The evidence about the representations
110 The evidence was that the 4 May meeting was attended by the following people: Mr Roycroft, his wife Deborah (who was the operations manager of Coolabah), Mr Grant, Mr Dib, and Louis Haddad (Dib Group's franchise manager). Three other officers or employees of Dib Group - John Dib, Ross Morris and Gary Tong - entered the meeting from time to time but, on the primary judge's finding, which is not challenged, did not participate in the discussions.
111 Coolabah called as witnesses Mr and Mrs Roycroft and Mr Grant. Dib Group called only Mr Haddad.
112 Coolabah's first witness was Mrs Roycroft. She testified that it was Mr Haddad who did most of the talking at the meeting. In her evidence in chief she said on two occasions that a turnover of 400 litres a month of fuel (not 400,000, the figure the subject of the representation alleged by Coolabah) was mentioned. She attributed this statement to Mr Haddad. Only after counsel for Coolabah referred to the figure of 400,000 twice in introductions to questions did she say, first that Mr Haddad "estimated", and then (in response to a leading question) that the site would "do" 400,000 a month. She adhered to that in cross-examination, insisting that her evidence was not a reconstruction based on what other people had told her about the meeting, but was an account of what she herself had heard at the meeting.
113 Mr Roycroft was the next to give evidence. He confirmed that it was Louis Haddad who "gave all the answers". He said that Mr Haddad had cited figures of "400,000 litres a month, $100,000 in the convenience store". He stated that Mr Dib made encouraging comments about how profitable the enterprise would be and he said he thought that Mr Dib also offered to supply relevant information about the bottle shop. Nevertheless, Mr Roycroft insisted that "Louis [Haddad] was mainly the speaker, and he offered all the information". Like his wife, Mr Roycroft also insisted under cross-examination that Mr Haddad told him that the site would sell 400,000 litres of fuel a month and that no range was given.
114 Mr Grant's evidence was to the same effect. He said that Mr Haddad was "one of the main talkers" from Dib Group and that "George [Dib] tended to sit back and let Louis [Haddad] do the talking". Mr Grant said it was "advised" to the Coolabah representatives that "there were [scil.] conservative figures of 400,000 litres of fuel per month expected for the site". He also said that that what was said in relation to the convenience store was that there would be "conservative sales figures of around $100,000 a month".
115 Mr Grant made some brief notes at the meeting and also sent an email to Mr Roycroft on 8 May 2007 purporting to give "a snapshot of the meeting". As we mentioned earlier, the email was said to support Coolabah's claim that the oral representations had been made as alleged.
116 In an analysis attached to Coolabah's application for finance in relation to the site ("the Wotif analysis"), the following assumptions appeared:
(a) in respect of the café, gross sales were estimated or assumed to be $30,000 per week ($1,560,000 per annum). The cost of sales was estimated or assumed to be $546,000 (or 35% of the gross sales figure), resulting in a gross profit of 65%;
(b) in respect of the convenience store, gross sales were estimated or assumed to be $23,000 per week ($1,196,000 per annum). The cost of sales was estimated or assumed to be $797,732 (or 66.7% of the gross sales figure), resulting in a gross profit of 33.3%;
(c) revenue from fuel sales was estimated or assumed to be $2,000 per week ($104,000 per annum). This equates to $8,666.67 per month, and is very close to representing two cents per litre in respect of 400,000 litres assumed to be sold per month; and
(d) in respect of the bottle shop, gross sales were estimated or assumed to be $12,000 per week ($624,000 per annum). The cost of sales was estimated or assumed to be $187,200 (or 30% of the gross sales figure) resulting in a gross profit of 70%.
117 It was argued that these figures were consistent with the account of the 4 May meeting given by Coolabah's witnesses.
118 Mr Grant gave evidence that the Wotif analysis was prepared by Rodney Dee, Coolabah's internal accountant. Mr Dee was not called to give evidence. He was sent a copy of Mr Grant's and Mr Dib's emails of 8 May 2007, but otherwise the origins and sources of the assumptions contained in the Wotif analysis were never disclosed. Mr Grant said that, while he had supplied Mr Dee with some of these assumptions, Mr Dee had made other assumptions with no input from him.
119 Mr Haddad's evidence about what he said at the 4 May meeting was at odds with the evidence of the Coolabah witnesses. He said Mr Roycroft asked for figures but he replied that:
we didn't have the figures for the service station… it was a completely new site that was being constructed in a completely different configuration to what it was, and that the figures weren't given to us. We didn't have any figures… it was a completely different operation as opposed to what it was.
120 In relation to fuel sales figures, Mr Haddad later said:
Figures, I recall saying were the site was capable of doing 3, 4 or 5 hundred thousand litres [per year].
121 Mr Haddad said nothing in his evidence in chief about a figure for convenience store sales.
122 In cross-examination, Mr Haddad denied saying that the site would generate fuel sales of 400,000 litres a month and that this was a conservative estimate. He also denied he was speaking about "the minimum turnover that could be obtained for the site" or that he spoke at all about minimum turnover. Mr Haddad further denied that he had indicated that the convenience store would turn over $100,000 a month. He maintained he had said only that "it was capable of turning over $100,000 a month". It was variously put to Mr Haddad that he had said the store would turn over $100,000 a month; then that he "simply said '$100,000 per month'"; and, later, that Coolabah would "do $100,000 easy", as all Dib Group's stores "do at least 100,000 a month". Mr Haddad denied each proposition. Unlike Mr Grant, he did not keep any notes of the meeting and was relying on his memory. Nevertheless, he professed to have no difficulties recalling what had occurred.
123 On 7 May 2007, three days after the 4 May meeting, Mr Roycroft sent an email to Mr Dib asking for information "to enable us to go forward". It was in reply to this request that the George Dib email was sent. The George Dib email incorporated the text of Mr Roycroft's email and marked Mr Dib's responses by the use of the colour blue. It is set out below. For present purposes the responses are reproduced in bold. Otherwise the text is unaltered. References to "CTC" (in this email as in all other correspondence extracted in these reasons) are references to Coolabah.
Attached file for state award for service station console operator, in the same file, I listed 1) extra income on turnover on Liquor stores and newsagency alike 2) fixed expenses.
For the list below, please see comments in Blue
1. Time frame. Delay should not be a problem once all parties agree that the project is going ahead. August would be a possible date pending the speed on which all parties can execute the necessary documents, terms and conditions. Early August ok.
2. George to email AG a copy of their lease plus costs of outgoings etc. Our solicitor will forward that in due course
3. Goodwill price of $200k is based on the fact that we are receiving a fully fitted out servo excluding the restaurant fit out for free, for a term of 15 years.
Fixout and equipments to the site are for the dealer to use, and maintain, it must remain under dib's asset register, never the dealer's
4. Goodwill on other sites if any, will be based on their merit. We acknowledge that
5. George to supply contact for CTC to discuss scenarios' re bottle shop turnover v profit and labor costs plus the same for the Post Office part of the business etc.
Please see attached file
6. George to arrange landlord to supply for the restaurant fit out. Tile floor, cold room, freezer, ceiling, Air-conditioning, any extra under floor hydraulics and wall partitions to CTC requirements. We would fit out service station side of the business including Tile floor, coolroom, ceiling, air-con and wall partitions, at the stage of discussion, there were no mentions on freezer, extra under floor hydraulics to CTC requirement. These must be discuss including other fitout like grease trap etc
7. George to supply current labor rates for console workers. CTC has to determine if it can bring all its employees under its CA or if it has to split them under the different awards EG, fuel and alcohol etc. I could only provide cost of labor for service station in the form of state awards see attached file. All others can be source from www.industrialrelation.nsw.gov au.
124 Mr Roycroft forwarded the email to Mr Grant and Mr Dee.
125 Coolabah alleged in its statement of claim that the George Dib email and the attached spreadsheet made the following representations:
(a) The bottle shop would obtain turnover of $12,000 per week and $187,200 gross profit per annum;
(b) The newsagency would obtain turnover of $4,000 per week and $31,200 gross profit per annum;
(c) Council expenses would be $3,500 per annum;
(d) Rubbish removal costs would be $1,500 per annum;
(e) Sewerage costs would be $1,000 per annum;
(f) Insurance costs would be $2,400 per annum; and
(g) Electricity costs would be $12,000 per annum.
126 Coolabah relied on the spreadsheet, rather than the George Dib email itself, as the source of these representations. In its statement of claim, Coolabah alleged that each of the representations was misleading. The argument on appeal, however, largely turned on the representations concerning turnover, principally from the bottle shop. Counsel for Dib Group submitted that there was no evidence that the figures given for expenses and costs were misleading or unrealistic and Coolabah did not argue otherwise.
127 The spreadsheet contained details of the award rates for various types of employees, which are irrelevant for present purposes. It went on to record the following details (emphasis added otherwise unaltered except where indicated):
Other Income beside service station and restaurant
Yearly gross profit
Based on historical data, Turnover bottle [scil.] shop per week $12,000 $187,200.0
30% due to most retailing on single bottles
Month fee from Post office $400 $4,800
Based on historical data, Turnover Newsagency per week $4,000 $31,200.00
15% on total turnover
Total yearly gp $223,200.0
Other fixed expense
Land/Council p.a. $3,500 $3,500
Land tax p.a. Nil Nil
Rubbish removal general for service station only (not restaurant) $1,500 $1,500
Sewerage pump out $1,000 $1,000
Insurances for building $2,400 $2,400
Electricity per month (service station only) $1,000 $12,000
Total Yearly expense $20,400