Appeal Special leave dismissed with costs by the High Court, 12 March 2010 s274/2009

Outcome:

New South Wales

Court of Appeal

CITATION: Culligan & Anor v Aco Pty Ltd [2009] NSWCA

290
This decision has been amended. Please see
the end of the judgment for a list of the
amendments.

HEARING DATE(S): 1 September 2009

JUDGMENT DATE: 15 September 2009

JUDGMENT OF: Basten JA at 1; Young JA at 1; Sackville AJA at 1

DECISION: 1) Appeal allowed.

2) Set aside the order made by Johnstone DCJ on
24 February 2009.
3) In lieu thereof, enter judgment for the
appellants (the first and second defendants).
4) Order the respondent to pay the the
appellants’ costs of the trial and of the appeal.
5) The respondent, if otherwise qualified, should
have a certificate under the Suitors Fund Act
1951 (NSW).
CATCHWORDS: TRADE PRACTICES - purchase of a business-
whether misleading or deceptive representations
were made by vendor- whether the
respresentations caused the purchaser loss or
damage- significance of contractual disclaimer on
reliance

LEGISLATION CITED: Trade Practices Act 1974 (Cth), ss 52(1), 82(1)

Fair Trading Act 1987 (NSW), ss 42(1), 68(1)

CATEGORY: Principal judgment

CASES CITED: Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA
60; 218 CLR 592
Campbell v Backoffice Investments Pty Ltd [2009]
HCA 25; 257 ALR 610
Hornsby Building Information Centre Pty Ltd v
Sydney Building Information Centre Ltd [1978]
HCA 11; 140 CLR 216
Henville v Walker [2000] HCA 52; 206 CLR 459
Keen Mar Corporation Pty Ltd v Labrador Park
Shopping Centre Pty Ltd [1989] FCA 46; (1989)
ATPR (Digest) 46-048
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty
Ltd [1982] HCA 44; 149 CLR 191
Poulet Frais Pty Ltd v The Silver Fox Co Pty Ltd
[2005] FCAFC 131; 220 ALR 211

PARTIES: Andrea Culligan (First Appellant)

Unimail Pty Ltd (Second Appellant)
Aco Pty Ltd (Respondent)

FILE NUMBER(S): CA 40121/09

COUNSEL: Bannon SC/ Spinak (Appellants)
Manousaridis/ Douglas-Baker (Respondent)

SOLICITORS: Bundock/Palmer Lawyers (Appellants)

Scarfone & Co Solicitors (Respondent)

LOWER COURT District Court

JURISDICTION:

LOWER COURT FILE 1982/07

NUMBER(S):

LOWER COURT JUDICIAL Johnstone DCJ

OFFICER:

LOWER COURT DATE OF 29 January 2009

DECISION:

LOWER COURT MEDIUM Aco Pty Limited v Culligan [2009] NSWDC

NEUTRAL CITATION:

- 30 -
IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 40121 of 2009

BASTEN JA
 YOUNG JA
SACKVILLE AJA

15 September 2009

CULLIGAN & ANOR v ACO PTY LTD

Judgment

THE COURT

1 This is an appeal against the decision of a Judge of the District Court

entering judgment for the respondent (“ Aco ”) against the appellant in the
sum of $160,000 plus interest. The primary Judge found that the first
appellant (“Ms Culligan”), a director of the second appellant
(“ Unimail ”), engaged in misleading and deceptive conduct in contravention
of s 42(1) of the Fair Trading Act 1987 (NSW) (“FT Act”). His Honour also
found that by reason of the false representations made by Ms Culligan to
representatives of Aco, Unimail engaged in misleading and deceptive
conduct in contravention of s 52(1) of the Trade Practices Act 1974 (Cth)
(“ TP Act”).
2 The primary Judge, his Honour Judge Johnstone, awarded damages against
Ms Culligan under s 68(1) of the FT Act and against Aco under s 82(1) of the
TP Act. The award represented the full purchase price paid by Aco to
Unimail to acquire a business which published and distributed a trade
magazine known as “Impulse” (“the Impulse business”). His Honour found
that Aco had been induced to purchase the Impulse business under an
Agreement for Sale of 22 December 2005 by reason of the appellants’
misleading and deceptive conduct. That conduct caused Aco to lose the
entire purchase price it paid for the Impulse business since, on his Honour’s
findings, the business was in truth worthless at the time Aco acquired it.

3 On appeal, Aco, although not conceding that the appellants had made out
their grounds of appeal, did not vigorously attempt to support the primary
Judge’s reasoning. Mr Manousaridis, who appeared with Ms Douglas-Baker
for Aco, sought to uphold the orders made by his Honour principally by
reference to a notice of contention. The notice of contention challenged a
number of findings adverse to Aco. Mr Manousaridis submitted that this
Court should substitute its own findings for the impugned findings made by
the primary Judge.

LEGISLATION
4 Section 42(1) of the FT Act provides as follows:
“A person shall not, in trade or commerce, engage in conduct
that is misleading or deceptive or is likely to mislead or
deceive.”

5 Section 68(1) of the FT Act provides, among other things, that a person
who suffers loss or damage by conduct of another person that is a
contravention of Part 5 (including s 42) may recover the amount of the loss
or damage by action against the other person or against any person
involved in the contravention.

6 Section 42(1) of the FT Act corresponds to s 52(1) of TP Act, although the

latter is expressed to apply to corporations. Section 68(1) of the FT Act
corresponds to s 82(1) of the TP Act.

ACO’S PLEADED CASE

7 Aco pleaded in its Statement of Claim that in September or October 2005,
Unimail engaged Claridges Business Sales, a business broker, to find a
buyer for the Impulse business (par 5). Mr Smith, an employee of Claridges,
arranged a meeting between Mr Wallace and Mr D’Angelo, both directors of
Aco, and Ms Culligan on 28 October 2005 (par 7).

8 At the October meeting (“October Meeting”), Ms Culligan made the

following four representations (par 8):
“(a) One person can run the business on 20 hours a week.

(b) [Ms Culligan] was putting in twenty hours a week in the

running of the business.

(c) In the alternative to (b), [Ms Culligan] was putting in two

days a week in the running of the business.

(d) No person other than [Ms Culligan] had been running the
business.”
9 At a second meeting between Messrs Wallace and D’Angelo and Ms
Culligan, held on 18 November 2005 (“November Meeting”), Ms Culligan is
said to have made the following further representations (par 9):
“(a) At least during the period August 2004 to July 2005
referred to in a document ( costs break-up ) produced from
computer records maintained by [Unimail], and provided to
Mr Wallace by Mr Smith in about late October 2005, [Ms
Culligan] had been doing all the work in relation to the
business, save that Jan Peeters had been engaged under
contract to do the bookkeeping and invoicing.

(b) Save for the bookkeeping and invoicing undertaken by

Jan Peeters, no person other than [Ms Culligan] had
undertaken any work in relation to the business during the
period August 2004 to July 2005.

(c) Save for the bookkeeping and invoicing undertaken by Jan

Peeters, [Ms Culligan] was doing all the work in relation to
the business which took about 20 hours per week.
 (d) Save for the bookkeeping and invoicing, during the period
August 2004 to July 2005, [Ms Culligan] had been doing all
the work in relation to the business and had been spending
about twenty hours a week doing so.”

10 Each representation made by Ms Culligan was said to be false in that

(par 11):
“(a) Contrary to the representations pleaded in paragraph
8(d), 9(a), 9(b) and 9(d), [Ms Culligan] and Jan Peeters were
not the only persons who had been undertaking all the work
in relation to the business.
Particulars
During the period from at least August 2004 to about
July 2005, a full time employee of [Unimail] known as
Lisa Woods, who had extensive experience and
connections in the industry, undertook all, or in the
alternative, most of the work in relation to the
business, such work consisting in regularly contacting
persons who wished or potentially wished to place
advertisements in Impulse and arrange contracts
between such persons and [Unimail] for the
placement of advertisements with “ Impulse ”.
(b) Contrary to the representation pleaded in paragraph 8(a),
the business could not be run part time by one person
spending approximately on twenty hours a week or two days
a week.
Particulars
[Aco] repeat[s] the particulars to paragraph (a) and further
[says] that Ms Wood devoted all, or substantially all of her
time as employee of [Unimail], in running the business. [Aco]
further [says] that the business could only have been run on
a full time basis by a person such as Ms Wood who had
extensive experience and connections in the industry, but at
a cost which, on the basis of the past financial trading
performance of the business as disclosed in the costs break-
up, would have rendered the business either unprofitable or
at best marginally profitable.
(c) Contrary to the representations pleaded in paragraph 8(b)
or, in the alternative, paragraph 8(c) and 9(c) … [Ms Culligan]
was not undertaking work of twenty hours a week, or two
days a week in relation to the business.”
11 Aco alleged that Ms Culligan, in making the pleaded representations,
engaged in misleading or deceptive conduct in contravention of s 42(1) of
the FT Act (par 12). Ms Culligan’s conduct was engaged in on behalf of
Unimail and it therefore had engaged in misleading and deceptive conduct
in contravention of s 52(1) of the TP Act (pars 14, 15).
12 Aco says that in reliance on the representations pleaded in pars 8 and 9,
Mr D’Angelo and Mr Wallace caused Aco to enter into a contract to buy the
assets of the Impulse business for the price of $160,000, to pay the
purchase price and to acquire the business (par 16).

13 As a consequence of the matters alleged in par 16, [Aco] is said to have

suffered loss and damage by reason of the conduct pleaded in pars 12 and
15 (par 17). The particulars of the loss and damage included the following:
“[Aco] paid $160,000 for a business which was of no value, or
in the alternative, was of marginal value. The business could
not be operated on a part time basis.”

THE PRIMARY JUDGMENT

Factual Findings
14 The following account summarises the factual findings made by his
Honour concerning events leading up to and including the October and
November Meetings.
15 Unimail purchased the Impulse business for $200,000 in April 2001. At
that time Impulse was a well-established trade publication distributed to
food retailers. Ms Culligan was recruited by Unimail in 2001 to assist in
producing Impulse and other magazines produced by Unimail.
16 In October 2005, Unimail decided to sell the Impulse business and
retained Claridges to act as broker for the sale. Ms Culligan provided a
number of documents to Mr Smith of Claridges relating to the business.
17 Mr Wallace, who happened to be working for Claridges at the time as a
business sales agent, obtained copies from Mr Smith of the documents
provided by Ms Culligan. Mr Smith told Mr Wallace that Ms Culligan ran the
business part time, doing twenty hours per week, with other work being
undertaken by subcontractors. Mr Smith also told Mr Wallace that there was
no wages recorded in a document setting out a costs break-up because Ms
Culligan was the only one working on the Impulse magazine.
18 After Mr Wallace expressed interest in purchasing the business, the
meeting of October Meeting was arranged. The primary Judge observed that
the substance of the conversation at the meeting, as recounted by Messrs
D’Angelo and Wallace, was not disputed by Ms Culligan. His Honour found
(at [30]) that Ms Culligan told the meeting that:
“she ran the Impulse business herself along with the other
publications … that she did so by putting in 2 days at the
most into Impulse each week and the rest of the time was
put into the other publications. She also told then that one
person could run the Impulse publication on twenty hours per
week or less and that she ran the business herself while
doing the other three publications, such that there were no
other expenses or salary costs, apart from those for … the
bookkeeper.”
19 On 2 November 2005, Mr D’Angelo offered $140,000 to acquire the
business, but this offer was rejected. However, the following day Mr
D’Angelo and Ms Culligan agreed on a price of $160,000.
20 The November Meeting took place at Unimail’s premises, while Messrs
D’Angelo and Wallace were undertaking due diligence on the business. The
primary Judge recounted the evidence as to what was said at that meeting,
but he found that by 2 November 2005 Messrs D’Angelo and Wallace had
already decided to buy the business, subject to due diligence. His Honour
concluded (at [29]) as follows:
“Nothing occurred during the due diligence that caused them
to alter that decision. I am satisfied, therefore, that nothing
occurred after 2 November 2005, including anything said by
Ms Culligan on [18] November 2005, was the subject of any
reliance by [Aco] in the purchase of the business, and the
conversations on that date could not, therefore, amount to
representations.”

21 The primary Judge, in these circumstances, found (at [52]) that, although
the representations alleged in par 9 of the Statement of Claim were not
proved, those made in par 8 were substantially proved, as follows:
“(a) Ms Culligan was putting in 20 hours a week in the
running of the business. Any person could run the business
on 20 hours a week.
(b) Ms Culligan had been running the business herself by
putting in 2 days at the most into it each week, and there
were no expenses other than those disclosed.”

Misleading and Deceptive Conduct?

22 The primary Judge noted (at [35]) that two matters were central to the
determination of whether Ms Culligan’s conduct had been misleading or
deceptive:
“Whether any person could run the business on 20 hours, or
2 days a week, and secondly, whether Ms Culligan had been
running the business herself, without any other expenses.”

23 His Honour accepted (at [36]) Ms Culligan’s evidence that once the
Impulse business had been established within Unimail, she had run the
business on 20 hours per week. However, she did not tell Messrs D’Angelo
and Wallace that:
“she had not run the business herself from August 2004 to
June 2005 and that during this period it was run by Ms Lisa
Wood, a person specially recruited for that purpose. Ms
Wood was paid a significant salary, in addition to which she
received commissions for the sale of advertising space in the
Impulse magazine.”
24 The primary Judge then addressed Ms Wood’s evidence as to the time
she spent on the Impulse business. His Honour noted that it was
uncontested that Ms Wood had worked on all of the Unimail magazine
businesses. What was in question was how much time she spent working on
the Impulse magazine. Mr Wallace had claimed that Ms Wood told him in a
telephone conversation in 2006 that she had spent 90 per cent of her time
on the Impulse magazine. In her evidence, however, Ms Wood maintained
that she spent only 50 per cent of her time on the magazine and said that
she could not recall the conversation recounted by Mr Wallace.

25 The primary Judge characterised (at [40]) Ms Wood’s evidence as

“unsatisfactory”, but did not explain why he had reached that conclusion. In
the result, he said (at [42]) that he could not be satisfied as to the
percentage of her time that Ms Wood spent on the Impulse business. He
continued (at [42]-[44]):
“It may not have been 90%, but what does seem clear is that
it was the majority of her time. I am satisfied, therefore, that
the time she spent was on average in excess of 2 days a
week and substantially more than 20 hours a week …
There could be no doubt that Ms Wood’s primary focus was
the Impulse business, and that was Ms Culligan’s intention.
For these reasons, I find that Ms Wood did not run the
business on 20 hours a week, and that Ms Culligan knew she
didn’t.”

26 Later in the judgment, when dealing with the value of the Impulse
business, his Honour said (at [79]) that it would be necessary to allocate a
wages component representing the hours required by a competent operator
which would “equate to those spent by Ms Wood, in the order of 67% to
75% of a 40-hour week”.
27 The primary Judge found (at [45]-[46]) that:
“The representation that anyone could run the Impulse
business spending only 20 hours a week was, therefore,
false. The totality of the evidence establishes that in reality,
only a person with considerable expertise and experience
could run the business on 20 hours a week, such as Ms
Culligan …
The failure of Ms Culligan to disclose the involvement of Ms
Wood in running the business for the period from August
2004 to June 2005 was conduct likely to mislead or deceive
and which did mislead and deceive Mr Wallace and Mr
D’Angelo … by telling them that she had run the business on
20 hours a week, but concealing the fact that Ms Wood had
run the business for a significant period and that Ms Wood
had been unable to run the business on 20 hours a week, Ms
Culligan conveyed a meaning inconsistent with the truth …
Had Mr Wallace and Mr D’Angelo known the full facts they
would have been alerted to the reality of the true time
demands the business required to operate efficiently and
profitably. This is relevant to their decision to cause ACO to
 purchase the business, and at what price.”
28 For these reasons, the primary Judge found (at [47]) that the
representations made in respect of the business to Mr Wallace and Mr
D’Angelo were false, in that:
“(a) Although Ms Culligan was putting in twenty hours a week
in the running of the business it was not true that any person
could run the business on 20 hours a week.

(b) Ms Culligan had not been running the business herself

such that there were no expenses other than those
disclosed.”

Accordingly, the allegations of falsity in pars 11(a) and (b) of the

Statement of Claim were made out, but not the allegations in par
11(c).

Reliance

29 The primary Judge found (at [52]) that both Mr Wallace and Mr D’Angelo
believed and relied on what Ms Culligan told them about the business at the
October Meeting. These matters were critical to their decision to cause Aco
to purchase the business. His Honour was satisfied that Messrs D’Angelo
and Wallace both relied upon the false representations when they caused
Aco to enter into the Agreement for Sale on 22 December 2005. In his view,
Ms Culligan’s false representations materially contributed to their decision
to cause ACO to purchase the business from Unimail. Moreover, the loss and
damaged proved by Aco as a result of purchasing the business was causally
connected to the misleading and deceptive conduct of Unimail.

Exclusion Clause
30 The primary Judge next addressed the significance of cl 13.4 in the
Agreement for Sale dated 22 October 2005. Clause 13.4 provided as follows:
“The Purchaser agrees that it is purchasing the Assets based
on its own enquiries and does not rely on any representations
whatsoever made by the Vendor [subject to irrelevant
exceptions].”
31 The appellants had submitted that because Mr Wallace understood the
effect of cl 13.4 and had agreed to it, he could not have relied on any
representation made by Ms Culligan. His Honour pointed out (at [58]) that
the appellants had conceded that the contract could not, of itself, oust the
operation of the legislation. In his view (at [61]), the appellants could not
rely on cl 13.4 to escape their statutory liability. In any event, Ms Culligan,
who was not a party to the contract, could not rely upon its terms to exclude
her liability.

Aco’s Loss
32 The primary Judge “instantly” observed (at [66]) that:
“The Impulse business could be operated on a part time
basis. Ms Culligan did. Even Ms Wood did, albeit with a time
commitment of something in excess of 50%. Only Mr Wallace
could not operate the business successfully on a part time
basis, but more probably than not, he could not have run the
business successfully in respect of the time commitment. It
was also clear to me that as a result of his complete lack of
success in selling advertising space for the magazine, he
simply gave up and walked away from the business.”

His Honour said (at [67]) that he had no doubt that the business
ultimately failed because of Mr Wallace’s lack of skill. However, the
failure of the business was not “ probative of the measure of loss
suffered by Aco ”.
33 The proper measure of damage was the difference between the price
paid for an asset and the “real” or “fair” value of the asset assessed in the
light of later events. Aco’s expert opined that the business was valueless,
while the appellant’s expert valued it in the range of $150,000 to $180,000
at the time of the sale. The primary Judge rejected (at [71]-[72]) the
approach taken by the appellant’s expert, on the grounds, inter alia, that
the expert had failed to take into account operating costs.
34 His Honour then turned to the “circulation issue”, noting (at [75]) that it
had not been disputed that from 2002 Unimail had represented to
advertisers that Impulse had a circulation of 26,000 per issue, when in fact
it had published no more than 12,000 copies at any time. Knowledge of the
true circulation of the magazine among customers would have drastically
reduced the advertising revenue derived by the magazine. His Honour
accepted that Messrs D’Angelo and Wallace were aware of the true position
concerning circulation before they purchased the Impulse business. That,
however, missed the point. The “circulation factor” went to the true value of
the business that ACO had been induced to purchase.

35 His Honour considered (at [79]) assessment of the fair value of the
business had to take account of two considerations:
“The first was the likely time commitment required by
someone other than an experienced operator such as Ms
Culligan to run the business. A fair price to be paid would
have involved the allocation of a wages component in excess
of 20 hours a week. More probably than not, the hours
required by a competent operator would equate to those
spent by Ms Wood, in the order of 67% to 75% of a 40-hour
week. The second was the true future revenue likely to be
derived for advertising space on the basis of a fully and
properly informed market as to the actual circulation of the
magazine. These two factors, taken together, were clearly
sufficient to eliminate any of the illusory profit for which the
 [appellants] contend. The reality is that Aco would not have
purchased the business at any price. As a result, it lost the
totality of the purchase price.”

Hence his Honour assessed damages under s 68(1) of the FJ Act and
s 82(1) of the TP Act at $160,000.

ADDITIONAL BACKGROUND

36 Before addressing the substantive issues debated on the appeal, it is

convenient to provide some further background by reference to matters
that were not in contest at the trial.
37 Ms Wood commenced contract employment with Unimail on 6 August
2004, initially on a part time basis. From 13 September 2004 she occupied
the position of Business Development Manager. The salary in that position
was $500 per week (plus superannuation) and she was entitled, in addition,
to 18% commission on all sales booked.

38 Ms Culligan set targets for Ms Wood to achieve in promoting the Impulse

business, but no targets were set in relation to the other Unimail magazines
on which Ms Wood worked. Ms Wood did not in fact succeed in selling
advertising space in any magazine other than Impulse and thus she did not
earn commission from any other source.

39 From shortly after the commencement of Ms Wood’s employment with

Unimail until June 2005, Ms Culligan spent no time on the Impulse business.
However, in June 2005, Ms Culligan became dissatisfied with Ms Wood’s
performance. On 6 September 2005, Ms Culligan gave Ms Wood an official
warning in writing stating that Ms Wood had not attained the targets or
budgets that had been set for Impulse and that she had not done so since
November 2004. The warning identified a number of areas, not limited to
activities connected with Impulse, that were not “being upheld”. On 28
September 2005, Ms Wood gave two weeks notice terminating her contract
of employment with Unimail.
40 From June 2005 until Ms Wood’s departure on 12 October 2005, Ms
Culligan devoted about five to ten hours per week on work connected with
Impulse. After Ms Wood’s departure, as the primary Judge found, Ms
Culligan resumed her previous practice of devoting twenty hours per week
to Impulse. Thus at the time the first meeting took place with Messrs
D’Angelo and Wallace on 28 October 2005, Ms Culligan was responsible for
the Impulse business and was devoting approximately twenty hours per
week to it.

41 Ms Wood was called by Aco to give evidence at the trial. Over objection,
Aco’s counsel was permitted to ask her leading questions. She was also
cross-examined by counsel for the appellants. In her evidence, Ms Wood
accepted that her performance towards the end of her employment may
have been affected by certain personal problems she had been
experiencing at the time.

THE APPEAL

42 The appellants submitted that the primary Judge’s findings and

conclusions were vitiated by a number of errors, including the following:
the finding that Ms Culligan had represented at the October Meeting
that any person could run the business on 20 hours per week was
neither pleaded nor consistent with the evidence;

neither Mr D’Angelo nor Mr Wallace understood Ms Culligan to

convey a representation of that kind at the November Meeting;

the break-up costs document, upon which the primary Judge relied
to find that Ms Culligan had represented that there were no
expenses other than those disclosed, did not come into existence
until 1 November 2005 and thus could not have been discussed at
the October meeting.

43 The appellants contended that the primary Judge had erred in two
further respects. First, his Honour had addressed the question of reliance by
treating it as a matter to be determined independently of the terms of the
Sale Agreement. His Honour, so it was argued, found that Mr D’Angelo and
Mr Wallace had relied on Ms Culligan’s representation at the October
Meeting and only then considered the effect of the clauses of the Agreement
for Sale. The correct approach was to treat the terms of the Agreement for
Sale “as part of the factual matrix against which reliance is to be judged”.

44 Secondly, assuming liability to have been established, the primary Judge

had incorrectly assessed damages. According to Mr Bannon SC, who
appeared with Mr Spinak for the appellants, his Honour erred in holding that
Aco was entitled to be compensated for the loss of the full purchase price.
The error was said to be that his Honour failed to take into account that the
business was valueless (if it was) only because the true circulation figures
were substantially less than some of Unimail’s documentation had
suggested. Mr D’Angelo and Mr Wallace were fully aware of the true
circulation figures before Aco entered the Agreement for Sale. Accordingly,
the appellants could not be held responsible for the difference between the
sale price and the true value of the Impulse business, insofar as the
difference was attributable to the effect of the true circulation figures.

October Meeting Representations

45 In Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; 257 ALR
610, at 639 [102], the joint judgment of Gummow, Hayne, Heydon and
Kiefel JJ quoted with approval the observations of McHugh J in Butcher v
Lachlan Elder Realty Pty Ltd [2004] HCA 60; 218 CLR 592, at 625 [109]:
“The question whether conduct is misleading or deceptive or
is likely to mislead or deceive is a question of fact. In
 determining whether a contravention of s 52 has occurred,
the task of the court is to examine the relevant course of
conduct as a whole. It is determined by reference to the
alleged conduct in the light of the relevant surrounding facts
and circumstances. It is an objective question that the court
must determine for itself. It invites error to look at isolated
parts of the corporation’s conduct. The effect of any relevant
statements or actions or any silence or inaction occurring in
the context of a single course of conduct must be deduced
from the whole course of conduct. Thus, where the alleged
contravention of s 52 relates primarily to a document, the
effect of the document must be examined in the context of
the evidence as a whole. The court is not confined to
examining the document in isolation. It must have regard to
all the conduct of the corporation in relation to the document
including the preparation and distribution of the document
and any statement, action, silence or inaction in connection
with the document.”

46 As the Full Federal Court pointed out in Poulet Frais Pty Ltd v The Silver
Fox Co Pty Ltd [2005] FCAFC 131; 220 ALR 211, at 226-227 [75]-[76]:
“Whether or not a corporation has contravened the norm of
corporate conduct established by s 52 of the TPA … is not
necessarily answered by asking whether someone was in fact
misled, although evidence to that effect might be highly
relevant.

…
The issue of whether the conduct of [the representor] was in
the circumstances misleading or deceptive was required to
be determined by reference to what a reasonable person in
the position of [the representee] would have made of those
documents.”

47 In the present case, the primary Judge found that the appellants engaged
in misleading and deceptive conduct exclusively on the basis of the
representations he found Ms Culligan made at the October Meeting. In order
to determine whether his Honour’s reasoning can be upheld, it is necessary
to consider Aco’s pleaded case and the evidence relating to the findings
made by his Honour.

48 Paragraph 8(a) of the Statement of Claim alleged that Ms Culligan

represented at the October Meeting that:
“One person can run the business on 20 hours a week.”

The finding made by the primary Judge (at [33]) was that Ms Culligan
said that “ [a]ny person could run the business on 20 hours per week
”.

49 There is a substantial difference between a representation that one

person can run a particular business on 20 hours per week and a
representation that any person can run the business on 20 hours per
week. As a matter of language, the first conveys to the representee
(assuming no other factors bear on the message conveyed) that one
person, acting alone, should be capable of running the business on 20 hours
per week. The statement implies that whether a particular person in fact will
be capable of doing so is likely to depend on his or her qualifications,
experience and aptitude. By contrast a statement that any person could run
a business on 20 hours per week, if interpreted literally, perhaps may
convey a claim that any person, regardless of qualifications, experience and
aptitude, can run the business on that part-time basis.

50 It follows that the representation found by his Honour to have been

made by Ms Culligan does not correspond to the case pleaded by Aco in par
8(a) of the Statement of Claim. This, however, does not necessarily mean
that the primary Judge should not have made the finding if the evidence
supported it. It could be argued (although Mr Manousaridis did not make a
submission to this effect), that a representation that anyone can run a
business on 20 hours a week goes further than and therefore includes a
representation that one person can run the business on 20 hours a week.
51 The difficulty with the finding in the terms made by the primary Judge,
however, is that there was no evidence to support it. His Honour quoted (at
[20]-[22]) the evidence of Mr Wallace and Mr D’Angelo as to what was said
by Ms Culligan at the meeting of 28 October 2005:
“20. According to Mr Wallace, Mr D’Angelo asked Ms Culligan,
‘How many hours do you put into the business?’ She replied:
‘I do it along with other publications: Unigrad, Univac and The
Recruiter. I probably put in 2 days at the most into Impulse
each week and the rest of my time I put into the other
publications.’
21. According to Mr D’Angelo, Ms Culligan said:
‘One person can run this publication on 20 hours per week or
less … I run the business myself while doing the other three
publications.’
22. Mr D’Angelo also stated that he asked Ms Culligan, ‘What
other expenses are there?’ to which she replied:
‘There are none. I run the business in house with Unimail
paying the rent’”.

52 It will be seen from these extracts that Ms Culligan was asked about what
she was doing at the time of the conversation. She replied, truthfully on the
findings made by the primary Judge, that she put in two days a week and
that one person could run the publication on 20 hours a week. She said
nothing, even on the accounts given by Messrs D’Angelo and Wallace, that
could have been construed by them as suggesting that any person could
run the business on 20 hours per week. On the evidence, Ms Culligan was
simply not asked at this meeting for her views as to what training or
experience was required to run the business in the same manner as she
had. Nor was she asked whether a person of Mr Wallace’s background could
do so.

53 As we have noted, the question of whether a person engaged in

misleading or deceptive conduct is not necessarily answered by asking
whether someone was in fact misled. It is nonetheless of some importance
that Mr Wallace did not understand Ms Culligan to represent that any person
could run the Impulse business on 20 hours, as his cross-examination
shows:
“Q. You understood that Ms Culligan indicated that she
thought she could do it or that she did it in two days a week
correct?
A. Yes.
Q. You understood when she said that, that she wasn’t giving
a warranty that anyone could do it in two days a week was
she?
A. Yes.
…
Q. Yes? She wasn’t guaranteeing that anyone could do it in
two days a week was she?
A. No she was explaining what she was doing.
Q. You didn’t think that was a guarantee that anyone could
do it in two days a week did you?
A. No I didn’t think it was a guarantee.”

54 For these reasons, in our opinion, his Honour’s finding that Ms Culligan
represented at the October Meeting that any person could run the Impulse
business on 20 hours a week cannot be sustained.

55 The primary Judge also found that Ms Culligan said that she had been
running the business by putting in two days at most a week and that there
were no expenses other than those disclosed. Mr Manousaridis frankly
accepted that this finding did not correspond to any representation pleaded
by Aco. This concession was correctly made, as there was nothing in par 8
of the Statement of Claim alleging that any representation was made at the
October 2005 meeting about expenses that had been incurred by the
Impulse business.

56 In any event, there was no basis for the finding insofar as it related to
expenses. Mr D’Angelo claimed in his affidavit that he had asked Ms
Culligan at the October Meeting about expenses. However, in cross-
examination he admitted that he had mistakenly assumed when preparing
his affidavit that he had received the costs break-up document before the
meeting. He also accepted that he had probably asked about expenses at
the November Meeting, not the October Meeting.

57 Mr Manousaridis applied at the hearing of the appeal to amend par 8(d)

of the Statement of Claim to include a reference to the representation
relating to expenses found by his Honour to have been made at the October
meeting. Quite apart from the other difficulties confronting an application to
amend at this stage of the proceedings, the amendment would be futile. As
we have explained, there was simply no evidence to support a finding in
terms of the proposed amendment.

58 The following conclusions should therefore be reached about the

representations which the primary Judge found had been made at the
October Meeting:

(i) the representation that Ms Culligan was putting in twenty hours

per week on the running of the business was made but was found by
his Honour not to be false and was not in fact false;

(ii) the representation that any person could run the business on 20
hours per week was not pleaded and in any event, on the evidence,
was not made at the October Meeting;

(iii) the representation that Ms Culligan had been running the

business herself by putting in two days per week was made but was
found by his Honour not to be false and was not in fact false;

(iv) the representation that there were no expenses other than rent
was not pleaded and was not made at the October Meeting.
59 The appellants’ attack on the findings as to the representations made at
the October Meeting and as to their falsity therefore succeeds. The
reasoning which led the primary Judge to conclude that the appellants had
engaged in misleading and deceptive conduct cannot stand.

THE NOTICE OF CONTENTION

60 Aco’s notice of contention proceeded on the basis that the primary Judge
erred in concluding that because Mr D'Angelo and Mr Wallace had already
decided to purchase the business on 2 November 2005 “subject only to due
diligence”, nothing in the conversation that occurred on 18 November 2005
could amount to a representation. Aco submitted that this reasoning
involved a non sequitor. Mr Manousaridis contended that the primary Judge
should have found that the representations alleged in subpars 9(a), (b) and
(d) of the Statement of Claim were made by Ms Culligan at the November
Meeting and that each representation was false, as alleged in par 11 of the
Statement of Claim. He invited this Court to make the findings necessary to
support the orders made by the primary Judge.
61 Aco further submitted that this Court should find that Messrs D’Angelo
and Wallace relied on the representations when they caused Aco to enter
into the Agreement for Sale of the Impulse business. According to Mr
Manousaridis, there was no basis for the primary Judge’s finding that the
decision made on 2 November 2005 to purchase the business precluded
Messrs D’Angelo and Wallace from relying on the representations made at
the November Meeting, particularly as the decision to purchase the business
was subject to due diligence. In any event, so he argued, the evidence as to
reliance was “ overwhelming”.

November Meeting Representations

62 Aco’s criticism of the approach taken by the primary Judge is well-

founded. In a claim under ss 42 and 68 of the FT Act (corresponding to ss 52
and 82 of the TP Act), it is necessary to identify contravening conduct and a
causal connection between that conduct and the loss or damage allegedly
suffered: Campbell v Backoffice Investments Pty Ltd, ALR, at 639 [102], per
Gummow, Hayne, Heydon and Kiefel JJ. As French CJ observed in Campbell v
Backoffice (at 620 [25]) the question of whether conduct is misleading or
deceptive within the meaning of s 42 of the FT Act is logically anterior to the
question of whether a person has thereby suffered loss or damage for the
purposes of s 68 of the FT Act.
63 Equally, the question of whether the defendant engaged in the conduct
alleged to be misleading or deceptive (in this case the making of the
representations said to be false) is logically anterior to the question of
whether the plaintiff has suffered loss or damage by reason of the
defendant’s misleading or deceptive conduct. A finding that the plaintiff did
not rely on a false statement made by the defendant does not demonstrate
that the statement was not capable of constituting misleading or deceptive
conduct.

64 It is not entirely clear what the primary Judge meant when he found that
in the absence of Aco’s reliance on anything said by Ms Culligan at the
November Meeting, the conversations on that date could not amount to
“representations”. If he intended to say that in the absence of proof of
reliance by Aco, the appellants could not have engaged in misleading or
deceptive conduct at the November Meeting, he was in error.

65 Aco submitted that, in these circumstances, this Court should make

findings as to what Ms Culligan said at the November Meeting. Mr
Manousaridis pointed out that the primary Judge, after setting out the
evidence of Mr D’Angelo and Mr Wallace as to the discussion at the
November Meeting, noted that “the substance of the conversations as set
out above was not disputed by Ms Culligan”. His Honour also said that
although there were some differences between the versions given by Mr
D’Angelo and Mr Wallace, he was “satisfied that these did not derogate
from the substance of what Ms Culligan was conveying to them”.
66 The primary Judge’s summary of the evidence given by Mr D’Angelo and
Mr Wallace was as follows (at [24]-[26]):
“24. … According to Mr Wallace, during the [course] of [the
November] meeting, Mr D’Angelo said to Ms Culligan, ‘There
are no wages in this document. Who’s doing the work?’ and
she replied:
‘I am doing it in my spare time about 20 hours a week.’
25. According to Mr D’Angelo, the conversation on this issue
 went as follows, when he raised the costs break-up document
with Ms Culligan:
D’Angelo:
‘How come there’s no wages expenses on this
breakdown of expenses?’
Culligan:
‘There’s no wages paid because I do it all myself. Jan
Peeters does the bookkeeping and invoicing every
second Thursday …’
26. Mr D’Angelo and Mr Wallace also undertook a due
diligence on 18 November 2005 and had further
conversations with Ms Peeters.”
67 The document referred to by Mr D’Angelo at the November Meeting was
a spreadsheet showing distribution figures and costs for Issues 49 to 53 of
Impulse. It was common ground that Unimail published Issues 49 to 53
during the period August 2004 to June 2005. The spreadsheet set out
various costs for each Issue, such as mailing, editing and design expenses,
but made no reference to wages.

68 On this evidence, it is by no means clear that the conversation at the

November Meeting, assuming it to be substantially in the terms recounted
by Mr D’Angelo and Mr Wallace, would justify this Court in finding that Ms
Culligan made representations to the effect pleaded in pars 9(a), (b) and (d)
of the Statement of Claim: in substance, that no person other than Ms
Culligan and the bookkeeper had undertaken work in relation to Impulse
during the period August 2004 to June 2005. Ms Culligan, when asked about
the absence of any reference in the spreadsheet to wages, replied in the
present tense:
“There are no wages because I do it all myself. Jan Peeters
does the bookkeeping.”

Ms Culligan explained in her evidence that she had prepared the

spreadsheet in early November 2005 at the request of Mr Smith of
Claridges and that it was on his advice that she included only the
direct costs of production.

69 Despite the primary Judge’s scepticism as to Ms Culligan’s intentions, her

response to Mr D’Angelo’s inquiry may have been honest. She may have
considered the role formerly played by Ms Wood to be irrelevant to Mr
D’Angelo’s inquiry, given that she (Ms Culligan) had resumed sole
responsibility for the Impulse magazine on Ms Wood’s departure some five
weeks earlier, devoting 20 hours per week to it. The primary Judge appears
to have thought that the significance of what Ms Culligan was telling Mr
D’Angelo and Mr Wallace would not have been lost on her, but it is unclear
whether his Honour was referring to the October Meeting, the November
Meeting (which he found did not contain “representations”) or both.
70 Of course, representations may constitute misleading or deceptive
conduct without the representor acting dishonestly or even carelessly:
Hornsby Building Information Centre Pty Ltd v Sydney Building Information
Centre Ltd [1978] HCA 11; 140 CLR 216, at 223, per Stephen J (with whom
Jacobs J agreed); at 234, per Murphy J; Parkdale Custom Built Furniture Pty
Ltd v Puxu Pty Ltd [1982] HCA 44; 149 CLR 191, at 197, per Gibbs CJ.
Moreover, as Stephen J pointed out in Hornsby Building Centre (at 227-228)
a statement that is literally true may nonetheless be misleading or
deceptive if, for example, it conveys a meaning to the representee other
than the literal meaning of the words used.

71 In this case, the question is whether Ms Culligan’s statements at the

November Meeting, taken in context, conveyed to Mr D’Angelo that no one
other than Ms Culligan herself and the bookkeeper had worked on the
Impulse magazine in the past. The understanding by Mr D’Angelo and Mr
Wallace of those statements, although not determinative of the issue, is
relevant to it. The primary Judge made no express findings as to how they
understood Ms Culligan’s statements at the November Meeting, presumably
because his Honour had previously concluded that no “ representations” had
been made.

72 This Court did not have the benefit of seeing the witnesses and, in
particular, of evaluating the understanding of Mr D’Angelo and Mr Wallace
as to what was conveyed at the November Meeting about Ms Culligan’s role
in the Impulse business. In these circumstances, it might be difficult to
make the findings sought by Aco. For the reasons that follow, we do not
think it necessary to resolve that question.

Causation

73 Even if this Court were to find that the representations alleged in subpars
9(a),(b) and (d) of the Statement of Claim were made by Ms Culligan, in our
opinion Aco faces an insurmountable obstacle to the success of its notice of
contention. This is so because the evidence is incapable of establishing that
any misleading or deceptive conduct by the appellants caused Aco to suffer
loss or damage.

74 Both Mr D’Angelo and Mr Wallace gave evidence as to what they would

have done had they not been misled by Ms Culligan. Mr D’Angelo said this in
his affidavit:
“At the time I made this offer [of 2 November 2005], I
believed that the Impulse business showed excellent profits
according to the jobs list. I believed that it took only up to 20
hours a week to run the business, and that Andrea Culligan
was the only person who had been running the business. My
belief in that regard was based on what Andrea Culligan said
to me in the meeting at the coffee lounge to which I refer
above. I would not have made the offer had I been aware
that my belief was wrong. I would not have made the offer
had Andrea Culligan informed me that Lisa Woods had
been employed as a business manager on a full time
basis or near full time basis for the purpose of making
 sales for Impulse.” (Emphasis added.)

Later in his affidavit he said that Ms Culligan’s statements at the

November Meeting:
“confirmed his belief that [Ms] Culligan was the only person
who was and had been involved in the running of the Impulse
business.”

75 Mr Wallace’s evidence was to similar effect:

“It was my intention that upon ACO acquiring the business it
would be run on a part time basis. I was not then aware of
what I subsequently became aware of, namely, that Unimail
had employed a person named Lisa Woods on a full
time basis during the period August 2004 to 12
October 2005 …Had I been aware of the fact that Lisa
Woods was employed on a full time basis, and of the matters
recorded in the discovered documents to which I refer, I
would not have considered looking further into acquiring the
business, and would not have agreed to ACO entering into
the agreement to acquire the Impulse business.” (Emphasis
added.)

76 It will be seen that both Mr D’Angelo and Mr Wallace directed his

attention to what he would have done had he known that Ms Wood was
employed on a full time basis (or in Mr D’Angelo’s case near full time
basis) during the period August 2004 to June 2005. It is not surprising that
the evidence should have been presented in this form since, as the
particulars to par 11 of the Statement of Claim show, Aco’s case was that
the pleaded representations were false because, during the relevant period,
Ms Wood
“devoted all, or substantially all of her time as employee of
[Unimail], in running the business.”

Aco claimed that the Impulse business could not be run on a part-
time basis.

77 The primary Judge, despite finding Ms Wood to be an unsatisfactory

witness, did not find that Ms Wood had devoted all, or substantially all, of
her time as an employee of Unimail to the Impulse business. His Honour
found only that Ms Wood devoted “the majority of her time” to the business,
a commitment that amounted to “substantially more than 20 hours a week”.
Later his Honour quantified this finding by determining that a competent
operator would have to devote “in the order of 67% to 75% of a 40-hour
week” to the business. This equates to 27 to 30 hours per week.
78 On his Honour’s findings, the question of causation would depend on
what Mr D’Angelo and Mr Wallace would have done had they known that,
during the period from August 2004 to June 2005, Ms Wood devoted an
average approximately 27 to 30 hours per week to the Impulse business,
rather than the 20 hours that Mr D’Angelo and Mr Wallace believed was
required to run the business. The evidence given on behalf of Aco simply did
not address this question.

79 In Campbell v Backoffice Investments, one issue was whether Mr Weeks

would have proceeded with a purchase of shares had he known that sales
revenue derived by the relevant business for a particular month had been
overstated. Mr Weeks gave evidence that if he had known of both the
overstatement of sales revenue and of an overstatement of EBIT (earnings
before interest and tax) he would not have purchased the shares. The
overstatement of EBIT was not proved. The joint judgment pointed out (at
649 [147]) that the only direct evidence given by Mr Weeks as to what he
would have done assumed that he knew that both matters were false. He
did not say what he would have done if he knew either matter was false.
This contrasted with his evidence on other issues where he had said that if
he had been aware of either or both of two matters, he would have taken a
different course. In this state of the evidence, so their Honours held (at 649
[147]):
“it was not open to the Court of Appeal to infer [as it had],
from its own assessment of the materiality of the
representation and its own assessment of whether the
representation was calculated to induce entry into a
contract, that Mr Weeks would not have proceeded with the
share purchase.”

See also (at 629 [55)], per French CJ.

80 There is no basis in the evidence in the present case to justify this Court
in finding that, if Mr D’Angelo and Mr Wallace had known that Ms Wood had
worked an average 27 to 30 hours per week on the Impulse business
between August 2004 and June 2005, they would not have caused Aco to
purchase the business. It is one thing for Ms Wood to have worked full time
or substantially full time on the Impulse business. It is another for her to
have devoted 27 to 30 hours per week to it while attending to other aspects
of Unimail’s business. Had Mr D’Angelo and Mr Wallace given evidence that
they would not have gone ahead had they known that Ms Wood devoted 27
to 30 hours per week to the business, their evidence might well have been
vigorously challenged.
81 Even in the absence of direct evidence from a representee as to what he
or she would have done in full knowledge of the facts, the objective
evidence in a given case might support a finding that a certain course of
conduct would have been taken by the representee. (Compare Civil Liability
Act 2002 (NSW), s 5D(3)(b) which applies, where it is relevant to determine
what the plaintiff would have done if the negligent person had not been
negligent. The provision renders inadmissible any statement by the plaintiff
as to what he or she would have done, except to the extent that the
statement is against interest.) However, the present is not such a case.
82 The objective circumstances include the fact that Ms Culligan had
operated the business on twenty hours a week, as she told Mr D’Angelo and
Mr Walker. Plainly Mr Wallace overrated his own ability to conduct the
Impulse business on a part-time basis. In this connection, his Honour found
that Mr Wallace probably could not have run the business successfully even
with a much greater time commitment. Mr Wallace’s own evidence
indicated that he considered that he had the requisite skills and experience
to sell the advertising space for the Impulse magazine and to run the
business part time. Indeed, Mr Wallace agreed that he had never inquired
about Ms Culligan’s expertise or managerial skills before deciding to commit
Aco to the business. Furthermore, while Ms Wood devoted 27 to 30 hours a
week to the Impulse business, for a significant portion of her period of
employment she was regarded as performing unsatisfactorily. Mr D’Angelo
and Mr Wallace would have had to take this into account in determining
whether they would have caused Aco to proceed with the purchase had
they known the truth.

83 For these reasons, the evidence is incapable of supporting a finding that

had Mr D’Angelo and Mr Wallace known the true position concerning Ms
Wood’s hours of work on the Impulse business, they would not have caused
Aco to purchase the business. Subject to a challenge, discussed below, to
the primary Judge’s findings as to Ms Wood’s hours of work on the Impulse
business, Aco’s notice of contention fails on the causation issue.

Ms Wood’s Hours of Work

84 Mr Manousaridis submitted that this Court should set aside the primary
Judge’s finding that Ms Wood devoted 67% to 75% of her time to the
Impulse business and should find that Ms Wood worked full time or nearly
full time on the Impulse business.

85 Although the primary Judge considered that Ms Wood’s evidence was

“unsatisfactory”, he took into account that it was common ground Ms Wood
had worked on all Unimail’s magazine businesses. His Honour also expressly
took into account matters relied upon by Mr Manousaridis in this Court.
These included the fact that the commission incentive in Ms Wood’s
remuneration package related solely to the Impulse business and that she
had failed to sell any advertising space for other publications produced by
Unimail. His Honour was clearly aware of Mr Wallace’s claim that Ms Wood
had stated to him in mid-2006 that she had spent over 90% of her time on
the Impulse business while at Unimail. However, his Honour did not consider
that Mr Wallace’s claim warranted finding that she had worked on the
Impulse business for at least 90% of her time.
86 Mr Manousaridis did not identify in his submissions to this Court any
evidence unequivocally indicating that Ms Wood worked substantially full-
time in the Impulse business. For example, the targets Ms Culligan set for
Ms Wood were consistent with her spending no more than two-thirds to
three-quarters of her time on the Impulse business. Similarly, a letter
describing Ms Wood’s position as “Business Development Manager ” and
setting out her salary and commission entitlements was equivocal on the
question of the proportion of time Ms Wood devoted to the Impulse
business.

87 The findings made by the primary Judge were based, in large part, on his
assessment of the oral evidence of Ms Culligan and Ms Wood. Aco has not
demonstrated any ground for setting aside these findings. Accordingly, this
aspect of the Notice of Contention fails.

Causation – The Agreement for Sale

88 We have addressed the question of causation without reference to the

appellant’s contention that his Honour erred in assessing the significance of
the terms of the Agreement for Sale in relation to this question. We have
taken this course because the appellants’ contention, if correct, can only
further weaken Aco’s case.

89 The relevant principles as to the significance of contractual disclaimers

are well established and were summarised by French CJ in Campbell v
Backoffice Investments, (at 622 [31]):
“Where the impugned conduct comprises allegedly
misleading pre-contractual representations, a contractual
disclaimer of reliance will ordinarily be considered in relation
to the question of causation. For if a person expressly
declares in a contractual document that he or she did not
rely upon pre-contractual representations, that declaration
may, according to the circumstances, be evidence of non-
reliance and of the want of a causal link between the
impugned conduct and the loss or damage flowing from entry
into the contract. In many cases, such a provision will not be
taken to evidence a break in the causal link between
misleading or deceptive conduct and loss. The person making
the declaration may nevertheless be found to have been
actuated by the misrepresentations into entering the
contract. The question is not one of law, but of fact.”

See also Keen Mar Corporation Pty Ltd v Labrador Park Shopping
Centre Pty Ltd [1989] FCA 46; ATPR (Digest) 46-048, at 53,146 [7],
per Morling and Wilcox JJ; Poulet Frais v Silver Fox, at 232 [101]-
[103], per curiam.

90 The primary Judge did not approach the question of causation in the
manner required by the authorities. As the appellants correctly submitted,
he first found that the representations materially contributed to Aco’s
decision to purchase the business. Only then did he turn to consider the
significance of the terms of the Agreement for Sale. Although his Honour
referred briefly to evidence given by Mr Wallace, he seems to have
understood the question to be whether the contract should be “construed to
have covered the field of the arrangements made between the parties”. He
did not consider Mr Wallace’s evidence as an element of the material that
had to be considered on the factual question of whether there was a causal
link between the appellants’ misleading and deceptive conduct and the loss
and damage flowing from Aco’s entry into the Agreement for Sale.

91 Mr Wallace’s evidence was that his solicitor had taken him through each
of the clauses in the Agreement for Sale and that he was aware of both cl 13
and cl 19 (the whole agreement clause). His cross-examination included the
following:
“Q. You would’ve gone over clause 13 with Mr Scarfone?
A. Yes, I was aware of that clause.
Q. And you were aware of it because you were a business
broker?
A. Yes.
Q. And because you understood warranties, representations
and exclusions in contracts for sale of business?
A. Yes.
Q. So when you read that and, in particular, clause 13.4 you
would have understood what that meant and agreed with it?
A. Yes.
Q. Can I also take you to page 28 and to clause 19.4. Do you
recall whether that clause was included in the contract that
you reviewed?

A. I don’t recall.

Q. But you understand the effect of that clause?

A. Yes.

…
Q. And you agree with me that the time you saw Mr Scarfone
prior to 14 December 2005 the contract – or, sorry,
amendments could be proposed to the contract and you
didn’t have to be bound by the contract that was put forward
by UniMail’s solicitors at the time?
A. Yes.”

92 In our view, the primary Judge’s approach to the question of causation, in

particular the significance of Mr Wallace’s understanding of cll 13 and 19 of
the Agreement for Sale, was in error. This conclusion provides an
independent reason for allowing the appeal.

93 It is unnecessary to determine whether this Court is in a position to make

a finding that, when Mr Wallace’s understanding of the Agreement for Sale
is taken into account, Aco did not rely on any misleading or deceptive
conduct on the part of the appellants. We have already concluded that the
evidence does not support Aco’s case on causation.

DAMAGES
 94 It is not necessary to consider the appellants’ challenge to his Honour’s
assessment of damages, in particular his conclusion that it was not
necessary to reduce the damages award by reason of Aco having to pay an
excessive purchase price having regard to the true circulation figures. The
appellants’ arguments raise the question of whether this is a case of
concurrent causes of loss as discussed by the High Court in Henville v
Walker [2000] HCA 52; 206 CLR 459.
95 The issues raised in relation to the assessment involve questions of legal
principle, rather than analysis of the facts. Such principles are best
addressed in a case in which they have a direct bearing on the outcome. In
the present case they are rendered moot by the findings on liability.
Furthermore, little time was devoted to them on the hearing of the appeal.

CONCLUSION

96 The appeal must be allowed. The orders made by the primary Judge
should be set aside. In lieu of those orders, the judgment should be entered
for the appellants (the first and second defendants) against Aco (the
plaintiff). Aco should be ordered to pay the appellants’ costs of the trial and
of the appeal. Aco, if otherwise qualified, should have a certificate under the
Suitors Fund Act 1951 (NSW).

**********

12/10/2009 - Incorrect spelling of name of counsel for the respondent. -

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