Dib Group Pty Ltd v Ventouris Enterprises Pty Ltd

Judgment 1ALLSOP P: The respondent, Ventouris Enterprises Pty Ltd ("Enterprises"), was and is a family company owned and controlled by Mrs Kathy Ventouris and her daughter Ms Betty Ventouris. The dispute on appeal (it was wider below) was whether the appellants, Dib Group Pty Ltd ("DG") and Mr George Dib engaged in conduct that was misleading or deceptive upon which Enterprises relied (through Ms Ventouris), causing Enterprises to lose $100,000 that it lent to a company called E-Style Marketing Pty Ltd ("E-Style") in October 2003. 2Contraventions of provisions of both the Trade Practices Act 1974 (Cth) (the "TPA") and the Fair Trading Act 1987 (NSW) (the "FTA"), then in force, were asserted.

The cases brought by Enterprises 3The case brought by Enterprises that succeeded ( Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963) was described by the primary judge at [8] of his reasons, as follows: "Ms Ventouris claims that Mr George Dib recommended E-Style to Enterprises as a suitable borrower. Enterprises' case is that Mr George Dib not only recommended E-Style but that he represented to Ms Ventouris that E-Style and its owners were running a good business and would be reliable borrowers." 4Another case (effectively one of dishonesty) was brought; but the primary judge rejected it. The primary judge described this case at [8] of his reasons, as follows: "... Enterprises claims that the Dib Group concealed from Enterprises material information that it had problems it was experiencing with E-Style as one of its franchisees. Specifically Ms Ventouris says that the Dib Group knew that the money that Enterprises was lending to E-Style would be used to pay past due franchise and rent payments that the Dib Group was then demanding from E-Style. In other words Ms Ventouris' case is that the Dib Group saw Ms Ventouris' proposed loan to E-Style as a way for the Dib Group to cure a problem with one of its franchisees." 5The response of Mr Dib and DG to these cases was described by the primary judge at [9] of his reasons, as follows: "The Dib Group's case is that Mr George Dib merely introduced Ms Ventouris to Mr Zibara and Mr Antonios without any recommendation of them or of E-Style's suitability as a borrower. Mr George Dib says he was unaware of any financial problem at E-Style in September 2003."

The background facts 6The critical events took place in late 2003. The background facts were described by the primary judge at [16]-[20] of his reasons: "[16] In early 2003 Ms Ventouris was a Business Development Manager in the Merchant Services Bank division of St George Bank Limited. Ms Ventouris' role involved approaching strategic groups within the business community. These included franchisor companies. Her objective was to sell St George EFTPOS facilities and other St George products in bulk to the franchisor and then to all the franchisees. A fellow bank employee introduced Ms Ventouris to the Dib Group. In early 2003 she telephoned Mr George Dib and arranged a meeting with him to discuss the bank's product range including its EFTPOS terminals. She met Mr George Dib at the offices of the Dib Group at Condell Park. She also met Mr John Dib and members of his family. Ms Ventouris persuaded the Dib Group to transfer their EFTPOS facilities, approximately thirty in number, from Westpac Banking Corporation to St George Bank Limited. The transfer of EFTPOS facilities for each individual service station involved Ms Ventouris meeting with Mr George Dib on many occasions at the Condell Park office at the Dib Group. Ms Ventouris met Mr George Dib on St George Bank business once or twice a month throughout 2003. Ms Ventouris met many Dib family members and came to see that the Dib Group was a family company. Mr George Dib's wife and two daughters also worked in the business, together with many members of Mr John Dib's family. [17] The frequency of Ms Ventouris' contact with the Dib Group meant that she also became acquainted with the Dib Group's accounts staff, Ms Elisa Dib and Mr Gary Tong, together with some of the company's main franchisors, Mr Colin Zibara and Mr Louis Haddad. As a result of this contact Ms Ventouris was able to deal easily and informally with members of the Dib family. [18] The Dib Group service stations operated under the name 'Metro Petroleum'. In April 2003 Ms Ventouris' mother, Mrs Kathy Ventouris decided to sell an investment property that she owned in Lake Munmorah NSW. Ms Betty Ventouris had to travel to Lake Munmorah to help prepare the property for sale. In doing so she noticed a number of 'Metro' service stations operating in the Wyong area. This started her thinking about the success of the Dib Group in the same connection as using the proceeds of sale of her mother's property. She spoke to her mother about this idea. [19] Mrs Kathy Ventouris decided to leave it up to her daughter to manage the proceeds of sale. She relied on her daughter's advice about what to do about her funds. Mrs Ventouris knew that her daughter was inexperienced in running her own money lending business but she trusted her diligence, her experience with St George, her loyalty and her good judgment. [20] A conversation between mother and daughter took place one day in about August 2003 after Ms Ventouris had driven to visit the Lake Munmorah property. It was only a general conversation but the effect of it was that Mrs Kathy Ventouris gave her daughter the liberty to make ' a safe investment ' and preferably a secured investment with the expected proceeds of sale." 7Though it was disputed by Mr Dib, the primary judge found that Ms Ventouris and Mr Dib had a conversation in August 2003. This was described at [21] of the primary judge's reasons, as follows: " ...Ms Ventouris explained to Mr George Dib that Mrs Kathy Ventouris' property in Wyong was being sold and that the Ventouris family were looking to invest about $100,000 of the proceeds of sale. Mr George Dib suggested that the money could be used to buy one of the Dib Group's service stations and to operate it as a franchisee. Mr George Dib suggested that Mr Colin Zibara or Mr Louis Haddad could help her set the service station up and then run it. Ms Ventouris was reluctant to become involved directly in an industry that she knew little about. She rejected this suggestion. However, I find that Mr George Dib advanced an alternative idea." 8The alternative idea referred to by the primary judge in the last sentence of [21] was that Ms Ventouris could invest the money in the business of Mr Colin Zibara's brother, Mr Anthony Zibara, being the running of a number of petrol stations in Terrigal. After some further discussion, Mr Dib said the following to her, as recounted at [22] of the primary judge's reasons: "'We have been in business many years and we know what to do. Look at Colin's sites. He is making a killing. You're in banking Betty. If you keep your money in the bank you will get 5% return. If you invest your money with us, you will be the one putting a price on the return. You know that short term lending normally brings 20%. You will be helping us and we will be helping you. You know where we are Betty. We are not going anywhere and nothing will go wrong. You have seen how we do business. It will be good and you know we are all family here. Anthony Zibara is going to do well. See Colin, he is very successful and his brother will be too. Have a think about it, but with a brother like Colin nothing will go wrong, I assure you.'" Ms Ventouris said that it sounded interesting and that she would speak to her mother. Mr Dib replied: "'Speak to your mum. Dib Group we have been in business for many years and we won't let anything go wrong. Anthony is my nephew. It will be OK trust me.'" 9The primary judge rejected Mr Dib's evidence that this conversation did not take place, saying at [23] of his reasons: "This is an idea that Mr George Dib promoted to Ms Ventouris once he was aware that her mother had money to lend." 10After Ms Ventouris spoke to her mother and received permission to invest the funds, she spoke again with Mr Dib. They arranged to meet at Darling Harbour at the Service Stations Association National Exhibition and Convention at which St George Bank had a stand. The meeting took place in a coffee shop. Present were Ms Ventouris, Mr Dib, Mr Anthony Zibara, Mr Louis Haddad and Mr Joseph Antonios. The terms of discussion were in dispute. The primary judge accepted Ms Ventouris' version. The importance of the conversation required the primary judge to set it out in full. Mr Dib said: "'Betty, I discussed our conversation regarding short term lending with the boys and they would like to go ahead. The boys will need the funds for about one (1) year.'" Mr Anthony Zibara said: "'Betty, George told us that you will be giving us a loan and we are happy to pay you interest on it. It will only be for a short time and we will be able to pay you back within the year. The Dib group is behind us all the way. You know that Colin has done miracles with the business and he will be helping us too. We are looking at expanding.'" Ms Ventouris said: "'I have thought about it and it has been recommended that 18% interest would be viable but I would need a security property and a fixed and floating charge over all company assets.'" Mr Anthony Zibara said: "'That's fine Betty. We are very happy with that. I have a property in Redfern which I can put down as security. It's a beautiful unit. We can also secure the loan with the business. We run three shops and they are fully stocked. If this is not enough, well I don't know what is. We have three sites. We are looking to expand and are following Colin's lead. We are doing very well. We just need the short term cash to build up the business. Our shops, including stock and fuel alone are probably worth about $80,000 to $100,000 each.'" Ms Ventouris said: "'How do you manage to run these three sites?'" Mr Anthony Zibara said: "'Joey (referring to Joseph Antonios) runs Bellbird, I run Greta and we have an Indian guy running Cliftleigh. It's shift work, they are all very close to each other, like a five minute drive.'" At the end of the conversation, Mr Joseph Antonios said: "'I grew up with Anthony from the age of five. It's great to be in business with your best friend because they know you and you know them. We share everything and have a very strong working relationship. Betty, thank you for taking the time to meet with us today.'" Mr Dib then said: "'Great, so when can we organise the loan Betty and what do you need from us to proceed?'" Ms Ventouris said: "'I will have to discuss this once again with my solicitor to draw up the necessary Documentation.'" 11At [30]-[31] of his reasons, the primary judge made the following findings about this meeting and later events: "[30] Although Mr George Dib did not give the same specific assurances at this meeting about the quality of Mr Zibara or Mr Antonios as borrowers his participation in the detail of this meeting showed the range of their and E-Style's plans to which the assurances were applicable, that he was continuing to be interested in the idea of the loan and that he wanted the loan organised. There were a number of other meetings between Ms Betty Ventouris, Mr George Dib and Mr Anthony Zibara after the meeting at Darling Harbour. But the Darling Harbour meeting was a central contest because it represented the point of difference between the parties as to when discussions started between Ms Ventouris and Mr George Dib. [31] Ms Ventouris set in train steps after this meeting to prepare the loan documents. Ms Ventouris instructed Mr Robert Minter from Minter & Associates to prepare the necessary paperwork. She instructed her accountant to set up the plaintiff, Enterprises, to be the corporate lender. The plaintiff company was structured with Mrs Kathy Ventouris and Ms Betty Ventouris the directors with each holding one share. Ms Betty Ventouris' idea was that this corporate vehicle would provide the loan funds to E-Style and that Mrs Kathy Ventouris would loan the funds to Enterprises from the proceeds of the Lake Munmorah property. When Ms Ventouris set Enterprises up she had not thought through the idea of using it to lend money to other people in the future. This was a small beginning, a kind of pilot project for her. She did not know what else the company would do." 12The next meeting found to have occurred on 22 September 2003 was at a caf e (the Caf e Neptune) in Brighton-le-Sands. Present were Ms Ventouris, Mr Dib, Mr Anthony Zibara and Mr George Zaj. By this time, Enterprises was established; and its solicitor, Mr Minter, was advanced in his preparation of the loan documentation. The primary judge did not accept some aspects of Ms Ventouris' evidence concerning the meeting. The primary judge can, however, be taken to have found the following at [62]-[64]: "[62] Ms Betty Ventouris recalls that at the Cafe Neptune meeting, and I accept her recollection on this as correct, that Mr Anthony Zibara introduced her to Mr George Zaj, Mr Zibara's brother in law. Ms Ventouris recalls that Mr George Zaj was described as someone who worked with the lender, Sydney Home Loans and was involved in the loan application that assisted Mr Anthony Zibara to fund the purchase of his home unit at Redfern. Mr Zibara explained to her that Mr Zaj was married to Mr Anthony Zibara's sister. [63] Those present at Cafe Neptune discussed the preparation of the loan documentation for the Enterprises loan. Ms Ventouris says and I accept, that Mr George Dib and Mr Anthony Zibara were both involved in this conversation with her. I find that she, Mr George Dib and Mr Anthony Zibara exchanged the following in conversation, with Ms Ventouris leading off: "'My solicitor is in the process of drawing up a fixed and floating charge over all the assets of E-Style Marketing Pty Ltd. I am not that crash with legals, but a fixed and floating charge is kind of like a registered mortgage over all of E-Style's assets, stock, fuel and the cash in the bank. My solicitor is also preparing Documents to register a second mortgage over Anthony's residential property in Redfern.' Anthony Zibara said: 'Betty, this property is brand new. The development is beautiful. It's not really considered Redfern but Moore Park. It's a property worth over $400,000.' George Dib said: 'That's right; it's got to be worth at least $400,000.' I said: 'The Documents have been a little delayed. We are waiting for consent from the first mortgagee to allow Ventouris Enterprises Pty Limited to be registered as second mortgagee.' George Zaj then said: 'Yes I know. I've seen the correspondence.' George Dib then said: 'I have heard of Robert Minter. He is a good solicitor. Nothing will go wrong. Betty I assure you. You have the three fully stocked shops now and a residential property too. See Col (referring to Anthony's brother), he is very successful and his brother will be too. Trust me. We are all family. It will be OK. You will be helping us and making a little bit of money too.'" [64] According to Ms Ventouris the Cafe Neptune meeting was to confirm what was to happen in the near term future. Mr George Dib repeated some assurances at this meeting but not all of what had been said before. The defendants allege that in her version of this meeting Ms Ventouris was trying to fit him with knowledge of various matters to assist her case and that there was no reason for him to continue his assurances to her. But with some exceptions, I generally accept her version, which I find is not an invention. The defendants' submission misses the dynamic of the relationship between Mr George Dib and Ms Ventouris. Right at the beginning of their discussions she had made clear to him that the money was coming from her mother. He was sufficiently intuitive to appreciate that this fact meant that she needed assurance about security if the loan was to proceed. I find that Mr George Dib gave her the assurances she claims about the safety of the loan investment." (Emphasis added.) 13Another meeting took place in early October at a bistro in Ryde when the security documentation was ready. At the meeting were Mr Anthony Zibara, Mr Joseph Antonios, family and friends. No relevant representation was made.

The conduct alleged 14The conduct that was said to be misleading or deceptive comprised three representations made to Ms Ventouris in August and September 2003, as set out by the primary judge at [87] of his reasons: "... (a) a loan of $100,000 to E-Style would be a safe investment, (b) a loan of $100,000 to E-Style would be repaid together with interest, and (c) the defendants would ensure that the loan of $100,000 to E-Style would be repaid." 15Each of the above representations was as to a future matter. Thus, the TPA, s 51A and the FTA, s 41 became relevant. 16Mr Dib's version of events was quite different to the evidence given by Ms Ventouris. The primary judge did not accept Mr Dib's evidence. Mr Dib denied the conversations with Ms Ventouris and in her presence. I will return to Mr Dib's evidence when dealing with the operation of the TPA, s 51A and the FTA, s 41.

The reasoning of the primary judge on the misleading or deceptive conduct case 17The first element found proven comprised the three representations as to future matters set out in [87] of his Honour's reasons ([14] above). The relevant findings were set out at [88]-[90] of the primary judge's reasons, as follows: "[88] Mr George Dib gave multiple assurances throughout his August 2003 discussions of the proposal that Ms Ventouris invest in one of the Dib Group franchisees that ' it will be OK ', ' trust me ', and of the proposed loan to E-Style, ' nothing will go wrong, I assure you '. He supported his assurances with reference to the quality of his family relationships with Dib Group franchisees such as Mr Anthony Zibara who was a cousin of his, ' we are all family here ', a statement which had the effect of strengthening the assurances he gave her. An assurance that nothing will go wrong should be read in this context as an assurance as to the security of the moneys to be advanced. At the Cafe Neptune meeting when the terms of the loan were defined the further assurances ' I assure you Betty it will be OK ', ' Trust me ', ' You will make a little bit of extra money on the side and you'll be helping us ', and ' the Dib Group won't let anything go wrong ' were made which were all equally assurances as to the security of the moneys to be advanced and as to their repayment with interest under the terms of the loan agreement then being discussed between E-Style and Enterprises. The repeated emphasis at the time of these assurances on the role of the Dib Group and the role of Mr George Dib as the speaker and CEO of the Dib Group also support the inference that the defendants were representing that they would ensure that the proposed $100,000 loan would be repaid with interest. Considerable encouragement based upon Dib family associations was being directed at Ms Ventouris to induce her to make this loan. [89] The defendants submitted that Enterprises did not adduce any evidence of representations made by Mr George Dib about E-Style itself or its financial position as distinct from the position of a Mr Anthony Zibara. I do not accept this. The representations were made in a context where Mr George Dib was aware that the loan was going to be made to E-Style. His assurances of repayment were assurances about E-Style's future repayment. E-Style as the operator of franchised Metro Petroleum businesses was contemplated to be the borrower. The representations were not about Mr Zibara except to the extent he played a role in E-Style. [90] The defendants also submitted that Ms Ventouris never asked Mr George Dib if he thought the loan was secure. But there is ample evidence of him stating that the loan would be secure. This is correct. The importance of this to Ms Ventouris was obvious to Mr George Dib, as a result of her early communication to him that the money to be loaned was ultimately coming from her mother." 18The representations pleaded and found to have been made were as to future matters. The TPA, s 51A and the FTA, s 41 were in the following terms: Section 51A "(1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading. (2) For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation. (3) Subsection (1) shall be deemed not to limit by implication the meaning of a reference in this Division to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead." Section 41 "(1) For the purposes of this Part, where a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the person does not have reasonable grounds for making the representation, the representation shall be taken to be misleading. (2) The onus of establishing that a person had reasonable grounds for making a representation referred to in subsection (1) is on the person. (3) Subsection (1) shall not be taken to limit by implication the meaning of a reference in this Part to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead." 19Dealing first with s 51A(2), the primary judge recognised that the authorities revealed a difference of view as to the provision's operation and the extent to which the onus of proof had been reversed: see, for example, Re McGrath; Pan Pharmaceuticals Ltd (In Liq) v Australian Naturalcare Products Pty Ltd [2008] FCAFC 2; 165 FCR 230 (an evidential onus only), Lewarne v Momentum Productions Pty Ltd [2007] FCA 1136 (a reversal of the legal burden) and, possibly to the same effect, Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 and also perhaps Digi-Tech (Australia) Ltd v Brand [2004] NSWCA 58. (See generally J D Heydon, Trade Practices Law (Looseleaf Service: Lawbook Company Limited) Vol 2 at [11.200] (Update 135) and R V Miller, Miller's Annotated Trade Practices Act: Australian Competition and Consumer Law (Thomson Reuters, 32 nd Ed, June 2010) at 556 [1.51A.37] and the discussion of the cases by Ward J in Traderight Pty Ltd v Bank of Queensland [2010] NSWSC 139; 266 ALR 503.) 20By reason of how the primary judge approached the operation of s 51A and s 41 otherwise, in particular in the context of how the case was fought, his Honour said that he did not need to deal with this difference in the authorities. There was another reason for that lack of necessity. Section 41 of the FTA was pleaded in the alternative against both DG and Mr Dib. Section 41(2) is, in terms, apt to reverse the legal or persuasive onus of proof. As discussed below, this is its proper construction. Thus, discussion about the differences in the case law about the operation of s 51A(2), is made unnecessary by the operation of s 41(2) subsuming the question. 21In [93] of his reasons, the primary judge described what the representor was required to prove by reference to what Heerey J had said in Sykes v Reserve Bank of Australia (1998) 88 FCR 511 at 513: "(1) some facts or circumstances; (2) existing at the time of the representation; (3) on which the representor in fact relied; (4) which are objectively reasonable, and; (5) which support the representations made." 22How the case was presented on behalf of Mr Dib and, in this respect, DG, and the primary judge's findings are set out in [94]-[97] of the primary judge's reasons: "[94] The defendants have not established that they did have reasonable grounds for making representations as to the future matters about which Mr George Dib assured Ms Ventouris. The absence of evidence of reasonable grounds and evidence in this case compels the inference that the defendants engaged in misleading and deceptive conduct. [95] The defendants fought the misleading and deceptive conduct case firmly upon the basis that Enterprises had not established that E-Style was in demonstrable financial difficulty in September 2003. The defendants were quite successful in showing that [ sic ] the weakness of the inferences that Enterprises sought to have drawn about the financial position of E-Style in September 2003. But the defendants did not adduce evidence that would establish that Mr George Dib or the Dib Group did have reasonable grounds to make representations to the effect that E-Style would be able to repay the amount advanced. There were several representations as to future matters. The defendants did not advance reasonable grounds for any of them. [96] Mr George Dib did not identify particular facts or circumstances existing at the time of representation upon which he in fact relied to make the representations that he did about E-Style. He did not go to the lengths of establishing that [ sic ] any facts tending to prove E-style's financial stability that were objectively reasonable and that support the representations he had made. It was open to him to identify particular communications with Mr Zibara and Mr Antonios, particular financial plans or particular financial information about E-Style's business operations and prospects that he actually relied upon to give him the necessary basis to make representations that he did. Rather he took the opposite course of deliberately distancing himself from E-Style's affairs. He said, ' I had no specific knowledge of the manner by which the E-Style Marketing Pty Limited accounts were conducted in September 2003. ' And again he said, ' As at September 2000 I had no knowledge of the financial position of E-Style Marketing Pty Limited. I was not aware that E-Style had any financial difficulties at that time .' And further he said, 'I was not informed by Anthony Zibara or Joe Antonios as to how E-Style Marketing Pty Ltd was trading save for general comments they might have made concerning their businesses in general conversations. I did not have any recollection of what those statements might have been as they were not extraordinary.' The price of this lack of knowledge for the defendants' case was that was it was very difficult for the defendants to demonstrate they had reasonable grounds for making the representations that I have found were made. [97] Some financial material relating to E-style was tendered but it was difficult to infer anything about E-Style's financial stability from it. Mr George Dib not identify that he actually relied upon any of it to give him a basis to make the representations." (Emphasis in original.) 23The primary judge found that Ms Ventouris, and so Enterprises, relied on the assurances made by Mr Dib in the representations as to future matters, as one factor material to the decision to enter the transaction and lend E-Style the funds. 24In [101] of his reasons, the primary judge described the defendants' case on reliance: "The defendants attack Enterprises' reliance case several ways. They submit that Ms Ventouris simply relied upon (1) the introduction by and reputation of the Dib Group, (2) the securities that Enterprises was taking on the transaction, (3) her solicitor's competent legal advice, and (4) several incorrect assumptions that she made for which the Dib Group was not responsible. The defendants say in their closing submissions that that even if Mr George Dib did make the statements that Ms Ventouris alleges he did that 'they were meaningless statements upon which she could not have placed any significant reliance, at least to the extent to which it could be said that her reliance on those statements was a cause of her loss'. I find that each of these attacks fails." 25His Honour then went on to deal with each of these matters at [102]-[114]. The answer to each of them was that the primary judge accepted the evidence of Ms Ventouris (upon which there was cross-examination) that part of the confidence she had in the transaction was the trust she placed in the representations made by Mr Dib. No doubt Ms Ventouris recognised the importance of security documents and the competence of Mr Minter's legal advice. Though the former, in particular, was important, these matters did not displace the effect of Mr Dib's assurances. There were a number of assumptions made by Ms Ventouris that were not accurate. The primary judge described them as nave, given her experience. They were, however, to a degree fed by the assurances given by Mr Dib: see [112]-[114] of the primary judge's reasons. 26Thus, the material reliance found by his Honour was a product of his assessment of the evidence of Ms Ventouris.

Loss and damage 27The primary judge concluded that, subject to apportionment, Enterprises was entitled to recover the capital of $100,000 advanced, interest under the Civil Procedure Act 2005 (NSW) and the costs of recovery. In a later judgment ( Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd (No 2) [2010] NSWSC 1317), the defendants' responsibility for the damages was reduced to 80 per cent, taking into account the responsibility of Ms Ventouris. 28At the trial, the defendants contested that Enterprises had suffered loss (as opposed to that suffered by Mrs Kathy Ventouris, who was not a party). This was rejected on the basis of Mrs Ventouris' evidence. 29The essential reasoning establishing a causal relationship between the misleading and deceptive conduct and the loss was set out in [119] of the primary judge's reasons: "If the loan advance had not been made the default would not have occurred and the recovery action would not have been necessary. All these expenses are recoverable. Enterprises is not entitled to interest at 18% or 26% though. These are the interest rates under the loan which Enterprises says could not have occurred but for the representations. Interest should be assessed at the rates prescribed under Civil Procedures Act , s 100."

The arguments on appeal and their disposition 30The appellants' first attack was on the finding of lack of reasonable grounds. This attack involved two legal questions and some factual questions. 31The first legal question was the proper construction of s 51A(2) and whether it should be construed in the manner I construed it in Re McGrath , or, if it be contrary to that, how the Queensland Court of Appeal construed it in Downey . The question of the construction of s 51A(2) concerns not only the nature of the onus but also what is encompassed by the words "it adduces evidence". As I said earlier, this point is irrelevant to the resolution of this dispute, because of the terms of s 41(2). Written submissions filed after the hearing put the submission that s 41(2) should be construed in the same way as s 51A(2) and in the manner that Emmett J and I construed the latter provision in Re McGrath . The terms of s 41(2) are, however, clear. They accord with the terms of the original Bill for s 51A that caused the concern of the Senate Standing Committee: Re McGrath at 275-276 [166]-[168]. The Explanatory Memorandum to that original Bill was clear: the persuasive onus would be on the representor: Re McGrath at 275 [167]. The Explanatory Note to the Fair Trading Bill 1987 referred to provisions of the TPA being uniformly adopted by the States. However, the words of s 41 are not those of s 51A. The Second Reading Speech (of the Hon Bob Carr) spoke of uniformity, but did not deal with the nature of the onus in s 41(2). There is no basis, in my view, other than to read s 41(2) according to its plain words: the onus of proof lies on the representor. 32The above construction accords with the construction given to the equivalent words in the Fair Trading Act 1987 (WA), s 9(2) by the Western Australian Court of Appeal in Holz v Lane [2005] WASCA 40 at [21]-[23], by the Federal Court in Metz Holdings Pty Ltd v Simmac Pty Ltd (No 2) [2011] FCA 981 at [259] and by the Western Australian Supreme Court in Computer Accounting & Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133 at [225]. The Federal Court and the New South Wales Supreme Court have given the same interpretation to s 41(2) of the FTA as the Federal Court and Western Australian Supreme Court and Court of Appeal have given to s 9(2) of that State's Fair Trading Act : Moss v Lowe Hunt and Partners Pty Ltd [2010] FCA 1181 (Katzman J); Lewarne at [82] (insofar as Stone J dealt with s 41(2)); Commissioner for Fair Trading, Department of Commerce v Perrett [2007] NSWSC 1130 (Harrison J); and Traderight v Bank of Queensland at 524 [98] and 525 [106]. Conformity of interpretation is important and should be maintained. 33There may be an argument that the principle of legality (cf Momcilovic v The Queen [2011] HCA 34) would support a reading of s 41(2) as limited to the evidential onus, given that it applies to provisions (other than s 42) that create criminal offences. That said, the purpose of s 41(2), derived from its text and context within the Act, is to take its place in the protection of consumers from misleading or deceptive conduct. Conformable with that purpose, the tolerably clear words of s 41(2) (to be contrasted with the more elaborate structure of s 51A(2)) lead me to conclude that s 41(2) was intended to deal with the legal or persuasive onus. This is confirmed by the reading that it has been given by other judges (including appellate judges) in the cases to which I have referred. Section 41(2) should be interpreted as dealing with the legal or persuasive onus of proof. 34This makes reconsideration of the cases concerning s 51A(2), including Re McGrath and Downey unnecessary. The reach of s 41(2) overtakes any more limited reach of s 51A(2), given that the former was pleaded in the alternative to the latter and that Mr Dib and DG may be liable under either. 35The second legal point is one of more substance. The primary judge applied Heerey J in Sykes at 513 (with whom Sundberg J agreed in this respect at 521) and in particular the third point set out at [21] above: that s 51A (and by the parity of their terms, s 41 also) requires (and require) the representor to prove facts on which the representor in fact relied. This was derived from the representor having reasonable grounds ("does not have reasonable grounds") for making the representation. Here, Mr Dib denied making the representations. Thus, he did not say he relied on anything to make the representations. Further, Mr Dib, in seeking to bolster the acceptability of that evidence, disavowed knowledge about E-Style: see [96] of the primary judge's reasons, set out at [22] above. This raised what Sheppard J and Neaves J referred to as the "practical difficulty" about the application of s 41(2) (and s 51A(2)) in Cummings v Lewis (1993) 41 FCR 559 at 565-566 that a party who denies making the representation and whose evidence is not accepted (perhaps for reasons that do not reflect on the witness' honesty) is left without evidence as to what he or she in fact relied on to make the representation. 36This aspect of Sykes was specifically agreed with by Mason P in City of Botany Bay Council v Jazabas Pty Ltd [2001] NSWCA 94 at [83]-[85] (with which Beazley JA agreed at [105]). Special leave was refused on 19 April 2002: (2002) 23(7) Leg Rep SL 3. The appellants submitted that [83]-[85] of Mason P's reasons were not part of the ratio of the decision. I disagree. Mason P upheld the appeal, finding the Council not liable. As to the common law claim, he found no relevant duty of care: [71]. He then had to deal with the statutory claim. He dismissed that because the material the representor had at hand and upon which (it was inferred) she relied was a reasonable basis for the representation: [96]. 37At the hearing of the appeal the appellants sought to argue that Sykes and Jazabas should not be followed. They sought leave to argue that these decisions were plainly wrong: Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; 230 CLR 89 at 151-152 [135]; Gett v Tabet [2009] NSWCA 76; 254 ALR 504 at 558-567 [261]-[301]. The practice of the Court is that leave is required in such circumstances. Paragraph 38 of the Court of Appeal Practice Note is in the following terms: "A party who proposes to seek leave to challenge the correctness of a decision of the Court of Appeal or of another Australian intermediate appellate court should notify the Registrar at the earliest opportunity. The letter should indicate the decision(s) likely to be challenged and their materiality to the instant proceedings." 38No such notice was given to the Registrar. The need for this early identification is to permit the consideration of whether five judges should sit, whether the Chief Justice should sit and whether a separate issue can be formulated for the resolution of which two judges can be added to a bench of three to hear the balance of the appeal. The application was made in Court during the hearing. It was initially refused. No submissions had been filed directing any attack to the reasoning of these decisions. During the hearing the Court, in the course of pointing out the unsatisfactory nature of the way the matter had come forward, said that a relevant consideration to granting leave would be the additional costs imposed on the respondent. The appellants were invited to consider an undertaking as to costs in this regard and communicate it to the Court. They did so. On 18 July 2011 a letter was sent to my Associate containing the following: "As directed by the Court on 14 July 2011, we hereby advise that our client undertakes to pay the additional costs of the respondent, on an indemnity scale, arising out of a further hearing before the Full Court of the separate question of law identified by the Court in the event that the Court advises the parties that the resolution of the question of law is critical to the determination of the appeal." 39The letter is to be understood as the product of the application in court to re-argue Downey , Sykes and Jazabas . ( Downey was relevant to the proper reach of s 51A(2) . ) The following was said by me and Mr Garnsey QC, senior counsel for the appellants: "ALLSOP P: ... Mr Garnsey has made one application to argue, to the extent necessary, Downey v Carlson Hotels in the Queensland Court of Appeal and Jazabas are plainly wrong. The initial application in relation to both cases was refused on the basis of there being no notice and no submissions. At the end of the argument Mr Garnsey renewed his application in relation to Jazabas and Sykes , to the extent that Jazabas adopted Justice Heerey's criteria in Sykes . MR GARNSEY: If your Honour pleases. Could I add Downey ? ALLSOP P: And Downey . The Court has indicated that it will consider that application during the course of preparation of its reasons and its decision. A critical consideration in relation to the granting of such leave would be the protection of the respondent to the appeal for costs. If this matter had been raised at the appropriate time by way of a letter to the Registrar in accordance with the Practice Note or in the written submissions, the matter could have been dealt with appropriately by the parties in the time allotted. That has not occurred and the appellants should assume that an undertaking as to costs of any additional hearing in any event on an indemnity basis would be a price of a late request to re-argue those cases. If the Court gets to the point in consideration of the matter where either or both of those cases become critical the Court will notify the parties and formally hear the parties about the re-argument of either or both of those cases. That argument may or may not be in court. The Court will make up its mind about that in due course. If the application were to be granted, it would be by way of separating an additional issue out in the appeal and adding judges or one judge and the Chief Justice to the bench for the resolution of that issue and not having those judges deal with the balance of the case. The parties can indicate to the Court, if it comes to hearing the application formally, whether that course is appropriate. So, with those reservations, the matter is reserved." 40In order to ascertain whether Sykes and Jazabas are critical to the resolution of this appeal, it is necessary to assess whether Mr Dib had reasonable grounds to make the representations first on such material or facts (if any) on which he in fact relied, and, secondly, on such material or facts as existed at the time.

Reasonable grounds on the assumption that Sykes and Jazabas are correct 41As to the first two representations (that the loan would be a safe investment and that it would be repaid with interest), it was submitted that the fact that the loan was adequately secured was the reasonable basis and that was the basis for Mr Dib saying what he did in his evidence taken from Ms Ventouris' account of the Caf e Neptune meeting. Reliance was placed on the emphasised part of the conversation set out at [12] above from [63] of the primary judge's reasons. It was submitted that this could be taken to be a reasonable basis for saying that Ms Ventouris would have adequate security (the charge over the three fully stocked shops and the mortgage over the residential property). 42It may be that this was some evidence to support the reasonableness of the representations. The first difficulty, however, is that in its context the second representation was not directed to the safety of the security. It was a representation that E-Style would repay the loan, not about the worth of the security. It may be that the value of the security can be seen as a basis for the first representation that the loan would be a safe investment. The respondent, in its submissions, conceded as much. Be that as it may, apart from evidence of the competence of Enterprises' solicitor and some evidence that the Redfern unit was worth $400,000, there was no evidence, sufficient to discharge the onus in s 41(2), that the security was adequate to cover the debt. There was no evidence of the first mortgage debt on the Redfern unit; nor was there any clear evidence of the level of stock in the shops, its value or the worth of any guarantee. 43It was submitted that there was unchallenged evidence that one of the service stations was sold for $80,000, two months after the loan was made and that Mr Dib was not challenged regarding the position that the shops were fully stocked at the time. These matters can be accepted, but the findings of the primary judge at [96] of his reasons cannot be ignored. There was no reliable evidence as to the financial position of E-Style. Mr Dib did not have any reliable basis to speak about matters that depended upon an assessment of E-Style's financial position. Further, even if the shops were fully stocked (whatever that may have meant in terms of E-Style's overall financial position), that was not the subject of coherent evidence. Mr Dib gave evidence (T333-334) that he did not go to the shops much and was not sure whether they were full or empty. Further, Mr Dib disavowed all knowledge of the value of the apartment (T332). Nor did Mr Dib give any evidence that he had a belief about the security and its adequacy. 44As to the third representation (that the defendants would ensure that the loan was repaid), it was submitted that the vagueness of the representation meant that the identification of reasonable grounds was difficult. It was submitted that it had not been shown that E-Style had financial difficulties. That, however, is not a reasonable basis for the representation. It was also submitted that the uncontested evidence was that the defendants had the capacity to repay the loan and Mr Dib must be taken to have understood this. That capacity, however, was inadequate as a foundation for a statement that DG and Mr Dib would ensure the loan to E-Style would be repaid. There was no evidence of any ability in DG or Mr Dib to influence E-Style to repay the money or any intention on their behalf to provide funds to enable E-Style to repay the loan. 45The appellants failed to discharge the legal or persuasive onus in s 41(2).

Reasonable grounds on the assumption that the appellants are entitled to point to any matters existing which could supply reasonable grounds for the representations 46The matters put forward in the pleadings (see paragraph 11 of the defence to the further amended statement of claim) were: "... The defendants say in the alternative, and only in the event that it is found that the second defendant made any of the representations pleaded in paragraph 7 of the [further amended statement of claim] (which is denied), at the time the representations were alleged to have been made: a. The second defendant was unaware that E-Style had been trading at a loss; b. The second defendant was aware that E-Style operated three service stations as franchisees of the first defendant; c. The service stations which are franchisees of the first defendant had in the past usually been successful businesses; d. The second defendant was not aware of any matters which would have or ought reasonably to have caused him to be concerned that E-Style would not be able to repay the loan." 47Particular (d) is conclusory and devoid of real content unless it simply be taken as a statement that Mr Dib knew of no facts to gainsay, or suggest a change to, the matters in (c). Understood thus, these matters were inadequate to discharge the onus in s 41(2). 48The submissions before the primary judge went further than these particulars. The detailed submissions to the primary judge as to E-Style's financial position as at September 2003 are at Black Book pp 490-506. They were limited principally to the first case made by Enterprises as described at [4] above. This case of Enterprises failed. The relevant findings of the primary judge at [74]-[83] of his reasons were as follows: "[74] In the alternative to its positive representation case, Enterprises sought to make a case of misleading conduct through non-disclosure against the Dib Group and Mr George Dib. I find in this section that Enterprises' non-disclosure case fails because it did not establish that that E-Style was in financial difficulty in September 2003. The parties also contested the related question of what Mr George Dib knew of E-Style's financial position in September 2003. E-Style's Financial Position in September 2003 [75] The defendants attacked the several ways that Enterprises sought to show that E-Style was in financial difficulties in September 2003. That attack was successful in my view. The first objective evidence of financial difficulties on the part of E-Style was in May - June 2004 when E-Style surrendered the Heddon Greta lease to the Dib Group. [76] Enterprises relied upon an aged receivables document for the Heddon Greta site as at 7 April 2004 as showing arrears in E-Style's account with the Dib Group at that time. I do not accept that even if this showed arrears in the account that it showed general financial problems. Also it is difficult to infer what the situation was in September 2003 from a document dated April 2004. [77] Another amount of $30,000 said to be outstanding was relied upon but this appears to have been an error in entries to the MYOB system and not necessarily an amount outstanding at all. [78] A suggestion was made to Mr George Dib in cross-examination that rent was late from E-Style to the Dib Group but the amounts are not so large that any inference about E-Style having financial difficulties could be drawn from this. [79] Enterprises also relies upon the fact that a deposit of close to $55,000 was made to Hunter Petroleum on the day after E-Style received the loan proceeds. Attempts to show that this company was associated with the Dib Group failed in my view. The payment of that sum does not show financial difficulty on the part of E-Style on its own. [80] Despite the fact that the receivers were in possession from March 2006 the usual evidence of financial distress was not tendered by Enterprises in the proceedings. [81] The financial accounts for E-Style show that it made a profit the year ending 31 December 2003. None of this makes a convincing case of financial distress in September 2003. Nor does the seeking of the loan of $100,000 show that. George Dib's knowledge of E-Style's financial position in September 2003 [82] Enterprises was not able to demonstrate that Mr George Dib or Mr John Dib knew that E-Style had financial difficulties in September 2003. But equally the evidence does not demonstrate Mr George Dib had any basis for confidence that E-Style would be able to meet its future liability to repay Enterprises $100,000 plus 18% interest in twelve months time. [83] The evidence about people within the Dib Group reporting to Mr George Dib is unsatisfactory and at times quite contradictory. It is difficult to accept that Mr George Dib's employees would not report to him about large amounts of money owed to the group from time to time by franchisees. But his actual knowledge of financial difficulty was not shown. There may have been some grounds for suspicion from the material set out above but that is all." 49Whilst the above reveals a deficiency in proof of Enterprises' case, it is not a body of findings sufficient to conclude that E-Style was in a financially sound position in September 2003. In order to ascertain whether there was sufficient evidence to found such a conclusion, assessment of the defendants' submissions below is required. 50I will first deal with the third representation. Nothing in the identified particulars to paragraph 11 of the defence touches this representation. Further, there was no evidence referred to in the submissions at Black Book pp 490-506 that was addressed to DG or Mr Dib having the willingness or capacity to have E-Style repay the loan. 51As to the first and second representations, apart from the tender of some financial statements of E-Style for the year ended 31 December 2003, there was no attempt to prove the financial worth of E-Style. It was not clear whether these were final accounts. They do not amount to sufficient proof that E-Style was financially sound (presently and prospectively) at the time of the representations to repay the loan. Indeed they might be thought to tend to the contrary. The balance sheet as at 31 December 2003 reveals net assets and equity of only $38,688, of which $25,000 represented intangible assets. The parties had access to the receivers' documents for E-Style. The appellants did not seek to prove E-Style's financial position. 52The submissions of the defendants at the hearing were to the effect that the plaintiff had not proved that E-Style was in financial difficulty as at September 2003. No attempt was made by them to discharge a positive onus that E-Style was financially sound on that date. The failure of the plaintiff to prove a negative does not amount to proof of the positive by the defendants. 53In my view, the material before the primary judge did not prove that there were reasonable grounds for the making of the representations, whether by reference to what Mr Dib had in mind or otherwise. In these circumstances a re-argument of Sykes and Jazabas would not avail the appellants.

Reliance 54The appellants challenged the primary judge's conclusions on reliance. The difficulty with that submission is that the primary judge's conclusions were based in significant part on his acceptance of the evidence of Ms Ventouris. This involved an assessment of her demeanour and credit. 55The submissions in support of the argument sought to have this Court accept Mr Dib's evidence in preference to Ms Ventouris'. No foundation conformable with principle was laid for this. There was no document or uncontroverted fact that even threw doubt on the primary judge's views about the acceptability of Ms Ventouris' evidence. 56Further, the submissions emphasised the assumptions made by Ms Ventouris and that she had a number of other considerations weighing on her decision to enter the loan. None of these submissions grappled, however, with the fact that the primary judge accepted Ms Ventouris' evidence that Mr Dib's representations were materially relevant to her decision about the loan, even though he accepted that there were other matters influencing her decision. 57This attack should be rejected.

Causation 58It was submitted that, in reasoning as he did in [119] (see [29] above) of his reasons, the primary judge approached the matter on the basis that it had been proved that E-Style was in financial difficulty. I reject that submission. His Honour was applying a test that had a significant element of "but for" reasoning, but which cannot be said not to be a commonsense approach to what happened, given the nature of the representations and Ms Ventouris' reliance on them. 59I refer to what I said in Bullabidgee Pty Ltd v McCleary [2011] NSWCA 259 at [64]-[71] as to the proper approach to causation under the FTA (with which Basten JA and Young JA agreed: [86] and [87]). There was here a sufficient and direct link between the representations and the loss. The representations materially influenced Ms Ventouris and Enterprises to make the loan. The representations were as to the loan's safety and repayment. Repayment was not made. 60It was unnecessary, in the circumstances, for Enterprises to prove what would have happened to any possibly alternative investment. A loss of opportunity case was not run; and there was no basis to think that any alternative investment would have been unsound. 61It may be that the demise of E-Style was occasioned by conduct of its directors, rather than any proved deficiency in E-Style's financial position as at September 2003, but that does not deny the clear and direct causal nexus by the application of the but for test, in the circumstances of representations of this character. 62It was submitted that the true cause of the loss was the intervening cause of the divorce of Mr Anthony Zibara and his spendthrift lifestyle. This was not pleaded, particularised or run below. It should not be permitted to be raised on appeal. In any event, there was insufficient evidence to understand how any such matters otherwise affected the financial affairs of E-Style, which in turn were not the subject of coherent evidence. 63No basis has been shown for interfering with the primary judge's conclusion on causation.

Orders 64The orders that I would make are:

1. The question of the correctness of Sykes v Reserve Bank of Australia (1998) 88 FCR 511; City of Botany Bay Council v Jazabas Pty Ltd [2001] NSWCA 94; and Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 not being necessary to resolve for the resolution of the appeal, leave to argue that they should not be followed is refused.
2. Appeal dismissed with costs. 65MACFARLAN JA: I agree with Allsop P. 66HANDLEY AJA: I agree with Allsop P.

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