Milner, B.J. & Ors v. Delita Pty Ltd & Ors [1985] FCA 478

Federal Court of Australia|1985-09-19|Before: Lockhart J

Trade Practices - consumer protection - alleged misrepresentations

made in velaticn to the promotion of guava growing and marketing schemes - orders sought under ss. 82 and 87 Trade Practices Act - whether misleading or deceptive conduct - whether contravention of

Ss. 52 Trade Practices Act - whether directors were persons involved in

Judiciary Act 1903: s. 79. Federal Court of Australia Act 1976: s. SIA.

BRYAN JOHN MILNER AND ORS. v. DELITA PTY. LIMITED, ROGER McMILLAN

DELITA PTY. LIMITED ROGER McMILLAN GLASSON and MORRIS WALTER LEWIN

JOHN CHRISTOPHER BENNETT First Cross-Respondents and Second Cross-Claimants ROGER McMILLAN GLASSON and MORRIS WALTER LEWIN

Applicants DELITA PTY. LIMITED ROGER McMILLAN GLASSON MORRIS WALTER LEWIN

JOHN CHRISTOPHER BENNETT First Cross-Respondents and Second Cross-Claimants AND: ROGER McMILLAN GLASSON and MORRIS WALTER LEWIN

THE COURT ORDERS THAT the applicants bring in Short Minutes of Order

Settlement and entry of orders is dealt with in Order 36 of

DELITA PTY. LIMITED ROGER McMILLAN GLASSON and MORRIS WALTER LEWIN

ROBERT CHARLES GOOCH MORRISON and JOHN CHRISTOPHER BENNETT First Cross-Respondents and Second Cross-Claimants ROGER McMILLAN GLASSON and MORRIS WALTER LEWIN

No. G85 of 1983 ALLAN JAMES GILL & ORS. Applicants DELITA PTY. LIMITED ROGER McMILLAN GLASSON MORRIS WALTER LEWIN

AND: ROBERT CHARLES GOOCH MORRISON and JOHN CHRISTOPHER BENNETT First Cross-Respondents and Second Cross-Claimants AND: ROGER McMILLAN GLASSON and MORRIS WALTER LEWIN

This case concerns guavas. In 1980 four people, Roger Glasson, Morris Lewin, Robert Morrison and John Bennett decided to promote a scheme for the growing and processing of guavas in the far north coast of New South Wales and for the marketing of guava puree. Guavas had not been grown previously in this country on any large scale. The scheme which they promoted involved approaching people to contribute funds to the scheme for the purpose of establishing and

Each trust venture was to be divided into two parts. First, a unit trust in respect of wnich a company would act as trustee. The

trust was to purchase the land. Each investor was to acquire a beneficial interest in the totality of the land equivalent to his share. For example, in Guava Property Trust No. 3 each investor would

have a share equivalent to 5.7 acres, 5 acres of which were to be

planted and .7 acres of which was river. In other cases, the investor's share of the plantation was a five acre particivaticon. No separate titles were to be offered to each investor. It was envisaged that in the third year the crop would return more than sufficient to cover expenses; in the fifth year the plantation would he properly established, yielding a steady income for the investors. Second, a partnership was to be formed by the participants to lease the property from the trustee of the property trust and to undertake the development of the plantation. The partnership would pay all development expenses. Tax losses, if any, in the formative years would be allocated to the partners in proportion to their interests in

the partnership. The person who required the tax deduction was to be the partner. The units in the guava property trust would be held by that same person or his family or family company or trust. All land,

trees and improvements were to be totally owned by the investors.

"Australian Plantations" 1s a trust which supplied the trees; when the plantation was established its role was to take over the total maintenance and care of the plantation as manager and pursuant to an agreement with the partnership. It was envisaged that there would be one document governing the terms upon which the investors would become owners of units in the property trusts and another document being the partnership agreement between themselves and their fellow investors. The terms under which Australian Plantations would act as manager were to be and in fact were set out in a separate

document. The processing and marketing of the guavas was proposed to

be done by a firm "Ballina Plantations" which had four principals

namely, Messrs. Glasson, Lewin, Morrison and Bennett.

It was intended by the promoters that Eallina Plantations would purchase che guava fruit at prevailing world prices. Ballina Plantations also would undertake the initial cultivation and

It is convenient to say something about the four promoters themselves. Mr. Glasson has grown avocados, guavas, lychees and macadamias and conducts a nursery business on the far north coast of New South Wales. He is a former president of the Richmond Avocado Growers Association and a member of the Avocado Marketing and Promotion Board. Dr. Lewin is a medical practitioner: a gynaecologist with an extensive practice in the Lismore district. He is an experienced financial entrepreneur and has other business activities. Mr. Morrison, is an investment adviser and chief consultant to a

newsletter called the "Investment Advisor". Mr. Bennett, who manages and owns his own marketing research company, is an expert in the

Delita Pty. Limited ("Delita") was incorporated in June 1979. Its shareholders and directors at all material times have been Lewin and Glasson. Delita was the proprietor of the firm "Australian

Glasson has been associated with the tropical fruit industry in Australia since 1972. He became interested in guava production in

about 1976. He visited Hawaii in 1977 and there met Harold Quinton,

Chairman of Lifesavers Limited and they discussed the prospects of successfully growing and marketing guavas in Australia. Subsequentiy Lifesavers decided to create a commercial plantation for quavas in Australia and Glasson entered into a contract with Lifesavers to

manage its plantation, at least so far as horticultural matters were

Later, Glasson was approached by Lewin about the growing of guavas and they assert that at this time (1978) their intention was to use their own money and borrow funds to engage in the growing of guavas. But before committing themselves to the investment they decided to travel to Hawaii to evaluate the guava industry. They assert that they made various enquiries there of different persons and institutions and obtained copies of relevant documents. They aiso

In 1980 the respondents invited persons to participate in the project of growing and processing guava fruit. Brochures and other written materials were sent or handed to prospective investors or otherwise came to their attention, including the applicants in these two sets of proceedings which are heing heard together by consent. The applicants rely on the statements contained in this written material to found their case in this Court, alleging that 1t contained representations which were made to them by the respondents and which are said to be false and to constitute misleading and deceptive conduct, or conduct that is likely to mislead or deceive within s. 52

of the Trade Practices Act 1974 ("the Act"). The applicants claim

damages and other relief against the respondents. Each of thes applicants asserts that he, she or it invested substantial sums cf money in the guava projects, that they made these investments by reason of the representations made to them by the respondents and in the result suffered loss and damage. The documents which wers received by the applicants, and upon which they primarily found their case of misleading conduct emanated from a business investment advisory firm known as Messrs. Robert Morrison & Associates. Morrison is a principal of that firm and it is alleged by the applicants that those documents were distributed by Robert Morrison & Associates as servant or agent of the respondents or with the consent of the

There are over 50 applicants. They are the persons or companies who invested funds in the guava ventures either as members of the property trusts or as partners in the development of the plantations. The applicants are resident in various States and Territories of Australia. They follow a wide variety of vocations and unclude a solicitor, medical practitioners, accountants, engineers, a grazier, a pharmacist, a psychologist, hairdressers, retired business men, a senior officer of a statutory authority, trustees of a religious order, together with the wives of some of those persons. Not only do the participants follow a wide variety of vocations but they had varied reasons for entering the schemes including the securing of a source of income for their retirement, a means of minimising income tax, a source of capital growth for their

investments, or a combination of these various elements.

There were four guava property trusts established. The trustee of Guava Property Trust No. 1 was Novera Pty. Limited. The trustee of Guava Property Trust No. 2 was Natran Pty. Limited. The trustee of Guava Property Trust No. 3 was Metral Pty. Limited. The trustee of Guava Property Trust _No. 4 was Hevilla Pty. Limited.

Various brochures were issued in respect of the property trusts, but

the contents of each brochure are not materially different. I will refer to differences where appropriate throughout these reasons. Some people who became members of a particular property trust in fact

received a brochure referable to another property trust other than the

one to which they ultimately subscribed. Other documents in the form of newsletters or otherwise were from time to time issued to various

The guava is a large shrub or small tree native to tropical America. It was first introduced into the Hawaizan islands in the early 19th Century by Don Francisco de Paula Marin, a Spanish horticulturalist. The guava fruit is round to pear-shaped and its interior flesh ranges from white to cream and from pink to salmon-red in colour. The fruit has an acid pulp within which is a juicier pulp full of small hard kidney-shaped seeds. The guava raw or processed is a valuable source of nourishment. Its vitamin C content considerably exceeds that of oranges; it is also rich in vitamins A and B and contains fair amounts of calcium and phospherous and some iron thiamine and niacin. Guavas are processed into nectars, juices, jams,

jellies, preserves, sherbert and baked products. Fruits preferred for

processing are those with a thick outer flesh and a small seed cavity. The fruit of the guava tree has a rough exterior texture and measures up to 3 inches in diameter. The guava grows wild in many parts of the Hawaiian islands and it is only in comparatively recent years that it has been grown commercially in plantations. In 1970 5.1 million pounds of guava fruit were processed in Hawaii, of which only 625,000 pounds (12.5%) were derived from 70 cultivated acres. This may be contrasted with the position in 1979, when of the 6.5 million pounds of guava fruit processed in Hawaii, 4.5 million pounds (70%) were derived from 940 cultivated acres. The guava is also produced in large quantities in South Africa, Brazil and Mexico, all of which grow

The case was the subject of many directions hearings and evidence was taken by me in Hawaii as a Commissioner appointed by this Court for the taking of evidence from residents of Hawaii in June 1984, The trial itself occupied 44 days. Evidence was taken from witnesses, most of whom had sworn affidavits. The exhibits are voluminous. Although all matters were "heard together, they are in fact separate from each other because each applicant sues in his own capacity and different considerations apply to each applicant although there are many points of commonality between the applicants. Counsel and solicitors for the parties are to be commended for their efforts in seeking to shorten the proceedings and confine their disputes to matters that were really in issue rather than merely technically in dispute. Were it not for their efforts the trial would have taken a

The vespondents are Delita, Glasson and Lewin. They nai earlier cross-claimed against Morrison and Bennett who in turn cross-claimed against Glasson and Lewin. The cross-claims were later not pressed because the parties to them resolved their differences, a

I propose to divide my treatment of the case into two broad divisions. First I will deal with questions that are common to all of the applicants or many of them; then I will turn to the case of each

applicant in so far as it raises issues other than common issues.

The applicants allege in paragraph 6 of their amended statements of claim that Delita, by Glasson and Lewin acting as its directors and agents, engaged in conduct that is misleading or deceptive or likely to mislead or deceive in contravention of s. 52 of

(a) The respondents, through an entity, Australian Plantations, had carefully monitored the

development of a guava fruit growing and processing industry in Hawaii.

(b) That there existed a substantial demand on the Mainland of the United States of America and in Japan for the products of the guava fruit growing and processing industry and that the extent of such demand was known to the

tC Atenienenetnenaiiie aaiatasaliasteeaed Mile Lyte

I propose to make my findings of fact referable to these

separately and to make separate findings of fact. The reason for

That there existed in Hawaii 4 lack of production to cater for local demand and that Hawaiian processers would tae ali of the guava puree which could be supolied by guava plantations as projected by or on behalf of the respondents and that the extent of such demand was known to the respondents.

That a guava fruzrt growing and processing industry in Australia was commercially viable both domestically and in export terms in 1980 and thereafter.

That the respondents had during 1980 a first-class management team in relation to the growing and processing of guava fruit.

That returns on overseas and local experience available to the respondents in relation to the growing and processing of guava fruit showed a lucrative early return, rising to an anticipated

That the costs of growing and processing guava fruit as projected by or on behalf of the respondents were a true and accurate representation of such costs,

That the costs and expenses of growing and marketing guava fruit as projected by or on behaif of the respondents represented a reasonable and proper charge in respect of such costs.

That the Department of Primary Industry through its Research Station at Nambour in Queensland had made certain data available to the respondents in relation to the growing of guava fruit.

That the New South Wales Department of Agriculture had made certain statements to the respondents, repeated by the respondents as having allegedly been made by the New South Wales Department of Agriculture as to the acreage requirements to meet the Australian demand for guava fruit."

taking this course is because, obviously, there is considera

In paragraphs 7, 8 and 9 of the statements of claim the applicants allege that Delita, by Glasson and Lewin acting as its directors and agents, engaged in conduct that is misleading or deceptive or likely to mislead or deceive in contravention of s. 52 of the Act "namely the distribution and the dissemination by themselves their servants or agents or with their consent by a business investment advisory firm known as Robert Morrison & Associates of a document entitled "Reasons for Recommending the Guava Property Trust" (paragraph 7) anda brochure related to the establishment of Guava Property Trusts including "Reasons for Recommending the Guava Property

Trust" (paragraph 8) and of a Progress Report (paragraph 9).

During 1980 they paid sums of money representing deposits on

account of units and partnership shares (capital) in relation to Guava

On 11 November 1980 the Guava Property Partnerships Nos. Il, 2, 3 and 4 of which the various classes of applicants are members,

During 1980 the applicants received summaries and uni

certificates in respect of their interest in the Guava Property Tvs:

and Partnerships from a firm of solicitors, Messrs. Stone and Poulos.

During 1981, 1982 and 1983 the applicants made further payments in cespect of the Guava Property Partnerships of which the

On 2 July 1982 the applicants instructed Delita to undertake

On 27 July 1982 demands were made on behalf of Delita upon

the applicants requiring payment of certain moneys.

On 9 September 1982 Delita, through its solicitors, purported to accept repudiation of the agreement between Delita and the various

Guava Property Partnerships of which the applicants are members.

The conduct of Delita mentioned above is in contravention of

Glasson and Lewin aided, abetted, counselled or procured the said contravention or induced it or were directly or indirectly

Declarations that Delita has engaged in misleading or

deceptive conduct or conduct that is likely to mislead or deceive in

contravention of s. 52 and declarations that Glasson and Lewin have aided, abetted, counselled or procured or induced or have been directly or indirectly skmowingly concerned in or party to the

A Declaration that the agreements of 11 November 1980 between

Delita and the applicants are void and of no effect, and an injunction

restraining Delita from taking any proceedings to enforce any of the

Orders declaring the four agreements of 11 November 1980 to be void ab initio and directing Delita to refund to the applicants all moneys paid by them pursuant to the agreements and to pay to the applicants any loss or damage sustained by them as a result of the alleged contraventions, and orders directing Glasson and Lewin to pay

Claims are also made generally for damages, interest and

In their defences the respondents answer the allegations made

net admitting the making and implementation of invitations ts

persons to participate in the investment in the growing and processin

of guavas and the establishment of the Guava Property Trusts;

denying that Delita (by Glasson and Lewin acting as its directors and agents) engaged in misleading or deceptive conduct or conduct that was likely to be misleading or deceptive in contravention

not admitting that the respondents made the representations

alleged in paragraph 6 of the statements of claim; and

saying that if the respondents did make any of those representations nevertheless the representations did not constitute misleading or deceptive conduct in contravention of s. 52 (paragraph 3

In paragraphs 4, 5 and 6 of their defences the respondents answered the allegations made in paragraphs 7, 8 and 9 respectively of the statements of claim. Those three paragraphs are in all material respects the same although each relates to the different document the subject of the allegations in paragraphs 7, 8 and 9 of the statements of claim. It 1s sufficient therefore to summarise paragraph 4 of the defences which is in answer to paragraph 7 of the statements of claim.

they do not admit making and implementing the invitaticns 45

they deny that Delita (by Glasson and Lewin acting as 1ts directors and agents) engaged in conduct that was misleading or deceptive cr was likely to be misleading or deceptive in contravention

of s. 52 as alleged in paragraph 7 of the statements of claim or at

they deny that they or any one acting for or on their behalf or with their consent distributed or disseminated the particular

document referred to in paragraph 7 of the statements of claim.

Counsel for 'the applicants submitted that the respondents had not denied in their defences that the three documents, the distribution and dissemination of which was alleged by the applicants to constitute misleading or deceptive conduct, were misleading or deceptive and therefore must be taken to have admitted that they were misleading or deceptive. Counsel relied in particular upon a comparison betweer paragraph 3 of the defences on the one hand with paragraphs 4, 5 and 6 of the defences on the other other. He stressed that in paragraph 3 the respondents specifically allege that if they did make any of the alleged representations nevertheless those representations did not constitute misleading or deceptive conduct in

contravention of s. 52. Counsel for the applicants emphasised that

there was no corresponding allegation in paragraphs 4, 5 and 6 of the

The submission is unsound. In each of paragraphs 3, 4, 5 and 6 of the defences the respondents denied that the conduct alleged by the applicants in the_ statements of claim to constitute misleading os deceptive conduct in contravention of s. 52 was misleading or deceptive. The applicants did not allege in their statements of clain that the three documents specified in paragraphs 7, 8 and 9 were misleading or deceptive: the allegation is that the misleading or deceptive conduct was constituted by the distribution and dissemination of those documents. Doubtless there is inherent in that allegation either an implied statement or an assumption that the documents are themselves untrue or misleading or deceptive; but the applicants cannot complain if the respondents take the statements of claim as they find them and answer the allegations made therein and not other allegations which rest on assumptions or implications in the

The case was fought throughout on the basis that the parties were at issue on the question of whether the three documents were untrue or misleading or deceptive and the question whether distribution or dissemination of them, assuming the relevant statements made therein were untrue, was misleading or deceptive conduct. If I had upheld the pleading points taken in final address by counsel for the applicants I would have granted leave to the

respondents to amend their defences to remedy the defects and I would

not have imposed any terms or conditions upon the respondents in

granting that application save the usual term that the respendents

ae the applicants' costs of and incidental to the amendment, a purely

The case against Glasson and Lewin was based on s.. 755 of the Act, namely that they were persons said to be involved in the contraventions of s. 52 by Delita. In summary, paragraphs 24 to 29 of the statements of claim, echoing the language of paragraphs (a), (b) and (c) of s. 75B, allege that Glasson and Lewin each aided abetted counselled or procured the contravention, induced the contravention, was directly or indirectly knowingly concerned in or a party to the contravention. Counsel for the respondents submitted that the statements of claim were defective in that paragraphs 24 to 29 do not allege the material facts supporting the allegations made in them, in particular the existence of knowledge by Glasson and Lewin of the essential elements of the alleged contravention. In my opinion there is no substance in this submission. As the complaint of the respondents is essentially one of absence of particularity, it does not, in my opinion, vitiate the pleading itself. Further, an application was made by the respondents well before the commencement of the hearing of this matter to another Judge of this Court to strike out the statements of claim, but the application was refused. Finally, the case was fought throughout on the basis that the parties were squarely at issue on all relevant questions of fact and law relating to- the alleged involvement of Glasson and Lewin in the

contraventions of Delita. Hence if any amendment was necessary I

would have taken the same course I mentioned above in relation to the

Counsel for the respondents made a further challenge to the statements of claim, namely, that paragraphs 7, 8 and 9 were said to be defective in that the only material allegation made in them is that the conduct alleged to be misleading or deceptive is the distribution of the three specified documents. Counsel submitted that the mere act of distribution of the documents cannot constitute misleading or deceptive conduct. The making of representations that are misleading or deceptive may constitute such conduct; also the distribution of a document which itself contains false statements, may constitute misleading conduct, but neither of these latter matters is alleged in paragraphs 7, 8 or 9. I reject the submission as unsound. The three paragraphs in question, when read in conjunction with paragraph 23 which asserts that Delita's conduct contravened s. 52, do not particularise the respects in which distribution of the documents is said to be misleading or deceptive; for example, whether they contain materially false statements or not. However, again this is essentially a complaint of absence of particularity; the absence of the particular respects in which the conduct is said to have contravened s. 52 does not vitiate the pleadings. It will be recalled that the earlier application by the respondents to strike out the statement of claim was unsuccessful and that the case was fought throughout on the basis that the conduct of Delita which was said to be misleading or deceptive was the distribution of the relevant

documents each of which contained materially false statements inducing

the applicants to invest in the quava projects. I say again that I would have allowed the applicants to amend the statements of claim to overcome the defects asserted by counsel for the respondents 1t I had

Although the allegations made in paragraphs 7, 8 and 9 of the statements of claim refer to the distribution and dissemination of the relevant documents the word dissemination adds nothing to distribution. Also, aithough the relevant paragraphs of the statement of claim refer to relevant conduct as being misleading or deceptive or likely to mislead or deceive I shall throughout my reasons simply refer to allegations of misleading or deceptive conduct. This should be taken as incorporating in those references a reference also to

What were the representations and how and by whom were they made?

Neither Glasson nor Lewin was called by the respondents to give evidence. Nor was Morrison or Bennett called as a witness by any party. A document was tendered in evidence, being a deed dated 24 September 1984 whereby Delita, Glasson, Lewin, Morrison and Bennett agreed to resolve the differences between them relating to the questions involved in this case. In brief. the deed provided that (i) Morrison and Bennett indemnified Delita. Glasson and Lewin as to one-third of the monetary value of any judgment which the applicants may obtain against Delita, Glasson and Lewin in this or other

proceedings based on the same, or substantially the same facts; (ii)

Delita, Glasson and S"ewin indemnified Morrison and Bennett 4 £0

two-thirds of the monetary value of any judament which the aoolicants may obtain in any proceeding against Morrison and Bennett; (iii. the parties would share the costs of these and any other proceedings in certain agreed proportions; (iv) Morrison and Bennett, Delite,

Glasson and Lewin would pay certain sums of money to each other in

consideration of the discontinuance of their respective cross-claims.

A considerable bedy of evidence was tendered in this case concerning various companies, the trusts of which they were trustees and their interlocking relationships. The companies included Danille Pty. Limited, Ferric Pty. Limited, Renwell Projects Pty. Limited, Bennett Research Pty. Limited and Quialo Pty. Limited. In the end I do not think this evidence matters very much or at all. Ultimately the relevant facts are fairly simple and in a rather narrow compass. I see no point in traversing the whole of the evidence in the case. I

have considered it all and intend to state my conclusions.

On 7 September 1979 a letter was written to Mr. F. Stein, one of the investors and an applicant, on the letterhead of Australian Plantations and signed by Lewin. Stein received the letter in mid September 1979. Various statements which were made to investors in the documents sent to them by or on behalf of Robert Morrison &

Associates are echoed in this letter. The letter was sent to Morrison

In 1979 and 1980 Mr. Oswald Blake conducted a reali estace

agency in Alstcnville on the north coast of New South Wales. He knew

both Lewin and Glasson. Morrison telephoned Blake early in i760 saying that he intended to visit the north coast with Bennett to lcok at a macadamia nut plantation with a view to purchasing one. Biake told Glasson of Morrison's intentions and Glasson asked Blake to arrange for Morrison to have a talk with Glasson and Lewin about guavas. A letter dated 21 January 1980 was sent by Australian Plantations and signed by Glasson to Blake giving "an appraisal" of the present and future prospects of the guava industry in Austraiia. Again various statements made in this letter are reflected or echoed in the documents sent to the investors. On 2 February 1980 Morrison and Bennett travelled to the north coast and met Blake. Blake introduced them to Glasson and Lewin. Morrison, Bennett, Glasson and Lewin, in the presence of Blake, discussed guavas generally as well as other matters. It is plain that both Glasson and Lewin sought to interest Morrison and Bennett in the promotion of the guava industry. It is also plain that the letter of 21 January 1980 was sent to Blake

at least for the purpose of his giving it to Morrison. After the

"He had been to Sydney and met Robert Morrison and , was getting on very well with him and that I CBiakeJ did him CGlasson] a denn good turn in introducing him."

"Look, the avocado plantation, the syndication by Robert Morrison seems te be going well and if that is finalised there will be $10,500 in your pocket" He then went on to say that:

that if that one was syndicated as well, there would be $20,000 in my pocket."

Glasson, Lewin, Morrison and Bennett met again on the weekend of of 23-24 February 1980 and correspondence passed between them in late February 1980. Glasson and Lewin said "the spirit of co-operation with which we are entering into the arrangement has been accepted by us all". Glasson and Lewin agreed with Morrison and Bennett to maintain a guava plantation for them for a special rate of $750 per acre provided Morrison and Bennett syndicated 200 acres and ensured that Delita was the manager "at our usual rates" namely $1,200 per acre. By late March 1980 negotiations were weil in train for the purchase of a number of properties to be used for the syndication of the guava property trusts and instructions were given to a firm of

solicitors in Lismore, Messrs. Stone & Poulos, to act in relevant

On 28 April 1980 Glasson and Lewin visited Hawaii. They returned om 12 May 1980. On 5 May 1980 Lewin saw a draft of one of the brochures or other documents issued in mid 1980 by Robert Morrison & Associates to the investors. Glasson saw adraft of one such

Various drafts of the relevant document were prepared from time to time. It was submitted by counsel for the applicants tnat Lewin substantially drafted or at least approved the pink edition of the No. 1 Guava Property Trust brechure. The later editions contained relatively minor changes so far as matters material to this case are

concerned. Although I recognise some force in this submission I do

The relevant documents seen by the investors were a brochure

relating to the No. 1 Trust (pink), another brochure relating to the

same trust (yellow), a brochure relating to No. 2 Trust, and a

brochure relating to No. 3 Trust. There were also some three versions

of the document styled "Reasons for Recommending the Guava Property

It is clear, with perhaps some exceptions to which I shall refer later, that all applicants received or saw copies of the relevant brochures and that most received copies of the document "Reasons for Recommending the Guava Property Trust". I will refer to the position of.individual investors later. None of the brochures or the document "Reasons for Recommending the Guava Property Trust" were sent to investors by any of the respondents. They were all sent by Robert Morrison & Associates. The relevant statements contained in those documents in substance reproduce the statements made in the two letters to which I have referred namely, the letter to Stein of 7 September 1979 and the letter to Blake of 21 January 1980, (the

"Stein" and "Blake" letters) both from Australian Plantations. It is

clear that there was reasonably frequent communication between Lewin

and Glasson on the one hand and Morrison and Bennett on the other from

On 14 June 1980 Glasson, Lewin, Morrison and Bennett met in Sydney and had dinner together. They discussed the syndication of the guava property trusts and various questions relating thereto including the question of Morrison's commission. Mr. Stone of Stone & Poulos, solicitor, had sent one of the brochures relating to the Guava Property Trust No. 1 to Morrison on 9 June 1980, having previously

expressed considerable concern about a draft of it to Lewin.

I referred in the opening part of my reasons for judgment to the establishment of the relevant property trusts and partnerships and the involvement of the respondents in it. I need not repeat what I said except to say that those statements also represent my findings of fact. In the early part of 1980, probably on or about 23-24 February 1980, Glasson, Lewin, Morrison and Bennett decided to promote the scheme for growing and processing guavas the subject of this case. Delita was a party to the joint enterprise; it was the proprietor of Australian Plantations which itself was to act as the manager of the relevant plantations. Each of Glasson, Lewin, Morrison and Bennett was co bring his own particular expertise to bear in the promotion and establishment of the property trusts and partnerships. Although the relevant documents upon which reliance-is placed in this case were distributed by Robert Morrison & Associates and not by Glasson, Lewin

or Delita it is plain that Lewin, Glasson and Delita were aware of the

contents of the documents, of the fact that they were being distributed to potential investors for the purpose of involving then in a scheme for growing and processing guavas and that the distribution of the documents to potential investors fell within the tasks allotted to Morrison and Bennett. The evidence is not precisely clear as to whether there was any line of demarcation drawn between the activities required or expected of each of the participants in the joint enterprise, although some correspondence between the four tends

In a letter of 29 February 1980 from Morrison and Bennett to Lewin and Glasson the four are referred to as offering a "powerful combination which should cover all aspects of the guava project". Morrison described his role in the venture as to help in the formation

and marketing of the syndicate formation components of our plan". The

"I CMorrison3 also see my role as one of assisting John €Bennett3] in the formation of marketing ideas and no doubt all our roles will overlap to a certain degree. ... I see John's role as one of holding the responsibility of marketing guava puree, be it to distributors or direct to the market place ... John is of course the most able to provide the market research necessary to establish and prove potential markets, and to market in the most appropriate manner."

That all four benefited from the arrangements and received profits from the venture is evident in the letter of 25 February 1981 from

"Bustralian Plantations has received equal land profits as members of Ballina Plantations as well as acting as the principal contractors for the Trusteés. John Bennett has also received approximately one hundred thousand dollars from the profits of the land sales and preparation as you have, and like Australian Plantations he has not received any commissions."

The statements made to investors in the documents distributed by Morrison & Associates or made orally by or on behalf of Morrison were all made within the scope of the authority given to Robert Morrison & Associates by Delita, Glasson and Lewin. Indeed. the objectives of the persons concerned could not have heen fulfilled

without this involvement by Robert Morrison & Associates. It was an

Other companies, some of which I have mentioned earlier, performed roles in the establishment and furtherance of the guava growing project but nothing turns on this for presently relevant

In my opinion the relevant representations which are the subject of this case were made by Delita. They were conveyed by Robert Morrison & Associates within the scope of authority given to Morriso.: and Bennett by the consortium which included Delita. Throughout the relevant conduct, Robert Morrison & Associates, in making representations to the investors, plainly acted for the benefit of Delita and Delita plainly ratified its conduct and derived benefit

Each of the applicants sues the respondents for damages said to arise from materially false statements in the documents emanating from Robert Morrison & Associates and upon which they claim to have relied when investing funds in the guava projects. There are four guava property syndicates and partnerships mirrored in the grouping of the applicants into four sections in the statements of clain. The documents which came to the attention of the investors varied from syndicate to syndicate and to some extent from investor to investor within each syndicate. But the essential statements on which the applicants rely to establish their case and on which the proceedings turn are substantially the same in each of the brochures read by the investors in ail four syndicates and, although in condensed form, in the document "Reasons for Recommending the Guava Property Trust". They fall conveniently into statements relating to the following six

The overseas market for guava puree and guava products;

The Australian or the domestic market for guava puree and guava products; ,

3, The costs of growing, processing and marketing guavas and guava products;

4, The profits from the guava syndicates and the viability of the guava projects;

The respondents' knowledge of overseas and domestic markets

I see no purpose in analysing every relevant statement in each of the brochures and other documents relied on by the applicants. It is sufficient if I take one brochure as a fair sample, a course followed by the parties themselves before me in evidence and address and which is the only practicable course to follow. I take the first brochure (called because of its colour the pink brochure) relating to Guava Property Trust No. las a fair sample, although some of the statements made in it were not repeated in any of the other documents. It was the brochure to which most attention was devoted by the parties in the case as representing a reasonable sample. A copy of this brochure is attached to these reasons for judgment as a schedule. Before referring to the particular statements made in this brochure it is important to say that each document must be read as a whole. The impression which I gained from my first reading of the documents and indeed from all subsequent readings, an impression shared by the investors who gave evidence before me, was that the guava growing, processing and marketing projects were represented in glowing terms as safe, exciting and lucrative investments with excellent long term prospects providing safe and high yielding superannuation and income benefits and probable tax deductions. The existence of markets for Australian grown guavas and their products was obviously fundamental to the success of the venture and to inducing rcople to invest in it. The documents painted a picture of excellent potential both here and abroad for the marketing of guavas and guava products. The evidence from investors before me confirms that they regarded the statements in the documents relating to markets both here and overseas as vital in

deciding whether or not to invest money in the guava projects.

The various statements are summarised in paragraph 6 of the

statements of claim and the schedule thereto and may be conveniently growped as follows (my references hereunder are to the matters pleaded in the statements of claim (para. 6) and my references to sub-paragraphs are to the sub-paragraph of paragrapn 6- of the

Overseas Markets (b) "Chat there existed a substantial demand on the mainland of

the United States of America and in Japan for the products of guava

(c) "that there existed in Hawaii a lack of production to cater for local demand, that Hawaiian processors would take all of the guava puree which could be supplied by guava plantations as projected by or

(d) "that a guava fruit growing and processing industry in Australia was commercially viable, both domestically and in export

Domestic or Australian Market (da) "that a guava fruit growing and processing industry in

Australia was commercially viable, both domestically and in export

Costs of Growing and Processing Guavas and their products and

(g) "that the costs of growing and processing guava fruit as

projected by or on behalf of the respondents were a true and accurate

(h) "that the costs and expenses of growing and marketing guava fruit as projected by or on behalf of the respondents represented a

reasonable and proper charge in respect of such costs."

Profitability and Viability of Guava Ventures (d) "that a guava fruit growing and processing industry in

Australia was commercially viable, both domestically and in export

(ft) "that, based on overseas and local experience available to the respondents, returns in relation to the growing and processing of guava fruit showed a lucrative early return, rising to an anticipated

The Respondent's Knowledge of Markets Both Overseas and

Domestic and of the Guava Industry Generally and their endorsement of

statements made in the documents relating to those matters.

(a) "The respondents, through an entity Australian Plantations, had carefully monitored the development of a guava fruit growing and

(b) "That there existed a substantial demand on the mainland of the United States of America and in Japan for the products of guava

fruit growing and processing industry and that the extent of such

{c) "That there existed in Hawaii a lack of production to cater

for local demand, that Hawaiian processors would take all of the guava puree which could be supplied by guava plantations as projected by or

At a glance

Court

Decision date

Before

Source

Judgment (572 paragraphs)

Legislation Cited (1)