hickey again about the takings and

was told

that

he would definitely receive

$750

per week "year round"

average from the machines. He said that

he was shown an exercise

book which recorded the takings.

He said that It was

an ordinary

lined

Pencraft

type

exercise

book

written

pencil.

Mr.

Willmott said, "I noticed that it was sort

of to do with the end

of the year. It was November, December, January, and

I sort of -

I had a takings written in pencil added up to show monthly returns.

look at that". He said that the book showed weekly

Mr.

Willmott said that

Mr. Hickey did not want to give him the book.

He just let him have

a very quick look at It and told him that It

was the only record kept. He said,

"We don't keep records

this business. This is all

I have". Mr. Willmott said that

remembered some amounts of

$500 and

$600 a week. One week was

$900.

That was the Christmas week.

After the inspection other sites. At one Mr. Hickey reiterated

of the book they continued to visit

how simple maintenance

was. At another

he told Mr. Willmott that the machines were all

in good order and were valued

at $2,000 each.

Of the machines at

Putt Putt he said that they were all upgraded and

had the latest

games available in them. He added

'I...

it is the best site and

is Subsequently they visited Putt Putt but Mr. Willmott was not sure

how all

the

top

machines

are

there."

that

what

whether

that

was

the

same

day

or later

the

week.

Eventually they returned to Tweed Heads.

The following evening Mr. Hickey rang Mr. Willmott and said that he had worked out that each machine would take

$27 per week

"and that was what

would get from them,

$27. "

Mr. Willmott

said that he remarked that that was just over

$800 a week.

Later the two met again. They went to Putt Putt which Mr.

Hlckey said was the key site.

He said all his best machines were

there. According to Mr. Willmott,

Mr. Hickey said, "...it is the

key site and it never drops below

$400

a week, that is gross,

that is

$200 each ... I

will not introduce you

to the manager.

He is a bit toey. I will make out that you are looking after the

business for me while

I am in Melbourne." Mr. Willmott asked

Mr.

Hickey why he needed

to do this.

Mr. Hickey said,

l'... he wants

everything his

own

way and we do not do it that way; we do what

we want to do." The two saw the

11 machines.

Although Mr.

Willmott had not mentioned it up to that point

in his evidence, he

said then that Mrs. Willmott was with him

during the visit to Putt Putt. Whilst there

Mr.

Hickey again

said that the machines

"were all upgraded and

... we have the

latest games available in them and

... it is the best site and

that 1s why all the top machines are there."

Mr.	Willmott said that there were another four machines on

the site. He was told that these belonged	to Putt Putt itself.
His evidence continued:-

l ' . . .

and they' had trouble with one or two and

that they were getting rid	of them and	I would
get the sites."

"And did you say anything

to that?"

I said, "that is fine, when would it be?"

And he said, "Well, its soon; you will keep in

touch with them and

you will get the sites soon."

As it turned out, the manager was not present at

the time of

the visit. During the visit moneys were collected and divided

and the machines were cleaned.

During the return journey Mr. Hickey reiterated that the

Willmotts would always get $200 a week from Putt Putt.

He also

repeated what had been said about the likelihood of the Willmotts

obtaining the four additional sites.

He again said that

he could

collect all the takings from the round in

a day and a half.

Mr.

Willmott asked at what point machines were changed. He was told

that when "the take" from

a machine dropped below $20 it should

be moved. Mr. Hickey said this was about every six weeks. Hickey repeated that all the machines were in excellent order and

Mr.

said that about

$18,000 had been spent upgrading them.

The

upgrading had been done by

Mr. Finnemore.

The two met again in Raine & Horne's office

on 22 February

when the contract was signed.

Also present were

Mrs. Willmott

and Mr.

Cotterill.

The contract is dated

1 March 1983. It is

expressed as being made between the respondent

as vendor and the

applicants as purchaser.

By clause 1 it is provided that the

vendor agrees to sell to the purchaser and the purchaser agrees

to purchase

from

the vendor

for the price of

$75,000

all the

right, title and interest of the vendor in and to a certain

"Amusement Machine Run business carried

on on

premises and

situated at various sites" as shown in a schedule together with the goodwill of the business and the vendor's fixtures, plant and

equipment set forth

in the schedule. By clause 3 a deposit of

$2,000 was required. This was to be paid to Raine & Horne (who

were described as "the agent"),

"as

Real Estate Agent for the

Vendor."

By clause 4 the balance of the purchase money was to be

paid as to $43,000 on

9 March 1983 and as to the remaining

$30,000, on 10 June 1983. Clause 4 continued, "The vendor agrees

that the purchasers shall have the benefit of the income

from 9

March 1983 subject to the purchasers paying interest at the rate of 10 per cent per annum for the period from 9 March 1983 to 10

June 1983 on the sum of $30,000." Clause 6 provided for the transfer of possession on 9 March 1983. Clause 12 of the agreement was as follows:-

"12.

THE Purchaser

acknowledges

that

representations in connection with this sale have

been

made

the

Vendor

and

that

he, the

Purchaser, has completed the said purchase after

satisfactory

pers nal

in pection

and

investigation of

the said premises and business

and the said fixtures, fittings, plant, trade

utensils, implements, stock and licences and has

perused such records of financial transactions

relating to the said business as he has desired

to inspect.

Clause 16 is an arbitration clause but clearly its provisions have been waived. Clause

17 provides that the vendor and the

purchaser agree that the price of

$75,000 is to be apportioned

to "Plant," $60,000 and as to "Goodwill," $15,000.

Clause 24

provides that the vendor warrants and assures the purchaser that

all plant and equipment will at the date of possession be

i good

working

order

and

condition.

Clause

says,

amongst

other

things, that the vendor "recognises and admits the agency of

Raine

& Horne, Tweed Heads,

as his agent responsible for the

finalisation of the transaction

. . . ' I

10.

It is unnecessary to refer to any other part

of the agreement

except to note that appended to the agreement is

schedule

described as an inventory of machines and sites. Thirty machines

are

referred

including

the

11 at

Putt

Putt.

The

other

locations had either

1, 2 or 3 machines.

The balance of Mr. Willmott's evidence

in chief dealt with

the completion of the contract on

11 March

1983 and with the

applicants' experience of the business after they took over. An average of $750 was never achieved. Records which were produced

showed that in

the Easter week

$772 were taken, but in no other

week did the takings amount to

$750 or more. In the early months

the range was more in the vicinity of

$400 or

$500 .

Later the

takings became even less. Records kept by Mrs. Willmott showed

that by the end of

the

year they were often little more than

$200.

In the early months

of 1984 they were under that figure.

On 23 May 1983 (not 23 May 1982 as appears in the handwritten copy of the letter) the applicants wrote to Mr. Hickey a letter

which was prepared by Mrs. Willmott.

The letter was

as follows:-

"Dear Mr. Hickey

Since taking over the video machine business in low level of takings, which consistently fall

well below the figures

we were led to expect.

As it was quite clearly stated to us on

a number

of occasions by yourself

& Raine &

Horne, that

the business takings averaged $750.00

per week,

we have been most disappointed to find that the

average is in fact $493.00, so far below the

IL. ..

quoted

figure

that it is a matter

of economic

necessity that

we now reconsider

our position.

Consequently we feel it is essential to enter further negotiations with you in order to

determine

realistic

purchase

price

commensurate

with

the

actual

returns

the

business.

this end will you please give this

matter your urgent attention

& contact us as soon

as possible.

Mr . Hickey did not answer the letter

writing but some of

his records were produced

in answer to the applicants' complaint.

A reason f o r the fall off in takings after June

1983 is

provided by applicants' machines and replace them with its

the

decision

Putt

remove

all

the

own machines.

Mr. Willmott said that he did not meet the Putt Putt manager,

a Mr. Norton, until

2 or

3 weeks after the business had been

taken over. He asked Mr.

Norton about the four sites which were

occupied by Putt Putt machines. Mr. Norton said that the company

ran an operation in Sydney at Pier One where they had

100 games.

He mentioned that some were to

be-sent from Sydney to the Gold

Coast and told Mr. Willmott that some of

his machines would have

to be moved. Mr. Willmott

at that time did not know when that

would happen. There was

a further conversation about the matter

in June. According to Mr. Willmott Mr. Norton said:-

"CT3hat he would notify me if the machines were

to be brought up and

I would have to move mine

and relocate them and all the operators had been told that Finnemore was the man that started the

placing of machines with Putt Putt on

a contract

12.

basis.

He said that he

told Finnemore that all

their machines would be replaced in time and

told Jim Hickey

who bought the machines from

Finnemore that his machines,

in time, would be

replaced with their

own machines."

Mr. Willmott said he removed the first 3

machines from the

Putt Putt balance had to be removed in September.

site

June

under

Mr. Norton's

directions.

The

A week's notice

was

given.

Mr. Willmott was cross-examined at length. It was revealed

that he had not had any previous experience

of video machines or

games. It appeared to me that he had had little experience of

business affairs.

Mr. Hickey showed him what

was necessary in

order to maintain the machines but

how much of this he really

took in is open to question.

The probabilities are that

he had

to learn the hard

way, that is, by personal experience.

Mr. recollection of the exercise book

Willmott was cross-examined extensively concerning

his

which he had seen during the

negotiations.

It was suggested to him that the book

he had seen

was the diary which is in evidence. Mr. Willmott firmly denied

this.

said that he had not seen the diary during the course

of negotiations or as a result	of the letter which was sent on	23
May 1983.

The the discussions concerning takings prior to the contract belng

cross-examination elicited some further evidence about

13.

entered into. Amongst other things

Mr.

Willmott said that Mr.

Hickey said, "Well, ... lets call it $750 a week because that is a figure we can guarantee." Later he agreed that Mr. Hickey had

told him that the takings had averaged

$750 a week for the

24 or

26 weeks before February 1983. It was strongly suggested to him

that that was all that was said, but Mr. Willmott remained firm

that in addition Mr. Hickey had told him that	he would receive
$750 per week average in the future.

number of questions were asked Mr. Willmott

as to what

enquiries he had made concerning the security of tenure of the sites. Some of these questions were asked by me. The questions

arose after

Mr.

Willmott had said that each machine was worth

$2,000 "and the site $500.

That is how he broke it up. "

Mr.

Willmott was asked what

he meant by the site. He said:-

"Well, the site, the siting of the machine, the

site; the fact that

you had that site was worth

$500.

He also told me that the registration

ensured that that site

was yours, which is not

,exactly correct.

Counsel for the respondent remarked that Mr. Willmott had not

given eviclence about this before, a matter on which colmsel was

clearly correct. Mr. Willmott's evidence continued:-

"What do you mean, the registration?

---

Well,

each machine is registered in Queensland with the

Justice

D partment

and

I understood

that

registration to be something that guaranteed me

that site; but that was not the case really, it

does not guarantee you the site at

all. But

14.

led me to believe that.

What did he say?

--- I said to him, 'What does

this registration mean?'

He said to me, 'That

site is registered with the Justice Department

and no one else can put

a machine on that.'"

Counsel suggested to Mr. Willmott that the answer

he had

given was not true. Mr. Willmott said that it was and added that

Mr. Hickey had told him originally that the registration meant that he kept the site.

Mr. Willmott was asked whether

he had made any independent

enquiries and said that he was told by Raine

& Horne that the

registration was "just the registration

of the machine." He said

he had learnt this before the agreement was signed but insisted

that

Mr.

Hickey

had

originally

led

him

believe

that

registration made the registrant

"a permanent holder of that

site." However, Mr. Willmott acknowledged quite clearly that he knew when he signed the agreement that registration

the

machine gave him no right

or tenure over the sites.

Later Mr. Willmott emphasised that

he had no reason to think

that any sites would be lost and said +hat Mr. Hickey told him

that losing sites was not a problem,

l ' . . .

you

might only lose a

site a year - that is

a milk bar site, possibly one

or two

machines. no more

. . ,"

Mr. Willmott said that

had had some discussion with Mr.

15.

Finnemore about the value of the machines and sites, who told him that $2,500 for each machine and site was "about right."

Mrs. Willmott said that she first met Mr. Hickey

in Mr.

Cotterill's office on 22 February 1983.

She recalled being shown

an exercise book at a car park in Tweed Head,s after some of the

sites had been visited. She said the exercise book was

ordinary lined exercise book like that used by a

child. It was

rather tattered

multi-coloured exterior" but added that she did not really look

at the exterior of it. She said that she looked inside the

looking.

She

thought

had

a "normal,

exercise book as Mr. Hickey flicked through the pages, but she

was not given the book herself to look at. She said that the

book appeared to contain records of the takings of the business.

She said that the highest was about

$500 and the lowest about

$100. The former was for the Christmas period and the latter was

for a week in February. Mr. Hickey pointed to the week in

February which showed $500 and said that the takings never fell

below $500.

Mr. Hickey said that no other records were kept.

The records seemed to cover about

3 or 4 months.

Willmott recalled the visit to Putt Putt. She observed

moneys being taken and divided and also Mr. Hickey junior

repairing a machine.

&-S.

Mrs. Willmott then embarked on an

account of her experience

of the business after it was taken over.

No further evidence was

16.

given at that time about conversations with

Mr. Hickey. She was

still in chief at the end of the day and the matter adjourned.

When she returnea to the witness box on the next day the matter

was in the list, her attention was directed to what

Mr. Hickey

had said about the income

of the business. Her evidence was that

there was a conversation in the car when the sites were being

visited. She Willmott were present. Her evidence continued,

said

that

Mr. Cotterill, Mr. Hickey

and Mr.

"I said- to

Mr.

Hickey, 'Will this business take

an average of $750 each week all

year?' and Mr. Hickey said, 'Yes' and

I said, 'All year? I wish

to emphasise that point.' And he said, 'Yes, all year.'

Mrs. Willmott's attention was again directed to the matter of the exercise book. She said it

was a lined exercise book, rather

battered inside, with written columns

in pencil and

in biro.

There was one column for

each week.

Each

column was totalled.

The four columns for each month were totalled into monthly

figures. She repeated that she did not actually see the cover

but only the opened book and also that it was the ordinary size

of a school child's exercise book. She said the records were for

a period of 4 months and that they stopped

in February 1983. She

was again asked her recollections of the figures and repeated

what she had earlier said, again mentioning that

Mr. Hickey said

that the takings never fell below

$500.

Mrs. Willmott gave

evidence about any conversation with

Mr. Hickey in which

he said that it was likely that four further

17.

machines could be placed at Putt Putt, nor about anything said by

Mr. Hickey as to the value of the machines.

She, like her husband, was extensively cross-examined. She

had kept the records and she was asked about these. She was

asked about her

own background.

She is a graduate in Arts from

the University of Melbourne and was for some years

school

teacher and a school librarian. She is far more intelligent than

her husband.

She, too, was asked about the security of tenure which the

applicants would have over the sites after they took over the

business. Part of her cross-examination on this matter was as

follows:-

"Mrs. Willmott,

you are

not

unintelligent

woman, are you; you

would agree with me, would

you not, with all due

modesty? --- Yes.

And I want to put to

you that the question

of how

long you could keep these machines on these sites

would have been a matter of great importance in

considering the purchase of this business. Now

would you agree with that? ---

Yes, I assumed I

could keep the machines on these sites. It was

important and that is what

I assumed.

Why did you make that assumption?

--- Because we

were

told

they

were

registered

sites

and

registered machines.

But you know that whatever

you were told about

registration was cleared up later on before you

signed the contract,	do not you?	---	It was
cleared up later on?

want to suggest to you that there was

discussion

either

with

Mr.

Hickey

Mr.

Cotterill in

which it was made perfectly clear to

18.

you

and your husband that registration. as

you

put it, had nothing to

do with making these sites

permanent for you?

---

That was not made clear

before we signed, definitely

not..

And

anybody who said that it was would

be in

error, would they?	---	Yes, it was not made clear
to me. "

It is to be observed that

Mrs. Willmott is in conflict with

her husband because she maintains that she remembered only after

the contract was signed that the machines were secure because of

their registration. This matter arose in her evidence only in

cross-examination as was also the	case	with	her	husband's
evidence.

The

only

other

matter

arising

out

Mrs. Willmott's

cross-examination that I should mention is that she,

as did her

husband, denied ever having seen the diary prior to the signing

of the contract. She stated categorically that the exercise

book

she had seen during the negotiations was not the diary.

Other witnesses called in the applicants' case were Mr.

Norton and

Mr. Tester.

shall refer to their evidence in the

cou'se

of dealing with the submissions made by counsel in

relation to the various issues.

Mr.	Hickey gave evidence of the negotlations leading up to

the making of the contract.

He deposed to the fact that the

respondent had acquired the business towards the end of

1981 from

19.

Mr. Finnemore. There were then

40 machines.

He paid $90,000.

He referred to the way records were kept up to August

1982 and

then referred to the diary which

I mentioned at the outset of the

judgment.

The diary was produced and identified.

He described

how he

collected the moneys and

how he kept the

record.

He said the decision to sell the business was made in

December 1982.

He retained H.P.C. Real Estate to act.

A Mr.

Santilla

of H.P.C. Real Estate apparently decided to act in

conjunction with Raine & Horne. Some time in February

1983 he

first met the Willmotts in Raine

& Horne's office at Tweed Heads.

He said that

in addition to the Willmotts, Mr. Cotterill was

present.

He could not remember whether Mr. Santilla was also

there.

He said that there was

a general discussion about the

buslness for 20

minutes.

He could not recall the detail of the

conversation. He did not recall

an inspection of the machines on

that day but said that

time to do that was fixed. He said that

the inspection took place a day or two later. Present were the

Willmotts and Mr. Cotterill. All drove in Mr. Cotterlll's car.

He recalled that

10 sites were visited and

he described what the

procedure for collection was.

He also showed how the games were

played. At one point he said that he told the Willmotts that the

nature of the business was seasonal. School holidays, Christmas

and Easter were the best periods. He said that one of the down

periods was from the end

January to Easter. Another was

between the end

of the May holidays and the beginning of the

September holidays.

He emphasised the importance

of regular

20.

maintenance and explained about the siting of the machines and the switching of the machines from site to site. Mr. Hickey was

asked whether

had said anything about the takings of the

business.

He is recorded in the transcript as having said,

“I

told them the average takings for the last

2 weeks had been about

$750 - that was over the whole 30 machines

- and they said that

sounded pretty good.” Counsel for the respondent suggested that Mr. Hickey did not say, “2 weeks” but either 24 weeks or 26 weeks

which is the period for which there is

a record. Neither counsel

for the applicants nor myself had any recollection one way

or the

other of this and my

own

.note of the evidence did not help

resolve the respondent is right and that the evidence ought to be read as if

question.

Nevertheless

I think

counsel for the

the period were of the order of

months. Counsel for the

applicants did not oppose my taking that view.

Mr. Hickey said that he told the Willmotts that it was

period in which the inspection of the machines was being carried

out.

a low

After the inspection they returned to Raine

& Home’s office.

Mr. and Mrs. Willmott accompanied Mr. Hickey to his van and he said that he showed them the book which is in evidence. He said,

“I showed them the diary, opened it up and flicked through the

pages and came up to an entry I made there of $807 average for I

forget how many weeks.“ He

indicated the page on which this was

done, it being the page containing the entries for 17th and 18th

21.

February.

He said that he

showed that page to the Willmotts but

not any other particular page. They themselves looked through

the diary, but he could not remember how

many pages they looked

week or

so later he met them again and took them on

collection round. The inspection began at Putt Putt. The total

collections were under

$500.

Mr. Hickey said that it was the

first time that the takings had been under

$500.

As they

- went round he described how general maintenance was

done and he introduced them to site owners. He said there was a

second occasion when

Mr. Willmott accompanied him.

Mr. business would average

Hickey

denied

that

told the Willmotts that the

$750 per week throughout the year.

He was

firm in saying that

he had told them

no more than what the

takings had been while the respondent had the business.

He said

that he did not go into what was going to happen in the future.

He denied saying that the turnover would never be less than	$500
a week.

He was asked what was said about maintenance.

He said, "I

used

it maintenance; the more that you

two

big

half

days

and

do the

general

did the general maintenance the

less time maintenance took if anything happened. We went around

and I showed them how to clean coin chutes and check your wiring

2 2 .

on your boards and things like that.“

He said that

he did not

say anything about the

length-of time the Willmotts could expect

to spend on running the business overall

on a weekly basis. He

said that it used to vary and “I never knew.”

He described the

detail of the maintenance which needed to be done. He also said

that major problems would be attended to by

firm, Amusement

Enterprises, which was

Mr. Finnemore’s firm.

Mr.

Hickey deposed to

a conversation with Mr.

Norton, the

manager of Putt

Putt, in December 1982.

Mr. Norton told him that

he had been rung by

a superior in Sydney who told him that

e was

sending four machines of their

own so that Mr. Hickey would have

to remove four of his. This occurred shortly afterwards.

said that when the business was originally advertised in December

the advertisment said that there were

15 machines on the Putt

Putt site. In fact the number was reduced to

11.

The four

machines were put

in storage while he looked for other sites.

He said that

did not have any conversation with anyone

from Putt Putt about the need to remove any other machines. He denied telling the Willmotts that he had approval to locate a further four machines on the Putt Putt site.

.. -

Mr. Hickey said that the price of $75,000 was discussed but

that

he did not tell the Willmotts that they were getting

bargain, or that the price was a good one or

that the machines

were worth what

he was asking. He was asked whether

he had ever

23 .

told the Willmotts that the price

he asked was equivalent to the

value of the business. He said that

he told the agents that, but

was not certain whether he told the Willmotts directly. But he

added, "I told the agents.

He was asked whether his price was reduced once

he realised

that the number of machines at Putt Putt would be reduced by

four. He said

he put the price on

30 machines. He said the

first advertisement said that there were

40 machines, some on

site and some not. The

price was then $95,000.

He then decided

that it was be€ter to sell only the machines that were on sites

and the price

of $75,000 was calculated accordingly.

was

asked

whether

he had

said

anything

about

any

arrangements

with

site

owners.

He said

that he told

the

Willmotts, ' I . . .

we were there as guests

of the owners and if

you

looked after the machines and if

you

looked after the site

owners, you usually retained the site but there was	no guarantee
of tenure of any site."

He agreed that he

had told the Willmotts that most

of the

games were =p to date games.

He also told them that th-re were a

lot of new machines coming. He said that the respondent had kept

upgrading the machines.

He said "All the machines were in

pretty fair condition,

yes, good condition." They had up to date

games in them. He said about half the machines had unlversal

harnesses which made the games easy to change.

' 24.

Mr. Hickey said that the machines were the same as those he had bought from

Mr. Finnemore some eighteen months before but

that he had bought new games

which varied in price from

$450 to

$800.

He said that new machines were then selling for between

$2,500 and $2,800

or $2,900. It depended on the game. He said

that he had noticed that over the period that

he had the business

the takings had dropped from

$30

a machine to about

$26 per

machine average per week. He said that there was

dramatic drop

in takings in this sort

of business after March 1983.

Mr. relied upon by the applicants were put to him. In some respects

Hickey

was

cross-examined.

All the

representations

his

memory was vague. He found

difficult

remember

precisely what had been said but

he remained firm that the only

statement he had made in relation to takings was that the takings

for the 6 months prior to the sale had averaged $750 per week. He denied making any representation as to what takings in the

future would be,

He was pressed on whether he had been told by

Mr.	Norton, prior to the contract being entered into, that

eventually all machines at Putt Putt would be replaced by Putt

Putt's own

machines. He remained firm that he had no knowledge

of this. He

also denied leading the applicants to think that

they had somehope or prospect of obtaining the four sites upon which Putt Putt machines were located.

was maintained throughout that the only record, apart from dockets

cross-examined

extensively

records.

25.

that had been kept by his son

a d, to an

extent, by himself, was

the diary. He denied that there was

an exercise book of the kind

that the applicants said they had been shown. He said that the

record they were shown was the diary anh no other.

He denied that

had not introduced the Willmotts to

Mr.

Norton and said that it was

his recollection that they were

introduced to him

on the first visit. At one stage

his

cross-examination

remarked that the applicants had every

opportunity to contact Mr. Norton if they had wished to

do so.

He was asked about what

he told the applicants concerning the

registration of the machines. He denied ever telling them that

the registration of the machines gave some form of security over

the sites.

He said that he had explained precisely what was

involved in registration of the machines by the Queensland

Justice Department and also in the licensing of them, as	I
inderstand it, by the local council.

He was asked in detail about the currency of the machines.

He said that of the

which were the subject of the agreement

for sale, only five were as they were when

he had purchased them

from Mr.. Finnemore. The remaining 25 were either new

or had been

upgraded.

Many

were

fitted

with

new

boards

or games.

The

upgrading had been done by

Mr. Finnemore.

Finally, he denied saying anything about the value of the

2 6 .

machines to the applicants directly.

Mr.

Hickey junior was called.

He is

a director of the

respondent. The other director is his younger brother. He was not present at any of the conversations between the applicants and Mr. Hickey senior leading to the signing of the contract. He

did endeavour to explain to Mr. Willmott what was involved in the cleaning, maintenance and changing over of games. There does not

seem to be any issue about this part of his evidence.

In his

cross-examination he

was pressed as to whether

he knew that the

Putt Putt machines would soon have to go because Putt Putt was

installing

its

own. He denied

knowledge of this.

was

cross-examined on a number of other matters including prices

obtained for the sale of machines not sold to the applicants and

the currency of the games.

I do not find it necessary to refer

to the detail

of this cross-examination.

The only other witness called in the respondent's case was

Mr. F'innemore to whose evidence

I shall refer later.

It is to be observed that there are a number of conflicts in

the evidence

of the Willmotts and Mr. Hickey. In some respects

the evidence of

Mr. and

Mrs. Willmott is not conslstent.

other

witness

was

called

give

evidence

about

the

conversations.

particular

neither

Mr. Cotterill

nor Mr.

Santilla

was

called.

No evidence

was

elicited

what

instructions

Mr.

Hickey gave either agent except as I have

indicated in the account of

his evidence which

I have given.

In their Statement of Claim

a number of representations were

relied upon. Not all of these were relied upon in counsel's

final address. Those upon which counsel then placed reliance

were as follows:-

That the turnover would average $750.00 per week.

That.the turnover would be never less than

$500.00 per week.

That the business operation would take no more than one and a half days per week.

That

approval

had

been

given

the

proprietor of

a site at Putt Putt, Mermaid

Beach,

Queensland,

for

the

continued

location of	11 machines for an indefinlte
period.

That

approval

had

been

given

the

proprietor of a site

at Putt Putt, Mermaid

Beach, Queensland, for the location of a further four machines by the applicants.

28.

( f )

That the machines were current models.

(g)

That the games in the machines were current games .

(h)

That the 30

machines to be allocated to the

applicants

had

a current

value

$60,000.00

These representations were said to be false with the result

that the respondent, through Mr. Hickey, had been guilty of.

conduct which was misleading or deceptive within the meaning of

S. 52 of the Act. Reliance was also placed on s s . 53 and 59 but

I do not think the provisions

those sections add to the

strength of the applicants' case under

S . 52 of the Act.

In addition to the causes

of action based on breaches of the

Trade Practices Act, the applicants also relied on breach

of a

collateral warranty. They said that in each case the respondent

by Mr.

Hickey had warranted the truth

of each of the statements

above set out and that in consideration of his promises in this

regard they had entered into the contract

1 March

1983.

Additionally, they relied upon a cause of action	in fraud and a
cause of action for negligent statement.

29.

Both counsel were agreed that the Court had jurisdiction to entertain each cause

of action.

There was some discusslon as to

whether or not the claim was in respect of a transaction in trade

or commerce for the purposes of the Trade Practices Act.

I think

that it was.

I am

in respectful agreement with what Wilcox J.

said in Lubidineuse v. Bevanere Ptv Limited

C19841 A.T.P.R. 40 -

407. In my opinion the transaction here is of that dealt with by his Honour

a similar kind to

in that case. As to the common

law

causes of action, there is plainly

a common substratum of fact

underlying the questions which arise for decision whether under

the Trade Practices Act or at common law.	I	propose to say no
more than that about jurisdiction.

Although there are conflicts

in the evidence, there are some

matters of common ground. Firstly, there is

no question but that

there was a representation (I use the expression neutrally) about

takings and that the representatlon referred to the figure of

$750 per week. The difference between the parties is whether the

representation was as to the future and was that the applicants

would take $750 on the average throughout the year (which

1s the

applicants' case)

or whether it was as to the past and was to the

effect that the takings over the last

6 months had averaqed

$750

per week (which is the respondent's case). Secondly, there was

representation as to the time that the ordinary operation of the

business would take each week, The applicants say one and a half

days; the respondent says two

"big half days."

I would not

regard the difference as material. Next it is common ground

30.

that nothing was said concerning the length of tenure available

on the Putt Putt site. Both parties are agreed that there was no

express representation about this matter. Then it seems to me to

common ground that the words used did imply that both

the

machines and games were current. Finally, there can be little

doubt that Mr. Hickey, either himself

or through one of the

agents, did represent that the

30 machines had a current value of

$60,000 or that each machine was worth

$2,000.

The parties are at issue

as to:-

(a) the substance of the representation about takings;

(b)	whether there was a representation that the takings would

never be less than (c) what the content of

$500 per week;

the representation concerning the time

needed to operate the business was. By that I mean whether

the one and a half days

two big half days were to

encompass all maintenance or only collections and rudimentary

maintenance. It is the respondent's case that it was	the
latter;

(d) whether

Mr.

Hickey did tell the Willmotts that they might

look forward to siting a further four machines at Putt Putt.

Additionally respondent, by

there

a question

as to whether

the

its conduct, did not mislead the applicants into

thinking

that

there was no impending risk of

the

immediate

removal of the machines at the Putt Putt site because of Putt

31.

Putt’s wish to replace them with its

own machines. This question

is raised by the representation alleged by the applicants in

para.

(d) of those earlier quoted (p.

2 7 ) .

This is not referred

to in the evidence because the applicants do not say that

anything was expressly said about it. Their case was rather that

they were led to believe that Putt Putt (and the proprietors of

the other sites where machines were located) would allow the

machines to remain where they were indefinitely, provided, of

course, that they were properly maintained, that games were

changed regularly and that the games were more

or less current.

In support

of this aspect of this case, the applicants called

the manager of the Putt Putt site,

Mr. Norton. He was not called

to give evidence of what was said during the negotiations

or of

Mr. Hickey’s conduct during them.

He was not present at the

negotiations and,

according to his evidence, learnt of the sale

only after the contract was completed.

Mr. Norton’s evidence was

designed

serve

different

purpose.

was

called

establish that	Mr. Hickey knew that all the machines at the Putt
Putt site were	to be replaced with Putt Putt‘s own machines. If

this were the case, it would tend to establish fraud

on Mr.

Hjckey’s part because it would be shown that

he, by his silence,

was leading the applicants to believe that there was no immediate

risk of the sites being lost, whereas in fact

he knew that that

was not

so.

further indication of fraudulent conduct on the

part of Mr. Hickey would be disclosed if it were accepted that

had said to the applicants that approval had been given by Putt

32.

Putt for the location of a further four machines or that it was likely that the applicants would be able in the near future to add a further four machines to the Putt Putt site; see the

representation in para (e) above. Mr. Norton does not deal

with

this matter expressly, but the tenor

his evidence would

suggest that there was no question of the four sites again

becoming available	to	the respondent or any purchaser of the
business.

analysis

Mr.

Norton‘s

evidence

therefore

required.

He said that he

was the manager of the Putt Putt site

and had held that position since 1980. He said that each video

machine had to be registered under some legislation which was

administered by the Queensland Justice Department. He said that

in February 1983 the Hickeys had between 12 and 13 machines at

the Putt Putt premises. The arrangement was

an indefinite one.

He said that the supplier, that is, the Hickeys, was asked to

provide games up to the standard that were available at the time

and to keep the machines in working order. He summarised the

agreement by saying, ‘ I . . . we would supply the site and the

customers and the site licence and they would supply the machines

and registration of the machines.” Takings were to be shared

equally.

Mr. Norton said that just prior to the Christmas holidays in

1982 Putt Putt had put four of its

own

machines on to the site.

At this time

Mr. Norton spoke to Mr. Hickey and said that his

. .

33.

company had an Sydney and that four machines had been sent to him to install

overflow of machines from its establishment in

with the consequence that

would have to remove machines

belonging to the Hickeys in order to keep within the

15 machines

which Putt Putt was licensed to have.

He said that the machines

were

removed

almost

immediately.

He could

not

remember

the

number but, witnesses, the number was plainly four.

upon

the

basis

of the

evidence

the

other

Mr. Norton said that

he remembered seeing the applicants when

machines were being cleared. He was vague about the conversation

which then took place. About three weeks later, when

he arrived

f o r work one evening, he noticed the whole games room "seemed to

be different." He noticed a bright yellow card on each machine.

He then concluded that each machine had been

sold by the Hickeys

to someone else and rang the number on the card.

was not

asked about what was said, perhaps because there may have been

difficulty about the admissibility of his answer to such a

question. He was asked again about his first meeting with the

applicants and recalled that

he was told that the applicants

would be clearing the machines for a while.

He was not asked

expressly,

but

apparent

from

his

evidence

that

the

applicants were not introduced to him as potential purchasers of

the respondent's buslness.

In cross-examination Mr. Norton said that the machines were good standard all the time the Hickeys operated them.

He said

34.

that he

was happy with the return Putt Putt was obtaining from

the machines.

He referred to one game, "Space Invaders," which

had been there for

a long time. He said that

he wanted it

because it was a very popular game.

He was different times of the year. It is not relevant to refer to that

asked

questions

about

the

level

takings

part of his evidence.

was questioned closely about his

evidence that the first time	he knew that the applicants had
bought the business was when	he saw the yellow cards on the

machines.

denied that Mr. Hickey had ever told him that the applicants had bought the machines or the business.

Mr.

Norton said that after the applicants took over,

noticed a drop in takings. He was unable to say

how long it was

before that occurred. He said that machines were out of service for a period longer than they had been when the Hickeys had the

business - sometimes for quite

long time. He said some of the

problems were

applicants about the state of the machines. He said that the

problems were not being attended to by the applicants. He said

minor

and

some

not.

complained

the

that he spoke to

Mr. Willmott on a number of occasions about the

problem which was not getting any better. He said he was concerned about the position because his company's share of the takings was going down. He said that the problem was eventually

solved because Putt Putt golf course in Brisbane were unable to

use some machines and sent them to his course. Additionally,

35.

four machines arrived

from the Canberra Putt Putt course with the

result that eight machines arrived at his site

to be installed.

He agreed that this was a Godsend and also with a question from

counsel for the respondent that	he had not expected that to
happen.

He agreed that

he had told Mr. Willmott that

he would have to

take away eight machines because the company was installing its

own.	He was unsure when this happened but agreed that there had

been some months of problems before it did.

He agreed that after the applicants had taken over the run they were not rotating the machines often enough with the

resht

that

some of the

games

were

becoming

less

interesting

customers.

He said that there had not been any discussion with either

Mr. Finnemore or Mr. Hickey as to how long machines would be kept

on the premises. There was no period agreed upon. The only

terms of the agreement concerned the need to keep them up to	a
standard or they were to be taken away.

In re-examination Mr. Norton said that at the time

he asked

the applicants to remove the machines

had received firm

instructions

from his head office that the company's machines

were to be installed and that eventually the company would	own
all their own machines on the site. His evidence continued:-

. ,

36.

“After you had

that

direction,

did

you

say

anything to

Mr. Hickey about that?

--- Yes.

Did you tell him that?-

- - Yes.

“

Upon hearing Mr. Norton’s answer to

the last question counsel

for the respondent said that

wished leave to cross-examine

about the last answer. Counsel for the applicants continued with

his

re-examination.

I do

not

refer

the

detail of

the

questions asked but they concerned the nature of the maintenance

that needed doing, the problems encountered by the applicants

after they had taken over the business and other similar matters.

At one stage

Mr. Norton said that the only change that came about

after the applicants took over was that “one supplier had the

knowledge to

fix the problem, the other one did not.“ The one

who did not was identified as the applicants.

I gave counsel for the respondent leave to cross-examine on

the

matter aised

him.

That

cross-examination

was

follows

“You told his Honour earlier that the question of

the time or

period for which the Hickey machines

would be allowed

to stay on your premises was not

discussed between you and the Hickeys.	Do you
recall that? --- Sorry?

will put it another way.

You told his Honour

there was no time limit discussed between

you and

the

Hickeys

concerning

the

siting

the

machines? --- No time.

None at all?

--- No.

You

have

since

said,

I understand

your

evidence, that you

told Mr. Hickey at some stage

37.

that he would have to remove all of	his machines
from your premises? --- No.

You never said that, did you? ---No."

I confess that it is difficult to reconcile what Mr. Norton said in his cross-examination with what he had said earlier in re-examination. But Mr. Norton seemed to have difficulty in understanding some questions. On a number of occasions he asked

for questions to be repeated or rephrased. My observation of him

was that he is a slow

and ponderous man who sometimes does not

understand what suggest to me that the answers given in re-examination were given

put

him.

Those

considerations

would

under a misapprehension.

He had

said nothing of the kind in his

evidence in chief.

The evidence that I think I should accept is

that given in the later cross-examination to which	I	have
referred.

Even if I had some reservation about adopting that course,

would be reluctant to accept at its face value Mr. Norton's

earlier answers that he had told Mr. Hickey that eventually the

company would own all the machines on the site. That is because

the acceptance of such evidence would tend to establlsh fraud on

Mr. Hickey's part. That is, of course,

a most serious allegation

and although the standard of proof is upon the balance of

probabilities, I

have to bear very

much

in mind the seriousness

of the allegation which is made. There is no other evidence of it, and, in the light of Mr. Norton's further cross-examination,

38.

it would be quite unsafe to find fraud established on the basis

only of Mr. Norton's answers given

in re-examination.

In reaching my conclusion

I have taken into account the

conflict in the evidence which there is about whether the

applicants were introduced to Mr. Norton prior to the signing of

the,contract.

Mr. Hickey is clear that they were introduced to

Mr. Norton as a prospective purchaser. Mr. Norton agrees that they were introduced, but says that

he was told that they would

be clearing the machines for the time being. He did not take

them to be prospective purchasers and was surprised when

he found

the yellow cards on the machines after the sale. The applicants

say that they were not introduced to

Mr. Norton, but that

Mr.

Hickey did tell them that

would introduce them, not as

prospective purchasers, but as

people who would be temporarily

clearing the machines.

The evidence I accept is that of

Mr.

Norton. His evidence is in accordance with what the applicants expected to happen, except for the fact that according to them,

Mr. Norton was not present at the time of their visit.

I think

their- recollection is erroneous and that they were introduced,

but not as prospective purchasers. It follows that	Mr. Hickey's
evidence on this matter shoul-3 be rejected.

If there were more evidence to support the applicants' case on fraud, I think that this finding would tend to strengthen

it.

But there is

other evidence which, in my opinion, establishes

a case In fraud and the finding

I have made is not sufficient, of

39.

itself, to establish it. Furthermore, as

Mr.

Hickey himself

said, there was nothing to stop the applicants seeing Mr. Norton

independently and making their

own enquiries. It would have been

foolish of

Mr. Hickey to act upon the basis that this was

something which would not happen.

The evidence given by Mr. Willmott that Mr. Hickey told him that he could expect to be able to site

a further four machines

at Putt Putt because the Putt Putt machines were not in good

order ought not,

I think, be accepted. The evidence is denied by

Mr. Hickey. There is no objective evidence which points to one

version or the other being correct. The probabilities tend the

other way because Mr. Norton's evidence inferentially makes it

clear that there was no prospect of the four sites being regained

the

respondent

or any

purchaser.

importantly,

Mrs.

Willmott gave no evidence about this matter at all. She dld not corroborate her husband in relation to it and she was not asked about it either in her- evidence in chief or in cross-examination;

yet it plainly appears from Mr. Willmott's evidence that she was

present

during

the

relevant

conversations.

those

circumstances I reject Mr. Willmott's evidence about thls matter.

My acceptance of Mr. Norton's evidence that

he did not tell

Mr. Hickey that Putt Putt would eventually take over all the

sites, my consequent acceptance of Mr. Hickey's evidence on this

question and my rejection of Mr. Willmott's evidence concerning

the likelihood of regaining the four lost sites leads to the

40.

conclusion that the applicant's

case based on fraud, at least

far as concerns the representations relied upon in paras. (d) and (e), must fail. "he applicants may have believed that the Putt Putt site would continue to be available to them indefinitely, but they were not deliberately misled by Mr. Hickey into thinking

that this would be the case. Nor were they led to believe that

they had some prospect of gaining four additional sites.

Is there any room for the view that

Mr.

Hickey's conduct,

although

innocent,

was

nevertheless

misleading

or deceptive

within the meaning

of S . 52 of the Trade Practices Act? This was

not a matter expressly relied upon by counsel for the applicants,

but it requires consideration.

I have already referred to the

fact that the. applicants do not allege any express statement by Mr. Hickey as to the length or security of the tenure which the

respondent had Nothing was said about it except that there was apparently some

the

various

sites,

including

Putt

Putt.

statement made by Mr. Hickey that

a loss of sites was unlikely

except to the extent of one

a year and then from

comparatively

unimportant

location

such

milk

bar.

follows that there was no statement made by Mr. Hickey which could be reliecl upon as misleading or deceptive. Ought I

nevertheless infer that

he so

conducted himself as to lead the

applicants to'think that the machines would remain where they

were

for an

indefinite period when in fact that was not the

case? If there were clear evidence

from Mr.

Norton that at the

time of negotiations for the contract the sites were to be taken

41.

over by Putt Putt itself,

think, notwithstanding that Mr.

Norton had not communicated this fact to Mr.

Hickey, there may

have been a case, based on Mr. Hickey’s general conduct, for saying that the applicants were misled into believing that all the machines could remain where they were indefinitely, when that

.. - -

was not the case. But my understanding of Mr. Norton‘s evidence decision was made because of some problem that had arisen in

is that the decision to replace the applicants’ machines with

Brisbane and Canberra some time after March

1983. I have earlier

referred to Mr. Norton’s evidence on this matter. He agreed that it was a Godsend and also that he had not expected it to happen. It follows that Mr. Hickey did not unwittingly mislead the

applicants any more than

he did fraudulently.

I therefore representations alleged in paras. (d) and ( e ) in

relect

the

applicants‘

case

based

the

so far as that

case depends upon

S . 52 of the Trade Practices Act. Sections 53

and 59

of the Act do not provide the applicants with

a better

case than they had under

S .

52.

No cause of action in negligent

statement can succeed because there is

no statement, and there is

no basis for the finding

of a collateral warranty.

Before leaving this part of the case,

I should say that

have not overlooked the evidence which the applicants gave

concerning what they had been told by Mr. Hickey about the

significance of the registration of the machines.

think it

42.

was. to say the least, strange that this evidence should emerge

for the first time in cross-examination. No representation to

this effect was relied upon, nor was any submission eventually

put based upon the evidence as an independent matter. This may

have been because of

Mr, Willmott's evidence that

he learnt from

Mr. Cotterill before the contract was signed that registration

did not.. mean that the sites were secure. That is

a sufficient

reason for putting the matter aside.

I do not say more about

it,

except that I think that the evidence bears, to

a degree, on the

general question of credibility which arises and with which	I
have yet to deal.

The applicants case based upon the representation alleged in

para. (a) that a figure of $750 per

(supra) should be considered next. There

I s no issue

week was mentioned by Mr. Hickey. But

he says that he said no

more than that the turnover or takings

had averaged

$750 per week during the previous 6 months.

There

is no However, the applicants say that

contest that that statement was made and was true.

he said more than this. He

represented or warranted that the takings would average

$750 per

week in the future. The question is whether

I should accept the

applicants' evidence in this regard rather than that

Mr.

Hickey. If I were to accept their evidence, there would be number of legal questions which would arise for consideration and

also a question of whether or

not supervening events, including

the loss of the Putt Putt sites through no fault of Mr. Hickey,

might not explain the reduction in takings that occurred.

43.

I confess that I have found the question of whose evidence should accept not without difficulty.

A starting point is to

consider the evidence of the parties about the diary and about the exercise book which the applicants deposed to having seen. It may be thought that there could be no question that the book was the diary which was in evidence, but they were both adamant,

when shown the diary, that it was not the record which they had

seen.

Having reflected on the matter record apart from the diary and that the diary was shown to the

I find that there was

no other

applicants.

I think their recollection of some other record is

erroneous. Notwithstanding their description of the book as

exercise book, brown

or multi-coloured as the case may

be,

battered or

not as Mrs.

Willmott says and written in pencil or

biro, too

much of their evidence is

in fact an account of what is

in the diary. In broad terms their recollection as to the period

covered tends to accord with that for which the diary was kept

even though the diary spans a period somewhat longer than the

three or four months to which they deposed.

The book is a record

of takings, although not of monthly takings. But monthly takings

can readily be derived from it.

In a sense the question of whether there was an exercise book

as well as the diary is not critical. If the exercise book did

exist, it, along with the diary, would have disclosed takings for

only the latter months of the business. It is common ground that

, _

44,

the diary does accurately record the takings received by the

respondent during those months. On the other hand, the issue has

.relevance because its resolution does bear on the reliability of

the recollections of the parties. Nevertheless the fact that the

applicants are erroneous in their recollection of the diary is

not conclusive on the question

of whose evidence is more reliable

in relation to what was said about takings and

$750

per week.

The

applicants could be quite correct about the substance

their case in this regard even though they were wrong about their

assertion that they had not previously seen the diary and had

seen an exercise book. But the fact that

I reject their evidence

about the diary tends to establish that Mr. Hickey's recollection

of the events in question is the more reliable.

Another matter which it is relevant to take into account is

the letter

23 May 1983 written by the applicants to Mr.

Hickey.

I have earlier set out the text

it. Amongst other

things it says,

"As it was quite clearly stated to us on

a umber

of occasLons by yourselves and Raine

& Horne that the business

takings averaged $750 per week,

. . . I '

That statement of what the

applicants were told tends to be more in accord with what

Mr.

Hickep has said than it does with what the appllcants have said

the position was. To a degree the letter is equivocal and I

would not regard it as conclusive, but it does tend to support

the respondent's case rather than the applicants' case.

A matter which has caused me concern is the absence from the

45.

witness box of both Mr. Cotterill and Mr. Santilla. It is clear

from the evidence of the parties that, at least

Mr.

Cotterill

must have discussions leading to the signing

been

present

during

some

of the

important

the contract. Raine

Horne, of

which he was the manager, was the respondent's agent.

That is made clear by clause

26 of the contract earlier referred

to. There appears to me to be strong reason for saying that

Mr.

Cotterill was

a witness whom the respondent might reasonably have

been expected to have called.

explanation for his absence

from the witness box was given. It seems to me that in those

circumstances I

should take the view that nothing

he could have

said

would

have

materially

assisted

the

respondent's

case.

Nevertheless, I must decide the case on the evidence which has been led, giving weight to the fact that Mr. Cotterill was not called.

The case is one where

no documentary evidence other than the

applicants' letter of 23 May 1983 assists, where no independent

witness has been called, where one has no satisfactory evidence

of the instructions given by

Mr. Hickey to the agents and is thus

one where one has to make

an	assessment of the probabilities

based

largely

one's

observations

the

witnesses,

the

evaluation of their evidence and the inherent probabilities which

it discloses.

Mr. Willmott appeared to me to be very naive, comparatively

uneducated and neither astute nor particularly intelligent. His

46.

wife is we11 educated, intelligent

and, to a degree, astute

but

her profession is teaching and

think she plainly lacked

business

experience.

I know

nothing

about

Mr. Hickey's

education, but I think he was a very astute man, used to doing

business at least at the level of the transaction in question and

well able witnesses do not provide substantial assistance in the resolution

look

after

himself.

Those

assessments

the

of the problem, but they should be kept in mind.

I did Mr. Hickey which assists in the resolution of the problem.

not find anything in the demeanour of

Mr. Willmott or

thought that each gave his evidence straightforwardly and to the

best of his ability. Neither was shaken in cross-examination on

any matter material to the general thrust of his evidence. I was

impressed by Mrs. Willmott as

a witness, but having considered

some of the things she

said and the way in

which some of her

evidence came out, I have misgivings about the reliability of her

testimony.

I have earlier mentioned that her evidence in chief commenced one afternoon and continued on the morning of the next day when

the matter vas listed

for

hearing. On that day she was taken

back over some

of the earlier ground and gave answers which were

much more forthright and detailed than had been the case during

the afternoon of the earlier day.

That, of

itself, is not a

matter upon which

I would place great stress. It would not have

been improper for counsel to seek to elicit from her matters

47.

which

he thought she had not covered sufficiently. But her

evidence did come out in that way and it is	a matter to be borne
in mind.

Then there is her

evidence concerning her understanding of

the effect of the registration of the machines. She is in

conflict with

Mr.

Willmott, she saying that she continued to

believe that registration did give some security of tenure over

the sites and

he saying that, although

he was of that view

originally, he learnt the true position from Mr. Cotterill.

The

evidence about this matter was not led in chief, but emerged only

in cross-examination. It was not the subject of any specific

allegation in the

particulars

furnished

the

applicants'

solicitor. All in all the evidence, and the way that it emerged,

misunderstanding concerning the effect of registration of the

machines, it seems to me that it was plain that it was cleared up

before the contract was signed. Otherwise the matter would have

has left me

with a feeling of disquiet. If there were some

been relied upon

by the applicants as a separate representation.

I have weighed the various matters

I have mentioned and some

others as best

I can. Some favour the applicants; more,

so it

seems to

me, favour the respondent. On balance

I have reached

the conclusion that

should prefer Mr. Hickey's evidence on the

question of the representatlon as to takings. Certainly

I am not

satisfied,

even

a balance

probabilities,

that

representation as to takings was as alleged by the applicants.

48.

I take the same view in relation to the representation that the takings had never fallen below

$500.

I should add that if

such

representation had been made, it would not have had

significance for the putcome of the case because the figures in

the diary, which are accepted by the applicants

as accurate,

disclosed -that except in the last week

or so the takings did

fact amount to

$500 per week or more.

It follows that I reject the applicants' case in

so far as it

is based upon the representations set out in paras. (a) and	(b)
above.

The next representation was that the business operation would

take no more than one and

a half days per week. I am satisfied

that

a representation to this effect was made, but

am not

satisfied

that

was

false.

The

evidence

the

Hickeys

establishes that that was the time which the operation of the

business

occupied

them.

I think

the

trouble

was

that

Mr.

Willmott was inexperienced in what had to be done.

He was not

familiar with video games at all. Additionally

he seems to have

neglected to visit the various sites as often as

should.

Certainly that is the effect of

Mr. Norton's evidence which

accept.

I therefore would dismiss the application insofar as it

upon representation alleged in para.

any

cause

action

dependent

upon

the

based

I	have already dealt with the representations alleged in

49.

paras.

(d) and

(e).

That alleged in para.

(f) is that the

machines were current models.

It is convenient to deal at the

same time

with the representation alleged in para.

(g) that the

games in the. machines were current games.

I find that these

representations were made but were not false. The evidence of

Mr. Norton and of

Mr. Finnemore corroborates that

of Mr. Hickey.

According to

Mr. Finnemore, to whose evidence I

shall refer in

more detail in a

moment, Mr. Hickey spent

$9,000

in upgrading

machines during the sixteen months or so which

he operated the

business. I see no

reason ot o

accept his

evidence.

Furthermore, Mr. Norton had no complaint about the currency

the machines or

the games at Putt Putt. It is obvious from the

tenor of

his

evidence that he would have insisted

on current

machines and games being on the site. If any was out

of date,

Mr. Hickey would have been told

to remove it.

Mr.

Hickey's

evidence was that only five of the

30 games purchased by him from

Mr.

Finnemore

remained

when

he sold

the

business

the

applicants. One of these was Space Invaders which has apparently

had continued popularity over many years.

I therefore reject the

case

the

applicants

insofar

based

upon

representations contained in paras.

(f) and (g) above.

That leaves their case based on the representation alleged in

para.

(h), namely that the

30 machines to be allocated to the

applicants had a current value of $60,000.

I find that there was

a representation that the machines were worth

$2,000 each.

Mr.

Hickey denied making any statement to the applicants along these

50.

lines, but

he agreed that

he had told the agents that the

business was worth the

$75,000 he was asking for it. There is

direct evidence that the agents passed this on to the applicants

but I think I should infer that they did.

I further think that

should accept Mr. Willmott's evidence that he

was told that the

machines were worth $2,000 each.

I do s o ,

not unmindful of the

absence of any evidence about this matter

from Mrs. Willmott.

In support of their case that the representation was false

the applicants called a Mr. Tester. Mr. Tester is

an amusement

machine operator in Sydney. He

has been the chairman of the New

South Wales Amusement Machine Operators' Association for

6 years.

also Operators' Association. He

director

the

National

Amusement

Machine

has had 40 years experience In the

amusement machine industry. He said that

he was experienced in

operating machines, repairing machines and "consultancy." By

consultancy

take him to mean that

was experienced in

advising others about aspects of carrying on

an amusement machine

business.

Mr. Tester said that the New South Wales Association

represented 80

per cent of operators in New South Wales.

The

National

Association

had

1500 members. He said

that

Associaticn was in

communication

with

all

other

states.

Conventions were held and information was exchanged.

Mr. Tester -said that

the price range for a new machine in

March 1983 was about $1,000. That was for

a sit-down 14 Inch

screen game. For a

similar upright machine the price was

$1,200

51.

or $1,300. The prices he mentioned were wholesale and not retail

prices, that is they were prices that would be paid as between

dealers. Prices for 20 inch machines were somewhat higher.

Mr. Tester was shown a document which is in evidence. It had

four

columns,

the "Description," the third "Age

first

being,

"Machine,

the

second

as at 1 March 1983" and the fourth,

"$" which was intended to represent the value of the machines.

The machines were those listed in the schedule to the agreement

for

sale.

Their

descriptions

inch or 20 inch. The age was shown for a number of them but not

for all. The ages varied from 6 months to 4 years, that being

the age of the Space Invader game. Most were said to be 1 to 2

indicated

whether

they

were

sit-down

or upright machines and whether the machines were

years old. In Mr. Tester's opinion no machine was worth as much as $1,000, let alone $2,000. Some were valued at figures as low

as $350, others at $450,

$500

and

$600.

The most valuable

machines were

"Mr. Du" and "Galagar 234" which were said to be

worth $700.	The total value of the 30 'machines at	1 March 1983
was $13,100.

If this evidence were accepted, it would indicate that the

applicants had paid

$60,000 for machines worth $13,100. Mr.

Tester was cross-examined. He

admitted that he had not seen any

of the machines in question and that

had never carried on

business in the Gold Coast area.

He also agreed that the sltes

where he operated were, for the most part, not tourist sites, but

52.

arcade sites in various suburbs of Sydney. I found some of his evidence difficult to follow because I do not think he himself

drew the same distinction at all points

of his evidence between

what he meant

wholesale

prices

and

retail

prices.

Nevertheless, I accept that Mr. Tester gave his evidence honestly and did his best to give the Court assistance on the question of valuation.

The respondent called Mr. Finnemore to counter Mr. Tester's evidence. Mr. Finnemore is a comparatively young man who	has a
close knowledge of the amusement machine industry in the Gold

Coast area.

He sold a video game machine business to the

respondent in November 1981.

Forty machines were sold; the price

was $90,000.

In September 1981

he sold 10 machines to Lepp

Enterprises for

$25,300.

An invoice for the sale was produced.

The machine sold to the respondent were sold on site. The

majority of the machines had been purchased within	a year or 18
months prior to the sale to the respondent. Some had older

cabinets which

had been refurbished inside with new electronic

parts. Many were fitted with universal harnesses.

After

the

sale

the

respondent,

Mr.

Finnemore's

firm

serviced the respondent's machines and upgraded some of them.

Mr. Finnemore described the upgrading as continuous and said that

a little over $9,000 had been spent on it during the period the

respondent had the business. Mr. Finnemore was asked whether he

was familiar with prices of machines comparable

to those sold to

53.

the respondent, but at March 1983 rather than November

1981. He

said that he was and that the value of the machines was $2,000 to

$2,300 on location.

He agreed that

Mr. Willmott had rung him prior to buying the

machines from the respondent. Mr. Willmott asked about service

but he did not remember telling Mr. Willmott anything about the

value of the machines. There was some discussion about takings,

but it is not relevant to refer to it.

Mr. Finnemore was shown Mr. Tester's valuation and said that he did not agree with Mr. Tester's figures.

He said that

thought they were well below

the market value. He repeated that

thought the machines were worth

$2,000

to $2,300 each on

location.

Mr. Finnemore agreed that

he knew the Hickeys but more

s Mr.

Hickey junior than Mr. Hickey senior. In cross-examination

remembered

that

Mr.

Willmott

had

asked

him

whether

the

respondents asking price, that is

$75,000,

was a

reasonable

price. He agreed that

he had said that

he would not disagree

with the price.

was then suggest4 to him that he had not

really expressed any

opinion-as to the price. His evidence then

became somewhat difficult to follow but eventually

he said that

he remembered saying to Mr. Willmott that a price

of $75,000 was

about right. That was his opinion at that time.

54. ,

Mr. Finnemore deposed to the fact that there had been

substantial falling off in demand for video games during

1983.

People had become disinterested

in them, perhaps because of the

increased availability of home videos and perhaps because of over

familiarity with them. By

1984 Mr.

Finnemore had all but rid

himself of video games and was operating juke box videos instead.

He said that there had been no sign of a	revival in the market
since.

The evidence substantial conflict.

Mr.

Tester

and

Mr.

Finnemore

I bear in mind that Mr. Finnemore was

known

to the Hickeys and may have had a sympathy for them.

Nevertheless

vastly experienced in the video machine

industry in the Gold Coast and

feel persuaded to accept his

evidence.

Mr.

Tester

no doubt

very

experienced

the

industry in Sydney. But he

did not see the machines in question

and he has no real knowledge of the industry in the Gold Coast

area.

Even if I were to accept Mr. Tester's evidence which

I do

not, there stands in the path of the applicants

a difficulty

which I do not think they could surmount. It is clear from the

evidence of both Mr. -Willmott and Mr. Finnemore that Mr. Willmott

sought Mr. Finnemore's advice on the question of the value of the

machines. Mr. Finnemore confirmed that the price being asked was

reasonable. It was Mr. Finnemore's statement which in my opinion

led the applicants to purchase the machines.

Thus,

as regards

55.

value, no statement made by Mr. Hickey induced the contract. It

follows that the applicants' case based

on the representation as

to value alleged	in para.	(h) of the particulars earlier set out
must fail.,

the

result

I have

reached

the

conclusion

that

the

applicants' case

representations upon which they relied were not established to

have been made and partly because other representations which

were made were not false. My conclusion in that regard makes it

unnecessary to deal with a number of submissions made on behalf

of the respondent, including a submission based on clause 12 of

must

dismissed

partly

because

some

the agreement for sale; see page 9 (supra).

In relation to that

submission I would say in passing, however, that I would not have thaught the clause could have operated to overcome the provislons

of the Trade Practices

Act nor a cause of action based on fraud.

The failure of the applicants' claim means that there is no

defence

the

respondent's

cross-claim.

The

respondent

entitled to

judgment on that claim in the sum of

$30,000, that

being the balance of purchase money

which remains unpaid.

The respondent makes

claim for interest.

This is not

case in which it is necessary to consider at length the power of

this Court to award interest before the coming into force of

S .

51A of the Federal Court of Australia Act 1976.

That is because

this case falls within a narrow class of cases in which Interest

56.

was

always

allowed

way of

damages

common

law.

The

principal authority is Cook

v. Fowler (1874)

L.R.

7 H.L. 27 which

decided that where

a defendant promised to pay

sum certain on

certain day with interest at

fixed rate until then, damages

would be awarded for non-payment of the sum

on the due date.

Reference should also be made to McGregor on Damages, 14th

edition, para. 451, p. 331. In

measure of damages will be the amount of interest which would

have been earned between the due date and the date of judgment.

The agreement itself entitles the respondent to interest down to

ordinary

circumstances

the

the due date, 10 June

1983.

Accordingly, the respondent is entitled to interest at the

rate of 10 per cent per annum on the sum of

$30,000 from 11 March

1983, when the transaction was settled, down to the date of judgment, that is today. The amount is $6,402.74.

Before concluding I

wish to say that I think that this is a

most unfortunate case. The appllcants entered into a most unwise

transaction

which

may

well

have

quite

disastrous

financial

consequences for them.

am afraid, however, that they have

no one to blame but themselves. They were naive in the extreme. video game business was likely to be nor what security they could expect to have over the various sites where the games were

placed. They said that they had consulted

a solicitor, but, of

course, I

do not know what his retainer was nor what advice

57.

gave them.

I am afraid the indications are that the applicants

succumbed to the lure of easy money

- money which would be paid

in cash for one and

half days work per week. This led them to

shut their eyes to reality and to overlook taking even the most

simple steps to'protect their interests.

Undoubtedly the loss of the Putt Putt sites

was a major

factor in the run of events which led

to the substantial drop

takings that occurred. But this was not fully felt until about

September 1983.

The business had been taken over in March.

think the fall-off in the period up to September is explained by

the general deterioration in the video game business, the fact

that the winter months, apart from school holidays, were not as

profitable as

the summer months and Mr. Willmott's inexperience

and

perhaps,

indolence,

maintaining

and

servicing

the

machines. Whether those

or other reasons accounted for the drop

in takings which occurred after the applicants took over the

business, I am satisfied that-the failure of the business to live

up to the applicants' expectations was not due to any conduct of

the respondent for which the applicants have legal redress

against It. The&

plight is due to'their

inexperience and their

nPglect to take proper steps to protect themselves.

- - -

In the result the application will be dismissed. There will be judgment for the respondent on its cross-claim in the sum of

$36,402.74.

The applicants must pay the respondent's costs of

the application and of the cross-claim.

58.

I certify thst 4hksmfthe 57 preceding

pagss are a true copy cf !tie reasons for

ludgrnent herein of Tha ilonourable

Mr Justice Sheppard.

-2-

nSsada6e

Dad

2-9 &PR!) ,

1 9 8 5

[1985] FCA 158

29 Apr 1985