Appellants v Respondents

2 The agreement for the sale was constituted by two documents, each signed on 24 November 2004, and respectively entitled Agreement For Sale Of Business and Supplementary Agreement For Sale Of Business, and which I will refer to simply as the sale agreement. The parties to the sale agreement were:

(a) On the vendor's side - as vendor the first appellant Kay Group Holdings Pty Ltd, and its directors Benjamin Koppel, William Koppel and Robert Klein who are the second, third and fourth appellants. The sale agreement contained warranties given by the appellants to the purchaser.

(b) On the purchaser's side - as purchaser the first respondent Kay & Kay Plastics Pty Ltd, and its directors Levi Mochkin and Ronald Joseph Tatarka who are the second and third respondents to the appeal. Messrs Mochkin and Tatarka provided a guarantee and indemnity to the vendor.

Another party, Clayton Property Investments Pty Ltd ("Clayton Property") was not a party to the sale agreement but was a party to the arbitration and is the fifth appellant. Clayton Property was involved because it was the owner of the premises at 522-530 Clayton Road, Clayton at which the business was conducted and in respect of which the sale agreement provided for a lease to be granted to the purchaser.

3 The questions of law in respect of which Byrne J granted leave are stated as grounds 1, 3 and 4 in the notice of appeal filed pursuant to the leave. The notice also includes a ground 2 in respect of which Byrne J did not grant leave. However, Byrne J mentioned the ground in giving judgment on the leave application and reserved to the appellants the right to seek leave from the trial judge to rely on it. The appellants seek such leave, which is opposed. I will grant leave as the proposed ground is so closely related to the issue or issues raised by ground 1 that it is just and appropriate to do so. The questions of law or grounds are stated as follows in the notice of appeal:

1. The Arbitrator erred in law in holding that the first and second appellants were liable to the first respondent for damages when no such damages were caused by incorrect statements as to facts which were not detrimental to and/or which were irrelevant to, the respondents.
2. The Arbitrator erred in law in failing to find that the first named respondent relied upon the erroneous information provided, that was the subject of the alleged misleading and deceptive representations, rather than upon the financial information generally.

1. The Arbitrator erred, in circumstances where the only findings made by him were that the Financial Records were inaccurate as to matters which were not detrimental to, or were not relevant to, the respondents, in holding that the respondents' damages should be assessed by calculating the difference between the price paid for the Business and the 'fair market price' for the Business.
2. The Arbitrator erred in law in holding that the amount of $3,040,751 which was payable to the first appellant by the respondents under the Agreements for Sale of Business should be reduced by $2,229,544 in respect of damages for misleading or deceptive conduct contrary to section 52 of the Trade Practices Act 1974 and section 9 of the Fair Trading Act 1999."

4 The subject business was that of printers and converters of film into bags and printed rewind. The business was sold as a going concern together with the assets thereof (being plant and equipment, software, intellectual property and management systems, stock in trade and goodwill) for $7,500,000[2] on the terms and conditions contained therein. On completion the vendor was to grant or procure a lease of the premises to the purchaser. The purchase price was payable as to $250,000 by way of deposit, $5,000,000 on completion (subject to certain adjustments), and the balance by 18 equal monthly instalments commencing on 30 April 2005. It was expressly provided that the purchase price "shall be interest free". Among other things, the sale agreement provided for the purchaser to give the vendor a charge as security for performance of its obligations, and also provided for the vendor's obligations at completion, the transfer of employees, adjustments, warranties and indemnities by the vendor and its directors, a guarantee and indemnity by the purchaser's directors, transitional provisions, and default.

5 The warranties of the vendor and its directors were contained in Schedule 3 to the sale agreement. As to the warranties, cl 12.1 of the sale agreement provided that the vendor and its directors "warrant and represent to the Purchaser that each of the Warranties are true and correct as at the date of this Agreement and the Completion Date and each date in between". Clause 12.4 provided that the warranties relating to financial matters expire on 28 February 2005 after which no claim may be brought by the purchaser in respect of any alleged breach of any warranty.

6 It is convenient to mention that cl 27 contained a further limitation on the right of the purchaser to recover loss. Clause 27 provided for the purchaser to conduct a due diligence examination of the business between the Effective Date (1 November 2004) and 15 February 2005, and to give a notice of irregularity or issue for concern up to 14 March 2005. Unless resolved the matter would be arbitrated. Clause 27.4 provided that if no notice of irregularity or issue for concern is served before 14 March 2005 the purchaser shall have no right to claim for loss or expense pursuant to cl 27.

7 It is then pertinent to note that cl 16, which dealt with "Default", provided that a party was a "Defaulting Party" if a warranty given by it is "materially incorrect" (cl 16.2.7), in which event the other party (called the "Offended Party") may at any time terminate the agreement by notice in writing.

8 Then, of the vendor warranties set out in Schedule 3 it is sufficient to note the following:

"1 Introduction and Information

1.1 The statements made and the information given by or on behalf of the Vendor to the Purchaser regarding the Assets and the Business are true and correct in every particular to the knowledge of the Vendor, after having made all reasonable enquiries.

2 Authority and Capacity of Vendor

2.6 There has been full disclosure in writing to the Purchaser of all material facts, circumstances and other information which the Vendor knows or should reasonably know relating to the Business, its operations and/or its assets.

5 Financial Matters

5.1 The Business Records have been fully, properly and accurately prepared, kept and completed in accordance with the usual accounting concepts and practices and in accordance with the accounting concepts and practices adopted by the Vendor in the previous three (3) financial years.

5.2 The balance sheet and profit and loss account of the Business and all other financial information provided to the Purchaser:

5.2.1 are the most recent balance sheet and profit and loss account for the Business which have been prepared;

5.2.2 present a true and fair view of the profit or loss of the Business for the accounting period expiring on the Balance Date[3] and the state of affairs of the Business at the Balance Date;

5.2.3 accurately disclose the Assets and liabilities of the Vendor irrespective of the Business at the Balance Date;

5.2.4 provide fully for all liabilities of the Business for Tax as at the Balance Date; and

5.2.5 are not affected by any unusual or non-recurring item.

5.3 Since the Balance Date, no material change detrimental to the interests of the Purchaser has taken place in the financial position or Business affairs of the Vendor or the Business.

...

5.10 All the information provided by or on behalf of the Vendor to or on behalf of the Purchaser relating to past or current turnover profits expenses and any other financial information are true, accurate and complete.

5.11 The Vendor's latest balance sheet in respect of the year ending 30th June 2003 is true, accurate and complete and there have been no material changes in the financial position of the business since that date which have not been disclosed or indicated to the Purchaser.

8 Disclosures

8.1 The Vendor has disclosed to the Purchaser all facts, circumstances and other information which the Vendor knows or should reasonably know relating to the Business and the Assets which are material to the Purchaser.

15.1 All stock of finished goods held by the Vendor is of merchantable quality and is fit for the purpose for which they are ordinarily acquired."

9 The supplementary agreement varied the agreement in relation to stock, debts and liabilities, and the employment by the purchaser of the vendor's directors. As to stock, it was provided that the purchase price shall be increased by the value of stock. As to debts and liabilities, the purchaser was to assume liability for creditors by which amount the purchase price would be reduced, and the purchaser was entitled to debtors by which amount the purchase price would be increased except that which reasonable effort could not recover. On the matter of the employment of directors, Benjamin Koppel was to be employed for not less than two years.

10 In the circumstances the above is a sufficient reference to the terms of the sale agreement.

11 On 1 November 2004 (in the sale agreement called "the Effective Date"), prior to signing the sale agreement, the purchaser entered into possession of the business. As mentioned earlier, the sale agreement was signed on 24 November 2004, on which day the purchaser's loan was approved.

12 Settlement under the sale agreement followed on 10 December 2004.

13 Before long the parties were in dispute. As early as 30 August 2005 the vendor filed a writ in this Court against the purchaser and the guarantors claiming the payment of monies due under the sale agreement. On 5 September 2005 the purchaser and its guarantor directors filed a writ in this Court against the vendor, its directors and Clayton Property claiming a declaration that the sale agreement was null and void, repayment of the purchase price, damages and other relief. On 9 September 2005 Clayton Property was added as a plaintiff in the vendor's proceeding, and the purchaser's proceeding was consolidated with the vendor's proceeding with the vendor to have the carriage of the consolidated proceeding. Various undertakings were given in that proceeding which, among other things, provided for Clayton Property to not recover possession of the subject premises from the purchaser and for payment for the use and occupation thereof. Under these arrangements the purchaser, which claimed a leasehold interest, continued in possession of the premises.

14 Then, by an Arbitration Agreement and a Supplementary Arbitration Agreement, each made on 30 November 2005, the parties agreed to refer their disputes and differences to arbitration. In summary, the disputes and differences were stated to be:

(a) What amounts, if any, the purchaser and its directors were liable to pay the vendor, its directors and Clayton Property by way of debt or damages as a result of breach of the sale agreement or any employment agreement or agreement for leasing the Clayton premises or for the use and occupation of the Clayton premises?

(b) What amounts, if any, the vendor, its directors and Clayton Property were liable to pay the purchaser and its directors by way of debt or damages as a result of breach of the sale agreement or any agreement for leasing the Clayton premises?

(c) Whether the sale agreement, or any agreement for leasing the Clayton premises, was void or voidable or had been terminated and should be declared void or to have been terminated?

(d) Who is entitled to possession of the Clayton premises?

(e) What damages, if any, are payable pursuant to any undertaking given to the Court?

(f) Who should bear the cost of the litigation, a mediation and of drawing the Arbitration Agreement?

(h) What personal property of the vendor, its directors or Clayton Property is held by the purchaser and its directors and should be delivered up by them?

15 The parties having duly appointed an arbitrator, the arbitration hearing commenced on 9 October 2007 and took 36 hearing days concluding on 19 December 2007. Thereafter there was a directions hearing on 16 January 2008 at which the arbitrator gave the respondents leave to file and serve a Second Further Amended Consolidated Defence and Counterclaim dated 20 December 2007 which inserted paras 50A(c) and (d) and 54(e) and (f), and with leave to the parties to amend the pleadings subsequent thereto. As they finally stood, the pleadings were constituted by the following documents:

(a) Consolidated Points of Claim dated 13 September 2007 ("Points of Claim").

(b) Second Further Amended Consolidated Defence and Counterclaim dated 20 December 2007 ("Defence and Counterclaim").

(c) Further Amended Consolidated Points of Reply and Defence to Counterclaim dated 10 January 2008 ("Reply and Defence to Counterclaim").

(d) Reply to Further Amended Consolidated Defence to Counterclaim dated 16 January 2008 ("Reply to Defence to Counterclaim").

16 On 13 February 2008 the arbitrator handed down written Reasons for Decision following which, on 17 and 19 March 2008 he heard submissions as to the form of the award and costs. In the light of these submissions the arbitrator revised, and on 31 March 2008 handed down, Revised Reasons for Decision dated 31 March 2008 together with a draft interim award bearing that date, Further Reasons for Decision dated 31 March 2008, and reasons for his award on costs in a document entitled Costs and dated 31 March 2008. After hearing the parties on 31 March 2008 the arbitrator made some changes to the draft interim award and on or about 2 April 2008 published the award the subject of the appeal. Clauses F and G of the award state respectively that the Revised Reasons for Decision and the Further Reasons for Decision form part of the award. The award also included various schedules dealing with stock (Schedule 1), debtors (Schedule 2), creditors (Schedule 3), rent damages (Schedule 4), extracts from the Defence and Counterclaim which pleaded representations (paras 50 and 50A) and warranties and their breach (paras 58 and 60) (Schedule 5), and extracts of some terms and warranties in the sale agreement (Schedule 6).

17 The Revised Reasons for Decision of the arbitrator and the submissions made to me indicate that the parties raised for determination many issues of fact and law. Perhaps as a result the Revised Reasons for Decision, which run to 137 pages (including the schedules), are attended with complexity and, to be understood, require careful reading. I will hereafter refer to the Revised Reasons for Decision simply as the revised reasons or the reasons. If I refer to the Further Reasons for Decision or the Costs reasons I will do so specifically.

18 In the reasons the arbitrator identified the respective claims for determination as follows:

(i) balance of the unpaid purchase price - $4,006,333.

(ii) non-payment of rent and/or damages for trespass - $406,863. Clayton Property also claimed possession.

(iii) balance owing under loan account - $1,847,715.

(b) Purchaser claims - on the basis that the purchaser entered into the sale agreement as a result of misrepresentations of the vendor, alternatively that the vendor had breached the contractual warranties -

❖ rescission and an order for repayment of monies paid pursuant to the sale agreement.

❖ damages, alternatively damages pursuant to s 82 of the Trade Practices Act 1974 (Cth) ("TPA") or s 159 of the Fair Trading Act 1999 (Vic) ("FTA").

❖ such other relief as may be necessary pursuant to s 87 of the TPA or s 158 of the FTA including but not limited to the costs of relocating the business.

(ii) against B Koppel - as an alterative to the above claim for rescission and restitution, that he give effect to an "option" representation that he purchase a one-third interest in the business.

(iii) against Clayton Property - relief against forfeiture.

19 As is apparent from the above references, at the heart of the purchaser's defence and counterclaim (including that of its directors) were the following allegations: first, of misrepresentations which induced entry into the sale agreements, and the giving of the guarantee and indemnity, and which constituted conduct in contravention of s 52 of the TPA and s 9 of the FTA, and secondly, breach of warranties. This appeal is concerned with the arbitrator's award in relation to these areas of the case.

20 The relevant allegations are contained in paras 50, 50A, 58 and 60 of the Defence and Counterclaim. Paragraphs 50 and 50A plead the representations relied upon while paras 58 and 60 plead the breach of warranty case. It is necessary to refer to the content of these paragraphs.

21 First, para 50 alleged that between April and November 2004, in the course of the negotiations, the vendor represented to the purchaser that:

"(a) the actual maintainable earnings before interest and tax[4] of the Business for a number of years up to and including the financial year ending 30 June 2004 were consistently (with the exception of the financial year ending 30 June 2002) approximately $1.8 million per annum;

(b) the annual maintainable earnings before interest and tax of the Business were and would be sufficient to:

(ii) provide a further $600,000 to Mochkin to cover his annual living expenses;

(iii) provide a consultancy fee of approximately $250,000 to be paid to Benjamin Koppel and a consultancy fee of approximately $120,000 to be paid to Robert Klein; and

(iv) produce a substantial profit even after the payments in (i), (ii) and (iii) had been made;

(c) the Business was a 'goldmine' and had returned millions of dollars to the families of Benjamin Koppel, William Koppel and Robert Klein over the years;

(d) the only reason for the proposed sale of the Business was infighting between Benjamin Koppel, William Koppel and Robert Klein and without such infighting the Business would be even more profitable than it currently was.

(collectively 'the Representations')."

In particulars it was stated that the representations were oral and made to one or other of the purchaser's directors.

22 Paragraph 50A alleged in the alternative that between April and November 2004, in the course of the negotiations, the vendor represented to the purchaser and its directors:

"(a) that the Business made a profit of $1.4 million for a number of years up to and including the financial year ending 30 June 2003 (with the exception of the financial year ending 30 June 2002);

(b) as alleged in paragraphs 50(b)-(d) herein;

(c) the trial balance and the adjusted EBIT calculations provided on 16 June 2004 and the accounts and the adjusted EBIT calculations provided on 5 October 2004 recorded the true financial position of the business; and

(d) the accounts and the EBIT calculations provided on 5 October 2004 showed that the average adjusted profit of the business for the financial year ended 30 June 2003 and the year to 31 May 2004 was approximately $1.4m.

(collectively 'the Alternate Representations')."

(a) The representation in sub-para (a) was oral and made to Mochkin.

(b) As to the representation in sub-para (b), the particulars to para 50(b) to (d) were referred to and repeated.

(c) The representations in sub-paras (c) and (d) were partly written and implied. Insofar as they were in writing they were contained in a trial balance profit and loss account of the Klein and Koppel Unit Trust for 2002/2003 provided by the vendor's accountant on 16 June 2004, and financial statements being the profit and loss account and balance sheet for the 2002/2003 year and a draft financial statement at 31 May 2004 provided by the vendor's accountant on 5 October 2004. The implication arose from the provision of this information.

23 Secondly, para 58, in relation to breach of warranty, identified the several terms of the sale agreement relied on in this respect. It was alleged that:

"58 Further and in the alternative, there were express terms of the Agreement for Sale of Business that:

(b) [The vendor], Benjamin Koppel, William Koppel and Robert Klein warranted and represented to [the purchaser] that each of the warranties contained in Schedule 3 of the Agreement for Sale of Business was true and correct including, inter alia that:

(i) the statements made and the information given by or on behalf of [the vendor] to [the purchaser] regarding the Assets and the Business are true and correct in every particular to the knowledge of [the vendor] after having made all reasonable enquires (Schedule 3 clause 1.1);

(ii) there has been full disclosure in writing to [the purchaser] of all material facts, circumstances and other information which [the vendor] knows or should reasonably know relating to the Business, its operation and/or its assets (Schedule 3 clause 2.6);

(iii) the balance sheet and profit and loss account of the Business and all other financial information provided to [the purchaser] (Schedule 3 clause 5.2):

(1) are the most recent balance sheet and profit and loss account of the Business which has been prepared;

(2) present a true and fair view of the profit or loss of the Business for the accounting period expiring on the Balance Date and the state of affairs of the Business at the Balance Date;

(3) accurately disclose the assets and liabilities of [the vendor] irrespective of the Business at the Balance Date;

(4) provide fully for all liabilities of the Business for tax as at the Balance Date; and

(5) are not affected by any unusual or non-recurring item.

(iv) [The vendor] holds all permits, licences, authorities, rights to use and consents necessary for the lawful carrying on of the Business (collectively 'Permits'). Particulars of the Permits have been fully and accurately disclosed to [the purchaser]. The Permits are valid and in good standing. [The vendor] has not failed to comply with any requirements of any of the Permits (Schedule 3 clause 7.1);

(v) [The vendor] has disclosed to [the purchaser] all facts, circumstances and other information which [the vendor] knows or should reasonably know relating to the business and the Assets which are material to [the purchaser] (Schedule 3 clause 8.1);

(vi) all of the assets having a value in excess of $1,000 are in good repair and working condition, having regard to its age and normal fair wear and tear and are capable of doing the work for which they are designed (Schedule 3 clause 12.3);

(vii) no structural or other material defects affecting the Premises and other improvements on or comprising all or a part of the Premises have appeared and all buildings or structures are in good and substantial repair and condition (Schedule 3 clause 13.11);

(viii) all stock of finished goods held by [the vendor] is of merchantable quality and is fit for the purpose for which they are ordinarily acquired (Schedule 3 clause 15.1);

(ix) so far as [the vendor], Benjamin Koppel, William Koppel and Robert Klein are aware no significant customer of the Business has indicated its intention to cease or reduce trading with the Business in the manner and at the levels they currently do and so far as [the vendor] is aware there are no circumstances currently existing which might give rise to such a cessation or reduction (Schedule 3 clause 16.4)."

"60 In breach of the Agreement for Sale of Business:

(b) the following warranties given by [the vendor and its directors] were not true and correct in that:

(i) the statements made and the information given by or on behalf of [the vendor] to [the purchaser] regarding the Assets and the Business were not true and correct in every particular to the knowledge of [the vendor] after having made all reasonable enquiries;

[The vendor] knew or ought to have known that the Assets having a value in excess of $1,000 were not in good repair and working condition having regard to its age and normal fair wear and tear and were incapable of doing the work for which they were designed.

Furthermore, [the vendor] knew or ought to have known that:

(a) the actual maintainable earnings before interest and tax of the Business or a number of years up to and including the financial year ending 30 June 2004 (with the exception of the financial year ending 30 June 2002) were not consistently approximately $1.8 million per annum;

(b) the annual maintainable earnings before interest and tax of the Business were not sufficient to:

(ii) provide a further $600,000 to Mochkin to cover his annual living expenses;

(iii) provide a consultancy fee of approximately $250,000 to be paid to Benjamin Koppel and a consultancy fee of approximately $120,000 to be paid to Robert Klein; and

(iv) produce a substantial profit even after the payments in (i), (ii) and (iii) had been made.

(c) The Business did not hold all permits, licences, authorities rights to use and consents necessary for the lawful carrying on of the Business; and

The Respondents refer to Schedule G-5 and Schedule L herein[5].

(ii) there had not been full disclosure in writing to [the purchaser] of all material facts, circumstances and other information which [the vendor] knows or should reasonably know relating to the Business, its operation and/or its assets;

[The vendor] failed to disclose in writing the matters set out in the particulars under paragraph 58(b)(i).

(iii) the balance sheet and profit and loss account of the Business and all other financial information provided to [the purchaser] did not:

(1) present a true and fair view of the profit or loss of the Business for the accounting period expiring on the Balance Date and the state of affairs of the Business at the Balance Date;

The Respondents refer to Schedule J herein[6].

(iv) The [vendor] did not hold all permits, licences, authorities, rights to use and consents necessary for the lawful carrying on of the Business.

The Business did not hold an EPA Waste Discharge Licence.

(v) [the vendor] did not disclose to [the purchaser] all facts, circumstances and other information which [the vendor] knew or should reasonably have known relating to the Business and the Assets which were material to [the purchaser];

[The vendor] did not disclose to [the purchaser] the matters set out in the particulars under paragraph 58(b)(i).

(vi) all of the assets having a value in excess of $1,000 were not in good repair and working condition, having regard to their age and normal fair wear and tear and were not capable of doing the work for which they are designed.

The Business's machinery was in poor condition and had not been serviced or properly maintained. Machine number 2, 3, 5, 6, 7, 8, 9, 10, 11 and 12 require maintenance works to be carried out together with the CMF Super Flex 6 Colour Stack, UTECO Amber 808, CEM 6 colour press and UTECO Coral 675 6 colour CI Press. See Schedule K attached hereto.

(vii) structural or other material defects affecting the Premises and other improvements on or comprising all or a part of the Premises had appeared and all buildings or structures were not in good and substantial repair and condition.

• Air conditioning units did not operate properly.

(viii) all stock (whether finished goods or raw materials) purchased by [the vendor] was not of merchantable quality nor fit for the purpose for which they were ordinarily acquired nor saleable.

Of the stock referred to above, 4,797 boxes of stock produced on or before 1 November 2004 is currently being warehoused on the Premises and is unable to be used and/or sold because:

• has been produced as over-runs in anticipation of clients ordering the stock of which no orders have been made and are likely to be never made; and
• has been produced as over-runs for companies who are no longer customers of the Business.

Additionally, 17.485 tonnes of stock in November 2004 and 56.020 tonnes of stock in December 2004 was required to be scrapped because the said stock was:

The Respondents refer to and repeat Schedule B herein.

(ix) [the vendor], Benjamin Koppel, William Koppel and Robert Klein were aware that Millers, a significant customer of the Business had indicated its intention to cease or reduce trading with the Business.

The Respondents refer to email correspondence from the Second Claimant to the Third Respondent dated 3 March 2005."

25 In his award the arbitrator made a number of determinations which may be summarised as follows:

(a) The respondents were ordered to pay the first appellant $741,017 with interest of $224,287.27 as at 31 March 2008 and thereafter at a rate 2 percent higher than the rate fixed under s 2 of the Penalty Interest Rates Act 1983. The second and third respondents were so liable as guarantors.

(b) The first respondent was ordered to pay the second appellant $123,894 with interest of $18,575.21 as at 31 March 2008 and thereafter at 6 percent per annum. That represented liability for B Koppel's claim for wages.

(c) The respondents (the second and third respondents being liable as guarantors) were ordered to pay the fifth appellant, Clayton Property, $416,823 for arrears of rental and mesne profits and interest thereon at specified rates. There was also provision for dissolution of the undertakings given to the Court, upon the dissolution of which Clayton Property was to recover possession of the Clayton premises with the respondents being liable to pay mesne profits for occupation until recovery of possession. It was further ordered that Clayton Property pay the respondents by way of damages in respect of a "lockout" of the premises certain items of the respondents' costs in the Court proceedings. Finally, it was ordered that Clayton Property was entitled to recover possession but that order was made subject to a conditional stay until 30 September 2008.

(d) The respondents were ordered to pay 50 percent of the appellants' costs and expenses of the arbitration. There were some further orders on costs dealing with particular issues; these particular orders would not be affected if the appeal is successful.

26 The appeal does not challenge the determinations referred to in paras (b) and (c) above. It concerns the determinations to the effect summarised in para (a) above. In addition, if the appeal is successful, the appellants submit that in view of their substantial success overall they should have in the order of 95 percent of their costs and expenses of the arbitration.

27 In these circumstances it is appropriate to set out paras 1 to 4 of the award as they contain findings and calculations which lead to the order for $741,017. The order for interest was contained in para 5 and need not be set out. Paragraphs 1 to 4 state:

"1. The amount which would otherwise than by reason of the Counterclaim herein be owed to the First Claimant by the First Respondent under the Sale Agreement is $3,040,751.

1. The First Respondent was induced to enter into the Sale Agreements as a result of misleading and deceptive conduct by the First Claimant entitling the First Respondent to orders for damages pursuant to Section 82 of the Trade Practices Act 1974 (Commonwealth) and Section 159 of the Fair Trading Act 1999 (Victoria) reducing the amount payable by the First Respondent under the Sale Agreements by an amount of $2,299,544.
2. The damages set out in Order 2 above will be offset against the amount owing under the Sale Agreements as set out in Order 1 above.
3. Taking into account the matters set out in Orders 1 - 3 above, the Respondents shall pay the First Claimant $741,017.00 as follows:

Loan account

(including

Employee

Entitlements)

As to these figures two points should be noted. First, the amount of $7,806,800 is the fair value of the business, as found by the arbitrator[7]. Secondly, an arithmetical error produced the figure of $6,962,418; the correct amount is $7,065,783. It only remains to mention that para 5 provided for the payment of interest.

28 A further point of clarification should be made at this stage. It will be noted that in para 2 the arbitrator awarded damages under s 82 of the TPA and s 159 of the FTA, and not for breach of contractual warranty. Yet, as will be seen, in his reasons the arbitrator upheld the breach of warranty claim and assessed damages for it. Byrne J gave leave to appeal from that assessment on the basis that the like questions of causation arise concerning it as with the damages ordered by para 2 of the award[8].

29 A further matter, to which I refer later, is that in para 9 of his separate reasons on costs the arbitrator referred to his finding that the amount due under the sale agreement exceeded the damages payable "as a result of the false and misleading conduct and breach of contract by the" vendor.

30 At this point it is necessary to refer to the Revised Reasons for Decision for the purpose of indicating the course of the arbitrator's reasoning. The reasons received much attention in counsel's submissions, each seeking to explain the arbitrator's findings and how he arrived at them.

31 At the outset the arbitrator stated a number of his findings, commencing with the finding that the amount owing by the first respondent under the sale agreement was $3,040,541, the calculation of which was set out. It is to be noted that this is $210 less than the amount of $3,040,751 stated in para 1 of the award; the difference was not explained and nothing turns on it.

32 Then, after identifying the parties' claims the arbitrator made some observations concerning the sale agreement[9]. He concluded that the sale agreement was commercially unrealistic; further, the two agreements were inconsistent, and there was no explanation for having two agreements. Furthermore, the business was not worth the amount of over $10M which Mochkin had agreed to pay in about June 2004, and the purchaser's directors had reached that conclusion before settlement. Moreover, "No proper financial investigation was done and no proper complete financial accounts were ever provided". To purchase "a business for in excess of $10M in such a way is highly unusual" and it was "difficult to believe that experienced businessmen would act in such a way which completely disregards normal business practice"[10].

33 The terms of the sale agreement being "uncommercial", the arbitrator concluded that "there must have been some other agreement or arrangement of which I am not aware or that one or other or both of the parties to the sale agreement never intended that it would be carried into effect in accordance with its terms"[11].

34 Finally on this aspect, the arbitrator referred[12] to the matter of rental for the premises and the difference between the notional rental of $170,000 per annum stated in the financial information provided to the respondents and the far higher amounts considered as market rental by the first respondent's lender, Westpac, and B Koppel, and the amount of $250,000 per annum which the parties agreed for rental. The arbitrator concluded that this "change is so extreme that once again it is clear that the whole truth has not been told or that the purchaser has had no regard for its own rights or position but has decided to get into possession and then worry about it". The arbitrator concluded (in para 21(b)) that "[a]nother unexplained and unsatisfactory aspect of the dealing is that there appears to be no request by the purchaser for up to date financials either before or after the sale agreement had been signed. There was not even a request for draft accounts for the year ended 30 June 2004".

35 The arbitrator then discussed the circumstances of the sale and set out a chronology of events[13]. He then discussed the witnesses in the course of which he made some factual findings[14]. He commenced with the finding that with two exceptions (Robert Klein and a witness referred to as PC) the non-professional witnesses were "unreliable and sometimes had no regard for the truth". He was also critical of the vendor's accountant Goldberger who he described as a witness who did not tell all the facts that occurred, who gave inconsistent evidence and who withheld information from the purchaser. He knew or strongly suspected that the accounts were not true and accurate, and it was likely he knew of deterioration in the management reports. He knew that the management accounts and the accounts submitted to the Tax Office were incorrect, and hence the profit. He also knew that the figure in the financial statements for closing stock at 30 June 2003, and in the management accounts at 30 March 2004 were understated. I do not set out all that the arbitrator said concerning the witnesses. As to Mochkin, the arbitrator found that he was "an unreliable witness and that his oral evidence cannot be accepted". In his dealings with Westpac Mochkin did not disclose "important facts"; the documents he produced to Westpac "did not reflect the entire picture". As to Tatarka, he found his version of conversations inexplicable except as apparent reconstruction, or implausible as being inconsistent with the verifiable facts. He expressly rejected certain of his evidence, and did not accept that Tatarka believed that Westpac had not been deceived.

36 The arbitrator then discussed and dismissed a claim against W Koppel and R Klein[15], and a claim against B Koppel based on a failure to exercise an option to buy back into the business[16]. Following that he dealt with claims in respect of the Clayton premises[17].

37 Then, at paras 77-82 the arbitrator commenced discussion of the claims for breach of contract. He referred (in para 77) to para 58(b) of the Defence and Counterclaim and as to the terms pleaded therein stated (without elaboration) that:

(a) "nothing different arises from (ii) and (v) as in (i) and no further claim is maintainable". This seems to be a finding that a matter on which he has concluded is covered by sub-paras (i), (ii) and (v) of para 58(b). The arbitrator omitted to mention sub-para (iii) but it is apparent from his later reasons that he found a breach of the warranty relied on in (iii) established.

(c) having allowed $28,000 for maintenance costs in arriving at the amount of $3,040,541 owing under the sale agreement, no other claim arose under para (vi).

(e) having allowed $180,990 for unusable stock in arriving at the above amount of $3,040,541, no other claim arose under para (viii).

It is to be noted that these conclusions were stated ahead of the discussion and analysis upon which they were based.

38 Then, in para 79 the arbitrator referred to the claim limitation provision in cl 12.4 of the sale agreement and concluded that it only applied to a claim for damages. It did not limit a right to rescind under cl 16.3 based on cl 16.2.7. That right to rescind had arisen because the stock on hand at 30 June 2003 was materially understated, and to the knowledge of B Koppel and Goldberger the latter of whom knew that an incorrect method of evaluation had been used. However, the purchaser had elected for damages and not termination. I interpolate that before me counsel for the purchaser said that no such election had been made and that in fact termination or rescission was sought, and that is consistent with the arbitrator's later discussion of rescission. In any event, nothing now turns on the issue.

39 Then the arbitrator discussed the breaches alleged in para 60 of the Defence and Counterclaim[18]. This discussion is to be read with the conclusions already stated in para 77.

40 Rejecting the breach of cl 12.7 alleged in para 60(a)[19], the arbitrator turned to the allegations of breach of warranties in para 60(b). As to the allegations of breach in para 60(b)(i), he found that the particulars thereof were not correct "and the allegations therein were not warranties given by the vendor save and except as to good repair and working condition of assets". Nor was there any evidence to support the claim in relation to permits etc; this finding dealt with the allegation in sub-para (c) of the particulars to para 60(b)(i), and the breach alleged in para 60(b)(iv).

41 The arbitrator then referred to the breaches alleged in para 60(b)(ii), (iii) and (v). He was unable to say whether or not the balance sheet for the year ended 30 June 2003 presented a true and fair view of the profit or loss for that period based upon the particulars in Schedule J which particulars did "not support this claim". He noted that the warranty was "extremely limited", the only relevant document being the balance sheet for the year ended 30 June 2003. As to that, he concluded, by reason of stock on hand having been seriously understated for some time and by reason of the presence of considerable amounts of uncounted and unusable stock, that the balance sheet did not present a true and fair view of the profit and loss and state of affairs of the business[20]. For this reason, but not by reason of the particulars in Schedule J, the warranty relied on in para 58(b)(iii) was breached as alleged in para 60(b)(iii).

42 So also was it established that the warranty in cl 8.1 of Schedule 3 was breached; this was relied on in paras 58(b)(v) and 60(b)(v). This conclusion would also seem to carry the consequence of breach of the warranty relied on in para 60(b)(ii). In either case however the breach was not established by the pleaded particulars, but for other reasons. At least a draft set of accounts for the year ended 30 June 2004 should have been presented prior to signing the sale agreement. The purchaser was also entitled to know of material matters in the management accounts in relation to sales, stock and profit[21].

43 The arbitrator then referred to debtors[22] and found that the debtors shown in the financial accounts as at 30 June 2003 and 31 May 2004 did not show whether or not a proper provision for doubtful debts had been taken. Trade debtors were shown as a net amount without any allowance for doubtful or bad debts. Substantial provision should have been made before the financial records could reflect a true and accurate account of the state of the business. If the full picture was known there may have been further inquiry. However, in this case the arbitrator was not satisfied that would have occurred as "the whole purchasing process is so inconsistent with proper business practice as to reinforce my conclusion that the whole story has not been told by either side".

44 The arbitrator then referred to transactions with Edensor Pty Ltd[23] who B Koppel said owed the vendor approximately $3M. That sum did not appear in the accounts. In the absence of explanation the arbitrator concluded that relevant information was not disclosed and that the financial records were not true and accurate in respect of Edensor.

45 Thus, these two matters of debtors and Edensor constituted further respects in which the warranty relied on in para 60(b)(v) was breached, although not for the reason stated in the particulars.

46 The arbitrator then referred[24] to a submission of the purchaser that the vendor could not rely on the claim limitation provisions in cl 12.4 and cl 27.4 of the sale agreement. He upheld the submission on the basis that he found that the vendor had engaged in false and misleading conduct. The arbitrator also referred to an argument of the vendor that the effect of the incorrect figure for stock was to understate profit. However the question on the warranties was not whether profit had been overstated but whether the accounts recorded the true financial position of the business including stock.

47 Having thus dealt with the breach of warranty claim, the arbitrator turned to the representations set out in paras 50 and 50A of the Defence and Counterclaim[25].

48 Dealing first with the para 50(a) representation, the arbitrator noted that Mochkin had alleged that B Koppel told him the profit was about $1.4M on the books and about $400,000 in cash, that the business consistently made approximately $1.8M per annum for many years, the income was understated by between $400,000 and $700,000 per annum and made other statements to similar effect, which B Koppel denied. The arbitrator found that the purchaser had not established that such representations were made[26]. Thus the para 50(a) representation was not established.

49 The arbitrator then discussed the representations alleged in para 50(b) and found that none were made[27]. That left para 50(c) and (d), each of which failed[28]. Sub-para (c) was not a representation of fact and was thus not actionable. Sub-para (d) was not a misrepresentation.

51 The arbitrator then turned to para 50A. As to that, for the reasons discussed already the para 50A(a) and (b) representations were not established.

52 The arbitrator then discussed the para 50A(c) representation. This representation was made by provision of the financial statements referred to and which the above discussion and findings established were false and misleading.

53 The final representation was para 50A(d). The documents had the effect alleged and were thus not misleading unless the financial position shown was inaccurate. As in that respect the only item on which evidence had been given was the opening and closing stock, the representation added nothing to para 50A(c)[29]. But it still constituted a finding that the representation was made and was false.

54 The arbitrator found that in making the para 50A(c), and (d), representations the vendor engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the TPA[30]. I interpolate that in the expression of this conclusion on the para 50A(d) representation the arbitrator conflated the representation and the finding that it was false by reason of the profit being "substantially less".

55 Before the arbitrator, the vendor had submitted that the provision of the financial information could not constitute misleading or deceptive conduct if in fact the profits were higher than shown. An understatement of profit could not constitute misleading or deceptive conduct as it was not detrimental to the interests of the purchaser. It could not be said that the purchaser would not have purchased if the true profitability had been stated. The arbitrator rejected the submission[31]: the fact was that the balance sheet did not record the true financial position of the business. Furthermore, for reasons he would discuss later, due to errors in the accounts the EBIT was not correct which further meant that the representation was false and misleading.

56 The arbitrator then found that the purchaser relied on the false and misleading financial information and was induced thereby to enter into the sale agreement. This conclusion was supported by the inclusion in the agreement of the warranties as to financial matters[32].

57 The arbitrator next dealt with rescission which he described as the purchaser's "primary remedy" either for breach of warranty or under s 87 of the TPA. The arbitrator rejected the claim as restitution could not be made[33].

58 The arbitrator then[34] turned to damages for breach of contract noting, among other things, that the vendor denied breach and contended that the only reasonable inference was that profits were understated and accordingly there was no damage. The vendor also relied on a lack of causation.

59 The arbitrator then[35] turned to consider what damage the purchaser had suffered "as a result of the false and misleading conduct and/or breach of warranty by the vendor". In the discussion that followed in this part of his reasons (paras 144-151) it is evident that the arbitrator was discussing damages for breach of warranty. He commenced by stating that the first measure of damage will be the difference between the amount paid by the purchaser for the business and the fair value of the business at the time of purchase[36]. He had to consider whether the purchaser was entitled to further damages when rescission has not been ordered and further damages are not ordered under s 87 of the TPA. He referred to the items of damage claimed by the purchaser and to the parties' submissions. He concluded that damages "will be calculated in much the same manner as the claim for damages for misrepresentation (see Gates v City Mutual Life Assurance Society Ltd (1986) 63 ALR 600 per Mason, Wilson and Dawson JJ at 609[37]). I have calculated this amount as $2,327.524"[38]. This amount represented the difference between the amount payable under the sale agreement and the fair value of the business. As to that figure, at para 253 of his reasons the arbitrator calculated the breach of contract damages as $2,388,324 as follows:

Amount payable under contract $10,194,324

Less fair value $ 7,806,800

Amount overpaid $ 2,388,324

The true figure on that calculation was $2,387,524. Of course none of these figures is the amount of $2,299,544 being the damages found by the arbitrator and stated at para 2 of the award, but nothing turns on this. The arbitrator then rejected all other heads of damage claimed by the purchaser[39].

60 The arbitrator then turned to discuss damages for misleading or deceptive conduct[40]. He first said that it was common ground that on the sale of a business false statements of profit and profitability of the business would constitute contravening conduct under s 52 of the TPA (and s 9 of the FTA). He then said that that may not be the position in this case having regard to the way in which the warranty of financial matters was given and that he was dealing with EBIT and not net profit.

61 Secondly, the arbitrator observed that s 82 of the TPA required that actual loss or damage be suffered "by" contravening conduct. A causal connection, although not as a sole cause, was required between the conduct and the loss for which the applicant seeks to be compensated[41]. The arbitrator found that such causation existed in the present case. The conduct of the vendor in providing financial and other accounts and the warranties was sufficient to induce the purchaser to enter into the sale agreement. The question however, was what was an appropriate measure of the purchaser's recoverable loss? The purchaser believed the business would yield a profit. The starting point for loss was the difference between the price paid and the fair market price to enable that belief to be satisfied. Thereafter, the position on the facts was not clear. Referring to Henville v Walker[42], the arbitrator said that principles in contract or tort may assist in determining the losses that flow from contravening conduct. In the present case the question was whether the business made more profit (and thus the EBIT was greater) than represented. The vendor submitted that the profit - and EBIT - must have been higher than that represented because the stock figure at acquisition was higher than the stock figure reported in the financial statements. While on the face of it this submission had merit, the arbitrator found that he was unable to determine whether the assumption was correct. He could not use the stock figure at acquisition as a measure of "true" profitability without knowing the true opening stock. The onus was on the vendor to establish that profit was understated but it had failed to discharge that onus[43]. Without real evidence as to the value of stock he could not reach a valid conclusion as to the understatement or overstatement of profit[44]. The fact was that the purchase proceeded "on a basis of complete disregard for business principles and it is very difficult to ascertain what the parties could reasonably expect"[45]. Moreover, the purchaser had conducted the business differently from the vendor. The arbitrator concluded that "other than damages by way of reduction of purchase price" he was unable to say that any damage was caused by the contravening conduct, or to be satisfied as to the amount thereof[46]. The other claims of loss were primarily of the purchaser's own making or not losses at all. The arbitrator concluded that "justice will be served between the vendor and the purchaser by only allowing a reduction of the purchase price"[47].

62 Having so concluded, the arbitrator then considered the expert evidence, each side having called two experts on accounting matters[48]. Following that he considered the value of the business on a future maintainable earnings basis. In this exercise the arbitrator considered the calculation of EBIT. He concluded that to place a value on the business in order to see whether the purchaser had overpaid pursuant to the sale agreement, the most appropriate period was the years ended 30 June 2003 and 2004[49].

63 Then, in relation to calculating EBIT, the arbitrator identified a number of items in respect to which there was no problem in the 2003 and 2004 figures to be used in calculating the EBIT including "Net Profit per accounts"[50]. As to other items he said this, in summary. There was some discrepancy as to interest paid in 2004 otherwise the item was agreed. In addition, there were disputes on the quantum of some items, namely stock, bad debts, notional rent and notional salaries. He concluded that notional rent, and notional salaries should be adjusted. He also adjusted the figure for rates and taxes. However, he found that no adjustment should be made for debtors[51] and stock[52]. He also made some other adjustments and concluded that the EBIT for the year ended 30 June 2003 was $1,074,000 and for the year ended 30 June 2004 was $1,482,000[53]. This meant the EBIT was overstated in the financial records provided to the purchaser.

64 The arbitrator ultimately concluded that the fair value of the business was $7,806,800 which he intended to substitute as the price payable under the sale agreement[54].

65 Alternatively, and as mentioned at [59] above, for the purpose of breach of contract he calculated the damages as $2,388,324[55].

66 The arbitrator then set out a calculation of the unpaid purchase price[56]; with some differences in items and amounts, this was the calculation contained in para 4 of the award.

67 As is apparent from the grounds of appeal, the appellants contend that the arbitrator's decision that the purchaser was entitled to damages under s 82 of the TPA and s 159 of the FTA was wrong in law because the arbitrator did not find, and it was the fact that there was not, a causal nexus between those damages and the errors he identified in the financial records provided to the purchaser. The financial records were those referred to in para 50A(c) and (d) of the Defence and Counterclaim and set out at [22] above.

68 The appellants acknowledged the arbitrator's findings that the conduct of the vendor in providing financial and other accounts and the warranties induced the purchaser to enter into the sale agreement. It was submitted, however, that that finding was insufficient. What was required, and what was not found, was that the purchaser was induced by the particular erroneous items identified by the arbitrator, as distinct from a mere finding of reliance on the financial records generally. Further, in so approaching the matter the arbitrator put aside as irrelevant whether the financial records underestimated or overestimated profit.

69 In support of this primary position counsel for the appellants undertook further analysis of the arbitrator's reasons.

70 It was submitted that the errors in the financial records did not induce the purchaser to enter into the sale agreement. In the first place, the arbitrator rejected the purchaser's case of oral misrepresentations as pleaded in paras 50(a)-(d) and 50A(a) and (b) and on which the hearing had been conducted and submissions made. The case succeeded on the late introduced para 50A(c) and (d) which relied on the financial records on their face. The arbitrator could not find whether these financial records underestimated or overstated profit. As to that and the arbitrator's finding as to the matter of stock constituting a breach of warranty and misleading or deceptive conduct, the arbitrator found (at para 245) in relation to valuing the business that there was no credible evidence upon which he could find that the profits should be reduced in 2003 and 2004 because of stock. Moreover, the arbitrator did not find that the purchaser was induced to enter into the sale agreement by a misrepresentation as to stock levels which were unrelated to levels of profit.

71 Counsel for the appellants addressed the adjustment of items in the recalculation of EBIT. The adjustment to rates and taxes was minor and had the effect of increasing profit. But the adjustments to notional rent and notional salaries effectively led to the reduction in EBIT. This was erroneous. The amounts for notional rent and notional salaries were not actual and in the ordinary course the purchaser would have determined on the amount to provide for these items. That was a matter for the purchaser. However the arbitrator substituted the agreed rental for the notional amount. And by increasing the figure for notional salaries, profit was impacted by $200,000 per year; if that was added back in the 2003 and 2004 years EBIT would average in excess of $1.4M over those years. Therefore, in truth a recalculated EBIT did not, or should not, produce a much lower EBIT figure such as would indicate the financial records misrepresented EBIT. Accordingly, the fact that the arbitrator adjusted those items did not mean that the inclusion of the notional amounts in the financial records provided to the purchaser rendered the records misleading or deceptive or could have caused the purchaser to suffer loss or damage. Further, the failure to adjust for stock, doubtful debts and Edensor showed that no relevant detriment flowed to the purchaser as a result of any inaccuracy concerning these matters.

72 Furthermore, the arbitrator appeared to have wrongly treated the adjusted EBIT sheets as though they showed the actual profit of the business for the 30 June 2003 financial year and the period to 31 May 2004, when the inclusion of notional items meant that could not be the case. Accordingly, the provision of the financial records could not amount to a representation as to actual profit of the business. Further, a difference in view as to the amount to be allowed for notional items did not mean that the provision of the financial records with those items constituted misleading or deceptive conduct, or that it was causative of damage. In any event, there was no finding that the purchaser believed the notional amounts were actual, that the purchaser relied upon the accuracy of the notional amounts when entering into the sale agreement, or that there was a nexus between the notional items and any damage suffered by the purchaser.

73 It was further submitted that it was difficult to identify with precision what the arbitrator relied on as errors in the financial records which constituted the basis of the misleading conduct. The errors appeared to be those concerning doubtful debts and Edensor. In fact, however, neither supported that conclusion. As to doubtful debts, debtors were shown as a net amount, meaning provision had been made, but even if "the full picture was known" the arbitrator was not satisfied the purchaser would have made further inquiry. That is, the purchaser would not have made further inquiry; this negatived causation as it showed the purchaser would not have relied on any disclosure of doubtful debts. Furthermore, later in his reasons the arbitrator refused to adjust EBIT on account of doubtful debts. In these circumstances the failure to make specific provision for doubtful debts could not have caused the purchaser loss or damage.

74 As to Edensor, the arbitrator did not identify how or why information on this matter was relevant to the business or the purchaser.

75 It was next submitted that if the appeal succeeded the award should be varied by setting aside paragraphs 2-5 and in lieu ordering the respondents to pay $3,040,751 plus interest, dismissing the counterclaim and amending the orders for costs.

76 There was, it was submitted, no reason to remit the award. That was notwithstanding that in his reasons the arbitrator upheld the claim based on breach of warranty and assessed damages therefor. However, the actual award of damages was expressly only made on the claim of misleading or deceptive conduct. Hence, damages were not awarded for breach of warranty. Furthermore, the finding on the breach of warranty claim did not render the appeal futile or mean that relief should not be granted. In the first place, a submission to that effect had not been made in opposition to the appellants' application for leave to appeal. Indeed, on the hearing of that application Byrne J refused leave to appeal against the finding of breach of warranty causing damage on the basis that (to quote Byrne J on the transcript of the hearing of the application) "the breaches of warranty were not followed through for a damages claim and therefore no award has been made against you for breach of warranty". On that basis, concurred in by the appellants' counsel, Byrne J did not further consider the application for leave to appeal from the breach of warranty finding. In these circumstances counsel submitted to me that the respondents should not be permitted to oppose the setting aside of the relevant parts of the award on the basis that the arbitrator had found the breach of warranty case established and assessed damages thereon.

77 As to this submission, it is appropriate to interpolate two things at this point. First, and as I mentioned earlier, Byrne J did grant leave to appeal on quantum (being grounds 3 and 4 referred to at [3] above) on both the warranty and misleading or deceptive conduct case[57]. Secondly, the above quoted remarks of Byrne J were directed to proposed grounds of appeal 14 and 15 which were concerned with causation of damage on the warranty case. In his reserved judgment Byrne J refused leave on the basis that no manifest error of law was demonstrated[58].

78 Byrne J also refused leave to appeal against the arbitrator's findings on the limitation provisions in cls 12.4 and 27.4[59]. He refused leave because there was no error in the arbitrator's reasoning. It was submitted to me that if the appeal was allowed and the award was remitted on the breach of warranty matter, the arbitrator would have to conclude on the application of cls 12.4 and 27.4 on the basis there was no claim for misleading or deceptive conduct. The appellants submitted that the contractual provisions were fatal to the respondents in those circumstances.

79 Apart from these matters, the appellants submitted that the award should not be remitted because on analysis the breach of warranty claims must fail for the same reasons that the claim based on misleading or deceptive conduct must fail, namely the lack of a causal nexus between the breach of warranty and any damage suffered by the purchaser. It was also submitted that the arbitrator had not found that the purchaser had suffered damage by reason of any breach of warranty.

80 In his written and oral submissions in support of the award counsel for the respondents engaged in a close analysis of the arbitrator's reasons to demonstrate that, properly understood, the arbitrator had found that the damages awarded were caused by the first appellant's misleading or deceptive conduct. On the matter of the requirement of a causal nexus between the contravening conduct and the loss or damage claimed, counsel submitted that it is not required that there be a causal nexus between the error which constitutes the misrepresentation and the loss or damage. Rather, it is only necessary to show a causal nexus between the contravening conduct and the loss or damage. In this case the nexus was to be inferred. As I understood the submission, the critical fact was that the recalculated EBIT was lower than that represented, and provided the foundation for quantifying the loss or damage suffered by the purchaser in consequence of entering into the sale agreement. The loss or damage was thus causally linked to the contravening conduct.

81 With that overview I refer to counsel's submission that the arbitrator found that the damages were caused by contravening conduct of the vendor. He said at the outset and I agree that the arbitrator's reasons require careful consideration to discern the relevant and essential findings. His submission moved from one part of the reasons to another to indicate, even by inference, the essential reasoning.

82 I interpolate that as indicated in my summary, the arbitrator discussed the breach of contract case pleaded in paras 58 and 60 of the Defence and Counterclaim before discussing the antecedent issue of the misleading or deceptive conduct case based on the representations pleaded in paras 50 and 50A. A consequence is that what he said, or perhaps did not say very clearly, in the latter discussion must be read with an eye to his earlier statements and findings.

83 Counsel referred to the arbitrator's finding that the representation pleaded in para 50A(c) of the Defence and Counterclaim was made, and was false and misleading for reasons given in the contract section[60]. Counsel noted that the arbitrator did not further identify the relevant reasons in the contract section. Counsel referred to paras 21(a), 25, 32 (being the chronology against 16 June 2004 and 6 October 2004), 36(4)(i), 37(4), 89, 91(a)(i) and (iv), 122, 127 and 128 as being relevant for this purpose. To these I would add paras 86 and 87 (referred to at [41] above) where the arbitrator found that by reason of matters concerning stock the balance sheet did not present a true and fair view of the profit and loss and state of affairs of the business. This matter of stock attracted the representation alleged in para 50A(d), as I referred at [53] above.

84 In the other paragraphs of the reasons relied on by the respondents, the arbitrator referred to stock and slowing of business (paras 89 and 90), and inadequate statements in the accounts for doubtful or bad debts (para 91). In para 90 the arbitrator found that true and accurate accounts had not been made available for the July-September 2004 period. Reference should also be made to para 91(b) in which the arbitrator found that the financial records were not true and accurate in respect of Edensor.

85 Then, in para 122(a) (to which I referred at [54] above), the arbitrator found that in making the representation alleged in para 50A(c) of the Defence and Counterclaim the vendor engaged in conduct in contravention of s 52 of the TPA. The arbitrator made a further finding of contravening conduct in para 122(b) on which counsel relied. Counsel noted that what the arbitrator stated as being the representation was not the pleaded representation. The respondents' counsel submitted that the explanation is that the arbitrator conflated the representation and his finding of falsity; thus the inclusion of "not" and the phrase "but was substantially less". I interpolate that I accept that as the explanation for an otherwise unintelligible statement. Thus understood, the finding constitutes establishment of a breach of the representation pleaded in para 50A(d) and of conduct in contravention of s 52.

86 These findings were confirmed in paras 127 and 128 of the reasons which I referred to at [53] and [55] above.

87 On the matter of reliance counsel referred to the reasons at paras 121(f) and 131 (referred to at [56] above), where the arbitrator found that the purchaser relied on the false representations in entering into the sale agreement. This, counsel submitted, disposed of the appellants' ground 2.

88 Counsel also drew attention to various other items in the financial records which the arbitrator adjusted in recalculating EBIT. It was submitted that these too were relevant on the matter of the accuracy of the financial records. I interpolate that I have not referred above to all of these items; in my view it is unnecessary to do so, although, of course, I have regard to all that counsel said.

89 That took counsel to the issue of causation, as to which he submitted that the arbitrator's conclusion as to the damages caused by the contravening conduct was open and correct in law. The representations found to have been broken were about the trial balance and adjusted EBIT calculations referred to in para 50A(c) and (d) of the Defence and Counterclaim. He recalculated the EBIT for the years ended 30 June 2003 and 2004 respectively as $1,074,000 and $1,482,000[61]. In fact, counsel submitted, the EBIT was overstated in the financial records provided to the purchaser regardless of the debate referred to in paras 154-163 of the reasons.

90 Finally, counsel submitted that if it were considered that the arbitrator had failed, expressly or by inference, to find a causal link between the contravening conduct and the loss and damage found, the only appropriate result was to remit the issues on the cross-claim to the arbitrator. An award should be saved rather than set aside, and remitter is more appropriate where the award does not deal with all issues. As to this counsel referred to Jacobs' Commercial Arbitration Law & Practice, para 41.50, Tuta Products Pty Ltd v Hutcherson Bros Pty Ltd[62] and Villani v Delstrat Pty Ltd[63].

91 The first thing to note is just what was decided by paras 1, 2 and 3 of the award. In simple terms, para 1 states the arbitrator's conclusion that under the sale agreement the purchaser owed the vendor $3,040,751. There is no issue as to this. The amount was arrived at by adjusting the purchase price of $7.5M taking into account several items. The items (and their amount) appear in paras 2 and 3 of the arbitrator's reasons. The items were allowed both in addition and in reduction of the purchase price in accordance with the terms of the sale agreement. It is important to note that against both debtors and stock the arbitrator made an allowance in favour of the purchaser for bad debts and unusable stock.

92 Paragraph 2 of the award states that the purchaser is entitled to damages of $2,299,544 pursuant to s 82 of the TPA and s 159 of the FTA. Paragraph 3 of the award expressly provides that this amount is to be offset against the amount owed under the agreement. The product of that offset is $741,207 which is $190 more than the amount the arbitrator ordered the purchaser to pay in para 4 of the award. But counsel make no point of this difference, and other such differences to which I have referred above.

93 It is clearly stated in para 2 that the damages were awarded under s 82 of the TPA and s 159 of the FTA meaning, because that was the pleaded case, on account of the vendor having contravened the normative standard of conduct prescribed by s 52 of the TPA and s 9 of the FTA. Notwithstanding the clear and unambiguous terms of para 2 of the award, counsel for the respondents submitted that the damages were also awarded for breach of warranty. He founded this submission on the arbitrator's statement in his reasons on costs that the damages were "payable as a result of the false and misleading conduct and breach of contract", which statement accorded with the findings in the revised reasons. As against this, relying on the terms of the award counsel for the appellants submitted that damages had been awarded on the single cause of action of "false and misleading conduct".

94 The language of para 2 of the award is clear and permits of no ambiguity as to the basis on which the purchaser was entitled to damages. The respondents' submission seemed to be that notwithstanding such clarity the award was nevertheless to be read as though it stated that the entitlement to damages also arose for breach of contract and were awarded as such, as that was the evident intention of the arbitrator. Even assuming it were possible to so qualify the order, and I consider it is not, the question is whether the submission is soundly based. In my view it is not.

95 In the first place, the statement in the costs reasons on which the respondents rely was not that damages had been awarded for breach of contract. The distinction is between a finding as to a basis on which damages may be payable and the basis on which they are actually awarded. In the passage in the costs reasons the arbitrator was referring to what he had found, not what he awarded. It was relevant to do so for the purpose of the discussion on costs.

96 In the second place, while the revised reasons include the finding of breach of warranty and an assessment of damages therefor, the award itself is clear as to the basis for the award of damages.

97 The appellants advanced a further reason to doubt the submission, namely that in fact the arbitrator had not reached a concluded view on the breach of warranty case. That was because the arbitrator had not considered whether the limitation provisions in cll 12.4 and 27.4 of the sale agreement precluded the breach of warranty claim. Counsel for the respondents submitted that the arbitrator had decided that these provisions were no bar to the warranty claim; see [46] above.

98 I agree with the respondents' reading of the arbitrator's reasons on this point. The discussion occurs in the consideration of the breach of warranty claim, and the subject is not mentioned again. The significance of the application of cll 12.4 and 27.4 is so obvious that it is hardly to be thought that the arbitrator would omit to rule on the issue. I find that he did so rule. I regret to say, however, that the ruling that cll 12.4 and 27.4 could not be relied on was wrong. While it is true that those provisions were no bar to the claim under the TPA or the FTA, as to which see Clarke Equipment Australia Ltd v Covcat Pty Ltd[64], to which the arbitrator referred, they remained applicable to the claim based on breach of contractual warranty and the application and effect of the provisions in the circumstances had to be considered accordingly. This, with respect, is an everyday proposition and explains why so often damages are awarded under the TPA or FTA rather than for breach of contract. Finally, having ruled as he did the arbitrator did not consider whether, on their terms and in light of the facts, cll 12.4 and 27.4 operated to preclude damages for breach of warranty.

99 To complete the discussion of this issue, I note that the appellants sought leave to appeal against the arbitrator's decision that the vendor could not rely on cll 12.4 and 27.4. The respondents opposed the application. In his judgment Byrne J refused leave on the basis that no error was demonstrated[65]. The appellant did not appeal against that refusal. As to that, it is to be borne in mind that the issue concerned only the breach of warranty claim on which damages had not been awarded. It remains to mention that before me counsel for the respondents submitted that the arbitrator's decision was correct, although he advanced no reason additional to the arbitrator's to establish the proposition. To put it another way, he pointed to no fact that might preclude the application of either clause.

100 It is then necessary to say something about the arbitrator's conclusions on damages. He first considered damages for breach of warranty and concluded on an amount being the difference between the amount payable under the sale agreement and the fair value of the business. As mentioned at [59] above there was some difference as to this figure in the arbitrator's reasons but for present purposes it may be taken as being the awarded amount of $2,299,544.

101 The next step to note is that the arbitrator arrived at that figure for damages by subtracting the fair value figure of $7,806,800 from the amount payable under the contract. In fact, however, at the point in his reasons of considering damages for breach of warranty, the arbitrator had not concluded on the fair value of the business. He did that later for the purpose of determining damages for the claim under the TPA and FTA. Having done that he inserted the figure in the calculation of damages for breach of warranty.

102 It is thus seen that however the matter be regarded the finding of the fair value of the business is critical and produced the ultimate result.

103 The appellants' submission attacks the finding of damages in para 2 of the award. For reasons discussed above that attack involves an attack upon the finding of fair value based upon a recalculated EBIT.

104 It is then important to note the reasoning on the misleading or deceptive conduct case. First, the arbitrator found that the effect of providing the financial records referred to in para 50A(c) and (d) was to represent to the purchaser that the documents correctly recorded the financial position of the business. Hence, the para 50A(c) and (d) representations were made.

105 Secondly, the arbitrator found that the financial records included errors and were thus false and misleading. The arbitrator found errors in the matters of stock, debtors and Edensor. In addition there are the references to and concerning the management accounts but it was not the respondents' pleaded case in paras 50A(c) and (d) that the management accounts constituted a misrepresentation.

106 Thirdly, the arbitrator found that the purchaser relied on the para 50A(c) and (d) representations in entering into the sale agreement.

107 It is important to bear in mind that the arbitrator had rejected the purchaser's para 50 and 50A(a) and (b) representation case. That is, the entire case based on oral representations was rejected. That left the para 50A(c) and (d) "representations" which were constituted not by statements to one or other of the purchaser's directors, but by the provision of the subject financial records without any accompanying pleaded representation. What, therefore, was the basis of the purchaser's complaint that the para 50A(c) and (d) "representations" were causative of loss once all of the oral representations had been rejected?

108 At this point one notes the vendor's submission to the arbitrator that there could not be a contravention of s 52 (or s 9) because allowing for greater stock the financial records were seen to have understated the profit. That being the case there was no detriment to the purchaser who could not be heard to say that it would not have purchased if true profitability had been stated. The arbitrator rejected the submission stating[66] that:

"The misleading statement is that the balance sheet with the adjusted EBIT recorded the true financial positions [sic] of the Business. This is not a matter of logic but of fact. Further as will appear later I do not regard the EBIT calculations as correct - but the important matter is that on the facts the true financial position was not recorded.

The financial statements were in such a form as specifically set out the EBIT of the Business on the basis of the amounts appearing therein being true and correct. If the facts contained in the accounts are not correct then I consider the representation in these circumstances was false and misleading."

109 From this point the next step in the reasoning on the misleading or deceptive conduct case was the rejection of rescission or termination under s 87 of the TPA, and then the consideration of damages.

110 At the outset of his consideration of damages the arbitrator referred to the requirement of s 82 that the applicant have suffered actual loss or damage "by" the conduct of another person. And, as mentioned earlier, he referred to the need for the impugned representation to have caused entry into the unprofitable transaction. Here the provision of the financial records was sufficient to induce entry into the transaction.

111 It is significant that the arbitrator moved immediately to consider the appropriate basis on which to measure the purchaser's recoverable loss. Thereafter followed the reasoning I referred to earlier which led to the assessment of the fair value of the business.

112 All of this was in the overall context of the transaction constituted by the sale agreement being "uncommercial", as the arbitrator described it, and having been entered into in circumstances he was not fully apprised of and could not understand from the point of view of ordinary business practice. Nevertheless, and notwithstanding the severity of his observations, and his findings concerning witnesses, he upheld the para 50A(c) and (d) case.

113 He did so regarding the financial records as they stood and being satisfied on the evidence as to errors in them and the recalculation of EBIT. There were two aspects involved here, first the matters which constituted errors in the financial records which founded the finding of contravening conduct and, secondly, the items which were adjusted in recalculating EBIT. The argument on the appeal questioned whether either was a cause of the purchaser's loss found by the arbitrator. In other words, what was the relevance of these items to the purchaser. It is to be noted that the arbitrator's reasons do not disclose how any of these items were relevant to the purchaser's decision to enter into the sale agreement, or to how it proposed to conduct the business, or its experience in the conduct of the business. This might have been shown by reference, for instance, to a business plan and the effect thereon of a false item in the financial records, and what, relative to that item, the purchaser experienced in the conduct of the business. It is thus that the appellants submit that the arbitrator fell into error in failing to find that any of the errors in the financial records were causative of the loss found by the arbitrator. The arbitrator used the errors as the gateway to finding contravening conduct but he jumped from there to damages without taking the intermediate and essential step of finding that the contravening conduct was a cause of the loss found. To put it another way, the arbitrator found reliance on the financial records but not reliance on any particular item therein; that the arbitrator proceeded in this way is apparent from para 131 of his reasons.

114 Counsel for the purchaser submitted that the arbitrator's findings involve the finding of causation on the basis that the purchaser was induced by reliance on the financial records to enter into an unprofitable transaction and as a result suffered loss or damage which the arbitrator assessed as he considered appropriate. In other words the loss or damage was found in the transaction regarded overall and not in a particular erroneous item in the financial records.

115 As against this, the appellants' submissions invited consideration of the items which the arbitrator relied on as constituting errors in the financial records, and items in the recalculation of EBIT. As to the former, the items identified and relied on by the arbitrator were stock, debtors and Edensor. It is true that the arbitrator also made reference to management accounts which reflected a deteriorating trend and to accounts not being correct, but the management accounts were not pleaded in para 50A(c) and (d); the arbitrator's reference was to show that the purchaser was not given all material information. Thus stock, debtors and Edensor were the particular matters found and relied on as constituting falsity of the pleaded representation.

116 There are evident difficulties in any of these three matters being considered as a cause of the loss or damage found and awarded by the arbitrator on the counterclaim. As to stock and debtors, the arbitrator found and made the appropriate allowance for these items in arriving at the amount the purchaser owed under the sale agreement. Having done so, stock and debtors were not adjusted in the recalculation of EBIT. In other words, each item was dealt with under the sale agreement, and was not a matter for damages on the counterclaim. As to Edensor, the dealings with this company were irrelevant to and were no part of the business sold by the sale agreement. Unsurprisingly Edensor was not adjusted in the recalculation of EBIT. Hence none of these matters were detrimental to the purchaser in the sense of being causative of the loss found and awarded by the arbitrator.

117 It is also to be borne in mind that the arbitrator did not make a finding on the issue of understatement or overstatement of profit in the financial records provided to the purchaser. The vendor's contention was that opening stock - and thus profit - was greater than shown in the financial records provided to the purchaser. Of course this bore directly on the issue of detriment to the purchaser. The omission of a finding meant, in a narrow sense, that the vendor did not establish understatement but, at the same time, the arbitrator found that the converse was not established.

118 This conclusion of the arbitrator gives further emphasis to his rejection of the purchaser's oral representations of profit alleged in paras 50 and 50A(a) and (b). Not only did the arbitrator reject that case (which involved reliance on the rejected representations), he did not find that the figure for profit or EBIT in the financial records provided to the purchaser was overstated or understated. The purchaser advanced no other figure of profit that it had relied upon in entering into the agreement. That is to say, its pleaded case relied on no other figure insofar as representations inducing entry into the sale agreement were concerned. This is not surprising because the arbitrator's findings constituted a rejection of the purchaser's case of a profit representation pleaded in paras 50 and 50A(a) and (b).

119 That brings me to the recalculation of EBIT. The arbitrator adjusted only some items, as to which I comment as follows. The adjustments to notional rent and notional salaries could not be items of loss or damage caused by the vendor's contravening conduct having regard to their character as notional items. Being notional the purchaser had to work out what the amounts would be for it in its conduct of the business. Correctly and unsurprisingly the arbitrator did not find that these notional items stated in the financial records provided to the purchaser had been relied on by the purchaser which had suffered loss or damage by reason of error therein. The purchaser's directors did not depose to having relied on notional sums. In any event, the nature of the notional items was such that no finding could have been made. Nor was such a finding made in relation to the other items he adjusted for the purpose of recalculating EBIT. The point is that merely because the arbitrator adjusted an item does not mean that that item was relied on by the purchaser in entering into the sale agreement and was a cause of the loss or damage found and awarded by the arbitrator.

120 Furthermore, the consequence of the adjustment of items in calculating EBIT was to change the profit or EBIT figure, and thus affect the valuation of the business. The adjustment to the notional items was important in this respect.

121 In my view it is unnecessary to go through the adjusted items one by one in an attempt to see how, if at all, they related to the errors in the financial records referred to by the arbitrator and how they could, if considered alone or in combination, have been found to be causative of the loss or damage found and awarded by the arbitrator. For one thing, that is not the exercise the arbitrator undertook. As mentioned earlier, he moved from a finding of reliance to damages without the two being linked by a finding of causation. In my view the reasoning proceeded from reliance on financial records generally (all the alleged oral representations being rejected) to damage assessed in the air, so to speak, unrelated to a specific causal factor or factors the purchaser relied upon. There was, for instance, no finding that the purchaser relied on a particular matter or matters in the financial records provided or that but for such matter or matters the purchaser would not have entered into the sale agreement, and a related finding of loss or damage suffered in consequence. What is said is that the purchaser entered into an unprofitable transaction. Well that might be but that alone does not establish causation. A purchase price for a business is a figure struck at the end of a negotiation between two parties, and as such is not the product of an independent exercise whereby the fair value of the business is ascertained and agreed upon as the purchase price. Indeed for a variety of reasons personal to the purchaser the price may bear a greater or lesser relationship to that value. But a subsequently transpiring of misfortune or lack of business profit does not without more feed the requirement of causation as the gateway to s 82 (or s 159) damages. Moreover, given the arbitrator's findings referred to at [33] above, the purchaser's motivations for entering into the sale agreement are left in the air.

122 I have regard to all that counsel said but I am of the view that the arbitrator erred in law in upholding the purchaser's claim for damages under s 82 of the TPA and s 159 of the FTA. The error lay in awarding damages in the absence of it being established that such damages were suffered "by" the contravening conduct of the vendor. It is axiomatic that without such a finding, the absence of which may in part be explained by the way in which the respondents conducted their case based on specific oral representations and in part as a matter of reality on the evidence, there can be no finding of loss or damage suffered by the contravening conduct of the vendor. There is nothing surprising in this. Contravention of the normative standard is one thing. Proof of loss or damage suffered by reason of that conduct is another. A contravening party is not an insurer of another. In the absence of proof of causation there is no recoverable loss or damage. That is this case. I add only that while I have addressed this as a matter of causation, reliance may also be seen to be involved. It is however unnecessary to separately discuss this.

123 The question that now arises is whether, as the appellants contend, paras 2, 3 and 4 of the award should be set aside with variations to the orders for interest and costs or, as the respondents contend, the award should stand or be remitted to the arbitrator for his reconsideration.

124 Whether or not to set aside an award or part thereof or remit for "reconsideration"[67] is a matter of discretion considered in the light of the relevant circumstances. It is a matter of regret if an award is set aside after a lengthy arbitration, although that can be the fate of an arbitral award just as it can be of the result of a judgment at trial in a court. And the parties' choice of arbitration rather than litigation should be observed and respect given to that choice in determining whether to set aside or remit. It is also to be borne in mind that in preferring arbitration parties may have preferred expedition and been prepared to accept reasoning that was a bit rough and ready, although in the present case the latter aspect must be tempered by the parties' choice of an experienced commercial silk as the arbitrator and the standard of reasoning expected of such an arbitrator, as to which see Oil Basins Limited v BHP Billiton Limited[68]. In my view the issues for determination, and the amounts involved, required close attention to the requirements for an award of damages under the TPA and the FTA.

125 In my view the present is not a case of an omission or inadequacy[69] of reasons. Rather, the arbitrator has provided reasons in which he has sought to engage with and conclude on the relevant issues including causation. Whether it was open to him to conclude as he did is a different matter; in my view it was not. If the matter was remitted the arbitrator would be provided the opportunity to re-engage on the matter of causation. But is justice between the parties appropriately achieved in such circumstances? As to this I share, with respect, the sentiments expressed by Sir John Donaldson MR in Mutual Shipping Corporation v Bayshore Shipping Co Ltd[70] against remitter "merely to enable the arbitrator to correct errors of judgment, whether of fact or law, or to have second thoughts, even if they would be better thoughts". If the present award was remitted for "reconsideration" it would presumably - at least from the respondents' point of view - be for the purpose of the arbitrator improving on the present reasons in the light of my judgment with a view to supporting the conclusion already reached. It may not be correct to regard a remit of an award in such circumstances as a remit "for reconsideration"; cf Jacobs' Commercial Arbitration Law and Practice, para 28.190.

126 These considerations militate against remitting the award. But, as mentioned earlier, the respondents submit that the award should stand or be remitted even if it be considered that the arbitrator erred as contended by the appellants. This is because the arbitrator had upheld the breach of warranty case and assessed damages thereon, thus rendering it futile to set the award aside. The just disposition was to refuse relief on the basis of that finding. Alternatively, the award should be remitted to enable the arbitrator to deal with any issue on either basis of claim, breach of warranty or the TPA/FTA.

127 Insofar as the submission relies on findings on the breach of warranty claim, there are some difficulties.

128 First, the fact is that the arbitrator did not award damages for breach of warranty. There may have been unexpressed reasons for not doing so.

129 Secondly, as discussed earlier the arbitrator erred in law on the application of cll 12.4 and 27.4 on the breach of warranty claim. The result of that error was that he did not consider whether on the facts and the proper construction thereof, cl 12.4 or cl 27.4 barred the breach of warranty claim. Nevertheless, and as mentioned earlier, there is no appeal on this aspect, leave having been refused on the respondents' opposition. I add as to the respondents' position on this, that when in the course of submissions I queried the basis of the arbitrator's decision on the application of cll 12.4 and 27.4 counsel advanced nothing in support beyond the arbitrator's reasoning based on Covcat.

130 Thirdly, by reason of what occurred on the hearing of the leave application, which led Byrne J not to grant leave in respect of causation on the breach of warranty damages, at least as appears by the transcript, the appellants submitted that it should not be open to the respondents to seek to uphold the award on the basis of the finding of those damages. In the circumstances there is no need to discuss this aspect further.

131 Fourthly, the fact is that leave was not granted to appeal against the arbitrator's reasons dealing with the breach of warranty claim. For that reason and in light of all the circumstances including the error as to cls 12.4 and 27.4 and that the subject award was not made on that claim I will not, as invited by the appellants, consider and rule on the merits of the arbitrator's reasons on that claim.

132 I have concluded, regarding the relevant circumstances overall that the just and appropriate disposition of the matter is that paras 2, 3 and 4 of the award be set aside, interest be recalculated and costs readjusted, and that the award not be remitted to the arbitrator. To be more precise, I would not remit the award on the matter of the claim under the TPA or the FTA, that of course being the only basis upon which the award of damages was made. As to the case based on breach of warranty, on which the award was not founded and on which there is no appeal before me, there is the issue of the application of cll 12.4 and 27.4 as to which the respondents advanced no reason, apart from the erroneous reason of the arbitrator, as to why either is not applicable in the circumstances. The result is that no reason appears why those provisions or either of them are not applicable according to their terms to preclude recovery of damages for breach of warranty. In these circumstances it would be an unjustifiable burden on the parties to remit the award for reconsideration. I should say also that I would regard it as quite unjust and inappropriate to remit the award generally, as the respondents suggested.

133 I will allow the parties time to consider these reasons and then hear counsel at a convenient time as to the terms of the orders and costs and otherwise as they may be advised.

[1] Kay Group Holdings Pty Ltd v K & K Plastics Pty Ltd [2008] VSC 169.

[2] As stated at [59] the amount payable was $10,194,324.

[3] "Balance Date" was defined as "the date of the Agreement".

[5] Schedule G-5 was a statement of dates in and between which maintenance works were carried out to a total value of $440,460.38. Schedule L was a "Breakdown of Reasonable Purchase Price Calculation".

[6] Schedule J was entitled "Breakdown of Average Maintainable Earnings Before Interest and Tax ("EBIT")".

[8] Kay Group Holdings Pty Ltd v K & K Plastics Pty Ltd [2008] VSC 169, at 8-9, [28]-[30].

[38] Reasons para 151; see also para 7.

[41] Elna Australia Pty Ltd v International Computers (Australia) Pty Ltd [1987] FCA 230; (1987) 75 ALR 271.

[42] [2001] HCA 52; (2001) 206 CLR 459 at 469-470 per Gleeson CJ.

[57] Kay Group Holdings Pty Ltd v K & K Plastics Pty Ltd [2008] VSC 169, at 8-9, [28]-[30].

[58] Kay Group Holdings Pty Ltd v K & K Plastics Pty Ltd [2008] VSC 169, at 9-10, [32]-[34].

[59] Kay Group Holdings Pty Ltd v K & K Plastics Pty Ltd [2008] VSC 169, at 9, [31].

[62] [1972] HCA 4; (1972) 127 CLR 253 at 290 per Stephen J.

[63] [2002] WASC 112, [45] per McKechnie J.

[64] (1987) 71 ALR 367 at 371.

[65] Kay Group Holdings Pty Ltd v K & K Plastics Pty Ltd [2008] VSC 169, at 9, [31].

[67] Commercial Arbitration Act 1984, s 38(3) and s 43.

[68] [2007] VSCA 255 at 24-31, [50]- [60].

[69] In re Poyser and Mills' Arbitration [1964] 2 QB 467 at 477-478 per Megaw J.

[70] [1985] 1 WLR 625 at 632.