Wright v Keenfilly P/L
[2007] QCA 89
•23 March 2007
SUPREME COURT OF QUEENSLAND
CITATION:
Wright & Anor v Keenfilly P/L & Anor [2007] QCA 89
PARTIES:
DAVID WRIGHT and SHARON WRIGHT trading as RARE IMPORT/EXPORT CO
(plaintiff/respondent)
v
KEENFILLY PTY LTD
ACN 056 014 352
(first defendant/first appellant)
MARK CARY
(second defendant/second appellant)FILE NO/S: Appeal No 9031 of 2006
DC No 4380 of 2003
DIVISION:
Court of Appeal
PROCEEDING:
General Civil Appeal
ORIGINATING COURT:
District Court in Brisbane
DELIVERED ON:
23 March 2007
DELIVERED AT:
Brisbane
HEARING DATE:
28 February 2007
JUDGES:
McMurdo P, Holmes JA and Mackenzie J
Separate reasons for judgment of each member of the Court, each concurring as to the orders madeORDER:
1. Appeal dismissed
2. Parties are granted seven days leave to make written submissions for further consequential ordersCATCHWORDS:
TRADE AND COMMERCE – TRADE PRACTICES ACT 1974 (CTH) AND RELATED LEGISLATION – CONSUMER PROTECTION – MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS – PARTICULAR CASES – BUSINESS ACTIVITIES – where respondent purchased a health products business from the first appellant – where appellant made representations to the respondent concerning the business relationship with suppliers, the buying habits of large customers and compliance with the Therapeutic Goods Administration – whether representations related to the current position of the business or to future matters – whether the respondent relied on the representations and were induced to purchase the business – whether the respondent would have purchased the business in the knowledge that matters of law had not been complied with
TRADE AND COMMERCE – TRADE PRACTICES ACT 1974 (CTH) AND RELATED LEGISLATION – ENFORCEMENT AND REMEDIES – ACCESSORIAL LIABILITY – where first appellant submitted accessorial liability on the part of the second appellant – whether the second appellant held the requisite knowledge in order to attach liability – whether the Court should entertain a point on appeal not litigated belowTrade Practices Act 1974 (Cth) s 4(2), s 52, s 75B(1)
Coulton v Holcombe (1986) 162 CLR 1, cited
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre (1978) 140 CLR 216, cited
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191, cited
Suttor v Gundowda Pty Ltd (1950) 81 CLR 418, cited
Whisprun Pty Ltd v Dixon (2003) 200 ALR 447, citedCOUNSEL:
K C Fleming QC, with P F Mylne, for the appellant
H Fraser QC, with G D O’Sullivan, for the respondentSOLICITORS:
Sajen Legal for the appellant
Rigby Lawyers for the respondent
P: MCMURDOThe appeal should be dismissed with costs for the reasons given by Mackenzie J.
JA:HOLMES I agree with the reasons of Mackenzie J. The appeals of each appellant should be dismissed with costs.
J:MACKENZIE This is an appeal against a District Court judge’s finding of liability on the part of the appellants for misleading and deceptive conduct pursuant to s 52 of the Trade Practices Act1974 (Cth). The respondents had purchased a health products business from the first appellant, of which the second appellant was director, and their case was that a number of false representations had been made upon which they relied in deciding to proceed with the purchase.
Adopting the schedule used at the trial to summarise the allegations of misrepresentation, those found in the respondents’ favour were the following:
4.That there was no new opposition to the business;
5. That the supplier relationship between the business and its main customer, Golden Glow, was going well;
8. That there was no change in the buying habits of large customers; and
10.That the Therapeutic Goods Administration (“TGA”) listing certificates and certificates of analysis and microbiology were available.
The learned trial judge regarded representations four, five and eight to be closely associated; they all related to a product called noni juice, and to things allegedly said during the course of the pre-purchase negotiations insofar as they had some connection with that product. Representation 10 concerned a different product, shark cartilage, and concerned what was said about compliance with TGA requirements. With regard to representation 10, it was conceded that it was a misrepresentation. The only issue was reliance on it by the respondents.
When the respondents went to a meeting on 10 December 2002 they took a list of topics for the purpose of obtaining information. At the meeting, brief notes of the information given were written next to the particular subjects. The answers recorded are, relevantly, to the effect that there was no new opposition, and that no large customers had left or changed their buying habits. The note written in relation to the last two states “no all going well”. With regard to a subject for discussion “TGA - Certificates of analysis, microbiology, etc” the note made records “GMP all ok”. “GMP” is an acronym for good management practice. Reference to it in relation to attempts to gain TGA approval on behalf of the appellants for another product can be found in correspondence prior to December 2002 between the second appellant and consultants trying to facilitate TGA approval.
The arguments for the appellants were grouped under three headings. The first was whether the representations were misleading. The second was whether the appellants relied on them. The third was whether the evidence established accessorial liability on the part of the second appellant.
Were the representations misleading?
This issue is confined to representations five and eight since it was not in issue that representations four and 10 were misleading. The learned trial judge made findings of fact that, by the time of the meeting at which the alleged misleading misrepresentations were made, the second appellant knew that a major customer for noni juice, Golden Glow, was becoming a competitor instead of a buyer of the product and that the second appellant had not provided that information to the respondents. He also found that the answering of the respondents’ inquiry about changes in buying patterns of major customers by conveying that all was going well was misleading. The only qualification, which was relied on by the appellants as being in their favour, was that, according to the learned trial judge the misleading statement made by the second appellant on the first appellant’s behalf “may not have been appreciated to be wrong” because the second appellant thought the problem may be temporary. In context, it is no more than a finding that the second appellant may not have set out to deliberately mislead the respondents. That is of no moment in the present context because the misleading nature of a statement is not dependant upon proof that it was intended to mislead the other party (Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre (1978) 140 CLR 216 at 228; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197).
There was a substantial body of evidence about the extent of the second appellant’s knowledge of the emergence of the cheaper Golden Glow product. He had given evidence that, about March 2002, Ms Russoniello, purchasing officer for Golden Glow, had told him that Golden Glow would be obtaining another noni juice. He inquired whether she thought it would affect his sales, to which, he said, she replied that she did not think so. In a letter of 14 May 2002 from Ms Russoniello to the second appellant, apparently in response to a phone call from him, there is an estimate of stock that Golden Glow may be ordering until the following November. The letter was at pains to stress that it was not a purchase order but a forecast. Its terms are difficult to reconcile with the second appellant’s evidence that, not long before, the conversation about Golden Glow obtaining another noni juice had occurred.
Nevertheless, counsel for the appellants submitted, with regard to the second appellant’s evidence as to the timing of the conversation about Golden Glow producing its own product, that this letter supported the proposition that the appellants had reason to believe that Golden Glow would remain a substantial customer. The second appellant denied in cross-examination that it was in July or August 2002 when Ms Russoniello told him that Golden Glow was going to introduce its own product and discontinue purchase of his. The learned trial judge preferred her evidence that before the November catalogue came out she had told him that Golden Glow would be discontinuing his noni juice because a decision had been taken to introduce their own brand. She said that would have been before their own brand became available for sale. There was evidence, based on records, from Ms Moxon, brand manager for Golden Glow, that its product was introduced in July or August 2002. There was good reason for the learned trial judge to find that it was unlikely that the second appellant’s evidence that the conversation between him and Ms Russoniello occurred round March 2002 was correct.
There was also evidence from Mr Grasso, the director of another customer which distributed the product to retailers, that in or around “mid 2002” he spoke to the second appellant about complaints from his clients that they were having difficulty selling the first appellant’s product because the same product was available more cheaply than the first appellant’s. Eventually he ceased buying from the first appellant although the time when that happened and, in particular, whether it was before or after the representations were made, was not identified.
Additionally, Mr Partridge, a director of the first appellant’s US supplier gave evidence that in late September 2002 the second appellant phoned him. There was a conversation about cheap noni juice flooding the Australian market, whether it was of comparable quality and issues about containing costs. In November 2002 there was a further conversation between them in which the second appellant complained that Golden Glow was introducing its own noni juice product at a considerably cheaper price and that it was affecting his business.
In the appellants’ written submissions, reliance was placed upon an accountant’s report where the opinion was expressed that at the time representation five was made it was the case that the supplier relationship between the respondents and Golden Glow was going well. The report, the cogency of which was challenged, on its face supports the conclusion that “in the absence of other information” it would have been reasonable for the appellants “not to expect issues with the sale of noni juice to Golden Glow”. The periodic nature of sales, it was said, in effect rendered the absence of further sales after September 2002 of no significance because no further sales would be expected until November or December. That conclusion was qualified to a degree under cross-examination. The report also notes the appellants’ allegations in the pleadings that manufacture of Golden Glow’s noni juice began in March 2002 and that the respondents were aware of Golden Glow manufacturing its own product. This was apparently referred to as support for the conclusion that the buying pattern by Golden Glow had, notwithstanding that, not changed. That version of the facts was not accepted by the learned trial judge. In the circumstances the weight of the accountant’s opinion on the issue is compromised.
Following extraction in the reasons of the relevant sales figures from the accountant’s report, the learned trial judge observed cryptically that it was possible to “massage such figures to indicate different conclusions”. He went on to say that it was not possible with confidence to ascribe to the second appellant at the time of his making the representations complained of in December 2002 that he knew or should have known that there would be “no more business” with Golden Glow in respect of noni juice. Nevertheless, in the paragraph immediately following, he made a finding that highly misleading statements were made for the purposes of “representations 4 and 5 and also 8.” When dealing specifically with representation eight the learned trial judge described it as a significant matter closely associated with representations four and five rather than being important on its own. He noted that the pattern of large orders coming from customers months apart made it difficult to reach conclusions at any particular point in time as to whether there was some change. He concludes by saying:
“Perhaps Mr Carey should have been more circumspect about making the representation. It is difficult to excuse his circumspection about Noni juice”.
The appellants argued that the findings specifically made in connection with representation eight were inconsistent with the finding that, for the purposes of s 52, highly misleading statements were made for purposes of representations four and five and also eight. I am not persuaded that this is correct. When dealing with representation eight, the learned trial judge was concerned with not only the noni juice issue, since there were customers for a variety of products. The reference to the difficulty with excusing the second appellant’s circumspection about noni juice is intended to put it in a different category from the other products. Although it is a somewhat understated proposition which might have been expressed more positively it is consistent with the other finding. In any event, if findings that misleading statements were made for the purposes of representations four and five stand, it is of little moment, at least in the present context, whether or not the representation with regard to representation eight stands or falls.
There was ample evidence to sustain the learned trial judge’s finding that, in respect of noni juice, for the purpose of s 52, highly misleading statements were made for the purposes of representations four and five and also, on the basis just discussed, representation eight.
One other issue was raised in relation to the representations. It was whether the representations should be construed as ones relating to a future matter. As pleaded in the statement of claim, the natural reading is that the relevant representations relate to whether, at the time the representations were made, there was any new opposition, the supplier relationship between the business and Golden Glow was going well and whether there was any change in buying habits of the large customers, of which Golden Glow was one. There is nothing in the drafting of the statement of claim to suggest that the questions asked which led to the representations being made related to anything more than the situation as it stood at the time when the representations were being made, and not as to predicting the future. It would involve a tortured construction to construe them as relating to future matters.
Particular focus was placed on an inelegant reply to a pleading in the defence to the effect that the respondents knew that orders from Golden Glow were not likely to change because they had sampled the Golden Glow product and knew it was of significantly lesser quality. The inelegance was plainly a consequence of a denial of a fundamental premise in the pleading in the defence that the appellants had purchased a bottle of the Golden Glow product at the time and acknowledged its inferiority. There is nothing in the pleading that justifies a conclusion that the appellants were relying on a representation as to a future matter.
Reliance on representations four, five and eight
Both respondents were asked whether, if they had been aware of how much noni juice had been purchased from the business and had been informed prior to entering into the contract, in the case of Mr Wright, that Golden Glow had decided to cease, or, in the case of Mrs Wright, had ceased purchasing it from the first appellant, they would have entered into the contract. Each replied in the negative. It was submitted by the appellants that this evidence was a departure from what had been pleaded. Further, it was said, the evidence depended on a failure to provide information, namely that Golden Glow had ceased to purchase the first appellant’s product, in circumstances where the appellants were unaware that that was so. Because failure to advise is, relevantly, “engaging in conduct” pursuant to s 4(2) of the Trade Practices Act only where there has been a deliberate refraining from advising, and the appellants were not aware at the time the representations were made that Golden Glow had decided to cease or had ceased purchasing noni juice from the first appellant, the conduct was not actionable.
It is true that neither respondent was asked directly whether they would have entered into the contract to purchase the business if they had known that the relationship with Golden Glow was not going well because Golden Glow was marketing its own brand of noni juice and that the appellants had been told that Golden Glow would be obtaining another noni juice and discontinuing purchase of the first appellant’s product. But the learned trial judge addressed the issue in terms of what was pleaded in paragraph eight of the amended statement of claim, as itemised in [4] above. Having decided that there were false or misleading representations of the kind alleged in paragraphs four and five of the schedule at trial in respect of noni juice and also in the sense described in [14] and [15] above in respect of paragraph eight, the learned trial judge found that they had induced the appellants to purchase the business.
Given the learned trial judge’s findings, the remaining issue, which he resolved in favour of the respondents, was whether they were induced to purchase the business which they would not have done otherwise, to their detriment. To conclude otherwise, having regard to the importance of the matters to which the respondents were misled, would have been unreasonable.
Reliance on representation 10
The learned trial judge found that the respondents relied on the shark cartilage products aspect of the business being carried on lawfully and that they would not have made the contract had the true situation been known to them. In reality, the TGA had no record of either appellant as sponsor or in relation to any sponsor of any shark cartilage product at relevant times. There had been a TGA listing in respect of shark cartilage powder for a previous owner of the first appellant on bases that had, in fact, ceased to be complied with some time before, although the listing was not formally cancelled until 17 January 2003.
Although the learned trial judge was not confident about the accuracy of the respondents’ chronology, he was satisfied that the list of subjects taken to the meeting at which the misrepresentation was made included a reference to the TGA. It is apparent from the evidence that the respondents were not precisely aware of the role of the TGA. However, at least the male respondent seems to have had an impression that it had some role in overseeing the industry, while probably not appreciating the extent of the regulatory regime. It was not disputed that the representation made in this instance was false or misleading. The second appellant also accepted in his evidence that it would not be reasonable to expect the purchaser to pay for part of the business that was not being conducted in accordance with the law. The learned trial judge’s conclusion that the respondents relied on that part of the business being conducted lawfully and would not have made the contract they did if they had known the true situation, was justified on the basis of the evidence.
Liability of second appellant as accessory
This was not in issue before the learned trial judge in relation to any of the matters in issue in the appeal. This can be discerned from the learned trial judge’s reasons where he said:
“It might be noted that, throughout, the second defendant, Mr Cary, represented the company. It did nothing relevant, except by him. The plaintiffs seek to saddle him with accessory liability under the Trade Practices Act. It was not contended otherwise than that he was a person involved in any contravention of s 52 within the meaning of s 75B(1).”
Later he recorded the second appellant’s counsel’s description of the issues for determination by him in the following terms:
“The defendants can hardly complain if the court approaches the representations in the way contended for by Mr Mylne (p 404):
‘The only decisions required are whether the representation was or was not misleading and whether the plaintiffs suffered a loss by the conduct in breach of section 52.’”
This is also consistent, according to the respondents’ Senior Counsel in the appeal, with the Senior Counsel’s written submissions below, where the argument was raised only in respect of a representation not in issue in the appeal. It was also submitted that the second appellant’s pleadings did not assert that if the company had contravened s 52, nevertheless he was not responsible because of a lack of relevant knowledge. Senior Counsel for the respondents submitted that because it was not an issue below, it was unfair to criticise the learned trial judge for not making an extended analysis of the issue in his findings.
It was submitted firstly, that usually a party would not be permitted to take a point on appeal that was not litigated below (Suttor v Gundowda Pty Ltd (1950) 81 CLR 418; Coulton v Holcombe (1986) 162 CLR 1; Whisprun Pty Ltd v Dixon (2003) 200 ALR 447). It was conceded that there was a discretion as to whether the court should entertain the ground but submitted that nevertheless there was no substance in it. It was conceded in oral submissions before us by senior counsel for the second respondent that the respondents’ analysis of what was in issue at trial was correct. It was, however, submitted that the issue had been ventilated at trial, albeit in a narrower context, and in any event it was purely a matter of law whether liability had been established. The oral submissions concluded to the effect that the second appellant probably had to concede that if the company were to be found to have made the misrepresentations then he, who was the voice of the company, made those statements.
Given the way the trial was conducted and the consequence that there was no need to make specific findings of fact, the case for allowing the issue to be raised on appeal is at best borderline. But I am satisfied that there is no substance in the ground in any event. The passages relied on by the second appellant in the written submissions in this Court are, as the respondents submit, taken out of context. The passage concerning whether or not the second appellant knew or should have known that there would be no more business in respect of noni juice with Golden Glow has to be read in the context that the relevant representations were that there was no new opposition to the business and that the supplier relationship between the business and its main customer Golden Glow was going well. Whether or not he should have known that there would be no more noni juice purchased by Golden Glow, it was, as the learned trial judge found, misleading to say that all was going well with regard to the two issues upon which information was sought.
The passage in which the learned trial judge said that one should not speculate that the second appellant feared “at that time” that Golden Glow’s requirements might fall appears in a discussion about what might have been inferred from the contents of catalogues issued prior to the making of the representations and sheds no light on his actual state of mind at the time the representations were made. As the learned trial judge found in the following paragraph, the second appellant had inklings from other sources of harder times ahead. Examples of this are to be found in the conversation between the second appellant and Mr Grasso, the conversation between the second appellant and Mr Partridge and the fact that the second appellant had been informed prior to the representations being made, that Golden Glow was introducing its own noni juice product. There was ample evidence upon which the learned trial judge could find that the second appellant was liable in respect of misrepresentations four, five and eight.
In respect of representation 10, reliance was placed on the following passage in the reasons for judgment:
“For Trade Practices Act purposes, what was intended is immaterial. The inference is readily drawn that Mr Cary allowed himself to make statements about important subjects as to which he lacked sufficient, or any familiarity. It rather appears that he relied on the Mickans to have set things up properly, that he took no trouble to get himself or the first defendant recognised by the TGA.”
Reliance was also placed on a passage in the second appellant’s evidence the effect of which was that, while, in hindsight, it was misleading to tell the respondents, in answer to an inquiry about the availability of TGA certificates of analysis, microbiology etc, that good management practice was “all ok”, he did not know, at the time, that there was non-compliance with TGA requirements with regard to the shark cartilage products.
As the learned trial judge said in the passage set out in paragraph [30] above, the inference could readily be drawn that the second appellant allowed himself to make statements about important subjects as to which he lacked sufficient or any familiarity. There was also a finding that the second appellant would have had a “good idea of the role of the Therapeutic Drugs [sic] Administration and the importance of complying with the regime supervised by it” by no later than August 2002, when the correspondence, some of which was directly with him, about frustrations in obtaining approval of the TGA for another product, was ongoing. Finally, there was a finding that, at the time when the representation was made, the second appellant was deceiving an important customer by using a spurious Certificate of Analysis, signed by the second appellant, for the purpose of misrepresenting the origin of the product as the United States rather than its true origin, Australia. The learned trial judge accepted that in cross-examination, he conceded that, given the manufacturing and packing practices engaged in, he was not entitled to sell shark cartilage products. The fact that the second appellant was paying fees to the TGA in respect of the product is a flimsy basis for his asserted belief that all was well.
It is not apparent that the passage reproduced in [30] above and relied on by the second appellant in this regard is either a contradiction of what went before or an endorsement of his credibility. Despite the absence of direct findings on the issue, against this background, there seems to be no reasonable basis for finding that the second appellant did not have the requisite knowledge to fix him with liability under s 75B in respect of the shark cartilage product when he said that Good Management Practice was “all ok”. It follows that there is no substance in this ground.
The appeal of each appellant should be dismissed with costs.
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