Consideration of the judge's reasons
34 It may be quibbling that Ms Smith asserted individually that if she had known that representations (e) and (f) above (paras 10 and 11, existing earnings and future earnings) were false or without reasonable grounds, she would not have entered into the partnership. For them, there was no question of a sufficient majority of false representations. His Honour's [47], however, showed insistence on more than the statements in Ms Smith's affidavit, and that his Honour considered that the absence of what he had earlier described as specific evidence of reliance, as evidence as to how the representations played a part in Ms Smith's decision and as evidence of her decision-making process, itself meant that causation had not been established. In referring at the end of his [47] to the need for analysis of the effect of the representations on Ms Smith, his Honour meant analysis by Ms Smith in evidence of that kind.
35 That bears upon how the judge's reasons as to the representations presently in question are to be understood, the "reasons discussed above". In my view, fundamental to his Honour's conclusion that Ms Smith had not established a causal connection with her decision to enter into the partnership was his second reason, the absence of evidence of her decision-making process; not because in considering the evidence in its entirety absence of evidence of Ms Smith's decision-making process led as a matter of fact to dominance of his first reason, but because the evidence of analysis by Ms Smith was required and in its absence he could not find causation.
36 On this understanding of his Honour's reasons, in my respectful opinion he was in error. Ms Smith had squarely said that, had she known the truth, she would not have entered into the partnership. It was not necessary in order to establish causation that she go further, on pain of failure in proof of causal connection. An analysis of the effect the representations had on Ms Smith was necessary, but it was an analysis for the judge on the evidence as a whole; and it was for his Honour even though Ms Smith had not engaged in it.
37 I am assisted in my conclusion that his Honour took an unduly strict approach to causation by two matters.
38 First, in my opinion representations (e) and (f) above (paras 10 and 11, existing earnings and future earnings) were "of such a nature as would be likely to provide … inducement" to enter into the partnership (Gould v Vagellas, above); or put differently it is inherently likely that Ms Smith would not have entered into the partnership if she had known that they were false. This underlines that explanation by Ms Smith of her decision-making process was not a necessity. Further explanation of this matter follows.
39 Ms Smith was acting for NRMA under an agreement which meant that she received no remuneration if the claim resolved at letter of demand stage and fixed amounts of remuneration depending on resolution after the issue of a statement of claim, after obtaining statements, after pre-trial review, or after a hearing. No remuneration was payable until the claim had been resolved. She had to fund the filing fee on the issue of a statement of claim, at the time $56.00, and was not reimbursed until the claim had been resolved.
40 Ms Smith was receiving instructions from NRMA at the rate of about 200 per week. She was working very long hours, and had some assistants, but was not coping with the volume of work. Her overdraft was almost at its limit, and she faced difficulty in funding the filing fees. Remuneration from resolved claims would be slow, because a great many were on hold awaiting decision of test cases. This lay behind Gzell J's observations, in his [33], that Ms Smith "had to find assistance in handling the thousands of files that arrived from NRMA and she had to find a way to finance the payment of filing fees of $56 per matter".
41 A partnership, not necessarily with Mr Noss, could provide the experience of another practitioner in establishing systems for dealing with the work, further assistants and funding for the filing fees. But what the partner brought to the partnership would be important, because the partnership would have to fund the filing fees and have financial resources sufficient to carry out the NRMA work, with further assistants, until the further time when significant remuneration would come in upon the resolution of claims.
42 Mr Noss' representations that Central Law had gross earnings of between $200,000 and $300,000 per annum, and that the partnership would have those gross earnings from clients introduced by him, were thus of their nature important to any decision by Ms Smith to enter into the partnership. Receipt of remuneration for the NRMA work was likely to be considerably deferred, because fees were not payable until the conclusion of the matters and many of the claims were in limbo awaiting decision of the test cases. Mr Noss himself told Ms Smith in pre-partnership discussion that they would have a hard time managing overheads and would "have to survive" until NRMA matters fructified, and in late September 2001 wrote to a financier seeking to factor filing fees. Ordinarily one partner bringing work to a partnership would be interested in the value of the work brought by the other partner, but here there was more. The income stream from Mr Noss' practice would be very significant in paying the overheads and wages, including for any additional assistants, in managing the NRMA matters, and in funding the filing fees. Its significance would be enhanced by Mr Noss' assertion to Ms Smith that he needed to draw at least $10,000 to $15,000 per month to meet certain personal commitments, and by representation (b) above (para 8, instructions worth $100,000); because the income stream would contribute to reduction of Mr Noss' overdraft, as Mr Noss represented would occur, whereby the overdraft could be a source of funding for the filing fees.
43 When Gzell J regarded the need for assistance and financing the payment of filing fees as a consideration in Ms Smith's entry into the partnership, see his [37], that did not close off that Ms Smith would not have entered into the partnership had she known that the representations were false. On the contrary, it made falsity of the representations all the more important in determining whether, if the representations had not been made, she would not have entered into the partnership. I have earlier commented on his Honour's reference to Ms Smith's desire for urgency, which in my opinion is quite consistent with a causal connection between the representations and her entry into the partnership.
44 The second matter can be stated more briefly. As I have indicated, Ms Smith's statements in her affidavit of 3 December 2003 were not challenged in cross-examination. The answer to the question "Why did you go into partnership with Stephen Noss?" is consistent with a causal effect of the representations presently in question. I do not say that the course taken by the cross-examiner meant that it was not open to the respondent to contend that the representations had no causal connection with Ms Smith's entry into the partnership. Causation was accepted as a matter in issue, and it is not the law that evidence unchallenged by cross-examination must be accepted (Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 at 586-8; Temiha v Sadebarth (CA, 13 May 1997, unreported). But, if the judge was effectively to reject the statements in the affidavit, the absence of challenge in cross-examination made it particularly necessary that he did so on his analysis of the evidence as a whole and explained his analysis (cf Holman v Holman (1965) ALR 274 at 278; Read v Nerey Nominees Pty Ltd (1979) VR 47 at 52; Temiha v Sadebarth). The sketchy consideration of the evidence to my mind underlines the influence in the judge's reasoning of absence of what he described as specific evidence of reliance and by the other phrases noted above.
45 The respondent relied on Ricochet Pty Ltd v Equity Trustees Executor and Agency Co Ltd (1993) 113 ALR 30. The plaintiff's officers gave evidence that they relied on statements as to customer traffic in entering into a lease of premises in a shopping complex. The trial judge found to the contrary, and that the statement were not causative of any loss it sustained. On appeal, it was submitted that the defendant had an evidentiary onus to rebut the fair inference that the officers relied on the statements, and that the judge had been bound to infer that they had been induced by the statements to enter into the lease. The Full Court did not accept the submission, and said (at 35-6) that the determination of causation was to be made on all the evidence and involved a question of judgment. As I understand it, the respondent took from their Honour's reasons that a finding that misrepresentation might have induced a decision will not of itself establish as a matter of probability that it did, and that Gzell J was entitled to reject Ms Smith's statements in the affidavit of 3 December 2003. That may be accepted; but I do not think it answers the error which, on my understanding of his Honour's reasons, befell his rejection.
46 In my opinion, his Honour's conclusion that Ms Smith failed to establish a causal connection between the representations presently in question and entry into the partnership can not stand.