DESMOND JOHN WALTER v CLEMENT RAYMOND VINEY, KEITH

risk - alleged misrepresentation as to earning capacity - owner-driver advertisement - no materially false or misleading statements - no statements as to future happenings made recklessly.

DESMOND JOHN WALTER v CLEMENT RAYMOND VINEY, KEITH RAYMOND HANSON and JOHN CHARLES DAWSON

) SOUTH AUSTRALIAN DISTRICT REGISTRY No. G.17 of 1981 )

CLEMENT RAYMOND VINEY, KEITH RAYMOND HANSON and JOHN CHARLES DAWSON

THE COURT ORDERS THAT:

1. Applicant's claim is dismissed.

) ) SOUTH AUSTRALIAN DISTRICT REGISTRY ) No. G.17 of 1981 ) )

CLEMENT RAYMOND VINEY, KEITH RAYMOND HANSON and JOHN CHARLES DAWSON

FISHER J.: This is a claim by Desmond John Walter ("the applicant") for damages arising out of an alleged contravention of s.59(2)

of the Trade Practices Act 1974 ("the Act") by Independent Concrete

Pty. Ltd. ("Independent Concrete"). That company, which was accepted as being a trading corporation engaged in trade or

commerce as a manufacturer and supplier of pre-mixed concrete, was not a party to the proceedings which were pursued against two directors and an agent of Independent Concrete. The statement

of claim alleged that these three persons were, within the meaning of s.82 of the Act, involved in the contravention of s.59(2) in that

pursuant to s.75B they had aided, induced, or were concerned in the

Each of the respondents joined issue with the applicant on this allegation contending that s.82, in purporting to impose

liability on them for the loss or damage suffered by the applicant,

was invalid and exceeded the powers of the Commonwealth Parliament. This issue was argued as a preliminary point after notice thereof had been given to the Attorney-General of the Commonwealth and of this State. The first mentioned Attorney- General was represented by counsel who tendered argument contrary

In the light of my findings, I am relieved of the obligation of determining the questions involved in the contentions of the respondents. However I draw attention to the fact that Toohey J.

in Hans Martin Muller and Ors v Bryan Eric Fencott and Ors, an

unreported decision handed down in Perth on 2 February 1982, did not accept similar submissions and concluded that a natural person may be liable if his conduct has the connection with the contravention by the corporation spelt out in s.75B. Section 82 in its application to a natural person was in his opinion within the legislative competence of the Commonwealth. Furthermore I note that an appeal to the Full Court of this Court has been lodged against this particular decision of Toohey J. which appeal was on

Section 59(2), a contravention of which by Independent Concrete is alleged, is in the following terms

(2) Where a Corporation, in trade or commerce, invites, whether by advertisement or otherwise, persons to engage or participate, or to offer or apply to engage or participate, in a business activity requiring the investment of moneys by the persons concerned and the performance by them or work associated with the invest- ment, the Corporation shall not make, with respect to the profitability or risk or any other material aspect of the business activity, a statement that is false or misleading in a material particular."

Section 75B, the terms of which generated much discussion before me and which appears in Part Vl of the Act is as follows:

"A reference in this Part to a person involved in a

(a) has aided, abetted, counselled or procured the contravention;

(b) has induced, whether by threats or promises or otherwise, the contravention;

(c) has been in any way, directly or indirectly, knowingly concerned in, or party to the contravention; or

(d) has conspired with others to effect the contravention."

The relevant reference in Part Vl to "a person involved" is to be found in s.82 of the Act, another section which was also subjected to much consideration by counsel, and particularly sub- section (2) thereof. As with s.75B I find it unnecessary to resolve the questions debated here by reason of my findings in relation to the alleged false or misleading statements. Section 82 is in the following terms: "(1) A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part 1V or V may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention. (2) An action under subsection (1) may be commenced at any

time within 3 years after the date on which the cause of action accrued."

In the month of February 1978 the applicant noticed an

advertisement in the daily press in the following terms:

Would you like to have a very good regular income of $2,000 and over per month?

Be self-employed in an interesting and rapidly-expanding

industry. If so, and you are not afraia of work, this could

be your opportunity to secure for yourself a contract and

join our expanding team in any of the following areas: SMITHFIELD, POORAKA, PLYMPTON, LONSDALE

This opportunity has become available because of the "Mini Mix" success story and our expansion.

If you want to be an owner-driver you will need a cash capital investment figure of $12,000, a Class 2 drivers licence, a history of good health and reliability and be able to start within the month. We can arrange suitable vehicles and finance if required for suitable applicants. Applicants: Write immediately giving all personal and relevant details and telephone number to:

This advertisement is relied upon as the requisite invitation in s.59(2) although the applicant's counsel put forward in the alternative a number of other alleged invitations made in advertisements or orally to the applicant. It was not seriously disputed that the applicant had responded to an invitation

That company was a member of a group of companies which had in February 1978 recently entered the market as a manufacturer and supplier of pre-mixed concrete in the Adelaide and Metropolitan area. The group operated on an owner-driver basis with the particular company selling concrete to the ultimate user which was carried by the owner-driver for a fee. At the beginning of the relevant period the group had been carrying on business with small trucks ("mini-trucks") for at least six months and with some success. At the time of the invitation it was preparing to enter the large truck market by its associated company Independent

Concrete which was an existing large truck operation carried on by

Holyoak and Chamberlain. Yiney and Hanson were directors of the group companies and they had introduced the mini-mix operation to South Australia from Queensland, Hanson had had quite considerable experience in that operation in Queensland. The respondent Dawson was a salesman engaged on a commission basis

to raise money by selling what were called franchises to owner-

drivers. He also had had experience in this field in Queensland.

As a result of the discussions and negotiations which form the subject of these proceedings, the applicant acquired a franchise anc leased a large 5-metre truck. He was obliged to pay $10,000 for the franchise, of which $2,000 was paid at the outset. He commenced work early in March, and it is sufficient to say that he was frequently disappointed with the number of loads of concrete available to him. However in the 8 months' period March to mid November, at which time the operation collapsed as a result of severe price cutting competition from other large companies, he had earned $15,468 before payment of expenses. The applicant was severely prejudiced by the collapse, as he had borrowed $8,000 on a personal loan to assist in purchase of the franchise and his vehicle was leased. Such was the end result of the chain of events which commenced from the applicant's point of view,when he noticed

Upon reading the advertisement the applicant wrote as requested and was subsequently invited by the respondent Dawson to visit him at his office on Greenhill Road. This visit was made by the applicant late in the afternoon of 22 or 23 February 1978

and a discussion commencing with the advertisement took place

between Dawson and the applicant. The misleading or false statements ultimately relied upon by the applicant are alleged

to have been made in the advertisement ("a very good regular income of $2,000 and over per month"), by Dawson during a later interview which the applicant had with Dawson and Hanson, and subsequently by Viney. It is fair to comment that in his evidence in chief the applicant departed considerably from the particulars in his pleadings and his version under cross-examination was

again very different. The following references to his evidence

In relation to the trucks referred to in the advertisement, namely mini-trucks, the applicant said he asked Dawson how many mini-trucks the company had, to which Dawson replied

"we have elght at Pooraka, two at Smithfield and five

at Lonsdale. That is why we are advertising for more

owner drivers as we are very shortly opening a new plant at Plympton."

Shortly thereafter, and again in the context of mini-trucks, the applicant asked Dawson why he was putting more trucks on. Dawson is alleged to have replied "we are that overburdened with work that we cannot cope unless we have more owner drivers. We have

Subsequently in relation to the plants operating or to be opened Dawson is alleged to have said the following in reply to the applicant -

"Money is no object to this company, as you will see when you see Mr. Hanson."

Dawson was further alleged to have said that they owned the concrete plants, that the plants were "freehold" and they had the backing of a millionaire, and that the millionaire was a director of the company. The applicant acknowledged these comments were made by Dawson in relation to the company Minimix Pty. Ltd., which operated the mini-trucks and not Independent

The next occasion on which the applicant visited Dawson's office was on the following Saturday, 25 February 1978. He was accompanied by his wife and met Dawson and Hanson, both of whom, he said, were present together during virtually the whole interview. In the particulars to his pleadings, all statements upon which he relied, other than those made by the respondent Viney, were alleged to have been made in the presence of both Dawson and

At an early stage in this discussion the possibility of the applicant purchasing a maxi-truck was raised. The following evidence given by the applicant as to this conversation can

"I said, 'Show me the figures now on a 1.8'. Dawson then took over the conversation and with

lined piece of foolscap paper for a 1.8, and said, 'Drivers at Pooraka are making at the moment $450 per week clear. This will increase within the next couple of weeks to $500 a week clear, because we are putting on people such as Andy Boom, who

Q. Who are Boral?.. They are an opposition company. 'Also another salesman from the same company, Tony Martino'.

I knew these two men, as I have dealt with Boral myself, and they are very good and impressive salesmen. He further went on to explain 'By having these salesmen our output will jump dramatically, and these men will be getting their $2,000

per month clear easy'. I stress one point: he said, 'You

have to work seven days a week for this, and sometimes 12 hours a day'. I said, "I am not frightened of work, and if the work is there I will do it'.

Q. When he said that to you in connection with the salesmen, was there at that time some discussion about contracts or jobs the company had on hand?... Yes. Hanson said, "We have contracts with S.A. Kerbing, Alpine Constructions,

the Port Adelaide Council; contracts with the Edinburgh airfield', and numerous other big contractors I cannot remember at the moment. This did impress me and I told

Q. You said that you cannot remember the names now: at the time were they names that were of any particular significance to you?... Yes, because they were names of reputable building firms here in Adelaide.

Q. You told us what they said to you in relation to a 1.8 which I think you told us earlier, is a mini, is that right?... The 1.8 is the size up from a mini.

Q. Was there any conversation in relation to earnings to be made from a maxi truck?... Yes. Dawson pointed out, 'As to

a maxi truck the contract price is $14,000, but I think we

can come to some arrangement about that. If you could give us a deposit we could make sort of a sweetheart deal with you.

At this stage, Dawson had produced to me figures stating

that with the work they had on hand and the work coming in a maxi driver, by doing seven days a week, would earn $3,000 clear per month.

Q. Did he either tell you in words or by writing on a piece of paper show you how he arrived at that figure?... He hada calculator in front of him. He assessed these figures

by loads per day a maxi truck could cart, taking an average of mileage paid per load, and came up with this figure of $3,000 clear money.

Q.You have told us that the figure of $3,000 a month

clear was mentioned. Did you inquire as to what expenses,

if any, would have to be met out of that?... I did enquire when he said, 'You would clear $3,000 a month after expenses'. I said, 'Before you take the expenses out, what would my wages be then?' He said, 'You would earn over $4,000'. I said, 'That is good money, over $1,000 a week'. He said, 'Yes

and if you are prepared to work hard you can make more'."

Thus it is quite clear that the statement concerning clearing $3,000 per month after expenses is alleged to have been made by

Dawson on the Saturday morning in the presence of the applicant's

The respondent Hanson who conducted his own defence, was very carefully and competently cross-examined by counsel for the applicant in relation to these conversations. He impressed me as a careful and truthful witness. He agreed that he told the applicant on the Saturday morning that he could expect to earn $2,000 per month as the operator of a large vehicle. Moreover he confirmed Dawson's evidence that Dawson did not make any statement on that morning concerning earnings. He strongly denied that the statements he made, whether in respect of present weekly earnings of small vehicle operators or the anticipated monthly earnings of the applicant, were stated as clear or net earnings. He furthermore satisfied me that in his discussions with the applicant he carefully distinguished between earnings whether present or future of the small and large vehicles, I am satisfied that he did not represent the earnings of the vehicle

I find that, contrary to the applicant's pleadings and evidence that the figure of $3,000 per month was not put ta the applicant on the Saturday morning in the presence of bath Hanson

The alleged statement in-respect.of earnings was made in hy-.. opinion, cif at all, at the applicant's first meeting with Dawson. He contends that the representation was in respect of "clear" earnings, that is after expenses and that it was $3,000 per month. I note

that such a statement is a statement or prediction as to the

future, in which case the applicant is required to establish that the person making it did not "believe that the forecast or prediction would be satisfied or was recklessly indifferent concerning the forecast or prediction". (See Thompson v

Mastertouch T.V. Services Pty. Limited (1977) 15 ALR 487 per

Franki J. at 495). However this aspect of the matter does not

Dawson's evidence confirms that of Hanson to the effect that no written figures were produced at the Saturday morning interview, that he, Dawson, was only present during a relatively short portion of the interview and that none of the allegedly misleading statements were made by him or Hanson in the presence of the other. However he acknowledges that he did give to Walter at the first interview written figures in respect of anticipated earnings and expenses of various trucks and also orally intimated to him that he could expect earnings of $2,000 per month from a mini-truck and $3,000 from a maxi-truck. He strongly contended that at no stage did he refer to net or clear earnings of $2,000 or $3,000 in respect of any vehicle but placed on the piece of paper potential earnings and anticipated outgoings based on a leasing of a vehicle. Walter agrees that he was given this piece of paper but he

Dawson said that he made the following oral statement to Walter at the first meeting concerning the earning capacity of various size trucks.

"The 3-metre whose purchase price was $10,000 had a

potential income to earn $2,000 a month. The 5-metre was $12,000 and had potential, after the growth period,

the same as the rest of the vehicles - you could hope

to earn $2,000 to $2,500 a month. The :7-metre was $14,000

and with that particular vehicle you could earn $3,000 or over a month. Then he went to the cement tankers which ranged in purchase price from $17,000. That basically was of no interest."

He said that he obtained this information from Mr. Holyoak with whom he had discussions and from whom he obtained market surveys and projection figures. However he strongly denied that any statement was made to the effect that such earnings were clear or net or in any way guaranteed. The actual figures for potential earnings of which he informed Walter he reiterated in cross- examination were $2,000 plus per month for a 5-metre truck (which Walter purchased) and $3,000 and over per month for a 7-metre

As I have said the crucial statement relied upon by Walter was that he would earn with his vehicle $2,000 to $3,000 per month clear after deduction of expenses. This was the way it was stated in the pleadings. Subsequently he put it that he was told that the gross figure would be $4,000 per month and that the expenses totalling some $1,000 per month were identified. The essence of his evidence was that he said it was represented to him that he would clear or have in hand $2,000 per month after deductioi of expenses. This version of the representation is in direct conflict with the evidence of both Dawson and Hanson and it is inevitable that I must decide which version I should accept. After hearing at some length their evidence, both in chief and under cross-examination and observing their demeanour I have no hesitation in preferring the evidence of Hanson and Dawson. I am

confirmed in my view as to what was said at the Saturday morning

interview by the evidence of Mrs. Walter who was present throughout the discussion. She did not remember any figures being mentioned = but only that they were assured that there was a good earning

to be obtained from the trucks. She agreed that to earn $3,000

per month after expenses would be a very significant increase

in the family income and if such a figure had been mentioned she probably would have remembered it. Furthermore she saw the

figures on a piece of paper which her husband had with him but

did not remember whether the figure of $3,000 after expenses

In his particulars in the statement of claim the applicant alleged that he was guaranteed earnings of $2,000 to $3,000 clear. There was no evidence at all to support the contention that the earnings were guaranteed. In the franchise agreement the company covenanted to endeavour to ensure that the owner-driver delivered in any one week not less than 25 metres of its products but -- expressly provided that it was under no obligation if the owner-

I accept Hanson and Dawson as reliable witnesses and I note that there is little if any divergence between what each said on a different occasion concerning the earnings of various vehicles. I can not accept that on either occasion any one of them made a statement concerning the amount that the applicant would earn or would be likely to earn after payment of expenses. Moreover a consideration of the varied nature of the expenses satisfies me that it is extremely unlikely that either of them would feel capable of making such a statement. In particular it would depend

to a considerable extent upon the means employed to acquire the

truck, and if leased or hired, the period of the leasing or

In making a finding that I prefer the evidence of Hanson and Dawson to that of Walter, I am in no way indicating that Walter was deliberately lying or attempting to mislead the Court. In my opinion he was an honest witness, who has suffered a considerable loss and is in consequence understandably most disappointed, and somewhat bitter. However the manner in which he gave his evidence did not satisfy me that he had an independent recollection of what

was said to him on particular occasions, by whom and in what context.

I therefore find that no statement was made by either Hanson or Dawson as to the amount which he could earn per month after payment of expenses. However I do find that a statement was made both in the advertisement and by each of them Dawson and Hanson that earnings of $2,000 per month could be made by an owner-driver of a mini-truck and by Dawson that earnings of $3,000 per month could be made by an owner of a maxi-truck larger than the particular maxi-truck which Walter acquired. In respect of the 5-metre truck which Walter acquired he was informed that he could

Counsel for the applicant properly conceded that if my finding was that the stated amount of $2,000 per month was a gross figure his client was not entitled to complain. I agree that to the extent that, if at all, it is proper to measure the statement against subsequent happenings, the average monthly earnings were only slightly below the represented amount. Moreover

it is appropriate to remember that the applicant was warned that

the estimated earnings wouldhave to build up from a low in the first month and that Dawson reiterated that the various earnings

were potential earnings of each of the particular sized trucks.

There were a number of other peripheral statements in the pleadings which were allegedly made at the interviews or by the respondent Viney. Some of these received some support from the evidence and a number were relied upon by counsel for the applicant. However he placed stress upon these statements as rather indicating the atmosphere of enthusiasm in which the representation as to earnings was made and as rendering more likely the version of the statements as to earnings put forward by the applicant.

In preferring the version of Dawson or Hanson or Viney, I do not suggest that no statement such as alleged was made at all, but that the applicant, in advocating his cause, has overstated or in

some instances misunderstood what he was told. There is no doubt that both Hanson and Dawson said that they were overburdened with work and required more drivers immediately, that they had a number of contracts with specified companies, that they had a number of plants in operation and which they proposed to operate and that they had the backing of a well to do business man. However the majority of these statements related to the operations which the business was then conducting and not to the maxi-truck

operations which Independent Concrete at the relevant time proposed to enter. In this regard they were prognosticating

what they hoped to achieve, based to a considerable extent on the expertise of Holyoak and Chamberlain the earlier operators of

In respect of all of the peripheral statements, I prefer the terminology which Dawson or Hanson or both said was used, when it is in conflict with that of the applicant. I find on each of these matters that the probabilities are that the statements were made as deposed to by the respondents. I turn now to these

On the question of the need for owner-drivers I find that Dawson said that the company needed owner-drivers immediately as it was expanding into the larger vehicle part of the concrete operation and did not wish to be in the situation where it had orders it could not deliver. At the present time they had large orders which they could not cope with until they had bigger vehicles and more drivers. On the statement that the franchise would consist of the applicant owning shares in a company I find that this statement was not made by Dawson at either of the two meetings. There was at the first meeting a discussion between Dawson and Walter concerning the plants operated or to be operated by the company and the cost of installing various size plants but no statement as to the manner in which the company had paid for the land or plants. I find that Dawson did state that Viney was a man of substance who was providing financial backing, but not that he was a millionaire. He said that Viney was involved in substantial land development, one of which was a million dollar development at Strathalbyn. He said furthermore that there would

As made in this way there is nothing established as materially false or misleading in any of these statements placed

before me, nor could it be said that any of them, in so far as they

relate to statements of future happenings, was made recklessly

or without belief that they would ultimately be satisfied.

On these topics to the extent to which they are relied upon by the applicant as amounting to false or misleading statements I find that Hanson had this to say. He said that he had had extensive experience in Queensland with mini-trucks but no experience at all with maxi-trucks. In respect of all matters relating to maxi-trucks he relied upon a Mr. Holyoak who had had experience with large truck operations, and who engaged in setting up Independent Conorete with large trucks at Smithfield. He agreed that he told the applicant that they needed drivers immediately and of contracts that they had for the supply of cement. expressly referred to Tudor Concrete, S.A, Kerbing, Alpine Constructions and Edinburgh Airfield. He said that at the time of the interview they did not have enough trucks to service the work that Mr...BOON,.a new experienced employee, indicated he could generate. In that regard he believed they were losing business as they were not accepting all of the orders which were being offered to them. He said that he told the applicant that Viney was a director and shareholder. He denied, as did Dawson, that he told the applicant that his franchise would consist of him owning shares in the company, but agreed that about 20 trucks would be enough to service the projected volume. These 20 truck drivers would have the say whether any other drivers were engaged. He agreed that he said the plants were the property of the company but denied saying that they were freehold or had been

Counsel for the applicant pressed me not to take the peripheral statements in isolation but rather to see them as indicative of excessive enthusiasm on the part of the promoters. This may well be so. On my reading of the s.59(2) the statement must be in respect of a material aspect of the business activity. Furthermore the statements must be false or misleading in a material particular. It was said that the making of these statements lead the applicant to accept uncritically the represent- ation concerning earnings and that he was misled into believing he was to receive $2,000 or $3,000 per month clear. This mayalso

However we are in this instance directed by the Act to consider statements and not conduct, and unless I can find that a statement is false or misleading in the relevant sense in a material particular the applicant must fail. Counsel for the applicant conceded that if no' false or misleading statements were made that was the end of the matter. It is my firm view that on the evidence none of the peripheral statements heretofore

or hereafter mentioned can be found to be false or misleading

The involvement of the respondent Viney relates to one occasion only when it was alleged by the pleadings that he said that the franchise agreement was a very good and viable proposition, that he would not have invested one million dollars if it wasn't a viable proposition and that he was thinking of giving up his own business to take on the position of Managing

Director of the company as he could see more money in that venture

than his other business. The applicant said that he went to Viney's office on the Monday week after the Saturday interview where he met Hanson who introduced him to Viney. He said in evidence in chief of the conversation with Viney as follows: "Mr. Viney welcomed me to the company. I asked him what he had to do with it and he said he was a director of the company. In actual fact he was the company as he had invested up to $1,000,000 in the company, his books were open at any time for anybody to look at to see what he had done.

Q. Was there any further conversation with Mr. Viney?... No."

This evidence in chief of the applicant lends no support to the allegation that Viney said the franchise agreement was a good and viable proposition, or that he was thinking of giving up his own business. Under cross~examination however he expanded his earlier evidence to indicate that he asked Viney whether it was a viable proposition to which Viney replied as above. Later, he said that Viney said "I would not have invested a million dollars

Viney gave evidence to the effect that he did not remember the interview but agreed that he might have said that the business was a good and viable proposition. However, he strongly denied he said he would not have put $1,000,000 into the business if he had not thought it was a good and viable proposition. I accept his evidence in this regard. Hanson denied that he had been present during this conversation. As against Viney therefore is the finding that he made a statement to the effect that the business was a good and viable proposition. Counsel for the

applicant did not contend that in making this statement

Viney as a director of Independent Concrete was involved

in a contravention of s.59(2), doubtless because there was no evidence at all that at the time it was a false or misleading statement. In fact the truth is that it was doubtless quite correct and there .is.no evidencé on:the>basis of which I .could.make i.

a finding to the contrary. Certainly there is nothing to indicate whether Viney made the comment in respect of the small truck operation which at the time was operating successfully or the

large truck operation which was also successful over the next

In respect of my finding that Dawson and Hanson's various statements concerning earnings were only to the effect that Walter could expect to earn $2,000 gross per month from the vehicle he ultimately purchased or $3,000 per month from a 7-metre truck, the appellant's counsel did not contend that either of such statements were false or misleading. Rather he concentrated on attempting to satisfy me that the representation was that the earnings would be clear. In any event for a number of reasons already mentioned I am prepared to find that neither statement,made in the manner that it was, was a false or misleading statement. As to whether it was, is to be tested by reference to circumstances as they existed at the time it was made and not by reference to subsequent events. Even so, after an initial and anticipated early period, the evidence is that the applicant did until the month of October

In the result I find that none of the statements made were false or misleading in a material particular and it follows that the application must be dismissed. There is therefore no reason to discuss the submissions on matters Qf law already mentionec¢ in these reasons nor the availability to the respondents of any defence under s.85 of the Act. Two of the respondents at one stage each claimed indemnity by way of cross-actions but these claims were all abandoned. The order of the Court must be that

| certity that this and the 17 preceding pages are a true copy of the Reasons af Judgment of Mr Justice Fisher

Ws eee LS EAP gue ne a a ee rn Ee . pt ie rae ath ee PTE Te etd etal Ameen rE SS EP tart rian A EOE tie ANY Shue ae ¢

OF SOUTH AUSTRALIA RE: CONSTANTINOS ATHANASSOPOULOS CORRIGENDA

p. 4, 3rd paragraph, line 3; "1980" should be "1982"