Rodi v Gelonesi

Judgment (EX TEMPORE) 1BEAZLEY JA: Ward JA will deliver the first judgment. 2WARD JA: The application before this Court is a summons seeking leave to appeal from the decision of Olsson SC DCJ dismissing proceedings brought by the applicants for damages under the Trade Practices Act 1974 (Cth) and/or the Fair Trading Act 1987 (NSW) in relation to alleged misleading and deceptive conduct (and unconscionable conduct) occurring in the context of a proposed sale to the first applicant or his company of a fruit and vegetable business then operated by the respondents. 3The sale did not proceed. However, during the course of negotiations in relation to the sale the applicant took over the operation of the business (under what the respondent says was a management agreement pursuant to which the applicant paid a management fee). That arrangement ceased after about 3 months and the respondent paid the applicant a partial refund of the management fee. 4The two individuals who are parties to the proceedings, Mr Rodi and Mr Gelonesi, are cousins. Mr Rodi had carried on the operation of fruit and vegetable businesses for some time. Mr Gelonesi is a solicitor who was relatively new to the operation of the business he was then attempting to sell. 5The applicants' clam in the District Court proceedings was that the respondents had engaged in misleading and deceptive conduct by way of the provision to the applicants of a particular spreadsheet showing the takings of the business over a particular period, and by silence in not disclosing the trading position after that period. The spreadsheet was on the apparent letterhead of an accountant who was a relative of both the individual parties and had acted for both of them from time to time. 6It was alleged that by the provision of the spreadsheet the respondents had misrepresented the takings of the business (and the probable continuation of those earnings) and had misrepresented that the spreadsheet had been verified by the accountant. The applicants claimed that they had relied on those misrepresentations when they took over the operation of the business. The issue of reliance is the central issue in the application for leave to appeal. 7The unconscionable conduct claim was based on the familial relationship between the cousins; that Mr Rodi was of modest educational means both generally and in comparison with Mr Gelonesi; that Mr Rodi, it was said, had been invited to rely upon the understanding that Mr Gelonesi's professional expertise was being engaged for the benefit of the applicants. It was also alleged that Mr Rodi had been induced to go into possession of the business and to pay the relevant fee "without recourse to" the applicants' legal representatives and it was put to the Court that, in effect, Mr Gelonesi had gone behind the back of the applicants' solicitor to effect a management agreement while he was corresponding with the applicants' solicitors concerning the terms of the proposed contract for sale of business. 8The applicants claimed to have suffered loss and damage in having incurred costs and expenses in preparing to execute a contract for the purchase of the business; trading losses while they operated the business; loss of the balance of the sum ($100,000) paid under the Management Agreement (that balance being $30,000); and loss of interest on that sum or the portion of it what as was not refunded. 9The primary judge found that the spreadsheet had been shown to the applicants in about October 2007, that the difference between the spreadsheet takings and the cash register takings over the 13 month period in question was about 5%, which was not regarded as significant. While her Honour was troubled at the lack of a satisfactory explanation for the appearance of the accountant's logo on that document, she found that that the plaintiff did not place much, if any, weight on its contents and that it was inherently improbable that had the spreadsheet been as persuasive as it was asserted by Mr Rodi to be Mr Rodi would not have mentioned it to his solicitor before June 2008. Her Honour further considered that in the absence of complete financial statements it was not possible to determine to what degree the spreadsheet was accurate. 10Her Honour considered that in the absence of complete financial statements it was not possible to determine to what degree the spreadsheet was accurate. Her Honour's finding was that the spreadsheet was proffered as a general overview or "big picture" of the business and that to the extent that that amounted to a representation the appellants did not rely on it (or that causation was severed by the plaintiff's own negligence or failure to take reasonable care). The central issue was one of reliance. 11Her Honour considered that the deficiencies of the spreadsheet document were plain on its face and noted that Mr Rodi had elected not to ask for up to date financial details for the business. An assignor's disclosure statement was provided to Mr Rodi's solicitor (Mr Muritini) prior to Mr Rodi taking over the operation of the business. The knowledge of the contents of that document would be imputed to Mr Rodi on the basis of the agency relationship between solicitor and client, and the duty that the solicitor would have had to convey that information to Mr Rodi. 12Her Honour found that the relationship between Mr Rodi and Mr Gelonesi was not affected by an imbalance; that there was not a relationship or expectation of trust between them and that there was not pressure placed on Mr Rodi in relation to the entry into the arrangements for the operation of the business. 13While there was no express finding in relation to the unconscionable conduct claim, her Honour addressed in essence the components on which reliance was placed for the assertion that there was a relationship of such a kind as to give rise to an unconscionable conduct claim and nothing has been demonstrated on the arguments on this application to suggest that the unconscionable conduct claim should have succeeded on the evidence before her Honour. 14Her Honour was not satisfied that the plaintiff had discharged the onus of proof as to a trading loss, noting that the plaintiff had conducted the business in a different manner to the defendant and that the expert accounting evidence (in view of the paucity of financial and other business documents) was of very limited weight. 15The applicants seek leave to appeal from the whole of the decision and for an extension for the time for filing and service of the summons seeking leave to appeal. The necessity for that application is that the summons was filed out of time (by one month). The explanation for this was given by the applicants' solicitor, who has deposed to a miscalculation of the date. It is submitted that no prejudice is suffered by the respondents by reason of the delay. Proposed Grounds of Appeal 16The grounds on which appeal is sought to be raised (if the requisite leave is given) are that the trial judge erred: (i) in finding that the failure to enquire as to the accuracy of the representations severed the chain of causation; (ii) in finding that the appellants did not rely on the profit and loss spreadsheet published by the respondents to the appellants; (iii) in failing to find that the spreadsheet was misleading and deceptive as to the financial performance of the business; (iv) in misapprehending the evidence insofar as it concerned the finding that the appellant's solicitor was investigating the figures when the appellant went in to operate the business; (v) in misapprehending the evidence in finding that the appellant contended that he would have disregarded advice by his solicitor concerning the actual figures of the business; (vi) in finding that Mr Rodi believed he could determine the financial performance of the business without regard to the respondents' actual performance figures in the spreadsheet; (vii) in misapprehending the evidence concerning the reference to $47,500 in the appellants' solicitor's letter of 13 December 2007 (this being a reference to a letter from Mr Muritini in which he had referred to a representation that the average takings were that amount per week but about which in cross-examination there was some reference to that being a typographical error); (viii) in not providing adequate reasons for not finding that the spreadsheet was false or misleading and deceptive; (ix) in not finding that the spreadsheet published by the respondents was false or misleading and deceptive; (x) in failing to find that, insofar as the spreadsheet of the business was a matter of Mr Gelonesi's opinion, the representation constituted by the spreadsheet was false in that he did not have reasonable grounds for the representations concerning the performance of the business; (xi) in failing to deal with the evidence (including Mr Gelonesi's acknowledgement in cross-examination) that the Assignor's disclosure statement contained the true turnover figures of the business; and (xii) in failing to deal adequately or at all with the unconscionable conduct claims. 17For the applicants it is said that the application turns largely on the contention that the findings of fact are impeachable. In particular, it is argued that the finding as to lack of reliance on the spreadsheet was glaringly improbable and that the primary judge's reasoning was illogical (insofar as it was common ground that Mr Rodi took an adverse view of Mr Gelonesi's skill in managing the business but it is said that that was "the very fulcrum of the Claimants' reliance"). 18It is submitted that the conclusion that Mr Rodi relied entirely on his own perceived knowledge is premised on the implausible proposition that he perceived he could generate a reliable understanding of the turnover with no figures as a starting point. 19The evidentiary matters which it is said the primary judge misapprehended related to the reference to the $47,500 weekly takings (from which her Honour suggested it could be inferred that Mr Rodi's solicitor did not have instructions at that date as to a pleaded representation of $35,800 per week consistent with the spreadsheet); the proposition that the $47,500, by reference to the spreadsheet, had referred only to the weekly average for December; and as to the evidence that Mr Rodi had not simply miscalculated the monthly average takings by applying the wrong number of months but had also considered the average for each month separately (and hence it was said that there remained a considerable gap between the weekly average turnover disclosed by the spreadsheet and what could be inferred from the evidence as to the actual performance of the business in that period). 20It is submitted that the core of the reasoning concerning non-reliance was flawed on the basis that it was founded on significant misapprehensions of the evidence (as to what the solicitor was investigating when Mr Rodi took over the business; what advice it is said Mr Rodi would have been indifferent to in making his decision to take over the business; and how Mr Rodi's statement as to not needing to have the figures checked because he was able to divine them should be understood). To some extent on the hearing of the summons for leave, we are hampered by the fact that some of the evidentiary material (including the transcript and the letter of 6 November 2007 that was the subject of the cross-examination of Mr Rodi in relation to his decision to take over the business) was not before this Court. 21References by the primary judge to her "impression" of various matters or of the witnesses were said to illustrate the misuse or failure to use her advantage as a trial judge. Criticism is made that it is not clear from the reasons whether there was a finding that no representation was made (a finding that it is said would have been glaringly improbable) and as to whether the representations were relevantly false. It is submitted that the respondents did not have a basis to make the representations as an expression of opinion because they carried with them the implied representation that they had been arrived at on the basis of or were supported by reasonable grounds (and that this was not the case). 22Insofar as it is said that the provision of a spreadsheet with the logo of an accountant on it carried with it an implied representation that it had been authenticated in some fashion by the accountants, I have difficulty seeing that this would have conveyed more than a representation that the document had been prepared by the accountant. 23For the respondents it is submitted that leave should not be granted as no question of principle warranting intervention has been shown (as opposed to dissatisfaction with the decision on the facts) and the amount of the dispute was approximately $86,000. It is noted that the proceedings commenced on 30 June 2008 and the hearing occupied 9 days. It is submitted by the respondents that the costs of the proceedings have exceeded the amount involved. Decision 24There are not exhaustive or rigid rules of practice or criteria governing the grant of leave to appeal (Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170) but leave should only be granted where there are there are substantial reasons to allow an appellate review (Johnson Tiles Pty Ltd v Esso Australia Ltd (2000) 104 FCR 564), such as where there is an error of principle which results in substantial injustice (Minogue v Williams (2000) 60 ALD 366; BHP Petroleum Pty Ltd v Oil Basins Ltd [1985] VR 756; Niemann v Electronic Industries Ltd [1978] VR 431; Darrell Lea (Vic) Pty Ltd v Union Assurance Society of Australia Ltd [1969] VR 401). 25The requirement for leave to appeal from a judgment where the quantum in dispute is less than $100,000 implicitly recognises the import of keeping in mind the proportionality of the dispute. Where there is no question of principle and there is only a small amount in dispute, leave to appeal will usually be refused (Jaycar Pty Ltd v Lombardo [2011] NSWCA 284; Zelden Sewell Henamast Pty Ltd [2011] NSWCA 56; Dunn v Ross Lamb Motors [1978] 1 NSWLR 26). 26I do not consider that the issues sought to be raised by way of appellate review of her Honour's decision involve any substantial issue of principle. I note that her Honour had the benefit of hearing from the parties and that in Nominal Defendant v McLennan [2012] NSWCA 148 at [141] Beazley JA confirmed that a finding of fact by a trial judge, based on the credibility of a witness, is not to be set aside simply because an appellate court thinks that the probabilities of the case are against (or even strongly against) that finding of fact; it being necessary for it to be shown that the trial judge "has failed to use or has palpably misused his (or her) advantage" (see Devries v Australian National Railways Commission [1993] HCA 78; (1993) 177 CLR 472 at 479). 27The matters raised in submissions and in the course of argument do not raise a sufficient basis for concluding that an appellate review in the present case would be likely to lead to a different conclusion being reached on a rehearing of the matter. I would therefore grant leave to extend the time for the filing of the summons for leave but dismiss the summons for leave to appeal with costs. 28BEAZLEY JA: The order of the Court is that leave is granted to extend the time for filing of the summons and the summons for leave to appeal is dismissed with costs. 29I would grant leave to extend the time for the filing of the summons for leave and dismiss the summons for leave to appeal with costs.