The report by Professor Walker
132 Professor Robert Walker, Professor of Accounting at the University of New South Wales, also gave evidence on behalf of the TCF. He analysed the Compilation Reports that accompanied the 1997 and 1998 financial statements and was very critical of them. In particular, he expressed the opinion that the assertion that the financial statements had been compiled in accordance with APS 9 was misleading.
133 APS 9 is a "miscellaneous professional statement" jointly issued by The Institute of Chartered Accountants in Australia and the Australian Society of Certified Practising Accountants. Its purpose is "to identify the basic principles and to provide guidance on a member's professional responsibilities when an engagement to compile a financial report is undertaken for a client". It also describes the form and content of the report that a member should issue in respect of such an engagement.
134 According to Professor Walker, the requirements of APS 9 were not met by the financial statements for the years ended 30 June 1997 and 30 June 1998 in the following respects:
(1) Clause 19 of APS 9 specifies that "a member must document matters which are important in providing evidence that the engagement was carried out in accordance with the terms of the engagement and this Statement". Professor Walker said that the materials produced by the firm on discovery did not include any correspondence from or to Ms Fry regarding the terms of the engagement. There were no documents supporting the claims that Ms Fry was responsible for the information in the financial report and had determined that the accounting policies used were consistent with her requirements.
(2) Clause 16 of APS 9 requires the accountant to establish the "financial reporting framework to be applied". The financial reports are the product of partly applying accrual accounting (for example, by recording depreciation) and partly applying cash based accounting (for example, by ignoring liabilities).
(3) Clause 20 of APS 9 specifies that "a member must obtain a general knowledge of the business and operations of the client in relation to which the compilation is being prepared and must be familiar with the accounting principles and practices of the industry in which the client operates and with the form and content of the financial report that is appropriate in the circumstances." Professor Walker said that, based on the documents produced on discovery, it was reasonable to infer that the firm was aware of the requirements of the TCF for accounts to be prepared in accordance with the Australian Accounting Standards, and for those accounts to be audited. It was therefore inappropriate, in Professor Walker's opinion, for the firm to produce the form of Compilation Report that was used or to assert that the financial statements were a "special purpose financial report" prepared in terms of APS 9. He noted that the explanatory material in the AFR form specified that the TCF required financial reports complying with all accounting standards except for a number of specified standards.
(4) Clause 24 of APS 9 states that "a member must consider whether the compiled financial report appears to be appropriate in form and free from material misstatements". In Professor Walker's opinion, the firm was or should have been aware that the TCF required accounts to be prepared on an accrual basis. Professor Walker's review of the material provided to him suggested that no accrual entries had been made at the end of the year to 30 June 1997. The ledger did not include any accounts for creditors, and receipts from customers appear to have been recorded as revenue at the time that they were received. As to the year ended 30 June 1998, he noted that the accounts recorded operating revenues of $1,402,255 but again, no liabilities. He said (Report, paragraph 28):
"In my opinion, it would be common knowledge that the business of a travel agent is not a 'cash' business, and that basic services such as electricity or telephone do not render accounts on 30 June. Accordingly, it is inconceivable that such a business would not have had any liabilities to 30 June 1998."
He also said it would be inconceivable that a travel business with the turnover in excess of $1.4 million for the year did not hold money on deposit from customers, either held in the trust account or else recorded in the accounts as a liability.
(5) Clause 11 of APS 9 states that "in undertaking a compilation engagement a member must comply with the requirements of Miscellaneous Professional Statement APS 1 'Conformity with Accounting Standards and UIG Consensus Views'." Professor Walker expressed the view that the firm was not entitled to regard "Renee Fry trading as The Travel Shop International" as an entity not required to prepare "general purpose financial statements". General purpose financial statements are prepared when there are users of accounting information who must rely on those reports when making judgments about the financial performance and circumstances of an entity. That was the case for these accounts, which would be relied upon by the TCF.
135 Professor Walker expressed the view that the very act of "compilation" of financial statements necessitates a degree of knowledge and skill, the proper application of which would or should have immediately highlighted serious deficiencies in the financial statements and in particular, the omission of any reference to trade creditors. He concluded (Report, paragraph 30):
"In my opinion, the failure of these accounts to recognise the existence of any liabilities represented a failure on the part of those who compiled the accounts (or those who were responsible for the issue) to exercise a reasonable standard of skill and care as accountants."
136 Professor Walker was also highly critical of Mr Roseby's audit reports for 1997 and 1998. He drew attention to the inconsistency between describing the financial statements as special purpose financial reports while at the same time asserting that the accounting disclosures contained in them were appropriate to the requirements of the Corporations Law as applied (at the time) to large corporations. Professor Walker said that large corporations would require the preparation of general purpose financial statements, and would require that all applicable Australian Accounting Standards be complied with.
137 Professor Walker was provided with a file of materials produced by Mr Roseby on discovery. He said he did not locate in those files sufficient audit working papers to provide reasonable support for Mr Roseby's claim that an audit had been carried out in accordance with Australian Auditing Standards. He noted that Australian Auditing Standard AUS 208 ("Documentation", October 1995) requires an auditor to prepare working papers that are sufficiently complete and detailed to provide an understanding of the audit. The material produced by Mr Roseby did not include any document setting up the terms of the audit engagement, or the overall audit plan, and such documents as had been produced seem to focus only on cash transactions, ignoring the need to assess such matters as whether liabilities had been properly recorded in the accounts and the significance of any post-balance date events.
138 Professor Walker also drew attention to Australian Auditing Standard AUS 210 ("Irregularities, Including Fraud, Other Illegal Acts and Errors", October 1995). According to that Standard, the auditor should plan and conduct the audit so as to have a reasonable expectation of detecting misstatements that have a material impact on the financial report arising as a result of irregularities. Professor Walker found no evidence that the audit plan complied with this requirement.
139 Nor was any document seen by Professor Walker which indicated any effort had been made to identify related parties and related party transactions, notwithstanding the requirements of Australian Auditing Standard AUS 518 ("Related Parties", October 1995). Professor Walker found evidence in the documents obtained from R Tambree & Associates that there were related party transactions between Fiji Resorts and The Travel Shop.
140 No document was produced to Professor Walker which indicated that any attention been paid to obtaining audit evidence to support the representations contained in the financial statements, notwithstanding Australian Auditing Standard AUS 502 ("Audit Evidence", October 1995). Nor was any document produced which indicated any attempt to apply analytical review procedures, notwithstanding Australian Auditing Standard AUS 512 ("Analytical Procedures", October 1995).
141 Professor Walker expressed the opinion that if Mr Fry had deliberately not informed Mr Roseby about the existence of certain liabilities, that they could not have exonerated Mr Roseby from his responsibility is auditor to undertake proper procedures to assess whether the financial statements were materially misstated. Nor would Mr Roseby be in any way exonerated for failure to carry out an appropriate and professional audit by the fact that he charged only a modest sum for the conduct of the 1997 the audit.
142 Professor Walker also commented on the certification by Mr Roseby of the 1997 and 1998 AFR forms. He said that there were three misrepresentations by Mr Roseby:
(1) the AFR forms acknowledged that the information contained in them would form the basis, together with the audited financial statements, on which the travel agency's continued eligibility for participation in the TCF would be determined, and yet the notes to the financial statements asserted that they were special purpose financial statements and that Ms Fry had determined that the accounting policies users were consistent with her accounts preparation requirements;
(2) Mr Roseby certified that the information in the AFRs was true and fair to the best of his knowledge and belief and disclosed all contingent liabilities of the agency, but no information was given in the AFR forms about actual liabilities, let alone contingent liabilities;
(3) Mr Roseby signed the 1998 form without deleting Clause 7, thereby asserting that the travel agency had properly maintained a fully funded Client or Travel Trust account, but the material reviewed by Professor Walker indicated that no separate account was maintained.
Liability of Mr Fry and Ms Fry
143 In my opinion the Participation Documents prepared for the purpose of the application to the TCF in 1996 were misleading. They did not disclose the travel-related business conducted by Ms Fry and her father through Fiji Resorts. However, it has not been shown that Ms Fry's misleading conduct in lodging those documents with the TCF, considered in isolation, caused any loss to the TCF. At the hearing, the TCF based its case for recovery on the misleading renewal applications in 1997 and 1998.
144 The contention of Ms Fry and Mr Fry that in fact there were no liabilities on 30 June 1997 and 30 June 1998 is false, in my view, having regard to the evidence given on behalf of Metro Travel and my assessment of the credibility of Ms Fry and Mr Fry as witnesses. I prefer the evidence given on behalf of Metro Travel, for reasons I have explained.
145 In her affidavit made in October 2000, Ms Fry responded to the report by Mr Humphreys. She said, correctly, that the TCF did not require a travel agent to operate a client account, as long as a minimum of 10 points were gained, and that The Travel Shop International did not have a client account. She also said that she adopted the "very simple" accounting procedure of treating as income all money paid for by clients. As Professor Walker pointed out in his supplementary report of 28 June 2001, this approach fails to concede that deposits paid to a travel agent may from time to time be refundable. I accept Professor Walker's evidence that deposits pre-paid for travel should have been brought to account as liabilities in the first instance, rather than as revenue.
146 Ms Fry denied that there was any liability to Metro Travel on 30 June 1997 or 30 June 1998, because (she said) The Travel Shop International never had any account with Metro. She said that she paid Metro's invoices on a weekly basis and did not pay on the basis of Metro's statements. This evidence implies that tickets were supplied by Metro on a credit basis and The Travel Shop International incurred liability to pay for them, if only for a few days. This conclusion was confirmed by the evidence that Ms Fry received a one-page statement from Metro showing "a debit and credit for each customer". As Professor Walker pointed out in his supplementary report, Ms Fry seems to have confused having an account with having a pre-arranged line of credit.
147 Ms Fry gave evidence that she had an arrangement with her father, under which he would pay incidental expenses such as electricity, rent, telephone and stationery, and she would pay him regular amounts to cover those expenses. As Professor Walker said in his supplementary report, this evidence implies that The Travel Shop International accumulated liabilities each month to Mr Fry, which should have been reflected in the accounts for the business.
148 In his affidavit made on 12 December 2000, Mr Fry contested Professor Walker's opinion that the business of a travel agent is not a cash business. Mr Fry said he advised his daughter to operate as if he, Mr Fry, were performing the functions of a service company, by payment of incidental expenses for which she would reimburse him by single regular payments.
149 In my opinion the reports by Mr Humphreys and Professor Walker are plausible and have not been undermined by any of the attacks on them during the hearing. They demonstrate, as against Ms Fry, that the financial statements and AFRs for the renewal applications in 1997 and 1998 were seriously misleading, especially insofar as they represented that the business had no liabilities at the two balance dates.
150 By submitting applications for renewal in those two years that contained seriously misleading financial information, Ms Fry engaged in misleading conduct in trade or commerce for the purposes of s 42 of the Fair Trading Act. The evidence clearly establishes that Mr Fry was aware of the true financial position of the business. He was the one who instructed Mr Tambree and who dealt with officers of Metro. By causing Mr Tambree to prepare financial statements for audit by Mr Roseby which he, Mr Fry, knew to be false, Mr Fry was knowingly involved in Ms Fry's contravention, for the purposes of ss 61 and 68 of the Fair Trading Act. He was also knowingly involved in the misleading conduct of Mr Tambree and Mr Roseby, in preparing the financial statements and providing audit reports concerning them. I shall deal with the position of Mr Tambree and Mr Roseby below.
151 Ms Fry and Mr Fry are both, therefore, liable under s 68 to compensate the TCF for the loss or damage it suffered "by" Ms Fry's misleading conduct. Questions of causation and reliance were fully argued by Mr Tambree and Mr Roseby, and so I shall deal with them when considering their liability.
152 Ms Fry may also be liable to the TCF on another basis. To the extent that she dealt with customers of The Travel Shop who became Claimants, at a time when the business was being conducted by her, she became liable to them contractually to perform her travel engagement. They had causes of action against her for her failure to do so. The TCF has taken assignments of those causes of action and, moreover, it has available the statutory right of subrogation under s 40 (3) of the Travel Agents Act. In my opinion the evidence establishes that if payments had been made to Claimants under the compensation scheme by reason of acts or omissions by Ms Fry as proprietor carrying on her travel agent's business, those payments would fall within s 40(3), and so the Trustees would be subrogated to the rights of the relevant Claimants against Ms Fry. Those rights would sound in damages, and the recoverable damages would include an amount equivalent to the amount paid to meet the compensation claim.
153 My finding of fact that Ms Fry informally transferred the business to TSIPL as from some time in November 1998 leads to the conclusion that the Claimants' rights arose at a time when Ms Fry was acting in a business conducted either by TSIPL or by DMV Travel. That being so, unless Ms Fry was acting without the authority of the proprietor of the business, the Claimants' contractual rights were against the proprietor rather than Ms Fry as its agent. Further, the TCF's payment of compensation to those Claimants was not made by reason of an act or omission by a person carrying on the business of a travel agent, for the purposes of s 40(3). At the relevant time, the persons whose acts and omissions are in question (namely Ms Fry and Mr Fry) were not carrying on the business as a travel agent, because the business was being carried on by TSIPL or, at a later stage, DMV Travel.
154 It therefore seems to me that, while there is potentially a valid claim available to the TCF against Ms Fry under s 40 (3) and the assignments by the Claimants, no basis for recovery has been established because it appears that the Claimants' rights against the supplier of travel services to them were not rights against Ms Fry. The Statement of Claim does not plead that Ms Fry is liable under s 40(4) for acts or omissions of TSIPL.
155 In contrast, the claim under the Fair Trading Act against the four defendants will entitle the TCF to recovery of all of the compensation payments made to Claimants, if my analysis of the principles of liability, reliance and causation is correct and I have correctly applied those principles.
Evidence as to causation
156 TCF's internal accountant, Mr Whittaker, gave evidence in which he re-assessed Ms Fry's AFRs for 1997 and 1998 on the basis of various scenarios for each year. His view was that if the accounts prepared for those AFRs had been prepared in a proper manner, the point score would have been minus 6 on each occasion. He said that if that had been so, he would have recommended the provision of a bank guarantee or an injection of capital in 1997 of between $47,000 and $86,000; and in 1998 he would have recommended a bank guarantee or capital injection in the sum of $292,000. He also said that Metro Travel's review of the amount which it claimed to be owing to it for the 1998 year would have led Mr Whittaker to increase the amount of the bank guarantee or capital injection. Failure to comply with the requirement for a bank guarantee or capital injection would have resulted, according to their evidence, in determination of Ms Fry's participation in the Fund, with the result that she would not have been able to carry on the business of a travel agent lawfully.
157 Mr Whittaker assumed, on instructions from the TCF, that the Travel Shop's financial statements presented on 2 December 1997 had been adjusted in the matter set out in Mr Humphreys' report, scenario 1. He then recalculated the Travel Shop's points under the TCF's financial criteria, based on the amended figures. His evidence was that the Travel Shop would have scored minus 6 points instead of 16 points. On that basis, Mr Whittaker said that the TCF assessor would have required either a bank guarantee of $47,000 in its favour, or an injection of capital in the sum of $47,000, for the Travel Shop to meet the financial criteria for continued participation in the Fund. The assessor would have written to the Travel Shop requiring that those remedial measures be carried out within 21 days. If the Travel Shop had failed to do so, a briefing paper would have been prepared recommending that the Fund Trustees impose a condition of a $47,000 capital injection or bank guarantee on continued participation by the Travel Shop in the Fund. If the Travel Shop had provided the necessary capital injection or bank guarantee before the meeting of the Management Committee of Trustees was held to consider the matter, then the issue would be at an end, but if the Trustees were to impose conditions as envisaged and the Travel Shop failed to comply, participation by the Travel Shop in the Fund would have been liable to be terminated.
158 Mr Whittaker also gave evidence based on scenario 2 in Mr Humphreys' report, in respect of the Travel Shop's 1997 AFR. His opinion was that if the revised figures were in accordance with scenario 2, the Travel Shop would have scored minus 6 points instead of 16 points, and the assessor would have required a bank guarantee or injection of capital of $86,000. The same consequences would have flowed from failure to comply.
159 Evidence was also given on behalf of the TCF by Osmond Pitts and Brian Given, who were Trustees of the TCF and members of the Management Committee at all relevant times. They explained that the Management Committee comprised three Trustees, themselves and one other. The meetings of the Management Committee were normally attended by Mr Brattoni as Chief Executive Officer and also by Mr Whittaker (as regards his department's agenda matters). When making a decision to impose a condition upon the eligibility of a participant, or to terminate participation in the Fund, the Management Committee followed the procedure of receiving a briefing paper from Mr Whittaker, which they would review and discuss at the meeting. Before any decision was made, the participant would be given an opportunity to address the meeting. The trustees would then make a decision and communicate it to the participant. The usual types of remedial action included bank guarantees and capital injections.
160 Both Mr Pitts and Mr Given gave evidence that if they had received a briefing paper from Mr Whittaker of the kind envisaged in Mr Whittaker's evidence in response to scenario 1 and scenario 2 of Mr Humphreys' report, they would have followed Mr Whittaker's recommendations by requiring either bank guarantees or capital injections in the amounts set out by him. Their opinion was that if the Travel Shop did not comply with conditions imposed by them in response to Mr Whittaker's recommendations, the Travel Shop's participation in the TCF would have been terminated.
161 As with the Travel Shop's 1997 AFR, Mr Whittaker gave evidence with respect to the 1998 AFR. He assumed, on instructions by the TCF, that the Travel Shop's 1998 AFR included financial statements in the adjusted form set out in Mr Humphreys' report for the year ended 30 June 1998. He said that the Travel Shop would then have scored minus 6 points instead of 20 points. He said that the assessor would have required either a bank guarantee or a capital injection of $292,000, and would also have required audited financial statements for the six months ended 31 December 1998, for the Travel Shop to meet the financial criteria. The same consequences would then have followed as would have followed in respect of the 1997 AFR, leading eventually to the imposition of conditions by the Management Committee and in the event of continued non-compliance, termination of the Travel Shop's participation in the Fund.
162 Mr Pitts and Mr Given gave evidence in respect of the 1998 AFR, similar to their evidence in respect of the 1997 AFR. They said that if Mr Whittaker had made the recommendations that (according to Mr Whittaker's evidence) he would have made upon the adjusted figures set out in Mr Humphreys' report, they would have accepted those recommendations. Their evidence took into account that by late 1998, the Management Committee would have had AFRs from the Travel Shop for two years. Their evidence was that they would have taken the decisions recommended by Mr Whittaker if either the 1997 AFR had been adjusted according to one of Mr Humphreys' scenarios or had remained in its present form. They said that, in addition to following Mr Whittaker's recommendations, they would have required that the Travel Shop's membership be reviewed within 21 days, and again at the end of February 1999 in light of the further audited accounting material. If the required bank guarantee or capital injection had not been provided, or if the six-monthly audited accounting records revealed further deterioration, the Travel Shop's participation in the Fund would have been terminated.
163 Mr Brattoni gave evidence about the procedure followed by the TCF before remedial action would be undertaken. He said that if a participant did not obtain the requisite 10 points in self-assessment of their AFR, or obtained 10 points but another matter was raised by the financial assessing section of the TCF, then usually the assessing section would write to the participant and outline the remedial action that ought to be taken to satisfy the TCF's financial criteria for continued eligibility. Usually this remedial action would be in the form of an increase in equity or the provision of a bank guarantee.
164 If the participant failed to comply with the TCF's request, the TCF would write to the participant and advise them that the matter would be placed before the Management Committee of Trustees for determination. The directors of the participant or its financial advisers would be invited to attend this meeting. Mr Whittaker as chief assessor would prepare a briefing paper on the matter for the Management Committee, including a recommendation. Mr Brattoni would countersign the recommendation if he approved it. Then the Management Committee, having heard the representatives of the participant, would make a determination by resolution in light of the recommendations in Mr Whittaker's report. If the participant failed to comply with the Management Committee's resolution, they would be liable to have their participation in the TCF terminated. Mr Brattoni said that, having reviewed Mr Whittaker's evidence, he would have approved Mr Whittaker's recommendations in respect of the 1997 and 1998 years.
Liability of Mr Tambree
165 As I understand the TCF's case, it is not now contended, against Mr Tambree, that the financial statements which accompanied the 1996 application for participation were inaccurate. Attention has been focused on the 1997 and 1998 renewals and the financial statements in relation to those years. I shall deal first with the misleading conduct claim, and then with the negligence claim.
166 A critical step in the case against Mr Tambree is to identify the representations made by him to the TCF, which may be said to constitute negligent misrepresentations, or misleading conduct for the purposes of s 42 of the Fair Trading Act.
167 Mr Tambree denies that he represented to the TCF that the accounts which accompanied the 1997 and 1998 renewal material were true and correct, or that he made a representation of his own as to whether the accounts could be relied upon. He contends that he merely passed on information supplied to him by Mr Fry. He relies on a passage in the judgment of Mason ACJ, Wilson, Deane & Dawson JJ in Yorke v Lucas (1985) 158 CLR 661 at 666, where their Honours said:
"If the circumstances are such as to make it apparent that the corporation is not the source of the information and that it expressly or implicitly disclaims any belief in its truth or falsity, merely passing it on for what it is worth, we very much doubt that the corporation can properly be said to be itself engaging in conduct that is misleading or deceptive."
168 In the same vein, French J referred, in Gardam v George Wills & Co Ltd (1988) 82 ALR 415 at 427 to "the innocent carriage" of false information by a "mere conduit", which did not give rise to liability; see also Saints Gallery Pty Ltd v Plummer (1988) 80 ALR 525 at 530-1.
169 Mr Tambree relies upon the disclaiming provisions in his Compilation Reports for 1997 and 1998, set out above. Those, he claims, make him a mere conduit who has no liability for the truth of the contents of the financial statements. Mr Tambree relies on evidence given by Mr Brattoni to the effect that Mr Tambree's statements convey the ordinary meaning that Mr Tambree did not warrant the truth of the accounts, and that the assessor who reviewed the renewal applications would have read the page containing those statements.
170 However, it is clear that Mr Tambree represented, in respect of both years, that the financial statements had been prepared in compliance with APS 9, that The Travel Shop was entitled to prepare a special-purpose financial report and (by inference) that the accounts were prepared on an accruals basis. I fully accept the analysis of Professor Walker with respect to these matters. It follows from Professor Walker's analysis that Mr Tambree's representations on these three matters were incorrect and misleading representations, and misleading conduct for the purposes of s 42.
171 In my opinion, Mr Tambree's misleading conduct was not confined to particular misrepresentations in the financial statements. His misleading conduct extended to the manner in which he went about his work as accountant in preparing the material. Mr Tambree's evidence was that he converted the data supplied by Mr Fry into a "meaningful financial statement". He did so in consultation with Mr Fry, in a manner inconsistent with his contention that he was a mere conduit or intermediary. He was aware of the purpose for which the accounts were being prepared, namely transmission to Mr Roseby for incorporation into the renewal application and AFRs. His conduct, in purporting to comply with APS 9, could not be described as merely a mechanical act, but was one in respect of which professional expertise was to be applied.
172 In order to recover damages under s 68 of the Fair Trading Act against Mr Tambree, for his contravention of s 42, the TCF must prove that it suffered loss or damage "by" Mr Tambree's misrepresentations. The requirement of causation under s 68 is the same as the "practical or common sense concept applied by the common law", with the result that acts done by a person in reliance upon the misrepresentation of another constitute a sufficient connection to satisfy the concept of causation: Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525 (in relation to the equivalent provision in s 82 of the Trade Practices Act 1974 (Cth)). It has not been suggested that the element of reliance for the purposes of liability for negligent statement is different from the element of reliance arising under s 68.
173 The "practical or common sense concept" referred to by the High Court in the Wardley Australia case was the concept expounded in March v E & MH Stramare Pty Ltd (1991) 171 CLR 506; see especially at 515 per Mason CJ. The question is not whether, but for the defendant's breach, the plaintiff's loss would have been sustained, but whether the defendant's identified breach was "so connected with the plaintiff's loss or injury that, as a matter of ordinary common sense and experience, it should be regarded as a cause of it": March v Stramare, at 522 per Deane J. Where, as here, there are several factors (the conduct of each of the four defendants) contributing to the plaintiff's loss, the correct approach is to identify each "substantial factor": J G Fleming, The Law of Torts (9th ed, 1998), p 222, citing March v Stramare. I shall consider whether the conduct of each of the four defendants was a "cause" in this sense.
174 It may be, as the TCF contends, that it is strictly not necessary for a plaintiff under s 68 to prove reliance on misrepresentations, if the causal connection between the misrepresentations and the plaintiff's loss can otherwise be established: see the remarks by the Hon Justice French, "The Action for Misleading or Deceptive Conduct: Future Directions", in Lockhart (ed), Misleading or Deceptive Conduct - Issues and Trends (1996), quoted in (1997) 5 Trade Practices Law Journal 176. Since I have concluded, however, that the element of reliance is present, it is unnecessary for me to investigate whether causation may be established in some other way.
175 Mr Tambree contends that the TCF did not rely on the financial statements prepared by him when they assessed the 1997 and 1998 renewal applications. I disagree with this contention. The evidence shows that the assessors who reviewed the renewal applications applied the TCF's financial criteria and the system of self-assessment which I have described. In doing so, they relied on the presence of financial information to support the assessments made by the applicant, and to support the points allocated to the application. That reliance involved reliance on the accuracy of certain aspects of the financial information made relevant by the criteria.
176 It is true that only a little time was given by the assessors to each renewal application, and that the plaintiff has not demonstrated that the assessors for the 1997 and 1998 applications in fact looked at the financial statements as opposed to the information in the application form. Additionally, Mr Brattoni gave evidence that the notes to the financial statements clearly disclosed that they had not complied with the instructions given in the form with respect to accounting standards. Nevertheless the misrepresentations that I have identified go to matters of importance, in respect of which the assessor for each year must have relied on the accuracy of the financial information. In particular, the fact that no liabilities were disclosed when in truth there were substantial liabilities in the business at both balance dates was a matter of fundamental importance. The assessors were entitled to assume that the accountant who prepared the financial statements would have taken steps of the kind prescribed by APS 9, even if the assessors did not read Mr Tambree's representation that he had complied with APS 9. That general assumption would include a particular assumption that the accountant had brought some judgment to bear on the question of liabilities before finalising financial statements which asserted that no liabilities were owing at the respective balance dates.
177 Mr Tambree contends that if the TCF in fact relied on his financial statements (which he denies), it would have been so negligent in protecting its own interest that the court should conclude that the misrepresentation was not any real inducement to the TCF's decision to continue Ms Fry's participation in the Fund (citing Argy v Blunts Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 at 138). I disagree. Having regard to the TCF's method of processing renewal applications, it is appropriate to infer, and I do infer, that Mr Tambree's misrepresentations were a real inducement to the TCF's decisions in respect of the 1997 and 1998 renewals.
178 Mr Tambree also says that the TCF has not shown that its losses occurred because Ms Fry was twice successful in having her participation in the Fund renewed. He points out that all but a small part of the claims made by the TCF related to losses incurred in 1999, while Ms Fry was operating while unlicensed. He relies on evidence by Mr Brattoni that he did not know whether, if Ms Fry had her Licence terminated a year earlier, she and her father would have stopped unlicensed trading at that time. In my opinion, however, the evidence given on behalf of the TCF as a whole, and in particular the evidence given by Mr Whittaker, Mr Pitts and Mr Given, provides a common sense causal connection between Mr Tambree's misrepresentations and the TCF's losses. I accept that evidence.
179 Finally as to causation, Mr Tambree says that the TCF made voluntary payments to those who lost money dealing with Ms Fry while she was unlicensed, in such a fashion that those voluntary payments were not causally related to any conduct of Mr Tambree. Again, I disagree. The evidence does not provide any reason to doubt that the Management Committee of Trustees of the TCF exercised their discretion under the Deed in a proper fashion, to address claims that had arisen through a chain of events causally related to the renewal of Ms Fry's participation as a result of her 1997 and 1998 applications. The renewals permitted her to continue to trade, and then to informally transfer the business to TSIPL, and later to have the business transferred again to DMV Travel, while she and her father continued to deal with clients in much the same way until the business was physically closed down.
180 If the TCF assessor had been aware at the relevant times that, by virtue of the content of the renewal applications, Mr Tambree had not complied with APS 9 and that the accounts had not been properly prepared on an accrual basis, it is reasonable to infer that he would have become concerned about the absence of liabilities in the financial statements, notwithstanding Mr Roseby's audit report. Applying the common sense approach to causation, one can infer that in such circumstances, further inquiries would have been made, leading to such events as Mr Whittaker, Mr Pitts and Mr Given have set out in evidence.
181 To the extent that the claim against Mr Tambree is based upon his involvement in contraventions by Ms Fry, Mr Tambree contends that it has not been established that he had the requisite knowledge that her conduct was misleading. Knowledge of falsehood is necessary, according to Yorke v Lucas (1985) 158 CLR 661 at 666. In my opinion it has not been shown that Mr Tambree knew that the financial statements were incorrect with respect to liabilities. Rather, the problem was that, through failure to comply with APS 9 and to apply his professional judgment appropriately, he did not detect the deficiencies that were present in the financial statements. In my opinion Mr Tambree's liability is primary liability flowing from his own misleading conduct rather than involvement in the misleading conduct of Ms Fry.
182 As to the claim for negligent misstatement causing economic loss, Mr Tambree contends that he did not owe a duty of care to the TCF, because he had no reason to suppose that the accounts he prepared would be communicated to the TCF and that it would rely on them (citing Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 at 252 per Brennan CJ, and at 265-6 per Toohey and Gaudron JJ). According to Mr Tambree, he compiled and supplied the figures to Mr Roseby for audit and no more, and did not expect the TCF to rely on his unaudited financial statements for the purpose of assessing Ms Fry's application. In my opinion these contentions are contrary to the facts. Mr Tambree arranged for Mr Roseby to be engaged as auditor and knew that the accounts were being prepared for submission to the TCF for the purpose of Ms Fry's annual renewal applications. He prepared financial statements which, according to his own evidence, were set out in a professional manner and amounted to meaningful financial statements. He must have been aware that the financial statements prepared by him would, subject to audit, form the basis for the renewal applications.
183 The reliance placed upon the financial statements was reasonable reliance and in particular, it was reasonable for the TCF to rely on Mr Tambree's statement that he had complied with APS 9, and on the implication from the financial statements that they had been prepared on an accruals basis, and therefore that (subject to audit) they were accurate when they showed no liabilities.
184 In my opinion Mr Tambree failed to meet the standard of care required of an accountant whose instructions are to prepare financial statements for the purpose of an audit and in connection with renewal applications to the TCF. The misstatements that I have identified were negligent misstatements by him and for the reasons I have given, they have caused the TCF to suffer losses.
Liability of Mr Roseby
185 The TCF makes claims against Mr Roseby for negligent misstatement and misleading conduct contrary to s 42 of the Fair Trading Act, on the ground that he was knowingly concerned in Ms Fry's contravention of s 42. In my opinion, the ingredients of the first two of these three causes of action have been made out.
186 When he provided his audit reports for the 1997 and 1998 financial statements and applications, Mr Roseby knew that the TCF would rely on those reports. That is evident from the text of the reports themselves. He was under a duty of care to the TCF. By providing his reports he represented that the accounts presented a true and fair view of the matters required to be dealt with in financial statements and that they complied with applicable accounting standards. He also represented that his audit had been conducted in accordance with Australian Auditing Standards and with due care and skill. The TCF relied on Mr Roseby's report, because the application of the TCF's financial criteria to produce a point score depended upon financial information which it required to be audited. Mr Roseby's conduct of the audit failed to comply with the standard of care to which he was subject, and the representations that he made in his report included inaccurate and misleading representations. This is so, notwithstanding that he was deceived by Mr Fry, who concealed from him information about liabilities, because Mr Roseby's duty, which he did not adequately discharge, was to conduct a proper audit regardless of what he was told by Mr Fry. He was therefore liable to the TCF for the loss caused by his negligent conduct.
187 Mr Roseby's conduct of the audits for the 1997 and 1998 financial statements and applications, and his inaccurate and misleading representations in his reports, constituted misleading conduct for the purposes of s 42 of the Fair Trading Act. He was therefore liable under s 68 to compensate the TCF for the loss or damage that it suffered by his contravention. I am not persuaded, however, that Mr Roseby was liable to compensate the TCF under s 68 as a person involved in Ms Fry's contravention of s 42. Her contravention arose when she submitted returns containing false financial information. Having regard to Mr Fry's deception, it has not been established that Mr Roseby actually knew the facts material to Ms Fry's contravention, although he negligently failed to conduct a proper audit which should have uncovered the true facts with respect to liabilities.
188 I base these conclusions on my full acceptance of the evidence of Mr Humphreys and Professor Walker as to the deficiencies of Mr Roseby's audits in 1997 and 1998. Their reports show that Mr Roseby's work was seriously inadequate. None of their reasoning and conclusions has been undermined. Indeed, in final submissions counsel for Mr Roseby did not directly contest the proposition that Mr Roseby was liable to compensate the TCF for losses caused by his client's audits. Rather, counsel submitted that Mr Roseby's audits did not cause the losses which the TCF seeks to recover.
189 As to causation, TCF's case against Mr Roseby is that by reason of Mr Roseby's conduct in auditing Ms Fry's business in 1997 and 1998, the TCF renewed her participation in the Fund and thereby permitted her to continue to trade as a licensed travel agent until February 1999. The TCF alleges that as a consequence, it suffered the loss constituted by meeting the Claimants' claims. Mr Roseby puts forward several answers to the TCF's case.
190 First, Mr Roseby points out that Ms Fry's participation in the Fund was terminated on 23 February 1999, and yet after that time either Ms Fry or Mr Fry or their related entities continued to trade as a travel agent. Indeed, since I have found that from November 1998, TSIPL had taken over Ms Fry's travel agency business, the logic of Mr Roseby's position is that the unlawful activity began in November 1998 rather than in February 1999. According to Mr Roseby, the resulting claims arose either entirely or substantially from this unlawful activity. Mr Roseby contends that the audits of Ms Fry's business in 1997 and 1998 cannot be causally related to the TCF losses. The losses were caused by unlawful trading without a licence or participation in the Fund. By their conduct in continuing to trade unlawfully notwithstanding the actions of the Department of Fair Trading, Mr Fry and Ms Fry have broken the chain of causation back to Mr Roseby's audits, according to his contention.
191 I disagree with this submission. If one takes the evidence of Mr Whitaker, Mr Pitts and Mr Given, which I accept, it can be seen that remedial steps would, in all probability, have been taken by the TCF and the Department of Fair Trading substantially earlier than they were in fact taken. A proper audit would have put the TCF in a position to deal with the misleading financial disclosure late in 1997 or early in 1998. In terms of the common sense meaning of causation, Mr Roseby's conduct of the 1997 audit was a cause of the losses, because it allowed a state of affairs to develop in which Ms Fry and Mr Fry were able to continue to trade and expose the clients of the business to losses.
192 Secondly, Mr Roseby invites the Court to consider the traditional sine qua non test, namely whether "but for" the negligent audit the TCF would have avoided any claims being made upon it. Mr Roseby submits that any such conclusion cannot be drawn in relation to the 1998 audit. This is because Mr Brattoni gave evidence that it would take up to a month to review the financial information in a renewal application, and if remedial action was then required, at least 21 days would be given for the participant to comply, and in the event of non-compliance, the participant would be invited to put its case at the next meeting of the Management Committee. This evidence means, according to Mr Roseby's submission, that a termination following the renewal application made in November 1998 would be unlikely to have occurred before 18 February 1999.
193 I accept this submission, subject to a qualification. Indeed, it seems to me that the same conclusion follows whether one applies the "but for" test or the more general common sense concept of causation. In my view, it could not be said that the deficiencies in the 1998 renewal application and financial statements, if they were considered in isolation, could be said to have been a contributing cause to the TCF losses. The qualification is that Mr Roseby's submission requires that the 1998 renewal application and financial statements be considered in isolation. If one considers the 1998 financial disclosure together with the 1997 financial disclosure, taking into account the evidence of Mr Whittaker, Mr Pitts and Mr Given, a different picture emerges. If there had been full disclosure of liabilities in 1997 either initially or in response to some investigations stimulated by the auditor, and then Ms Fry lodged an application for renewal in 1998 showing much larger turnover figures but no liabilities, it stands to reason that the TCF would have responded rather more quickly than Mr Brattoni's timetable implies.
194 Turning to the 1997 audit, Mr Roseby says that at its highest, the TCF's case is that Ms Fry's licence would have been terminated in about February or March 1998 following lodgement of the financial materials in December 1997. But Mr Brattoni gave evidence that the policing of unlicensed trading was the responsibility of the Department of Fair Trading, whose activities were outside the control of the Fund, and he agreed with the proposition that no one knew whether the Frys would have stopped unlicensed trading if Ms Fry's licence had been terminated a year earlier. Moreover, says Mr Roseby, the Fund became aware of serious grounds for concern about the business on 8 February 1999, and rather than freezing bank accounts or requiring a trust account, it merely gave Ms Fry time to resign and terminated her participation two weeks later.
195 This submission does not take into account the evidence of Mr Whittaker, Mr Pitts and Mr Given. The effect of their evidence is that if proper financial disclosure had been made in 1997, Ms Fry's point score would have been minus 6 and the TCF would have imposed a requirement for a bank guarantee or an injection of capital, leading to termination of the licence if this funding was not forthcoming. Either funding would have been provided and so a capital buffer would have been created for the protection of clients, or participation in the Fund would have been withdrawn and Ms Fry's licence cancelled. If funding had been provided for the purposes of the 1997 renewal, it would then have been increased for the 1998 renewal so that, by February 1999, there would have been a capital buffer in the vicinity of $292,000, an amount adequate to meet the claims in fact made. Mr Roseby's deficient audits in 1997 and 1998 were a cause of this capital buffer not being required and obtained.
196 If the TCF's funding requirements were not met for the 1997 renewal, and consequently Ms Fry's participation in the Fund and her travel agent's licence were withdrawn in 1998, no one can be sure that Ms Fry and her father would not then have engaged in unlawful trading causing losses. But there is no evidence that would lead me to conclude that unlawful trading and losses would be more likely than not. The issue is purely one for speculation. What is tolerably clear is that proper discharge of his auditing duties by Mr Roseby would have led to a chain of regulatory events that would have prevented the loss in fact suffered by the TCF.
197 Thirdly, Mr Roseby draws attention to evidence indicating that Mr Fry, through one or more of the companies Fiji Resorts, Bali Resorts and TSIPL, engaged in unlicensed trading throughout 1997 and 1998. I have found that TSIPL took over the business from November 1998 onwards. TSIPL was never licensed and never audited.
198 It does not seem to me that Mr Fry's activities, assuming them to have been unlawful, made it improbable that proper auditing of Ms Fry's business in 1997 and 1998 would have avoided the TCF's loss. Whether, if regulatory intervention had taken place after a proper audit, Mr Fry would nevertheless have used one or more corporate entities to conduct unlawful trading, is a matter for speculation. Whether, if he did so, he would have caused loss to anyone and whether, if so, the loss would have been borne by the TCF rather than (for example) trade creditors such as Metro, are matters for speculation upon speculation. The evidence shows that on the balance of probabilities, and applying the common sense test of causation, Mr Roseby's deficient audits were a cause of the loss in fact incurred by the TCF.
199 Fourthly, Mr Roseby submits that as from 8 February 1999, all of the alleged financial misrepresentations had been revealed to the TCF. Therefore, says Mr Roseby, any misrepresentation arising from the audit no longer had any operative effect on the TCF. From that date onwards, he says, the TCF was entirely the author of its own losses. It declined to conduct a field audit. It permitted participation to continue until 23 February 1999, and thereafter left it to the Department of Fair Trading to follow up any potential unlicensed trading. Therefore losses incurred after 8 February 1999 can have no causal link to any misrepresentation in the audit.
200 This submission misses the point of the TCF's case on causation. Assuming that the TCF had all relevant knowledge on 8 February 1999, it was then in a position to commence appropriate regulatory steps that would make it likely that losses would eventually be avoided. The losses in fact suffered by the TCF were incurred, principally, during 1999 before closure of the business. The evidence does not show that, if the TCF took its appropriate and usual regulatory measures in a period beginning on 8 February 1999, the actual losses it suffered would have been avoided. However, the evidence does show, on balance, that if Mr Roseby had conducted proper audits and thereby put the TCF in a position to commence its appropriate and usual regulatory procedures in 1998, the losses suffered by the TCF would have been avoided.
201 Fifthly, Mr Roseby draws attention to the fact that the TCF treated the claims it received as discretionary claims under clause 15.2 of the Deed, on the ground that even where payments were made prior to termination, the failure to account was considered to have arisen while the business was unlicensed. Generally speaking, the dates of travel by Claimants, or the dates of the demands made upon the travel agent, or the dates of the claims made upon the TCF, post-dated the termination of Ms Fry's participation in the scheme.
202 In those circumstances, Mr Roseby invokes the general principle that "the free, deliberate and informed act or omission of a human being, intended to produce the consequence which it did in fact produce, negatives causal connection (citing HLA Hart and A Honore, Causation in the Law (1959) at 130). Such intervention is frequently seen as a novus actus interveniens, which is an exception to the "but for" test of causation (citing March v Stramare (1991) 171 CLR 506). To put the matter another way, the law does not recognise a voluntary payment as amounting to a person's loss or damage unless that person was under a legal obligation to meet the payment. The TCF was under no such obligation to meet the claims, because claims were in respect of unlicensed trading and the Trustees had a discretion with respect to them.
203 In my opinion it is correct, in respect of most of the claims, that they were not covered by clause 15.1 of the Deed, because the Claimants' losses did not arise from an act or omission by a participant in the Fund. By the time the losses were incurred, the business had been taken over by TSIPL, which was not a participant, and although Ms Fry remained a participant until 23 February 1999, her business conduct from November 1998 onwards was as agent for TSIPL. Consequently I proceed on the basis that most of the claims were met under clause 15.2, which gives the Trustees an absolute discretion to pay compensation in certain circumstances not governed by clause 15.1.
204 Although the Trustees had a discretion to accept or deny the claims, they were required to exercise that discretion in their capacity as fiduciaries, acting for proper purposes and upon relevant considerations. It is probable that their discretion is in the nature of a trust power (Re Baden's Deed Trusts [1971] AC 424 at 449 per Lord Wilberforce), and consequently they have an equitable duty to exercise that discretion, when faced with a claim for compensation in proper form. The Court cannot review "on the merits" the exercise by a trustee of an absolute discretion that has been exercised in good faith and without ulterior purpose (Gisborne v Gisborne (1877) 2 App Cas 300), but the exercise of fiduciary powers is open to review on several grounds, however broad may be the terms of the discretion (Karger v Paul [1984] VR 161). The Court may determine whether the discretion has been exercised in bad faith or arbitrarily or capriciously or irresponsibly (Re Pauling's Settlement Trust [1964] Ch 303, at 333; Lutheran Church of Australia v Farmers' Co-operative Executors & Trustees Ltd (1970) 121 CLR 628, at 639; Attorney-General for the Commonwealth v Breckler (1999) 197 CLR 83); whether it has been exercised upon a "real and genuine consideration" (Dundee General Hospitals Board of Management v Walker [1952] 1 All ER 896, at 905); whether the discretion has been exercised for an ulterior purpose or not in accordance with the purposes for which it was conferred (Cowan v Scargill [1985] 1 Ch 270; Lock v Westpac Banking Corporation (1991) 25 NSWLR 593); and in a case where the trustee has disclosed the reasons for the exercise of the discretion, whether those reasons are sound (Re Londonderry's Settlement [1965] Ch 916; Parkes Management Ltd v Perpetual Trustee Co Ltd (1997) 10 ACLR 303).
205 The evidence does not provide any ground for contending that the Trustees acted otherwise than properly in the discharge of their fiduciary responsibilities. Nevertheless, the Trustees' decisions were constrained by the equitable principles to which I have referred. In particular, the equitable requirement to exercise the discretion for proper purposes, having regard to the objects for which it was conferred, is a substantial limitation which may well mean that, subject to disentitling factors, a claim in proper form should be allowed, where the loss has been caused to a customer of a travel agent who did not know, and had no reason to believe, that the agent was unlicensed. That being so, it is incorrect to classify the Trustees' decisions to allow claims as free acts of intervention, breaking the chain of causation. The misleading financial disclosure in 1997 and 1998 set in train a series of events that included the consideration of compensation claims by the Trustees in the exercise of their fiduciary responsibilities, the product of that process being acceptance of the claims and payment of the Claimants.
206 Sixthly, Mr Roseby submits that, on the evidence, the Metro account holder until June 1997 was Fiji Resorts, and thereafter the account holder was TSIPL. Mr Roseby contends that Ms Fry's business acquired tickets from TSIPL and was only indebted to that company for the tickets actually ordered by her for the business, all of which were paid for. Hence, it said, Ms Fry's evidence that her business had no liabilities at the two balance dates was correct, and consequently the financial statements and renewal applications in 1997 and 1998 did not mistake the liabilities of the business.
207 There are two answers to this submission. First, it is contrary to the findings of fact that I have made with respect to the Metro account, on the basis of my review of the whole of the evidence. I have taken the view that from about February 1997 until November 1998, a period that includes the two balance dates, the account holder with Metro was Ms Fry trading as The Travel Shop International. Secondly, while Mr Roseby's submission, if correct, would have answered the allegation that the financial statements were misleading in their assertion that there were no liabilities, it would not have overcome other deficiencies in the financial statements and their audit, as identified by Mr Humphreys and Professor Walker. Those other deficiencies were causally related to the TCF's loss.
208 Seventhly, Mr Roseby contends that even if Ms Fry's personal business was indebted to Metro Travel at the two balance dates, it does not necessarily follow that this fact would have been revealed in an audit. He draws attention to the fact that the state of the records in the possession of Ms Fry and Mr Fry at the time of the 1997 audit is not known. Metro did not issue regular statements of accounts to The Travel Shop, and the invoices that it issued are not in evidence. While the printout which is in evidence suggests an outstanding debt of approximately $65,000 as at 30 June 1997, Mr Roseby points out that there is no direct evidence that the invoices the subject of the printout had been issued to and received by Ms Fry before 30 June 1997, or that they were due for payment at or before that date.
209 I disagree with Mr Roseby's assessment of the evidence on this point. The printout is to be read in conjunction with Mr Ng's second affidavit and his oral evidence. His evidence clearly was that, although the due date on the statement may not have been accurate, an amount of approximately $65,000 was owing as at 30 June 1997.
210 Mr Roseby also submits that Mr Fry, who admitted to deceiving the auditor in 1998, could have succeeded in deceiving the most diligent auditor in 1997 by not revealing invoices or client files and the like. However, Professor Walker's evidence established that a diligent auditor would have pursued the question of liabilities in the circumstances in this case, where the accounts asserted that there were no liabilities at all. I infer that, although particular invoices or client files could have been concealed from even the most diligent auditor, Mr Fry would not have been able to persuade a diligent auditor that the business had no liabilities whatever at the balance date. Further, I infer that where the business involved very frequent contact with a ticket consolidator, a diligent auditor would have been concerned to know the state of the account between the ticket consolidator and travel agent, and would not have accepted the assertion that there was no debt in the absence of verification.
211 Mr Roseby contends that the alleged debt to Metro Travel as at 30 June 1997 could have been matched by corresponding debtors (for example, DMV Travel or TSIPL), whose debts were not accounted for as current assets. That submission is merely speculation. The only fact established by the evidence is that there was a debt owing to Metro Travel.
212 Mr Roseby says that a payment of $30,000 was proved to have been made to Metro on 2 July 1998, but there is no direct evidence that it was for unpaid invoices issued before 30 June 1998. I am satisfied by other evidence, however, that there was a substantial debt owing to Metro as at 30 June 1998. Moreover, on balance I think it would be appropriate to infer that the amount of $30,000 paid to Metro on 2 July 1998 was in respect of a debt incurred on or before 30 June 1998.
213 Although neither Mr Humphreys nor Professor Walker was prepared to give evidence that proper audits would in fact have revealed the outstanding liabilities to Metro Travel, their evidence is to the effect that the audit should have been directed towards testing, inter alia, whether there was any indebtedness as at the balance dates by the business to the major ticket consolidator with which the business dealt.
214 My conclusion is that there is no substance to Mr Roseby's submissions on these matters. The TCF has made out its case against Mr Roseby for negligent misstatement and for misleading conduct in contravention of s 42, and has established the requisite causal connection between the negligent conduct and contravention and the losses incurred in meeting claims by Claimants.
Conclusions
215 The case against Ms Fry for misleading conduct in contravention of s 42 of the Fair Trading Act has been made out. Mr Fry was involved in Ms Fry's contravention, for the purposes of ss 61 and 68 of the Fair Trading Act, and he was also involved in contraventions by Mr Tambree and Mr Roseby. Mr Tambree and Mr Roseby engaged in conduct in breach of their duties of care to the TCF, which was also misleading conduct under s 42 of the Fair Trading Act.
216 I am satisfied that the wrongful conduct of each of these four defendants caused the TCF to suffer the losses in the sum of $143,050 particularised in the schedule to the Third Amended Statement of Claim. Consequently the TCF is entitled to judgment against each of those four defendants.
217 In my opinion, the TCF has not established any entitlement to recovery under s 40 (3) of the Travel Agents Act or by virtue of assignments by the Claimants of their rights of action.
218 There is no credible evidence to support the cross-claim (the Third Cross-claim) brought by Ms Fry against the TCF, alleging breach of duty and conspiracy by officers of the TCF and defamation against the TCF. That cross-claim should be dismissed.
219 It will be necessary to receive further submissions with respect to the claims for indemnity and contribution made by Mr Roseby and Mr Tambree against the other defendants (including one another). I shall give some directions for that purpose.
220 I shall direct the TCF to bring in short minutes to reflect these reasons for judgment, and I shall arrange a time to hear the submissions of the parties with respect to costs.
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