//
© 2026 Zoe. All rights reserved.
Zoe is a legal information platform. Always consult the Federal Register of Legislation for authoritative text.
[1999] HCA 15
appellant. Appeal allowed with costs. The Full Court orders of 24 April 1997 and 11 July 1997 were set aside, and the appeal to that Court was dismissed with costs. Special leave to cross-appeal was granted;...
The High Court restored the trial judge's rejection of the investors' misleading-conduct claims. The Full Court had ordered a new trial based on what it saw as an error in the trial judge's comments about witness credibility. The High Court held that this did not fairly reflect the full reasons: the trial judge had also considered the documents, commercial circumstances, whether the alleged statements were made or false, and whether the investors relied on them. The contract at the centre of the dispute had been accepted as genuine and binding, and the finding that the investors would have invested anyway remained in place. The respondents' cross-appeal concerning a separate sourcing representation also failed, principally because reliance had not been established.
AI-generated legal information, not legal advice. Zoe can make mistakes. Check the cited source, and for advice about your situation consult a qualified Australian lawyer.
2,266 words · generated 05/10/2026
2 cited instruments linked from this judgment.
Effem Foods Pty Ltd traded as Uncle Ben's of Australia (UBA) and bought fish from Trawl Industries of Australia Pty Ltd (TIA). The respondents invested $2 million in TIA on 30 March 1987 in return for a 50 per cent interest. TIA went into receivership in April 1989 and was wound up in August 1990, leaving the respondents with substantial losses ([1]-[2]).
The respondents alleged that, around the time of their investment, UBA had engaged in misleading or deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (Cth). Their case included an allegation that a supply contract, W17299, was a sham designed to make TIA appear more commercially attractive to prospective investors. The contract, dated 11 February 1987, provided for TIA to supply UBA with 6,250 tonnes of fish. The respondents also challenged Heads of Agreement signed on 26 March 1987 ([3]-[4]).
The litigation changed shape on appeal. At trial, the sham-contract allegation was rejected. The respondents did not challenge the finding that W17299 was a genuine and binding contract. That mattered because the alleged representations about UBA's intention to honour the contract and TIA's capacity to supply had initially been advanced in the context of the claim that the contract was a sham ([12], [18]-[20]).
Tamberlin J rejected the claims, finding that most of the alleged representations had not been made, none had been shown to be false, and the respondents had not relied on them when investing ([7], [13], [22], [26]). The Full Court did not substitute different factual findings. It held that the trial judge had misdirected himself in approaching some of the representations and ordered a new trial on three of them ([8], [27]-[32]).
The High Court allowed UBA's appeal. It set aside the Full Court's orders and directed that the appeal to the Full Court be dismissed. It also granted the respondents special leave to cross-appeal on representation (xiii), concerning the alleged undertaking that UBA would source its fish requirements from TIA in the first instance, but dismissed that cross-appeal ([57]-[58]).
The plurality's central concern was that the Full Court had treated the trial judge's preliminary comments about witness credibility as though they controlled the whole decision. The trial judge had said that, given the time between the events and the trial, he would place primary emphasis on objective circumstances, commercial probabilities and documents. The Full Court characterised this as a decisive part of the reasoning and concluded that it could not justify rejecting claims based on written material ([15], [29]-[31]).
The High Court considered that an incomplete reading. Tamberlin J had not relied on demeanour or credibility alone. His assessment of witnesses also considered whether their evidence was plausible against the documentary record and commercial circumstances. The plurality described that approach as orthodox and sensible ([16]). It examined the trial judge's reasons and concluded they were plausible, carefully expressed, and took proper account of witness credibility as well as objective evidence ([32]).
The genuine status of W17299 was another important feature. Once the respondents accepted that it was a genuine and binding commercial contract, the asserted representations about UBA's intended performance and TIA's ability to perform became harder to identify. The fact of a contract, even if UBA knew that potential investors might see it, did not itself show that UBA had made representations to those investors about how it would perform or about TIA's capacity ([12], [20], [34], [43]).
The trial judge had also examined the evidence about performance. UBA had accepted about 45 per cent of the total order scheduled to be taken over the relevant period up to the end of May 1987. TIA had difficulty maintaining supply, but the trial judge found this was not caused by UBA's attitude to the contract or by the contract lacking genuineness ([18]-[21]). The High Court held that the Full Court's reasoning did not displace that assessment ([32]-[36]).
Reliance was independently important. The trial judge found that the respondents were experienced commercial people, had investigated TIA, and considered the investment extremely attractive. He concluded that they would have invested even if the alleged representations had not been made ([5], [22]). The High Court found no material error in that reasoning and could not see how the suggested misdirection about credit could have affected it ([35]).
On representation (xiii), the Heads of Agreement stated that UBA would source its fish requirements from TIA in the first instance. The trial judge discussed the uncertain contractual status of that arrangement and found, among other things, that the respondents had not relied on such a representation. The High Court treated the absence-of-reliance finding as fatal to the cross-appeal, because no reason had been shown for disturbing it ([52]-[57]).
Callinan J added that, in his view, the respondents' argument depended on propositions that would require an arm's-length contracting party to disclose its assessment of another party's ability to perform, and whether it might act in its own commercial interests in response to non-performance. He considered that imposing such obligations in this case would distort the Act and risk requiring one party to protect another against its own imprudence or negligence ([60]). This was an additional observation, not a substitute for the plurality's examination of the trial findings.
The judgment applies s 52 of the Trade Practices Act 1974 (Cth) to the particular allegations and record before the Court. The reasons do not set out a comprehensive test for misleading or deceptive conduct, nor do they purport to alter the statutory text. The practical focus is on what was alleged to have been represented, whether the conduct amounted to such a representation, whether it was false or misleading, and whether the respondents relied on it ([2]-[4], [11]-[13]).
The decision's most direct contribution in the supplied judgment concerns appellate review. A Full Court cannot establish a trial judge's misdirection merely by isolating introductory remarks about witness credibility and treating them as decisive. The appellate reasons need to engage with the trial judge's actual analysis and explain how the alleged error bears on the findings under review ([29]-[36]). The judgment refers to State Rail Authority of New South Wales v Earthline Constructions Pty Ltd in a footnote as relevant to appellate review of primary findings ([16]).
The judgment also illustrates the significance of the factual and pleading context. The investors' original case treated W17299 as a sham. When that finding was not challenged, the case concerning representations about performance and capacity had to be considered in light of the contract being genuine and binding. The Court did not treat the contract's existence as a representation to third parties in itself ([12], [20], [34]).
On reliance, the result confirms the importance of the trial finding that the respondents would have invested regardless of the alleged representations. The High Court did not announce a new general formula for reliance. It held that, on this record, the specific finding was explained and had not been shown to be affected by the Full Court's supposed misdirection ([22], [35]).
The supplied judgment does not describe a prior legal rule being replaced, or a new test being enacted by the Court. Its before-and-after significance should therefore be stated narrowly: it restores the trial result and rejects the Full Court's basis for a retrial, while illustrating the need to assess alleged representations, falsity, reliance and appellate error against the actual findings and evidence.
Paragraph 12: The plurality explained that the allegations about UBA's intentions were initially tied to the claim that W17299 was a sham. Once the contract was accepted as genuine, the alleged representations about UBA's approach to performance became less clear. In plain English, showing investors a real contract does not, without more, necessarily communicate a promise about every aspect of future conduct beyond the contract's terms.
Paragraph 16: The trial judge assessed witness reliability using both impressions of the witnesses and the plausibility of their evidence against documents and commercial probabilities. The High Court called this an orthodox and sensible approach. In plain English, the judge did not have to choose between witness credibility and objective evidence; the reasons showed both were considered.
Paragraph 29: The Full Court gave the trial judge's preliminary remarks more importance than they warranted. In plain English, comments that introduce an analysis do not necessarily explain the judge's decisive reasoning. The judgment must be read as a whole.
Paragraph 34: The plurality said that, after accepting the contract was genuine and binding, a finding that UBA had represented something about its future performance or TIA's capacity would require very unusual commercial circumstances. In plain English, the existence of a real commercial contract does not automatically amount to a message to outside investors about the parties' intentions or performance prospects.
Paragraph 35: The trial judge's reasoning on reliance was not undermined by the alleged error about witness credit. In plain English, the finding that the respondents would have invested anyway stood independently of the issue on which the Full Court focused.
Paragraph 56: The High Court identified absence of reliance as fatal to the cross-appeal concerning representation (xiii). In plain English, even if there were an arguable issue about what the Heads of Agreement meant, the respondents still had to overcome the unchallenged finding that the alleged statement did not influence their investment decision.
Paragraph 60: Callinan J warned against turning s 52 into a general obligation for one arm's-length party to protect prospective investors from their own investment decisions. In plain English, he considered that the Act should not be used to impose broad disclosure duties merely because a third party may invest in a business that has a commercial contract.
The reasoning is particularly relevant where an appeal challenges a trial judge's fact-finding by pointing to introductory remarks about witness credibility, without demonstrating how those remarks infected the detailed findings. The case shows why an appellate argument must account for the primary judge's full reasons, including documentary material, commercial probabilities, and findings about each alleged representation ([15]-[16], [29]-[36]).
It is also relevant where a claimant's pleaded theory changes after a central factual allegation is abandoned or not pursued. Here, the respondents stopped contesting the finding that W17299 was genuine and binding. The remaining allegations about intention and capacity had to be considered in that altered setting ([12], [20]).
A third pattern is a claim that a commercial contract, or knowledge that prospective investors might see it, itself represents something about a party's likely performance or another party's ability to perform. The plurality's reasoning indicates that the answer depends on the circumstances and that, on these facts, the contract alone did not establish the pleaded representations ([34], [43]).
Finally, the case matters where reliance is disputed. The respondents had undertaken investigations, were commercially experienced, and the trial judge found their investment decision was driven by their own assessment of TIA's prospects. The High Court treated the unchallenged reliance finding as a substantial obstacle to both the appeal and cross-appeal issues ([5], [22], [35], [56]).
These are illustrations of the judgment's reasoning, not a universal checklist. The decision itself confines its conclusions to the pleaded allegations, the findings made, and the evidence in this litigation.
The supplied judgment does not contain any account of later courts citing, applying, distinguishing or criticising Effem Foods. It therefore does not support a reliable statement about the decision's later treatment or present status beyond the orders and reasoning recorded in the judgment.
The only other authority identified in the supplied text is State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (1999) 73 ALJR 306; 160 ALR 588. It is mentioned in a footnote to the plurality's discussion of appellate review of a primary judge's findings of fact ([16]). The judgment does not describe Earthline as a later treatment of Effem Foods; it is cited as a source relevant to the appellate-review approach.
Any account of subsequent treatment would require sources beyond the judgment provided here. No later cases or developments are asserted in this analysis.
The judgment does not specify what additional conduct or circumstances would be sufficient to turn the existence of a genuine supply contract into a representation to prospective investors about performance or capacity. It says that a conclusion of that kind would require very unusual commercial circumstances, but does not define the boundary ([34]).
The decision also does not establish a general rule about the legal effect of Heads of Agreement. The trial judge regarded the legal status of the sourcing arrangement as uncertain, and the High Court dismissed the cross-appeal principally because reliance had not been established. The judgment therefore leaves unresolved how a differently worded or differently relied-upon sourcing provision might be treated ([52]-[57]).
The judgment's discussion of reliance is tied to the particular findings about these respondents' investigations, commercial experience and enthusiasm for the investment. It does not explain how those factors would be weighed in a different evidentiary record, or set out a general method for deciding reliance where an investor made independent enquiries ([22], [35]).
Nor does the supplied text address later statutory amendments, subsequent cases, or the current treatment of the relevant statutory provisions. It would be unsafe to infer those developments from this judgment alone.
This is general legal information, not legal advice. Zoe can make mistakes. Before acting on or relying on this analysis, have it checked by a qualified Australian lawyer.
Source: the High Court of Australia (www.hcourt.gov.au). Converted to plain text by ZoeLaw. Not the official version.
HIGH COURT OF AUSTRALIA
GLEESON CJ,
GAUDRON, KIRBY, HAYNE AND CALLINAN JJ
EFFEM FOODS PTY LIMITED trading as
UNCLE BEN'S OF AUSTRALIA APPELLANT
AND
LAKE CUMBELINE PTY LIMITED & ORS RESPONDENTS
Effem Foods Pty Limited v Lake Cumbeline Pty Limited (S136-1997)
[1999] HCA 15
14 April 1999
ORDER
1. Appeal allowed with costs.
2. Orders of the Full Court of the Federal Court made on 24 April 1997 and 11 July 1997 be set aside, and in lieu, order that the appeal to that Court be dismissed with costs.
3. Respondents granted special leave to cross-appeal.
4. Cross-appeal dismissed with costs.
On appeal from the Federal Court of Australia
Representation:
D F Jackson QC with R M Smith SC for the appellant (instructed by Deacons Graham & James)
J D Heydon QC with J Stoljar for the respondents (instructed by
Blake Dawson Waldron)
Notice: This copy of the Court’s Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.
CATCHWORDS
Effem Foods Pty Limited v Lake Cumbeline Pty Limited & Ors
Trade practices – Misleading or deceptive conduct – Alleged representation concerning contract for supply of fish – Falsity of representation not established – Reliance not established.
Appeal – Facts – Findings of fact by Trial Judge – Power of Appellate Court to set aside findings.
Trade Practices Act 1974 (Cth), s 52.
GLEESON CJ, GAUDRON, KIRBY AND HAYNE JJ. This litigation arose out of an unsuccessful investment made by the respondents in Trawl Industries of Australia Pty Ltd ("TIA"). The issues before this Court are such that it is unnecessary to distinguish between the individual investments made by the various respondents. It is convenient for most purposes to refer to them collectively. On 30 March 1987 the respondents invested $2 million in TIA and acquired a 50 per cent interest in the company. In April 1989 TIA went into receivership. It was wound up in August 1990. The respondents suffered substantial losses.
The respondents sued the appellant in the Federal Court. The appellant, a subsidiary of an American corporation, is the largest pet food manufacturer in Australia. The business of TIA was that of catching or otherwise acquiring, processing and selling fish. The appellant, (referred to in the Federal Court and where appropriate hereafter as UBA), which used fish in the manufacture of pet food, was a large purchaser of TIA's products. The respondents alleged that, at or about the time of their investment in TIA, the appellant engaged in misleading and deceptive conduct in breach of s 52 of the Trade Practices Act 1974 (Cth) ("the Act") and claimed damages. The conduct alleged involved the making of a number of representations, some of which were said to have been fraudulent. A common law claim for damages for fraudulent misrepresentation was also made, but the case proceeded upon the assumptions that the claim under the Act, if established, would result in relief at least as extensive as that available at common law and, if not established, that there would be no liability at common law. Consequently, the alleged contraventions of the Act were the focus of the judgments in the courts below, and of the argument in this Court.
The essence of the respondents' case against the appellant, as originally formulated, may be summarised as follows. The appellant, it was said, had an interest in encouraging persons to invest in TIA. Such investment would strengthen the financial position of TIA, and provide it with funds which would enhance its capacity and efficiency as a supplier. Knowing that TIA was seeking to attract investors, and knowing that potential investors would be interested in TIA's supply arrangements with the appellant, the appellant put out false or misleading material and information about those arrangements, knowing it would be relied upon by potential investors, for the purpose of making the business of TIA appear more profitable and attractive than it was. In particular, a six-month contract for the supply of fish by TIA to the appellant, entered into on 11 February 1987, identified as No W17299, was alleged to have been a sham. That contract, which was dated 11 February 1987, provided for the supply by TIA to the appellant of a total of 6,250 tonnes of fish, having a value of more than $4 million. Additionally, certain Heads of Agreement between TIA and the appellant, signed on 26 March 1987, were said, in effect, to constitute window-dressing calculated to mislead and deceive persons such as the respondents as to the relationship between TIA and the appellant.
In all, there were 24 representations pleaded by the respondents, nine of which were said to be fraudulent, and all of which were said to be false or misleading. A number of the alleged representations were merely verbal refinements of other alleged representations. The respondents allegedly relied on the representations when they invested in TIA.
The individual respondents were experienced commercial people. They made investigations of the business of TIA. The appellant and TIA were at arm's length. So far as the appellant was aware, there was no limit upon the enquiries about TIA and its business which the respondents were free to make before they decided to invest. Clearly, the question of what motivation the appellant might have had to set out to mislead or deceive the respondents about TIA, or to enter into sham contracts with TIA, was a matter that required close examination.
The action came on for hearing before Tamberlin J. The principal witnesses were the individual respondents and Mr Lees, the officer of the appellant in charge of its dealings with TIA. The hearing lasted 33 days. The dispute was litigated at what should be, but regrettably is not, extraordinary length.
Tamberlin J found that the respondents' case was without merit. He held that most of the representations alleged were never made, that not one of them was shown to have been false, and that not one of them was relied upon by the respondents in making their decision to invest.
The respondents appealed to the Full Court of the Federal Court. They did not pursue all the issues raised at first instance, and some of the findings made by Tamberlin J were not challenged. One important respect in which the case was altered will be examined below. The appeal was partly successful. The Full Court (Beaumont, Einfeld and Foster JJ) allowed the appeal insofar as it related to three of the representations alleged, and ordered a new trial of the case in relation to those representations. The Full Court did not set aside any of the material findings made by Tamberlin J, or substitute findings of its own. Rather, it held that, in relation to his findings on the three representations in question, Tamberlin J had misdirected himself, and that the case should be sent back for a further hearing at first instance.
The appellant appeals against the decision of the Full Court and contends that there was no misdirection of the kind attributed to Tamberlin J. The respondents have filed a notice of contention, seeking to support the Full Court's decision that there should be a new trial in relation to the three representations the subject of the order on the ground that the trial judge's findings concerning those representations were erroneous or incomplete, and that a new trial is justified. In addition, the respondents seek special leave to cross-appeal against the Full Court's decision in relation to one other alleged representation, arguing that the decision of Tamberlin J on that representation was wrong, and that the Full Court failed to deal with the matter insofar as it concerned that representation.
It is proposed to consider in turn the appeal, the notice of contention, and the application for special leave to cross-appeal.
The appeal
(i) that [UBA] had entered into a binding contract with [TIA] for the supply by [TIA] to [UBA] of 6,250 tonnes of fish in 1987;
(ii) that [UBA] intended to honour its obligations under that contract;
(iii) that the contract was a genuine one intended to be fulfilled by the parties to it; and
(iv) that [TIA] presently had and/or would have the ability and capacity to supply 6,250 tonnes of fish in accordance with the terms and conditions of the contract.
Representation (i) was put at the trial in the context of an allegation that contract W17299 was a sham. Tamberlin J, for reasons explained in his judgment, which necessarily involved the credit of Mr Lees, rejected that allegation. It was not pressed on appeal. The appeal was conducted on the footing that the contract was genuine and legally binding. No attempt was made to overturn Tamberlin J's finding in that respect. That, it may be observed, put a different complexion upon the respondents' case in relation to representations (ii) and (iii). In the context of an allegation that W17299 was a sham, their meaning, and their significance in relation to s 52 of the Act, is clear. Indeed, at first sight, (ii) and (iii) look like elaborations of (i). When (i) is removed from the picture, the meaning of (ii) and (iii) is not nearly so clear. As explained in argument, they seem to involve the idea that the appellant had in truth, and at arm's length, entered into a binding agreement to purchase fish from TIA, but that the appellant's attitude to the contract, formed in the light of its superior bargaining strength, was that it would only honour its obligations to the extent to which it suited its commercial purposes to do so. In those circumstances, identifying the conduct on the part of the appellant which was misleading or deceptive is not easy. If the contention is analysed, as it was presented, in terms of making false representations with the intention of inducing the respondents, in reliance on the representations, to invest in TIA, several difficulties appear. Once it is accepted that the contract was not a sham, at first sight all that one has is a genuine contract for the supply and purchase of fish, entered into in February 1987. How did that involve the appellant, in March 1987, making to the respondents representations, concerning the contract, of the kind alleged in (ii) and (iii)? The particulars of the making of the alleged representations were that the contract was made and the appellant knew the contract would be shown to potential investors. That does not appear to involve a representation as to the way the appellant would conduct itself in relation to the performance of its contractual obligations, or as to the intentions of the appellant in relation to the administration of its dealings with TIA.
Tamberlin J rejected the respondents' case in all its aspects. He found that representations (ii) and (iii) had not been made by the appellant to the respondents. He also found that, even if they had been made, they would not have been false. Finally, he found that the respondents did not rely on the alleged representations in deciding to invest in TIA.
Having regard to the way in which the Full Court dealt with the matter, it is necessary to refer to the structure and content of the trial judge's reasoning in coming to these conclusions.
After setting out the facts giving rise to the dispute, the documentary material relied upon by the parties, and the evidence of the main witnesses, and before coming to a statement of the issues to be resolved, a formulation of the relevant legal principles, and a statement of his findings, Tamberlin J expressed his views on the credit of each of the main witnesses. He introduced this part of his judgment with the following preliminary comment:
"Credit in this matter assumes a significant role because almost all of the representations alleged are specifically and categorically denied. There are four principal witnesses whose credit is squarely in issue, and I propose to comment on each of them in turn.
I should add that my final conclusion is that having regard to the seven to eight year period that has elapsed between the events and conversations raised in evidence and the hearing of the evidence before me, the only safe course is to place primary emphasis on the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence. In circumstances where the events took place so long ago, it must be an exceptional witness whose undocumented testimony can be unreservedly relied on. The witnesses in this case unfortunately did not come within that exceptional class. The discussions referred to in evidence were capable of bearing quite opposed meanings depending on subtle differences of nuance and emphasis, and a proper appreciation of the significance of those matters must necessarily be considerably diminished over such a long period of time."
Tamberlin J then went on, assigning detailed reasons, to express his views on the reliability of the four witnesses concerned. In each case those views were based in part upon observations made, and impressions formed, concerning the demeanour of the witnesses, but they also turned in part upon reasoning as to the plausibility of certain parts of the evidence of the witnesses, considered in the light of what Tamberlin J had referred to as "the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence." This was an orthodox and sensible approach to the matter1.
Having completed that exercise, Tamberlin J set out the history of this, and related, litigation. He then referred to, and discussed, the legal principles relevant to his decision. Having done that, he then came to the matter of his findings in relation to each of the representations relied upon by the respondents.
The reasoning of Tamberlin J in relation to the findings concerning representations (ii) and (iii) may be summarised as follows. A substantial part of that reasoning was, naturally, directed to the assertion, made in relation to representation (i), that contract W17299 was a sham. Because the finding that W17299 was a genuine and binding contract was not questioned either in the Full Court, or this Court, it is unnecessary to consider that reasoning in detail. It is important to remember that, at the trial, representations (ii) and (iii) were being pressed in the context of representation (i). Tamberlin J said that there was never any suggestion from UBA that it was not prepared to take any of the fish contracted for under W17299 and which TIA was able to supply at the prices and on the terms set out in that contract. There was never any complaint by TIA that UBA was not honouring its commitments to take fish. In the months up to the end of May 1987, UBA had accepted about 45 per cent of the total order scheduled in the contract to be taken by UBA over the eleven-month period from January to the end of December 1987. TIA was having difficulty maintaining supply, although that was not the result of UBA's attitude towards the contract or of any lack of genuineness on the part of the contract. His Honour made the following comment on the objective commercial probabilities:
"If Lees had entered into a binding contract for 6,250 tonnes with the firm expectation that [TIA] would not be able to supply the quantities contracted for, it was a dangerous and extraordinary 'tactic' on the part of Lees, because there was a significant danger that he would have to answer to his senior executives if the contract resulted in over-commitment or [TIA] was not able to supply. Moreover, there was the added danger that the tactic would not work because Lees must have anticipated some inquiry by the applicants or other interested parties as to the past performance record of [TIA]."
These findings were reasonable and supported by the evidence.
As was noted, if representations (ii) and (iii) are to be considered separately from representation (i), they are even more difficult to sustain than they were in the context in which Tamberlin J had to consider them. Once it is accepted that contract W17299 was a genuine and binding contract, then it is less easy to understand the basis upon which it could be said that the conduct of the appellant involved the making of any representation to the respondents of the kind alleged in (ii) and (iii).
Tamberlin J went on to consider what was described as the "attitude of UBA" to contract W17299. He examined in detail some of the material in evidence about the past, and likely future, performance of TIA, and about the expectations of UBA in that regard. He concluded that UBA intended to be bound by the contract, and to honour its commitments under it.
Later in his judgment, after having made findings in relation to each of the 24 representations relied upon by the respondents, Tamberlin J came to express his findings on the matter of reliance. He concluded that there was no reliance by the respondents on any one or more of the representations allegedly made before 30 March 1987 when the respondents came to make their investment in TIA. In that connection he referred to the background and experience of the various respondents, to the comparative brevity of their communications with UBA, to the extent of the investigations they made in relation to TIA, and to their enthusiasm for the investment. He said:
"The evidence demonstrates that [the respondents] saw their 50% investment in [TIA] in March 1987 as an extremely attractive, if not irresistible investment, with an enormous 'upside' of sustained future profits with little 'downside'. This attraction in their opinion was so great that the clear inference is that [the respondents] would have invested in [TIA] even if the alleged representations had not been made."
When Tamberlin J came to deal with representation (iv) he began by noting that, unlike representations (i) to (iii) inclusive, this representation was not alleged to be fraudulent.
He said:
"It is important to note that the allegations as to misrepresentation by silence in respect of the perceived incapacity of [TIA] to supply the quantity contracted for are not alleged to be fraudulent. It is hard to understand this in the circumstances of this case because the basic submission is that UBA actively and intentionally participated in a 'sham' transaction."
He then went on to deal with the assertion that UBA must have had strong doubts about TIA's ability to perform, or even a firm belief that TIA would not in fact be able to perform, and that it was making a misrepresentation to prospective investors to the effect that TIA would have the capacity and ability to supply 6,250 tonnes of fish contracted to the specifications of UBA. This submission was rejected for a number of reasons. Those reasons involved a close examination of the evidence concerning the performance of TIA, and the expectations of UBA, in relation to supplies of fish. For the reasons he set out, Tamberlin J first rejected the proposition that the conduct of the appellant involved the making of any representation as to the capacity of TIA to supply fish. In that connection it was pointed out that contract W17299 had its own operation and legal effect, and that the conduct of UBA in entering into the contract did not involve a representation about it to third parties. Further, for reasons which he gave, Tamberlin J concluded that the weight of evidence was to the contrary of the proposition that the appellant did not believe that TIA had the ability to supply and process the 6,250 tonnes of fish. To a large extent, those conclusions were based upon his Honour's view of the commercial probabilities as to the way in which a company in the position of the appellant might be expected to behave. The reasoning also turned upon a consideration of the facilities available to TIA, and the knowledge or belief of Mr Lees about the capacity of TIA.
The finding of Tamberlin J was that representation (iv) had not been made, and that in any event, it had not been shown to be untrue. The finding concerning reliance, referred to above, also applied to this alleged representation.
The Full Court did not reverse any of these findings. Rather, it concluded they were based upon a misdirection, and sent the matter back for a new trial.
In their joint reasons for judgment, having set out the issues in the case, having referred to a substantial part of the evidence, and having outlined the competing submissions of the parties, the members of the Full Court came to deal with the claims relating to representations (ii), (iii) and (iv).
Their Honours said that in their view "the key, central or decisive section" of the reasoning in the judgment of Tamberlin J was that part which has been quoted earlier in this judgment, where there was set out the introductory portion of Tamberlin J's findings on the credit of the four main witnesses in the case. The Full Court elevated Tamberlin J's preliminary observations about credit to a position of importance in his process of reasoning which those observations did not have.
The Full Court attached particular importance to Tamberlin J's comment that the only safe course available to him was to place primary emphasis on the objective factual surrounding material and the inherent commercial probabilities together with the documentation tendered in evidence. Their Honours said:
"There are, in our view, difficulties with this reasoning, when it is sought to be applied to the written material in question, namely, the W contract, [the Heads of Agreement] and the Shareholder's Agreement, the existence of which is not disputed and the tenor of which accords with usual commercial practice. We acknowledge that such reasoning may have been appropriate in rejecting the [respondents'] case so far as it was based on the alleged oral misrepresentations; but, with all respect, we cannot see how this process of reasoning could justify rejection of the claims made in para 3 of the statement of claim when it is recalled that those claims were grounded on written material the existence of which is not disputed. To this extent, in our view, his Honour misdirected himself."
In essence, the Full Court reasoned that, because a substantial part of the case for the respondents was based, not upon oral misrepresentations, the existence of which might have turned upon the credibility of individual witnesses, but upon objective conduct including the existence of contracts, there was some fundamental error in the approach which Tamberlin J took towards resolving the issues concerning representations (ii), (iii) and (iv).
Perhaps because the members of the Full Court did not set out to make findings concerning the question of whether the representations had been made, or whether they were false, or whether they had been relied upon by the respondents, there is little examination in the judgment of the Full Court of the reasons which had been given by Tamberlin J for his conclusions on each of those matters. Rather, the introductory comments concerning the credit of individual witnesses were taken as demonstrating a basic error in approach, and it was said that the matter should go back for a new trial. In fact, however, an analysis of the reasons for judgment of Tamberlin J shows that they were plausible and carefully expressed, took proper account of both the findings as to the credibility of witnesses and the undisputed objective circumstances of the case, and were soundly based.
On any view of the matter, the credit of the witnesses was important. Representations (ii) and (iii) were alleged to have been fraudulent. A resolution of that issue necessarily involved findings concerning the credit of Mr Lees. He was alleged to have been a party to the fraud. Similarly, in relation to representation (iv), although it was not alleged to be fraudulent, the case turned in a significant measure upon the evidence given by Mr Lees as to his knowledge and belief concerning TIA's capacity to supply.
On the question whether the conduct of the appellant, in all the circumstances, involved the making of any representations of the kind alleged in (ii) and (iii), the reasoning of the Full Court does not answer the important point, made by Tamberlin J, that for a party in the position of the appellant to enter into a genuine and binding commercial agreement such as W17299, even coupled with an awareness that the contract would be shown to people considering making an investment in TIA, does not involve making representations to potential investors, either in or about the contract. It might be easier to reach a different conclusion if one had decided that the contract was a sham. However, once it is concluded that the contract was genuine and binding (as was accepted in the Full Court), then a conclusion that the appellant was making some kind of a representation to third parties as to its own attitude towards performance of the contract, or as to the other party's capacity to perform it, would require the existence of very unusual commercial circumstances.
Further, it is impossible to understand how the suggested misdirection by Tamberlin J in his introductory remarks on credit might have affected the findings he made as to the absence of reliance by the investors on any of the alleged representations, bearing in mind the reasons he gave for his conclusion in that respect. In substance, he said that the investors, who made their own investigations of TIA, satisfied themselves that it was a very attractive investment, and he did not believe they relied on anything that was done or said or represented by the appellant. As to the latter part of that conclusion, his Honour's assessment of the principal witnesses called on behalf of the respondents was an important factor in his reasoning, but that reasoning, which was explained at length, was not affected by any misdirection or error of approach.
The notice of contention
The respondents, in addition to supporting the reasoning of the Full Court, argued that there were additional reasons why the judgment of Tamberlin J in relation to representations (ii), (iii) and (iv) should be found deficient, and why a new trial on those representations should be ordered. Five such reasons were advanced.
First, it was said that Tamberlin J, in concluding that representation (iv) was not made, failed to make a finding with respect to that part of the alleged representation which related to TIA's capacity to comply with contractual requirements as to quality as distinct from quantity. This submission has not been made out. Tamberlin J gave 10 reasons for rejecting the respondents' case concerning alleged representation (iv). In introducing those reasons he referred to TIA's "capacity and ... ability to supply 6,250 tonnes of fish contracted to the specifications of UBA." The reference to specifications was clearly a reference to quality. In the reasons, he referred to the evidence concerning TIA's ability and capacity to supply and process the fish. Mr Lees gave evidence that he believed that TIA was producing product in accordance with UBA's specifications. It is true that a good deal of the trial judge's reasoning concerning representation (iv) was concerned with tonnages of fish rather than specifications, but the matter of quality as well as quantity was considered.
Secondly, the respondents submitted that the trial judge failed to make any finding as to whether TIA had the capacity to comply with product quality specifications. His Honour found :
"It has not been demonstrated that it is likely UBA was convinced that [TIA] did not in fact have the ability and capacity to supply and process the 6,250 tonnes or would not do so. The weight of the evidence is to the contrary."
Leaving to one side a particular problem that occurred in the period 20‑28 May 1987, which was explained in a manner discussed in the judge's reasons, the fish supplied to UBA met the required specifications.
There is no substance in this criticism.
Thirdly, it was argued in relation to all three representations that the trial judge failed to make a finding as to whether UBA knew that TIA was going to show contract W17299 to potential investors.
The case advanced at trial was that contract W17299 was a sham, entered into for the very purpose of being shown to, and misleading, potential investors in TIA. The trial judge rejected this, and accepted the evidence of Mr Lees that he regarded the contract as genuine and binding. The reasons which Tamberlin J gave for rejecting the argument that the conduct of the appellant in relation to the contract involved the making of representations to investors about the contract, some of which have been referred to above, were not affected by the hypothesis that Mr Lees knew that potential investors would, or might, see the contract. The reasoning was no less valid on the assumption that he had such knowledge.
Fourthly, it was said that the trial judge should have made a finding as to whether UBA knew or ought to have known how much, or how little, knowledge potential investors would have about TIA.
His Honour made this finding:
"The evidence does not establish that Lees had any knowledge or appreciation of the reputation or experience of [the three persons who represented the investors in dealing with TIA]."
Some of the reasoning supporting the findings on the various issues in the case made reference to the fact that UBA did not know who all the prospective investors in TIA might be, or what kinds of investigation they might make. Implicit in the reasoning was the consideration, which was consistent with the evidence, that the class of possible or potential investors in TIA might have included people of varying backgrounds, and with varying degrees of knowledge and understanding of the industry in general, and of TIA in particular. There was no necessity to make a specific finding of the kind referred to.
Fifthly, it was contended that the finding, in relation to alleged representation (iv), that TIA could comply with the requirements of contract W17299 was wrong and contrary to the evidence.
As well as concluding that no representation of the kind asserted was made, and that in any event there was no reliance on such a representation, Tamberlin J examined in detail the evidence as to TIA's capacity, in March 1987, to supply fish, and as to UBA's information and belief about that capacity. He concluded that if such a representation had been made, there were reasonable grounds for making the representation. The arguments advanced on behalf of the respondents in support of the proposition that such a representation (which was not alleged to be fraudulent) would have been misleading, even if accepted, do not warrant a re-trial unless there is sufficient reason shown for rejecting the findings that such a representation was not made and was not relied upon. No sufficient reason has been shown.
The grounds set out in the notice of contention have not been made out.
The application for special leave to cross-appeal
In considering this application, the Court heard full argument on the merits of the proposed cross-appeal.
The argument concerns representation (xiii) which was alleged to be as follows:
"(xiii) That UBA would source in the first instance its requirements for fish from [TIA] except for Western Australia."
On 26 March 1987 UBA and TIA entered into Heads of Agreement, under which UBA agreed "to source in the first instance its requirements for fish from TIA". Mr Lees gave evidence that he did not regard the Heads of Agreement as contractually binding and took the view that a contractual obligation only came into existence when there was agreement as to price, quantity, quality, and time, of the kind contained in the W17299 contract. Tamberlin J considered that this view was reasonably open to him, although his Honour regarded the legal effect of the agreement as involving a binding obligation on UBA to first approach TIA to see whether TIA could supply fish on terms acceptable to UBA.
Tamberlin J's conclusions in relation to representation (xiii) were as follows:
"Moreover, for reasons given later, I do not consider that the obligation to provide an opportunity for negotiation played any part in the decision of the applicants in entering into the shareholders' agreement in March 1987. In my opinion the applicants relied on their contractual rights as set out under the Heads of Agreement coupled with the strong commercial attractions of the investment. That is why they obtained a copy as altered on 26 March 1987 to ensure that the Heads of Agreement gave them sufficient protection in its terms. They were concerned with the written obligations of UBA as opposed to an assurance that Lees would 'look at' the draft Heads of Agreement. They did not direct their attention to any representation in the Heads of Agreement that they would be approached first by UBA. There is no evidence that any of them considered the agreement did not give them the protection they sought. Nor do I consider that as events turned out it gave rise to any damages, because UBA took all the fish which [TIA] could supply, and there was no evidence that [TIA] supplied, or could have supplied, more fish than was contracted for in the 'W' or 'A' contracts in force from time to time.
Had the clause given [TIA] the right to require UBA to take additional fish at specific prices, quantity, quality and times, this would have been a most important matter, but in fact, it only gave a right to negotiate which in the face of disagreement by UBA would prove to be barren.
Accordingly, in relation to the alleged representation as to sourcing supply in the first instance I do not find that there was such a misrepresentation made in the Heads of Agreement or otherwise. In fact UBA took all the fish contracted for which [TIA] was able to supply. Supplies from other sources were over and above those which [TIA] could supply and in some instances UBA took more fish than it was required to under its contract. For example, in the case of mackerel in the first 3 months of contract W17299 it took substantially more than it was contractually bound to.
I find that there was no misrepresentation in respect of alleged representation (xiii)."
The Full Court dealt fairly briefly, and compendiously, with representations (xii), (xiii) and (xiv). They said the trial judge had accepted, to a limited extent, that the Heads of Agreement involved a representation that a continuing long-term relationship between UBA and TIA was contemplated, but that this involved no misrepresentation. They did not mention the findings of no reliance and no damage. They agreed with the conclusion that no misrepresentation was involved.
As Tamberlin J pointed out, Mr Lees was a fish buyer, not a lawyer. Even to a lawyer, however, the contractual status of the Heads of Agreement, considered against the background of the pattern of dealings between UBA and TIA, would have been a matter of some doubt. Viewed as containing, or involving, a representation by UBA as to where UBA would "source its fish", its status was equally unclear. However, there are concurrent findings by the trial judge and the Full Court that it involved no misrepresentation of the kind alleged in representation (xiii).
What is fatal to the respondents, however, is the finding of absence of reliance. No reason has been shown as to why that finding should have been disturbed by the Full Court. Indeed, the case which the witnesses for the respondents sought to make at trial was that they relied upon two significantly different representations, one to the effect that UBA and TIA would have an exclusive supply agreement, and the other that supply would be on a cost-plus basis.
Special leave to cross-appeal should be granted, but the cross-appeal should be dismissed.
Conclusion
The appeal should be allowed. The orders of the Full Court of the Federal Court should be set aside, and the orders made by Tamberlin J should be restored. The respondents should have special leave to cross-appeal, but the cross-appeal should be dismissed. The respondents must pay the costs of the appellant of the proceedings in the Full Court of the Federal Court and in this Court.
CALLINAN J. I agree with the reasons for judgment and the orders proposed by Gleeson CJ, Gaudron, Kirby and Hayne JJ in this matter.
I would only wish to make these further observations about the respondents' case. On the hearing of the appeal they made several attempts to give it a different complexion but, reduced to its essentials, it inescapably involved these unlikely propositions: that if A has a contract with B and knows that C may be minded to invest in or lend money to B, A comes under an obligation to inform C of its assessment of B's capacity to perform the contract; that A is under an obligation to inform C whether, in the event of non-performance of the contract by B, A will take advantage of that non-performance by looking to its own commercial interests; and that to fail to inform C accordingly of these matters is to engage in misleading or deceptive conduct within the meaning of ss 4(2) and 52 of the Trade Practices Act 1974 (Cth). To give effect to propositions of these kinds in this type of case would be to distort the intention and the meaning of that Act, and the obligations which s 52 imposes, and would involve the imposition upon arm's length third parties of an oppressive obligation to protect another party against his or her own imprudence or negligence in entering into a transaction. In this case such an obligation can be seen to be even more onerous and unreasonable in light of the facts that the respondents here were sophisticated, commercial people, they undertook their own investigation into the affairs of Trawl Industries of Australia Pty Ltd, and, as the trial judge correctly held, they allowed themselves to be dazzled by the lure of almost fantastic profits of which they themselves had made their own independent projections.
As to the approach to be taken by an appellate court when reviewing a primary judge's findings of fact see State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (1999) 73 ALJR 306; 160 ALR 588*.* ↩
Effem Foods Pty Ltd
Lake Cumbeline Pty Limited [1999] HCA 15; 161 ALR 599
(1999) 73 ALJR 306
Appeal allowed with costs. The Full Court orders of 24 April 1997 and 11 July 1997 were set aside, and the appeal to that Court was dismissed with costs. Special leave to cross-appeal was granted; the cross-appeal was dismissed with costs.
In this Court it was argued, in support of the decision of the Full Court, that the "short point being made by the Full Court" was that the trial judge's credit-based rejection of the three principal witnesses called on behalf of the respondents translated itself into hostility as to the general credibility of their case; and that that approach was inappropriate in relation to representations (ii), (iii) and (iv) which rested on W17299. If that is the substance of the criticism being made by the Full Court of the reasoning of Tamberlin J, then we do not agree with the criticism. It does not do justice to the reasoning of the trial judge. His Honour explained carefully why he rejected every element of the respondents' case on those representations, and that explanation involved a great deal more than his views on the credit of the witnesses, although those views had a part to play.