ACN 070 037 599 P/L & Anor v Larvik P/L & Anor [2008] QCA 416

SUPREME COURT OF QUEENSLAND

CITATION: ACN 070 037 599 P/L & Anor v Larvik P/L & Anor [2008] QCA 416

PARTIES: ACN 070 037 599 PTY LTD (first plaintiff/first respondent) SUSAN McEWEN (second plaintiff/second respondent) v LARVIK PTY LTD ACN 010 185 350 (first defendant/first appellant) RONALD MALCOLM STAMFORD (second defendant/second appellant)

FILE NO: Appeal No 6167 of 2008 / SC No 4550 of 2004

DIVISION: Court of Appeal

PROCEEDING: General Civil Appeal

ORIGINATING COURT: Supreme Court at Brisbane

DELIVERED ON: 19 December 2008

DELIVERED AT: Brisbane

HEARING DATE: 14 October 2008

JUDGES: McMurdo P, White AJA and McMeekin J / Separate reasons for judgment of each member of the Court, each concurring as to the orders made.

ORDERS: 1.The appeal is allowed;2.The first respondent to pay the appellant’s costs of the appeal;3.Set aside the orders made below and in lieu thereof make the following orders:By consent judgment for the first respondent against the first appellant in the amount of $93,402.42 for damages and interest calculated to 2 June 2008;That the first appellant pay the first respondent's costs of the breach of contract claim, including reserved costs;That the first respondent's proceedings against the appellants otherwise be dismissed;That the first respondent pay the appellant's costs of the trade practices claims, including reserved costs;That, by consent, judgment for the appellants on the second respondent's claims;That the second respondent pay the appellant's costs of the second respondent's proceedings on the standard basis.

CATCHWORDS: 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 alleged reliance upon representations made by appellant to enter into various contracts – whether appellant had reasonable grounds to make representations – whether representations are to future matters - whether there is evidence of reliance on the representations by the respondent / PROCEDURE – COSTS – JURISDICTION – GENERAL – where the respondent withdrew claim for damages on eve of trial – where trial judge ordered respondent to pay appellant’s costs – where those costs were not on the indemnity basis – whether indemnity costs should be ordered / Trade Practices Act 1974 (Cth), s 51A, s 82 / Allianz Australia Insurance Ltd v GSF Australia Pty Ltd (2005) 221 CLR 568; [2005] HCA 26, followed / CSR Ltd v Maddalena (2006) 224 ALR 1; [2006] HCA 1, followed / Elders Trustee & Executor Co Ltd v EG Reeves Pty Ltd (1988) 78 ALR 193, [1987] FCA 332, followed / I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109, [2002] HCA 41, followed / Onassis & Calogeropoulis v Vergottis [1968] 2 Lloyd’s Rep 403, followed / Ricochet Pty Ltd v Equity Trustees Executors and Agency Co Ltd (1993) 41 FCR 229, [1993] FCA 99, followed

COUNSEL: G W Diehm with A Luchich for the appellants / A S Mellick for the respondents

SOLICITORS: MacDonnells Law for the appellants / Sykes Pearson Miller for the respondents

McMURDO P: I agree with White AJA and McMeekin J that this appeal should be allowed.

The primary judge found in favour of the first plaintiff respondent, ACN 070 037 599 Pty Ltd, which I shall call the plaintiff company, in both its breach of contract claim and its claim under the Trade Practices Act 1974 (Cth) against the first and second defendants appellants, Larvik Pty Ltd and Ronald Malcolm Stamford. His Honour assessed damages and interest calculated to 2 June 2008 in the contract claim at $93,402.42 and in the Trade Practices Act claim at $315,890.82. Not surprisingly, the plaintiff company elected for judgment on the Trade Practices Act claim. His Honour gave it judgment in that amount. The substantive appeal concerns only the plaintiff company's Trade Practices Act claim and judgment.

The substantive appeal succeeds by this Court overturning a number of contested factual findings made by the primary judge. The relevant evidence, issues and legal principles are set out in McMeekin J's reasons. The second plaintiff respondent, Mrs Susan McEwen, was the person behind the plaintiff company. She was, on her evidence, a woman with 25 years business experience at the time she set up her Cold Rock ice creamery business near the cinema at Noosa Junction. As the primary judge recognised,¹ she could ordinarily be expected to have been satisfied that she would have some sort of secure long term tenure of the premises before she expended considerable money, time and effort establishing the ice creamery there. But sometimes even experienced business people make imprudent commercial decisions which are not necessarily the result of misleading representations under the Trade Practices Act. Mrs McEwen, on her evidence, wanted to establish a Cold Rock ice creamery business in the Noosa area. The site of the business had to be approved by the franchisor before she was granted a franchise. In March 2007, she showed the franchisor three potential sites in Noosa. On her evidence, the franchisor disapproved of two sites. Mrs McEwen agreed that the Noosa Junction site next to the cinema was "his clear recommendation" and that he "was rather strongly of the view that the site best suited for the establishment of the Cold Rock Ice Creamery business was in fact the one at the cine centre".² She added that he compared it to a successful Cold Rock ice creamery business operating at Indooroopilly close to a cinema complex. As McMeekin J points out,³ it seems likely that Mrs McEwen's decision to set up her Cold Rock ice creamery venture near the cinema at Noosa Junction was not significantly influenced by any statements that might have been made by Mr Stamford, but rather by the franchisor's strong view that this site was a very promising one on which to develop a successful Cold Rock ice creamery business.

McMeekin J has convincingly demonstrated in his reasons why his conclusions on the contested factual findings in this appeal are more probable than and preferable to those of the primary judge.

I agree with McMeekin J's reasons and with his proposed orders.

WHITE AJA: As McMeekin J’s reasons for judgment reveal, “the resolution of factual issues is…frequently more difficult and more exacting that the deciding of pure points of law.”⁴ Fact-finding has been described as a “labour on the factory floor of the judicial system”.⁵ When considering conflicting accounts of events that occurred well in the past – in this case some eight years ago – it is as well to recall the observation of Lord Pearce that with every day that passes the memory becomes fainter and the imagination becomes more active⁶. Even though the witnesses may be honest, the probabilities must be carefully weighed and, in the process, contemporary documents and incontrovertible facts play an important part.

McMeekin J has demonstrated that the primary Judge gave too little attention to contemporary documents and objective facts when seeking to resolve the issues raised in these proceedings. When the analysis is done, as McMeekin J has done with great care, it is clear that the conclusions reached by the primary Judge cannot stand.

I agree with his Honour that the appeal should be allowed except so far as the complaint is made about the costs order made below in respect of the discontinuance by the second respondent of her proceedings against the appellants. No error occurred in the primary Judge’s exercise of his discretion not to award costs against her on the indemnity basis.

I agree with the orders proposed by McMeekin J.

McMEEKIN J: This is an appeal against a judgment of a judge of the Trial Division in which he ordered, in respect of a claim for damages brought pursuant to s 82 of the Trade Practices Act 1974 (Cth) (“the Act”), that there be judgment for the first respondent, ACN 070 037 599 Pty Ltd, against the appellants in the amount of $315,890.82 and that the appellants pay the first respondents' costs on the indemnity basis.

The first respondent’s case was that by reason of one or more of three representations allegedly made by the appellants to the second respondent, Mrs Susan McEwen and the guiding mind of the first respondent, the first respondent entered into various contracts and expended substantial sums of money which resulted in substantial losses to the first respondent. Leave to amend the pleadings to introduce the first of the three representations, there being an argument that the relevant limitation period had expired, was sought and obtained at trial.

Several issues were argued on appeal. It is not necessary to consider them all. The principal questions can be resolved by considering the following points:

a)Do the representations made carry the connotation found by the learned trial judge - namely that a lease would be available within a few months of the representations or within a short time of the completion of the Barber contract?

b)Did the appellants have reasonable grounds for making the representations found to have been made within the meaning of s 51A of the Trade Practices Act?

c)Does the evidence support the finding that the respondent relied on the representations?

The Relevant Principles

The substantive matters raised by the appeal concern an attempt to overturn findings of fact. The appeal to this Court is an appeal by way of re-hearing⁷ the requirements and limitations of which were described by Kirby J in CSR Ltd v Maddalena [2006] HCA 1 at [16]-[17]:

"[16]Requirements and limitations

The form of rehearing so provided 'shapes the requirements, and limitations, of such an appeal'. The relevant 'requirements' are that the appellate court is obliged to conduct a thorough examination of the record and a real rehearing. It is not confined to reconsideration of the record in order to correct errors of law, although that will certainly be encompassed in such an appeal. It is required to consider suggested errors of fact-finding. Experience teaches that many errors of this kind arise at first instance, more perhaps than errors of law. Having conducted a rehearing as so described, the appellate court is obliged to 'give the judgment which in its opinion ought to have been given in the first instance'. This involves, where, as here, there is no jury, conducting a thorough review of the primary judge's reasons and engaging in the tasks of 'weighing conflicting evidence and drawing . . . inferences and conclusions'.

[17]The 'limitations' introduced into the rehearing based on a record of the trial are those necessarily involved in that form of appellate procedure. Such limitations include those occasioned by the resolution of any conflicts at trial about witness credibility based on factors such as the demeanour or impression of witnesses; any disadvantages that may derive from considerations not adequately reflected in the recorded transcript of the trial; and matters arising from the advantages that a primary judge may enjoy and the opportunity to consider, and reflect upon, the entirety of the evidence as it is received at trial and to draw conclusions from that evidence, viewed as a whole." (footnotes omitted)

It follows from his Honour's discussion of the limitations on such a re-hearing that it is necessary to distinguish between the reasoning of a trial judge which is based on a credibility determination on the one hand and the reasoning of a trial judge which is based on inferences drawn from facts that were undisputed or found by the trial judge on the other.⁸ Kirby J summarised the position in relation to expressed credibility findings in the following passage in CSR at [21]-[22]:

"[21]Even in the case of expressed credibility findings, the statutory duty to conduct a real 'rehearing' remains. It may sometimes justify reversal of a decision by a primary judge who has 'failed to use or has palpably misused his advantage' or where 'incontrovertible facts or uncontested testimony' demonstrates the findings to be erroneous; or where they are 'glaringly improbable' and 'contrary to compelling inferences'.

[22]However, where the conclusion of the primary judge depends on inferences drawn from undisputed facts or facts that have been found but can equally be determined by the appellate court, without relevant disadvantage, the duty of the appellate court is clear. It derives from the parliamentary enactment. It 'will give respect and weight to the conclusion of the trial judge, but, once having reached its own conclusion, will not shrink from giving effect to it'."

I note that there is no suggestion by the learned primary judge in his reasons that he was influenced in any way by the demeanour of the witnesses. Given the circumstances that is hardly surprising. Each was being asked to recall conversations that had occurred eight years before. Each had entrenched views. It would be surprising if the demeanour of the witnesses played any part in the determination of such a question of fact. Rather, resolution of the disputed issue required an analysis of the objective evidence available and that, it seems, is what the primary judge set out to do.

Appreciating then that due deference should be given to any advantages enjoyed by the learned trial judge, and respect and weight given to his decision, the question for this Court is whether there were incontrovertible facts established that demonstrate error or something short of that but enabling this Court to come to the view that the decision at trial was "glaringly improbable" or "contrary to compelling inferences".⁹

The Background Facts

In early 2000 the second respondent was interested in setting up a business of a “Cold Rock" ice cream franchise. To that end she had investigated three sites for the location of the business. One such site was a kiosk in the forecourt of a building on Sunshine Beach Road, Noosa Junction (“the building”). At that time the first respondent, Larvik Pty Ltd (Larvik), had the right to license the use of the kiosk and had done so to Mr and Mrs Barber. They ran a gift shop there.

Upon identifying the kiosk as a suitable site, Mrs McEwen entered into negotiations with the second appellant, Mr Stamford, who was a director of Larvik. There is a dispute as to when those negotiations commenced. Mrs McEwen contended, successfully before the learned trial judge, that three representations were made to her by Mr Stamford over the period from February to May 2000, and which she relied on, concerning the imminent availability of a lease over the relevant area.

The first representation was alleged to have been made in the course of a telephone conversation in mid-February 2000¹⁰ between Mrs McEwen and Mr Stamford. The second is alleged to have occurred on 13 April 2000 at a meeting between them. The third is said to be contained in a letter written by the solicitors for Larvik to the solicitors for the first respondent and dated 15 May 2000.

The first respondent pleaded, and it was accepted by the learned trial judge, that in reliance upon the first and/or the second and/or the third representations the first respondent entered into two contracts with Mr and Mrs Barber to acquire their interest in the kiosk for $15,000 (“the Barber contracts”) and completed the second of the Barber contracts on 17 May 2000, proceeded with the purchase of a Cold Rock franchise on 18 May 2000 at a cost of $30,000, commenced the fit out of the kiosk with a prospective cost of $140,000, commenced to pay rent for the kiosk on 18 May 2000, completed the fit out of the kiosk on 10 June 2000, and commenced business the following day.

It is relevant to note that Larvik’s right to the exclusive use of the kiosk area had been affected by changes to the statutory regime governing the relevant title. Initially title to the building was registered under the Building Units and Group Titles Act 1980. That Act was replaced by the Body Corporate and Community Management Act 1997. Larvik constituted, with two others, the body corporate for the "Scheme" established by that latter Act. The building forecourt in which the kiosk was located comprised part of the common property under the Scheme.

Up until 6 November 2000 Larvik had the right under the body corporate bylaws to the exclusive use of the kiosk area for the purpose of maintaining the kiosk for retail purposes. Since about 1993 the area had been licensed to various successive licensees. From 6 November 2000 Larvik lost the right to that exclusive use of the kiosk area for reasons related to the coming into force of the Body Corporate and Community Management Act 1997.

Errors in the Approach at Trial

Whilst it is usually appropriate to look at the whole of the conduct of the corporation for the purposes of determining whether it has engaged in misleading or deceptive conduct¹¹ it is necessary in this case to look at the events of February 2000 in isolation. That is so because Mrs McEwen entered into the first of the Barber contracts on 27 March 2000 and before the second alleged representation. The two Barber contracts are very similar in terms. If Mrs McEwen was prepared to enter into the first contract without any relevant representation being made then that is of some significance when judging what reliance was placed on the statements said to have been made at the April meeting and in the May letter. His Honour has examined the representations allegedly made in February and April together in determining their meaning. In my view it is essential to keep the two conversations separate at this stage of the analysis.

His Honour concludes, without analysis of surrounding circumstances, that “Mrs McEwen could reasonably accept the representations as giving an expectation that the lease would be executed within ‘a matter of a few months’ or alternatively within a short time after purchase of the Barber business”.¹² The complaint that the appellants make is that in accepting the first respondent's claim that there was such a representation his Honour failed to have regard to incontrovertible facts and as a result failed to use or palpably misused his advantage.

I have come to the conclusion that the learned primary judge fell into error in several respects. First, he has not appreciated the importance of examining the February conversation in isolation from the later events. His Honour has not considered that if the words used in February did not bear the temporal connotation found that substantially undermines the later finding of reliance on the alleged representations made in April and May. Secondly, because he approached the question of construction of the words used by looking at the conduct as a whole, he has not appreciated the complete lack of direct evidence supporting the construction that he placed on the words Mrs McEwen alleges were used in the February conversation. Thirdly, because of that lack of direct evidence, his Honour’s construction of the words used in February depended entirely on an implication that his Honour felt able to read into the words used, a construction I cannot support. Fourthly, the proper approach to the question of the appellant’s liability for the words used in February, assuming that Mrs McEwen’s version stands, depends on all the surrounding circumstances, circumstances which were not examined by the learned trial judge, and circumstances which when examined are against the finding that the words used could have the connotation that the learned trial judge found they should bear. Fifthly, the learned trial judge seems not to have appreciated that all objective evidence available seems to be against the finding that Mrs McEwen placed any reliance on any words that Mr Stamford may have used in February.

It is necessary then to start with the question of whether the finding that there was a relevant representation in February can be maintained.

The Evidence Concerning the Making of the February Representation

The first respondent's case was that Mrs McEwen had rung Mr Stamford to introduce herself. She had obtained his contact details from a real estate agent, Mr Craig Clemich. Mrs McEwen said that there were three issues that she raised with Mr Stamford. First, whether the use of the kiosk could change from gift shop to food use; secondly, whether the kiosk could be extended and renovated; and thirdly, whether Mr Stamford would grant her a "long - new longer termed lease"¹³. There was no precise period of the lease mentioned at that stage. Mrs McEwen said that Mr Stamford said "he had no problem with those issues, that there was parts of it he would have to look into, but with regards to the - granting me a new long term lease that he wouldn't have a problem with it and he would get his people onto it." ¹⁴

In cross-examination concerning the February conversation Mrs McEwen said:

"Alright. Now, with regard to that, he indicated to you, you say, it was in order for you to have a longer lease, something could be done about that? -- Yes."¹⁵

The only other evidence that Mrs McEwen gave concerning the February conversation was where, still under cross-examination, she drew a distinction between the conversations that she maintained took place in February and that in April. She asserted that Mr Stamford said in the earlier conversation that "his people can get on to it" and in the April conversation he said "they would get on to it".¹⁶

I note that in one version Mrs McEwen had Mr Stamford saying that he “would get his people onto it” and in another she said his people “can get onto it”. There are differences in meaning between those two versions as her own evidence recognised. Apart from anything else I confess to some disquiet to being satisfied to the necessary level when the case advanced is based on words not recorded, used eight years before, and where the meaning attributed can turn on one word.¹⁷

Mr Stamford denied that any conversation in February occurred. He asserted that his first significant conversation with Mrs McEwen was at the meeting with her on 13 April 2000.

The Nature of the February Representation

The important point is that the misleading and deceptive conduct alleged was not that Mr Stamford said that he was prepared to give to Mrs McEwen a lease and a longer lease but, rather, that he represented that such a lease would be available within a particular time.

It can be seen from the evidence quoted above that Mrs McEwen did not contend that Mr Stamford, at any stage in the February conversation, represented in terms that a lease would be prepared or registered in a short time or within any particular time. The words alleged to have been used in February, in their normal meaning, convey no more than a statement of existing fact – that Mr Stamford had no objection to a longer term lease and that he had the present ability to, and the present preparedness to, instruct those who worked or acted for him to commence preparation of the requested longer lease if and when required.

Thus to arrive at his conclusion that the words conveyed a statement of prediction as to the future conduct of the corporation – that a lease would be prepared within a period of time, described in the respondents’ pleading as “a few weeks”¹⁸, “a few months”, or within “a short period of time following the purchase” (a reference to the Barber contract)¹⁹ - the learned trial judge necessarily found that an inference could be drawn to that effect.

For my part I have significant difficulty accepting that such an interpretation of the words said to have been used is open. Indeed I doubt that the words even convey the meaning that Mr Stamford represented that he had the present ability to provide a lease within the times suggested in the pleading, let alone that he would do so. As will be seen I cannot see that any surrounding circumstance justifies the inference drawn.

The Lack of Evidence

Whilst the learned primary judge acknowledged that no claim was made by Mrs McEwen that a date was set for the provision of a lease²⁰ his expressed reasons seem clearly to demonstrate an assumption that there was evidence that Mr Stamford had said that the lease would be available within a short period of time. Whatever can be said of the April conversation²¹ that cannot be said of the February one. I am not confident that the learned primary judge appreciated the complete lack of any evidence of a statement by Mr Stamford in February indicating when a lease would be ready. Because his Honour has approached the construction question by looking at the whole of the conduct he has presumably not seen the need to analyse the circumstances in February to determine whether the implication that he found and which conveyed the misleading connotation was justified.

The relevant reasons are at paragraphs [55] to [57]. My concerns arise out of the passage in the reasons for judgment at paragraph [56] as follows: “I prefer Mrs McEwen’s evidence that the expressed attitude of Mr Stamford was that it could be attended to ‘forthwith’…”.²² There was no evidence from Mrs McEwen to support the quoted “forthwith”, whether in relation to the February conversation or the April one. This was said by his Honour immediately after a paragraph in the judgement that commenced “Mr Stamford denied that he gave any estimate of time it would take to obtain a lease”²³ which, whilst that is accurate, tends to suggest that his Honour was under the impression that the contrary had been alleged in evidence against Mr Stamford given the quote that immediately followed. It is debateable as to whether such evidence had been given in relation to the April conversation but it was not in relation to the February conversation.

Further his Honour found that “Mr Stamford represented that there would be no notable delay”.²⁴ There was no evidence given of any such express statement in relation to either conversation.

This lack of analysis of the relevant circumstances then pertaining reinforces my view that his Honour seems to have assumed that there was in fact evidence to support a direct representation to the effect found.

Because of the mistaken assumption, either explicit or implicit in his Honour’s reasons, that there was direct evidence to support the interpretation he placed on the words used it is necessary to see if such a connotation can be justified in all the circumstances.

Statements of Future Intent

Before turning to the circumstances it is important to recognise that the alleged misrepresentations convey a prediction as to the future and that that is a matter of some significance.

Making one liable for representations as to the occurrence of future events presents certain difficulties. None of us know the future. Hence a statement about the future must, of its very nature, be taken by the recipient with the caveat that the subject of the discussion is inherently uncertain. Various approaches have been taken in the cases to the proper principle that should apply to render a maker of such a statement liable. One matter that is clear from the authorities is that the mere fact that a prediction as to future conduct does not come to pass of itself cannot establish misleading and deceptive conduct.²⁵

One line of authority suggests that such predictions are not actionable unless the maker of the statement “did not believe it could be fulfilled or was recklessly indifferent to the accuracy thereof” (eg per Gummow J in Elders Trustee & Executor Co Ltd v EG Reeves Pty Ltd (1988) 78 ALR 193 at 242). Neither alternative was either pleaded against the appellants or suggested to Mr Stamford.

Toohey J put the relevant law slightly differently: “A statement involving the state of mind of the maker of the statement, eg promises, predications, and opinions, ordinarily conveys the meaning that the maker of the statement had a particular state of mind when the statement was made and that there was basis for that state of mind”.²⁶ The first respondent relies²⁷ on the deeming provision in s 51A of the Act and argues an absence of evidence of reasonable grounds for the statements said to have been made. The appellants plead that the statements they concede were made were merely statements of present intention and not as to “any future matter” so as to fall within s 51A. I will come to s 51A later.

An alternative view is that some statements as to future predictions may constitute misleading conduct “if relevant circumstances show the need for some qualifications to be attached or the possibility of its non-fulfilment to be disclosed as a requirement of fair trading” (per Lee J in Wheeler Grace & Pierucci Pty Ltd v Wright (1989) ATPR 40-940 at 50251²⁸). That approach is reflected in the pleaded case.²⁹ That judgment of course must be made at the time that the representations were made and not with the benefit of hindsight.³⁰

Assuming that to be the principle to apply then the issue here is whether there were such relevant circumstances showing the need for qualification of what was said by Mr Stamford, so as not to mislead, assuming his Honour’s finding as to the reliability of Mrs McEwen’s account stands. Determination of whether representations constituted conduct that was misleading or deceptive requires a consideration of the respective position of the parties, their knowledge and experience, and the surrounding circumstances: Butcher v Lachlan Elder Realty³¹; NEA Pty Ltd v Magenta Mining Pty Ltd.³²

The Relevant Circumstances

In mid February Mrs McEwen was no more than a prospective tenant ringing without notice.³³ At best for Mrs McEwen this was a preliminary conversation between two people who had never met each other, she not expressing any sentiment other than her tentative interest, and seeking the landlord’s attitude to a longer tenure than the nearly three years the Barbers had to run. The point of the discussion was not when a lease would be prepared but whether a term of greater than 3 years would be possible.

From Mr Stamford’s perspective if Mrs McEwen was after a “longer lease” than enjoyed by the Barbers then she presumably had spoken with the Barbers and knew the period for which they had secured the premises.³⁴ The significance of this is that at the time of any discussion in February, and assuming Mrs McEwen obtained the Barber’s right of occupancy, both Mrs McEwen and Mr Stamford knew that Mrs McEwen’s right to occupy the kiosk was secure for several years ahead.³⁵ Why in those circumstances Mr Stamford would have thought there was some urgency about the matter of the provision of a new and longer lease is not apparent.

Thirdly, two lay people were discussing a lease – a document that normally requires some legal expertise in drafting. Experienced business people, as each of them were, know perfectly well that a lease needs to be put into proper form. Lawyers are almost invariably involved. Mrs McEwen eventually retained her own lawyers. Mr Stamford said nothing to suggest that he had any particular expertise with regard to leases. Each would have been well aware that documents had to be drafted, terms agreed, and that third parties would need to be involved in concluding the documents. Each must have known that if a firm idea of when such a legal document would be ready was required then Mr Stamford would need to obtain advice.³⁶

Fourthly, what is of importance is not only what was alleged to have been said but what was not said. There was no mention by Mrs McEwen of a need for a lease within any given time, nor any statement by her that would suggest a need for a lease within any given time. There was no discussion, even of the most preliminary kind, as to the possible terms of the lease, save that it was to be longer. At the meeting in April it is not contested that the period discussed was a “6+3+3” lease. However there was no such discussion in February.³⁷ There was no mention of any future intention that Mrs McEwen may have had concerning the business venture she was contemplating embarking upon. There was no mention of what amount she planned to spend on renovating (although plainly enough it was to be a significant sum) or what amount the franchise might cost her. There was no mention of what stage the Barber contract negotiations had reached (and, as best I can make out, they may not have progressed far at all at that stage³⁸). As to that point it seems a remarkable feature of the findings made that Mr Stamford is said to have made a representation that the lease would be available within a short time of the completion of a contract then only in vague contemplation by Mrs McEwen and one that Mr Stamford knew nothing about.

Finally it might be thought that Mrs McEwen should be taken to have been indicating to Mr Stamford that she was after a lease rather than the licence the Barbers enjoyed and there came onto Mr Stamford some obligation to indicate the true nature of their right of occupancy. I would reject any such argument. Firstly the case was not pleaded on that basis. Secondly, I observe that from Mr Stamford’s perspective³⁹ that was not an issue as he intended that a lease be put in place⁴⁰ and in any case well knew that a lease had to be put in place due to legislative changes. Thirdly, Mr Stamford would have been justified in thinking that if Mrs McEwen had spoken to the Barbers to know that she wanted a longer term than they enjoyed then presumably she would have explored the basis of their right of occupancy, especially if that was of particular interest to her, as is the premise here, and would raise the issue with him in express terms that a licence was not satisfactory, if it was not. Fourthly, from Mr Stamford’s perspective, if Mrs McEwen took an assignment of the Barber’s licence then her position was secure until the lease could be put in place. It had been so since 1993.⁴¹ If that was not satisfactory to her then presumably she would not enter into a contract with the Barbers.

In this regard I observe that it is far from clear that Mrs McEwen was conscious of any distinction between a lease and a licence even at the time of contracting with the Barbers. The evidence seems consistent with two possibilities – either she used the terms interchangeably, or she did not know that the Barbers held a licence not a lease. In either case it says something about the alleged significance of the tenure to Mrs McEwen.

I note that on at least two occasions in the trial Mrs McEwen used the terms interchangeably.⁴² And her direct evidence, eight years later, on the distinction between a lease and a licence did not suggest any strong delineation in her mind. His Honour attempted to clarify the point:

"His Honour: At that time did you know the distinction between a lease and a licence? -- I wasn't very clear on it, no.

Which did you understand, if either of them, would give you a safer title? -- Well, lease to me is very - it's very accepted as being a binding agreement; a licence is something that is a promise.

. . .

Mr Diehm: Is that what you understood back then? -- I understood that I had to enter into a deed of agreement at the last moment all documents were being prepared for the sublease".⁴³

Thus Mrs McEwen avoided answering the direct question in cross-examination. Nonetheless his Honour was prepared to proceed on the basis she was determined at that time to obtain a lease not a licence and I proceed on that basis.

Assuming that Mrs McEwen did not use the terms interchangeably then it is plain that at the time of contracting she was unaware that the Barbers held a licence not a lease. So much follows from her evidence,⁴⁴ the terms of the two Barber contracts whereby she took an assignment of the “existing lease”, and her instruction to her solicitor evidenced in their letter preceding the second Barber contract⁴⁵. It is peculiar, to say the least, that if a particular tenure was so significant to Mrs McEwen she did not clarify the tenure that she was acquiring from the Barbers and for which she was paying $15,000.⁴⁶

To my mind these factors are all strongly against the notion that there came onto Mr Stamford some obligation to qualify his remarks in order not to mislead or deceive. They are strongly against the implication that he was representing that a lease would be prepared within any given time. Neither the apparent subject of the call or any surrounding circumstance suggested either that Mrs McEwen was at all interested in knowing how quickly a lease could be made ready or that Mr Stamford should have assumed that she was. Nothing indicated that her decision on whether to purchase the Barber business turned on when the lease would be ready. Every circumstance seems to suggest that at that stage it was immaterial whether the lease be ready within one month or one year.

The only other circumstance of relevance that I can discern is the fact that Mr Stamford had instructed solicitors to prepare the head lease the previous July and it had not yet materialised. Without antecedent knowledge that the timing of the provision of the lease was of significance I cannot accept that there was any requirement on Mr Stamford to either tell Mrs McEwen that fact or otherwise qualify his answer so as to indicate that he could not give any certain time for the production of a lease in registrable form.

Thus I would reject the finding that there was a relevant representation carrying the connotation that the respondent contends for and as was found by the learned primary judge. I cannot accept that there was any circumstance that called for a qualification to be made to the statement at that time in order to prevent the statement being misleading.

Whilst that determination is sufficient to dispose of the February representations as of relevance to the case, subject to any deeming effect of s 51A, it is worth noting that quite apart from those considerations there must be real doubt that Mrs McEwen in fact interpreted anything said in a telephone call in February as carrying the implication that a lease would be provided within any given time, or relied on it. Again it is necessary to consider the February conversation in isolation.

The Evidence Not Considered

I observe that the first respondent’s case on this point had an inherent improbability that called for an explanation. No mention was made in the pleadings of the alleged February conversation until six and a half years after the alleged event.⁴⁷ If it is to be accepted that the representations made in that conversation were sufficiently significant to have influenced Mrs McEwen’s later actions then that is a remarkable omission. This improbability was not addressed by his Honour.

When asked in cross examination when she had first mentioned the matter to her solicitors she accepted that was possibly in August 2006⁴⁸ – shortly prior to its introduction into the pleadings. Her evidence was that she wasn’t aware how important verbal conversations were.⁴⁹ That piece of evidence is of considerable significance for two reasons. Firstly, common experience suggests that the less importance one places on a conversation the less likelihood there is that it will be recalled accurately later, let alone six and a half years later. I refer to my comments earlier about the significance that might attach to even one word. Secondly, it reinforces the point made above - it is difficult to accept that a conversation to which Mrs McEwen did not attach importance for six and a half years could have the significance sought to be attached to it by the respondents at trial. Again this was not addressed by his Honour.

I turn then to the actions that the appellants point to as demonstrating a lack of any reliance on anything that may have been said in February. The first unequivocal action of Mrs McEwen subsequent to the claimed conversation in February that the appellants point to is the entering into of the first of the Barber contracts by the first respondent on 27 March 2000. Of significance are the terms of the contract. A special condition of that contract was that the first respondent had 28 days to obtain the approval of the "landlord" to establish the Cold Rock ice cream retail outlet. If that approval was not obtained then the contract was to be terminated and deposit monies refunded in full. Larvik was the landlord and Mr Stamford its principal. Mrs McEwen said that she obtained that approval in the course of the February conversation, well before the execution of this contract. If the first respondent already had the landlord’s approval in February 2000, why contract on the basis that it did not?

And there is a further point. One might reasonably expect that Mr Stamford had total control over the landlord’s attitude to whether it would permit the retailing of ice cream. His control over the granting of a lease within a certain time however was far from clear. As discussed above, at the very least, two lay people would appreciate that the timing of its production depended on the actions of lawyers acting for the parties, over whom lay clients may not have a great deal of control. Depending on their experience they may have appreciated that other third parties, over whom Mr Stamford had no control, would be involved before a lease could be registered.⁵⁰ The point is that if the verbal “promise” said to have been obtained concerning the retailing of ice cream was not sufficiently certain to permit the leaving out of such a condition from the contract then that says a great deal about the supposed reliance on any statement concerning the obtaining of a lease and necessarily within a certain time.

It is not irrelevant to consider that second contract at this stage. The first Barber contract was abandoned and a fresh contract entered into on 3 May 2000. In the meantime the meeting of 13 April 2000 occurred. There was no dispute that at that meeting Mr Stamford had indicated the landlord's consent to the establishment of a Cold Rock ice cream retail outlet at the kiosk. The special conditions to the second Barber contract again contained a clause making the contract conditional upon the purchaser obtaining approvals but on this occasion there was no reference to the landlord’s approval of the use as an ice cream outlet. Again the question arises - if Mr Stamford's verbal approval to the opening of such an outlet given on 13 April was sufficient for Mrs McEwen not to require that as a condition of the contract with the Barbers on 3 May 2000 why was that same verbal approval allegedly given in mid-February not sufficient when she entered into the first Barber contract? The inference is that there was either no conversation or one that Mrs McEwen put not the slightest reliance upon.⁵¹

Mrs McEwen said that she considered there was a distinction between a face to face meeting and mere phone call – the former being a “more concrete meeting”.⁵² That, with respect, is precisely the point. As his Honour observed, but apparently dismissed as not worthy of weight, Mr Stamford might well have considered that any early phone call was merely a “vague feeling out by a possible tenant”.⁵³ Not only is there is nothing inherently improbable in that characterisation of any early contact, some six weeks prior to the eventual contract, but Mrs McEwen’s actions in requiring that the contract be conditional on the landlord’s consent to the use as an ice cream outlet in the first Barber contract, but not the second, is entirely consistent with it.

There is a further point that arises from the terms of these Barber contracts. Mrs McEwen did not make the contracts conditional on a longer lease being secured, or secured within any particular time. One might think that to be a normal precaution for any purchaser, especially an experienced business woman⁵⁴, who maintains that the occurrence of some future event was of significance to her commercial decisions.

Finally there is not the slightest hint in the documentation produced by the solicitors acting for the first respondent throughout 2000 of any claim that there had been a representation made by Mr Stamford of the type now alleged and on which it is said Mrs McEwen relied.

It is not that any one of these arguments necessarily determines the point in issue. However each certainly deserved to be weighed in the scales. And their combined force and effect is of considerable significance. In my respectful view his Honour's dismissal of the arguments centred on the two Barber contracts does not acknowledge that significance. His Honour said:

"I accept that Mrs McEwen regarded that [i.e. the failure of the contracts to make any reference to the importance of ACN getting a lease] as unimportant 'formalities', as she said in cross-examination, to secure her possession of the kiosk. I expect she would have known that she could get no more than the Barbers had to sell. Importantly, the lease had been offered to her by Mr Stamford."⁵⁵

In relation to the issue of whether or not there was a representation in February 2000 that last sentence rather begs the question. In my view the arguments I have identified deserved consideration. Nowhere are these arguments dealt with by his Honour. They call into serious doubt whether the conversation alleged, assuming that it occurred, had any significance for Mrs McEwen.

The issue then is whether these considerations are outweighed by those identified by his Honour as persuasive.

The Considerations that Persuaded the Trial Judge

The learned trial judge expressed his reasons for accepting Mrs McEwen's version of events at paragraphs [46]-[48] of his judgement. Those reasons go to the issue of whether there was a February conversation and may be summarised as follows:

a)Mrs McEwen was an experienced business woman;

b)It accords with commonsense that Mrs McEwen would want to explore the likelihood of all concerned (being Mr Stamford and the Local Council) agreeing in principle to her acquisition of the kiosk and her operation of the ice creamery before she expended money, time and effort on details;

c)It was easy to accept that she used the term "lease" and insisted on the importance of a long term lease because that continued to be her attitude all through the negotiations and the documentation as reflected in her correspondence and ultimately in a deed of agreement entered into in August of 2000;

d)Mr Clemich, a real estate agent, said that Mrs McEwen had told him that she wanted a lease;

e)Mr Stamford largely relied on the absence of any entry in his diary in denying that the conversation occurred but had to concede that he did not diarise everything;

f)Mr Stamford might well have considered that the initial phone call from Mrs McEwen as being simply a vague "feeling out" by a possible tenant, an interest which might or might not be pursued;

g)Mr Stamford having first been contacted by the real estate agent Mr Clemich might well have thought that anything important or concrete would come from him;

h)There was no good reason why Mr Stamford would not have said to Mrs McEwen that there would no difficulty in the granting of a longer term lease to her as that was precisely the course that he had accepted to be the appropriate one in his prior discussions with his solicitor Mr Egan as evidenced by his diary note to himself of 14 February 2000 which read "Body Corp in not too distant future will head lease to Larvik and Larvik will sublease to tenant";

i)There was a coincidence in time between the making of the diary note and Mrs McEwen's claim as to when she spoke to Mr Stamford about a lease;

j)The fact of Mr Stamford's agreement to the longer term was supported by the terms of the Deed of Agreement entered in to in August (ie six months later).

Again given my views as to the meaning that could reasonably be attributed to the words said to have been used and Mrs McEwen’s apparent lack of reliance on anything said it is not essential to analyse his Honours’ finding that there was a conversation in February, however the factors he identifies are hardly compelling.

The first factor identified was that Mrs McEwen was an experienced business woman who would exercise common sense.⁵⁶ His Honour thought that it would accord with commonsense that Mrs McEwen would want to explore the likelihood of the various parties interested such as the prospective landlord, Mr Stamford, agreeing in principle to her acquisition of the kiosk and her operation of the ice creamery before she expended money, time and effort on details. So much may be accepted. But so too did it accord with commonsense that when entering into binding contracts whereby she expended $15,000 (the Barber contracts) and when contemplating expending $30,000 to acquire a franchise and in the order of $140,000 to renovate the kiosk she would, if these matters were so important to her, mention these matters to her agent and solicitor and secure her position with an appropriate condition. Given that Mrs McEwen failed to clarify the precise title that the Barbers had to give to the kiosk in the contracts she executed, and signed a contract which did not protect her interests, now claimed, in securing a longer lease within a given time, just what weight can be given to Mrs McEwen’s alleged experience is at least doubtful.

His Honour gave some weight to the view that that Mrs McEwen would have used the word “lease”. I would give that consideration little weight. Whilst there is no reason to doubt that she might well have used the word, assuming a conversation occurred, the issue, given the way the evidence emerged, was not whether she used the word but whether she drew any distinction between “lease” and “licence” or gave any emphasis to it so as to contrast it with a licence. I refer to the discussion above. Contrary to his Honour’s express finding that the negotiations and the documentation reflected her attitude that she wanted a new and longer lease⁵⁷ the Barber contracts did not.

His Honour placed some reliance on the evidence of Mr Clemich that he was told by Mrs McEwen at an early stage that she required a new and longer lease.⁵⁸ There are two things to consider in weighing up the significance of this – first Mr Clemich did not claim that Mrs McEwen asserted that it was essential to her plans that she obtain a lease within any particular time. The drafting of the first Barber contract of 27 March 2000 which he carried out⁵⁹ is consistent with him having no such instruction. There is no condition requiring a new and longer lease from the landlord. There is a clause seeking assignment of an existing lease – something that Mrs McEwen now says she did not want and as it turns out that the Barbers did not have.

Secondly, Mr Clemich’s reliability as to the time of any conversation is crucial. Whilst Mr Clemich was confident that he had a conversation with Mr Stamford about the landlord’s willingness to enter into a longer lease⁶⁰ he did not purport to assert when that occurred.⁶¹ It is common ground that by mid April and well before Mr Clemich was off the scene Mrs McEwen had discussed a 6+3+3 lease with Mr Stamford. She might well have told Mr Clemich by then. However the tenor of his evidence in chief was that any such conversation occurred prior to the entering into the first Barber contract on 27 March.⁶² There was good reason to doubt his reliability.

Mr Clemich was asked to recall events that had occurred eight years before without the benefit of any contemporaneous note or record. He had not seen any file note for nearly eight years by the time he gave his evidence. That alone might give one pause in placing too much reliance on his recollections as to the timing of relevant events. But more significantly there were contemporaneous diary entries in Mr Stamford’s diary, not challenged in any way as to their honesty or accuracy, which showed that Mr Clemich was plainly wrong in his recollections as to the timing of related events.

Mr Clemich accepted that he had a conversation with Mr Stamford in relation to a related matter concerning a "grease trap and his promise to drop the plans into [his] office". He said that he believed that the date of this conversation was at a time prior to the contract being executed.⁶³ That can only be a reference to the first Barber contract as he left the employment of the agency at the time that contract “fell over”.⁶⁴ It will be recalled that Mrs McEwen had the first respondent enter into the first Barber contract on 27 March. Mr Stamford made entries on 29 and 30 March and 1 April relevant to his dealings with Mr Clemich.⁶⁵ Those entries are consistent with Mr Clemich ringing Mr Stamford on 29 March and asking for the plans of the kiosk to be dropped around to him and the dropping off of the plans by Mr Stamford on 1 April ie all subsequent to the first contract being executed.

Whilst his Honour was quite right to find that the absence of an entry in the diary was hardly conclusive nonetheless the entries that are there deserve to be given weight. They lead strongly to a finding that Mr Stamford was accurate in his recollections of his dealings with Mr Clemich and Mr Clemich not accurate. The probabilities strongly favour that Mr Clemich’s recollection, unassisted as it was by any contemporaneous file note or record, was simply wrong. Again that does not mean that he is wrong on all points but it is a significant matter to be weighed in the balance when attempting to determine what weight should be given to this claimed recollection. His Honour did not do this.

There is another aspect of the diary notes that is relevant. Mr Stamford did record entries consistent with Mr Clemich making contact with him on 10 February 2000.⁶⁶ Those diary entries make no reference to Mr Clemich mentioning any insistence on a lease, let alone one within any given time. His Honour recorded as part of his reasoning for rejecting Mr Stamford’s version of events that Mr Stamford might have expected any significant matter to be mentioned by the agent. I observe that that is precisely what one would expect of an agent when sounding out a prospective landlord. If Mr Clemich had clear instructions that it was a condition of his client’s interest that a lease was required and within some particular time frame then one might expect that he would make that enquiry of Mr Stamford and that Mr Stamford would note it. The absence of any evidence of such a communication or any diary note suggesting such communication were each consistent with Mr Stamford’s position but not, apparently, recognised as such.

It is true, as his Honour identified, that Mr Stamford would not have had any difficulty in agreeing that a lease would be offered to Mrs McEwen given that the legislative changes of which he was well aware required that he do precisely that. But that does not advance the matter very far.

The final consideration mentioned by his Honour was the reference to a longer term lease in the deed of agreement entered into in August, some six months after the alleged conversation. That is hardly persuasive that there was a conversation in February given the agreed discussions about the giving of such a lease at the April meeting.

Conclusion

The crucial issue is not so much whether there was a telephone call in February in which the possibility of a longer term lease was mentioned. His Honour found that to be so on grounds that I find unpersuasive. Assuming the finding to stand however, the issue is whether the content and context of any discussion justified the finding that a representation had been made which could carry the temporal implication essential to characterising the conduct as misleading or which demanded qualification, and if so whether the respondents relied on it.

The words on their face carry no such connotation. They indicate no more than a present preparedness to instruct others to put in place a lease having a longer term than the licence that the Barber’s enjoyed. No surrounding circumstance suggested any need for qualification.

Even if that not be so all objective evidence is against the proposition that any reliance was placed on any conversation in February.

These various pieces of evidence that I have discussed which support the appellants’ case ought to have been brought into the balance when considering the probabilities on those crucial issues. The evidence relied on mainly concerns facts which are uncontroverted – contemporaneous documents entered into by Mrs McEwen and inferences plainly open from those documents. His Honour’s reasons do not demonstrate a detailed analysis of these aspects of the evidence. In my view that justifies this Court in determining the facts for itself. In my view these aspects of the evidence lead strongly to the conclusion that his Honour's finding as to the meaning and significance of the conversation, recalled so long after the event and forming no part of the respondent's case until six and a half years after the event, is "contrary to compelling inferences".

The first respondent bore the onus of establishing the making of the representation. I would not be prepared to find, on the balance of probabilities, that if there was any conversation it contained any representation or was of any significance to either party at the time. The case should be determined on the assumption that no relevant representation was made prior to the April meeting.

The Temporal Connotation in the April Conversation and May Letter

I turn then to the second and third representations.

At the meeting of 13 April 2000 after asserting that the lease was discussed and the term of the lease Mrs McEwen said: "Ron [Stamford] agreed that that [the period of the lease] would be fine, and that he could again get his people on to it". She was asked when could he do that and she said he replied "straight away".⁶⁷ It is common ground that there was discussion of a 6+3+3 lease. Mrs McEwen accepted that nothing else was discussed about the terms of the lease and they were left up to her solicitor and Mr Stamford's people to organise.⁶⁸

As previously noted, when under cross-examination, Mrs McEwen drew a distinction between the conversation she maintained took place in February and that in April. She asserted that Mr Stamford said in the earlier conversation that "his people can get on to it" and in the April conversation he said "they would get on to it".⁶⁹ Again I note a change in the word used – “could” as against “would”.

Many of the considerations previously discussed are relevant here. I particularly observe that the words used do not in terms assert that a lease will be available at any particular time. Again they assert no more than an existing fact – a preparedness to instruct agents, presumably lawyers, to attend to the preparation of the lease.

The evidence discloses only four relevant points of difference between the situation that pertained in February to that in April. First, one term of the lease, and only one term, was agreed – the term of 6+3+3 years. Secondly, Mrs McEwen asserted, and the learned trial judge accepted, that Mr Stamford said that he could or would get his people onto the preparation of the lease “straight away”. Thirdly, Mrs McEwen asserted, and the learned trial judge accepted, that she told Mr Stamford that the representation of 13 April was made in the context that she eventually wanted to sell the business "in a couple of years".⁷⁰ Fourthly, Mrs McEwen had already entered into the first Barber contract.⁷¹

I would observe four things – first, the readiness to enter into the first contract with the Barbers without any reason to think that a lease was imminent is a relevant matter to weigh in the balance. It is strongly against any understanding on Mr Stamford’s part (and so against any need to qualify his statement) that it was of any significance to Mrs McEwen’s decision that the lease be produced within any given time. Their common basis was that Mrs McEwen was content to enter into the contract with Mr and Mrs Barber without any indication of the availability of the lease or even as to so basic a matter of how long the lease period would be.

Secondly, the terms of that Barber contract are significant too. The completion date for the first Barber contract was then only 3 weeks away.⁷² Neither party then knew that the contract would go off. One of the implications from the words Mrs McEwen said were used and that the learned trial judge was prepared to draw was that the lease would be available “within a short time after purchase of the Barber business”.⁷³ Despite the learned trial judge’s apparent reluctance to find for the first of the claimed implications pleaded – that the lease would be available “within a few weeks” – that effectively is what he has found. Mrs McEwen was intending to extend and renovate the kiosk. Indeed at the time of the April conversation Mrs McEwen intended that architect’s plans be prepared but they had not yet been.⁷⁴ She was well aware, and Mr Stamford was entitled to believe that an experienced business person would be aware, that a plan of survey of the kiosk would then need to be prepared and submitted to the Council for approval.⁷⁵ She was aware that a body corporate was involved and would need to approve any dealings.⁷⁶ For my part I cannot accept that anyone in commerce would believe for a moment that a lease would be produced within a few weeks of having your first discussion with the landlord of any significance, when architect’s plans are yet to be prepared, and council approvals yet to be obtained.

Thirdly, the advice to Mr Stamford of the intention to sell the business “in a couple of years” is against any implication of there being some urgency attaching to the need to produce a lease, provided Mrs McEwen’s tenure was secure in the meantime. If that be accepted then it is difficult to see why either Mrs McEwen or Mr Stamford ought to be taken as discussing the availability of a lease within a few months or within a short period of time as found.

Fourthly, a readiness to instruct does not to my mind carry with it any implication as to the speed with which those instructions can be carried out, bearing in mind the parties are discussing the preparation of a legal document involving expertise that neither of them purported to possess.

Again it is of note that there was no statement by Mrs McEwen of any need to have the lease within any particular time, or of any circumstance that would put Mr Stamford on notice that it was required within any particular time.

In my opinion the third representation said to be conveyed in the letter of 15 May 2000 does not assist the respondents at all. His Honour’s findings were: “[The letter] did not expressly state when the sub lease would be ready for execution but it suggested a commencement date for the sub-lease of 18 May 2000 and suggested, pending the execution of the ‘final lease documentation’ that the Deed of Agreement be signed to permit ACN to take possession of the kiosk on 18 May. Implicit in that is a suggestion that the lease would be ready for execution very close to 18 May”.⁷⁷

The significant difficulty with those findings is that there is an express reference in the letter of 15 May 2000 to when the lease documentation would be ready. The letter concludes, after referring to the proposed deed of agreement, that the respondent could take possession of the property as from the proposed settlement date with the Barbers on Thursday, 18 May 2000 "with the final lease documentation to be signed once the restructuring of the Cine Centre has been completed."⁷⁸ The restructuring referred to was the legal restructuring, not any physical work at the centre. There was no statement as to when that restructuring would be completed.

It is necessary to bear in mind that this was correspondence between the solicitors representing the parties, that the steps that were required to be taken to put in place the "final lease documentation" were matters that involved some expertise in conveyancing practice, that the solicitors could be assumed to each have some expertise in that regard, and that the expert evidence before the court was that it would take some eleven months from the sealing of the relevant plan (which occurred in June 2000). In that context I fail to see what basis there is for the implication that a sublease would be in place within a few weeks or a few months or within a short period of time of the completion of the Barber contract.

The primary submission made by the respondent is that numerous steps had to be undertaken to have the lease put in place those steps being enumerated at paragraph 14 of the further amended statement of claim.⁷⁹ The submission is that Mr Stamford ought to have qualified any statement he made to Mrs McEwen by informing her of all the steps that still remained to be taken. The steps pleaded were as follows:

(a)negotiate the terms of a head lease ("the head lease") over the Kiosk with the Body Corporate for the Noosa Cine Centre ("the body corporate");

(b)negotiate the terms of a sublease over the kiosk with the Plaintiff;

(c)cause a plan of survey of the kiosk to be prepared;

(d) obtain the consent of the Noosa Council to the plan of survey and the lease and the sublease;

(e)cause the body corporate, at a general meeting, to pass a resolution without dissent granting the head lease in exchange for the surrender of the first defendant’s exclusive use rights to the Kiosk;

(f)cause the body corporate at a general meeting to pass a special resolution consenting to a sublease of the Kiosk;

(g)procure the execution of the head lease and sublease;

(h) register the head lease and sublease with the Department of Natural Resources.

I note that the terms of the head lease had already been negotiated.

In my view the circumstances did not require that any such qualification be given. First, Mr Stamford would have reasonably assumed that the need for many of those steps was within Mrs McEwen’s knowledge, and she must have known they were still to be completed. Indeed the only two steps I can see where Mr Stamford may have had some advantage over Mrs McEwen is in his knowledge of the workings of the body corporate, which may be relevant to steps (e) and (f). The evidence was that Larvik had a 53 per cent interest in the body corporate,⁸⁰ that a head lease had been negotiated and lodged with Council the previous August⁸¹ and that Larvik had received legal advice that they ought to give a tenant a sub lease.⁸² Larvik was not opposed to the sub-lease (and nor was any other unit holder). These circumstances are all against any need to qualify what had been said as they each suggest that all should be smooth sailing.

Secondly, relevant surrounding circumstances seem to me to be against the need for Mr Stamford to say anything at all. They include that the respondents at this stage are represented themselves by solicitors presumably well able to advise their client on such matters, that if those solicitors required information to properly advise their client they would presumably ask for it, that no statement by Mrs McEwen to that time could be taken as indicating that the timing of the provision of the lease was of any significance to her, and that Mrs McEwen tenure was secure for some years ahead.

It is relevant too that this letter is written in mid May, 4 weeks after the April conversation. If Mrs McEwen had construed the conversation as carrying with it the implication that a lease was then imminent⁸³ and that no lease had emerged four weeks later then one would expect there to be some enquiry of the solicitors acting for the appellants of what was meant by the final sentence of the letter if indeed the representations had been interpreted with the claimed connotation, or if the matters were of significance.⁸⁴

There is a further point. The letter concerned the terms of a proposed deed of agreement which in turn was to deal with the proposed lease of the kiosk area. The solicitors acting for the appellants pointed out in the letter that they were unsure as to the final terms of the sublease that was to be put in place in favour of the first respondent. They suggested that if agreement could not be reached on those final terms then a clause ought to be incorporated into the agreement that provides that "the sublease be referred to an independent solicitor as nominated by the President of the Law Society" for the determination of any disputed terms.⁸⁵ That carries with it the obvious implication that there were the possibility of delays, and perhaps significant delays, even in the dealings between Larvik and the first respondent.

I cannot accept that there ought to be implied some temporal connotation into these dealings as was found. Without some express statement that the respondents required a lease to be produced within the periods of time pleaded I cannot seen any circumstance which called for a qualification of what was said to avoid the characterisation of the conduct as misleading or deceptive.

In my view there was no proper basis for his Honour’s determination that Mr Stamford was guilty of a “serious factual misrepresentation”⁸⁶ and one “likely to induce error, the error being that the creation of a lease was so imminent as to be expected within, at most, a few months (say 3 or 4) or a short period of time following the completion of the Barber contract”⁸⁷.

Section 51A of the Trade Practices Act 1974

For my part I cannot see that the representations carried any implication as to a future matter. If they did then s 51A of the Trade Practices Act 1974 (Cth) is relevant. It provides:

"Interpretation

(1)For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.

(2)For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation.

(3) Subsection (1) shall be deemed not to limit by implication the meaning of a reference in this Division to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead. "

Section 51A deals with one of the two approaches earlier discussed to making a corporation liable for a misrepresentation concerning the future⁸⁸ – it assists the claimant with its proof where the state of mind of a corporation is in issue. Here the corporation avoids a deemed finding that it engaged in misleading conduct if it adduces evidence that it had reasonable grounds for any representation made. That does not mean that the court cannot still find it did engage in misleading and deceptive conduct. It remains a question of fact to be determined on the whole of the evidence, the respondents bearing the onus.

The appellants submitted that they had established, the first appellant bearing the onus, that the first appellant, through Mr Stamford, had reasonable grounds for making representations that were made.⁸⁹ The appellants therefore, they submit, avoid the deemed finding. The learned primary judge found to the contrary. There are, in my respectful opinion, three reasons not to accept his Honour’s finding. First, his Honour did not bring into account relevant evidence which was to the contrary. Secondly, he based his finding in part at least on a factual basis not supported by the evidence. Thirdly, the reasons advanced for the finding are either irrelevant or equivocal.

The principal submission made is that his Honour did not examine two relevant pieces of evidence, at least in this context, and determine whether that afforded Mr Stamford, and hence the corporation, reasonable grounds for making the representations. Those two pieces of evidence were:

a)The advice that Mr Stamford had received from his solicitors on 7 July 1999⁹⁰ when discussing the head lease. That advice reads:

"It is hard to gauge when the lease will come into effect but it should be within three to six months from today."⁹¹

b)Mr Stamford's diary note of 14 February 2000 which reads:

"Body corp in not too distant future will head lease to Larvik and Larvik will sublease to tenant."

His Honour made an express finding that the diary note of 14 February 2000 reflected the legal advice that Mr Stamford had in mid-February and used it as a basis for finding that in April 2000 Mr Stamford "would have given Mrs McEwen to understand that there would be little delay in producing her required lease".⁹² But he did not bring the note into account on this point. I observe that if that was Mr Stamford’s legal advice in mid February, at about the time of the alleged first representation, then even had I been of the view that the words used in February related to some future matter, and had I thought that Mrs McEwen had relied on them, nonetheless such advice would plainly provide reasonable grounds for the making of the statement so construed.

The fact is that Mr Stamford's legal advice to mid April was more or less consistent. He had been told in July 1999 that the head lease to Larvik would be ready within three to six months. As it turned out the lease could not be submitted to Council until 4 August 1999.⁹³ He could expect it then by February. By mid-February he is told that the lease should be ready in the “not too distant future”. That legal advice was given by a practitioner in a firm of good repute, the firm having acted for Mr Stamford since 1979, and in respect of this business since its inception.⁹⁴ Mr Stamford had found them “very competent”.⁹⁵ He had spoken to the solicitors in late March 2000 about the kiosk and nothing apparently was said to suggest that his instructions with regard to the lease were not being pursued.⁹⁶

For my part I have a great deal of difficulty in accepting that, with that background, a corporation does not have reasonable grounds for asserting at a meeting with a prospective tenant two weeks after the last discussion with the solicitors handling the matter and two months after being told that the lease would be ready in the “not too distant future” that a lease could be put in place “within a few months”, one construction his Honour placed on the words. Mr Stamford had every reason to think, given the legal advice that he had received, that if Mrs McEwen was operating on the assumption that the leases would be available “within a few months” that belief was entirely justified.

There is no evidence to show that anything had changed by the time the letter of 15 May was written. The legal advice to date provided reasonable grounds for saying precisely what was said. If the premise is that Mrs McEwen was justified in interpreting the conversations of February and April with the letter of 15 May as indicating that a lease would be available within a few months then from Mr Stamford’s perspective he had reasonable grounds for saying that. So far as he was aware all was on track.

The learned trial judge held that he was satisfied on the balance of probabilities that there were no such reasonable grounds. He expressed four reasons for that finding:

a)Mr Stamford was indifferent to a lease as opposed to a licence;

b)Mr Stamford did not personally urge or even encourage his solicitors to act expeditiously;

c)Mr Stamford's evidence was that he did not actually know how long it would take to get the lease in place and he did not obtain any up to date estimate from his solicitors at the time of the representations;

d)Mr Stamford held no genuine belief that the lease could be put in place within three to nine months (that being Mr Stamford's recollection of the effect of a letter sent to him by his solicitors⁹⁷) because he did not urge his solicitor on when that period was heading towards expiry.⁹⁸

It seems to me, with respect, that there is a deal of force in the submission made by Mr Diehm of counsel, who appeared with Mr Luchich on behalf of the appellants, that the first two reasons are not relevant to the issue.

As to the third reason, whilst relevant and accurate it is far from determinative as to whether Mr Stamford had no reasonable grounds for thinking that a lease could be put in place within a few months. In some circumstances it may have been necessary for Mr Stamford to go back to the solicitors at the time that he spoke with Mrs McEwen and obtain an up to date estimate to avoid a finding that the corporation had no reasonable grounds for his statement. For example, if Mr Stamford had put some definite time on when the lease would be available, thereby suggesting that he had actual advice on the subject, or if Mrs McEwen had indicated some reason for urgency such that she was evidently expecting a lease imminently. But in the absence of such circumstance I fail to see that a corporation acts unreasonably in failing to seek up to date advice given the advice received to that time, and given that there had been some communication on related matters only two weeks or so before without mention of any problems.

There are two further relevant matters. The only intimation Mrs McEwen had given as to her interests was that she had some intention of selling the business “within a couple of years”. That gives some context to the extent of the need to obtain more precise advice as to the probable availability of the lease. Clearly it would be in Mrs McEwen’s interest to have a lease in place prior to that time. But the urgency to obtain an up to date estimate from solicitors is hardly demonstrated.

The second matter is that Mrs McEwen had already demonstrated by her own actions the need for precision that she expected. She had already entered into one contract with the Barbers, clearly in the knowledge that no longer lease was yet in place and with no promise that one would be imminently put in place. That contract had been entered into only about two weeks before the conversation of 13 April. Again it is difficult to see what made it unreasonable for Mr Stamford not to go back to his solicitors with an express enquiry about how things were progressing with the lease. One would expect that if the issue was of concern something would have been said about it.

As to the last reason, it is by no means obvious that a failure to urge a solicitor on at the end of any expected period within which the lease would have been ready necessarily means that the belief is not held on reasonable grounds when made. It seems with respect to be equally consistent with a view that trust is placed in the solicitor to perform as efficiently as he or she can. No ground at all was shown why Mr Stamford would not have expected his solicitors to perform their duties competently. They had done so for 21 years. If he did trust them then I cannot see why it would not be consistent with that trust that he would await their performance of their duty, he assuming that they were attending to his affairs in a timely way as they apparently had done in the past.

Finally his Honour appears to have made an adverse finding against Mr Stamford without evidence to support it. In answer to a question from the learned trial judge to the effect that he would expect even in quite a complicated matter to have the lease prepared within a year Mr Stamford responded that he "would certainly have expected and hoped that it would have been done within a couple of years anyway, but it had already started at 1999. So, that would take it through to 2001."⁹⁹ After referring to that passage the learned trial judge said that he observed: "That it does not seem that he knew what progress had been made in 1999 so how could he estimate 'a couple of years' and '2001'?"¹⁰⁰

It was submitted by Mr Diehm, and not contradicted, that there was no evidence to justify that observation.

Mr Stamford in fact gave some evidence as to what occurred during 1999 under cross-examination and it was not put to him that he did not know what was going on. Amongst other things he agreed that the first time that the question of a long term head lease had been raised with him by his then solicitors was on 10 February 1999.¹⁰¹ He also accepted that a long term lease in respect of the kiosk had been submitted by a Mr Brinkley (who was the solicitor for the body corporate) on 10 April 1999.¹⁰² He accepted a suggestion that a draft lease was submitted to the Council on 4 August 1999.¹⁰³ Further his Honour accepted that on 20 December 1999 documents were forwarded to the Council including a letter of consent by Larvik.¹⁰⁴ There is no suggestion that Mr Stamford was unaware of the activities of his own company.

Bearing in mind that Mr Stamford is being questioned in 2008 about events eight to nine years before one could hardly expect that his recollection at the time of trial would be particularly fresh. However, there is no reason to think that these matters would not have been well known to him in the year 2000 within months of their occurrence.

In my view there was evidence that the corporation had reasonable grounds for the statements that Mr Stamford or the solicitors made. If there was a persuasive onus it was discharged. There is no basis for a deemed finding under s 51A that the corporation engaged in misleading or deceptive conduct.

Reliance and Causation

What I have said is sufficient to dispose of the substantive appeal. However given the matters argued I will deal with the remaining principal issue, that of causation and hence reliance.

Section 82 of the Trade Practices Act provides that "a person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part … V … may recover the amount of a loss or damage by action …"

His Honour’s findings are at paragraph [100] and relevantly read: “I have accepted that she was promised a lease rather than a licence. Did she rely on the representations? I have decided that a lease, rather than a licence was critical to her intention; she was induced to enter into occupancy of the kiosk because of her belief that ACN would soon get a head lease, then quickly give her a sub lease, and because she quite understandably felt committed to the project.”¹⁰⁵

If that finding is intended to mean that the critical point was not the provision of a lease within a period of time but rather the promise of “a lease rather than a licence” then I have some significant difficulties in accepting that it was open. The case pleaded was not that Mr Stamford misled Mrs McEwen by pretending that she was to receive a lease when she in fact was to receive a licence. Nothing was said by Mrs McEwen to Mr Stamford to enable him to appreciate that the acceptance of a licence initially from the Barbers was unexpected. As far as he was aware that was precisely what Mrs McEwen had contracted to receive. That however was not Mrs McEwen’s expectation – that she thought that she was to receive a lease on taking over the Barber’s rights is clear. That is the inescapable conclusion from the evidence¹⁰⁶. It is consistent with his Honour’s findings that she “was not happy” to discover that she was to enter into a Deed of Agreement not a lease at the time of completion of the Barber contract.¹⁰⁷ The issue is why she did she hold this view?

Mrs McEwen did not conduct the case on the basis that Mr Stamford induced this belief¹⁰⁸ – Mrs McEwen simply failed to check the title she was acquiring from the Barbers. That fundamental misunderstanding seems to me to lie at the heart of Mrs McEwen’s belief (accepting her claim that she held that belief) that a lease would be prepared quickly - all she was seeking was a simple change to an existing lease by way of the provision of a longer term, and she expected, not unreasonably given the premise, that should have been able to be accomplished with ease.

As I have mentioned the significance of the finding that there was no relevant representation in February of 2000 goes to this question of reliance. The first respondent entered into the first Barber contract on 27 March 2000 and therefore before the April meeting when the first relevant representation was made. The second Berber contract, entered into on 3 May 2000, was in substantially the same terms as the first. Those circumstances, in my view, undermine completely the first respondent's claim that there was any reliance by the first respondent on statements made by Mr Stamford concerning the availability of a lease within a given time.

There are other difficulties with the notion that there was any reliance on the assumption that Mr Stamford would imminently produce a lease. Whilst his Honour has found that it was “critical to her” to have lease not a licence, apart from Mrs McEwen’s assertion at trial that the matter was of significance to her, the objective evidence available does not support the finding.

The critical time for this assessment is in the period from 3 May 2000, when she entered into the second of the Barber contracts, to 17 May 2000, when the time for completion of the Barber contract arrives. She had solicitors acting at least from 2 May when her solicitors Sykes Pearson Miller wrote to the Barbers’ solicitor DJ Turner seeking “a copy of the lease”.¹⁰⁹ They wrote in respect of the first Barber contract that was still then on foot. DJ Turner responded the following day enclosing a copy of the licence.¹¹⁰ The parties (ie the first respondent and the Barbers) by now had agreed to abandon the first Barber contract, because certain approvals had not been obtained, and enter into the second contract. On 4 May Sykes Pearson Miller again wrote to DJ Turner, this time in relation to the second Barber contract, again calling for a “true copy of the lease document in accordance with clause 26.1 of the contract” and sought their advices as to “the landlord’s requirements to consent to the assignment of the lease”.¹¹¹ On the same date they wrote to Mrs McEwen seeking, inter alia, information from her to satisfy the landlord as to the assignment of the lease.¹¹² Thus as at 4 May Mrs McEwen and her solicitors are operating under a fundamental misconception as to the nature of the title the first respondent was to receive from the Barbers.

Presumably upon receipt of the DJ Turner letter of 3 May – which could only have been a day or two later - the solicitors acting for Mrs McEwen and the first respondent became aware of the misconception as to the title being conveyed by the Barbers. The significant point for present purposes is Mrs McEwen’s reaction. If indeed the nature of the title was “critical to her” then one would expect a sharp response. She could have called off the contract – it clearly represented that she was to receive a lease not a licence. At the very least one would expect an exchange of correspondence strongly querying the lack of any lease. Not only is there no protest but the contract is completed without so much as a query directed to the solicitors for the appellants asking when the lease, so critical to the plans, would be prepared. If she had thought prior to this time that it was a simple matter to extend the period of an existing lease she had no basis for so thinking from shortly after 4 May onwards.

The learned trial judge found that Mrs McEwen “understandably felt committed to the project” and presumably that this explained the lack of any complaint or action. There may have been an emotional commitment to the project but there was no significant financial one. At this stage Mrs McEwen had not committed any significant funds to her project save the payment of a deposit to the franchisor of $10,000 presumably on 4 February 2000.¹¹³ That was paid when Mrs McEwen was yet to identify any suitable premises and before her first disputed conversation with Mr Stamford. She had paid a deposit of $200 to the Barbers and expended some monies, undisclosed in amount, to an architect to alter the existing kiosk. She contemplated spending a further $20,000 on securing the franchise and $140,000 on renovating the kiosk. If the provision of a lease within a given time was of importance to the decision to go on or not with these plans involving very substantial expenditure then it is inconceivable that Mrs McEwen did nothing to check on the likely time period before the lease could be made ready – a time period that had not to that point been discussed, even on her version of events. I suspect that Mrs McEwen was far more influenced by the franchisors’ decision, mistaken as events transpired, that this was the ideal site for her franchise.¹¹⁴

Nor is there any compelling reason that I can see why the timing of the provision of the lease was of particular relevance to the first respondent. Certainly Mrs McEwen’s answers, when pressed in cross-examination, did not elicit any compelling reason as to why a short time period was important to her.¹¹⁵

Again it is significant that nowhere in the correspondence between the solicitors before or after the second contract of 3 May 2000 is there any assertion by the solicitors acting on behalf of Mrs McEwen and the first respondent that she was operating under an assumption that the lease and sublease would be provided imminently. Indeed the correspondence that followed is against any such inference.

By letter of 15 May 2000 the appellants’ solicitors confirmed the understanding their respective clients had reached as to an agreement regarding the proposed lease of the kiosk area. There was then a confirmation on 17 May that the respondents agreed with the basic terms proposed with some changes. There was then a flurry of correspondence between 17 and 19 May 2000 confirming that the respondent would be taking possession of the site and could not delay further and other housekeeping matters.

In a letter of 17 May the respondents’ solicitors indicated that they looked forward to receiving the deed of agreement and "regular advices concerning the preparation of a sublease".¹¹⁶ That would appear to be as high as the matter was ever put.

Matters then proceeded at a leisurely pace. On 4 July 2000 the appellant's solicitors forwarded an agreement in duplicate for signature by the first respondent that explained that in respect of the sublease they understood that the plan was "still with Council for approval and so there will be some delay".¹¹⁷ This prompted a response from the respondent's solicitors over three weeks later on 27 July 2000 seeking some changes to the proposed agreement.¹¹⁸ The agreement was executed on 18 August 2000. There is no reference through any of this correspondence to any assumption held by Mrs McEwen that she was operating under the impression that the provision of the lease was imminent as long ago as 13 April 2000. The lack of urgency shown by her own solicitors suggests that their instructions were not consistent with the case now advanced.

It is well established that s 82(1) takes up "the common law practical or commonsense concept of causation" discussed by the High Court in March v E & MH Stramare Pty Ltd.¹¹⁹ Hence causation was a question of fact for the learned primary judge and was to be determined by reference to commonsense and experience into which policy considerations and value judgments necessarily entered. The loss or damage that the plaintiffs are entitled to is that loss or damage suffered “by conduct” done in contravention of the Act. It has been said that so long as the contravening conduct is a cause of the loss, in the sense that it “materially contributes”, that is sufficient (Henville v Walker,¹²⁰ I & L Securities v HTW Valuers (Brisbane) Pty Ltd ¹²¹) but that finding of materiality depends on the purpose behind the statute. In Allianz Australia Insurance Ltd v GSF Australia Pty Ltd¹²² Gummow, Hayne and Heydon JJ said that the notion of causation within s 82 is "to be understood by reference to the statutory subject, scope and purpose".¹²³ Gleeson CJ observed in I & L Securities Pty Ltd that an order under s 82 is made "in order to give effect to a statute with a discernable purpose: and that purpose provides a guide as to the requirements of justice and equity in the case".¹²⁴

The question then is whether, in the circumstances that prevail, the respondents have satisfied this commonsense test of causation. Those circumstances are that at the time of the conversations in February and April Mrs McEwen was operating under a mistaken assumption as to the title that she was to receive from the Barbers, an assumption not said to be induced by Mr Stamford; she failed to expressly make known to Mr Stamford that she was reliant on the production of a lease within a given period of time; she failed to include in the contract with the Barbers or the franchisor any condition that a lease be produced in a timely way; so far as the evidence shows she failed to instruct her solicitors and agent that it was of significance that a lease be produced imminently; she failed to make enquiry of any person how long it might take to produce a lease, even after she became aware that the Barbers had a licence not a lease; she settled on major contracts and embarked on significant expenditure without clarifying any of these matters; and she failed to instruct her solicitors to insist on expedition in the production of the lease in the months following the completion of the Barber contract.

These matters all strongly suggest that if Mrs McEwen did assume that a lease was to be produced “within a few months” then this was of minimal, if any, importance at the time. Coupled with that is a complete absence of objective, contemporaneous evidence of reliance.

In my view the "causative threshold", as it has been called, has not been reached. In Ricochet Pty Ltd v Equity Trustees Executors and Agency Co Ltd (1993) 41 FCR 299 at 235, Lockhart, Gummow and French JJ observed:

"A finding that a misrepresentation might have induced a decision does not of itself establish as a matter of probability that it did. … Ultimately, the 'causative threshold' beyond which liability attaches to a misrepresentation which is one of a number of factors inducing the decision that produces loss, will be a question of judgment. … But the mere possibility that a misrepresentation might have induced a course of action by the representee can never of itself attach liability under s 82 to the making of it."

Section 52 renders a corporation, and those connected with them, strictly liable for conduct characterised as misleading and deceptive. If Mr Stamford’s statements did play a part in inducing the decisions which led to the losses claimed, and I am doubtful they did, then in my view it would be contrary to justice and equity to hold that contribution was “material” in the relevant sense.

Summary

In my respectful view I disagree with the findings of the learned trial judge. In my view:

a)The probabilities favoured a finding that there was no relevant representation in February of 2000;

b)That conclusion substantially weakens any finding of reliance;

c)The representations complained of could not have reasonably borne the implication attributed to them which implication constituted the relevant misrepresentation;

d)In any case the corporation had reasonable grounds for making the representations in the form that they were in;

e)There were significant considerations not adequately dealt with by his Honour that made it improbable that there was reliance in the relevant sense on the representations.

Those findings dispose of the need to determine whether leave should have been given to amend the pleadings to include the February conversation.

Costs

The appellants complain of the orders made by the learned trial judge concerning costs against the second respondent. The second respondent withdrew her claim for damages on the eve of trial. Whilst his Honour ordered that she pay the appellants’ costs he refused to order that the costs be on the indemnity basis. The reasons given by the learned trial judge are as follows:

“The defendants argue for indemnity costs against the second plaintiff. I fail to see any basis for that. She made no allegation of fraud. The breaches of the Trade Practices Act which she alleged were ultimately successfully prosecuted by the first plaintiff. She really only alleged a loss peculiar to her. There is no evidence of malafides on her part or any other improper motive. She simply abandoned a claim she had made, for which she may have had any number of good reasons. For that she must bear an adverse order of costs, but on the standard basis.”¹²⁵

The appropriate order in respect of costs is peculiarly a matter for the trial judge’s discretion. That this court should be slow to intervene in the exercise of that discretion is demonstrated by the legislative requirement that leave be first obtained to argue a costs order: s 253 Supreme Court Act 1995 (Qld). Provided that the discretion is exercised in accordance with the applicable principles then there would in my view need to be displayed a manifest error or injustice before this court should intervene.¹²⁶

The appellants’ argument is that the learned trial judge ought to have found that the second respondent’s case was without merit by reason of her late abandonment of it. It is true that an order for indemnity costs may be made where, for example, the losing party’s case is “wholly without any arguable merit”.¹²⁷ That however was not established here.

An order for indemnity costs is made only in a special case. Mere lack of success in the action has never been sufficient justification. Sheppard J summarised some of the usual bases for such an order in Colgate-Palmolive Co & Anor v Cussons Pty Ltd.¹²⁸ The reasons given by the learned trial judge reflect grounds mentioned there and relevant to this case. If the second respondent had pursued her claim and failed then there is nothing shown that would have justified an order on the indemnity basis. Why should a recognition that she should save the parties the trouble of whatever additional evidence or argument was required to prosecute her action result in an indemnity costs order against her?

The learned trial judge, in my view, has plainly directed his mind to the correct principles. The fact that I am of a different opinion to his Honour as to the merits of the Trade Practices Act argument does not alter my view of the matter. It can hardly be said that the respondents’ case was unarguable given its success before the trial judge. There is no manifest error or injustice in the order made.

Orders

There was no complaint by the appellants of the judgment given in favour of the first respondent and against the first appellant in the amount of $93,402.42 in respect of a breach of contract claim.

In those circumstances the orders should be:

The appeal is allowed;

The first respondent to pay the appellant’s costs of the appeal.

Set aside the orders made below and in lieu thereof make the following orders:

By consent judgment for the first respondent against the first appellant in the amount of $93,402.42 for damages and interest calculated to 2 June 2008;

The first appellant pay the first respondent's costs of the breach of contract claim, including reserved costs;

That the first respondent's proceedings against the appellants otherwise be dismissed;

That the first respondent pay the appellant's costs of the trade practices claims, including reserved costs;

That, by consent, judgment for the appellants on the second respondent's claims;

That the second respondent pay the appellant's costs of the second respondent's proceedings on the standard basis.

Footnotes

1. ACN 070 037 599 Pty Ltd & Anor v Larvik Pty Ltd & Anor [2008] QSC 95 at [46]. ↩

2. AB 60-61; transcript 84-85. ↩

3. McMeekin J's reasons at [135]. ↩

4. Lord Bingham “Assessing Contentious Eyewitness Evidence: A Judicial View” in Witness Testimony (Oxford) 2nd ed, 2006 at 328. ↩

5. Justice David Ipp in “Problems with Fact-Finding” in (2006) 80 ALJ 667. ↩

6. Onassis & Calogeropoulis v Vergottis [1968] 2 Lloyd’s Rep 431 at 31. ↩

7. Rule 765(1) Uniform Civil Procedure Rules 1999. ↩

8. This discussion reflects a passage from the reasons of Gleeson CJ, Gummow and Kirby JJ in Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 at [22]-[23]. See also at [88]. ↩

9. Fox v Percy at [29]. ↩

10. The precise timing of the conversation was far from clear on the evidence – Mrs McEwen said that the first conversation occurred “around February 2000” (AR 3/20) and later explained her interaction with the Cold Rock franchisor over the few weeks before commencing 23 January 2000 (AR 53/20). ↩

11. Pappas v Soulac Pty Ltd (1983) 50 ALR 242; Elders Trustee & Executor Co Ltd v EG Reeves Pty Ltd (1988) 78 ALR 193 at 242 per Gummow J; [2004] HCA 60 at [38] - [40] and [109]; (2004) 212 ALR 357 at 367, 383 – 384.