Jewelsnloo Pty Ltd v Sengos

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE [This headnote is not to be read as part of the judgment] On 27 January 2012 the second respondent, Mr Stan Kotsiopoulos, purchased a business from a company effectively owned by the first respondent, Mr Paul Sengos, for the price of $300,000. The business was named "Amazing Water" and undertook the sale of water coolers, filters and benchtop filters through the internet. Later in the year Mr Kotsiopoulos sold the business for the price of $200,000 to the appellant ("Jewelsnloo"), a company effectively owned by Mr Julian Facer. Exchange of contracts occurred on 18 October and settlement on 26 October 2012. In Supreme Court proceedings for orders declaring the 18 October 2012 contract void and for damages under the Australian Consumer Law (Sch 2, Competition and Consumer Act 2010 (Cth)), Jewelsnloo alleged, first, that Mr Kotsiopoulos and his wife, the third respondent, had engaged in misleading and deceptive conduct by representing to it that the business had an income from sales in the period February 2012 to June 2012 of $166,375.65. Secondly, it alleged that Mr Sengos and the Kotsiopouloses had engaged in misleading and deceptive conduct in relation to Mr Sengos' ability and intention to compete with the business. An allegation by Jewelsnloo that Mr Sengos had engaged in conduct constituting passing off was not in issue on appeal. After a 10 day hearing in the Equity Division, Robb J, by judgment of 12 February 2016, granted an injunction restraining passing off conduct but otherwise dismissed the proceedings ([2016] NSWSC 61). Jewelsnloo appealed to the Court of Appeal against his Honour's rejection of its misleading and deceptive conduct claims and of its consequential claims to relief under the Australian Consumer Law. Held, dismissing the appeal (per Macfarlan JA with Beazley ACJ and Payne JA concurring): (1) There was no error in the primary judge's conclusion that the appellant did not rely upon the representations made to it concerning the sales figures of the business for the period February 2012 to June 2012. The evidence demonstrated that the bargain for sale of the business was struck on the basis that the sale price would be discounted in return for the appellant's non-reliance on those figures. (2) There was no error in the primary judge's conclusion that neither the vendors nor Mr Sengos made any misrepresentations by silence concerning Mr Sengos' ability or intent to compete with the business when in the ownership of the appellant. Any expectation that the vendors or Mr Sengos would volunteer information on this topic was not reasonable in all the circumstances. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357. Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 and other authorities referred to.

Judgment

1. BEAZLEY ACJ: I have had the advantage of reading in draft the reasons of Macfarlan JA. I agree with his Honour's reasons and proposed orders.
2. MACFARLAN JA: On 27 January 2012 the second respondent, Mr Stan Kotsiopoulos, purchased a business from a company effectively owned by the first respondent, Mr Paul Sengos, for the price of $300,000. The business was named "Amazing Water" and undertook the sale of water coolers, filters and benchtop filters through the internet. Later in the year Mr Kotsiopoulos sold the business for the price of $200,000 to the appellant ("Jewelsnloo"), a company effectively owned by Mr Julian Facer. Exchange of contracts occurred on 18 October and settlement on 26 October 2012.
3. In Supreme Court proceedings for orders declaring the 18 October 2012 contract void and for damages under the Australian Consumer Law (Sch 2, Competition and Consumer Act 2010 (Cth)), Jewelsnloo alleged, first, that Mr Kotsiopoulos and his wife, the third respondent, had engaged in misleading and deceptive conduct by representing to it that the business had an income from sales in the period February 2012 to June 2012 of $166,375.65. Secondly, it alleged that Mr Sengos and the Kotsiopouloses had engaged in misleading and deceptive conduct in relation to Mr Sengos' ability and intention to compete with the business. An allegation by Jewelsnloo that Mr Sengos had engaged in conduct constituting passing off was not in issue on appeal.
4. After a 10 day hearing in the Equity Division, Robb J, by judgment of 12 February 2016, granted an injunction restraining passing off conduct but otherwise dismissed the proceedings ([2016] NSWSC 61). Jewelsnloo appealed to this Court against his Honour's rejection of its misleading and deceptive conduct claims and of its consequential claims to relief under the Australian Consumer Law. For the reasons given below, I consider that the appeal should be dismissed.

FACTUAL CIRCUMSTANCES

1. On 1 February 2012, the date of settlement of Mr Kotsiopoulos' purchase, Mr Sengos undertook to him by deed not to compete with the purchased business for a period of approximately 2 years (the "Deed of Restraint"). However in March 2012 Mr Kotsiopoulos discovered that Mr Sengos had in fact been selling water coolers in competition with the business. As a result Mr Kotsiopoulos approached Mr Sengos and a new arrangement was negotiated, recorded in a written agreement of 15 March 2012. Under this agreement Mr Sengos agreed to introduce new customers to the business and to assist in it, in return for which he was to receive "(a) 10% of the sale price of any goods/services sold, (b) a further 40% of the net profit of the sale", with the profit share to increase to 50% from 1 January 2013. In permitting this to occur the agreement qualified the prohibition on competition contained in the Deed of Restraint.
2. In July 2012 Mr Kotsiopoulos engaged Mr Phil Lyons as a business broker to assist him in selling the business. Mr Lyons had acted for Mr Sengos when Mr Kotsiopoulos had purchased the business.
3. On 21 September 2012 Mr Lyons supplied Mr Facer, acting on behalf of Jewelsnloo as a prospective purchaser, with a 21 page Confidential Information Memorandum dated 10 July 2012 relating to the sale of the business. The Memorandum stated that the asking price was $350,000 and contained a profit and loss account for the business for the years ended 30 June 2009 to 2012. The sales for the year ended 30 June 2012 were stated to have been $349,562. A profit and loss statement for the period 1 February 2012 to 30 June 2012 appeared on a further page. This showed sales for that period to have been $166,375.65. The executive summary stated that the sale price of $350,000 represented "a multiple of the Owner's Return of 1.76 times based upon 2012 profits". On page 17, the statement appeared: "Sales in 2012 reached $349,562 indicating a seemless transition of ownership".
4. A confidentiality agreement that Mr Facer signed prior to being provided with the Confidential Information Memorandum stated that information provided to the prospective purchaser was to be "checked independently for accuracy and truth".
5. In the following days Mr Facer sent emails asking Mr Lyons detailed questions concerning financial and other aspects of the business. Mr Lyons supplied him with further information, including copies of bank statements.
6. Mr Facer requested copies of the previous 12 months bank statements "regardless of how inaccurate they [were]". The primary judge found that the statements supplied in response indicated that only $54,152.71 was banked in the period between early February and 26 July 2012.
7. Mr Lyons deposed that on about 25 or 26 September 2012 the following occurred: "11. I … called Mr Kotsiopoulos and had a conversation with him in words to the following effect: Lyons: The Bank Statements seem to be less than the amount of the monthly trading figures. Have you got any other Bank Statements? Kotsiopoulos: As I said my accounting skills are hopeless. I can't provide you with anything else. Lyons: We can't sell the Business without verifying the numbers. I will have to tell the interested buyers that the Business is off the market. Kotsiopoulos: OK. 12. On or around 25 September 2012 I called Mr Facer and had a conversation with him in words to the following effect: Lyons: I've just spoken with the vendor and they can't provide any other documents verifying the income. Unfortunately we have to withdraw the Business from sale. Facer: I would be prepared to still go ahead but at a lesser price if the figures can't be verified. Lyons: Wait a minute, I don't want you to rely upon those figures. I will need you to sign off on a waiver confirming that you are not relying on those figures if you want to proceed. Facer: OK. Send it through. Lyons: Come back to me on the price that you are prepared to pay." Mr Facer gave different evidence but in a presently unchallenged finding the primary judge preferred that given by Mr Lyons.
8. Mr Facer deposed that the following then occurred: "On about 25 September 2012 I had a telephone conversation with Phil [Lyons]. During the course of the telephone conversation, I said to Phil words to the effect: 'Phil, I'm not prepared to pay $350,000.00 for this business I might be prepared to pay $220,000.00 including stock. The banking records are not conclusive' Phil said: 'I don't think he'll [referring to Mr Kotsiopoulos] go for that but I'll ask him. In the meantime it might be good to talk to Paul Sengos ('Paul') the previous owner. He is a better person to talk to about the business. He is the one who knows all the ins and outs of the business whereas Stan (Stan Kotsiopoulos) does not know much'. I said: 'Ok I will talk to Paul about the business and also ask him to verify that his figures are right that you sent to me'. He said: 'No problems I'll text you Paul's mobile phone number. I'll get back to you'."
9. Mr Facer continued: "I then telephoned Paul the previous owner of Amazing Water and had a telephone conversation with Paul. During the course of the telephone conversation, I said to Paul words to the effect: 'Paul, I am looking at buying the Amazing Water Business from Stan. Phil Lyons his Broker sent to me the trading figures for when you had the company. Are those figures right'. Paul said: 'My figures are right Julian. I don't know what Stan or Phil sent to you but I banked all of the money that I made in that business because I did not want to have any troubles with the tax man'. During the course of the conversation, I said to Paul words to the effect: 'Why did you sell the business to Stan'. Paul said: 'Mate, I'm too busy. I've got other businesses going on and I just don't have enough time to dedicate to that business that's why I sold it to Stan. I started the business for my children but they weren't interested in giving it a go'. I said: 'Paul I'm worried that if I buy the business from Stan, you might come back into it once he sells it to me'. Paul said: 'I'm far too busy. My family and I have got other businesses to worry about at the moment. I sold it to Stan because I simply couldn't work in it but I help him out every now and then when he had some problems. I would love to see that business grow because I think it's a really good business for someone who is prepared to put in the effort which Stan unfortunately hasn't, you could say it was my baby.'"
10. Following discussions with Mr Sengos concerning the price that Mr Kotsiopoulos might accept and Mr Facer was prepared to offer, Mr Facer received the following letter dated 26 September from Mr Lyons: "Congratulations on your offer of $200,000 plus stock being accepted by the vendor of Amazing Water. As per our telephone conversations I confirm that the vendor cannot offer verification of the sales data he has provided in the accounts included in the Information Memorandum provided to you on Amazing Water. In recognition of this fact we have negotiated a discounted sale / purchase price to reflect that situation. Would you please confirm that this is your understanding by signing and returning it to me."
11. Mr Facer signed and returned the letter, noting that it was subject to execution of a contract suitable to both parties.
12. At about this time Mr Lyons supplied to Mr Facer a document entitled Frequently Asked Questions. It included the following: "Do you have a non-compete agreement with the original vendor? If we proceed, we would require the vendor to sign a non-compete agreement." The response was: "Non-compete with the original vendor is in place but that is with the vendor. Yes vendor would sign a non-compete."
13. Mr Facer deposed that the following conversation occurred at a meeting he had with Mr Kotsiopoulos and Mr Lyons on 1 October 2012: "I said: 'Paul seems to be still involved in this business yet he sold the business to you seven months ago'. Stan said: 'Paul helps me with the imports and daily deals promotions because he used to do all of that work and we share the profits'. I said: 'But how does that help me if I buy the business from you what protection have I got that Paul won't compete against me in the business'. Stan said: 'Because I've got that two year restraint thing with him and he won't do the wrong thing'. I said: 'Are you meaning a two-year non-compete agreement?' He said: 'Yeah'. I said: 'But how does that help me?' Stan said: 'Well you get that when you buy the business. Why don't you ask him maybe you could get it in writing by emailing him later as well, I know he's too busy doing other things and he hasn't got time to bring in water coolers. Just send him that email, I am sure he will email back that he's got no interest in this type of business anymore anyway'."
14. Mr Kotsiopoulos accepted that this conversation occurred up to and including the question "But how does that help me?". He said that the balance of the conversation was: "I said: The Deed of Restraint is between Paul and myself. As far as I am aware, the restraint will no longer apply to Paul if you buy out the business. You should call Paul directly and find out what he is going to do over the next year or so. Phil Lyons said: I'm no lawyer, but I don't think the restraint passes onto you. Julian said: Ok, I will." The primary judge accepted Mr Kotsiopoulos' version of the conversation.
15. This led to Mr Facer sending the following email to Mr Sengos on 1 October 2012: "Stan mentioned that you guys had a 2 year non-compete agreement. I obviously do not have an agreement with you. From our conversation I know you or your family will not be competing in the water filter/cooler world, in fact you said you would like to see me grow it. I would like to know however if you have any intention of getting back into the water filter/cooler business once Stan sells it to me. Much appreciated and kind regards."
16. Mr Sengos replied on the same day as follows: "I have no intentions at getting back into the water cooler business. The reason I sold it was that I have too many other things on the go and need to concentrate on these."
17. As the primary judge recorded: "Mr Sengos' evidence was that, at the time he wrote this email, he in fact had no intention of going back into the water cooler business, in the sense of trading in water coolers and filters on his own account, although he hoped that he could continue the subsidiary arrangement that he had enjoyed with Mr Kotsiopoulos."
18. Mr Sengos deposed that he had the following conversation with Mr Kotsiopoulos on 9 October 2012: "I said: 'Do you know what Julian's plans are for me? Has he said anything to you about what is to happen post Julian's purchase?' He said: 'I think things are going to stay pretty much the same as before'. I said: 'Well, that's what I want but I've got some of your stock which I've bought, and I really need you to release me from my restraint so that I can sell it or otherwise do what I want if Julian doesn't keep me on'. He said: 'OK. I'll release you and sign whatever you want'."
19. On 9 October 2012 Mr Sengos sent an email containing the following to Mr Kotsiopoulos: "As discussed once you sell the business of Amazing Water you undertake that you, your wife and any assignees will NOT take any action against me under the restraint of trade provision that I entered into when I sold you the business, do you agree? Also as discussed I may also be purchasing from you a quantity of Floor coolers, Bench filters and Replacement filters shortly to resell to catch of the day in Melbourne and possibly others. Please respond with 'I Agree' if you are in agreement to not take any action and agree the restraint of trade is removed."
20. Mr Kotsiopoulos responded with the agreement of himself and his wife.
21. A form of Deed of Release releasing Mr Sengos from any restraint on him competing with the business was prepared and dated 12 October 2012 (the "Deed of Release"). The primary judge found that it was not prepared and signed until December 2012 but Jewelsnloo contends that Mr Sengos signed it in mid-October.
22. Mr Kotsiopoulos gave evidence that at a meeting between himself, Mr Facer and Mr Sengos on 18 October 2012, after discussion occurred concerning activities of Mr Sengos in connection with the business, the following conversation occurred: "Julian said: … Why did you sell the business and you are still involved? Paul said: I am a commission based salesman. I bring sales to you for a share of the price. I said: Paul would be good for you to get on board. He is able to generate sales for you. Julian said: I don't want anything to change until I get my head around this business."
23. Mr Sengos' evidence was that Mr Facer asked him "why are you selling the business?", to which Mr Sengos replied "I'm out of it. I just help Stan from time to time".
24. After exchange of the contract to purchase on 18 October 2012 (at a price of $200,000 inclusive of stock), Jewelsnloo's solicitors delivered apparently standard form requisitions asking inter alia: "When you acquired the business, did you obtain the benefit of any restraint of trade covenants? If so, full details and a copy of such covenants must be provided [and] any rights in respect thereof should be assigned to the purchaser on completion."
25. The response was "Yes", with a copy of the Deed of Restraint of 1 February 2012 attached. The primary judge noted in this connection: "Jewelsnloo did not put any argument that the terms of the contract authorised it to make any requisition concerning the existence of any non-competition agreement between the vendors and Mr Sengos, or that Jewelsnloo was entitled under the contract to terminate it if such a requisition was responded to in a false or misleading manner."
26. The primary judge also noted that "Jewelsnloo has not put any argument to justify the claim in the requisition that it was entitled to require the vendors to provide an assignment in its favour of the benefit of the restraint of trade deed on completion."
27. On 30 October 2012 Mr Sengos sent Mr Facer an email in which he asked "Do you want to do a deal where I get paid 50% of the profit on any business I introduce to the Amazing Water Busn [sic] - profit split after cost of goods and freight". Mr Sengos deposed that when Mr Facer rejected this proposal he changed his mind about re-entering the water cooler and filtering business.

THE STATEMENT OF CLAIM

1. The version of the Statement of Claim current at the commencement of the hearing was the Second Further Amended Statement of Claim. A minor amendment to that was permitted (Transcript p 7) whilst a ruling on another, presently irrelevant amendment was deferred and apparently not ever the subject of a ruling (Transcript p 7, Judgment [53]).
2. As noted earlier, Jewelsnloo alleged first that Mr and Mrs Kotsiopoulos had engaged in misleading and deceptive conduct by representing that the business had an income from sales in the period February 2012 to June 2012 in the sum of $166,375.65 (the "turnover representation").
3. Jewelsnloo then alleged that, by conversations on 25 September 2012 between Mr Kotisopoulos and Mr Facer and between Mr Lyons and Mr Facer, and by email of 1 October 2012, Mr Sengos represented to the effect that he had no intention of "getting back into the water cooler and filtration business" and would not compete with the business (described in the Statement of Claim as the "initial representations").
4. By paragraph 8 of the Statement of Claim, Jewelsnloo further alleged that Mr and Mrs Kotsiopoulos represented to it to the effect that Jewelsnloo had the benefit of a Deed of Restraint binding on Mr Sengos that would be assigned to Jewelsnloo on settlement (the "further representations"). These representations were said to have been made in writing by way of the answer to the requisition referred to in [28] above and the provision to Mr Facer of a copy of the Deed of Restraint dated 15 January 2012.
5. The various representations that Jewelsnloo alleged were said to be misleading and deceptive because the trading figures were not true and correct, Mr Sengos in fact intended to compete with the business, and the Deed of Restraint between Mr Sengos and Mr Kotsiopoulos had been released.
6. Jewelsnloo also alleged that Mr Sengos and Mr and Mrs Kotsiopooulos engaged in misleading and deceptive conduct by making erroneous representations by silence. It alleged that: "… the plaintiff had a reasonable expectation of being apprised by the first defendant and or second and third defendant of the: a. Deed of Release, and/or b. All matters in connection with the Deed of Release, whether arising before or after the date of execution of the Deed of Release; c. first defendant's intentions of getting back into the water cooler and water filtration business."
7. It asserted that this reasonable expectation extended to being informed of the agreement, or otherwise, made on about 9 October 2012 waiving or otherwise releasing Mr Sengos from all restraints on his trade (the "waiver").
8. The defendants' silence in respect of the "Deed of Release and Waiver" was alleged to constitute misleading and deceptive conduct.
9. Jewelsnloo alleged that it suffered loss and damage as a result of the alleged misleading and deceptive conduct. This was particularised as the purchase price of the business of $210,000 (although the contract stated the price to be $200,000) and "interest payments, cash contributions to business and legal fees and disbursements" to be quantified. There was also a passing off claim which does not arise for consideration on appeal.

The turnover representation

1. The primary judge found that the turnover representation was misleading and deceptive because the actual turnover for the relevant period was about $58,730.03, compared to the represented figure of $166,375.65.

Reliance

1. His Honour found however that Jewelsnloo did not rely on the truth of the turnover representation in deciding to enter into the contract for the purchase of the business. His Honour inferred "that Jewelsnloo regarded the business as being viable and worthwhile over the period to February 2012 in which the business was managed by Mr Sengos" and that the "turnover representation was not crucial to the inherent viability of the business, as that had been established by the trading results for the first four years of its existence. He said that "variations from the historical trends in turnover would more likely go to Mr and Mrs Kotsiopoulos' effectiveness as managers of the business, rather than its inherent viability and any reductions in turnover experienced by Mr and Mrs Kotsiopoulos in their short tenure could probably be turned around by competent management".
2. His Honour took into account that by the Confidentiality Agreement Mr Facer had agreed to check representations independently for accuracy and truth and that by the contract of sale Jewelsnloo had warranted that it had made its own enquiries and that it did not rely upon any representation. He noted that Mr Facer had not given any evidence about these provisions despite them being specifically raised by the defences of Mr and Mrs Kotsiopoulos. Whilst recognising that disclaimers are frequently found to be ineffective in this context, the primary judge found that it would "be unfair for the court not to give effect" to them in the circumstances of the present case.
3. His Honour found that in light of the magnitude of the disparity between the actual and represented turnover "the court could not rationally accept that Mr Facer continued to believe that the turnover representation was true without some explanation from Mr Facer that justified that acceptance".
4. Importantly, his Honour found that "Mr Facer on behalf of Jewelsnloo struck the bargain that he did with Mr and Mrs Kotsiopoulos on the basis that he did not accept that the turnover representation was true, and he understood that Jewelsnloo would be taking the risk" as to its truth. His Honour concluded that Mr Lyons' signature of the letter of 26 September 2012 amounted to an acknowledgement that "a discounted purchase price had been negotiated in recognition of the fact that the vendors could not verify the sales data that had been provided" (Judgment [153]). His Honour regarded Mr Facer's inability in cross-examination to respond persuasively to this proposition as of assistance in concluding that it had been established.
5. Additionally, his Honour drew support from the absence of any complaint about the turnover representation before Jewelsnloo filed its Amended Statement of Claim on 24 July 2013, particularly as the sales for the period between settlement and 30 June 2013 were only $37,064.88.

Relief

1. The primary judge found that even if Jewelsnloo had proved that misleading and deceptive conduct had occurred it would not have been entitled to either of the types of relief that it claimed, that is, damages or an order avoiding the purchase agreement.
2. His Honour found that Jewelsnloo had effectively abandoned its claim for damages as it "did not tender evidence of the value of the business and the stock at the date of the completion of the contract of sale. It therefore could not demonstrate on the evidence that the business and stock was worth less than the amount paid". Nor did Jewelsnloo give evidence that it would not have entered into the contract of sale at all if it had known that the turnover representation was not true. Further, loss of the whole value of the business (which was the only claim advanced by Jewelsnloo) could not be inferred simply by reason of the shortfall in the business' turnover in the five months prior to the turnover representation.
3. Likewise, his Honour held that a number of factors indicated that no order for avoidance of the sale would have been appropriate, not least of them the fact that Jewelsnloo continued to operate the business long after it discovered that the turnover representation was not true and did not seek an order avoiding the sale until 10 December 2013.

Mr Sengos' intent

1. Mr Sengos told Mr Facer on 1 October 2012 that he did not intend to compete with the subject business (see [20]) above) but the primary judge held that that was in fact Mr Sengos' state of mind at the time and that he therefore did not engage in misleading or deceptive conduct.

The Deed of Restraint representations

1. The primary judge held that there was no misleading or deceptive conduct in this connection because there was no misrepresentation that Jewelsnloo would have the benefit of the Deed of Restraint against Mr Sengos or that it would be assigned to Jewelsnloo on settlement. Whilst Jewelsnloo's solicitors sought that assignment (see [28] above), the vendor's solicitors did not respond to the request and, so his Honour held, did not therefore make any representation that an assignment would occur. Moreover the alleged representations were only made after exchange of contracts and Jewelsnloo did not allege that it was, as a matter of contract or otherwise, entitled to terminate the contract if it was dissatisfied with the responses to the purchaser's requisitions.

Representations by silence

1. The primary judge rejected Jewelsnloo's contentions that Mr Sengos was obliged to inform it of any change in his intention not to compete with the subject business or inform it of the 9 October 2012 arrangement concerning his release from the Deed of Restraint. There could not have been obligation on him to inform Jewelsnloo of the Deed of Release itself as that was not executed until December 2012.
2. For the following reasons, his Honour rejected the claim that Mr and Mrs Kotsiopoulos should have informed Mr Facer of the 9 October 2012 arrangement: "265 The first observation to be made about this possible representation by silence is that it could not have been material to Jewelsnloo to be told that the deed of restraint remained valid and effective, because the deed did not benefit Jewelsnloo; it would not do so merely upon the purchase of the business; and Jewelsnloo through its solicitors took no positive steps to try to get the benefit of the deed of restraint, save for the demand in requisition 16(b). 266 Furthermore, the significance of the effect of the response to the requisition must be assessed in the light of my findings that both Mr Kotsiopoulos and Mr Lyons said to Mr Facer that they did not think that a purchaser would get the benefit of the deed, and suggested to Mr Facer, and he agreed, that he should seek his own legal advice. In those circumstances, it was reasonable for Mr and Ms Kotsiopoulos to understand that Mr Facer would pursue the issue of the restraint of Mr Sengos directly with Mr Sengos, and for them not to understand that Mr Facer had a continuing expectation that if, as between themselves and Mr Sengos, they took any step to release the deed of restraint, they would advise Mr Facer of that circumstance."

Whether damages would have been awarded

1. The primary judge observed that Jewelsnloo had not led evidence or made any submissions capable of quantifying any loss that it suffered. Moreover, as noted earlier, his Honour observed that most of the alleged representations were made after the contract was entered into in circumstances in which Jewelsnloo did not contend that it had any relevant right to withdraw from the contract.

THE NOTICE OF APPEAL

1. Jewelsnloo appealed to this Court against the primary judge's finding of no reliance concerning the turnover representation (Grounds 2 to 6) and the findings concerning the alleged express and by silence competition representations (Grounds 7 to 12). It also contended in the Notice of Appeal that the primary judge failed to address the "further representations" (referred to in [35] above as the Deed of Restraint representations) pleaded in the Statement of Claim (Ground 13) and alleged that the primary judge was in error in not granting relief under ss 236 and 243(a) of the Australian Consumer Law (damages and avoidance of contracts respectively) (Ground 17).

The turnover representation

1. There was no challenge before this Court to the primary judge's finding that Mr Kotsiopoulos made a false representation about the sales figures of the business for the period February to 30 June 2012 and thereby engaged in misleading and deceptive conduct.
2. Jewelsnloo however challenged his Honour's finding that it did not rely on the representation. I turn now to that challenge.
3. At the outset I point out that the question that s 236 of the Australian Consumer Law requires to be addressed in this context is whether the claimant has suffered loss or damage "because of" the conduct of the defendant. Whilst proof that the claimant took action in reliance upon the conduct will often suffice to prove the necessary causal connection, "reliance is not a substitute … for the essential question of causation" (Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [102] and [143]). Campbell v Backoffice Investments Pty Ltd (2008) 66 ACSR 359; [2008] NSWCA 95 at [44] instances a circumstance in which the concepts may differ. In the present case, it is sufficient to examine whether Jewelsnloo proved that it acted in reliance upon the alleged misleading and deceptive conduct in entering into the purchase contract.
4. In my view the critical point that the primary judge made in his reasoning on the issue of reliance was that the bargain between Mr Kotsiopoulos and Jewelsnloo was struck upon the basis that Jewelsnloo would pay a severely discounted price to reflect the fact that it was not able to rely upon the accuracy of the sales figures for the period from February to 30 June 2012 ([45] above).
5. This finding of his Honour was well-supported by the evidence to which I have referred above. In particular, the evidence that:

• The Confidentiality Agreement signed by Mr Facer acknowledged that information supplied by the vendor was to be "checked independently for accuracy and truth" ([8] above);
• Mr Facer became aware that the bank statements supplied did not support the sales figures for the relevant period ([10] and [11] above);
• On 25 September 2012, when it was apparent that that income could not be verified, Mr Facer told Mr Lyons that he would proceed with the purchase but at a lesser price to recognise that fact and would sign a waiver confirming that he was not relying upon the relevant figures ([11] and [12] above);
• On about the same date Mr Facer spoke to Mr Lyons again. He referred to his preparedness to pay only a discounted price and to the inadequacy of the banking records ([12] above);
• At about the same time Mr Sengos confirmed to Mr Facer that he could only speak as to the correctness of figures relating to his period of operation of the business (that is, before its sale to Mr Kotsiopoulos) ([13] above).
• Mr Lyons' letter of 26 September, subsequently signed by Mr Facer to record his agreement, acknowledged that the purchase price was discounted to reflect the absence of verification of the sales figures ([14] and [15] above).

1. On the appeal, leading counsel for Jewelsnloo did not address the issue of reliance orally. His written submissions criticised other aspects of the primary judge's reasoning which I have summarised in [42] and [44] above. I reject these criticisms as his Honour's findings are supportable as demonstrations of why the conclusion, to which the evidence strongly pointed, that Mr Facer did not rely upon the relevant representation does not defy common sense. They do not need to be treated as definite conclusions about Mr Facer's state of mind. As one would ordinarily expect sales figures for an immediate past period to be of importance to an intending purchaser of a business, it was important for his Honour to identify possible reasons why that might not be so in the present case in relation to the period from February to 30 June 2012. It was not necessary to conclude that Mr Facer in fact had one or more of the identified thought processes. It was sufficient that there were possible explanations for Mr Facer being prepared to proceed without reliance upon the sales figures for that period, in return for a heavily discounted purchase price. These being possible explanations, for Mr Facer's conduct, there was no reason not to give effect to the compelling evidence of the basis upon which the bargain was struck and its corollary that Mr Facer did not rely upon the relevant sales figures.
2. Contrary to Jewelsnloo's implicit submission, the primary judge did not approach the case upon the basis that Jewelsnloo could not succeed on reliance in the absence of evidence from Mr Facer that, but for the various alleged representations, Jewelsnloo would not have entered into the purchase contract. Rather, his Honour's approach appeared to be, correctly, to regard the absence of such evidence as requiring Jewelsnloo to identify other aspects of the evidence which justified an inference of reliance. This it was unable to do.
3. Contrary to Jewelsnloo's submissions, the primary judgment did not treat the terms of the Confidentiality Agreement and a "No Reliance" provision in Jewelsnloo's contract of purchase as providing an absolute bar to it succeeding on its misleading and deceptive conduct claims. Rather, his Honour treated these, and many other matters, as forming part of the overall circumstances that needed to be considered in assessing Jewelsnloo's claim. This approach is consistent with authority (see for example Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 at [150]-[153] per McHugh J).
4. Accordingly Jewelsnloo did not establish that the primary judge erred in finding that it did not rely upon the turnover representation.
5. In any event, Jewelsnloo did not establish that his Honour's findings on the question of relief ([47]-[49] above) were erroneous. The reasons that his Honour gave were compelling, with no arguable response to them being put by Jewelsnloo on appeal.
6. In answer to the primary judge's findings concerning the inappropriateness of an order avoiding the contract, Jewelsnloo referred to claims that it had made in late December 2012 for "restitution" but these did not amount to a claim, or at least any clear claim, that the contract was or should be avoided with the business being restored by Jewelsnloo to Mr Kotsiopoulos. On the contrary, Jewelsnloo affirmed the contract by its operation of the business for a number of years. There was no error in the primary judge concluding that an order for avoidance would have been inappropriate when no case that an intact business was available to be restored to Mr Kotsiopoulos was sought to be established.

Mr Sengos' intent

1. On the appeal, Jewelsnloo did not challenge the primary judge's finding that Mr Sengos' statement of his lack of intent to compete with the business made in his email of 1 October 2012 ([20] above), reflected his then state of mind (written submissions, [52]).
2. Jewelsnloo however submitted that the primary judge failed to deal with a pleaded variant on this representation, namely, that Mr Sengos "would not" sell water coolers and/or compete with the business. However this alleged representation is promissory in form and was not made either by the email of 1 October 2012 or in the conversation with Mr Sengos of 25 September 2012 ([13] above), which Jewelsnloo particularised to support its contention.

The Deed of Restraint representations

1. Jewelsnloo did not provide any arguable basis for departing from the primary judge's conclusions in relation to these representations (see [51] above).
2. In answering the purchaser's requisitions ([28] and [29] above), Mr Kotsiopoulos' solicitors referred to, and provided a copy of, the Deed of Restraint of 1 February 2012. Referring to this Deed without also referring to the arrangement to release Mr Sengos from the restraint was misleading (although presumably the solicitors were not aware of that arrangement). However that misstatement of the position was of no consequence because Jewelsnloo had at that stage no relevant right to withdraw from the contract which had been entered into (see [21] above) and Jewelsnloo's solicitors recognised by the form of their requisition ([28] above) that Jewelsnloo would have to secure an assignment to obtain the benefit of the Deed of Restraint. It never sought to do that.
3. The absence of reference by Mr Kotsiopoulos' solicitors to the 15 March 2012 agreement (see [5] above) was similarly of no consequence, at least because Mr Facer had already been informed that there was some such arrangement between Mr Sengos and Mr Kotsiopoulos as that for which the agreement provided (see [17] above).
4. Further, contrary to Jewelsnloo's Ground 13 of appeal, the primary judge did not fail to deal with what the statement of claim described as "the further representations" ([35] above) and what I have referred to in the above heading as "the Deed of Restraint Representations". I have summarised his Honour's findings on this topic at [51] above.

Representations by silence

1. In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31, the High Court approved the confirmation in the Full Federal Court decision in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 that silence is one of the circumstances that may render conduct misleading and deceptive in contravention of a statutory prohibition such as s 18 of the Australian Consumer Law. Further in Miller at [18], French CJ and Kiefel J referred with approval to the following observation that Gummow J quoted in Demagogue at 41: "Unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist."
2. Their Honours emphasised that "s 52 [of the Trade Practices Act] does not strike at the traditional secretiveness and obliquity of the bargaining process" (at [21]) and continued at [22]: " … as a general proposition s 51 does not require a party to commercial negotiations to volunteer information which will be of assistance to the decision-making of the other party. A fortiori it does not impose on a party an obligation to volunteer information in order to avoid the consequences of the careless disregard, for its own interests, of another party of equal bargaining power and competence."
3. The same approach is reflected in the following observations of Gleeson CJ in Lam v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458 at 475: "Where parties are dealing at arms' length in a commercial situation in which they have conflicting interests it will often be the case that one party will be aware of information which, if known to the other, would or might cause the other party to take a different negotiating stance. This does not in itself impose any obligation on the first party to bring the information to the attention of the other party, and failure to do so would not, without more, ordinarily be regarded as dishonesty or even sharp practice."
4. Matters of fact that are of particular relevance to Jewelsnloo's case under this head are as follows.
5. First, on about 25 September 2012 Mr Facer made it clear to Mr Sengos that he was concerned about possible competition from Mr Sengos ([13] above).
6. Secondly, the "Frequently Asked Questions" ("FAQ") made it clear to Mr Facer that to prevent competition from Mr Sengos he would have to obtain a non-compete agreement from him ([16] above).
7. Thirdly, on 1 October 2012 Mr Kotsiopoulos told Mr Facer that Mr Sengos was still involved in the business and sharing its profits, and, that to secure itself against competition by Mr Sengos, Jewelsnloo would have to enter into a non-compete agreement with him ([17] and [18] above).
8. Fourthly, on 1 October 2012, in response from an enquiry from Mr Facer, Mr Sengos confirmed that he had "no intentions at getting back into the water cooler business" (at [19] and [20] above).
9. Fifthly, on 9 October 2012, at Mr Sengos' request, Mr Kotsiopoulos agreed to release him from the Deed of Restraint ([22] and [23] above). This was confirmed by letter and subsequently recorded in a Deed of Release ([23]-[25] above).
10. Sixthly, on 18 October 2012, the day of exchange of contracts, there was a meeting between Mr Kotsiopoulos, Mr Facer and Mr Sengos at which there was reference to at least some continuing involvement of Mr Sengos in the business ([26] and [27] above).
11. In my view these circumstances are insufficient to establish misleading and deceptive conduct on the part of Mr Sengos or Mr and Mrs Kotsiopoulos. This is so whether one focuses on Jewelsnloo's ignorance of the arrangement between Mr Sengos and Mr Kotsiopoulos for the former to be released from the Deed of Restraint, upon the Deed of Release (whether in draft or executed form) or upon Mr Sengos' intention formed after 1 October 2012 to compete with the business.
12. Certainly Jewelsnloo had a commercial interest in being apprised of these matters and Mr Facer had made clear Jewelsnloo's interest in the question of whether Mr Sengos could and would compete with the business. However, this was insufficient to require information about them to be volunteered.
13. As the authorities to which I have referred above confirm, the normal competitive basis upon which arm's length commercial parties deal with each other is not abrogated by statutory prohibitions on misleading and deceptive conduct. Such parties are not obliged to volunteer information to the others with whom they are dealing simply because they realise, or should realise, that it is of importance to the commercial interests of the others. There has to be something more that renders their silence misleading or deceptive.
14. The high point of Jewelsnloo's case is Mr Sengos' email statement of 1 October 2012 that he had no intention to compete with the business. The question that arises is whether Mr Sengos had any obligation to advise if his intention changed, as it did. I do not consider that he did. What he said was not framed as a promise as to the future and needs to be considered in the context of dealings between the parties which apprised Mr Facer that, to restrain Mr Sengos from competing, Jewelsnloo would have to enter into a restraint agreement with him. I refer in this regard to the "Frequently Asked Questions" ([16] above) and Mr Facer's meeting with Mr Kotsiopoulos and Mr Lyons on 1 October 2012 ([17] and [18] above). I do not consider that any expectation that Mr Facer may have had that Mr Sengos would advise him of any change of intention was in this circumstance a reasonable one, such that non-fulfilment of it rendered Mr Sengos' conduct misleading or deceptive.
15. Put simply, there was nothing that rendered it dishonest "or even sharp practice" (see Lam referred to in [76] above) for Mr Sengos and Mr and Mrs Kotsiopoulos not to inform Mr Facer of any of the matters referred to in [84] above.
16. Contrary to Jewelsnloo's submissions on appeal, Mr Kotsiopoulos' conduct in releasing Mr Sengos from the trade restraint and not informing Mr Facer that he had done so was not unconscionable conduct, in contravention of s 20 of the Australian Consumer Law. For the reasons just given, Mr Sengos did not have any obligation to inform Jewelsnloo of any such release and Jewelsnloo did not identify any reason why it should not have been effected. The same reasoning applies to Mr and Mrs Kotsiopoulos.
17. Accordingly, I reject Jewelsnloo's contention that the primary judge erred in finding that there were no relevant representations by silence.

Relief

1. The observations that I have made in [65] to [67] above concerning relief in the context of the turnover representation apply equally in relation to the competition representations.

Ground 16 of Appeal - Mr Sengos' role

1. Without further elaboration, the primary judge described Mr Sengos' participation in the relevant events as "substantially in the nature of a helpful bystander". This characterisation does not appear to have had any significant bearing on his Honour's reasoning as his Honour elsewhere dealt fully with the detail of the evidence relating to Mr Sengos' role. In any event, the characterisation was open to his Honour as the evidence demonstrated that Mr Sengos sought to facilitate Mr Kotsiopulos' sale to Jewelsnloo (see for example the pre-contractual discussions with Mr Sengos referred to at [13] and [14] above).

CONCLUSION AND ORDER

1. For the reasons given above, Jewelsnloo has failed to make good its challenges to the primary judgment. As a result, its appeal should be dismissed with costs.
2. PAYNE JA: I agree with Macfarlan JA.

Amendments 21 November 2016 - [75] Typographical error in quotation corrected. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 November 2016