North East Equity Pty Ltd (ACN 009 248 819) v Proud Nominees Pty Ltd

GENERAL DIVISION WAD 220 of 2008

BETWEEN: NORTH EAST EQUITY PTY LTD (ACN 009 248 819)

1. The appeal be allowed. 2. Paragraphs 1 and 3 of the orders of the primary judge made on 2 September 2008 be set aside, and in lieu thereof it be ordered that the matter be remitted to the primary judge for: (a) the formulation of reasons for his conclusion that s 51A of the Trade Practices Act 1974 (Cth) did not assist the appellant; and (b) further consideration of the question of damages in the light of the Court's reasons. 3. Paragraph 4 of the said orders be varied so as to read "The first respondent pay the applicant's costs of the cross‑claim". 4. The costs of the appeal and at first instance (other than the costs of the cross‑claim) be reserved pending the determination of the matters remitted. Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION WAD 220 of 2008

BETWEEN: NORTH EAST EQUITY PTY LTD (ACN 009 248 819)

BACKGROUND 1 In September 1998 the appellant purchased from the Sumich group a carrot processing plant at Wattleup, south of Fremantle. In 2002 the appellant's controller, Nicola Tana, negotiated with the second respondent, David Proud of Proud Machinery, with a view to replacing part of the processing plant with a more modern plant. Proud Machinery was the name under which the first respondent traded. In October 2002 the appellant agreed to pay Proud Machinery $3 million for the purchase and installation of new equipment for the plant. The equipment was installed in March 2003. The appellant was not satisfied with its performance and sued the first respondent for damages for breach of contract, and both respondents for contraventions of ss 52 and 53(c) of the Trade Practices Act 1974 (Cth) (the Act) and negligent misstatement.

PRIMARY JUDGE'S REASONS 2 The primary judge dismissed the proceeding: North East Equity Pty Ltd v Proud Nominees Pty Ltd (No 2) [2008] FCA 1189. Having identified the terms of the contract, his Honour found that they had not been breached. In addition he concluded that any economic loss the appellant claimed to have suffered was not caused by any alleged deficiencies in the new equipment. He also found that the appellant had no title to bring the contract claim, having earlier assigned its rights under the contract to a financier in connection with the purchase. The findings made with respect to the contract claim necessarily led to the failure of the claim in tort. 3 In dealing with the ss 52 and 53(c) claims the primary judge proceeded on the basis that "Where experienced business people have concluded an agreement, that contract will normally provide a very good starting point, and often an equally good finish, in ascertaining what terms and representations were made which caused the parties to proceed as they did": [2008] FCA 1189 at [344]. His Honour found that the parties understood that the terms of their contract "were, in effect, representations". Accordingly the ss 52 and 53(c) claims collapsed with the contract claim. 4 At [345] the primary judge set out his findings on the pleaded contractual terms and representations. We summarise them at [5]‑[10].

Pack out rate per hour 5 His Honour found that this term or representation was that the new carrot processing and packing line would have the capacity to process and pack at a rate of production per operating hour of 18.75 tonnes final pack out on the pallet, which was later reduced to 17.55 tonnes. He was not satisfied that this was incorrect or misleading or deceptive. The new line had that capacity. Further, by operating a split shift, the new line had the capacity to achieve a pack out in excess of 150 tonnes in eight working hours, and after the later deletion of the handline, in excess of 140.4 tonnes in eight working hours. (The handline was part of the former Sumich equipment that was retained and relocated as part of the new set up. It could deal with 1.2 tonnes per hour. Mr Tana discontinued the line in early 2003. Hence the difference between 18.75 tonnes and 17.55 tonnes per operating hour.)

Temperature 6 The primary judge found that the terms or representations were, as pleaded, that the new line would: (a) be designed so as to be reasonably fit to process farm fresh carrots at field temperatures and achieve a core temperature of packed carrots of not more than 5°C, and (b) achieve a guaranteed maximum of 5°C core temperature for the appellant's carrots, have hydro‑cooling tanks capable of producing constant product output, and be capable of controlling the temperature of the carrots. His Honour was not satisfied that the new line did not have these capacities "if operated correctly". His Honour had dealt at length with the lack of competence in the operation of the new equipment on the part of two of the appellant's key employees, despite instruction by or on behalf of Proud Machinery, and the problems this created in the proper working of the new line. See in particular [2008] FCA 1189 at [166]‑[167] and [175].

Grading 7 His Honour found that the terms or representations were, as pleaded, that the new line would: (a) be designed so as to be reasonably fit to sort and grade carrots into eight distinct streams of size and length; (b) have nine hydro‑cooling tanks, which would allow one for each length or size grade and one spare, and (c) provide quality length sizing for three separate tanks. He was not satisfied that the length graders (there being no complaint about the width or girth graders) did not provide quality length sizing in accordance with what both parties understood were their "inherent limitations" (par (c)). Nor was he satisfied that the new line was not reasonably fit for the purpose in (a). He was satisfied that the tanks complied with representation (b). The "inherent limitations" was a reference to evidence that length graders generally were inherently inaccurate because of the shape of carrots. See [2008] FCA 1189 at [326]‑[330].

Efficiency 8 The primary judge found that terms or representations were, as pleaded, that the new line would: (a) be designed so as to be reasonably fit to achieve an increase in efficiency of labour usage compared to the existing line, and (b) increase production while reducing the man hours required to achieve that production compared to the existing line. His Honour was satisfied that the terms or representations "were correct". He noted that Mr Tana had admitted at a "test" meeting on 18 November 2003 that labour costs per carton had fallen by 25% or more.

Reduction in damage to carrots 9 His Honour found that a representation was made, as pleaded, that the new line would greatly reduce wastage and damage to carrots. He was not satisfied that this was incorrect, misleading or deceptive. He noted that there were no records of waste or damage so as to enable any finding to be made as to the position before or after the new line was installed. He also observed that the quality of carrots delivered for processing after the installation of the new line was very different from, and worse than, their earlier quality. This post‑installation quality issue, which had nothing to do with the performance of the new line, was examined at length by his Honour at [187]‑[221] and [226]‑[232]. 10 His Honour's reference to "representations" in the preceding paragraphs was directed to s 52 of the Act. At [346] he noted that the appellant also relied on s 53(c) (performance characteristics, uses or benefits of the new line) and s 51A (representations as to future matters), and said that on the findings he had made in relation to the contractual terms and s 52 representations, it was not necessary to consider s 53(c) or s 51A.

Damages 11 Although he rejected the claims that the respondents had contravened s 52 or s 53(c), the primary judge went on to consider whether, if there had been a contravention, the appellant had suffered any loss as a result. Damages were claimed on a "no transaction" basis, meaning that the appellant would not have entered into the contract had it not acted in reliance on the respondents' misleading representations. The claim was for approximately $1.3 million. His Honour rejected it for two reasons. First, there was no evidence that the new line, as installed, was worth less than was paid for it. Second, even if it were, there was no evidence that that difference was greater than the savings the appellant achieved by operating the new line. 12 The primary judge dealt separately with two particular items of damage. The first related to the flume elevators component of the new line. It was common ground that they did not operate to the standard they ought to have achieved. His Honour would have awarded €60,000: €51,000 as the cost of replacing them and €9,000 for freight and installation. However he made no such award because the flume elevators were not the subject of any pleaded claim. The second specific item of damage related to extra labour and operating expenses occasioned by the deficiencies in the flume elevators and the need to relocate the touch screen. Although there was no evidence of these expenses, his Honour thought that $10,000 would compensate the appellant. Again, however, he did not award that sum for want of a pleaded claim. 13 The primary judge's reasoning in relation to "no transaction" damages is more fully examined at [100] to [116] below.

GROUNDS OF APPEAL 14 There are twelve grounds of appeal, though one of them (ground 4) was not pursued. The first attacks the primary judge's refusal to find at [342] that the respondents had represented that the new line would have the capacity not only to perform each of the separate functions represented (ie process farm fresh carrots at field temperatures, the pack out temperature to be not more than 5°C, and sort and grade them into eight distinct streams within eight hours), but also all of them together in any combination. 15 The second ground is that his Honour erred in finding at [91] that the represented capacity of the new line was to be "construed" on the basis that the line was to be operated using a split shift for the appellant's employees, because this was not alleged by the respondents. His Honour should have found that the representation about the capacity of the new line was to its capacity in a single eight hour period. 16 The third ground asserts error on the part of the primary judge in finding at [75] that the capacity of the existing brush washers was only 15 tonnes per hour, thereby limiting the ability of the new line to achieve the represented capacity within a single eight hour period, when such finding was not reasonably open. 17 The fifth ground assails the judge's failure to find at [324] that the representation that the new line would achieve and guarantee a pack out temperature of less than 5°C at the represented capacity was misleading or deceptive, having regard to the weight of the evidence. 18 The sixth ground attacks the judge's inference at [44] and [327] that Mr Tana had seen length graders in operation in Belgium prior to purchasing the new line and that the limitations on the length graders would have been apparent to him, in that the inference was unsupported by evidence. 19 The seventh ground is that the judge failed to make any finding as to whether the respondents had reasonable grounds within the meaning of s 51A of the Act for their representations as to the capacity of the new line. 20 The eighth ground asserts error of fact on the part of the primary judge at [87] and [345(1)] in failing to "construe" the representation as to the capacity of the new line on the basis that it referred to its capacity in a single eight hour period. This ground is related to the second ground. 21 The ninth ground attacks the judge's finding at [278] that the tests conducted on 17 and 18 November 2003 demonstrated that the new line was capable of achieving the represented capacity, in that: (a) many of the carrots were pre‑chilled; (b) no length grading was carried out and the new line was processing only four streams of carrots rather than eight as represented; (c) many of the carrots packed had a core temperature at pack out of more than 5°C; (d) the carrots were packed as a composite grade of class 1 and class 2 carrots; and (e) the pack out was achieved over a total production time of more than eight hours. 22 The tenth ground is that the primary judge failed to give adequate reasons for his decision, resulting in findings that are unsafe and constituting a substantial miscarriage of justice. Particulars are given of twelve alleged failures to have regard to items of evidence. 23 The eleventh ground claims error by the judge at [385] in assessing the appellant's reliance damages, in that he: (a) allowed for labour saving costs over the whole five year term of the lease of the new line from its financier, whereas Mr Tana's evidence that the line was being shut down and would not be operated for that term, and (b) excluded additional power costs of $89,700 per annum involved in using the new line, with the result that damages should have been assessed at not less than $1.3 million. 24 The final ground of appeal is that the judge should, in the alternative, have assessed the appellant's loss in the sum of €60,000 plus $10,000 (the amounts appearing at [377] and [379]), alternatively in the sum of $44,730 (the amount appearing at [387]).

Ground 7 ‑ s 51A 25 The appellant's seventh ground was at the forefront of the appeal. It pleaded that the representations were with respect to future matters. It was common ground that save for that pleaded in par 9(a) of the statement of claim, the representations were of that character. The respondents did not plead that they had reasonable grounds for making those representations. Following an interlocutory ruling, the primary judge gave the respondents leave to rely upon the matters in a document headed "Respondents' Reasonable Grounds" "as a basis for contending that they had reasonable grounds for the purposes of s 51A(2)". 26 The respondents' reasonable grounds document relies on the following matters: · Mr Proud's statement of his education and training (pages 1 to 9 of his witness statement of 6 March 2007) (the statement). · The respondents' previous dealings with the applicant and Mr Tana (pars 1 to 10 of the statement). · Mr Proud's knowledge of the earlier grading facilities at Sumich's premises (pars 24‑31 and 59‑60 of the statement). · Mr Proud's knowledge and experience of a Bruynooghe system installed at the KalFresh plant in Queensland (par 102.1 of the statement). · Mr Proud's dealings with the Bruynooghe factory in Belgium (par 102.2 of the statement). · Mr Proud's knowledge of the Sumich equipment to be incorporated in the new line (par 102.3 of the statement). · Mr Proud's activities as agent for Bruynooghe and Gillenkirch, another manufacturer of equipment used in the new line, and his knowledge of the capacities of the equipment supplied by them (pars 102.5 and 102.6 of the statement). · Matters disclosed in two letters said to contain the representations relied on, namely Mr Proud's and Proud Machinery's letters of 29 July 2002 and 30 September 2002. · The contents of par 39 of Mr Tana's statement of 25 May 2007 in which he responds to par 102.6 of the statement. · Mr David Harris' statement of May 2007 filed in response to a request by the appellant that he review Mr Proud's statement and "provide any comment that he may have as to the matters raised". 27 The appellant says, correctly, that the primary judge did not in his reasons address whether the respondents had reasonable grounds for making the representations. As indicated earlier, all his Honour said at [346] was that the appellant pleaded that the representations were as to future matters, thus engaging s 51A, and that on the findings he had made, it was not necessary to consider the s 51A claim. 28 So far as presently material s 51A provides: (1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading. (2) For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation. 29 Section 51A(2) imposes an evidential burden on a respondent. It does not impose on a respondent the legal or persuasive burden of proving that reasonable grounds existed for making the representation alleged: see Australian Competition and Consumer Commission v Universal Sports Challenge [2002] FCA 1276 (Universal Sports) at [46]. In Fubilian Catering Services Ltd v Compass Group (Australia) Pty Ltd [2007] FCA 1205 (Fubilian), French J said at [545]: Section 51A '… does not of itself create a cause of action, nor define a norm of conduct' … It does not create a cause of action independent of that created by s 52 when read with s 82 … It certainly casts the 'evidential burden' on the respondent in the sense of an obligation to adduce evidence on the issue of whether there were reasonable grounds for making the representation. It does not impose on the representor the legal or persuasive burden to prove that it had reasonable grounds for making the representations alleged … [T]he section does not refer to the onus of proof when it applies. It merely requires the alleged representor to 'adduce evidence to the contrary'. There may be a question whether the representor can discharge the evidential burden by pointing to evidence which forms part of the applicant's case. In my opinion a respondent may rely upon evidence called by an applicant which answers the description 'evidence to the contrary'. 30 Later at [548], French J said: The causal connection between the respondent's conduct [in a case based on statements of future fact] and the loss or damage claimed is not the breaking of the promise or the failure of the prediction. The causal connection which must be shown to exist is a causal connection between the loss or damage claimed and the making of the promise or prediction without reasonable grounds. 31 The observations of French J recorded at [29] and [30] were applied by the primary judge in the interlocutory ruling referred to at [25]: North East Equity Pty Ltd v Proud Nominees Pty Ltd [2007] FCA 1587 at [19]‑[21]. 32 An appeal to the Full Court in Fubilian [2007] FCA 1205 was dismissed: Fubilian Catering Services Ltd v Compass Group (Australia) Pty Ltd [2008] FCAFC 53, but there was no discussion of the matters canvassed at [29]‑[30]. 33 What is said in Universal Sports [2002] FCA 1276 and Fubilian [2007] FCA 1205 about the evidential burden as opposed to onus of proof is important in the present case. If s 51A(1) stood alone, an applicant would have to establish the absence of reasonable grounds for making the representation. Without that, the cause of action under s 52 would be incomplete. The deeming effect of subs (2) arises only when the representor fails to adduce evidence to the contrary; that is to say, some evidence that it had reasonable grounds for making the representation. Once the representor discharges that evidential burden, the matter is thereafter dealt with under subs (1), the obligation being on the applicant to establish that the representor did not have reasonable grounds for making the representation. 34 The respondents illustrated the operation of the two components of s 51A by reference to one of the matters in its list of reasonable grounds, namely Proud Machinery's letter of 30 September 2002 containing the pack out rate per hour representation. After making the representation the writer went on to explain its basis - "I have used the following as a basis of our calculation". Then are set out pre pack line, carton filler and hand line calculations which, says the writer, explain how "we are able to achieve the desired pack out of 18.75 tonnes per hour". The respondents submitted that while the court may not accept that the letter in fact establishes the existence of reasonable grounds, it nevertheless qualifies as "evidence to the contrary" so as to discharge the evidential burden in s 51A(2). Thus the issue reverts to subs (1) which, say the respondents, "depends entirely upon the applicant satisfying the court that the representation … is in fact misleading or deceptive as s 52 requires". 35 We accept the thrust of this submission, though we think it more accurate to say that once evidence to the contrary is adduced, an applicant must, in order to establish a s 52 contravention, satisfy the court under s 51A(1) that the representor does not have reasonable grounds for making the representation. 36 The primary judge was of course alert to the way in which s 51A has been held to operate. He set out the case law in his interlocutory ruling on the respondents' application to rely on their reasonable grounds document. The ruling shows that his Honour was aware that s 51A required him, in respect of each future matter representation found to have been made, to determine whether the respondents had adduced evidence to the contrary, and if they had, whether the appellant had established that the respondents did not have reasonable grounds for making the representation. If the respondents did not adduce evidence to the contrary, the second question would not arise, because they would be deemed not to have had reasonable grounds. However, as the respondents accept, the complaint is that his Honour did not expressly consider these questions in his reasons. In view of his exploration of the two questions in his interlocutory ruling, his disposal of the appellant's reliance on s 51A may well have involved a conclusion that the respondents had adduced evidence to the contrary and that the appellant had not satisfied him that the respondents did not have reasonable grounds for making the representations. However, that is nowhere explained and no reasoning process is exposed. 37 The respondents accept this lacuna, but seek to escape its consequences by contending that the primary judge's conclusion that the appellant had not established the existence of loss or damage should not be disturbed. 38 The consequence of a judge's failure to give adequate reasons was recently considered by the Full Court in Echo Tasmania Pty Ltd v Imperial Chemical Industries PLC [2008] FCAFC 58 (Echo) at [41]: A failure by a trial Judge to give adequate reasons does not necessarily mean that the matters should be remitted for a new trial or for the purpose of the trial Judge formulating adequate reasons for the orders. In Bourke v Beneficial Finance, for example, the Full Court considered (at 284) that, although the trial Judge in that case had not given adequate reasons for his conclusions, the appropriate course was for the Court to analyse the documentation upon which the appellants relied and reach its own conclusions as to whether the orders made at first instance were justified. Since the analysis showed that the appellants could not succeed in their claims for relief, the Court concluded that there was no point in sending the matter back for a new trial … Their Honours pointed out that in Echo [2008] FCAFC 58, as in Bourke v Beneficial Finance Ltd (1993) 47 FCR 264 (Bourke), there was no issue concerning the credit of witnesses, and the case depended entirely on the documentation and on unchallenged evidence. In those circumstances, they thought the appropriate course was for them to determine, on the evidence before the primary judge, whether his orders were properly made. 39 The present case is unlike Echo [2008] FCAFC 58 and Bourke 47 FCR 264. If the respondents are found to have adduced evidence to the contrary for the purposes of s 51A(2), the question will be whether the appellant has established that Mr Proud did not have reasonable grounds for making the representations. In answering that question the primary judge will have the advantage we do not have of having seen and heard Mr Proud give his evidence. Further, the reasonable grounds issue does not depend entirely on documentation and unchallenged evidence. 40 In Mount Lawley Pty Ltd v Western Australia Planning Commission (2004) 29 WAR 273 (Mount Lawley) at [29] the Full Court said that one case in which an appellate court might itself decide the matter was where only one conclusion is available on the evidence. That is not the case here. The parties' detailed written submissions on this issue, and our own preliminary examination of the evidence, disclose that the s 51A reasonable grounds issue is far from open and shut. In recognition of the inappropriateness of our undertaking this enquiry ourselves, neither party suggested that we should embark on that exercise. Mr Allanson SC submitted that the only course was for there to be a new trial on the trade practices claims, that is to say without reopening the contract and tort causes of action. Mr McGowan also adopted that approach. 41 As appears from Echo [2008] FCAFC 58 at [41], an alternative to ordering a new trial is for the matter to be remitted for the purpose of the primary judge formulating reasons for his conclusion that s 51A did not assist the appellant. The appropriate course to adopt will depend on the circumstances of the particular case. Here, the inadequacy of reasons is restricted to one comparatively small point. The primary judge's reasons are otherwise comprehensive. A retrial, even on the limited issues on which the appellant seeks it, is unnecessary.

Ground 1 - representation as to capacity of plant 42 In the first ground of appeal, the appellant contends that the primary judge erred in finding that the respondents had not represented that the new line would have the capacity to perform each of the separate functions represented together in any combination. The appellant contended that the primary judge should have found that the respondents represented that the new line was capable of performing each of the separate functions together in any combination. 43 The primary judge found that the representation as to the capacity of the plant was to be qualified by reference to the input or selection of grades of carrots processed. The primary judge's conclusion is based on a detailed analysis of the surrounding circumstances and of what the parties knew or would be reasonably expected to know prior to entering into the contract. The primary judge said at [338]‑[339] of his reasons: It was up to North East Equity to determine the mix of sizes of carrots it fed into the new line. Thus, as a matter of commonsense, when Mr Tana and Mr Proud discussed the capacity of the new plant to process a number of tonnes per hour, each must have had understood that consistency of the size and quality [of] carrots introduced at the commencement of the production process, affected the capacity of the plant to pack out particular numbers of carrots. And, a reasonable person in their position would have understood this. If the carrots were predominantly, as appeared to have been the case, small and small/medium, eight different lengths and grades would accumulate in the tanks at significantly differing rates. That would require the person controlling the production process to have a keen eye on how quickly the receiving tanks were filling up. Once more than one tank was full (there being a spare tank) it would be necessary to stop the input of the line so as to clear up to three of the full tanks by commencing the packing process. Thus, the selection of the sizes of carrots to be processed, using the girth and length graders would have a critical impact on how output would occur. It was obvious to the parties, at the time of the contract, that Proud Machinery and Mr Proud had no control over the sizes of the carrots grown on the farms and delivered for processing. That input, and the selection of the grades for processing, were critical inputs beyond the control of Proud Machinery and Mr Proud. Both parties must have understood this at the time of the negotiations. The capacity or ability of the plant to grade and process carrots at a particular rate per hour was one thing. However, I do not think either party understood that what each of Proud Machinery and Mr Proud was being asked to do was to guarantee that, whatever the variety or combination of inputs in carrot size or length, there would or could be a minimum constancy of output. 44 The appellant complained that none of the respondents' written representations were qualified by reference to input or selection of grades of carrots. Further, the appellant contended that the finding that the appellant must have understood the representations were limited in that way, was not supported by evidence. In this regard, the appellant referred to the affidavit evidence of Mr Tana. 45 In our view, these circumstances would not preclude the primary judge from coming to the view that he did as to the content of the representation. Further, in our view, the primary judge did not err in coming to the conclusion that he did. In determining or "construing" the content of a representation, and whether a party has engaged in misleading or deceptive conduct, all of the surrounding circumstances must be taken into account, not just the terms of the representations standing alone. 46 In Butcher v Lachlan Elder Realty Pty Limited (2004) 218 CLR 592 (Butcher), the High Court emphasised that in assessing whether a party has engaged in misleading or deceptive conduct, the court is required to have regard to all of the circumstances. The assessment is then made by reference to what a reasonable person in the position of the representee would have understood. 47 At [109] of Butcher 218 CLR 592, McHugh J (who was in the minority, but not on this issue) observed as follows: The question whether conduct is misleading or deceptive or is likely to mislead or deceive is a question of fact. In determining whether a contravention of s 52 has occurred, the task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. It is an objective question that the court must determine for itself. (Footnote omitted.) 48 Accordingly, because the test is an objective test, the subjective evidence of what the representee understood the impugned representation to convey is not determinative of the proper construction of the impugned representation and, more particularly, whether by engaging in that conduct, the representor has engaged in misleading or deceptive conduct. 49 The primary judge properly applied the correct approach to the construction of the representation. His finding as to the construction of the representation was open to the primary judge. The first ground of appeal is dismissed.

Grounds 2 and 8 - capacity of the plant in an eight hour day 50 The second and eighth grounds of appeal can be dealt with together because both grounds impugn the primary judge's finding as to the content of the respondents' representation as to the packing capacity of the new line. The appellant pleaded that the respondents had represented that the new line would fulfil the appellant's desire to pack 150 tonnes of carrots over an eight hour working day. 51 The primary judge rejected the appellant's contention that the respondents had represented that the packing capacity could be achieved during an eight hour working day comprising a continuous shift. The primary judge found that the representation was that the pack out capacity could be achieved by operating a split shift during the course of an eight hour working day. 52 The primary judge relied particularly upon the content of a memorandum dated 1 August 2002, which Mr John Webster, the maintenance manager of the appellant, had sent to Mr Tana, in response to Mr Tana's request that Mr Webster comment upon the proposals and drawings of the new line which had been sent to Mr Tana by Mr Proud. In that memorandum, Mr Webster reported on discussions he had had with a fellow employee who also had expertise in the operation of a carrot processing plant. Further, in that memorandum Mr Webster contemplated that the processing plant would operate in split shifts. Mr Webster also recognised in that memorandum that because of the quality limitations of the existing brush washing machines, the machines could not supply 150 tonnes worth of good polished carrots in eight hours. 53 The primary judge also found that Mr Tana was aware that if the speed of the brush washers was increased beyond the 14-15 tonnes per hour to which Mr Webster referred, this would have an adverse consequence on the quality of the processed carrots. 54 At [38] of his reasons, the primary judge said: Thus, it was clear to Mr Tana that, to achieve his objective of 150 tonnes in an 8 hour shift, he would have to have his work force operating on split shifts as Mr Webster's memorandum had discussed. In that way, it would be possible for the work force, efficiently managed, to have the individual workers paid only for 8 hour or shorter shifts, but they would not all work during the same 8 hours in any one day. Indeed, as the expert evidence made clear, split shifts in the food packaging and processing industry are common. I am satisfied that Mr Tana was, at all times, fully cognisant of this fact. 55 The primary judge found that taking into account the surrounding circumstances and the facts known to both parties, the representation as to the ability of the plant to meet the represented output was to be construed on the basis of the plant being operated on a split shift system. This was a system whereby employees did not work for more than eight hours, rather than working in a single eight hour shift. 56 At [84] the primary judge observed: With this background in mind, a reasonable person in the position of the parties would have appreciated that the figure of 18.75 tonnes per hour final pack out on the pallet, could only be achieved for good quality carrots in an efficiently run plant using a split shift for its work force. 57 The appellant complained that the respondents had not pleaded that the representation was to be construed as referring to split shifts, nor was this stated as an issue in the statement of issues for the trial. 58 The primary judge, however, found that it was unnecessary for the respondents to have pleaded that the representation was to have been construed in that way. The primary judge said that as the question was one of construction of the representation, it was not necessary for the respondents to have pleaded the meaning of the representation. In our view, the primary judge did not err in coming to that conclusion. It was incumbent upon the appellant to establish that the respondents' representation would be understood by a reasonable person in the position of Mr Tana in the terms in which it was pleaded. This it failed to do. 59 Further, the primary judge held that in any event this issue had been the subject of cross‑examination and re-examination of Mr Tana. 60 In our view, therefore, the appellant's contention that the primary judge was precluded from making his findings as to the "proper construction" of the representation, because the operation of the plant by a split shift was not an issue at trial, is to be rejected. 61 The appellant also complained that the primary judge's finding was not supported by the evidence. As previously stated, the meaning of a representation is to be construed by reference to the surrounding circumstances known to the parties. The content of Mr Webster's memorandum was an important part of the surrounding circumstances. Further, the primary judge supported the finding that Mr Tana appreciated that there would be a split shift operation by reference to a letter of complaint that Mr Tana sent on 12 September 2003. The letter was addressed to Mr Proud. The primary judge noted that in the letter Mr Tana made no complaint about the split shift operation commencing at 6 am which he described in this letter. The primary judge went on to say at [241] that: I infer that this was because it was always his understanding that the new line, which he and Mr Proud discussed in 2002, would operate with a split shift, as Mr Webster's memorandum of 1 August 2002 had indicated. 62 It was open to the primary judge on the basis of that evidence to make the finding which he did. The fact that the letter was not written until 2003 does not preclude it from comprising a source of evidence of Mr Tana's understanding in 2002. 63 The second and eighth grounds of appeal are dismissed.

Ground 3 - capacity of the brush washers 64 The third ground of appeal is that the primary judge erred in finding that "the capacity of the existing brush washers was only 15 tonnes per hour and thereby limited the ability of the new line to achieve the represented capacity within a single 8 hour period", when such a finding was not reasonably open. 65 Contrary to the contention of the appellant, the primary judge did not find that "the capacity of the existing brush washers was only 15 tonnes per hour". The primary judge found that Mr Webster's memorandum showed that the existing brush washers "could not process more than 14-15 tonnes per hour if a good quality were to be maintained". 66 The primary judge went on to find that each of Mr Webster and Mr Tana (to whom the memorandum had been addressed) was aware that it was impossible, even if the whole plant operated continuously for an eight hour day, to process more than 120 tonnes of good quality carrots. 67 The primary judge recognised that the brush washers could operate at a higher capacity, but the primary judge also recognised Mr Webster and Mr Tana were aware that if the brush washers operated at the higher capacity, the quality of the cleaning of the carrots would be adversely affected. 68 At [77] the primary judge observed: I am satisfied that Mr Tana was fully aware of this limitation in his work force's operating hours when he decided that North East Equity would contract with Proud Nominees for the new line. I am also satisfied that a reasonable person in the position of the parties would have appreciated that Proud Nominees was representing and warranting that the packing machines could operate, initially, at the 18.75 tonnes per hour (and, after deletion of the handline, at 17.55 tonnes per hour), but that for good quality carrots, this output level could only be achieved by building up a store of carrots which had been processed through the brush washer operating at a slower speed. And, they would have appreciated that, when the letters of 30 September and 8 October 2002 referred to the capacity of the line to process 22.8 gross tonnes of carrots per operating hour, they must have had in mind the overall operation of the plant in a commercially efficient manner that would result, at the time of pack out, in a net output of 18.75 tonnes of good quality carrots. Both knew the quality limitations on the brush washers which prevented them feeding more than 15 tonnes per hour into the grading and chilling tank system, as Mr Webster's memorandum to Mr Tana of 1 August 2002 demonstrated. Equally, both knew that the existing brush washers had the capacity to process carrots at 22.8 tonnes per hour if North East Equity wished to use them at that speed, and so sacrifice quality. 69 These findings were open to the primary judge. The third ground of appeal is dismissed.

Ground 5 - pack out temperature of the carrots 70 The fifth ground of appeal is that the primary judge erred in failing to find that the respondents' representation that the new line would achieve and guarantee a pack out temperature of less than 5şC at the represented capacity was misleading or deceptive. This was because, so the appellant contended, the new line was not able to achieve the represented outcome. 71 The appellant contended that the finding of the primary judge was against the weight of evidence and also contrary to his finding that there was, on any view, a risk that some carrots would not be chilled to 5şC or less. 72 The primary judge heard evidence from experts on the operation of the chilling tanks. One of the experts was Mr Harris, the expert called by the appellant. Another of the experts was Mr Gillenkirch who was called by the respondents. Mr Stammers, a witness called by the respondents, was instructed by Mr Gillenkirch to make observations of the operation of the chilling tanks and record results for the purpose of assisting in the preparation of his expert report. Mr Stammers reported that it was possible for a carrot to go from one end of the chilling tank to the other and to exit in about five minutes, which was not a sufficient time for the carrot to be chilled to 5şC. Mr Gillenkirch agreed that there was a low risk that this could happen. 73 The primary judge found that there was a risk that a carrot introduced into a chilling tank would come out of it before it had chilled to 5şC. However, he found that the risk was relatively low. In coming to that view, the primary judge accepted the evidence of Mr Gillenkirch. The primary judge concluded at [324] that: I accept Mr Gillenkirch's evidence that the risk was relatively low that, after a considerable period of accumulation of the lower volume sizes, a carrot recently introduced into a chilling tank would come out before it had chilled to 5şC. This risk was more likely to occur in the tank in which Mr Stammers did his experiment, but that did not make the new line, as a whole, deficient. That tank could be managed so as to minimise the risk. None of the experts measured whether this in fact was occurring in the operation of North East Equity's plant. However, Mr Gillenkirch's experience with the ordinary operation of such plants satisfied me that, in terms of fitness for purpose, the system was reasonably capable of processing carrots at 5şC or less, even if there were a small risk that a few carrots in the smaller volume sizes might slip through without having been chilled to 5şC. Overall, such a risk was unlikely to affect the quality of the out turn in any material way. 74 As the primary judge found, the question whether the representation was misleading or deceptive had to be assessed by reference to the system as a whole. 75 The fifth ground of appeal is dismissed.

Ground 6 - representation of quality length sizing 76 The sixth ground of appeal is that the primary judge erred in finding, by way of inference, that Mr Tana had seen length graders in operation in Belgium prior to purchasing the new line and that the limitations of length graders would have been apparent to Mr Tana. It was contended that the inference was unsupported by the evidence and was not reasonably open to the primary judge. It was said that the primary judge ought to have found that the representation as to the capacity of the length graders was a cause of the appellant's decision to purchase the new line. 77 One of the claims made by the appellant was that Mr Tana was misled by the statements made by the respondents that the new line had the ability to sort and grade carrots into eight distinct streams of size and length grades. The appellant specified five widths and three lengths into which the carrots should be able to be graded. The appellant went on to contend that the representation was false because of the inability of the length graders to grade all of the carrots accurately. 78 The primary judge rejected the appellant's contention that Mr Tana had been misled by this representation. 79 The primary judge observed that the expert evidence was consistent with Mr Proud's evidence that length graders were "inherently inaccurate". The conclusion of the experts was that the shape of the carrots impeded consistent grading. The primary judge found that this would have been known to Mr Tana. He inferred that Mr Tana had seen the length graders in operation during his visit to Belgium when he saw a system in operation similar to that described in Proud Machinery's letter of 29 July 2002. It is this finding of the primary judge which is impugned. 80 The grading component of the new line comprised machinery manufactured by Bruynooghe. Mr Tana visited the Bruynooghe factory in Belgium to inspect the Bruynooghe machinery in operation in about July or August 2002. Prior to Mr Tana going to Bruynooghe, Mr Tana had discussions with Mr Proud about the Bruynooghe processing system and had seen a DVD presentation made by Mr Proud of the Bruynooghe system in operation at the new KalFresh plant. 81 In Belgium Mr Tana met Bruynooghe's export manager, Mr Seldeslachts and Mr Parrein, the managing director of Bruynooghe. Mr Tana was taken to the Bruynooghe head office and factory. Mr Tana was also taken to observe three Bruynooghe plants in operation at various factories, one of which Mr Tana considered to be similar to the proposed Wattleup plant. Whilst he was at the Bruynooghe office he was shown drawings of the then current version of the design for the Wattleup plant. 82 The primary judge also found that whilst Mr Tana was in Belgium on this visit, he telephoned Mr Webster and reported enthusiastically on the operation of the Bruynooghe machinery. 83 In evidence, Mr Tana said that he had not noticed any length grading occurring in the Belgian operations that he had been shown. Mr Tana said that he had not gone to Belgium to understand technical specific matters about the Bruynooghe system. 84 The primary judge said at [43] and [44]: In his written evidence, Mr Tana went as far as claiming that he had no prior knowledge of the Bruynooghe tank sytem and "(a)ll of my knowledge came from (Mr) Proud's representations to me". He said this in responding to Mr Webster's evidence that Mr Tana had rung him from Belgium sounding very excited and had said: "It looks like this could be the way to go". In cross-examination Mr Tana accepted the accuracy of Mr Webster's account. He sought to explain his written response to it as relating to his initial discussions with Mr Proud. I reject Mr Tana's evidence seeking to minimise his investigations, knowledge and understanding of the Bruynooghe system. As he said in cross-examination: …I had availed myself of knowledge by going to see the system itself, by having sent John Webster by (sic) Queensland to view the system. Mr Tana said that he was taken to a plant in Belgium with a similar operation to that he was contemplating for Wattleup. He claimed not to recall whether he saw a length grader at a plant in Belgium. I infer that, in Belgium, Mr Tana ensured for himself by his discussions with Bruynooghe and his inspections, how each important part of the equipment described in Proud Machinery's letter of 29 July would operate. That is why he was so enthusiastic when speaking from Belgium with Mr Webster. I also find that Mr Tana observed in operation Bruynooghe length graders of the kind later installed in his new line. 85 Further, at [329] the primary judge said: I have approached Mr Tana's evidence with caution for reasons I have given above. He was a skilled and astute businessman. He examined business propositions with care. I am satisfied that Mr Tana was aware of the nature and practical operation of the length sizers that Proud Machinery suggested before deciding to enter into the contract. I am not satisfied that he was misled. 86 We reject the appellant's contention that the inference drawn by the primary judge was not open on the evidence. The inference was open on the basis that a skilled and astute businessman who was cautious enough to undertake an investigative trip to Belgium would have made a close observation of the operation of the machinery he had come to observe. 87 This was a finding which was open to the primary judge to make.

Ground 9 - finding regarding November 2003 test 88 The ninth ground of appeal complains that the primary judge had erred in finding that the tests conducted in November 2003 demonstrated that the new line was capable of achieving the represented capacity. 89 The gravamen of the complaint was that the test carried out in November 2003 could not constitute a test of the represented capacity of the new line because of the circumstances in which the test was carried out. These included that a composite class of carrots was used for the test, that many of the carrots were pre-chilled, that no length grading was carried out and that pack out was achieved over a total production time of more than eight hours. 90 The primary judge noted the circumstances in which the test was carried out. He found, by reference to the notes made of the test and the evidence of Mr Gillenkirch, which he preferred over Mr Tana's, that both class 1 and class 2 carrots had been used in the test. The primary judge also found, however, that the quality of the carrots which had been used in the test had been adversely affected by conditions on Mr Tana's farms. The primary judge also considered and rejected Mr Tana's evidence that "all carrots were pre-chilled". The primary judge found that a proportion of the carrots had been pre‑chilled - he inferred that over 60% were processed at ambient temperature and had not been pre-chilled. Further, the primary judge found that the packing operations had used the split shift and had taken less than six hours to pack out about 130 tonnes of carrots, and that it was "clear to everyone present that the line could process at least 17.55 tonnes per hour at final pack-out". The primary judge also found that the length graders were not used. 91 The primary judge went on to reject Mr Tana's evidence that the purpose of the November 2003 test was to assess the box packing section of the line and that all other parts of the line were compromised to ensure that the maximum amount of carrots were fed to the box packing machines. The primary judge found at [280] that if the purpose was as limited as Mr Tana asserted, there would have been no need for Mr Vermeulen, as a representative of Bruynooghe, or for Mr North to have been present. They could not have contributed to the simple question of whether the Newtec and Gillenkirch machines were capable of processing 17.55 tonnes per hour. Moreover, that assertion was inconsistent with Mr Tana's conduct immediately after the test during the meeting between him and Messrs Proud, Gillenkirch, Webster, Vermeulen, North and Hunter. 92 The primary judge also found at [282] as follows: I find that the purpose of the test on 17 or 18 November 2003 was to assess the overall operation of the plant to see whether, in substance, it met the contractual or represented requirements, after making allowances for the fact that the length graders were no longer being operated, and the number of classes graded had reduced from eight to five. 93 The primary judge then went on to find that after the test, a meeting was held on 18 November 2003 at the appellant's offices. Mr Tana attended the meeting. The primary judge found (at [283] of his reasons) that Mr Tana confirmed to Mr Proud at that meeting that he was satisfied with the day's production and that if four problems were fixed then he would accept the installation of the new plant and would pay Proud Machinery the $50,000 that had been withheld. 94 Accordingly, the primary judge did not make an unqualified finding, as is contended for by the appellant, that the test showed that the plant met the represented capacity. The primary judge found that the purpose of the test was to assess the overall operation of the plant to see whether "in substance" it met the contractual requirements subject to the circumstances in which it was undertaken. He then went on to find that Mr Tana knew that this was the purpose of the test and that he was satisfied with the day's production. 95 It follows that the appellant has misconstrued the nature of the primary judge's finding. The ninth ground of appeal is dismissed.

Ground 10 - findings unsafe in general 96 This ground of appeal contends that the primary judge failed to give adequate reasons and adequately assess and analyse all the relevant evidence, and that because of the delay by the primary judge in delivering the judgment "it should be inferred…that his findings are unsafe resulting in a substantial miscarriage of justice". 97 The appellant particularises a number of items of evidence to which, the appellant contends, the primary judge did not have regard. The appellant does not, however, identify how the alleged failure to deal with each particularised item of evidence led to any erroneous finding of fact or law. It appears to be the appellant's contention that by reason of the totality of the alleged omissions, in the circumstances of a delay in delivering the judgment, the whole judgment is unsafe. This ground of appeal is founded on Mount Lawley 29 WAR 273. Indeed, the language used in the ground of appeal echoes the related ground of appeal relied upon by the appellant in that case. However, the present case is entirely distinguishable from Mount Lawley 29 WAR 273. In Mount Lawley 29 WAR 273, the Western Australian Court of Appeal observed at [37]: …the judgment runs…to only 24 pages of text and makes no attempt to refer to much of the relevant evidence or to set out, in any adequate way, the trial judge's reasons for preferring significant sets of evidence over other significant sets of evidence. Moreover, this was a factually and legally complex case which involved an intellectual exchange with reasons and analysis advanced on either side. However, the trial judge, in significant instances, did not enter into the issues canvassed before him in any adequate way or provide explanations for his decisions which treated those intellectual exchanges with the respect which they plainly warranted. 98 In this case, however, the primary judge, during the course of his judgment which ran to 134 pages, has on the whole, addressed his mind to analysing the evidence and has "entered into the issues canvassed before him" by giving detailed reasons for the conclusions to which he came on the issues which were tried before him. That is not to say, however, that in relation to certain specific matters, the primary judge's approach may not be criticised on the basis of the failure to provide adequate reasons. Indeed, we have found that to be the case in relation to the manner in which the primary judge dealt with ground 7 of the appeal and the question of damages. But that is an entirely different matter to the challenge to the integrity of the judgment as a whole, made by this ground of appeal. 99 In our view, therefore, this ground of appeal should be dismissed. Insofar as the primary judge may have failed to give adequate reasons or failed to take into account the relevant evidence with the consequence that erroneous findings of fact or law were made, such complaints could have been (and were in some cases) expressed in independent grounds of appeal. As mentioned, the appellant's complaints, as expressed in independent grounds of appeal, have in some instances been upheld. The further contention, however, that the findings as a whole are unsafe, is to be rejected.

The primary judge's assessment of damages 100 At [146] and [147] of the reasons, the primary judge accepted that the representations made by the respondents were calculated to and did induce the appellant to enter into the contract; there was no serious dispute that the appellant had "relied on any representations which would be found"; by entering into a contract to define their legal relationship the appellant and the first respondent, Proud Machinery, selected an agreed expression of the promises; and Mr Tana, on behalf of the appellant, would not have signed the contract unless he was satisfied that the documents correctly reflected the agreed standard of performance. 101 In presenting its case at trial, the appellant formulated a methodology for the assessment of the loss and damage it suffered on the footing that it would not have entered into the contract and the subsequent lease with the financier, the Bank of Western Australia Limited, but for its reliance on the representations of Proud Machinery and Mr Proud. 102 Applying this "no transaction" methodology, the appellant calculated its reliance loss or damage in this way. 103 First, the appellant entered into a five year lease with the financier ending on 30 May 2008 which gave rise to an obligation to pay lease payments amounting to $4,328,230. This figure was agreed between the parties. Secondly, the appellant had acquired new plant described as the new line which had a value. An experienced auctioneer, Mr Gregson, made an assessment of the auction value of the new line at May 2007 of between $640,000 and $960,000 and the appellant selected the upper value of $960,000 as the "true value" of the new line at that date which it said was the relevant date. The off‑setting true value of the new line in the hands of the appellant reduced its loss from $4,328,230 to $3,368,230. 104 Thirdly, the appellant derived some labour cost savings from operating the new line. The appellant gave evidence that its production costs using the new line had decreased from $1.20 per carton to between 86c and 90c, generating a saving of between 30c and 34c per carton. The appellant selected the low end of that range and accepted that it had generated a 30c saving per carton on 1,955,000 cartons resulting in an annualised saving of $586,550. 105 The appellant contended that those savings ought to be calculated over a four year period as the appellant ceased operating the new line after four years. Over that period the savings constituted $2,346,200 reducing the appellant's loss to $1,022,030. 106 Fourthly, by operating the new line, the appellant incurred additional power costs of $89,700 per annum which over four years amounted to $358,800 increasing the loss to $1,380,830. 107 Accordingly, the appellant contended that it was worse off by reason of the conduct of the respondents by approximately $1.3m. 108 The primary judge in analysing the appellant's methodology reached these conclusions. 109 First, since the new line had continued to operate beyond a four year period and there was no evidence that the appellant intended to bring the lease to an end before the expiry of the five year term, the calculation of the off‑setting benefit derived by the appellant should be made over the whole five year term of the lease rather than four years: [386]. Secondly, the production cost savings achieved by the appellant through the use of the new line were not less than 34c per carton (costs having reduced to 86c per carton from $1.20 per carton) resulting in an annualised production cost saving on 1,955,000 cartons of $664,700: [387]. The primary judge projected those cost savings over five years and found that the appellant ought to be treated as having achieved production cost savings of $3,323,500. On that basis, the loss was reduced to $1,004,730 from the five year lease costs of $4,328,230. Accepting, for the purposes of the argument, a real value of the new line in the hands of the appellant of $960,000, the primary judge calculated that the correct loss suffered by the appellant, applying the appellant's methodology, was $44,730: [387]. 110 Thirdly, the primary judge concluded that since he had rejected the claim that any representation had been made to the effect that the appellant's power costs would be less if the new line were acquired, the additional power costs incurred by the appellant in operating the new line of $89,700 per annum were to be excluded from the calculation. 111 The primary judge found that since the appellant, on its methodology although adjusted to reflect its proper application in the circumstances that emerged, was likely to incur such a small loss, common sense dictates that the appellant would have contracted to acquire the new line. The primary judge found that since the appellant was optimistic in 2002 that the demand for carrots would increase thus generating greater savings, the appellant would have replaced its existing inefficient old plant with the more efficient new line plant: [388]. 112 However, the primary judge found that the correct date for determining the true value of the new line in the hands of the appellant was the date of acquisition, March 2003: [389]. Further, the primary judge found that there was no evidence of true value at that date and did not accept Mr Gregson's appraisal of the auction price realisable in May 2007 as providing any reasonable basis on which to arrive at the true value of the new line in March 2003 "when it was brand new": [389] and [392]. The primary judge concluded that the appellant had not suffered any loss or damage by conduct of the respondents and that arose because first, there was no evidence that the new line, as installed, was worth less than the appellant paid for it and secondly, even if the new line was worth less than $3m, there was no evidence that the difference was greater than the savings the appellant had achieved by operating the new line: [391]. 113 Accordingly, the primary judge at [393] calculated the appellant's loss and damage in the following way: Total cost to the appellant of the new line based on the appellant making all lease payments to the bank for five years to 30 May 2008 (being the figure agreed between the parties) $4,328,230 Bring to account the true value of the new line in the hands of the appellant at the date of acquisition, March 2003 at an assumed value of $1.5m $1,500,000 Balance loss $2,828,230 Bring to account the labour cost savings achieved by the appellant through the use of the new line for five years based upon a saving of 34c per carton for 1,955,000 cartons per annum ($664,700 per annum) $3,323,500 Balance benefit derived by the appellant $495,270 Bring to account claimed additional power costs per annum of $89,700 for five years $448,500 Balance benefit derived by the appellant $46,770

114 The primary judge postulated that if the new line in March 2003 had a value of even half of the price payable to Proud Machinery in March 2003 of $3m, namely, $1.5m, the recalculation of the damages demonstrates that the appellant was actually better off rather than worse off by having entered into the contract and subsequent lease agreement with the bank in reliance upon the conduct of the respondents: [393]. The primary judge seems to have brought the additional power costs to account in the calculation so as to demonstrate that even if the rejected claim is included, the applicant nevertheless obtained a benefit assuming that the true value is calculated at March 2003 at $1.5m. 115 As to the election to cease using the new line facility, the primary judge said at [394]: The fact that North East Equity chose to move most of its packing operation in October 2007 from Wattleup is not relevant to the application of the methodology suggested by it, since it has claimed the cost of leasing up until May 2008 [the full five years]. Had it continued to use the new line, it would not have been worse off. Its decision to change its operations should be viewed in the same way that the decision to buy new turbines in British Westinghouse [1912] AC at 691 was viewed; namely, that the decision to centre operations at Lancelin was commercially sensible and would enable North East Equity to eliminate unnecessary road transport costs including for transport of rejects and waste. 116 At [395] the primary judge concluded that he could not be satisfied that the appellant had established what the worth of the new line was when installed in March 2003 and thus his Honour was not satisfied that the appellant had suffered any loss in receiving "something worth less than what it agreed to pay or what the bank actually paid for it …". 117 By ground 11 of its Notice of Appeal the appellant contends that the primary judge erred in fact and in law in assessing the appellant's reliance damages as claimed in the formulation set out at [385] in: (a) allowing for labour saving costs over the whole five year term of the lease given the unchallenged and uncontradicted evidence of Tana that the new line was being shut down and would not be operated for that five year period; and (b) excluding additional power costs of $89,700 p.a. using the new line; and in the premises the learned trial judge ought to have assessed the appellant's loss and damage at not less than $1.3 million or such lesser sum as would follow if only one of the subgrounds (a) or (b) herein were upheld. 118 Accordingly, two specific errors are identified, namely, the calculation of labour cost savings over a five year period rather than the lesser period having regard to the closure of the new line facility, and the exclusion of the additional power costs incurred each year by the appellant in using the new line. However, the appellant says that the primary judge ought to have assessed the appellant's loss and damage at not less than $1.3m, in accordance with the formulation at [385] which necessarily challenges, although not put expressly, the primary judge's finding that the date for determining the true value of the new line was the date of acquisition, March 2003, rather than the date selected by the appellant of May 2007 based on the evidence of Mr Gregson. That follows because the appellant's claimed loss of $1.3m was calculated on the footing that the value or worth of the new line to be brought to account was $960,000, being the top end of Mr Gregson's assessment at May 2007 set out in his report of 24 May 2007 (AB - Part C, Vol. 4 1297 and following). 119 The appellant contends that if five years of labour cost savings are to be brought to account, being the actual cost savings and assumed savings had the appellant continued to operate the new line for the term of the lease, so too should five years of additional power costs incurred throughout the same period through use of the new line, be included in the calculation. On that footing, five years of additional power costs at $89,700 p.a. amount to $448,500 constituting a loss, having regard to his Honour's approach, of $493,230. 120 Alternatively, if four years of labour cost savings are brought to account rather than five, his Honour's calculation of the amount of the loss of $44,700 should be increased by $664,700 constituting a loss of $709,400. If four years of additional power costs are brought to account ($358,800) the loss amounts to $1,068,200.

The principles 121 As we have already indicated, it was common ground on appeal that save for that pleaded at para 9(a) of the Statement of Claim, the representations inducing the appellant to enter into the contract and the lease with the bank were representations with respect to future matters engaging s 51A of the Act. As we have also noted, the respondents accept that the primary judge did not expressly consider (and therefore did not determine) in respect of each future matter representation found to have been made, whether the respondents had adduced "evidence to the contrary" for the purposes of s 51A(2) of the Act and if so whether the appellant had established that the respondents did not have reasonable grounds for making each representation found to have been made: s 51A(1). 122 The question of whether the primary judge erred in fact or in law in assessing whether the appellant had suffered loss or damage by conduct of the respondents done in contravention of s 52 of the Act for the purposes of s 82 of the Act should be answered on the footing that each of the representations as found constitutes a contravention of s 52, having regard to the lacunadescribed earlier. 123 The amount of the loss or damage suffered by the appellant by conduct of the respondents done in contravention of s 52 of the Act is measured for the purposes of the statutory remedy of s 82, by asking what measure of damages properly conforms to the remedial purpose of the statute and does justice and equity in the circumstances of the case: Henville v Walker (2001) 206 CLR 459 (Henville) at [18] per Gleeson CJ. In this case, the appellant was induced to enter into the contract and the lease with the bank in reliance on the representations as found. It suffered loss by contravening conduct (for the purposes of this discussion) in terms of the well known passages in the judgment of Mason CJ, Dawson, Gaudron and McHugh JJ in Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525‑526. Once such a connection is found to exist, nothing in s 82 suggests that the recoverable amount should be limited by reference to analogues drawn from contract, tort or the principles governing the application of equitable remedies, although these references will usually be of "great assistance": Henville 206 CLR 459 at [130] per McHugh J. That is so because the common law principles have had to respond to problems of the same nature as the problems which arise in the application of the Act. These principles "are not controlling, but they represent an accumulation of valuable insight and experience which may well be useful in applying the Act": Henville 206 CLR 459 at [18] per Gleeson CJ. 124 Although these principles provide great assistance, insight and valuable experience and learning, s 82 (like s 87 in respect of a likelihood of suffered loss or damage by reason of the relevantly contravening conduct) is singular and sui generis in the sense that s 82 is cast in broad terms, is unconfined by analogues drawn from the common law and is capable, by its terms, of being adapted to accommodate approaches to the assessment of damages that provide proper compensation in all the circumstances provided the particular approach serves the purpose of doing justice and equity in the circumstances of the case: Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 (Marks) per Gaudron J at [17], per McHugh, Hayne and Callinan JJ at [38], [41], per Gummow J at [103], per Kirby J at [152]; Henville 206 CLR 459per Gleeson CJ at [18], per McHugh J at [130], [131]; I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 per Gaudron, Gummow and Hayne JJ at [42] to [48]; Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 per Gleeson CJ, McHugh, Gummow, Kirby, Hayne, Callinan and Heydon JJ at [31], [44] and [45]. 125 However, as to the assistance these principles derived from the general law might provide, McHugh J observed in Henville 206 CLR 459at [132] that the general principles for assessing damages may have to give way altogether in particular cases to solutions best adapted to give the injured claimant an amount which will most fairly compensate for the wrong suffered. The Court must, in particular cases, configure solutions best adapted to giving a claimant that amount in damages which will most fairly compensate for the wrong suffered: Johnson v Perez (1988) 166 CLR 351 per Mason CJ at 355 and 356. The appropriate approach is to identify what loss or damage the appellant has suffered by way of prejudice or disadvantage in consequence of altering its position in reliance upon the contravening conduct: Henville 206 CLR 459at [132] per McHugh J. In Toteff v Antonas (1952) 87 CLR 647 in the context of the assessment of damages in an action of deceit at common law, which provides some useful assistance, Dixon J at p 650 observed that a plaintiff is entitled to recover as damages a sum representing the prejudice or disadvantage he or she has suffered in consequence of altering his or her position under the inducement of the fraudulent misrepresentations and what is recoverable is the difference between the real value of the property [acquired] and the sum which the plaintiff was induced to give for it. His Honour approved the formulation of Sir James Hannen P in Peek v Derry (1887) 37 Ch D 541 at 594, that the question is how much worse off is the plaintiff than if he or she had not entered into the transaction. The general principle is that the plaintiff is to be put, so far as possible, in the position he or she would have been in if he or she had not acted on the inducement: Gould v Vaggelas (1985) 157 CLR 215 (Gould) at 221 per Gibbs CJ. 126 The measure of damages in such an action consists in the loss or expenditure incurred by the plaintiff in consequence of the inducement on which he or she relied diminished by the corresponding advantage in money or monies worth obtained by him or her on the other side: Potts v Miller (1940) 64 CLR 282 (Potts) at 297. The loss a claimant can recover includes consequential losses flowing directly from the misrepresentation: Potts 64 CLR at 297 and 298. 127 In Henville 206 CLR 459 at [135] McHugh J concluded, in the context of the circumstances of the particular case, that he could see no reason why these principles applicable in an action for deceit at common law should not be applied in the assessment of damages under s 82 of the Act, particularly having regard to the purposes of the Act which include promoting fair trading and protecting consumers from contraventions of the Act which, in his Honour's view, are more readily achieved by ensuring that consumers recover the actual losses they have suffered as a result of contraventions of the Act. His Honour observed at [135]: Where a person contravenes the Act and induces a person to enter upon a course of conduct that results in loss or damage, an award of damages that compensates for the actual losses incurred in embarking on that course of conduct best serves the purposes of the Act and should ordinarily be awarded. 128 Gummow J at [152] agreed with these observations of McHugh J, and Hayne J at [167] concluded, for the reasons his Honour advanced (agreeing with McHugh J in the outcome), that the claimants were entitled to recover the whole of the amount lost on the footing that the loss claimed was caused by the conduct in question in contravention of s 52 of the Act. 129 If the respondents in this case had not made the representations, the appellant would not have entered into the contract or the lease and none of its loss would have occurred. The loss suffered is directly attributable to the contravening representations. 130 As to the additional power costs, was the appellant worse off as a result of purchasing the new line? The primary judge refused to bring the additional power costs to account on the footing that his Honour had rejected the appellant's claim that any representation was made to it to the effect that the appellant's power costs would be less if the new line were acquired. The claim was not rejected on the footing that the evidence did not establish that the appellant had incurred additional power costs through the use of the new line. The particular item of expenditure by which the appellant is, in part, worse off is not to be eliminated from the calculation simply because no representation was made as to power costs. The expense is directly related to operating the new line which the appellant was induced to acquire and operate in reliance on the representations as found. 131 Moreover, increased power costs were not only foreseeable but contemplated, having regard to the evidence, although the particular representation alleged by the appellant was found not to have been made. The appellant is worse off by reason of those additional power costs although, in the calculation of loss or damage overall, benefits otherwise derived by the appellant might offset those additional power costs, having regard to any corresponding advantage in money or monies worth obtained by the appellant on the other side. In Gould 157 CLRat 221 Gibbs CJ said: There may be cases in which the purchaser continues to trade, either because he has no real alternative or because he has not become aware of the nature of the fraud, and in those circumstances incurs losses which are not represented by the difference between the price and value of the business. There is no reason in principle why the defrauded purchaser should not recover damages for all the loss that flowed directly from the fraudulent inducement (unless, possibly, the loss was not foreseeable). If the purchaser, besides paying more for the business than it was worth, has suffered additional losses which resulted directly from the fraud he ought to be compensated for them. Of course, the court must be satisfied that the loss did result directly from the fraud and not from some supervening cause such as the folly, error or misfortune of the purchaser himself, and must ensure that no additional compensation is given for losses when those losses, or the probability of their occurrence, has already been taken into account in determining the value of the business. 132 The general principle that the appellant contends must give way altogether in this case so as to craft a solution best adapted to fairly compensating it for its loss (above [125]) and accommodating the remedial purpose of s 82 in a way that does justice and equity in the circumstances of the case (above [123]), is that the measure of damages usually applicable in the case of an acquisition of an asset in reliance upon conduct in contravention of s 52, is the difference between the real value of the asset and the price paid for it, plus consequential losses, at the time of acquisition. In HTW Valuers v Astonland Pty Ltd (2004) 217 CLR 640 (HTW Valuers), the Court per Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ at [65] observed that: … a primary reason for the common adoption, in assessing damages in deceit, of the test of comparing the price paid for an asset with its true value when acquired is the desirability of separating out losses resulting from extraneous factors in the later history of the asset. Lord Browne‑Wilkinson observed in Smith New Court Securities Ltd v Citibank NA [1997] AC 254 (Smith New Court Securities) at 266 that "It was the desire to avoid these difficulties of causation which led to the adoption of the transaction date rule". 133 The "well‑settled" rule is only a rule of practice: McAllister v Richmond Brewing Co. (NSW) Pty Ltd (1942) 42 SR (NSW) 187 at 192 per Jordan CJ: HTW Valuers 217 CLR 640 at [35]. In HTW Valuers at [35] the Court said: The approach of subtracting value from price is commonly employed where the acquisition of land, chattels, businesses or shares is induced by deceit. It has also been commonly employed under s 82 of the Act (Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 6‑7, per Gibbs CJ; at 12, per Mason, Wilson and Dawson JJ; Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281 at 291, per Brennan, Deane, Dawson, Gaudron and McHugh JJ). It is sometimes described as the rule in Potts v Miller. Even in the areas in which that approach is often applied, and even apart from cases in which consequential losses have been recovered, the "rule" is not universal or inflexible or rigid. This perception is not novel. It has existed at least since the judgment of Dixon J in Potts v Miller and has been quite plain since that of Gibbs CJ in Gould v Vaggelas. 134 At [36] the Court said of the flexibility of the rule: One key qualification of the rule which prevents it from being inflexible is that the test depends not on the difference between price and "market value", but price and "real value" or "fair value" or "fair or real value" or "intrinsic" value or "true value" or "actual value" or what the asset was "truly worth" or "really worth" or "what would have been a fair price to be paid … in the circumstances … at the time of the purchase". This distinction is sometimes difficult to draw, but it is old and fundamental. 135 In all of these examples, although the focus of the discussion concerned the comparison between value assessed by reference to the various descriptive terms and price, rather than a comparison between price and market value, particularly having regard to the way in which market value might be affected by manipulation or improper practices, the comparison nevertheless was struck at the date of purchase. 136 Assessments of value or compensation payable at a particular date are commonly made taking account of all matters known at the date of the Court's assessment, and that approach applies to s 82 of the Act when the Court assesses damages by comparing the price paid and the real value of the asset at the date of acquisition: Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281 (Kizbeau); HTW Valuers 217 CLR 640 at [39]. In considering post‑acquisition events, if the cause of the decline in value is inherent to the asset itself, then the decline in value should be taken into account in determining the real value. If, on the other hand, the cause is "independent", "extrinsic", "supervening" or "accidental", the additional loss is not the consequence of the inducement: HTW Valuers at [40]. 137 In what circumstances is it appropriate to adopt an alternative approach to assessing damages to that of comparing the price paid and the real value of the asset at the date of acquisition (the "transaction date")? In HTW Valuers 217 CLR 640, at [63] to [66] the Court considered the merits of an alternative approach conditioned by the circumstances of a particular case that might represent the right vehicle for the application of such an approach. The Court said of a method of assessing damages based on an entitlement to recover the difference between the purchase price of the asset and whatever [value] was left in the hands of the buyer: … does not lack merit whether it is viewed as the only acceptable path to damages under s 82 in this case, or whether it is viewed as a means of checking the soundness of results achieved by other possible paths. 138 At [63] the Court noted that a majority of the House of Lords in Smith New Court Securities [1997] AC 254 (Lord Browne‑Wilkinson, Lords Keith of Kinkel, Mustill and Slynn of Hadley concurring), in considering the transaction date rule, recognised that there are circumstances where it is appropriate to calculate damages by reference to the actual proceeds of the asset, provided the party had acted reasonably in retaining it. 139 As to the principles governing the application of the transaction rule, Lord Steyn at 284 said: And generally the date of the transaction would be a practical and just date to adopt. But it is not always so. It is only prima facie the right date. It may be appropriate to select a later date. That follows from the fact that the valuation method is only a means of trying to give effect to the overriding compensatory rule: … Moreover, and more importantly, the date of transaction rule is simply a second order rule applicable only where the valuation method is employed. If that method is inapposite, the court is entitled simply to assess the loss flowing directly from the transaction without any reference to the date of transaction or indeed any particular date. Such a course will be appropriate whenever the overriding compensatory rule requires it. [emphasis added] 140 In the circumstances of the damages assessment arising out of the HTW Valuers 217 CLR 640 transaction, the High Court at [64] and [65] said of such an approach: 64. Advantages of the approach. While here the plaintiff cannot bring into account the actual proceeds of sale of the Plaza, because, despite its best efforts, it has not succeeded in effecting a sale, the principle would permit the value of the Plaza at the time of the trial to be the relevant figure. 65. There is certainly no reason why an approach of that kind is not open under s 82 of the Act. The deduction of true value at the acquisition date from the price paid is no more than a guide to the assessment of damages under s 82. Section 82 does not in terms refer to that method, and the width of s 82 permits other approaches to the assessment of damages so long as they work no injustice. … Here, the trial judge found that the decline in value of the Plaza had no cause other than the completion of the [new shopping centre]. The present case is from that point of view an unusually pure one. Since there are no losses resulting from extraneous factors to separate out, there is correspondingly less need to look to a comparison of purchase price and real value on acquisition as the appropriate approach. [emphasis added] 141 In Smith New Court Securities [1997] AC at 266‑267 Lord Browne‑Wilkinson speaking for the majority said: In many cases, even in deceit, it will be appropriate to value the asset acquired as at the transaction date if that truly reflects the value of what the plaintiff has obtained. Thus, if the asset acquired is a readily marketable asset and there is no special feature (such as a continuing misrepresentation or the purchaser being locked into a business that he has acquired) the transaction date rule may well produce a fair result. … But in cases where property has been acquired in reliance on a fraudulent misrepresentation there are likely to be many cases where the general rule has to be departed from in order to give adequate compensation for the wrong done to the plaintiff, in particular where the fraud continues to influence the conduct of the plaintiff after the transaction is complete or where the result of the transaction induced by fraud is to lock the plaintiff into continuing to hold the asset acquired. [emphasis added] 142 In summing up the application of the principles, Lord Browne‑Wilkinson at 267 observed that in assessing damage [loss or damage] the plaintiff is entitled to recover by way of damages the full price paid by him or her but must give credit for any benefits received as a result of the transaction and: … (4) as a general rule, the benefits received by him include the market value of the property acquired as at the date of acquisition; but such general rule is not to be inflexibly applied where to do so would prevent him obtaining full compensation for the wrong suffered; (5) although the circumstances in which the general rule should not apply cannot be comprehensibly stated, it will normally not apply where either (a) the misrepresentation has continued to operate after the date of the acquisition of the asset so as to induce the plaintiff to retain the asset or (b) the circumstances of the case are such that the plaintiff is, by reason of the fraud, locked into the property. (6) In addition, the plaintiff is entitled to recover consequential losses caused by the transaction; … [emphasis added] 143 In examining the application of those principles to the facts of the HTW Valuers 217 CLR 640 transaction, the Court observed that Astonland'soptions were confined in the sense that because of the defendant's conduct, the plaintiff was induced to buy the asset at a time when it was perceived to be valuable; was forced by circumstance to retain it during declining utility and value; and the asset was not "a readily marketable asset". Having regard to the principles earlier discussed, the Court concluded that "the alternative contention of the plaintiff produces a fairer result" than that urged by HTW Valuers (namely, the difference between the purchase price and market value at the date of acquisition). However, of course, the determination of the appeal before the High Court did not rest on the plaintiff's alternative contention as the finding of the primary judge of the true value of the asset at the date of acquisition (and the amount of damages by taking account of post‑acquisition evidence of true value at the acquisition date) was not disturbed. 144 Nevertheless, the Court recognised that the scope of s 82, in the appropriate case, accommodates the alternative approach discussed above with the result that the application of the approach might bring about a fairer result than the application of the general transaction rule. 145 The appellant contends that this case is the appropriate vehicle for the application of the alternative approach. That is said to follow for these reasons. 146 The new plant and equipment were installed at the Wattleup site in February and March 2003. The primary judge observed at [149] that this involved removing much of the previous plant with the exception of some components used in the new line system. The retained components included equipment described as the tipping hopper, initial grading conveyor tables and brush washers, and some existing "Newtec" and "Gillenkirch" weighing and packing equipment. The installation of the new equipment integrated with some of the old equipment was designed to provide an entirely new line or new system for the processing, grading and packing of carrots. Some of the equipment was to be manufactured by a Belgian company called "Bruynooghe" which manufactured the grading and associated equipment designed to sort carrots into various sizes by width (or girth) and length. The packing equipment was to be manufactured by a German manufacturer called Gillenkirch. The suppliers and installer of the designed integrated new line system was Proud Machinery although the primary judge found that Proud Machinery did not perform the design role: [13] and [149]. 147 Key personnel from the suppliers attended the Wattleup site in late February 2003 and early March 2003. Mr Gillenkirch together with Mr Manteca were present for the installation of the Gillenkirch packers. An electrician from Bruynooghe, Mr van der Vermuelen was present; later, other staff from Bruynooghe arrived: [149]. 148 The key components of the new line were these. 149 The first section involved washing and polishing of carrots and utilised equipment previously used at the Wattleup plant, namely, two wet hoppers which received approximately 800 to 900kg of carrots at any one time. The wet hoppers fed carrots on to roller grass removers; then to a conveyor system; then to inspection tables for removal of stones and reject carrots; and then to brush polishers where the carrots were polished. 150 After polishing, the carrots passed on to one of a pair of Bruynooghe flume elevators which lifted the carrots up to the diameter or girth graders. At the top of the flume elevators were two infeed vibrators which spread the carrots out before they dropped through appropriate sized rollers of the two diameter graders. These machines could grade the carrots into six streams of diameter sized carrots. The waste removed by the graders was delivered into crates or bins. 151 Next, each of the streams of carrots was delivered to length grading equipment. The extra large carrots were delivered to a tank. Four length graders were capable of grading the carrots into three lengths and could be adjusted to select different lengths. Consistent sizing was not always possible because of the natural variations in the shapes of the carrots. 152 After the carrots were processed by the length graders, they were delivered to nine chiller tanks by gates positioned on eight conveyors located under the length graders. Each size of carrot could be placed into one or more chiller tanks where they were held prior to being moved on to conveyors for packing. On the southern side of the tanks was a refrigeration tank housing refrigeration coils which chilled water delivered from a filter so as to maintain the temperature of the carrots at the required specification. The tank contained submersible water pumps that pumped chilled water into the chiller tanks. The submersible pumps delivered sufficient chilled water to chill the carrots in response to a signal from a temperature sensor located in the chiller tank. Each chiller tank contained an air blower, a submersible pump and temperature sensors. 153 Each of the nine chiller tanks had an exit conveyor which removed carrots and fed them on to one of four distribution belts. The packing sections were fed by five distribution belts or conveyors. Some belts conveyed carrots to a grading table; another to pairs of dual inspection tables and to automatic carton fillers; another to inspection tables and Newtec/Gillenkirch weighing and packing machines. A fifth belt delivered carrots in bulk directly into wooden delivery crates. 154 Some exit conveyors directed carrots to the Newtec multi‑head weighers on the pre‑pack line which were then packed by the Gillenkirch packing machines. The new line system also incorporated a touch screen which when used brought up windows or pages which allowed the adjustment of settings, conveyor speeds and the like in the operation of the new processing line. Each machine could be turned on or off and its operation could be adjusted by touching the page on the screen that related to that machine. 155 These features are described throughout the judgment but the component features are discussed at [150] and [151] of the reasons. 156 The appellant says that these considerations demonstrate the specialist nature of the plant and equipment. It was large and complex. Further, the appellant had sold, as the primary judge recognised at [149], its existing plant apart from those components integrated into the new system. The new line was installed in the appellant's shed at Wattleup as the new system for processing carrots. The appellant had to conduct its business through the use of the processing system. In that sense, the appellant was dependent upon and locked into use of the new line. 157 At the hearing of the appeal, Mr Allanson SC for the appellant put the argument (transcript 54 lines 27‑33) thus: The position that we were in was that we purchased specialist equipment. We replaced existing equipment, we purchased specialist equipment. There was evidence before the court that there was only a limited market for that equipment. But in any event we weren't in a position where we could just sell that equipment because if we sell that equipment our means of production is gone. So this is our means of production. We've sold our existing plant, we've got the new line installed in the shed. We have to continue our business. He continued (transcript 56 lines 5‑12): If you were simply looking at it in terms of the difference between the value of the property - the value of the line when it was purchased and what it cost you, with respect, are going into a unrealistic exercise in these circumstances where you have a line of equipment which the appellant has got no choice but to operate. So he operates it over a four-year period during which time he is able to shut it down, move his operations elsewhere, and you look at the net position at the end of that four-year period. 158 In the course of the reasons, the primary judge plots the sequence of exchanges and meetings between the appellant, the respondents and representatives of the equipment manufacturers in seeking to deal with problems in the operation of the new line the subject of the appellant's complaints (meritorious or otherwise). Those exchanges took place throughout 2003 and culminated in a meeting in November 2003 which, as the primary judge observes, seemed to go close to resolving the four particular matters which were identified as the subject of continuing concern. One particular problem concerned the functionality of the flume elevators and that matter remained unresolved. 159 At [373] the primary judge notes Mr Tana's evidence that the appellant's packing operations would be conducted from a farm pack house at a different property, (the Lancelin property) from late October 2007 with the exception of a pre‑pack line for 10kg cartons for small to medium carrots. Otherwise, the new line would from that date cease operation. At [374] to [377], the primary judge discusses the disruptions to the operation of the new line by reason of the problems associated with the flume elevators and Mr Tana's approach to that problem. The primary judge was not persuaded that it was reasonable for the appellant not to have replaced the flume elevators by June 2004 if there were production difficulties of any substance caused by the flume elevators: [375]. The primary judge found that the cost of replacing and installing the flume elevators was €60,000. 160 Mr Jonathan Gregson carried out an inspection of the new line plant on 21 May 2007 and prepared an itemised valuation report for the purpose of assessing the present day value of the plant (leading up to trial) to establish the realisable auction value if the plant was to be offered as one lot. An alternative salvage break‑up value was also considered. The primary judge noted that Mr Gregson, although an experienced auctioneer, had no formal qualifications as a valuer and had no experience in selling equipment of the kind incorporated within the new line system: [389]. Mr Gregson observed: My past experience in specialised equipment that is presented for sale by public auction has proved that generally in the first five years since purchase it has a greatly depreciated auction value unless you have a willing buyer at the time of sale that can fully utilise a plant in an already established market. As the plant ages the realisable auction value decreases at a quicker level generally due to technology and advancement in the process industry. Part of this plant will be difficult to sell because of their specialised nature. Given the above information and in, my experience, I have estimated that in a well published public auction, offered as one lot, this plant would realise approximately 20‑30% of the original purchase price, ie, $640,000 - $960,000. An auction value would best reflect the price [the appellant] could obtain for the plant. Overall Conclusions as to Value In conclusion … the most appropriate method to establish a true assessment of the value of the plant in its present format as one lot would be to offer it at a properly promoted, conducted and attended onsite public auction sale which would have to take into consideration such inflationary or depreciable conditions as physical location, difficulty of removal, adaptability or specialisation, marketability, physical conditions, overall appearance and total psychological appeal. It furthers takes into consideration the ability to attract interested buyers. 161 Mr Gregson was also asked to comment on what the value of the new line may have been in a public auction "when the plant was relatively new and not producing the represented volume". In response, Mr Gregson said: It is my opinion that the Plant could have been offered for sale by public auction at that time, either as one lot or in a break up scenario, however to establish a realisable auction value is difficult. As this is going to be determined wholly on there being a willing buyer on the market at the time of sale and most importantly what value the vendor is prepared to accept. [emphasis added] 162 In cross‑examination, Mr Gregson was asked why he determined that the best method of determining value was by auction. Mr Gregson said, at transcript 278 lines 13‑15: Because specialised equipment which is limited to a market, like this sort of gear, is very hard to sell and the only way you are really going to determine a market for a total plant is probably by auction or public tender. 163 In re‑examination, Mr Gregson was asked whether he had been involved in the sale of equipment of this kind in the last five or six years for entities other than the appellant. Mr Gregson said at transcript 278 lines 46‑47: Not really, not a lot of it because it doesn't come on the market too much. Not in relation to carrot processing anyway. 164 The appellant contends that May 2007 is the date on which the true value of the new line in the hands of the appellant ought to be struck. Because the appellant required the new line in order to conduct its business, it was not possible to sell it either as an integrated system or on a break‑up basis once it became the production system essential to the conduct of the carrot processing business. The new line remained a working asset of the appellant's business until at least October 2007: [384]. The primary judge found that the appellant could however have remedied the production difficulties encountered in the use of the new line by an expenditure of €60,000 in 2004. Mr Gregson was unable to attribute a realisable auction value to the new line at the acquisition date for the reason he gave. The new line was not a readily marketable asset. 165 The primary judge at [389] found that the date for determining the true value of the new line in the hands of the appellant was the date of acquisition, four years earlier than Mr Gregson's assessment of the realisable auction value. The primary judge did not discuss the merits of the application of the alternative approach contended for by the appellant in the context of the special circumstances the appellant identified. The judge, without discussion of the merits of the alternative approach, simply applied the general transaction rule. Whether, on the facts, special circumstances were made out which warranted a methodology which brought about a fairer, more just and equitable compensatory outcome for the appellant was not considered. 166 Having regard to the selection of the acquisition date as the relevant date for determining true value, the primary judge concluded that Mr Gregson's appraisal of the realisable auction price at May 2007 provided no reasonable basis on which to derive a value in March 2003: [392]. At [394], the primary judge concluded that the appellant's election to change its operations to the Lancelin property was simply undertaken for commercially sensible reasons of enabling the appellant to eliminate unnecessary road transport costs rather than reasons referable to losses arising out of use of the new line system. That follows because, in his Honour's view, had the appellant continued to use the new line, it would not have been worse off. 167 The appellant contends that the primary judge erred in failing to apply s 82 in such a way that the appellant's loss or damage caused by reason of the contravening conduct of the respondents was calculated having regard to the true value of the new line in the hands of the appellant as at May 2007, that is, in effect, at the trial date. 168 On that assumption, the appellant's loss should be calculated as follows: Total cost to the appellant of the new line based on the appellant making all lease payments to the bank for five years to 30 May 2008 (being the figure agreed between the parties) $4,328,230 Bring to account the true value of the new line in the hands of the appellant assessed at May 2007 $960,000 Balance loss $3,368,230 Bring to account the labour costs savings achieved by the appellant through the use of the new line for the period to the end of October 2007 representing four years and five months based upon a saving of 34c per carton for 1,955,000 cartons per annum ($664,700 per annum): five months based on a pro rata assessment of the annualised savings is $276,958. $2,935,758 Balance loss $432,472 Bring to account additional power costs directly related to the operation of the new line over a period of four years and five months to October 2007 based on annual additional power costs of $89,700 per annum: five months based on a pro rata assessment of the annual costs is $37,375. $396,175 Balance loss $828,647

169 The appellant contends that the primary judge erred by bringing five years of production savings to account in circumstances where first, five years of actual savings were not achieved or derived and secondly, the evidence of Mr Tana was unchallenged and undisputed that the closing of the new line was due to problems experienced and thus the line could not continue in operation for the full five years. As appears from [394], the primary judge rejected evidence that the appellant closed down use of the line due to operational problems but rather elected to relocate operations to the Lancelin property for purely commercial reasons and thus reasons unrelated to contended operational difficulties. 170 The essential test to be applied under s 82 is "… how much worse off the plaintiff is as a result of entering into the transaction which the representation induced him to enter than he would have been had the transaction not taken place" and this test "… entitles the plaintiff to all the consequential loss directly flowing from his reliance on the representation … at least if the loss is foreseeable": Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 12 per Mason, Wilson and Dawson JJ. The election on the part of the appellant to relocate the processing operation to the Lancelin farm did not necessarily break the causal connection with the respondents' contravening conduct. That is no doubt why the parties agreed the amount of the five year headline loss by reference to the lease payments due under the five year lease with the bank. The decision to move the processing operations to the Lancelin farm is more properly characterised as "a link … not a break … in the chain of causation": Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 per Brennan J at 356 and 357; approved in the application to s 82 of the Act in Henville 206 CLR 459 at [14] per Gleeson CJ. The objects of the Act tell against a narrow, inflexible construction of causation for the purposes of s 82: Henville 206 CLR 459 at [96] per McHugh J; Marks 196 CLR 494 at [56] per McHugh, Hayne and Callinan JJ at [101] per Gummow J. 171 In Henville 206 CLR 459at [106] McHugh J said: If the defendant's breach has "materially contributed" to the loss or damage suffered, it will be regarded as a cause of the loss or damage, despite other factors or conditions having played an even more significant role in producing the loss or damage. As long as the breach materially contributed to the damage, a causal connection will ordinarily exist even though the breach without more would not have brought about the damage. In exceptional cases, where an abnormal event intervenes between the breach and damage, it may be right as a matter of common sense to hold that the breach was not a cause of damage. But such cases are exceptional. 172 At the trial, the following evidence was given by Mr Tana in cross‑examination (at transcript 103 and 104, AB, B1): What was your plan with the Lancelin farm?---To develop it with 16 by 100 acre pivots and ultimately over a period of five plus years, five to 10 years, turn it into an on-site packing operation as well as a growing operation. […] So the advantage, obviously - one of the advantages, obviously, of having the pack house on the farm, was to avoid having to transport the carrots 180 kilometres?---It had several advantages, that was one of them, yes. Yes, all right and you say your plan was over a five to 10 year period to move to a point where Lancelin would become not only the growing centre, but also the pack house?---Correct. So that all the operations from seed to export, that is putting on the trucks to be sent overseas, would all take place on the farm?---Which is happening now, as we speak. 173 The primary judge concluded that the relocation of the processing operations to the Lancelin farm was influenced by commercial factors advantageous to the appellant. It followed, in his Honour's view, that the loss and damage for the purposes of s 82 ought to be calculated on the footing that a fair compensatory measure of damage ought to attribute enduring benefits or advantages to the appellant by treating the election of the appellant to relocate as depriving the respondents of a benefit or advantage that ought to have continued thus offsetting the headline loss of a five year commitment to the lease. However, the proper approach is to examine the loss or damage actually incurred and to bring to account the benefits actually derived by the appellant. On that footing, the proper approach is to bring to account four years and five months of production benefits and four years and five months of additional electricity expenses rather than five years in respect of each item simply because the lease is a five year lease. 174 If, however, the damages calculation is made on the footing adopted by his Honour that the appellant could have continued to operate the new line for five years but chose, for reasons unrelated to operational problems, to cease use of the new line, the loss calculation is to be adjusted for seven further months of notional benefits that could have been derived, namely, $387,742, and further adjusted to take account of an additional seven months of further power costs to the end of the fifth year, namely, $52,325, resulting in an additional net benefit of $335,417 which would have the effect of reducing the balance loss to $493,230, on the assumption that the just and fair date for assessing the true value of the new line is May 2007. 175 The conclusion of the primary judge that the appellant elected to cease operating the new line for commercial reasons rather than reasons related to operational difficulties ought not be disturbed. However, it does not follow that the proper compensatory loss, having regard to the valuation date assumption, is $493,230 because it does not follow that the notional benefits representing seven further months of benefits and expenses are to be brought to account. 176 It follows that the primary judge erred in three respects in the calculation of damages. First, his Honour failed to consider the appellant's contention that an alternative methodology ought to be applied in the circumstances of the present case which required a determination of the true value of the new line in the hands of the appellant at the trial date or at least a date approximating the trial date, namely May 2007, having regard to the observations of the High Court in the joint judgment of Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ in HTW Valuers 217 CLR 640 at [63] to [66] and the Court's consideration of the decision of the House of Lords in Smith New Court Securities [1997] AC 254. Secondly, the primary judge ought to have brought to account in the damages calculation the additional power costs incurred by the appellant in operating the new line as those costs arose directly out of the operation of the new line acquired in reliance upon the respondents' representations. Thirdly, the primary judge ought not to have brought to account notional benefits and notional expenses incurred for a further seven months for the reasons previously discussed. 177 That being so, the amount of the loss and damage caused by reason of the respondents' conduct for the purposes of s 82 of the Act is the formulation contained at para [168] of these reasons assuming the true value of the new line is determined at May 2007 and Mr Gregson's value of $960,000 is accepted. 178 The ultimate question of whether the "alternative approach" to determining the assessment of damages is to be adopted requires a consideration of factual questions going to the circumstances of the acquisition and of the principles identified for adopting such an approach as discussed by the Court in HTW Valuers 217 CLR 640 having regard also to the Court's consideration of Smith New Court Securities [1997] AC 254.Those matters must be considered by the primary judge. In addition, there is the further important question of whether any loss or damage claimed by the appellant is subject to a supervening event relating to the incompetence, as found by the primary judge, of the appellant in the operation of the new line by reason of the failure to train and deploy individuals who could and would properly operate the touch screen central to the operation of the new processing line. That matter needs to be taken into account by the primary judge in assessing damages. In Kizbeau 184 CLR at 291 Brennan, Deane, Dawson, Gaudron and McHugh JJ, consistent with the observations of Gibbs CJ in Gould 157 CLR at 222 that, "Of course, the court must be satisfied that the loss did result directly from the fraud [speaking of the tort of deceit] and not from some supervening cause such as the folly, error or misfortune of the purchaser himself …", said: In an action for damages for deceit for inducing a person to enter a contract of purchase, which is an action that is closely analogous to an action for damages for breach of s 52, the courts have consistently held that the proper measure of damages is the difference between the real value of the thing acquired as at the date of acquisition and the price paid for it [this transaction date general rule is subject to the question of whether an alternative approach as discussed in HTW Valuers v Astonland is meritorious in the circumstances of the particular case]. Nevertheless, although the value is assessed at the date of acquisition, subsequent events may be looked at in so far as they illuminate the value of the thing at that date. A distinction is drawn, however, between subsequent events that arise from the nature or use of the thing itself and subsequent events that affect the value of the thing but arise from sources supervening upon or extraneous to the fraudulent inducement. Events falling into the former category are admissible to prove the value of the thing, those falling into the latter category are inadmissible for that purpose. … Even when some difference exists between the conditions under which the business was conducted before and after purchase, evidence of subsequent takings may be admissible, "subject to due allowance being made for any differences in relevant conditions [authority cited]". But if it is established that the decline in takings has been caused by business ineptitude or unexpected competition, evidence of subsequent takings is not admissible to prove the value of the business at that date, events such as ineptitude and unexpected competition being regarded as supervening events. In some cases … it may also be proper to compensate … also for losses induced by the fraud and directly incurred in conducting the business. All of these principles are appropriate to the assessment of damages under s 82 where a breach of s 52 of the Act has induced a person to purchase a business. 179 At [388] the primary judge observed that in assessing what Mr Tana would have done, it was important to exclude from consideration the subsequent impacts of the fall in the market and the production problems with the farms. At [390], the primary judge also referred to the "subsequent fall in the carrot market". In addressing the further important question of whether any loss or damage claimed by the appellant is subject to a supervening event, the primary judge will also need to give consideration, in the context of the "alternative approach", to whether the market issue he identified is to be characterised as a "supervening event". 180 It may be that the primary judge elected not to consider the alternative approach to the calculation of damages or potential intervening circumstances because he had formed a view that the respondents had adduced evidence to the contrary for the purposes of s 51A and the appellant had not satisfied his Honour that the respondents did not have reasonable grounds for making the representations. However, as the respondents accept and as we have already noted, that position is not explained in the exposed reasoning process, if that was his Honour's conclusion. In any event, the calculation of damages for the purposes of s 82 of the Act ought to proceed on the footing that on the assumption that the representations found constitute contravening conduct by operation of ss 51A and 52, the amount of the loss and damage recoverable under s 82 of the Act would be of a particular compensatory kind or magnitude. The question does not arise if the primary judge is satisfied that the respondents adduced some evidence to the contrary for the purposes of s 51A and the appellant failed to establish that the respondents did not have reasonable grounds for making the representations. 181 The proceeding ought to be remitted to the primary judge to consider these questions.

CONCLUSION 182 We will allow the appeal and remit the matter to the primary judge for the formulation of reasons for his conclusion that s 51A of the Trade Practices Act did not assist the appellant, and for further consideration of the question of damages in the light of our reasons. I certify that the preceding one hundred and eighty-two (182) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Sundberg, Siopis and Greenwood.