The representations pleaded in relation to the sales capacity of the proposed outlet were in paragraphs 6(e)(i), (ii) and (g) of the applicants' pleadings:
(e) (i) a well managed operation in Northland Shopping Centre Food Court would achieve sales of between $8,000.00 and $12,000.00 per week;
I am not satisfied that a representation in these terms or to that effect was made by the respondents. No representation was made by Nelson in the letter or otherwise that sales of $8,000.00 to $12,000.00 per week would be achieved:
(ii) the Respondents believed on reasonable and proper grounds that a well managed operation in Northland Shopping Centre Food Court could achieve sales of between $8,000.00 and $12,000.00 per week after adjusting for competition and demographics.
The respondents represented that the grounds for their belief were those which were set out in the letter. In my view no general representation in the terms or to the effect of that pleaded was made. As I have stated, it may be that Nelson impliedly represented that he believed that the grounds were reasonable and proper. It is not necessary to explore this aspect further as I have no doubt that Nelson held that belief.
(g) that the Applicants would in the first year of operation of a Muffin Break franchise store at Northland Shopping Centre.
(i) achieve sales of at least $8,000.00 per week;
(ii) earn an income of at least $30,000.00 per annum;
(iii)achieve sales sufficient to provide adequate monies to pay the costs of operation;
(iv) achieve sales sufficient to service a bank loan of approximately $130,000.00.
I am satisfied that no representation was made in the letter or at any earlier date to the effect alleged. The source of the pleading appears to be the pro forma financial projections handed to the Vittouris' early in June 1990. In my view nothing said at the meeting or contained in the document constituted the making of a representation as specific as that alleged. In addition to my finding that the pro forma was overtaken by the letter of 3 July 1990 in respect of these issues, I have also found that Nelson was always careful about not representing sales or income projections in terms which expressly or impliedly conveyed any assurance or promise to the Vittouris' about these matters. I am satisfied that both Nelson and the Vittouris' were aware of the risks of sales and income estimates not being realised.
The representations as pleaded have not been established by the applicants. However, as I explain in the concluding section of these reasons the case was not strictly confined to the allegations as pleaded but was contested on broader grounds.
It is necessary to consider those grounds but before doing so some observations on the case of the applicants in reliance on s.51A is desirable.
Reasonable grounds - s.51A of the TPA
The applicants submitted that the representation as to projected sales was with respect to a future matter and the respondents have not established that they had reasonable grounds for making it: see Ting v. Blanch (1993) 118 ALR 543 at 552-3 per Hill J. The respondents replied that the representation was with respect to a present belief held on the grounds set out and that s.51A had no role in these circumstances: See Jacques & Ors. v. Cut Price Deli Pty. Ltd. & Ors. (1993) ATPR (Digest) 46-102 at 53435-6 per Spender J.
Section 51A of the TPA provides:
(1) For the purpose of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.
(2) For the purposes of the application of sub-section (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation.
(3) ...
In Ting at 552-3 Hill J discussed the operation of s.51A:
The section is but an interpretation section; it does not of itself create a cause of action, nor define a norm of conduct. The relevant cause of action is to be found in s.82(1) of the Act by reference to the norm of conduct laid down in s.52 of the Act. What s.51A does, in a practical sense, in cases where it applies, is to cast the burden of proof upon the respondent corporation who has made a representation about a future matter to show that in making that representation it had reasonable grounds for so doing. In the language of Sheppard and Neaves JJ in Cummings v. Lewis (1993) 113 ALR 285; ATPR (Digest) 46-103, s.51A is "designed to facilitate proof" (at ALR 294; ATPR 53,450).
Representation as to future facts may, of course, constitute conduct which is misleading or deceptive or likely to mislead or deceive within s.52 of the Act, irrespective of the operation of s.51A. However, without the intervention of s.51A the burden would remain upon the applicant to show that the representation, in whatever form it took, was misleading or deceptive or likely to mislead to deceive. In the ordinary case where a representation as to future conduct or events is alleged to have been made, that means that the burden would be upon the applicant to show not merely that the conduct or event has not come to pass but also that at the time the representation was made the respondent did not believe that the conduct or event would come to pass or that there was no basis for a belief that the conduct or event would come to pass: James v. ANZ Banking Group Ltd.(1986) 64 ALR 347; Global Sportsman Pty. Ltd. v. Mirror Newspapers Pty. Ltd.(1984) 2 FCR 82 at 88; 55 ALR 25.
It will be readily apparent that a representation as to future conduct or a future event will generally imply (and sometimes explicitly state) that the maker of the representation was of a particular state of mind as to the future conduct or event as at the time the representation was made. A representation that a particular occupancy rate for a hotel might in the future be achieved, or, as alleged here, that a particular rent for nominated premises could be achieved in a future letting, impliedly involves a representation that the maker of the representation believed that the occupancy rate or rental could be achieved. It would be no less a representation as to the future by virtue of this implication. If the actual term of the representation is
that the maker of the representation is of the view at the time that the occupancy rate or rental nominated could be achieved in the future, does that express statement turn a representation as to the future into a representation as to existing fact?
I was referred to the decision of Spender J in Jacques v. Cut Price Deli Pty. Ltd.(1993) ATPR (Digest) 46-102 in support of a submission that the representations pleaded were not representations as to future fact. In that case the representations alleged in the statement of claim related to turnover in the future in a shopping centre of a shop operating under a franchise from the respondent to the applicant then under negotiation. There was also specific representation as to the respondent's state of mind as to that future turnover. As Spender J put it (at 53,436):
In so far as turnover is concerned, the allegation is first, a representation as to a future matter, namely, that the future turnover would be of a certain order and, secondly, a representation as to the present fact, namely, a present belief as to the trading potential of a shop.
The first of these representations, his Honour held, was a representation with respect to a future matter to which s.51A applied. However, the representation as to the present state of mind of the respondent was a representation, so his Honour held, to which s.51A had no operation.
Whatever may be the case where there is an express representation as to the maker's state of mind concerning a future matter, it is not, in my opinion, correct to treat a representation as to an event or conduct in the future, be that in the firm of a prediction or otherwise, as not being a representation with respect to a future matter merely because it implies a representation as to the maker's present state of mind. The language of s.51A is very wide and the words "with respect to" are, like the words "in respect of" discussed by Dickson J, delivering the judgment of the Supreme Court of Canada in Nowegijick v. R (1983) 144 DLR 93d) 193 at 200, (a discussion cited with approval by Toohey J in Smith v. FCT (1987) 164 CLR513 at 533; 74 ALR 411 at 424):
...words of the widest possible scope. They import such meanings as "in relation to", "with reference to" or "in connection with". The phrase "in respect of" is probably the widest of any expression intended to convey some connection between two related subject-matters.
A representation as to future rental, for example, will be a representation with respect to a future matter, even if also, impliedly, a representation as to the existing state of mind of the maker.
I agree with the observations of Hill J. However, it is still necessary to characterise the representation made. In the present case it is my view that it is properly characterised as a statement as to a present belief based on the grounds set
out. In that context it relates to the capacity of the proposed outlet to achieve the sales projection. Although the sales projection necessarily has a future element in it that element does not transform the characterisation of the representation into one which is with respect to a future matter. In my view the applicability of s.51A is to be ascertained by a proper characterisation of the representation made in each case. It is difficult to see how s.51A can operate in a case such as the present where the grounds for the sales projection are expressly stipulated and an assessment of their reasonableness is left for evaluation by the representee. In these circumstances a representation that the grounds are reasonable, rather than that the representor believes that they are reasonable, is inconsistent with the representation made.
I should add that the operation of s.51A cannot be rendered nugatory by merely stating a belief or understanding with respect to a future matter. For the reasons pointed out by Hill J in my view such a statement, without more, is and remains one with respect to a future matter.
If, contrary to the conclusion I have reached, the respondents were required to establish that the grounds set out in the letter were reasonable and proper grounds for the belief held, in my view they have done so.