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Quality Corp (Aust) Pty Ltd v Millford Builders (Vic) Pty Ltd

 

[2003] QCA 502

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Quality Corp (Aust) P/L & Ors v Millford Builders (Vic) P/L & Ors [2003] QCA 502

PARTIES:

QUALITY CORPORATION (AUST) PTY LIMITED
ACN 071 974 957
(first plaintiff/appellant)
JOHN ERIC SKELTON
(second plaintiff/appellant)
MARY DIANNE SKELTON
(third plaintiff/appellant)
v
MILLFORD BUILDERS (VIC) PTY LTD
ACN 005 342 530
(first defendant/respondent)
PHILIP KEITH STRAWFORD
(second defendant/respondent)
ROSLYN JOY THOMAS
(third defendant/respondent)
RESORT BROKERS PTY LTD
ACN 010 536 811
(fourth defendant/respondent)
RODNEY ASKEW
(fifth defendant/respondent)

FILE NO/S:

Appeal No 3892 of 2003
SC No 10942 of 1998

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

14 November 2003

DELIVERED AT:

Brisbane

HEARING DATE:

28 October 2003

JUDGES:

McPherson and Davies JJA and Wilson J

Separate reasons for judgment of each member of the Court, each concurring as to the orders made

ORDER:

1.Allow each appeal

2.Set aside the judgments of the learned trial judge of 9 April 2003 and the order for costs of 22 April 2003

3.In lieu, judgment for the first plaintiff against the defendants for $234,000, judgment for the second plaintiff against the defendants for $10,000 and judgment for the third plaintiff against the defendants for $12,000, in each case with interest from18 December 1995 at nine per cent per annum

4.Defendants to pay plaintiffs' costs of the trial and of this appeal

CATCHWORDS:

TRADE AND COMMERCE - TRADE PRACTICES AND RELATED MATTERS -  ENFORCEMENT AND REMEDIES - ACTIONS FOR DAMAGES - ASSESSMENT OF DAMAGES - DAMAGES ARISING OUT OF PURCHASE OR LEASE - where plaintiffs purchased the business of a motel from the defendants - where plaintiffs leased motel premises from defendants - where plaintiffs sued defendants for damages for misrepresentations as to profits and profitability of motel business - where trial judge found misrepresentations had been made -  where trial judge found plaintiffs would not have proceeded with purchase of business but for misrepresentations - where plaintiffs claimed that rental of premises was higher than it would have been if misrepresentations had not been made - whether rental actually paid was higher in consequence of misrepresentations

APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - INTERFERENCE WITH JUDGE'S FINDINGS OF FACT - FUNCTIONS OF APPELLATE COURT - OTHER FINDINGS - where evidence at trial that real value of rental was less than that payable under lease in consequence of misrepresentations - where difference of opinion at trial as to what real value of rental was - where trial judge did not resolve difference of opinion - whether court can resolve factual matter not resolved by trial judge

TRADE AND COMMERCE - TRADE PRACTICES AND RELATED MATTERS - ENFORCEMENT AND REMEDIES - ACTIONS FOR DAMAGES - CAUSATION - where individual plaintiffs gave up their jobs prematurely in reliance on misrepresentations - where individual plaintiffs allege that they should be compensated for lost opportunity to earn income from their former jobs - where trial judge rejected these claims - where difficulty in assessing claims of individual plaintiffs because of lack of evidentiary basis for fixing period of time for which income was lost - whether individual plaintiffs can recover damages

Chaplin v Hicks [1911] 2 KB 786, considered

Kizbeau Pty Limited & Ors v W G & B Pty Limited (1995) 184 CLR 281, applied

Sellars v Adelaide Petroleum NL & Ors (1994) 179 CLR 332, considered

COUNSEL:

R J Douglas SC, with A M Musgrave, for the appellants

J A Logan SC for the respondents

SOLICITORS:

Siemons Lawyers (Noosa Heads) for the appellants

McLaughlins (Southport) for the respondents

  1. McPHERSON JA:  This is an appeal by the successful plaintiffs in the action against the assessment of damages arising out of their claim under s 52 and at common law for misrepresentation. I agree with Davies JA in thinking that damages are to be assessed in accordance with the principle in Kizbeau Pty Ltd  v W G & B Pty Ltd (1995) 184 CLR 281, and I agree with the conclusions reached by his Honour on this and other aspects of the appeal. I also agree with the orders he proposes for disposing of the appeal.

DAVIES JA:

1.The appeals

  1. These are appeals by plaintiffs against judgments given in the Supreme Court on 9 April 2003 and a refusal by the learned primary judge to grant leave to appeal against an order for costs made on 22 April 2003.  The judgments on 9 April 2003 were:
  1. a judgment for the first plaintiff against each defendant for $314,900 ($190,000 plus $124,900 interest);  and
  1. dismissal of the claims of the second and third plaintiffs against each defendant.

The order for costs in respect of which the learned primary judge refused to grant leave to appeal was an order that the first plaintiff recover against the defendants costs assessed on the District Court scale.  The facts relevant to the appeals against the substantive judgments are as follows.

2.The relevant history

  1. On 26 November 1995 the plaintiffs John Eric Skelton and Mary Dianne Skelton, whom I shall describe as the individual plaintiffs, executed a document described as a Motel Purchase Agreement in which they agreed to purchase from Millford Builders (Vic) Pty Ltd ("Millford") the business of a motel in Hastings Street Noosa for $410,000. They also agreed as was necessary for that purpose, to lease the motel premises from Millford for an annual rental of $140,000, subject to yearly increases according to the CPI but of at least five per cent. That lease was to be for a term of five years with three options for renewal.
  1. Shortly after this the individual plaintiffs decided that a company which they owned and controlled, Quality Corporation (Aust) Pty Limited ("Quality") should purchase the business and acquire the lease. Accordingly on 18 December 1995 a new Motel Purchase Agreement was executed with Quality, instead of the individual plaintiffs, as the purchaser, but on the same terms, and a lease on the above terms was executed with Quality as the lessee. On the same day Phillip Keith Strawford and Roslyn Joy Thomas ("the individual defendants") who together were the owners and controllers of Millford and who together up to that date had run the motel, also granted a lease to Quality of an apartment called the Jacaranda Apartment, which had been used in the motel business, for a term of three years commencing on 21 December 1995 with no option of renewal but with a right of first refusal of the freehold.[1]
  1. The plaintiffs sued the defendants for damages for misrepresentations as to the profits and profitability of the motel business which they alleged constituted conduct in contravention of s 52 and s 53A of the Trade Practices Act 1974 (Cth) and the corresponding provisions of the Fair Trading Act 1989 (Qld), were in breach of a duty of care owed to each plaintiff and were in breach of warranties in the contract.  Resort Brokers Pty Ltd and Rodney Askew were, the learned trial judge found, the agents of Millford and the individual defendants for the purpose of making these or some of these misrepresentations, which the learned trial judge found to have been made.
  1. The learned trial judge found that by misrepresenting the actual takings of the motel for July through October 1995, and by comparing those takings with corresponding months of the previous year without disclosing that those takings were based on the use of 12 rooms, rather than 10 or 11, Millford misrepresented matters of existing fact. In effect, his Honour found, it represented that the same resources had been used in each period and that the comparison thereby provided a reasonable basis for an expected increase of the order of 15 per cent for the whole of the 1996 year over the previous year. It also involved, his Honour held, representations as to future matters, being what would be the takings, expenses and profit for the 1996 year.
  1. His Honour held that the misrepresentation on behalf of Millford of matters of existing fact contravened s 52 as did the predictions of the 1996 profits. And as there was no reasonable grounds for making these predictions, these representations as to future matters were taken to have been misleading and deceptive, according to s 51A. His Honour found that the plaintiffs would not have proceeded with the acquisition of the business or taken the lease had it not been for the conduct which he also found to be negligent. His Honour then concluded that, on the same basis, the defendants were also liable in negligence.[2]
  1. The claim in contract was pursued but it was conceded on the plaintiffs' behalf that, for reasons which are no longer relevant, damages for breach of warranty would not exceed those recoverable under the Trade Practices Act or for negligence.  It therefore became unnecessary for his Honour to consider the claim in contract any further and no aspect of that claim is pursued in this Court.
  1. His Honour assessed Quality's damages by first deducting from the estimated maintainable gross income of $280,000 the estimated real, not the represented, expenses other than rent, which were $77,000, and the rental payable under the lease in consequence of the misrepresentation, not the estimated real rental value of such premises,[3] of $140,000, leaving maintainable earnings, according to his Honour, of $63,000.  His Honour then capitalized those maintainable earnings of $63,000 at 30 per cent yielding a sum of $210,000.  To that he added the value of the Jacaranda unit lease which he assessed at $10,000 arriving at a total of $220,000.[4]  He then deducted that sum from $410,000, the amount paid under the Motel Purchase Agreement, arriving at a nett sum of $190,000.  That was the sum, his Honour held, by which Quality had paid too much for the business in reliance on the misrepresentations.  He did not include any additional amount which Quality claimed to have lost by entering into the lease.  Accordingly he assessed that amount as damages recoverable under s 82 of the Trade Practices Act.
  1. In order to understand the claim of the individual plaintiffs and his Honour's reasons for dismissal of their claims it is necessary to state some further facts. These plaintiffs were resident and employed in Sydney. For some time they had had in mind leaving their respective jobs to run a motel together and to that end had looked at a number of motels for sale in various places. The intention of each of them was that, as soon as they were able to purchase a motel which satisfied the criteria which they had in mind they would resign. Accordingly Mrs Skelton resigned from her job on 1 December 1995 and Mr Skelton resigned from his later that month. The appellant accepts that the learned trial judge correctly identified the individual plaintiffs' claim as one for the "opportunity lost … which the [individual plaintiffs] had already decided to forego, once a suitable business was found".
  1. Having found that the individual plaintiffs would not have acquired, or caused to be acquired, this business but for the s 52 misconduct and negligence of the defendants and that, but for those matters, they would not have left their respective jobs in Sydney precisely when they did, his Honour nevertheless rejected their claims primarily, it seems, because the "opportunity" to which he referred was lost, he thought, not because of the defendant's wrongdoing but because the individual plaintiffs had decided to take another course in their lives. He also found himself unable to see any evidentiary basis for fixing a period of time for which their Sydney incomes was lost.

3.The claim by Quality

  1. Its claim was and is that, as a result of the misrepresentations, it entered into two disadvantageous contracts, the contract for purchase of the business and the contract of lease. Both the purchase price of the business, $410,000, and the starting rental, $140,000 a year, were higher than they would have been, it submitted, if the misrepresentations had not been made. The second of these submissions is a question which must be resolved; whether, on the facts which his Honour found or on those which he should have found, it is correct that the rental of $140,000 was higher than it should have been because of the misrepresentations.

4.The learned trial judge's reasons

  1. In assessing Quality's damages in the way in which he did, his Honour appears either to have rejected the contention that, in reliance on the misrepresentations, Quality entered into two disadvantageous contracts; or concluded that his assessment compensated Quality in respect of both its loss under the Motel Purchase Agreement and its loss under the lease. Mr Logan SC, for the defendants, submitted that the latter was the case and that this explains why, in arriving at his assessment of maintainable earnings for the purpose of assessing the real value of the lease, his Honour deducted the rental paid in consequence of the misrepresentations rather than an estimate of the rental that would have been payable if the misrepresentations had not been made; and this notwithstanding that the expenses other than rent which he also deducted were the estimated real expenses not those as misrepresented. However it seems to me that that is equally consistent with the other possibility referred to above; that his Honour may have concluded that only the Motel Purchase Agreement was entered into in consequence of the misrepresentations and consequently that that rental would have been payable whether or not the misrepresentations had been made.
  1. His Honour's reasoning can, I think, be seen from the following passages in his judgment:

"Quality Corporation says that by proceeding with this purchase and lease, it has suffered loss in two ways.  First, it says that the acquisition caused it loss, because the price paid for that acquisition ($410,000) was more than the value of what was acquired.  Secondly, it says that by taking a lease at a rental of $140,000 a year, it suffered a loss because the leasehold interest was worth less than that, measured by an appropriate annual rent.  But these losses are not mutually exclusive, for what was acquired included the leasehold, and the value of what was acquired should be ascertained by some capitalisation of maintainable profits, which are directly affected by the amount of the rent.  So the value of what was acquired was less than would have been the case had the lease required the payment of what the plaintiffs say was an appropriate rent.  Recognising this, Quality Corporation seeks damages in which the component which is intended to represent an amount by which too much was paid for the acquisition is calculated not by the difference between the price paid and the value of what was acquired, but instead by a difference between the price paid and what would have been the value of the property acquired had the rent been what is said to have been an appropriate rent.  There is then a claim for a further component, being the difference between the agreed rent and that lower 'fair market rental', totalled over the initial term of five years. …

I prefer to assess the first plaintiff's loss by what could be considered a more usual approach, which is to compare its actual position with that which it would have enjoyed had it not been misled into this transaction.  Prima facie, that is measured by the difference between the price paid and the value of what was obtained.  If the rent was higher than would be expected for a motel with this turnover, then that will be reflected in a lower value and a higher award.  To adopt the first plaintiff's approach requires an assessment of the amount of an appropriate rent for this motel.  As the evidence here shows, that is a matter upon which different experts will have different views, and it is thereby a further variable which could affect a fair assessment."

  1. The above passages appear to encompass two reasons for his Honour's conclusion that the correct measure of Quality's damage was that which he adopted. First his Honour appears to be of the view that his was the more usual approach because, in his view, it compared the actual position with that which Quality would have enjoyed had it not been misled into this transaction. And secondly his Honour thought that different views among experts as to the appropriate rental for this motel was a "variable" which could affect a fair assessment.
  1. In my opinion the first of these reasons appears to assume that it did not matter, for the purpose of assessing damages, whether the transaction into which Quality was misled encompassed only the Motel Purchase Agreement or that agreement and the lease agreement. See especially the sentence "If the rent was higher than would be expected for a motel with this turnover, then that will be reflected in a lower value and a higher award"; a higher rental will be reflected in lower maintainable profits whether or not the acceptance of that higher rental was in reliance on misrepresentations. However as a comparison of the assessment which I make later with that arrived at by his Honour shows, it does matter whether the transaction into which Quality was misled included both agreements or only the Motel Purchase Agreement.
  1. The second reason given by his Honour for his declining to make an assessment of loss in respect of Quality's having entered into the lease agreement, that the assessment of the amount of appropriate rental for this motel was something upon which different experts will have different views, also supports the view that his Honour thought that it did not matter whether the lease agreement also was a disadvantageous one for Quality because of the misrepresentations. If his Honour had thought it mattered it would not have been difficult for him to make such an assessment as I shall endeavour to show. As I shall also endeavour to show, I think that his Honour erred in so declining.

5.The measure of damages

  1. In my opinion, the transaction into which Quality entered because of the misrepresentations involved two contracts, the Motel Purchase Agreement and the lease. There does not appear to be any dispute that the Motel Purchase Agreement was disadvantageous to Quality because the amount paid for the business was more than it would have been if the misrepresentations had not been made. What is not completely clear, because his Honour declined to so find, is whether the rental under the lease would have been less than it was if the misrepresentations had not been made. If it would have been then I see no reason why Quality's loss in consequence thereof should not have been included in its damages. And if that is so then I think that his Honour ought to have resolved the difference between experts upon that question.
  1. As his Honour recognized, the damages claim in this case is somewhat analogous to that considered by the High Court in Kizbeau Pty Limited v W G & B Pty Limited.[5]  And as he also recognized, Kizbeau provides some support for an assessment of damages in the manner sought by Quality.  But his Honour then said:

"However, it by no means suggests that damages must be assessed in that way."

That may or may not be correct but if an assessment made in some other way yields a different result then it seems to me that it is prima facie wrong.

  1. As in this case, Kizbeau purchased a motel business and lease in reliance upon a false representation, the representation in that case being that an upstairs section of the premises could lawfully be used for seminars and conferences. The facts were complicated in that case because, in reliance on the misrepresentation, Kizbeau used the upstairs section of the premises for a specific period for seminars and conferences and, although that was unlawful, it derived income therefrom; and because, at the end of that period, it became lawful to use the upstairs section for seminars and conferences but with a restriction as to numbers. The High Court held that the proper measure of damages was the difference between the real value of what was acquired as at the date of acquisition and the price paid for it and that, as the price paid for it consisted of both the capital sum paid under the purchase agreement and the rental paid under the lease, a judgment for damages in respect of the loss under the first and of variation of the lease in order to compensate for the loss under the second agreement were necessary to give effect to that proper measure of damages.
  1. In respect of the first of these the court said:[6]

"Evidence given by Mr Young established that the imposition of condition (s) would bring about a maximum decline of 5.17% in revenue.  As a result, he estimated that the revenue for the 1988 year would have been $2,086,260 if condition (s) and the amended condition (p) had applied and the correct commencing rent for the business would have been $455,000.  The profit margin on that lost revenue was 70% which was much better than the industry average of 45%.  Mr Young, therefore, estimated that the profit for the 1988 year would have been $910,382 if the March 1991 amendments to the conditions had applied.  After deducting the deemed rent of $455,000, he estimated that the net profit of the business would have been $455,382 for that year giving the business a value of $1,517,940.  After deducting $600,000 for the future payout of the leased chattels, Mr Young estimated that the value of the business, as at the date of purchase, was $917,940 which meant that, if the amended conditions had applied at that date, Kizbeau had paid $182,060 more than the business was worth.

In our opinion, this figure of $182,060 should be accepted as the difference between what the business was worth and what Kizbeau was induced to pay as the result of the owner's misrepresentation that the boardroom and the annex could be used without restriction for seminars, conferences and similar functions."[7]

It is significant, for present purposes, that the rental used for this calculation, $455,000, was an estimated real value of a rental of premises with the restriction imposed by condition (s), that is, the value which the rental would have on the true facts;  not $480,000, the actual rental under the lease entered into in reliance on the misrepresentation that there was no such restriction.

  1. As to the second of these the court said:

"An order for the payment of damages of $182,060 and interest is not sufficient to compensate Kizbeau for the loss that it suffered as the result of the misleading conduct of the owner.  The sum of $182,060 is assessed on the assumption that the rent bears the same proportion to the revenue of the business as the stipulated rent of $480,000 bore to the revenue of $2,200,000 which the business would have produced in the absence of conditions limiting the use of the premises.  If Kizbeau is to be fairly compensated for its loss, the rent provisions of the lease will have to be varied.  Under the lease, Kizbeau agreed to pay a commencing rent of $480,000 which was $74,000 higher than it should have been, having regard to the then restrictions on the use of the boardroom and the annex, and $25,000 higher than it should have been if the amended conditions are treated as notionally applying on the day that the lease commenced."

Because until the end of the period to which I have referred, Kizbeau traded as if there were no such restrictions on the use of the upstairs section of the premises the court held, in effect, that the lease should be varied so that the commencing rental as from the end of that period should be $455,000.

  1. It can be seen from this analysis of Kizbeau that the High Court accepted that the correct way to value the loss of a plaintiff who has entered into an agreement to purchase a business and a lease, both in reliance on misrepresentations by the vendor, is to value the plaintiff's loss, if any, in consequence of its having entered into the purchase agreement, to value its loss, if any, in consequence of its having entered into the lease and, at least where those losses do not overlap, to add them together in order to determine the plaintiff's total loss in consequence of its having relied on the misrepresentations.  In my opinion that approach is one which accords with both principle and common sense.
  1. In the present case Quality contends that the real rental, if the misrepresentations had not been made, would have been either $100,000 per annum or $120,000 per annum and that this sum should have been used as the rental to enable amounts of damages to be assessed and awarded in respect of its loss under both the Motel Purchase Agreement and the lease. If the first of these propositions is correct then I think it follows that the second is and that is consistent with the way in which the High Court calculated Kizbeau's loss in that case. Indeed the only difference in this respect between this case and Kizbeau is that, in Kizbeau, the plaintiff's loss was remedied by a judgment for damages under the motel purchase agreement and a variation of the lease under the lease agreement;  whereas in this case an order of the latter kind could not have been made because Millford had sold the freehold of the motel premises by the time this case came on for hearing and so damages was the appropriate remedy.

6.The resolution of a factual matter not resolved by the learned trial judge

  1. There was evidence that the real value of the rental was less than that which was payable under the lease in consequence of the misrepresentations. But there was a difference of opinion, which was not resolved by the learned trial judge, as to what that real value was. His Honour not having assessed that real value, may this Court do so or should it send the matter back to the learned trial judge for determination of that question? If this Court may do so, and that is clearly desirable, the question then is how it may do so. As his Honour correctly said, this assessment was a matter upon which different experts had different views. Quality adduced evidence from two experts, Mr Rabbitt and Mr Calabro.  The defendants adduced evidence from Mr Crawford.  They produced three different estimates.
  1. Mr Rabbitt estimated the real rental at $100,000 per annum. He did this by accepting the projected gross income for the 1995-1996 year at $282,000. He then said that rental should be 45 per cent of gross income, thus arriving at a rental figure of $99,900 per annum. He said that a percentage of 45 per cent to 50 per cent for this purpose reflected a fair apportionment to both lessor and lessee. He derived support for a percentage of 45 per cent from a paper given at a conference by Mr Ian Crooks of Resort Brokers, the fourth defendant, who was said by Mr Askew the fifth defendant, to be a specialist in this industry. It also accords with evidence given by Mr Askew that rent ought not to exceed 50 per cent of maintainable income less other expenses. Maintainable income of $280,000, less expenses other than rent, $77,000, is $203,000, half of which is $101,500.
  1. Mr Calabro estimated the real rental at $120,000. He did this by arriving at the same proportion of real rent to actual turnover as represented rent bore to represented turnover.[8]  This is the exercise performed by the valuer whose assessment in this respect was accepted as correct by the High Court in Kizbeau.[9]
  1. Finally, Mr Crawford, the defendants' witness, estimated the real rental at $140,000 which included a $20,000 "lifestyle component". However his Honour rejected any such lifestyle component and Mr Logan SC, for the defendants, does not seek to contest that finding. Otherwise Mr Crawford agreed with Mr Calabro's estimate.
  1. Mr Douglas SC, for Quality, relied in the first place on Mr Rabbitt's estimate of $100,000. But faced with the possibility of the matter being sent back to the learned trial judge to resolve this conflict between Mr Rabbit's estimate, on the one hand, and, on the other, that of Mr Calabro and Mr Crawford (without a lifestyle component), he was content to accept the latter estimate. I would be prepared to act on Mr Douglas' acceptance and find that the real rental was $120,000.
  1. It will be recalled that the lease was one for five years with three options for renewal. Mr Douglas SC framed the claim as one of loss for five years and I think that is a reasonable basis for assessment notwithstanding that, by the time of trial, Quality had exercised its first option for renewal as it may have felt economically bound to do, having paid a capital sum of $410,000 for the business.

7.The application to the facts of the above measure of damages

  1. Once that estimate is accepted I would accept Quality's calculations of its loss as $124,000 under the Motel Purchase Agreement and $110,000 under the lease agreement. Those sums are calculated, respectively, as follows:

(a)under the Motel Purchase Agreement

Maintainable earnings were $83,000 ($280,000 less $77,000 expenses other than rent and rent of $120,000).  Capitalizing that sum at 30 per cent yields $276,000 to which must be added the value of the Jacaranda lease, about which there was no dispute, of $10,000.  Deducting this from the purchase price of $410,000 leaves $124,000.

(b)under the lease

This calculation may be stated by adapting a table of Mr Calabro's as follows:

Year

Rental Paid

$

Real Rental

$

Difference

$

1996

140,000

119,974

20,026

1997

147,000

125,973

21,027

1998

154,350

132,271

22,079

1999

162,067

138,885

23,182

2000

170,170

145,829

24,341

 

 

 

110,655

  1. It follows from what I have said that I think his Honour erred in assessing Quality's damages at $190,000 plus interest and that the correct assessment should have been $234,000 ($124,000 plus $110,000) plus interest at nine per cent per annum from 18 December 1995 to 9 April 2003.

8.The claims by the individual plaintiffs

  1. These claims were and are that these plaintiffs would not have given up their jobs in Sydney until they purchased a motel which satisfied their criteria,[10] that the motel as represented satisfied those criteria but that in actuality it did not.  They therefore gave up their jobs prematurely in reliance on the misrepresentations and allege that they should be compensated for the lost opportunity which they had to earn income from their former jobs until they would have found a motel which in fact satisfied their criteria.
  1. As already mentioned, his Honour rejected these claims primarily, it seems, because the "opportunity" to which he referred was lost, he thought, not because of the defendants' wrong but because the individual plaintiffs had decided to take another course in their lives. It is true that the individual plaintiffs had decided to take another course in their lives. But that was only if and when they were able to purchase a motel which satisfied their criteria. This motel was plainly not one of those and his Honour found that they would not have bought it had they known the real facts. Consequently, absent the misrepresentations, the individual plaintiffs would not have entered into contracts or caused Quality to enter into contracts to purchase a motel on 26 November 1995 or on 18 December 1995 and, accordingly, they would not have left their jobs in Sydney in December 1995. Once that is accepted, it seems to me that they have established that they suffered loss in consequence of the misrepresentations by the defendants.
  1. A greater difficulty in arriving at any meaningful assessment of the claims of the individual plaintiffs is, as the learned trial judge pointed out, the lack of any evidentiary basis for fixing a period of time for which their Sydney incomes were lost. For some time they had been considering leaving their jobs to operate a motel together. They began investigations into the motel industry in early 1995, had been inspecting motels for most of 1995 and had made an offer on a motel at Parkes in July or August 1995. That and their willingness to enter into this contract show that they were keen to enter into such a venture and it was never suggested by the defendants that their criteria were unrealistic. But that is all the evidence on this question that there was.
  1. That may seem skimpy evidence upon which to make an assessment of damages. But cases such as Chaplin v Hicks[11] and Sellars v Adelaide Petroleum NL & Ors[12] show that that is not an impediment to the assessment of damages in cases such as this.  From the above evidence it may be inferred that it would probably have been only some months, rather than longer than that, within which the individual plaintiffs would have found a motel which satisfied their criteria.  From this evidence then, I would assess that the individual plaintiffs had a 50 per cent chance that, within three months they would find such a motel and an 80 per cent chance that they would do so within six months.  The plaintiffs' losses on each of these bases may be illustrated by the following tables.  In each I have included in the plaintiffs' income after December 1995, as Mr Douglas SC has conceded I should, the whole of the income derived from the motel.
  1. Fifty per cent of three months loss of income

                                               J SkeltonM Skelton

Salaries$22,238.00$28,582.00

Less:  Motel income($9,337.00)

Drawings $4,512.50

Total deductions($4,824.50)

Add half of $4,824.50 to each $2,412.25 $2,412.25

$24,650.25$30,994.25

50 per cent of each$12,325.12$15,497.12

  1. Twenty percent of six months loss of income

J SkeltonM Skelton

Salaries$44,476.00$57,164.00

Less:  Motel income($18,674)

Drawings    $9,025

Total deductions   ($9,649)

Add one-half of $4,824.50 to each4,824.504,824.50

$49,300.50$61,988.50

20 per cent of each$9,860.10$12,397.70

  1. Adopting the second of these tables for the purpose of assessing the individual plaintiffs' losses, as I do, and rounding off the above figures, I would assess the loss of the individual plaintiff John Eric Skelton at $10,000 and the loss to the individual plaintiff Mary Dianne Skelton at $12,000.
  1. It is plain that on the above assessments the combined assessments of $234,000 to Quality, $10,000 to John Eric Skelton and $12,000 to Mary Dianne Skelton, exceed the monetary jurisdiction of the District Court. However, because no plaintiff's claim alone exceeded the jurisdiction of the District Court, r 698(3) appears prima facie to apply. There are, however, in my opinion, several reasons which, taken together, persuade me that the Court should nevertheless order otherwise pursuant to r 698(1). The first is that the assessment of Quality's damages and both the right to damages and the assessment thereof of the individual plaintiffs were all matters of some complexity. And the second is that Quality's claim and that of the individual plaintiffs were so inter-related that it is, in my opinion, appropriate to look at their damages in totality in considering how to exercise the discretion under r 698. I would therefore make the following orders.

Orders

  1. Allow each appeal.
  1. Set aside the judgments of the learned trial judge of 9 April 2003 and the order for costs of 22 April 2003.
  1. In lieu, judgment for the first plaintiff against the defendants for $234,000, judgment for the second plaintiff against the defendants for $10,000 and judgment for the third plaintiff against the defendants for $12,000, in each case with interest from 18 December 1995 at nine per cent per annum.
  1. The defendants to pay the plaintiffs' costs of the trial and of this appeal.
  1. WILSON J:  I agree with the reasons for judgment of Davies JA and with the orders he proposes.

Footnotes

[1]The plaintiffs stopped using the Jacaranda Apartment when its lease expired in December 1998.  Quality exercised its option to renew the motel lease for a further five years from 18 December 2000 and continued to conduct that business.  Millford sold the freehold of the motel to an unrelated party in April 1999.

[2]The claim pursuant to the Fair Trading Act was not pursued.

[3]By estimated real rental value or real rental I mean the rental which "freely contracting, fully informed parties would have offered and accepted":  Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 514.

[4]The inclusion or value of the Jacaranda lease was not in issue in this Court.

[5](1995) 184 CLR 281.

[6]At 297.

[7]Amended condition (p) was the local council condition which allowed the upstairs section of the premises to be used for seminars and conferences and condition (s) was the condition which provided a restriction on numbers for that purpose.

[8]Gross takings as represented were $323,000.  The rental actually charged was $140,000 which is 43.3 per cent of $323,000.  The actual takings were $280,000, 43.3 per cent of which is $121,240.

[9]At 288.

[10]Those criteria were that it would provide them with a nett profit before tax of at least $150,000;  that it was in good condition, had good exposure to traffic, had approximately 20 rooms and had at least a three star NRMA rating.

[11][1911] 2 KB 786.

[12](1994) 179 CLR 332.

Close

Editorial Notes

  • Published Case Name:

    Quality Corp (Aust) P/L & Ors v Millford Builders (Vic) P/L & Ors

  • Shortened Case Name:

    Quality Corp (Aust) Pty Ltd v Millford Builders (Vic) Pty Ltd

  • MNC:

    [2003] QCA 502

  • Court:

    QCA

  • Judge(s):

    McPherson JA, Davies JA, Wilson J

  • Date:

    14 Nov 2003

  • White Star Case:

    Yes

Litigation History

No Litigation History

Appeal Status

No Status