Willmott, R.G. & Anor v. Dora Banks Pty Ltd & Anor [1985] FCA 158

Federal Court of Australia|1985-04-29|Before: Sheppard J

The application be dismissed.
The applicants pay the first respondent's costs thereof.
There be judgment for the first respondent on its cross-claim

The applicants pay the first respondent's costs of the

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NEW SOUTH WALES DISTRICT REGISTRY ) No. G267 of 1983

) GENERAL DIVISTON )

RICHARD GEORGE WILLMOTT and ELIZABETH MARY WILLMOTT

Applicants AND: DORA BANKS PTY LIMITED and ANOR. Respondents CORAM: SHEPPARD J. DATE: 29 APRIL 1985 . REASONS FOR JUDGMENT

HIS HONOUR: In this action the applicants sue the first respondent ("the respondent") for damages under the Trade

Practices Act 1974, ss. 52, 53 and 59, and for damages in respect

of a number of common law causes of action. They also seek

relief pursuant to s. 87 of the Trade Practices Act. Originally

they sued the second respondent, James Thomas Hickey, but did not proceed against him because he is an undischarged bankrupt. It may be that they could have proceeded on the causes of action relied upon, or most of them, without the leave of the Court, but in the result the action against Mr. Hickey was abandoned. He

did not appear in the proceedings except as a witness on behalf

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In a cross-claim the respondent has sued the applicants for

Until some time in the month of March 1983 the respondent carried on a business in the Gold Coast area of Queensland. The business consisted of placing a number of video games in various locations in the area. There were 30 games in all. At the time of the negotiations which I am about to recount 11 of these were in what is known as Putt Putt which is a miniature golf links at Mermaid Beach. Others were in various places of amusement, fast

food shops, milk bars and the like. The respondent had no firm arrangement with any of the proprietors of the businesses where the machines were placed as to the length of time the machines might remain with the result that any proprietor could require the removal of a machine on short notice. The machines were operated by customers of the various businesses where the machines were. In order to play a game a customer inserted the requisite number of coins into a slot. At regular intervals Mr. Hickey or his son collected the proceeds and divided them equally

between the proprietor of the business and the respondent.

The business of the respondent began when a number of machines were purchased from a Mr. Finnemore about the end of 1981. Mr. Hickey was then at Moama in south-west New South

Wales and the business was operated by Mr. Hickey Junior. These

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arrangements continued until about the middle of 1982 when Mr. Hickey came to the Gold Coast to manage it. He said that he did so because his son had a full time job and running the business as well was too much for him. About this time, so the Hickeys said, they had a burglary in the flat which they occupied. Records of the business which had been kept up to that time were either destroyed or damaged. This was why, so the Hickeys said,

Thereafter Mr. Hickey senior kept a record in a diary. The record consists of a note of the takings from each machine each week. It commences on 21 August 1982 and concludes on 10 March 1983 when the business was sold. It is common ground that the record shows that takings over the period August 1982 to March 1983 averaged $750 per week. It is also conceded by counsel for the applicants that the takings for that period did in fact average $750 per week. Counsel made the concession because of

some independent evidence from the company operating Putt Putt

which confirmed the takings recorded in Mr. Hickey's record.

There are no other records available. No books of account were kept. No formal accounts were prepared and no income tax disclosing the receipt of the moneys appear to have been lodged. I should say in passing that because there appears to have been a flagrant breach of the respondent's obligations under the Income

Tax Assessment Act 1936, a copy of this judgment will be sent to

the Commissioner of Taxation and his attention drawn to this

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The other activity of the respondent is the carrying on of a property in the Moama district. Mr. Hickey said that his wife became ill whilst he was away in Surfers Paradise and that it was for that reason that he decided that either the property should be sold or that the business should be sold. According to his evidence both were put on the market. When the business was sold, the property was withdrawn from sale and he returned to Moama to be with his wife. That explanation for the sale of the

business is not accepted by counsel for the applicants.

The applicants became interested in the business when Mr. Willmott saw an advertisement in a newspaper and called on Raine & Horne, estate agents, in Tweed Heads. That occurred in February 1983. He there met a Mr. Cotterill, who managed the business of Raine & Horne, and Mr. Hickey. Mr. Willmott was accompanied by Mrs. Willmott. Amongst other things Mr. Willmott said that Mr. Hickey said to him, "You will get $750 a week the

« year round from the machines and ail that is required is a day and a half a week to get that". Mr. Hickey said that maintaining the machines was not difficult. He also said, "We operate a universal harness which means that you can just change boards to alter the games". The universal harness is apparently a mechanism which enables games to be changed from one machine to another or new games substituted for old or out of date games

without the need to engage in any complex operation.

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There was further discussion to which it is unnecessary to refer but which apparently took place in the presence of Mr.

After the conversation Mr. Willmott accompanied Mr. Hickey on a visit to a number of the sites where the machines were. During these visits Mr. Willmott said that he was again told that he would receive $750 a week. He said that he said to Mr. Hickey, "Well, the time factor is important. You said that you would only work a day to a day and a half per week to do your round, and the machines have all been upgraded, the latest games are in them, and you won't have to touch any of them for twelve months."

Mr. Hickey apparently assented to the fact that he had said words to this effect.

Mr. Willmott described the visit to various sites. Whilst they were at one site known as the Snack Shack Mr. Willmott said that he asked Mr. Hickey again about the takings and was told that he would definitely receive $750 per week "year round" average from the machines. He said that he was shown an exercise book which recorded the takings. He said that it was an ordinary lined Pencraft type exercise book written in pencil. Mr. Willmott said, "I noticed that it was sort of to do with the end of the year. It was November, December, January, and I sort of - I had a look at' that". He said that the book showed weekly takings written in pencil added up to show monthiyv returns. Mr.

Willmott said that Mr. Hickey did not want to give him the book.

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He just let him have a very quick look at it and told him that it

was the only record kept. He said, "We don't keep records in this business. This is ali I have". Mr. Willmott said that he remembered some amounts of $500 and $600 a week. One week was $900. That was the Christmas week.

After the inspection of the book they continued to visit other sites. At one Mr. Hickey reiterated how simple maintenance was. At another he told Mr. Willmott that the machines were all in good order and were valued at $2,000 each. Of the machines at Putt Putt he said that they were all upgraded and had the latest games available in them. He added "... it is the best site and that is what is how all the top machines are there." Subsequently they visited Putt Putt but Mr. Willmott was not sure whether that was on the same day or later in the week.

The following evening Mr. Hickey rang Mr. Willmott and said that he had worked out that each machine would take $27 per week "and that was what I would get from them, $27." Mr. Willmott

said that he remarked that that was just over $800 a week.

Later the two met again. They went to Putt Putt which Mr. Hickey said was the key site. He said all his best machines were

there. According to Mr. Willmott, Mr. Hickey said, "...it is the

key site and it never drops below $400 a week, that is gross,

that is $200 each ... I will not introduce you to the manager.

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He is a bit toey. I will make out that you are looking after the business for me while I am in Melbourne." Mr. Willmott asked Mr. Hickey why he needed to do this. Mr. Hickey said, "... he wants

everything his own way and we do not do it that way; we do what

Although Mr. Willmott had not mentioned it up to that point in his evidence, he said then that Mrs. Willmott was with him during the visit to Putt Putt. Whilst there Mr. Hickey again said that the machines "were all upgraded and... we have the latest games available in them and... it is the best site and

Mr. Willmott said that there were another four machines on the site. He was told that these belonged to Putt Putt itself. His evidence continued:-

that they were getting rid of them and I would get the sites."

"And did you say anything to that?" I said, "that is fine, when would it be?"

And he said, "Well, its soon; you will keep in touch with them and you will get the sites soon."

As it turned out, the manager was not present at the time of the visit. During the visit moneys were collected and divided

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During the return journey Mr. Hickey reiterated that the Willmotts would always get $200 a week from Putt Putt. He also- repeated what had been said about the likelihood of the Wililmotts obtaining the four additional sites. He again said that he could collect all the takings from the round in a day anda half. Mr. Willmott asked at what point machines were changed. He was told that when "the take" from a machine dropped below $20 it should be moved. Mr. Hickey said this was about every six weeks. Mr. Hickey repeated that all the machines were in excellent order and said that about $18,000 had been spent upgrading them. The

The two met again in Raine & Horne's office on 22 February when the contract was signed. Also present were Mrs. Willmott and Mr. Cotterill. The contract is dated 1 March 1983. It is expressed as being made between the respondent as vendor and the applicants as purchaser. By clause 1 it is provided that the vendor agrees to sell to the purchaser and the purchaser agrees to purchase from the vendor for the price of $75,000 all the right, title and interest of the vendor in and to a certain "Amusement Machine Run business carried on on premises and situated at various sites" as shown in a schedule together with the goodwill of the business and the vendor's fixtures, plant and equipment set forth in the schedule. By clause 3 a deposit of $2,000 was required. This was to be paid to Raine & Horne (who were described as "the agent"), "as Real Estate Agent for the

Vendor." By clause 4 the balance of the purchase money was to be

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paid as to $43,000 on 9 March 1983 and as to the remaining $30,000, on 10 June 1983. Clause 4 continued, "The vendor agrees that the purchasers shall have the benefit of the income from 9 March 1983 subject to the purchasers paying interest at the rate of 10 per cent per annum for the period from 9 March 1983 to 10 June 1983 on the sum of $30,000." Clause 6 provided for the transfer of possession on 9 March 1983. Clause 12 of the

"12. THE Purchaser acknowledges that no representations in connection with this sale have been made by the Vendor and that he, the Purchaser, has completed the said purchase after satisfactory personal inspection and investigation of the said premises and business and the said fixtures, fittings, plant, trade utensils, implements, stock and licences and has perused such records of financial transactions

relating to the said business as he has desired to inspect."

Clause 16 is an arbitration clause but clearly its provisions have been waived. Clause 17 provides that the vendor and the

purchaser agree that the price of $75,000 is to be apportioned as

to "Plant," $60,000 and as to "Goodwill," $15,000. Clause 24 provides that the vendor warrants and assures the purchaser that all plant and equipment will at the date of possession be in good working order and condition. Clause 26 says, amongst other things, that the vendor "recognises and admits the agency of Raine & Horne, Tweed Heads, as his agent responsible for the

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It is unnecessary to refer to any other part of the agreement except to note that appended to the agreement is a_ schedule described as an inventory of machines and sites. Thirty machines

are referred to including the 11 at Putt Putt. The other

The balance of Mr. Willmott's evidence in chief dealt with the completion of the contract on 1i March 1983 and with the applicants' experience of the business after they took over. An average of $750 was never achieved. Records which were produced showed that in the Easter week $772 were taken, but in no other week did the takings amount to $750 or more. In the early months the range was more in the vicinity of $400 or $500. Later the takings became even less. Records kept by Mrs. Willmott showed that by the end of the year they were often little more than

$200. In the early months of 1984 they were under that figure.

On 23 May 1983 (not 23 May 1982 as appears in the handwritten copy of the letter) the applicants wrote to Mr. Hickey a letter

which was prepared by Mrs. Willmott. The letter was as follows:-

Since taking over the video machine business in March we have been increasingly concerned by the low level of takings, which consistently fall well below the figures we were led to expect.

As it was quite clearly stated to us on a number of occasions by yourself & Raine & Horne, that the business takings averaged $750.00 per week, we have been most disappointed to find that the average is in fact $493.00, so far below the

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quoted figure that it is a matter of economic necessity that we now reconsider our position.

Consequently we feel it is essential to enter further negotiations with you in order to determine a more realistic purchase price commensurate with the actual returns of the business. To this end will you please give this

matter your urgent attention & contact us as soon as possible."

Mr. Hickey did not answer the letter in writing but some of

his records were produced in answer to the applicants' complaint.

A reason for the fall off in takings after June 1983 is provided by the decision of Putt Putt to remove all the

applicants' machines and replace them with its own machines.

Mr. Willmott said that he did not meet the Putt Putt manager, a Mr. Norton, until 2 or 3 weeks after the business had been taken over. He asked Mr. Norton about the four sites which were occupied by Putt Putt machines. Mr. Norton said that the company ran an operation in Sydney at Pier One where they had 100 games. He mentioned that some were to be-sent from Sydney to the Gold Coast and told Mr. Willmott that some of his machines would have to be moved. Mr. Willmott at that time did not know when that would happen. There was a further conversation about the matter

in June. According to Mr. Willmott Mr. Norton said:-

"ETThat he would notify me if the machines were to be brought up and I would have to move mine

and relocate them and all the operators had been told that Finnemore was the man that started the

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basis. He said that he told Finnemore that all their machines would be replaced in time and he told Jim Hickey who bought the machines from

Finnemore that his machines, in time, would be replaced with their own machines."

Mr. Willmott said he removed the first 3 machines from the Putt Putt site in June under Mr. Norton's directions. The

balance had to be removed in September. A week's notice was

Mr. Willmott was cross-examined at length. It was revealed that he had not had any previous experience of video machines or games. It appeared to me that he had had little experience of business affairs. Mr. Hickey showed him what was necessary in order to maintain the machines but how much of this he really took in is open to question. The probabilities are that he had

to learn the hard way, that is, by personal experience.

Mr. Willmott was cross-examined extensively concerning his recollection of the exercise book which he had seen during the negotiations. It was suggested to him that the book he had seen was the diary which is in evidence. Mr. Willmott firmly denied this. He said that he had not seen the diary during the course

of negotiations or as a result of the letter which was sent on 23

The cross-examination elicited some further evidence about

the discussions concerning takings prior to the contract being

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entered into. Amongst other things Mr. Willmott said that Mr. Hickey said, "Well, ... lets call it $750 a week because that is a figure we can guarantee." Later he agreed that Mr. Hickey had toid him that the takings had averaged $750 a week for the 24 or 26 weeks before February 1983. It was strongly suggested to him that that was all that was said, but Mr. Willmott remained firm that in addition Mr. Hickey had told him that he would receive

A number of questions were asked Mr. Willmott as to what enquiries he had made concerning the security of tenure of the sites. Some of these questions were asked by me. The questions arose after Mr. Willmott had said that each machine was worth $2,000 "and the site $500. That is how he broke it up." Mr.

Willmott was asked what he meant by the site. He said:-

"Well, the site, the siting of the machine, the site; the fact that you had that site was worth $500. He also told me that the registration ensured that that site was yours, which is not exactly correct."

Counsel for the respondent remarked that Mr. Willmott had not

given evidence about this before, a matter on which counsel was

Clearly correct. Mr. Willmott's evidence continued:-

"What do you mean, the registration? --- Well, each machine is registered in Queensland with the Justice Department and I understood that

registration to be something that guaranteed me that site; but that was not the case really, it

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given at that time about conversations with Mr. Hickey. She was still in chief at the end of the day and the matter adjourned. When she returned to the witness box on the next day the matter was in the list, her attention was directed to what Mr. Hickey had said about the income of the business. Her evidence was that there was a conversation in the car when the sites were being visited. She said that Mr. Cotterill, Mr. Hickey and Mr. Willmott were present. Her evidence continued, "I said to Mr. Hickey, 'Will this business take an average of $750 each week all year?' and Mr. Hickey said, 'Yes' and I said, 'All year? I wish

to emphasise that point.' And he said, 'Yes, all year.'

Mrs. Willmott's attention was again directed to the matter of the exercise book. She said it was a lined exercise book, rather battered inside, with written columns in pencil and in biro. There was one column for each week. Each column was totalled. The four columns for each month were totalled into monthly figures. She repeated that she did not actually see the cover but only the opened book and also that it was the ordinary size of a school child's exercise book. She said the records were for a period of 4 months and that they stopped in February 1983. She was again asked her recollections of the figures and repeated what she had earlier said, again mentioning that Mr. Hickey said that the takings never fell below $500.

Mrs. Willmott gave no evidence about any conversation with

Mr. Hickey in which he said that it was likely that four further

' machines could be placed at Putt Putt, nor about anything said by

She, like her husband, was extensively cross-examined. She

had kept the records and she was asked about these. She was asked about her own background. She is a graduate in Arts from the University of Melbourne and was for some years a_ school

teacher and a school librarian. She is far more intelligent than

She, too, was asked about the security of tenure which the applicants would have over the sites after they took over the

business. Part of her cross-examination on this matter was as

"Mrs. Willmott, you are not an unintelligent woman, are you; you would agree with me, would you not, with all due modesty? --- Yes.

And I want to put to you that the question of how long you could keep these machines on these sites would have been a matter of great importance in considering the purchase of this business. Now would you agree with that? --- Yes, I assumed I could keep the machines on these sites. It was important and that is what I assumed.

Why did you make that assumption? --- Because we were told they were registered sites and registered machines.

But you know that whatever you were told about registration was cleared up later on before you signed the contract, do not you? --- It was cleared up later on?

I want to suggest to you that there was a discussion either with Mr. Hickey or Mr. Cotterill in which it was made perfectly clear to

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18, you and your husband that registration, as you put it, had nothing to do with making these sites permanent for you? --- That was not made clear before we signed, definitely not.

And anybody who said that it was would be in error, would they? --- Yes, it was not made clear to me."

It is to be observed that Mrs. Willmott is in conflict with her husband because she maintains that she remembered only after the contract was signed that the machines were secure because of their registration. This matter arose in her evidence only in

cross-examination as was also the case with her husband's

The only other matter arising out of Mrs. Willmott's cross-examination that I should mention is that she, as did her husband, denied ever having seen the diary prior to the signing of the contract. She stated categorically that the exercise book

she had seen during the negotiations was not the diary.

Other witnesses called in the applicants' case were Mr. Norton and Mr. Tester. I shall refer to their evidence in the course of dealing with the submissions made by counsel in

Mr. Hickey gave evidence of the negotiations leading up to the making of the contract. He deposed to the fact that the

respondent had acquired the business towards the end of 1981 from

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Mr. Finnemore. There were then 40 machines. He paid $90,000. He referred to the way records were kept up to August 1982 and then referred to the diary which I mentioned at the outset of the

judgment. The diary was produced and identified. He described

how he collected the moneys and how he kept the record.

He said the decision to sell the business was made in December 1982. He retained H.P.C. Real Estate to act. A Mr. Santilla of H.P.C. Real Estate apparently decided to act in conjunction with Raine & Horne. Some time in February 1983 he first met the Willmotts in Raine & Horne's office at Tweed Heads. He said that in addition to the Willmotts, Mr. Cotterill was present. He could not remember whether Mr. Santilla was also there. He said that there was a general discussion about the business for 20 minutes. He could not recall the detail of the conversation. He did not recall an inspection of the machines on that day but said that a time to do that was fixed. He said that the inspection took place a day or two later. Present were the Willmotts and Mr. Cotterill. All drove in Mr. Cotteriil's car. He recalled that 10 sites were visited and he described what the procedure for collection was. He also showed how the games were rlayed. At one point he said that he told the Willmotts that the nature of the business was seasonal. School holidays, Christmas and Easter were the best periods. He said that one of the down periods was from the end of January to Easter. Another was between the end of the May holidays and the beginning of the

September holidays. He emphasised the importance of regular

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maintenance and explained about the siting of the machines and the switching of the machines from site to site. Mr. Hickey was asked whether he had said anything about the takings of the . business. He is recorded in the transcript as having said, "I told them the average takings for the last 2 weeks had been about $750 - that was over the whole 30 machines - and they said that sounded pretty good." Counsel for the respondent suggested that Mr. Hickey did not say, "2 weeks" but either 24 weeks or 26 weeks

which is the period for which there is a record. Neither counsel for the applicants nor myself had any recollection one way or the other of this and my own note of the evidence did not help resolve the question. Nevertheless I think counsel for the respondent is right and that the evidence ought to be read as if the period were of the order of 6 months. Counsel for the

Mr. Hickey said that he told the Willmotts that it was a low

period in which the inspection of the machines was being carried

After the inspection they returned to Raine & Horne's office. Mr. and Mrs. Willmott accompanied Mr. Hickey to his van and he said that he showed them the book which is in evidence. He said, "I showed them the diary, opened it up and flicked through the pages and came up to an entry I made there of $807 average for I forget how many weeks." He indicated the page on which this was

done, it being the page containing the entries for 17th and 18th

February. He said that he showed that page to the Willmotts but not any other particular page. They themselves looked through

the diary, but he could not remember how many pages they looked at.

A week or so later he met them again and took them ona collection round. The inspection began at Putt Putt. The total collections were under $500. Mr. Hickey said that it was the

As they went round he described how general maintenance was

done and he introduced them to site owners. He said there was a

Mr. Hickey denied that he told the Willmotts that the business would average $750 per week throughout the year. He was firm in saying that he had told them no more than what' the takings had been while the respondent had the business. He said

that he did not go into what was going to happen in the future. He denied saying that the turnover would never be less than $500

He was asked what was said about maintenance. He said, "I used to do it in two big half days and do the general

Maintenance; the more that you did the general maintenance the

less time maintenance took if anything happened. We went around

and I showed them how to clean coin chutes and check your wiring

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on your boards and things like that." He said that he did not say anything about the length-of time the Willmotts could expect to spend on running the business overall on a weekly basis. He said that it used to vary and "I never knew." He described the detail of the maintenance which needed to be done. He also said that major problems would be attended to by a firm, Amusement

Mr. Hickey deposed to a conversation with Mr. Norton, the manager of Putt Putt, in December 1982. Mr. Norton told him that he had been rung by a superior in Sydney who told him that he was sending four machines of their own so that Mr. Hickey would have to remove four of his. This occurred shortly afterwards. He said that when the business was originally advertised in December the advertisment said that there were 15 machines on the Putt Putt site. In fact the number was reduced to ll. The four

machines were put in storage while he looked for other sites.

He said that he did not have any conversation with anyone from Putt Putt about the need to remove any other machines. He

denied telling the Willmotts that he had approval to locate a further four machines on the Putt Putt site.

Mr. Hickey said that the price of $75,000 was discussed but that he did not tell the Willmotts that they were getting a bargain, or that the price was a good one or that the machines

were worth what he was asking. He was asked whether he had ever

told the Willmotts that the price he asked was equivalent to the value of the business. He said that he told the agents that, but was not certain whether he told the Willmotts directly. But he

He was asked whether his price was reduced once he realised that the number of machines at Putt Putt would be reduced by four. He said he put the price on 30 machines. He said the first advertisement said that there were 40 machines, some on site and some not. The price was then $95,000. He then decided that it was better to sell only the machines that were on sites

and the price of $75,000 was calculated accordingly.

He was asked whether he had said anything about any arrangements with site owners. He said that he told the Willmotts, "... we were there as guests of the owners and if you

looked after the machines and if you looked after the site owners, you usually retained the site but there was no guarantee

He agreed that he had told the Willmotts that most of the games were up to date games. He also told them that there were a lot of new machines coming. He said that the respondent had kept upgrading the machines. He said "All the machines were ina pretty fair condition, yes, good condition." They had up to date games in them. He said about half the machines had universal

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Mr. Hickey said that the machines were the same as those he had bought from Mr. Finnemore some eighteen months before but that he had bought new games which varied in price from $450 to $800. He said that new machines were then selling for between $2,500 and $2,800 or $2,900. It depended on the game. He said that he had noticed that over the period that he had the business the takings had dropped from $30 a machine to about $26 per Machine average per week. He said that there was a dramatic drop

in takings in this sort of business after March 1983.

Mr. Hickey was cross-examined. All the representations relied upon by the applicants were put to him. In some respects his memory was vague. He found it difficult to remember precisely what had been said but he remained firm that the only statement he had made in relation to takings was that the takings for the 6 months prior to the sale had averaged $750 per week. He denied making any representation as to what takings in the future would be. He was pressed on whether he had been told by Mr. Norton, prior to the contract being entered into, that eventually all machines at Putt Putt would be replaced by Putt Putt's own machines. He remained firm that he had no knowledge of this. He also denied leading the applicants to think that they had some hope or prospect of obtaining the four sites upon

He was cross-examined extensively as to records. He

maintained throughout that the only record, apart from dockets

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that had been kept by his son and, to an extent, by himself, was the diary. He denied that there was an exercise book of the kind that the applicants said they had been shown. He said that the

He denied that he had not introduced the Willmotts to Mr. Norton and said that it was his recollection that they were introduced to him on the first visit. At one stage of his cross-examination he remarked that the applicants had every

opportunity to contact Mr. Norton if they had wished to do so.

He was asked about what he told the applicants concerning the registration of the machines. He denied ever telling them that the registration of the machines gave some form of security over the sites. He said that he had explained precisely what was involved in registration of the machines by the Queensland Justice Department and also in the licensing of them, as I

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (431 paragraphs)