WSA Online Limited (in administration) v Arms - [2006] FCAFC 45

FEDERAL COURT OF AUSTRALIA
WSA Online Limited (in administration) v Arms [2006] FCAFC 45
TRADE PRACTICES – appeal – damages – quantum – notional period of seven months loss through set-back – no error of principle in calculation of damages
Trade Practices Act 1974 (Cth) ss 52, 82
The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
WSA ONLINE LIMITED (in administration) v SIMON ARMS
VID 843 of 2005
NICHOLSON, MANSFIELD and BENNETT JJ
30 MARCH 2006
MELBOURNE (via video-link)

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VID 843 OF 2005

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

WSA ONLINE LIMITED (in administration)
(ACN 081 121 495)
APPELLANT

AND:

SIMON ARMS
RESPONDENT

JUDGES:

NICHOLSON, MANSFIELD and BENNETT JJ

DATE OF ORDER:

30 MARCH 2006

WHERE MADE:

MELBOURNE (via video-link)

THE COURT ORDERS THAT:
1.The appeal be dismissed.
2.Costs reserved.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VID 843 OF 2005

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

WSA ONLINE LIMITED (in administration)
(ACN 081 121 495)
APPELLANT

AND:

SIMON ARMS
RESPONDENT

JUDGES:

NICHOLSON, MANSFIELD and BENNETT JJ

DATE:

30 MARCH 2006

PLACE:

MELBOURNE (via video-link)

REASONS FOR JUDGMENT
THE COURT:

This appeal is brought in respect of a judgment against the appellant in the sum of $58 331 by way of damages in respect of misleading or deceptive conduct pursuant to s 52 of the Trade Practices Act 1974 (Cth) (‘the TPA’). The appellant contends the primary judge erred in law in arriving at the quantum of damages.
BACKGROUND FACTS
The background facts are identical to those in an appeal on other issues heard contemporaneously with this appeal, namely VID 855 of 2005. The circumstances are, so far as necessary, recapitulated here.
In 1999 the respondent proposed to establish a business of providing a market service for small to medium independent wineries by means of a website on the internet under the name ‘auscellardoor’ (‘the Original Concept’). The method of operation was to be as follows:
(a)retail purchasers would identify and purchase wines from participating vendor wineries through the auscellardoor website.
(b)payment for the wine would be made online by credit card processed through an ‘e-Gate’ facility on the website provided on behalf of the ANZ Bank by the respondent.
(c)the vendor wineries would be credited with the purchase directly into the account of the vendor winery, after deduction of a small transaction charge (estimated to be between 2 per cent and 2.5 per cent).
(d)the vendor wineries would pay auscellardoor a commission of 5 per cent on each sale effected through the website.
The Original Concept did not require payment of sales tax on ‘cellar door sales’.
The appellant provided services to the respondent in respect of the Original Concept. Prior to the respondent contracting with the vendor wineries, the appellant represented to the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2006] FCAFC 45
Decision Date: 30 March 2006

CaseChat Overview and Summary

WSA Online Limited, in administration, brought an appeal against a judgment awarded to Arms for misleading or deceptive conduct under s 52 of the Trade Practices Act 1974. The appeal focused on the quantum of damages awarded, which amounted to $58,331. The background facts of the case are largely similar to those in another appeal, VID 855 of 2005, and involve a proposed business model for a website that would facilitate wine sales for small to medium wineries. The appellant had represented to the respondent that wineries would only need to complete a form to become ANZ e-Gate merchants, but in reality, the process was far more complex.

The legal issue before the court was whether the primary judge erred in law when determining the amount of damages awarded to Arms. Specifically, the court needed to determine if the primary judge’s approach to calculating damages was correct and whether the damages were fairly assessed based on the representations made by the appellant. The appellant argued that the damages were excessive and not properly justified, given the circumstances of the case.

The court found that the primary judge's approach to assessing damages was sound and did not err in principle. The court held that the primary judge correctly evaluated the profitability of the business between November 2000 and June 2001, and did not wrongly assume profitability. The appeal did not correctly attribute the process undertaken by the primary judge, and therefore, the appeal was dismissed with costs reserved. The court concluded that the appeal should be dismissed and ordered accordingly.

Orders

Orders of the court

1. The appeal be dismissed.

2. Costs reserved.

Background

Background to the litigation

This appeal is brought in respect of a judgment against the appellant in the sum of $58 331 by way of damages in respect of misleading or deceptive conduct pursuant to s 52 of the Trade Practices Act 1974 (Cth) (‘the TPA’). The appellant contends the primary judge erred in law in arriving at the quantum of damages.BACKGROUND FACTS The background facts are identical to those in an appeal on other issues heard contemporaneously with this appeal, namely VID 855 of 2005. The circumstances are, so far as necessary, recapitulated here. In 1999 the respondent proposed to establish a business of providing a market service for small to medium independent wineries by means of a website on the internet under the name ‘auscellardoor’ (‘the Original Concept’). The method of operation was to be as follows:(a)retail purchasers would identify and purchase wines from participating vendor wineries through the auscellardoor website.(b)payment for the wine would be made online by credit card processed through an ‘e-Gate’ facility on the website provided on behalf of the ANZ Bank by the respondent.(c)the vendor wineries would be credited with the purchase directly into the account of the vendor winery, after deduction of a small transaction charge (estimated to be between 2 per cent and 2.5 per cent).(d)the vendor wineries would pay auscellardoor a commission of 5 per cent on each sale effected through the website.The Original Concept did not require payment of sales tax on ‘cellar door sales’. The appellant provided services to the respondent in respect of the Original Concept. Prior to the respondent contracting with the vendor wineries, the appellant represented to the respondent that the vendor winery would not be required to do anything more to become an ANZ e-Gate merchant than to complete the documents in a Trade Presentation Kit and, in particular, to complete the ANZ form with certain banking details. This representation was said by the respondent to arise from two sources. First, a statement on 7 February 2000 by Messrs Student and Houghton, employees of the appellant, that wineries could be added to the website by simply filling in a form and paying a small setup fee. Second, approval by the appellant and its employees of the form in a Trade Presentation Kit in March 2000. In reliance on the representations, the respondent travelled around Australia signing up wineries on the basis that all that was required of vendor wineries to be added to the website and receive payments through the ANZ e-Gate facilities was to sign the simple form. However, as the Mr Student disclosed to the respondent on 23 June 2000, he would have to arrange for each winery to become a merchant and the procedure for the vendor wineries to become ANZ e-Gate merchants ‘was far from simple’. It required more of an applicant by way of provision of financial statements and projections and company or partnership details, together with accreditation by the ANZ Bank, Diners Club and American Express, acceptable profit and loss statements for the last two years and a business plan.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

In consequence, his Honour did not wrongly assume that between November 2000 and June 2001 the business was profitable. We agree with the submission for the respondent that his Honour’s approach did not err in principle. The contention in the first way in which the appeal is pressed in particular does not correctly attribute to his Honour the process which he undertook.CONCLUSION In our opinion the appeal should be dismissed with costs.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 843 OF 2005

BETWEEN:	WSA ONLINE LIMITED (in administration) (ACN 081 121 495) APPELLANT
AND:	SIMON ARMS RESPONDENT
JUDGES:	NICHOLSON, MANSFIELD and BENNETT JJ
DATE OF ORDER:	30 MARCH 2006
WHERE MADE:	MELBOURNE (via video-link)

JUDGES:	NICHOLSON, MANSFIELD and BENNETT JJ
DATE:	30 MARCH 2006
PLACE:	MELBOURNE (via video-link)