Paul Mitchell Systems (Australia) Pty Ltd v Paul Mitchell Systems Pty Ltd

nt in the proceeding), ('Mr Winton'), at relevant times an employee of Richard Ellis; and Ian Holmes, (as third respondent in the proceeding, ('Mr Holmes'), an employee of Richard Ellis. The shopping centre was owned by Collendina, which was controlled by a Mr David Stewart ('Mr Stewart'). Mr Stewart controlled other companies which owned shopping centres in the Perth metropolitan area and he also controlled a company called Caland Pty Ltd ('Caland'), which company traded as "Harvest Fresh" and operated five fruit and vegetable retail outlets, known as "Growers' Markets" in the suburbs of Perth, including one in the shopping centre. The claim by Magenta was in two parts. The first was a claim for damages for misleading or deceptive conduct contrary to s. 52 of the Trade Practices Act 1974 ('the Act') in relation to statements about the Growers' Market at the shopping centre. This claim was based upon alleged oral misrepresentations by Mr Corbett and by what was said to be written misrepresentations based upon the terms of a facsimile sent by Mr Corbett on 15 September 1988. Mr Corbett was said to be a person knowingly concerned in this conduct. The same conduct was relied upon for an alternative claim in negligence.

The second part of Magenta's claim was a claim for damages for, inter alia, misleading or deceptive conduct quantified in the sum of $52,290.29, being the amount of municipal rates and charges, and a penalty for late payment, paid by Magenta to the City of Armadale ('the Council rates'). Mr Holmes and Mr Winton were said to be persons knowingly concerned in that conduct. Magenta failed after a ten day trial in its case based on the claimed oral and written misrepresentations, the oral misrepresentations not being made out and the primary judge concluding that the facsimile represented an opinion honestly held at the time, and until some time in December 1988, about the security of income offered by the shopping centre. The primary judge also concluded that Magenta failed on the issue of reliance, holding that Mr Chesson, who was a duly licensed real estate agent and business agent and the principal person acting for Magenta in the purchase of the shopping centre, did not rely on the facsimile of 15 September 1988, or upon anything that Mr Corbett said to Mr Chesson about the shopping centre. The primary judge further found that not only was there no misrepresentation and no reliance, but that on the question of damages, it had not been shown that the shopping centre was not worth what the appellant had paid for it at settlement. At the trial it was common ground that the balance of the purchase price payable by Magenta at settlement was calculated on the basis that the vendor of the shopping centre, Collendina, had paid the Council rates. Collendina had not paid the Council rates and subsequently went into liquidation without having paid them. It was asserted before the primary judge that Richard Ellis, by making certain representations about payment of the Council rates, contravened s. 52 when read with s. 51A of the Act, and was thus liable to Magenta for damages pursuant to s. 82 of the Act and that Mr Holmes and Mr Winton were persons knowingly concerned in that contravention. It was also asserted that the claim in respect of Council rates could be made out against Richard Ellis as a breach of contract, or on a third basis, for breach of statutory duty, namely, a duty said to arise under s. 65(1) of the Real Estate and Business Agents Act 1978 (WA). The primary judge concluded that Mr Chesson had received assurances from Richard Ellis through Mr Holmes and Mr Winton that Richard Ellis had received from the tenants the moneys required to pay virtually all of the Council rates and that Richard Ellis would pay the Council rates at or shortly after settlement. His Honour concluded that when Mr Winton and Mr Holmes made the representations to Mr Chesson, at that time Richard Ellis had reasonable grounds for making them; that position changed at some time on 22 November 1988 when Mrs Stewart, the wife of Mr Stewart, told Mr Winton that Messrs Mallesons Stephen Jaques, the solicitors for the vendors, would pay the Council rates. His Honour found that the effect of later communications to Richard Ellis falsified the earlier representations, that the uncorrected earlier representations misled Magenta, and that Richard Ellis's conduct in allowing those representations to continue constituted misleading and deceptive conduct within s. 52 of the Act. His Honour held that Mr Winton was knowingly concerned in that misleading and deceptive conduct of Richard Ellis but that the evidence was insufficient to show that Mr Holmes was knowingly concerned in that conduct. Having reached those conclusions, the primary judge did not consider it necessary to consider the basis of the claim in contract or whether there was a duty as alleged under s. 65(1) of the Real Estate and Business Agents Act 1978 (WA) to ensure that the Council rates were paid. The claim for damages based on misrepresentations was dismissed and the claim concerning the Council rates resulted in judgment for Magenta against Richard Ellis and Mr Winton for $52,290.29 plus interest, the quantum of which was agreed at $37,029.52. Subsequent to the trial there was further argument as to costs, during which it was common ground that about one-third of the time taken to trial was in respect of the Council rates claim and two-thirds in respect of the claims in which the applicant was unsuccessful. The primary judge ordered that Magenta pay the respondents' costs, to be taxed, in respect of its unsuccessful claims in respect of the acquisition of the shopping centre (and an unsuccessful claim, relating to a number of parking bays, which had been abandoned on the third day of the trial), but that the first respondent and the fourth respondent pay Magenta's costs, to be taxed, in respect of the claim for damages in respect of Council rates up until 2 February 1994 and that such costs not be reduced by one-third under O 62 r 36A(1), and there be no order as to costs in respect of the Council rates claims after 2 February 1994. The division of costs pre and post 2 February 1994 was as a consequence of his Honour's consideration of a 'Calderbank' type letter. In respect of costs which had been reserved or ordered to be costs in the cause, the primary judge ordered that the applicant pay one-third of the respondents' costs, to be taxed, and that there be no order as to costs in respect of the hearing concerning questions of interest and costs which had occurred on 11 May 1994. In its appeal, Magenta seeks that judgment be entered for it in respect of its claim based on misrepresent- ation or, alternatively, that the Full Court should decide on the value of the supermarket as at 6 December 1988 and direct a new trial on the issues of misleading and deceptive conduct and reliance. Magenta further sought that it should have the costs of the claim relating to the Council rates in full. There was an alternative claim that the first and second respondents should pay Magenta's costs in respect of the issue concerning the insolvency of Caland. Richard Ellis and Mr Winton cross-appealed against the finding concerning the Council rates plus interest and the costs order made concerning those matters. There was a notice of contention by Magenta concerning the judgment by the primary judge for the Council rates plus interest at an agreed quantum, it being asserted that that judgment could be supported on the proper construction of s. 65(1) of the Real Estate and Business Agents Act 1978 (WA) and on the claim that Richard Ellis breached its duty to the appellant under that section and is liable to Magenta for the loss Magenta suffered by reason of Richard Ellis's breach of duty or, alternatively, Richard Ellis agreed to pay the rates and is liable to Magenta in damages for breach of contract in failing to do so. Dealing with the appeal by Magenta, it should be said that Magenta faces a series of major consecutive hurdles, being the findings by the primary judge concerning the non-making of the claimed oral representations and the conclusion that the written representations expressed an opinion honestly held at the time concerning the security of income offered by the shopping centre, and the finding by the primary judge of non-reliance upon anything Mr Corbett said to Mr Chesson about the shopping centre and the finding that the claim for damages had not been made out. The findings of the primary judge concerning mis- representation and reliance are based in large measure on his Honour's assessment of Mr Chesson, and his assessment of Mr Corbett. In that context it is necessary to set out the facts a little more fully. Richard Ellis advertised the shopping centre in "The West Australian" newspaper on five occasions during the period 30 July 1988 to 24 August 1988. Mr Chesson responded to one of those advertisements, although there was a dispute as to when precisely that response occurred. Mr Chesson, prior to his dealings with the shopping centre, had previously organised small groups of investors interested in purchasing shopping centres as a going concern. Mr Chesson would usually form or obtain a corporate trustee to purchase the shopping centre and the group of investors or trustees of their family trusts would purchase units in the unit trust of which the company was trustee. Mr Chesson controlled a settlement agency, 'Master Settlements', which represented the applicant in respect of settlement of the shopping centre, and a real estate firm, 'Chesson & Co.', which after settlement of the shopping centre, took over the management of it from Richard Ellis. After some negotiations, a written contract of 19 September 1988 for the purchase of the shopping centre was entered into by Temco Pty Ltd ('Temco'), a company controlled by Mr Chesson and interests associated with him for $6.1 million payable as to $20,000.00 by way of deposit, which was paid on 19 September 1988, and the balance being expressed as payable on "Settlement Date" nominated as 1 December 1988. That contract was conditional upon Temco securing finance, and there was a special condition providing for novation to a nominated purchaser. There had been an earlier offer of $6 million by Temco, accompanied by a cheque for $20,000.00, which had been rejected and the vendor had counter offered to sell at a price of $6.2 million. Subsequent to that, the Temco contract at $6.1 million was executed. On 4 November 1988, Richard Ellis were advised that the nominee contemplated by the Temco contract was the appellant as trustee for the Kelmscott Village (1988) Unit Trust. The appellant had been incorporated as a shelf company and by the time of the advice to Richard Ellis, Mr Chesson and his wife were directors of the appellant. The balance of the deposit was paid on 7 November 1988 by bank cheque from an account styled "Magenta Nominees Pty Ltd. as T/ee for Kelmscott Village (1988) Unit Trust". On 29 November 1988 a new contract showing Collendina as the vendor and Magenta as the purchaser on the same price and essentially the same terms and conditions was executed. The deposits paid under the Temco contract were refunded and Magenta paid a deposit in the same amount to the solicitors for Collendina. The settlement of the transaction took place on 6 December 1988.