[1991] FCA 375; (1991) 42 FCR 390

Trade Practices (Consumer Protection) - respondents customers of country branch of bank - bank manager consulted about businesses which respondents might acquire - respondents informed by bank manager of hotel business for sale by another customer of bank - respondents advised by bank manager that vendor customer of bank and that bank manager had conflict of interest - respondents nevertheless advised by bank manager that purchase a good one - respondents dissuaded by bank manager from consulting accountant and hotel broker - respondents advised by bank manager to use vendor's solicitor to complete transaction - consideration of detailed facts and circumstances concerning purchase, purchase price and value of business - whether bank through its bank manager engaged in misleading or deceptive conduct in advising respondents that purchase of hotel business a good one - whether bank manager a person involved in misleading or deceptive conduct.

Trade Practices Act 1974, ss. 52, 75B(1)(c), 82.

Negligence - negligent misstatement - whether bank and bank manager owed respondents duty of care - whether statement that purchase a good one a breach of that duty.

Fiduciary Duty - whether bank in fiduciary relationship with respondents - whether breach by bank of that duty - discussion of authorities and applicable principles.

Damages - purchase of lease of hotel with four years to run at time of completion - no indication from lessor whether renewal of lease would be granted at end of four year term - lessor not called - whether valuer's assessment of value of business including lease at time of purchase based on lease not being renewed provided any evidence of value - appropriateness of adding to that value a sum to take account of the possibility of renewal - disallowance of respondents' claim for consequential loss.

Mr J.J. Garnsey, QC and Mr N. Morcombe

Mr N. Morcombe

Solicitors for the Appellants: M.P. Andersen

Counsel for the Respondents: Mr R.W. Evans

Solicitors for the Respondents: Poveys

2. The appellants pay to the respondents four-fifths of their costs of the appeal and cross-appeal.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

This is an appeal from a judgment of a single judge of this Court (Von Doussa J.) in an action brought by the respondents against the Commonwealth Bank of Australia ("the bank") and Mr Dungan who was the Manager of the Kadina Branch of the bank at the time of the transaction in question in the case. Kadina is a town in South Australia about 150 kilometres north of Adelaide. The transaction in question was the purchase by the respondents of the leasehold business known as the Weeroona Hotel at Wallaroo which is near Kadina. The respondents allege that they entered into, and completed, the contract to purchase the hotel business in reliance upon oral advice and representations made by Mr Dungan. The causes of action upon which the applicants relied were a breach of s.52 of the Trade Practices Act 1974, negligent misstatement and breach of fiduciary duty. His Honour found each cause of action established and awarded the respondents damages in the sum of $102,500. The amount of damages was arrived at by ascertaining the difference between the price paid by the respondents for the business, $160,000, and deducting therefrom the value of the business which his Honour assessed in the sum of $100,000. His Honour concluded that the amount of damages or pecuniary compensation necessary to restore the respondents to the position they would have been in but for the breaches of obligation committed by the appellants was $60,000 plus interest. His Honour allowed compound interest pursuant to the principles propounded by the High Court in Hungerfords v. Walker [1989] HCA 8; (1989) 171 CLR 125. His Honour calculated interest as compound interest at rates in line with those actually charged to the respondents by the bank.

2. The respondents have appealed against his Honour's findings in relation to liability and also complain that the amount of damages awarded was excessive in that the amount selected as the difference between the price paid for the business and its value should have been a figure lower than $60,000. Instead, their submissions go so far as to say that the respondents established no damage at all. The respondents have cross-appealed claiming that the amount of damages they were awarded was inadequate. They submit that the amount of $100,000 found by his Honour to be the value of the business overvalued it by $20,000 so that the difference between the price and the value was $80,000 rather than the $60,000 which his Honour found. Additionally, they claim that they should have been awarded consequential damages which his Honour refused. We shall come to the detail of the way in which they put their case in this regard in due course.

3. In their challenge to his Honour's findings on the question of liability, the appellants submit:-

1. They did not engage in misleading or deceptive conduct.

None of the statements made by Mr Dungan in the

conversations he had with the respondents amounted to a

representation which was misleading or deceptive.

2. The circumstances were such as to show that neither Mr

Dungan nor the bank said or did anything which would involve

there being imposed upon them a duty to take care in relation

to what was said or done by or on behalf of the bank.

3. There was no breach of any such duty.

4. In any event no misleading or deceptive conduct engaged in

by the apppellants and no negligent statement made by them

was the cause of any damage suffered by the respondents.

The respondents did not rely on any representations and did

not enter into the transaction upon the faith of any advice

given them by the appellants.

5. The circumstances were not such as to warrant the conclusion

that the appellants were in any fiduciary relationship to

the respondents.

6. There was no breach of any fiduciary obligation.

7. No breach of any fiduciary obligation led to any damage or

loss suffered by the respondents.

4. There was no question raised concerning Mr Dungan's authority to make the statements and express the opinions he did on behalf of the bank. It was conceded by the bank that these were made in the course of his employment and that he had, if not actual, then implied or apparent authority to make them.

5. Present at the critical conversations which occurred were the respondent, Mr Smith, and Mr Dungan. Mrs. Smith was present at one. Of the evidence of the respondents and Mr Dungan, his Honour said:-

"I do not doubt that the parties themselves endeavoured to

give an honest account of what happened, but unfortunately

their memories were poor and were shown by other evidence to

be unreliable in some respects. Mr Dungan had very little

independent recollection of what happened and was prone to

reconstruct an exculpatory version of events according to

what he now thinks he 'would' or 'would not' have done.

Although it is not possible to accept all of Mr Smith's

evidence I have reached the conclusion that his evidence

generally is to be preferred to that of Mr Dungan as being

the more reliable and accurate. Mrs. Smith's memory of the

events is very poor. I do not think it is safe to place

weight on her recollections such as they are."

6. There was no challenge to this finding so that we may proceed upon the basis that the evidence given by the respondent, Mr Smith, was, broadly speaking, accepted and the evidence given by Mrs. Smith and Mr Dungan was not accepted.

7. The essential complaint made by counsel for the bank about his Honour's conclusions on the question of liability was that, on the basis that one accepted Mr Smith's account of what Mr Dungan said, it was erroneous to conclude that Mr Dungan had made representations which were misleading or deceptive, had so acted as to assume on the part of the bank or himself a duty to take care, or had assumed the role of the respondent's adviser. The submission requires an examination of the facts of the matter and of the findings about them made by his Honour. The account which is given is taken, to a degree, from his Honour's judgment but here and there there are references to Mr Dungan's evidence and to documents not referred to or not fully referred to in the judgment under appeal.

8. The respondents had been customers of the Kadina branch of the bank since 1964. At that time Mr Smith was employed by farmers in the area. From 1967 to 1974 the respondents were in partnership as sharefarmers. From 1974 onwards Mr Smith was employed by farm machinery distributors. In 1988, when the transaction in question was entered into, he was the area manager for Massey Ferguson and also conducted a small rubbish removal business. Mrs. Smith was employed at the local school in a secretarial position. The two operated a cheque account and savings account at the bank. His Honour found that their experience in business matters and their evidence of financial matters was limited.

9. Mr Dungan became the Kadina branch manager early in 1987. His Honour found that the respondents before then had been accustomed to seek advice from the branch manager of the bank about financial matters. During 1987 they discussed with Mr Dungan the prospects of their buying a number of different hotels. His Honour found that, by January 1988, Mr Dungan understood that the respondents were seeking to buy a hotel, or hotel licence, it being their intention to give up their employment and manage the hotel business. They intended to sell their house in Kadina to provide part of the fundings for the venture and to look to the bank to lend them the balance.

10. There is to be found in Mr Smith's evidence and in his Honour's judgment reference to acquiring businesses other than the Weeroona Hotel. It is not necessary to refer to the detail of their various inquiries and expeditions. It is sufficient to say that they investigated the possibility of acquiring a motel which was to be constructed in Kadina and a holiday resort on Kangaroo Island. Mr Dungan was consulted about these proposals. Referring to the Kangaroo Island project, his Honour said that he was satisfied that Mr Dungan gave the respondents advice which went beyond advising them whether the bank would finance the transaction if it proceeded. We should pause to mention a submission made by counsel for the appellants that that finding was not open. We have considered the evidence to which counsel referred and reject the submission.

11. In late January and early February 1988 the respondents discussed with Mr Dungan information they had obtained about the Kadina Hotel and about another hotel known as the Belalie Hotel. His Honour said that in early February 1988, to the knowledge of Mr Dungan, the respondents were in active pursuit of a business.

12. The fee simple of the Weeroona Hotel was owned by E.C. and P.A. Parker. The lease, liquor licence, stock, plant and equipment (and associated goodwill) were owned by No Justice Pty Limited. The directors and shareholders of the company were Mr B.R. Hart and Mr R.L. Gwynne. All three were customers of the Kadina Branch of the bank. The company had purchased the hotel business in July 1986 for $95,000 with the assistance of a mortgage loan by the Commonwealth Development Bank. The company conducted an operating account with the bank which at all material times was in overdraft. By January 1988, the balance of the loan stood at approximately $61,500. Both Messrs Hart and Gwynne conducted savings accounts which were substantially in credit.

13. Mr Dungan had met Messrs Gwynne and Hart soon after he arrived at Kadina early in 1987. In March 1987, they told him that they might very well be selling the hotel in due course. Other meetings followed. In January 1988, they had a discussion with him about selling the hotel. Mr Dungan assumed the role of introducing the parties and bringing them together. No hotel broker was engaged.

14. On Saturday, 13 February 1988, Mr Dungan approached the respondents in the street at Kadina. He told them that he knew of a hotel that was for sale and suggested they come into the bank office on the following Monday. The respondents had an appointment to see the hotel broker who was selling the Kadina Hotel on the Monday so they arranged to see Mr Dungan on Tuesday, 16 February 1988. They then attended Mr Dungan's office. He informed them that the hotel he had mentioned on the Saturday was not the Kadina Hotel but the Weeroona Hotel. He briefly discussed the nature of the Weeroona hotel business and showed the respondents a document known as a "Form 6" which his Honour said was a statutory schedule of information which the vendor of a business must supply under the Land Agents, Brokers and Valuers' Act 1973 (S.A.). The form gave particulars of the leasehold interest of the vendor, the asking price, and trading figures for the past three financial years which his Honour said were incomplete. Mr Dungan said that the hotel was being sold privately, not through a hotel broker. The respondents told Mr Dungan of information they had received the preceding day about the Kadina Hotel. There was discussion about the two hotels. His Honour said that the Kadina Hotel was a "brewery hotel" with an extremely short lease which made it difficult for the bank to lend against. His Honour then made a number of critical findings. He said:-

"I find that in the course of the discussion Mr Dungan said

the Weeroona Hotel would be a good hotel for the applicants,

that it would be a better purchase than the Kadina Hotel and

it would be within their financial reach. He also said that

as the remaining term of the lease expired in July 1992, Mr

Smith should approach the landlords to see if they would

extend the lease. A longer lease would make the purchase

easier to finance. He said that the vendor had obtained an

extension of the lease from the landlords when it acquired

the hotel. It seems that what was contemplated was an

enquiry whether the lease would be extended by a further two

year term, as the existing lease had been for two years with

two rights of renewal each for two years."

15. The meeting ended on the understanding that the respondents would inspect the hotel the following weekend. They did not thereafter discuss with Mr Dungan the Kadina Hotel or any other prospective ventures that had been considered by them in the past.

16. His Honour then referred to Mr Dungan's account of the meeting on 16 February. He said:-

"Mr Dungan says that at the meeting on 16 February, and

early during it, he disclosed his position of conflict to

the applicants. It is common ground that he said that the

vendor was a customer of the Bank but the evidence is to the

effect that the disclosure did not go much beyond this. Mr

Smith says Mr Dungan said words to the effect that he had a

conflict as the Bank acted for the vendors and he had to be

careful what he said. At one point in their duscussions Mr

Dungan said he could not disclose the amount of the hotel

takings which were banked as that was confidential

information. Mr Dungan's account of what he said was:

'Words to the effect that I am a banker for both people. I

am going to have difficulty helping you with anything that

might prejudice the other party.'"

17. The respondents inspected the hotel on 21 February and Mr Smith saw Mr Dungan in his office on 22 February 1988. Mr Smith said that there was discussion about the hotel, its trading figures and profitability, its suitability for the respondents, and its value. There were further discussions about some of these matters over the next few days.

18. All parties met in Mr Dungan's office on 3 March 1988 and signed the contract for sale of the hotel business for $160,000. We refer later in these reasons to certain of the terms of the contract. On 7 March 1988, Mr Dungan wrote to his senior management recommending approval of an application by Mr and Mrs. Smith whereby the bank would lend term funds of $70,000 together with $95,000 bridging finance whilst their house was sold. The application was approved on 10 March 1988 subject to the provision of a satisfactory valuation from the Valuers' Department of the bank. The valuation, by Mr Mudge, became available on about 30 March 1988. The purchase was settled on 20 April 1988. On settlement the bank advanced the whole of the moneys required (after adjustments) to complete the purchase, namely $169,781.72.

19. His Honour found that either on 22 February 1988 or at some later time prior to 3 March 1988, when the contract for sale was executed, a number of matters took place. There was discussion about trading figures. Mr Dungan said that it would be desirable to see the vendor's books, the purpose of this apparently being to gauge the seasonal fluctuations in takings and the revenue received for different aspects of the business. His Honour found that Mr Dungan said something to the effect that he knew what the takings of the hotel were and that the business was a good purchase.

20. One of the submissions strongly relied upon by counsel for the appellants was that it was not open to his Honour to read into the statements made by Mr Dungan that the acquisition of the hotel would be "a good purchase" that it was a good purchase from the point of view of price. This submission necessitates a reference to the actual evidence upon which his Honour made his findings. The evidence is that of Mr Smith and is as follows:-

"Was anything else said about the operation of the hotel?---

Mainly on the figures that the hotel was doing. He did not

go into great detail because at this stage it was only the

looking stage.

Was anything said about the desirability of purchasing it?---

Yes. He told us it would be a good hotel for us, good

hotel for beginners or learners, being in the same area with

us it would not be so - you know, it is a home thing, a

place where we are known. It would be a good purchase.

Was anything said about the time that you had to consider

the proposition?---Not at that meeting.

At that meeting was anything said about the Kadina Hotel?---

Yes. We discussed the Kadina Hotel. I had the figures as

from the previous meeting the day before. He said it was

not necessary for him to look at those figures because he

already knew the figures of that hotel.

Did he say how he came about that information?---No.

Did you discuss the figures with him?---Not in detail. He

just informed me that the Weeroona Hotel would be a better

purchase than the Kadina Hotel.

At that time, what was your attitude to the purchase of the

Kadina Hotel?---We were interested. I was told that

finance for the Kadina Hotel would be harder to obtain.

Who told you that?---Dungan."

21. In the course of his cross-examination Mr Smith gave the following evidence:-

"I suggest to you that at no stage did he say to you that he

considered the hotel to be either cheap or expensive?---A

good purchase.

Do you recall him saying that, that it was a good purchase

or words to that effect?---Words to that effect.

From that, you interpreted that he was saying that the hotel

was good value?---Yes."

22. At a later meeting between Mr Smith and Mr Dungan, Mr Smith said:-

"I told him that we were interested in the hotel from the

previous visit. I questioned the 160,000 - or whether we

should offer less as we had done on previous other

occasions. He - I was - he told me that they would not take

less as there are other people interested. I asked whether

it was going through a broker or should be through a broker.

His answer to that was if it goes through the broker, they

will want more money for the business to cover broker's fees."

23. Later Mr Smith said that Mr Dungan told him that the value was good value and the owners would not take less as they had other interested parties. At the first meeting Mr Dungan had told the respondents that the hotel was being sold privately.

24. It remains to mention evidence given by Mr Smith of a later conversation which he had with Mr Dungan in between the time that the contract for sale had been signed and the date of settlement. Mr Smith said that he came to Mr Dungan after doing some calculations and questioned the amount of $160,000 as a price. The worry which Mr Smith expressed to Mr Dungan was whether the respondents were paying too much for the business. Mr Dungan said that Mr Smith was wanting too much and told him that neither he nor the bank would lend on an over priced business.

25. The totality of this evidence makes it clear that the conversations which the parties had were conversations in which it was recognised that Mr Dungan considered that the purchase was a good one from a number of points of view including price. The submission that price did not come into the matter is, accordingly, rejected.

26. Another matter that should be put out of the way at this point arises from submissions made by the appellant concerning the respondents' understanding of the term of the lease. There was no question but that they understood that the lease had approximately 4 1/2 years to run but there was discussion about the desirability of their obtaining a renewal at least for a period of two years. The suggestion which underlay the submission was that the advice or statements made by Mr Dungan about the purchase were made by him upon the basis that the Smiths would obtain a renewal of the lease with the consequence that they would have at least 6 1/2 years trading rather than 4 1/2 years which would have been the case if the lease were not renewed. In the evidence already referred to there is reference to Mr Dungan saying that, as the remaining term of the lease expired in 1992, Mr Smith should approach the landlords to see whether they would extend the lease. His Honour added that a longer lease would make the purchase easier to finance.

27. Mr Smith was cross-examined about this matter. The relevant part of the cross-examination is as follows:-

"If you look at the top of page 3 of exhibit A3? (notes

prepared by Mr Smith)---Yes.

You will see a notation there, 'subject to extended

lease'?---That is right.

Does that refresh your memory that the first conversation

you had with Mr Dungan regarding extending the lease was on

your first visit, that is, 16 February?---Looking at that,

the extension of lease would have been discussed.

On 16 February?---The subject would have been discussed on

that day, the 16th.

On that day, when it was discussed, you saw the extension of

the lease as an important matter as to whether you would

purchase or not. Is that correct?---Yes. Mr Dungan told

me it was very important we try to get an extension of lease

for the reason of - that it would be easier to raise finance

and we would have something to - a lot more to sell at the

end, a longer period.

At the end of the four year period it would be better to

have two years of the lease to sell. Is that right?---As I

understand it, yes.

So the obtaining of the extension of the lease, was one of

the most important matters to you at that point, can I

suggest?---Yes, it would have been, yes.

And remained so right up until settlement. Is that a yes?

---Yes."

28. Relevant to this matter is the memorandum sent by Mr Dungan to a department of the bank in Adelaide known as Branch Lending. The memorandum was dated 7 March 1988. It referred to Mr Dungan's view of the respondents' business acumen, their connection with the bank and the contract into which they had entered to purchase the hotel. A schedule set out their requirements and showed that they wished to borrow $180,000. It also showed that they then owed $25,000. The schedule dealt with repayments and the respondents' assets position as it would be assuming the purchase to be completed. To the schedule were appended some notes one of which said, "Existing lease has 4 1/2 years to run. Landlord has indicated to me he will renegotiate out a further two years though it is unlikely this will occur prior to settlement - accordingly repayments have been set within existing lease." The emphasis is added.

29. His Honour did not take the view that the price which the respondents agreed to pay was based or predicated upon a renewal of the lease. Both Mr Dungan and Mr Smith recognised that it was highly desirable that such a renewal be obtained but it is clear that the transaction proceeded on the footing that all parties, including the bank which agreed to advance approximately $170,000, understood that it was a distinct possibility that the lease might not be renewed. The appellants' submissions based upon a contention that the position was to the contrary are rejected.

30. It is now appropriate to return to his Honour's judgment. His Honour said that in the course of the discussion about the calculations, Mr Smith said that he did not have an accountant and would like to have one as he did not think he was qualified to assess the figures himself. His Honour said that it was common ground that the question of the need for an accountant arose before the contract for sale was executed. Mr Smith said that Mr Dungan's response was to the effect that an accountant would cost more money, that the respondents were at their financial limit and that he (Mr Dungan) was able at that stage to advise them "on the accountancy side". Mr Dungan told them that he would "get the applicants an accountant if the purchase went ahead".

31. After some discussion of the evidence, his Honour found that Mr Dungan must have realised that Mr Smith was seeking accounting advice on the financial implications of the Form 6 figures and about the wisdom of purchasing the business at the asking price. His Honour's view was that it was clear to Mr Dungan then that this was the reason why Mr Smith was seeking an accountant's advice.

32. His Honour went on to say that no satisfactory explanation was offered in Mr Dungan's evidence of why, on 16 February 1988, he had a copy of the Form 6, a document prepared by the vendor's accountant on 9 February 1988. The point of his Honour's comment was that 16 February 1988 was the day upon which the respondents had their initial discussion about the acquisition of the hotel. The inference was open that Mr Dungan must have been given the Form 6 by the vendors or one of their agents beforehand. His Honour said that the inference clearly was that, when Mr Dungan learned of the vendor's desire to sell, he informed the directors of the interest of the respondents and undertook the role of bringing the two parties together. His Honour said that an advantage to the vendor, if the sale could be arranged through an introduction by Mr Dungan, would be a saving on the commission which would be paid if the sale were put through a hotel broker. His Honour said that Mr Dungan conceded that this advantage was mentioned by one of the vendor's directors. His Honour concluded that Mr Dungan assumed the role of introducing the parties and acting as their go-between.

33. This conclusion of his Honour was the subject of substantial challenge by counsel for the appellant. Counsel firstly challenged his Honour's statement that there was no satisfactory explanation in Mr Dungan's evidence of why, on 16 February 1988, he had a copy of the Form 6 which he produced at the initial meeting with the respondents. Counsel referred to evidence given by Mr Dungan in which he was asked how it came about that he obtained the Form 6 from the vendor's accountant. Mr Dungan said, "I had spoken to the vendors previously ... they indicated that they had had some figures prepared ... and I said I would like to have a look at (them) as their banker so they came to me, naturally."

34. In the course of his cross-examination Mr Dungan gave the following evidence:-

"A form 6 is a sale document, is it not? People do not get

form 6's just for the heck of it?---Yes.

It is because they are proposing to sell the business and

that is a statutory requirement?---I repeat, in the country

it is not unusual for a business to be marketed - on the

market for a year or more.

Whether it is a year or six years, it still means that the

business is up for sale, does it not?---Yeah, but that does

not preclude me from looking at the figures to see whether

this is profitable.

But why would the vendors want you to look at the figures?

That is what mystifies me. That is - - -?---No, I asked to

look at them, I am suggesting.

HIS HONOUR: The bank might want to look at them. People do

not always tell the bank the truth on all these matters?---

Precisely, your Honour.

I think someone had shown two sets of figures prepared under

the statute for some independent purpose. Curiosity got the

better of the manager. He wanted to check. That is the

picture, is it not?---Precisely.

Again, that is speculation on your part - you do not

remember?---Yes."

35. In the submission of counsel for the appellant, it emerges from this evidence that the reason why Mr Dungan had the Form 6 was in order to complete the bank's financial records of its customer. It was submitted that so much was acknowledged by his Honour in statements made by him in the passage from Mr Dungan's evidence just quoted but that in his judgment, his Honour had said there was no satisfactory explanation of why Mr Dungan had the form. Counsel said that the statement in the judgment was an oversight and led his Honour to find, amongst other things, that Mr Dungan's limited disclosure of his conflict of interest "failed dismally" as a disclosure sufficient to inform the respondents of the role Mr Dungan had assumed in the transaction for the vendor. The problem we have about the submission is that it ignores the last of the questions asked by his Honour in the quoted passage. Mr Dungan conceded that what he had said about the Form 6 was speculation. This evidence appears to us to provide an example of the general criticism which his Honour made of Mr Dungan's evidence. We have earlier quoted that criticism. It was that Mr Dungan had very little independent recollection of what happened and was prone to reconstruct an exculpatory version of events. That observation, coupled with the concession made by Mr Dungan that his explanation for having Form 6 in his possession was speculation, in our opinion destroys the criticism which underlies the submission now under consideration. Accordingly it should be rejected.

36. The next matter upon which counsel relied to challenge his Honour's finding that Mr Dungan had assumed the role of introducing the parties, acting as their go-between and advising the respondents, necessitates reference to evidence given by Mr G.W. Forbes who is a solicitor and Mr R.N. Clark who is an accountant. It was submitted that the respondents obtained advice about the merits of the transaction from them with the consequence that any statement or advice made or given by Mr Dungan was overtaken by advice given by Mr Forbes and Mr Clark. The advice was said to have been given in between the time that the contract was signed and the time it might have been rescinded as the result of a cooling off period provided for in legislation to which we shall refer in a moment.

37. Prior to the beginning of 1988 Mr Forbes acted for the proprietor of the Weeroona Hotel, i.e. the vendor to the respondents. As we have said, its name was No Justice Pty Limited, which must conceal an interesting story. Mr Forbes also acted for a firm of accountants, John S. Hazlegrove and Co. Mr Forbes said that on 22 February 1988 he received instructions from Mr Hazlegrove to prepare a memorandum of agreement for the sale and purchase of the licence of the Weeroona Hotel. Mr Forbes could not precisely recall what he then did but said that his normal procedure would have been to order all necessary searches and obtain a copy of the relevant lease.

38. On 23 February 1988 Mr Forbes wrote to Mr Hazlegrove enclosing three copies of an agreement for sale and purchase. In the letter he queried whether his firm was to act on behalf of the purchaser as well as the vendor. Mr Forbes gave evidence by reference to his file. He was not able to remember how it came about that instructions were given to him by the respondents but said that his file referred to the fact that his firm was to act for them. He said that on 8 March he telephoned one of the vendor's directors in relation to the completion of a form 18. A form 18 was explained by his Honour to be a form which is required by the provisions of the Land Agents, Brokers and Valuers Act. The vendor is obliged to serve on the purchaser of an interest in land a form 18 which sets out prescribed particulars including a statement of "cooling-off" rights which exist by virtue of the Act. The purchaser may by written notice notify the vendor of the purchaser's intention not to be bound by the contract for sale. If duly given, the notice has the effect of rescinding the contract. The notice must be given, when the form 18 is served before the making of the contract, within two clear days after the day on which the contract is made. Where the form 18 is served after the making of the contract but more than 10 days before the date for completion, the notice must be given within two clear days after the form is served.

39. Mr Forbes was referred to a memorandum in his file dated 11 March 1988 referring to a personal attendance upon Mr Smith. The memorandum said, "Client handed to (Mr Forbes) copy of lease - concerned with two by two from July 1988, Rick (Mr Dungan) - Commonwealth Kadina. Client to ring landlord, Parker." The reference to "two by two" from July 1988 was a reference, so Mr Forbes said, to the fact that the existing lease had only four years to run or rather that it had two years to run and provided an option to renew for a further two years. Mr Forbes said that the memorandum prompted his memorandum "as to what would have been said". His recollection was that Mr Dungan was the contact point at the bank for the purpose of providing finance and that Mr Smith would ring the landlord presumably to discuss with him the shortness of the remaining term of the lease. Also on Mr Forbes' file and dated 11 March 1988 there was noted a telephone attendance on Mr Clark who was reported as saying that he strongly recommended the respondents obtain a further two year right of renewal from the landlord.

40. Later in his evidence Mr Forbes was again referred to his file note of 11 March 1988. His evidence was as follows:-

"Perhaps if you could turn to that file note dated 11 March.

You will see that it reads, 'Concerned that two by two from

July 88.' That is what is written. Do you see that?---Yes.

I take it that means that someone was concerned?---Yes. I

do not know who.

The question is, were you concerned that it was only a four

year lease?---I would have then and I would still regard it

as part of my function to advise the purchaser as to the

remaining term. So I - yes, I would have been concerned.

You would consider that four years left on the lease was a

relatively short period compared to most transactions you

would handle?---Correct.

Can you recall whether Mr Smith expressed concern to you?---

I cannot recall.

Can you recall whether you expressed your concern to him?---

I cannot specifically recall, although, in the normal

course, I would have at least drawn his attention to the fact.

But from what you have said earlier, it is likely that,

given you saw the lease on that day and given that you made

a note of the fact that it was two by two, it is probable

that you did express concern to Mr Smith about the term?---

That is a fair conclusion.

Do you recall any discussion with Mr Smith at about that

time that he had already had discussions with the landlord

about it about getting more than the four years?---No.

When was the first time you had a discussion with Mr Smith

on that subject; that is, getting more than the four

years?---I would have to refer to the file to - - -

Please?---Detect that if it is recorded. I am sorry, the

note of 11 March itself refers, in my shorthand, to the

intention of Bob Smith to ring the landlord Parker, although,

it does not state in relation to what aspect of the lease.

Did Mr Smith say to you on about that date that the vendors

of the hotel and Mr Dungan had suggested that he contact

the landlord in respect of trying to get more than the four

years?---I cannot recall."

41. After being asked further questions about this matter Mr Forbes said:-

"I felt then, as I do now, that that aspect pertains to the

value of the lease, if I can put it that way, and is

therefore a financial matter which is the responsibility of

the accountant to advise the client and, in fact, I

invariably ensure that in transactions such as this, a

purchaser is represented by an accountant to advise in

relation to the financial aspects.

Presumably because you do not consider yourself having

expertise in that area?---Correct.

Nevertheless, given your experience in the industry, you

felt an obligation to point out to Mr Smith that he should

try to get any additional time from the landlord that he

could?---It seemed like a short term, taking into account

comparable transactions at that time."

42. Mr Clark said that he had been a partner in a firm of accountants, Colin D. Rowe, for 11 or 12 years. Originally Colin D. Rowe and Co. practised as barristers and solicitors. A very large accounting and taxation practice went with it. The firm was based in Maitland but had an office at Kadina which was attended once a week. Mr Clark is a joint holder of the registration of a tax agent's licence in the name of Colin D. Rowe and Co. He has undergone no formal training as an accountant and has no formal accounting qualifications. He said that he received the training "from the principals in that area." He has had over 20 years experience performing the work of an accountant. He said that he had first met Mr Dungan in 1986. He said that his firm and the bank had "mutual clients". He said that occasionally Mr Dungan referred him to clients. Mr Clark also knew the respondents. They also were clients of the firm well before the transaction here in question.

43. Mr Clark said that the respondents saw him early in 1988 about the Weeroona Hotel business. He said that he understood that Mr Dungan had given them his name and referred them to him. His recollection was that Mr Dungan said, "... people by the name of Bob and Marie Smith had purchased a hotel and that we looked like we would be getting the tax work." Mr Clark said that he saw the respondents on 10 March 1988, a date he identified from his diary. Mr Clark was asked for the terms of the conversations. He said that Mr Smith told him that he had purchased a hotel and would require assistance with the preparation of new tax returns and financial statements. Mr Smith asked Mr Clark whether he was prepared to act in that capacity. Mr Clark said that he was.

44. Mr Clark did not see Mr Smith again for some time. He said that after the visit he rang Mr Forbes and told him that Mr Smith had been to see him and that his firm would be acting as the respondents' accountants and taxation consultants. Mr Clark said that, in his conversation with Mr Forbes, he asked who was acting for the various parties and was told that Poveys, Mr Forbes' firm, was acting for both. Mr Clark said that he asked Mr Forbes the length of the lease, "because I had a feeling that just generally - the morning before, talking with Bob (Smith), I said to make sure when you sign legal documents, et cetera, you know what you are signing and things, and Geoff Forbes indicated to me that it was either a two by two or a four year lease." Mr Clark said that, if Mr Forbes was acting for all parties, "if there was a possibility of getting a lease ... longer than that, that would certainly be an advantage ..."

45. Mr Clark said that after that conversation with Mr Forbes he did not discuss the length of the lease with the respondents "for some time".

46. Counsel for the appellants submitted that the evidence disclosed that the respondents did receive advice as to the merits of the transaction from an accountant (Mr Clark) and a solicitor (Mr Forbes) prior to proceeding to purchase the hotel. The advice was said to have been received in between the time that the contract was signed and the time when it might have been rescinded as a result of the cooling off period provided for in the form 18 notice.

47. Before a conclusion is reached upon the question whether the respondents did receive advice about the transaction from Mr Forbes and Mr Clark, it is necessary to refer to some further evidence, to some further matters relied upon by counsel for the appellant and to the way in which the matters relied upon by counsel were dealt with by his Honour. The contract of sale is dated 3 March 1988. The parties to the transaction were No Justice Pty. Limited as vendor, the respondents as purchasers and Messrs Hart and Gwynne who were described as "the covenantors". The covenantors were the directors of No Justice. The reason they were joined in the agreement was for their covenant not to carry on or be concerned or interested in the business of a hotel for a period of three years within a radius of 50 kilometres from the Weeroona Hotel. The agreement provided for the payment by the respondents to the vendor of the purchase price of $160,000 and the value of stock.

48. It is unnecessary to refer to the remaining terms of the agreement except for the provisions of clauses 27.1 and 27.2. These made the agreement subject to the Licensing Court of South Australia approving the transfer of the licence and the landlord of the premises consenting to the transfer of the existing lease of the premises from the vendor to the respondents on or before the settlement date. The agreement for sale is typewritten. At one stage there were added after the provisions of clause 27.2 handwritten words which said "and agree to grant a further two years right of renewal to the Purchaser". The handwritten words have been crossed out and initialled by the parties. His Honour said that speculation as to when and why these handwritten amendments were made to one of the copies of the contract produced no likely explanation. Subject to what follows, no challenge was made to that statement.

49. Appended to the agreement was the form 18 notice. It is unnecessary to refer to the detail of this but it should be pointed out that the form had not been completed by the vendor at that stage. This was a matter noticed by his Honour. His Honour drew this conclusion from notes on Messrs Poveys' file and said that these notes suggested that the form was not completed until after 8 March 1988. He said that at some stage the text of the contract was amended to provide for the taking over by the respondents of various leases of chattels which were owned by the vendor and were to be the subject of the sale. His Honour said that it was not clear when these amendments were made, but it was clear that they were made in Messrs Poveys' office. His Honour thought that the probability was that they were made on 11 March 1988 when Mr Smith saw Mr Forbes. His Honour said that this conclusion was supported by a note in Mr Smith's diary for 11 March 1988 which referred to the signing of changes on the contract of purchase. His Honour said that, on this sequence of events, the contract for sale in its amended form was not made until 11 March 1988 so that the cooling off period had not expired at the time of Mr Smith's attendance on Mr Clark on 10 March or on Mr Forbes on 11 March. His Honour found that the amended contract and the completed form 18 were returned in final form to Messrs Poveys not later than 15 March 1988 when a copy was lodged with the Licensed Premises Division together with an application to transfer the licence.

50. His Honour said that the appellants contended that, whatever the role played by Mr Dungan up to 3 March 1988 and whatever advice he may have given to the respondents before the contract for sale in its initial form was signed, the respondents received advice from Mr Clark and from Mr Forbes at a time when the cooling off period was still running and that with the benefit of the advice from these people, the respondents, by taking no steps to avoid the contract, affirmed it. Of these submissions his Honour said:-

"The applicants, through Mr Smith, had been advised against

consulting an accountant on the merits of the transaction

before signing the contract for sale by Mr Dungan. He had

advised them to the effect that the transaction was

favourable to them, and they had decided to proceed on the

strength of that advice. There was no reason for the

applicants to question the financial virtue of the

transaction with either Mr Clark or Mr Forbes, and Mr

Dungan did not expect them to be getting advice on the

merits of the transaction from either person. I have

already found that Mr Smith's visit to Mr Clark was for a

quite different purpose. There is no evidence that Mr

Clark in fact gave any advice to Mr Smith on the merits of

the transaction. Mr Clark was told the contract was

already made.

The range of topics discussed between Mr Smith and Mr

Forbes was more extensive, but again there is no evidence

that Mr Smith sought advice on the merits of the

transaction, or that any advice was given to him which ran

counter to what Mr Dungan had said. Had he sought such

advice Mr Forbes would have found himself in an obvious

position of conflict where he should not continue to act for

both sides to the transaction. Mr Forbes did not draw Mr

Smith's attention to the applicants' rights at that stage to

"cool off" or advise him that the applicants should consider

doing so. During their meeting Mr Smith signed the

application for the transfer of the liquor licence and, on

my findings above, there must have been some discussion

about the amendments to the contract for sale. Mr Smith

also handed Mr Forbes a copy of the hotel lease which he

got from someone, perhaps the vendor. Concern was expressed

by one of them about the short duration of the balance of

the lease, and Mr Smith said he was to ring the landlord

about an extension of the term. The position in relation to

the duration of the lease had not changed from the preceding

week when the applicants decided to proceed with the transaction."

51. A further piece of evidence which should be referred to is a letter dated 11 March 1988 to Mr Smith from the lessor. Mr Smith received it about 14 March 1988. The letter was as follows:-

"I Eric Charles Parker, Lessor confirm that I will consider

granting a further 2 year lease at the expirey (sic) date of

the current lease of the Weeroona Hotel. Subject to

satisfactory negotiations between the Lessor and Lesee,

under the same conditions that apply to the existing lease.

Signed; E.C. Parker"

52. After referring to the letter, his Honour said that the respondents contended that Mr Smith treated this letter as confirmation of the lessor's agreement to extend the lease for a further two years from July 1992 and proceeded with the contract for sale under this mistaken belief - a mistake of Mr Smith's own making. The appellants submitted to his Honour that the handwritten words added to clause 27.2 of the contract, which are in Mr Forbes' handwriting, indicated that he had given advice to the respondents about the need to obtain a further two year term and that the striking out of the words indicated that Mr Smith believed that the lease had been extended. His Honour continued:-

"A difficulty with this hypothesis is that when the contract

was finally executed (by the parties initialling a series of

amendments on 11 March 1988) Mr Smith was still awaiting

receipt of the letter dated 11 March 1988, and on the other

evidence it is clear that on 10 and 11 March 1988 Mr Smith

knew the lease ran only to July 1992."

It will be recalled that Mr Smith did not receive Mr Parker's letter until 14 March 1988.

53. Be that as it may, it was submitted by the appellants that the only reason Mr Forbes would make the handwritten amendment to clause 27.2 of the contract was because one of the parties must have required it. The amendment was said to be consistent with Mr Forbes' conversation with the respondents on 11 March wherein concern was expressed about the term of the lease. It was further said that the contract for sale in its amended form was not made until 11 March 1988 and the cooling off period had not expired at the time of Mr Smith's attendance on Mr Clark on 10 March or on Mr Forbes on 11 March 1988. That is in accordance with his Honour's findings. The appellants then submitted that, as a matter of logic, Mr Forbes and Mr Clark must have given advice to the purchasers prior to the expiration of the cooling off period because there was no other reason why Mr Forbes would insert the amendment to clause 27.2 on that day. The amendment was said to be an obvious alternative to cooling off. The appellants submitted that no explanation had been given by the respondents of how, when or why the handwritten amendment was subsequently deleted. The information was said to be solely within the knowledge of the respondents, yet no evidence was led on the point either from them or from the lessor. It was submitted that that was because no such evidence could have assisted them. Reference was made to Jones v. Dunkel [1959] HCA 8; (1959) 101 CLR 298.

54. We should put this last point out of the way first of all. In our opinion this is not a case in which the appellants obtain any assistance from Jones v. Dunkel. The respondents themselves were called to give evidence and made themselves available for cross-examination. Their solicitor, who was also the solicitor for the vendor, was also called. He was specifically asked about the matter but could not shed any light upon it. The appellants, however, rely on the fact that the lessor was not called. But the lessor was not a witness who could properly be said to be in the respondents' camp and not in that of the appellants. He was a witness able to be subpoenaed by either party. No adverse inferences of the kind contended for by the appellants should be drawn.

55. The submissions made on behalf of the appellants concerning advice said to have been given by Mr Forbes and Mr Clark are speculative in the extreme. There is no warrant for inferring that, as a matter of logic or otherwise, Mr Forbes and Mr Clark must have given advice to the respondents prior to the expiration of the cooling off period. The basis for submitting the contrary was, if not entirely, then substantially, the presence of the amendments to clause 27.2 of the contract. That, as we have shown, was unexplained, but the lack of an explanation is not a matter of advantage to the appellants and of disadvantage to the respondents. It is a neutral factor. In any event the significant fact is that an examination of the evidence of Mr Forbes and Mr Clark simply does not warrant the conclusion that any such advice was given. Their evidence is to the contrary. Both were concerned about the problem but neither said he gave any such advice. Mr Forbes was inclined to leave the matter to Mr Clark. Mr Clark, on the other hand, wanted to be sure that Mr Forbes was aware of the problem. The important factor is that there is absolutely no indication in the evidence of either witness that Mr Smith was advised by either one that the respondents should not enter into the transaction unless they obtained an assurance from the lessor binding him to give the respondents a further two years renewal of the lease at the expiration of the existing term.

56. In reaching this conclusion we have taken into account all that his Honour has said. We have not quoted the entirety of it but we should say that the whole of his Honour's judgment is painstakingly and carefully written and his analysis of the evidence on this aspect of the case is exhaustive. None of the submissions made to us persuade us that that analysis is in any way flawed.

57. We leave the conversations which Mr Smith had with Mr Clark and Mr Forbes on 10 and 11 March 1988 and return to Mr Dungan's role in the affair. We have referred to the evidence of the critical conversations with him. Upon the basis of his Honour's conclusion about what evidence was to be regarded as reliable, Mr Dungan's evidence should be substantially put aside. He did not approach the matter upon the basis that a two year extension of the term of the lease was relevant to his advice that the purchase was a good one. We refer again to the memorandum he wrote to Branch Lending on 7 March 1988 and his statement in that memorandum that it was unlikely that any renewal of the lease would occur prior to settlement. That, coupled with Mr Dungan's assurances to Mr Smith that the purchase was a good one and that he was worrying too much about the matter, demonstrates that Mr Smith, and thus the respondents acted upon Mr Dungan's statements and advice.

58. His Honour referred to evidence given by Mr Dungan that, although loan repayments and forecasts were predicated on the respondents not being entitled to any extension of the lease beyond July 1992, Mr Dungan thought that there was only a one in 100 chance that the lease would not be renewed. His Honour said that it was on the assumption that the lease would be renewed for a further two years that he wrote that the value of the leasehold estate, for security purposes, was $150,000. His Honour thought that it was probable that Mr Dungan had been shown the lessor's letter of 11 March 1988 before completion and added, that, whether this was so or not, Mr Dungan did not check before completion whether the lessors had in fact agreed to extend the lease.

"There was no reasonable basis then or at any time before

completion for Mr Dungan to proceed on the footing that the

purchaser of the hotel business would have secure tenure

beyond July 1992. His mistaken belief to the contrary could

well explain why he gave the advice which I have found that

he did to the applicants. Unfortunately the advice was

wrong. In the absence of a reasonable basis for the belief

that the landlords had agreed to extend the lease beyond

July 1992 there was no reasonable basis for believing that

the value of the leasehold was in the order of $150,000, or

anything like that sum. Mr Dungan's calculations in the

application of likely net profit from the hotel, hardly

justify his statements to the applicants that the hotel

business would be a good hotel for them, and that it would

be within their financial reach, even on the basis that they

could recoup their capital outlay to buy the goodwill of the

business over 6 years. On his calculations the statements

are clearly unjustified if the capital had to be recouped

over 4 years."

60. The accommodation which the bank was asked to make available to the respondents was the difference between what they would be obliged to pay and the sum of $95,000 which they themselves would bring to the transaction. The application for this accommodation was approved on 10 March 1988 subject to a satisfactory valuation from the bank's valuer. Mr Dungan instructed the bank's valuer, Mr Mudge, on 14 March 1988. The valuation became available on 30 March 1988. As his Honour put it, Mr Mudge was unfortunately instructed that the lessor had agreed to extend the lease for a further two years and he carried out his valuation on the basis that the lease had six years rather than four years to run. He concluded that the plant was worth $9,000 (this figure was obtained from the contract), the stock $18,000 and the leasehold $138,000, a total of $165,000. His Honour said that the valuation of the leasehold was below the purchase price, but the valuation offered the bank sufficient security to cover its proposed loan and the transaction proceeded. The respondents were not informed of the valuation.

61. Because it was Mr Dungan who instructed Mr Mudge to make the valuation, it would appear that Mr Dungan must have remained under the impression that the lessor was prepared to grant two years extension of the lease from July 1992. Mr Dungan's misapprehension must therefore have continued throughout March 1988 and beyond. As his Honour said, there was no reasonable basis then or at any time before completion for Mr Dungan to proceed on this footing.

62. A matter which needs to be mentioned concerns the amount of Mr Mudge's valuation of the leasehold. It is to be borne in mind that the valuation would be likely to have been a conservative one because it was made for security purposes. Nevertheless Mr Mudge's figure was substantially below the $160,000 which Mr Dungan had led the respondents to believe was a good price. Putting aside the fact that it was made on an erroneous assumption, the situation is one in which Mr Dungan, having given the respondents advice about the appropriateness of the purchase, let them proceed without informing them of Mr Mudge's conclusions notwithstanding the fact that Mr Smith had subsequently raised with him the question of the price during the cooling off period when the contract might have been rescinded. The situation was one in which Mr Dungan had told the respondents that the purchase was a good one, had told them that it was not appropriate to seek to negotiate with the vendor for a lower price, had proceeded himself upon a false assumption as to the length of the lease and did not disclose the outcome of the valuation which might have suggested to the respondents that the price they were paying was excessive.

63. The transaction was completed on 20 April 1988 after approval for the transfer of the licence had been given by the licensing court. It was not until about March 1989, when the respondents were discussing their trading figures with Mr Clark, that they sought advice from anyone other than Mr Dungan about the value of the hotel business. A valuer, Mr J.G. Murphy, was consulted and his advice led to the institution of the proceedings.

64. Mr Murphy's report is in evidence. He also gave oral evidence. It is not necessary to refer to the detail of the report or his evidence. Subject to some aspects of it relevant to the issue of damages, it was accepted by his Honour and we see no reason to disturb his Honour's conclusion in that respect. Mr Murphy came to the conclusion that the value of "the property" as at 20 April 1988, the date of completion, was $80,000. As at 6 June 1989, when the valuation was carried out, Mr Murphy thought that the value was $60,000. Mr Murphy's reference to the property is a reference to the leasehold and not to stock or plant. The leasehold, of course, included the licence.

65. It is relevant to note that Mr Murphy thought that, if the hotel had had "a normal 9-10 year lease", with standard conditions and rental, the lessee owned the plant and equipment which was in good and reasonable repair and condition, and the painting and repair schedule had been completed, the value of the leasehold in April 1988 would have been $180,000. If this view be right, it seems unlikely that Mr Murphy would have valued even a six year term at anything close to the $160,000 which the respondents paid for the lease.

66. At the outset it was mentioned that the causes of action upon which the respondents relied were breach of fiduciary obligation, negligence and breach of s.52 of the Trade Practices Act. His Honour dealt with the causes of action in this order and found each of them established. For our part, we propose to approach them in the reverse order.

67. We come first to the cause of action based on breach of s.52 of the Trade Practices Act. A substantial criticism of his Honour's conclusions in relation to this cause of action was that his Honour did not specify with any particularity the representations said to have been made by the appellants which were misleading or deceptive. That submission should be rejected. His Honour said that there was no reasonable basis for the statements made by Mr Dungan about the suitability of the hotel business for the respondents. We have earlier dealt with the submission that statements along these lines did not imply that Mr Dungan was saying that the price at which the hotel was to be purchased was a good one. The submission has been rejected. It is clear to us that his Honour found the statements made by Mr Dungan about the suitability of the business to be statements, inter alia, about the appropriateness of the price. That is the representation which is in question. It will have been observed that Mr Dungan's statements about this matter were made quite categorically.

68. It is important to bear in mind some of the background of this matter. The respondents had been customers of the bank for a long time. They had known Mr Dungan since he became the manager of the bank. They had told him of their wish to buy a business of some kind and it is common ground that he discussed with them a variety of transactions before any question of purchasing the Weeroona Hotel arose. It was he who raised the projected purchase with them and it was he alone who, throughout February and March 1988, continued to give them advice. It is plain that he did act as their adviser. The totality of the evidence to which we have referred establishes this. They sought advice from no one else. He subsequently discouraged them from seeking any accounting advice or from consulting a hotel broker; and he also persuaded them that there was no point in negotiating with the vendor for a lower price or worrying about whether they had agreed to pay too much for the hotel. All these things taken together establish that the respondents looked to Mr Dungan as their guide in the matter. They evinced complete faith in him and they relied on him.

69. Evidence was given about the business experience and background of the respondents. These were summed up in a passage to be found in the transcript of the proceedings in which his Honour said:-

"Here we have a couple of country people who have got no

great experience in the business world who relied on the

bank for ordinary sort of financial advice for a long time.

They have gone to the bank on this occasion and at least

they seem to have expected that they would be told that if

the deal was just not on and it was not a flyer at all they

would be told that, and they would be told: this is not the

sort of thing you ought to be going into."

70. What his Honour said was said in the run of the case. It was not intended by his Honour to reflect his ultimate view but, as matters now are, it seems to us to sum up very well the extent of the experience which the respondents had and the type of people they were.

71. Notwithstanding the categorical way in which Mr Dungan expressed himself, we agree with his Honour that the statements made by Mr Dungan about the merits of the transaction were expressions of opinion and predictions. They were statements expressing his belief. His Honour referred to the decision of this Court in Global Sportsman Pty. Limited v. Mirror Newspapers [1984] FCA 180; (1984) 2 FCR 82 where the Court said (p 88):-

"A statement which involves the state of mind of the maker

ordinarily conveys the meaning (expressly or by implication)

that the maker of the statement had a particular state of

mind when the statement was made and, commonly at least,

that there was basis for that state of mind. If the meaning

contained in or conveyed by the statement is false in that

or in any other respect, the making of the statement will

have contravened s.52(1) of the Act."

It was after that citation that his Honour concluded that there was no reasonable basis for the statements about the suitability of the hotel business for the respondents.

72. The statement which Mr Dungan made was a serious one. He must have known that it was of critical importance to the respondents. He knew that they would rely upon his advice. When he made the statement, that is what he intended them to do. There does not appear in the entirety of the evidence any basis whatever for the statement which was made. At the time it was made, he had no valuation, not even a bank valuation, which was current. He did not have Mr Mudge's valuation and, if he had had it, it would have been no use to him because it was made on the assumption that the lease had six years, rather than four years, to run. The respondents were entitled to think that the statement was made by a bank manager who had close knowledge of the hotel and what it was appropriate for them to pay for it. They knew, because Mr Dungan told them, that the vendor was a customer of the bank and they knew that Mr Dungan was advising it also because that is what he said when he purported to discuss his conflict of interest. They were not to know that his statement was made in the absence of any credible information of what the value of the hotel was. It seems to us, although we do not need to go so far, that there was a substantial degree of recklessness in Mr Dungan's conduct. We are satisfied that it was amply demonstrated in this case, to pick up the words of the Court in Global Sportsman, that there was no basis for the state of mind which Mr Dungan needed to have if his conduct were not to be regarded as misleading and deceptive.

73. For all these reasons we are satisfied that his Honour was well justified in concluding that the bank, through its agent, Mr Dungan, engaged in conduct which was misleading or deceptive. His Honour found that Mr Dungan was "knowingly concerned" in that conduct within the meaning of para. 75B(1)(c) of the Trade Practices Act. Mr Dungan was the person who engaged in the conduct on behalf of the bank. His Honour's finding in this respect was well open.

74. We turn to the question of negligence. All that we have so far said is relevant to this question. The evidence establishes that Mr Dungan, on behalf of the bank, assumed the position of business adviser to the respondents. He was not merely acting in the interests of the bank; he had another capacity, namely, that of adviser to the respondents as well. He was therefore under a duty to advise them with due care and skill. He failed in this duty because the advice he gave the respondents about the appropriateness of the transaction was wrong. For reasons earlier given, he had no basis, let along any reasonable basis, for making the statments which he did. No valuation or other material available to him justified him in giving advice about the matter particularly in the categorical way in which he did. It follows that his Honour's conclusions that the cause of action in negligence was made out should not be disturbed.

75. It remains to deal with fiduciary relationship. It is not a novel proposition that where a bank gives to a customer advice upon financial affairs, then in addition to any contractual rights the customer may have (something which does not arise on this appeal) the relationship between the parties may be such as to found either or both a common law duty of care and a fiduciary duty: see 'Halsbury's Laws of England', 4th Ed, 1989, Vol 3(1), 'Banking', para. 251.

76. In many cases, and the present is one of them, the bank as financier will have a manifest personal interest of its own in the matter. The question then becomes one of ascertaining when, given the apparent commercial self interest of the bank, the bank also may be taken to have assumed a fiduciary responsibility towards the customer in question. It was upon the answer to similar questions, but in very different factual settings, that the High Court was divided in Hospital Products Limited v. United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 but unamimous in United Dominion Corporation Limited v Brian Proprietary Limited [1985] HCA 49; (1985) 157 CLR 1.

77. A bank may be expected to act in its own interests in ensuring the security of its position as lender to its customer, but it may have created in the customer the expectation that nevertheless it will advise in the customer's interests as to the wisdom of a proposed investment. This may be the case where the customer may fairly take it that to a significant extent his interest is consistent with that of the bank in financing the customer for a prudent business venture. In such a way the bank may become a fiduciary and occupy the position of what Brennan J. has called 'an investment adviser': Daly v. The Sydney Stock Exchange Limited [1986] HCA 25; (1986) 160 CLR 371 at 384-385.

78. Two Canadian decisions provide recent examples. Hayward v. Bank of Nova Scotia (1984) 45 OR (2d) 542, concerned a plaintiff living on a farm in Ontario who for forty years had banked with the branch of the defendant bank in a nearby country town. As Potts J. put it (supra at 543) the bank manager in such a situation had a position of some status in the community. The same comment may be ventured in the present case as to the position of the manager at Kadina. In Hayward's case the plaintiff was approached by another customer of the bank with a proposal to invest in the purchase of a new breed of cattle. In reliance upon advice favouring her entry into the transaction, the plaintiff sought and obtained credit from the bank to make what it transpired was a disastrous investment. In holding that a fiduciary duty arose, Potts J. referred to the earlier decision in McBean v. Bank of Nova Scotia (1981) 15 BLR 296, where the activities of the same bank manager had led another customer to seek and obtain a loan upon a similar investment in the 'exotic cow' business of the same customer, a Mr Poland. It had been held that the bank was in a position of conflict of interest, because Mr Poland had substantial indebtedness to the bank and the bank manager himself had an active involvement in Mr Poland's business. An appeal in Hayward's case was dismissed: (1985) 51 OR (2d) 193.

79. The present case, like those just considered, is not one where one would properly describe the parties as acting in a commercial transaction at arm's length and each with the assistance of fully independent professional advice. Such considerations would be of significance in tending to show the absence of a fiduciary relationship: Hospital Products Limited v. United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 at 70, 119, 146. The starting points for consideration of the present problem are the findings that Mr Dungan assumed the role of introducing the parties and bringing them together, that he then acted as the respondents' financial adviser in the matter, and that they evinced complete faith in him. The circumstances in which that came about need to be borne in mind. We do not repeat, although it is highly significant here also, what we have already said as to the background of his earlier dealings and discussions with the respondents and as to the type of people which the respondents were. These are important matters to be taken into account in consideration of the question of whether a fiduciary relationship arose.

80. In our view, the primary Judge was correct in concluding on the facts that the bank became the investment adviser of the respondents in the matter of the purchase of the Weeroona Hotel and that a fiduciary relationship arose. The question then was one of (i) identifying the relevant incidents of that relationship and duties arising from it, and (ii) determining whether there had been a breach of duty leading to loss for which there was an obligation upon the bank to compensate the respondents.

81. The crucial incident of the fiduciary relationship in this case arose from the conflicting interests between the two sets of customers of the bank. As Von Doussa J. put it, and we agree, Mr Dungan had become the representative of one customer of the bank, No Justice Pty Limited, that is to say, in substance, of two other customers, Messrs Gwynne and Hart, in helping to bring about the sale of their business to two other customers of the bank. Not only must the fiduciary avoid, without informed consent, placing himself in a position of conflict between duty and personal interest, but he must eschew conflicting engagements. The reason is that by reason of the multiple engagements, the fiduciary may be unable to discharge adequately the one without conflicting with his obligation in the other. Thus, it has been said, after ample citation of authority, that where an adviser in a sale is also the undisclosed adviser of the purchaser, an actual conflict of duties arises: Finn, 'Fiduciary Obligations', pages 253-254.

82. In such a case, it is not to the point that the fiduciary himself may not stand to profit from the transaction he brings about between the parties. The prohibition is not against the making of a profit (though many cases of breach of fiduciary duty involve the wrongful acquisition of a profit, rather than the infliction of a loss) but of the avoidance of conflict of duties, something described in forceful terms by Lord Cozens-Hardy M.R. in Moody v. Cox and Hatt (1971) 2 Ch 71 at 81-82. It is true that the evidence did not show that the bank was pressing Messrs Gwynne and Hart to sell, or that their company was having trouble in meeting its commitments. But, as we have indicated, it would not be necessary for such facts to exist in order for the fiduciary obligations that we have described to arise. Nor, of course, is it to the point that the appellants did not act with fraudulent intent: Nocton v. Lord Ashburton (1914) AC 932 at 957.

83. It frequently is said that the fiduciary will be absolved by the giving of fully informed consent to the existence of what otherwise would be a conflict. There is no precise formula which will determine in all cases if fully informed consent has been given; it is a question of fact in all the circumstances of each case: In re Pauling's Settlement Trusts (1962) 1 WLR 86 at 108 per Wilberforce J., whose judgment on this issue was untouched by the Court of Appeal, (1964) Ch 303. Turner L.J. had spoken to the same effect in Life Association of Scotland v. Siddal (1861) 3 De G.F. and J. 58 at 73[1861] EngR 300; , 45 ER 800 at 806, and also had there said that the question was whether the party had been fully informed of his rights "and of all the material facts and circumstances of the case". The circumstances of the case may include (as they do here) the importance of obtaining independent and skilled advice from other parties.

84. In the present appeal, counsel for the appellants relied strongly on the disclosure which Mr Dungan made. At an early stage, on 16 February 1988, he told them of his relationship with the vendor and of the existence of a conflict. In counsel's submission, that was sufficient. The difficulty with that submission is that the matter did not stop there. Mr Dungan did not tell the respondents to go to someone else for advice. On the contrary, he persuaded them not to do so. He did his best to encourage them not to see either an accountant or a hotel broker. He did encourage them to go to the solicitor for the vendor, but with the unfortunate result that the solicitor was in a position of conflict. Had Mr and Mrs. Smith sought advice from that solicitor about the merits of the transaction, the solicitor would have been in an impossible position. This is because the acceptance of the double engagement would have placed the solicitor in a dilemma. As Lord Cozens-Hardy M.R. put it in Moody v. Cox and Hatt, supra at 81:

"He ought before putting himself in that position to inform

the client of his conflicting duties, and either obtain from

that client an agreement that he should not perform his full

duties of disclosure or say - which would be much better -

'I cannot accept this business'."

(We pause to say that various courts in a number of jurisdictions have decried the practice of the one solicitor acting for both vendor and purchaser; cf. Jennings v. Zilahi-Kiss (1972) 2 SASR 493 at 511-512; Spector v. Agela (1973) Ch 30 at 47; Fox v. Everingham [1983] FCA 258; (1983) 50 ALR 337 at 345; Farrington v. Rowe McBride and Partners (1985) 1 NZLR 83 at 90-91, 96. It is an undesirable practice and it ought not to be permitted.)

85. We agree with the following statement by the learned primary Judge:-

"Even if Mr Dungan had disclosed to the applicants that he

was acting for the vendor in presenting Form 6 and then

giving particulars of the hotel business he would still have

been placed in an impossible position when the applicants

sought his advice on the merits of the transaction, and

enquired whether they should offer less than the vendor's

asking price. He could give no answer on these matters

without running into conflict with his duty to at least one

side in the negotiations. In the circumstances of this case

Mr Dungan ought never to have advised the applicants at all

on the merits of the transaction ... He should have

explained to them the need to get advice on the questions

raised by them from someone who is independent. When Mr

Smith asked if he should seek accounting advice, he should

have been told to do so."

86. The failure of Mr Dungan to act in the manner indicated in that passage leads equity to afford its remedies for breach of duty, including that of compensation. In Farrington v. Rowe McBride and Partners, supra at 93, Richardson J. set out the following passage from the advice of the Privy Council delivered by Lord Thankerton in Brickenden v. London Loan and Savings Co. (1934) 3 DLR 465 at 469:-

"When a party, holding a fiduciary relationship, commits a

breach of his duty by non-disclosure of material facts,

which his constituent is entitled to know in connection with

the transaction, he cannot be heard to maintain that

disclosure would have altered the decision to proceed with

the transaction, because the constituent's action would be

solely determined by some other factor, such as the

valuation by another of the property proposed to be

mortgaged. Once the court has determined that the non-disclosed

facts were material, speculation as to what course

the constituent or disclosure would have taken is not relevant."

Lord Radcliffe, in another Privy Council appeal from Canada, later spoke to similar effect: Gray v. New Augarita Porcupine Mines Limited (1952) 3 DLR at 15.

87. We turn to the question of damages. As mentioned, his Honour awarded the respondents the sum of $102,500. This was made up of two sums, $60,000 and $42,500. His Honour concluded that the value of the lease was $100,000. He awarded the difference between what he had been paid for it, $160,000, and the sum of $100,000. The $42,500 was awarded in respect of interest. Compound interest was awarded at rates in line with those actually charged to the respondents by the bank. The respondents had claimed in addition the sum of $59,465 which was said to be the difference, after adjustment for income tax, between what the respondents would have received had each continued in employment which they held immediately before purchasing the hotel and the net profits received from the hotel up to 30 June 1990. His Honour refused to accede to this claim. He gave a number of reasons for this. One was that the net profits achieved by the respondents in running the hotel were due to factors unrelated to representations made about the operation of the business. He also thought that it was quite clear that the respondents had, by 1988, decided to purchase a business which they would operate together and to give up their employment and sell their house as soon as they did so. He thought that conjecture as to what the position of the respondents might have been had they not purchased the hotel was pure speculation but that it was a probability that they would not have continued indefinitely in their employment.

88. A further reason which his Honour gave was that the respondents realised by June 1989, if not much earlier, that they had paid too much for the hotel business and that it was not suitable for them for that reason. They could have endeavoured to sell the hotel then and sue for their losses. They chose not to do so. Subject to the allowance of a reasonable time to sell the business once they realised the true position, the respondents could not recover consequential loss thereafter. It followed, so his Honour thought, that the damages should be limited to the difference between what the respondents paid for the business and its true value in April 1988 when the transaction was completed, together with interest.

89. The measure of damages which his Honour applied was the same for both the causes of action for breach of the Trade Practices Act and negligence. As regards breach of fiduciary duty he concluded that, from a practical point of view, the measure was the same. As his Honour said, the obligation of a defaulting fiduciary is essentially one of effecting a restitution. He referred to what had been said by Street J. in Re Dawson; Union Fidelity Trustee Co. Limited v. Perpetual Trustee Co. Limited (1966) 2 NSWR 211 at p 216, namely, that the obligation to make restitution which courts of equity have from very early times imposed on defaulting trustees and other fiduciaries is of a more absolute nature than the common law obligation to pay damages for tort or breach of contract. His Honour continued by saying that the obligation to make restitution was not necessarily limited by common law concepts of foreseeability and remoteness. The point is illustrated by what was said in the passage we have set out above from the advice of the Privy Council in Brickenden v. London Loan and Savings Co., supra. See also Catt v. Marac Australia Limited (1986) 9 NSWLR 639 and the unreported judgment of Deane J. in Palmisano v. Hyman in the Supreme Court of New South Wales (30 March 1977, No. E1353 of 1975). Nevertheless, he thought that the present case was one where the default of the fiduciary caused an immediate pecuniary loss which could be quantified by the difference between the price paid and the real value of the business. He concluded that this was a case (like Nocton v. Lord Ashburton, supra, itself) where there was no difference in result whether one quantified the damages in tort or quantified compensation in equity.

90. The appellants contended that the figure of $100,000 arrived at by his Honour as the value of the business in April 1988 was substantially too low. Indeed, they went so far as to suggest that the respondents had established no damage at all because, unless one knew whether the lease was to be renewed beyond July 1992, one could not put a figure on the value of the business. In the absence of evidence from the lessor, the view should be taken that the respondents had established no damage. That was particularly so in the light of the terms of the letter which Mr Parker had written concerning this question. Reliance was again placed upon Jones v. Dunkel (supra).

91. We deal with this submission first. It should be rejected. The case had to be decided upon the evidence which his Honour had. The lessor and the respondents are not shown to have been in league with one another. So far as the evidence reveals, the lessor had not, at the time his Honour dealt with the matter, granted a further renewal of the lease. He may or may not do so in the future. His Honour dealt with this problem by making an allowance for the fact that the lease might be renewed. He said:-

"Notwithstanding that the burden of proof as a matter of law

rests on the applicants I do not think that the

unsatisfactory state of the evidence means that the

applicants have failed to prove any loss at all. Mr

Murphy's evidence establishes that the market value, upon

the assumption that the lease was unlikely to be renewed,

was much less than the applicants paid for it. The

uncertain factor existing then which could lead to a finding

that the true value differed from Mr Murphy's opinion was

the chance of renewal of the lease beyond July 1992. The

likelihood of renewal of the lease is almost as clouded now

as it was in 1988, although the chances of renewal are, I

think, to be assessed as slightly higher now than they would

have appeared in 1988. The expiry date is much closer and

the landlords are now expressing a willingness 'to give

serious consideration to any reasonable proposition'. As a

matter of probability on the evidence I find that the chance

of renewal of the lease was higher in 1988 than Mr Murphy

assumed for the purpose of his valuation, and is slightly

higher now than it was then. But there is still no

certainty that the lease will be renewed. The assessment of

the chance of renewal can be no more than a broad exercise

of judgment. If later events show that the chance has been

assessed too favourably to the respondents that will be a

consequence of the unsatisfactory state of the evidence. I

assess the true value of the hotel business at April 1988 at

$100,000 plus stock."

92. We are of opinion that the approach taken by his Honour was one which was open to him. It is not indicative of any error. Both parties quibbled with the sum of $100,000 at which his Honour arrived, the appellants saying that it was too low and the respondents saying that it was too high. The matter was one peculiarly for his Honour's judgment. Again, we detect no error in the conclusion at which his Honour arrived.

93. It remains to deal with the respondents' submission that the award of damages made in their favour should have included an amount for consequential loss. Again we have considered what his Honour has said about this claim. His reasons for disallowing it do not disclose error. Indeed, we are of opinion that, had it been our task to assess damages, we would have reached the same conclusion. The claim for consequential loss was rightly rejected.

94. It follows that both the appeal and the cross-appeal must be dismissed. We have considered the question of costs and have concluded that the appropriate order for costs is that the appellants pay to the respondents four-fifths of their costs of the appeal and cross-appeal.