Re Netaf Pty Limited and David Marlow v Bikane Pty Limited [1990] FCA 35; 26 FCR 305

Re Netaf Pty Limited and David Marlow v Bikane Pty Limited [1990] FCA 35; 26 FCR 305 - FCA 1990 case summary — Zoe

[33]

15. The valuation on which the primary judge acted was one based on the evidence of a Mr Brady, called before his Honour as a witness for the cross-appellant, then applicant. The value reached was apparently based on a turnover of $18,000.00 per week, a gross profit margin (found by the trial judge) of 21%, expenses of $2,542.00 per week, producing a net profit of $1,238.00 per week, or over $64,000.00 per year. According to the evidence, during the period in which the cross-appellant traded, it incurred trading losses (including liability for interest) in the sum of $86,929.00. One could not be absolutely confident, however, of the accuracy of the cross-appellant's figures. It was admitted that early during the trading period referred to, there was some deliberate falsification of the records of the business in the hope of reducing tax liabilities and the primary rcords were not available for the whole of the trading period. If it is assumed that losses of the order claimed were in fact made, it is not easy to see why the primary judge was obliged to lay them at the door of the cross-respondents. It is a matter of common experience that, on a change of management, many businesses engaged in competitive activities do substantially worse and that some do substantially better; such reversals of fortune may be due to superior or inferior management, or to causes beyond management's control, such as the activities of competitors or suppliers. As we understand from the reasons of our brother, Wilcox J., his Honour is of the view that there is a prima facie right in a buyer such as the cross-appellant to recover trading losses and a loss on re-sale, subject to the possibility of that right being defeated if it is proved that reasonable steps were not taken to mitigate losses. We do not decide this appeal on that basis, but think that an applicant must prove each element of his loss, and that a trial judge should award that sum which, in his view, is shown to constitute reasonable compensation for the harm done by the wrongdoer. We respectfully express the view that the primary entitlement, on the authorities, is to the difference between the price and the value at the time of the purchase; the question whether further losses should be allowed is to be determined having regard to the circumstances of each individual case.

[55]

Q "And Mr Wall said, did he, that 24 per

cent is what he thought he could achieve?"

A "Something to that effect; I could not be

precise. And Mr Marlow accepted -- the

reason I put it down was that Mr Marlow

accepted the reduction made by Mr Wall."

Q "I think you said yesterday -- and again

correct me if I am wrong -- that Mr

Marlow tended to go along with that?"

A "Yes, I mean -- yes, same thing."

Q "Tended to go along with Mr Wall saying he

thought he would get 24?"

A "There was an acknowledgement of 24, that

is why I wrote it down."

Q "Now I come back to the matter we were

discussing just before lunch. There is

an obvious relationship between the 25

per cent that Mr Marlow said that he was

achieving in the business, which he did

-- is that correct?"

A "Well, my understanding was that 25 per

cent was the figure he gave me on the

sales inspection report -- that is the

reason I put 25 per cent there. But in

subsequent conversations to the time when

I would have written this 25 per cent, Mr

Marlow, in the telephone conversation I

referred to earlier and also in the

earlier part of this meeting, indicated

he was in fact, he believed, achieving in

excess of 28 per cent."

Q "I follow that. My question is whether

the 24 per cent that you noted on exhibit

10 jogs your memory as to this

differential in buying power of 1 per

cent because what I want to suggest to

you is that the 24 per cent was put on

exhibit 10 by you reflecting the

conversation; and that conversation in

turn was 25 percent is the figure at

least that Mr Marlow is getting and a 1

per cent differential the difference in

buying power?"

A "I do not remember it being put that way.

I remember the words were not exactly to

that effect; they were quite different,

I thought."

Q "I see; but the 24 per cent is a

reflection of what Mr Wall -- at least

your perception of what Mr Wall was

likely to achieve?"

A "No, it was what Mr Wall said to Mr Marlow

and Mr Marlow in return acknowledged and

went along with that figure provided by

Mr Wall."

Q "All right, thank you. Could I have

exhibit Q, if the Court please?"

HIS HONOUR: "I just want to get this clear:

you are not saying Mr Marlow acknowledged

that 24 was all he was doing, are you?"

A "No."

HIS HONOUR: "Because he had told you that he

was doing 28.9 or whatever it was?"

A "Yes, your Honour; he has said that he in

fact believed, because of his new

computerized cash registers, that he

believed that he could definitely say

that he was achieving in excess of 28 per

cent. He said that on two occasions."

At a glance

Court

Decision date

Before

Source

Judgment (101 paragraphs)

Re Netaf Pty Limited and David Marlow v Bikane Pty Limited [1990] FCA 35; 26 FCR 305 (16 February 1990)

Parties

Legislation Cited (8)

Cases Cited (9)