Trade Practices Commission v Frendship Aloe Vera Pty Ltd & Anor [1988] FCA 450

Federal Court of Australia|1988-06-10|Before: Pincus J

TRADE PRACTICES - misleading statements - application by Trade Practices Commission on behalf of others - nature of such application - statements made by natural person acting as principal - whether such natural person involved in contravention by corporation - time limit for injunction claim and for compensation claims.

LIMITATION OF ACTIONS - - claim by Trade Practices Commission on behalf of others - whether to be regarded as Trade Practices Commission's cause of action - time of accrual of cause of action.

Trade Practices Act 1974, ss.52, 59, 75B(1)(c), 80, 87(1A), 87(1B), 87{1C), 87(1CA)

v. Frendship Aloe Vera Pty Limited & Anor Qld G76 of 537

"the second respondent says that the application was not commenced within the time prescribed by s.87(1CA) of the Trade Practices Act";

an injunction be granted restraining the first respondent, by itself, its servants or agents, or otherwise howsoever, from promoting, by any means, any scheme involving the supply of aloe vera plants by the first respondent and the purchase of leaves produced from such plants or the sale of gel extracted therefrom;

an injunction be granted restraining the second respondent from aiding, abetting, counselling or procuring or being in any way, directly or indirectly, knowingly concerned in, or party to, the promotion by the first respondent of any scheme

involving the supply of aloe vera plants by the first respondent and the purchase of leaves produced from such plants or the sale of gel extracted therefrom;

the respondents pay the applicant's costs of and uncidental to the proceedings, to be taxed.

the first respondent, in trade and commerce, engaged in conduct that was misleading and deceptive;

the .first respondent, in trade and commerce, invited persons to participate in a business activity requiring the investment of moneys by the persons concerned and the performance by them of work associated with the investment, and that the first respondent made, with respect to material aspects of the business activity, representations that were false and misleading in material

the misleading and deceptive conduct and the false and misleading representations herein before referred to were:

i. that by growing aloe vera plants and supplying their leaves to the first respondent for processing pursuant to an agreement with the first respondent, the growers would be able to earn a projected income of $400,000 per year per acre:

(i) made to Brian Stanley Zunker in November and December 1983 and to Wendy

(ii) made to Russell Lloyd Lyons' and Beverley Ann Lyons early in 1984 and in January 1985;

(iii) made to Harvey Albert Dingle about March 1984 and about 24 April 1985;

that the first respondent had a contract with a Mr Birch to buy from the first respondent all the gel produced from 100 acres of hydroponically grown aloe vera or a contract to take 80% of that crop with an option on the other 20% -

made to Brian Stanley Zunker in November and December 1983;

that the first respondent had a contract with Terry Corporation of U.S.A. under which that company would buy all the aloe vera gel produced by the first respondent -

(i) made to Russell Lloyd Lyons and Beverley Ann Lyons in January 1985;

(ii) made to Harvey Albert Dingle on 24 April 1985;

that the returns to be received from growing an acre of aloe vera under contract with the first respondent would be likely to be $19,000 from the first cut and $250,000 within two years -

the engaging in the said conduct constituted a breach by the first respondent of s.52(1) of the Trade Practices Act 1974 and the making of the said representations constituted a breach by the first respondent of s.59(2) of the said Act;

the second respondent was directly and knowingly concerned in and party to the contraventions herein before referred to, other than those relating to Peter James Attard.

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

IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD G78 of 1987 GENERAL DIVISION )

This is an application (filed on 14 May 1987) by the Trade Practices Commission for injunctions and other relief under

the Trade Practices Act 1974 relating to a scheme for growing and

selling the product of aloe vera plants. The other relief sought consists of orders for compensation under s.87(1B) of the Act. The applicant complains that persons entering the scheme were misled by the respondents. The application is based on s.52(1) of

"Where a corporation, in trade or commerce, invites, whether by advertisement or otherwise, persons to engage or participate, or to offer or apply to engage or participate, in a business activity requiring the performance by the persons concerned of work, or the investment of moneys by the persons concerned and the performance by them of work associated with the investment, the corporation shall not make, with respect to the profitability

or risk or any other material aspect of the business activity, a representation that is false or misleading in a material particular."

During the course of the hearing, I was informed that the applicant no longer desired injunctive relief, but in the end counsel for the applicant pressed, in his address, for injunctions. As to the orders for compensation mentioned in the application, the applicant's counsel told me that, if suitable findings were made, the intention is to seek compensation on behalf of certain nominated persons in a further hearing. As will appear, it is my view that the Commission cannot apply for compensation until appropriate findings have been made by the

The first respondent is a company and the second a natural person; neither was represented at the trial, but the

The defence which was filed took no point as to the time of institution of the proceedings. In the course of submissions, the second respondent asserted that the proceedings were instituted out of time and I intimated (counsel for the applicant not objecting) that I would amend the defence to put that in issue; it will be ordered that a paragraph 45 be added to the

"The second respondent says that the application was not commenced within the time prescribed by s.87(1CA) of the Trade Practices Act."

The statement of claim makes allegations against the respondents that they made representations which were misleading or deceptive or likely to mislead or deceive within the meaning of

s.52 of the Trade Practices Act and representations that were

"false or misleading in a material particular" within the meaning of s.59(2) of the Act. Section 80(1) has the effect that if these matters are proved, the Court may grant an injunction. Section 87(1A) has the effect that on the application of the Commission, in accordance with sub-s.(1B), on behalf of persons damaged by such conduct, the Court may make orders for compensation. Section 87(1B) is ancillary to the part of s.87(1A) which I have just

"Some of the provisions in question, in an earlier form,

were considered by the High Court in Sent v. Jet Corporation of

Australia Proprietary Limited (1986) 160 C.L.R. 540. The views

there expressed, however, do not appear to assist in the construction of the relevant provisions, namely ss.80, 87(1A), 87(1B) and 87(1CA), in their operation as at the date of

institution of these proceedings (14 May 1987) and at present.

Sent''s case concerned proceedings instituted in 1983. By Acts Nos

17 and 168 of 1986, amendments to the legislation were made respectively repealing and replacing the former s.87(1A) (Act No. 17 of 1986) and adding new sub-ss.(1C) and (1CA) (Act No. 168 of 1986). These changes make Sent's case of historical importance

only, so far as the present proceedings are concerned.

As to the claim for an injunction, Mr Hack argued for

the respondents that the statute imposes no time limit. Section

80(1), under which the Trade Practices Commission applies for an injunction, has none and no other provision of the Act contains a time limit relating to an application for an injunction under s.80(1). It does not appear that any question arises as to acting by analogy with the statute, on equitable principles and the lapse of time is relevant only in considering, as a discretionary

A more difficult question arises as to the time limit on the compensation claims. The second respondent contended that there is a three year time limit on such claims and that they are

Assuming there is a three year time limit, then if the compensation claims are in time the respective causes of action must have accrued on or after 14 May 1984. Without, at this stage, going into detail, some of the damage complained of appears to have occurred before that date, but not all of it, and on no view of the matter could it be held that all the causes of action

Therefore, whatever conclusion is come to on the law relating to the time limit, the second respondent cannot succeed completely on that ground at this stage. It is, however, desirable to express my view upon the matter; it would be inappropriate to make findings as to claims which are

The claim in question is of the sort described in s.87(1A); it is made "on the application of the Commission in accordance with sub-section(iB) on behalf of such a person or 2 or more such persons" - the persons referred to being those who have suffered or are likely to suffer loss or damage. Being within sub-s.(1A), the claims for compensation are caught by sub-s.(1CA) which, as far as relevant, imposes a time limit of three years "after the day on which the cause of action accrued". One fixes

that day by reference to s.87({1B) which reads as follows:

"Where, in a proceeding instituted for an offence against section 79 or instituted by the Commission or the Minister under section 80, a person is found to have engaged (whether before or after the commencement of this sub-section) in conduct in contravention of a provision of Part V, the Commission may make an application under sub-section (1A) on behalf of one or more persons identified in the application who have suffered, or are likely to suffer, loss or damage by the conduct, but the Commission shall not make such an application except with the consent in writing given before the application is made by the person, or by each of the persons, on whose behalf the application is made."

It will be seen that the right to make an application on behalf of persons who have suffered, or are likely to suffer, loss or damage depends upon there having been a finding of the kind mentioned in the first part of the provision. It further depends upon the existence of a consent in writing. I do not think the absence of the latter would defer the accrual of the cause of action; the Commission could not defer it indefinitely by not

What is not so clear is whether the cause of action, in a case of the kind mentioned in s.87(1B), is the Commission's cause of action, the existence of which depends upon the making of a finding, or the cause of action of the persons who are damaged or likely to suffer damage. The latter possibility is strengthened by the consideration that those persons could obtain under s.87(1) an order of the precise description sought, without the intervention of the Commission. It is unclear whether the intention is that, where a representative suit is brought (of the kind described in s.87(1B)), the Commission is to be allowed three

My view is that the cause of action does not accrue until the necessary findings have been made; the findings are a pre-condition of the right to make this sort of claim. That is the natural meaning of the expressions used: "Where ... a person is found to have engaged" in certain conduct "the Commission may make an application ..." It appears to me, in consequence, that it is necessary to make findings with respect to all the potential

claimants, for none of the claims is statute-barred.

Mr Wildschut was, during the time of relevant events, the managing director of the first respondent. The details are set out below, but it may be said at the outset that some at least of the representations complained of were made by Mr Wildschut

The applicant argued that Mr Wildschut was involved in the relevant contraventions as having been a person who "has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention", to quote from s.75B(1)(c) of the

The authorities discussed below support varying views as to the construction of this provision, so far as applicable to the present case. One is that Mr Wildschut, having personally made some of the oral representations complained of, falls neatly within the description in s.75B(1)(c) just quoted. As a matter of ordinary language, that view is hard to resist: in particular, the expression "in any way" and the word "directly" hardly reflect an intention that one kind of party to the commission of an offence should be excluded, namely one who is the only person

One approaches s.75B, of course, with the knowledge that the primary target of the whole statute is, for constitutional reasons, the conduct of corporations of the type described. Section 75B has the principal purpose of bringing within the scope of the operation of the Act the activities of natural persons participating in the affairs of those corporations and, in my respectful opinion, its natural reading is such as to catch all such participants, even those who actually perform (in the physical sense) the acts complained of. If, for example, the managing director of a company makes a representation contrary to the statute with the direct authority of the board, it is hardly

conceivable that the directors should be taken to be within, but

the managing director outside, the description in par.(c): "in any way, directly or indirectly, knowingly concerned in, or party

The view of s.75B which is opposed to that I have just mentioned is that it is, generally speaking at least, concerned with accessories rather than principal offenders and should

The law once included within the description of "accomplices" all the sorts of persons mentioned in paras.(a), (b) and (c) of s.75B(1), as well as principals. The word included "all the particeps criminis, whether they are considered in strict legal propriety as principals in the first or second degree, or merely as accessories before or after the fact" - Russell on

Crime, 12th ed., vol.1, p.132. The author's reference to

principals in the first degree and those in the second degree is, firstly, to those who committed the offence in question by their own hand and secondly, to those who aided at the time. The law on the subject was developed by the judges, but in 1861 the Accessories and Abettors Act (U.K.) dealt statutorily with the liability of those other than principals in the first degree. Generally speaking (at least), similar statutes passed elsewhere, such as s.5 of our Crimes Act enacted in 1914, must have had the purpose of creating or defining the criminal liability of those other than principals of the first degree, whose liability would ordinarily flow directly from some offence-creating provision of a

These historical considerations make a reading down of s.75B so as to exclude (in the case just postulated) the managing director a defensible course. The argument is that since similarly expressed statutes dealing with criminal liability have not been intended to catch principals in the first degree (who were already liable under specific provisions to be found elsewhere) s.75B should also exclude principals in the first degree. In my opinion, however, the contention cannot save Mr Wildschut in this case; if one uses the analogy of the criminal law, he could not be considered the principal in the first degree;

that role has been reserved for the first respondent, the

To this point, I have dealt with the matter without reference to the authorities. I would, if free to do so, hold that s.75B is not confined in its operation to the conduct of those who would, under similar provisions in the criminal law, be regarded as accessories. One reason is that such provisions are used to create criminal liability in principals in the second degree, as well as in accessories. Another reason is that the historical considerations I have mentioned are not comfortably applicable to a statute which places corporations in a position analogous to that of principals in the first, degree. Lastly, but most importantly, I would be reluctant to depart from what appears

There are three authorities principally relevant. The

first is a sentence in the reasons of Dixon J. in Mallan v. Lee

"It would be an inversion of the conceptions on which the degrees of offending are founded to make the person actually committing the forbidden acts an accessory to the offence consisting in the vicarious responsibility for his acts."

Mallan v. Lee was a criminal case concerning the lodgment of a false income tax return, the prosecution being brought against both the taxpayer company and its public officer who lodged the return. The offence was created by s.230 of the

Income Tax Assessment Act 1936-1944, whose terms created liability

directly in both the company and the public officer. He, so the complaint said, was liable under s.5 of the Crimes Act 1914. Dixon J. pointed at p.213 that the charge against the public officer "should have been for an offence against so much of s.230(1) as states that any person who in any return knowingly and lawfully understates the amount of any income shall be guilty of an offence". It followed, as I understand the position, that it was inappropriate to have regard to s.5 of the Crimes Act, whose function was to deal only with those not already caught by a specific offence-creating provision such as s.230 of the Income Tax Assessment Act. Before writing the sentence quoted above,

"On the interpretation I have given to s.230(1), for more than one reason s.5 of the Crimes Act cannot apply to a public officer so as to make him an accessory to the offence of the company. In the first place, the public officer's act on behalf of the company making it an offender' ipso facto amounts to a substantive offence on his part under s.230(1). In the second place, the sub-section makes him the actor, the principal, for whose guilty conduct the company is responsible vicariously."

The next relevant authority is the decision of the Full

Court of this Court in Enzed Holdings Ltd v. Wynthea Pty Ltd

(1984) 57 A.L.R. 167. In that case one Smith engaged in certain activities which were held to involve breaches of s.52 and s.53(d) of the Trade Practices Act by Wynthea Pty Ltd, a company on whose behalf he acted, and by Mr Smith. The Court said at p.178:

"Next it was submitted that no relief should have been granted against Mr Smith. It was said that he was the person for whose conduct Wynthea Pty Ltd was held to be vicariously liable and could not therefore himself be made liable as an accessory. Reliance was placed upon dicta in Mallan v. Lee (1949) 80 C.L.R. 198, per Dixon J. (as he was) at pp.213-6."

"The misleading or deceptive conduct was that of Wynthea Pty Ltd. Mr Smith procured that conduct and was knowingly concerned in Wynthea's contravention of the Act."

I can see no basis on which this decision can properly be

On the Full Court decision, one does not have to examine the conduct of the corporation's servants and agents to determine if the involvement of any of them is so direct as to make them, were the proceedings criminal, principals in the first degree. I can find nothing in the section to suggest that such a process was contemplated, nor is it easy to see by what language the legislature could more clearly have caught all natural persons

involved, whatever their degree of participation, than by the

words "in any way, directly or indirectly, knowingly concerned in,

However that may be, it seems clear that the proper course is to follow the decision of the Full Court of this Court,

The third case relevant to the point is the decision of

the High Court in Yorke v. Lucas (1985) 158 C.L.R. 661. The Court

was there concerned with the nature of the mental element necessary to bring the respondent within the scope of s.75B(a) or (c). In arriving at its conclusion as to the former paragraph, (a), the Court was influenced by the circumstance that the paragraph used "an existing concept drawn from the criminal law .-." (p.668). In the principal judgment at p.671, Mason A.C.Jd.

(as his Honour then was), Wilson, Deane and Dawson JJ. remarked:

"We would only add, lest it be thought that it has escaped our attention, that the appellants may, even if knowledge were not necessary to involvement under par.(a) or under par.(c) as 'party to', have encountered difficulty in establishing that Lucas was involved within the meaning of s.75B in the contravention constituted by the making of the false representations, having regard to the fact that the representations, albeit made on behalf of the Lucas company, were made by Lucas himself. As Dixon J. observed in Mallan v. Lee (1949) 80 C.L.R.

'It would be an inversion of the conceptions on which the degrees of offending are founded to make the person actually committing the forbidden acts an accessory to the offence consisting in the vicarious responsibility for his acts.'

It is, however, unnecessary to pursue this aspect of the matter further."

The remaining judgment, that of Brennan J., contains the

"A 'party to' an offence is one who, by the principles of the common law, would be held to be criminally liable for the offence. The term adds little to the more specific terms to be found in s.5 of the Crimes Act, but it ensures that none is omitted from the net of criminal liability whom the common law would include. As s.75B transports the criteria of the criminal law into the definition of the parties who are civilly liable for contraventions of Pts IV and V, the criminal law definition of parties to an offence furnishes the

definition of those who are civilly liable as a party to a contravention under s.75B(c)."

I do not understand this passage to involve a confining

of par.(c) to those whom the criminal law would treat as

In my opinion, the basic point of Yorke v. Lucas - that

s.75B should be read having regard to the established construction of similar provisions of the criminal law - throws no doubt upon

the correctness of the decision in the Enzed case, so far as it

affects these proceedings. The expression of view I have quoted from the principal judgment is, as I read it, directly opposed to

the Full Federal Court's decision, but does not overrule it.

The conclusion, then, is that Mr Wildschut cannot be (paradoxically) exonerated by demonstrating that his participation in certain breaches of the Act was such as would have made him,

under the criminal law, a principal in the first degree.

As to the extent of Mr Wildschut's knowledge, no problem arises except as to one of the complainants, Mr Attard. It is

According to Mr Wildschut's evidence, he had had some years of practical experience in the aloe vera industry when he decided, in 1983, to promote the growing of aloe vera in Queensland on a large scale. The company which he (as a practical matter) controlled, the first respondent, acting through Mr Wildschut and others, contracted with a number of people to grow the plants. The idea was that the first respondent would purchase the leaves, process and sell them, the growers making substantial

Aloe vera is used for a number of purposes, for example, the juice is drunk and it is also used in the cosmetics industry. I am satisfied that Mr Wiidschut genuinely thought, in 1983 and 1984, that there was likely to be much more use of the products of the plant, as time passed. He gave evidence that it was his

opinion, based on a number of studies, that there would be an

If that did not occur, however, then there must have been downward pressure on prices; it seems clear from the evidence that at the time the first respondent began to interest farmers in growing aloe vera in Queensland, the demand for the plant was

being met. Mr Wildschut said that the American crop was affected

in 1983 by frost, and I accept that to be so, but it must have seemed likely that the temporary lessening in output due to frost would soon be made up by increased production elsewhere; the plant

The theory upon which the first respondent acted was that a quick and very large increase in the quantity of aloe vera produced would cause no depression in prices, that the demand was such that there would be no problem in disposing of a much larger quantity of aloe vera than was being grown and, to put it simply,

Speaking generally, the growers who have given evidence before me did not accept the prognostications put before them by the respondents as literally true. Some were more sceptical than others, but none I think took the first respondent's projections as a secure guide to their future conduct. On the other hand, I do not believe that any of the growers who gave evidence before me appreciated how far from reality was the picture painted by the first respondent, and in particular by Mr Wildschut. There was, in truth, so far as the evidence shows, no particular reason to think that there would be a vast increase in the sales of aloe

vera products - particularly not one at undiminished prices.

The first respondent told the growers, in effect, that it had contracts for the sale of all the aloe vera likely to be produced by the growers. That was untrue and (although Mr Wildschut probably thought his commercial skills would have been

up to the task of getting rid of a great deal of it) I do not

believe it could ever have seemed to him likely that all the increased production calculated to ensue from the first

In the result, only a small fraction of the returns which should, on the first respondent's predictions, have been received, came in. The growers lost large sums of money. The first respondent went into liquidation with substantial creditors and suspiciously large sums debited in its records to travel and

other expenses. Much effort and money has been simply wasted.

The applicant, through its counsel, has suggested in effect that the whole project was fraudulent through and through. In my opinion that is not so. Mr Wildschut is, in my view, a very good salesman, and his ability extends to half-persuading himself of the most improbable commercial propositions. Nevertheless, I am quite satisfied that the growers who have given evidence were all misled. Statements were made to them which were remote from the true facts. Such statements were not wholly believed, but they influenced the growers. That they did so is relevant to the

Had the truth been revealed, and in particular had the growers not been misled into thinking that there were firm commitments in existence to purchase their produce, none of them {in my opinion) would have gone into the venture and thereby

Mr Wildschut initially proposed to defend himself, then claimed he had definitely arranged legal representation, thereby obtaining an adjournment. In the result, he appeared for himself and demonstrated his considerable ability in the way in which he explained his position and cross-examined witnesses. He showed a curious and persistent reluctance, however, to expound the details of his case, refrained (in general) from directly challenging in cross-examination the evidence of witnesses called by the applicant, and only by much exhortation from the bench was induced to deal in his evidence-in-chief specifically with the particulars of the applicant's case. For that and other reasons I have become satisfied that, speaking generally, the allegations of illegal conduct made against him are true and his denials of them untrue. It is necessary, however, to deal separately and in detail with

Mr Brian Zunker was, of the growers who gave evidence before me, the first to become involved with the respondents. He is a cane farmer who grew rockmelons as an additional crop. During the period from 1981 to 1983, his returns from sugar cane fell and he became interested in finding an alternative crop. In response to an advertisement, he phoned a number given to him about November 1983 and was told by one Hosler, an agent of the

first respondent, to come to see Mr Wildschut in a motel in

Mr Zunker did as asked, met Mr Wildschut and was told by him that there was to be a hydroponics project for aloe vera in the Bundaberg area. "Hydroponics" is growing of plants without soil. Mr Wildschut showed Mr Zunker a booklet called "The

In his evidence, Mr Wildschut denied that the booklet was in existence at the time he first spoke to Mr Zunker. He said

If so, it should have been fairly simple to lead evidence on that subject, other than Mr Wildschut's bare assertion. At one stage Mr Wildschut informed me that he was going to call 52 witnesses. In fact he called only one - himself. I do not know whether Mr Zunker is quite sure precisely when the

book was shown to him, but am satisfied that it was in 1983 and

The particular passage in the booklet which (as is admitted) caused considerable discussion between Mr Wildschut and Mr Zunker, was a page headed "Growers 'Projected' Income". This,

after setting out the alleged basis of the calculations read:

40 litres x 5000 plants = 200,000 litres p.a. 200,000 litres x $2 per litre = $400,000.00 p.a.

These figures are based on the December, 1983 World Market Price."

It should be noted that the figure of $400,000 was supposed to be a projected annual income from a single acre of hydroponically grown aloe vera. The proposal of the respondents was to arrange for production of the plant on 100 acres in Queensland, making a total return to the growers of $40 million

per annum - corresponding, at the processor's level, to a return

Mr Zunker thought the returns projected to be an exaggeration and said so to Mr Wildschut. In reply, Mr Wildschut claimed to have a contract with a Mr Birch "to take all the gel that I can produce from 100 acres of hydroponically grown aloe vera". At a later stage, that claim was varied, and Mr Wildschut

said the Birch contract was to take 80% of the crop, with an

At a fairly late stage in the proceedings, there was tendered a document (exhibit 26) signed by Messrs Birch and Wildschut purporting to record a contract between Aloe Vera Scientifics Inc. and Mr Michael Birch as purchasers, and the respondents as the suppliers for the purchase of aloe vera. Although Mr Wildschut denied it, I am satisfied that he toid potential growers, well before that document came into existence, that he had made an agreement to sell to Birch; according to Mr

Wildschut's evidence, its date of execution was 24 February 1984.

Mr Zunker was, as I have said, sceptical about the projected returns, but after being told about the alleged contract

with Birch, he went into the matter further with Mr Wildschut and

concluded that he "would be able to make good money from growing aloe vera". He discussed the project with his wife, and after further approaches from Mr Wildschut, cautiously asked to see further written information. In December 1983, he was supplied with a booklet headed "The Proposal by Frendship Aloe Vera Pty Ltd" which appeared to him to be the same as the booklet he had previously been shown but not given. He consulted with others, received further assurances from Wildschut along the same lines,

On 13 January 1984, Mr and Mrs Zunker signed a contract with the first respondent for the growing of aloe vera. He says he spent considerable sums, grew some aloe vera and harvested his first crop in March 1985. Receiving substantial payments, he was encouraged to make a further contract in August 1985 to grow additional acres of aloe vera. Eventually payments ceased and the

Mr Zunker claims that he (and presumably his wife) lost over $137,000 in the venture. It is unnecessary, however, to deal with the particulars of that, since the claim for compensation which is contained in the application is not being pressed. As explained above, it appears that the applicant's intention is to commence a further such claim on the foundation mentioned in

s.87(1B) - on the basis of the findings made at this stage of the

It should be added that Mr Wildschut claimed in evidence

that the contract with Birch "as Mr Zunker well knew was not

signed". It may be that Mr Wildschut did not specifically claim to Zunker in 1983 that he had a contract with Birch written down and executed. He may well have said no more than that there was a contract, but I am satisfied on Mr Zunker's evidence that he would not have committed himself to substantial expenditures on the project unless he had been given an assurance that Birch had agreed to buy the product. On Mr Wildschut's version of events, Mr Zunker (who struck me as a cautious and intelligent person) went into the venture having been given no indication that anyone had agreed to buy as much as a kilogram of the product. Mr Wildschut said that when Mr Zunker committed himself, he had not been told that anyone was going to buy and "was told the opposite was the case". That was not put to Mr Zunker and, in my opinion,

It is desirable to say a little more about the Birch contract. Under it, according to Mr Wildschut, he had a committed buyer for many millions of dollars worth of aloe vera annually. It appears that when, on 24 February 1984, Birch signed a contract

at Bundaberg, a public ceremony was made of it to ensure maximum

mentioned that the Birch contract seems to have been little more

Mr Wildschut gave evidence that he did not investigate Birch's background, made no inquiries as to his financial

standing, had no idea whether Birch had ever purchased such

quantities of aloe vera, and did not know what Birch's turnover was. It is unlikely that an intelligent man like Mr Wildschut would found this large project on the expectation of selling to Birch, or a company controlled by him, without making at least some inquiry as to Birch's capacity to dispose of many millions of dollars worth of the product annually. Apart from the scarcely encouraging information that Birch was a "dry alcoholic", Mr Wildschut seems to have had nothing substantial on which to base the alleged expectation that these vast sales would be made to or

through Birch. I conclude that he had in truth no such

Mr Wildschut argued that I should not accept Mr Zunker's evidence about the Birch contract because of an admission that Mr zunker saw the Birch contract being signed, in February. I have taken that point into account in reaching my conclusion, set out above. Mr Wildschut also contended that Mr Zunker could not have been right in thinking that "The Proposal" was handed to him in November 1983, since the document attached to Mr Zunker's affidavit includes correspondence from December 1983. That does not falsify Mr Zunker's evidence, because he was not given the

latter document until December, and I infer that it had, by then,

Mr Lyons is not a farmer at all, but a Shire Council employee. He and his wife were in Mackay on holidays when they

saw an advertisement in the newspaper which put them in touch with

Hosler, mentioned above. He eventually introduced them to Nr Wildschut who told Mr and Mrs Lyons, as a member of a group, that he was looking for people to grow 100 acres of aloe vera hydroponically. Mr Wildschut explained that no previous farming experience was necessary, that 5,000 aloe vera plants would grow on one acre, and that the income would be $400,000 per year from that acre. Another person present at the time inquired how so much could be obtained from one acre, and Mr Wildschut replied that from his experience he knew that he would be able to sell all the aloe vera from the 100 acres. He assured them that he could sell all the aloe vera that was produced. After making further investigations, however, Mr and Mrs Lyons decided not to go any further at that stage.

In October 1984, one Cations, a salesman acting for the first respondent, inquired of Mrs Lyons whether she and her husband were still interested in the project. She put him off, but he persisted and about November 1984, it was arranged that Mr and Mrs Lyons would later call at the first respondent's factory

Mr and Mrs Lyons went to the factory in January 1985 and met Cations and Mr Wildschut. After some discussion, Cations took them to the properties of people who had been growing aloe vera. They then returned to the factory and Mr Wildschut told them that a grower would get $2 per litre of gel, that each plant produced 40 litres per annum, and that if 5,000 plants were grown, there would be a gross return of $400,000 per acre. Mr Wildschut showed

Mr Lyons, and then handed to him, a written proposal, presumably

being much the same as that given to Mr Zunker. He also told Mr and Mrs Lyons that he had a contract with the Terry Corporation in the U.S.A., which would take all the aloe vera produced. The claim that there was a contract to purchase the aloe vera impressed Mr and Mrs Lyons. Although they (like Mr Zunker) took the mention of $400,000 with more than a grain of salt, they were sufficiently impressed by what Mr Wildschut showed them and told

them to make an initial contract on 25 January 1985.

Now it is admitted that on the date of that contract there was no contract with the Terry Corporation at all; no such contract was made until April 1985. With a great deal of trouble and expense (including borrowed money), Mr and Mrs_ Lyons established themselves as aloe vera growers. They finished up owing substantial moneys and currently claim to owe the bank about

Mr Harvey Dingle and his wife are cane farmers near Bundaberg and also have a small grazing property. Mr Dingle first became interested in growing aloe vera when he attended a meeting which he places as being late March or early April 1984. Many other persons were there, and Wildschut addressed the meeting, explaining that returns of $400,000 per acre could be expected, and that 100 acres were to be grown. Mr Wildschut introduced a man said to be Mr Birch and said that Birch was going to buy "all the crop we can produce". He claimed that "There is a large

demand for aloe vera in the world and no one can meet it".

Mr Dingle did nothing about the proposal for a year, other than to contact aloe vera growers from time to time. About March 1985, he telephoned the first respondent's factory and was shortly afterwards in touch with Mr Wildschut, who repeated his assertions that the returns would be $400,000 per acre. He told Mr Dingle that he was going overseas to get a contract from the Terry Corporation to buy all the gel from the 100 acres. Mr

Dingle replied that, if Mr Wildschut could show him such a

About 24 April 1985, Mr Wildschut came to Mr Dingle's house and showed him a contract between the Terry Corporation and the first respondent "to buy all the gel Frendship can produce". Thereupon, Mr Dingle signed a contract with the first respondent and paid it $41,250. The following month he paid an identical sum

for further plants and again repeated the transaction in July

Ultimately, Mr Dingle got nothing from any aloe vera

leaf, having expended nearly $240,000, according to his account,

Mr Wildschut's attack on this aspect of the case related mainly to the matter of inducement which, as it seems to me, is only marginally relevant at this stage. If it appeared that a statement such as the assertion that a farmer would receive $400,000 per acre was not taken seriously, it might (as I

understand the point) be argued to be a mere puff and not within

Mr Wildschut particularly relied upon the gap of 12 months between the initial contact with Mr Dingle and his finally signing up "which then bears heavily upon the question of

There is substance in these submissions, but all I have to decide at present is whether there was a breach of the Act; the loss, if any, occasioned by it is to be decided later. I am quite satisfied that Mr Wildschut claimed that there would be a

return of $400,000 per acre, and that he said there was a contract

The question of the veracity of the statement about $400,000 per acre per year is considered below. It is convenient to discuss, at this point, whether the respondents misled Mr

The story concerning this unfolded gradually, but in the end Mr Wildschut's case was that the contract with the Terry Corporation was made in four phases, the principal contract being

Mr Wildschut's evidence as to the dates of the addenda was not entirely consistent. At one time he claimed that the first addendum came into existence closer to October 1985 than to April - "possibly" about July or August 1985. in other evidence, he seemed to say that the first addendum was executed rather earlier. I am by no means satisfied that Mr Wildschut told me the

truth about the dates of the addenda and, in particular, am not

satisfied that they were executed at any time significantly later than the principal agreement. The onus, however, is at all times on the applicant, and I cannot positively find that all these

The principal agreement contains a promise that "Terry will pay Frendship a negotiated price of $5.00 U.S. per gallon U.S. of Aloe Vera". It said: "This price will be stipulated as the minimum price and may be adjusted according to the prevailing price of Aloe Vera leaves and the rate of exchange for the

It is not clear whether the proper law of this contract is that of Australia or that of the United States, so that I am unable to express a view as to the effect of the contract between the parties; as far as Australian law is concerned, there is room

for argument as to the certainty of the price clause. A more

important provision, however, is clause VI which reads as follows:

"Sales Volume Considerations: Terry will make every

good faith effort to purchase from Frendship the Aloe Vera Gel produced from their 500,000 plants."

Mr Hack, for the applicant, raised during the hearing the question whether the expression "make every good faith effort" imposed a legal obligation on Terry Corporation. Whether or not it did so, it seems clear from the evidence given by Mr Wildschut that the vendor and the purchaser agreed that the clause was not intended to impose any absolute obligation to purchase; that

By the addendum marked "Atch 1" - all the addenda are undated - the respondents agreed to indemnify Terry Corporation "against any and all claims and or disputes which may arise from Terry Corporation's failure to take delivery of or arrange sales for all or part of the Aloe Vera Gel produced from the 500,000 ... plants ... providing always that Terry Corporation has fulfilled it's [sic] obligation to the best of it's [sic] ability in it's [sic] efforts to develop markets for said gel ..." Clause 2

contained a similar indemnity with respect to the price.

The addendum marked "Atch 3" referred to the agreement

"During the discussion of this portion of the Agreement, it was, and is, the intentions of both parties that Frendship will not be the sole supplier of Aloe to fulfill Terry's overseas requirements but will, on a case by case basis, be considered in the overall economical evaluation as to the best source to fill those needs."

Mr Wildschut claimed in his oral evidence (in effect) that the addenda set out the "spirit or intent" of the agreement between Terry Corporation and the first respondent. He was asked whether the "indemnification agreement ... put into words the spirit and intent of the April 1985 agreement" and answered in the

If there was any serious intention that Terry Corporation should purchase $40 million or $60 million worth of aloe vera gel per annum, that would have involved an enormous

At a glance

Court

Decision date

Before

Source

Judgment (274 paragraphs)

Cited By (2)