DISTRICT COURT OF QUEENSLAND

Introduction

1. [1]
   On 24 March 2008 Ross Goodhew (Mr Goodhew) entered into a contract to purchase a tutoring centre at 1/25 Thomas Street, Noosaville (the premises) known as Aldon Tutoring Centre – Noosa District (the business) from Vivad Pty Ltd as trustee for the Vivad Trust (the company) for $96,500. As a condition of that contract Mr Goodhew required a new lease of the premises, and a lease was granted to him by the company and Jeanette Ann Rachinger (Ms Rachinger) for three years with options, the initial term to expire on 15 April 2011. There is some confusion in both the business contract and the lease as to proper description of the company and its status but nothing turns on this and Mr Goodhew has never raised it as an issue. MsRachinger was a director of the company and clearly acted on its behalf at all relevant times.

2. [2]
   It is common ground that Mr Goodhew left the premises on 15 December 2009 and that MsRachinger and the company retook possession the following day. They commenced proceedings against Mr Goodhew on 12 May 2011 to recover damages and loss for breach of the lease agreement. At a time when Mr Goodhew was represented by solicitors he filed a defence and counterclaim on 1 July 2011. Essentially his defence and counterclaim was based on what was pleaded to be a misleading and deceptive representation made to him by MsRachinger in contravention of s52 of the Trade Practices Act 1974, during the negotiations with the company for the purchase of the business. Essentially, MrGoodhew’s pleaded case was that he was induced by misleading and deceptive conduct in that MsRachinger represented to him “that the average weekly number of enrolled students was 105”:  5.5 Amended Defence and Counterclaim filed 14 November 2011.

3. [3]
   The trial proceeded over two days. Evidence was received on 11 May 2012 and addresses conducted on 29 June 2012 in the Noosa Magistrates Court. On 13 July 2011 his Honour Magistrate Hodgkins dismissed Mr Goodhew’s counterclaim and awarded the company and MsRachinger $29,911.36 damages for breach of lease together with interest and costs assessed on the indemnity basis. MrGoodhew has appealed to this court against that judgment.

The appeal

4. [4]
   The appeal is pursuant to s45 of the Magistrates Court Act 1921, and by application of r785, r765(1) and r787 of the Uniform Civil Procedure Rules, the appeal is to be by way of a rehearing, and the Court must rely on the transcripts and exhibits before his Honour unless I “otherwise” order.

5. [5]
   Mr Goodhew seeks to introduce new evidence.

6. [6]
   By virtue of r785 of the Uniform Civil Procedure Rules, r766(1)(c) relating to procedure in appeals to the Court of Appeal, applies to this appeal, so the court has power to receive “further evidence on questions of fact … on special grounds”. In many cases, the Court of Appeal has applied the common law test i.e. (i) could the evidence have been obtained with reasonable diligence at the trial and (ii) would it have an important influence on the result of the case:  Pickering v McArthur [2010] QCA 341.

7. [7]
   The evidence he seeks to lead before this court comprises tax returns of his family trust from 2009 to 2011 presumably relevant to the issue of loss and damage, and he had in court Pamela Stockdale who had provided a statutory declaration. His outline of argument also refers to other evidence and annexes other documents. As is evident from the transcript below, all of this evidence was in fact available at the trial.

8. [8]
   The tax returns are the subject of a complaint made by Mr Goodhew against MsASmith, counsel for the company and Ms Rachinger both here and below, and the Clerk assisting his Honour in the Noosa Magistrates Court which is annexed to his Notice of Appeal. In view of my conclusions about the merits of the appeal, I will deal with this issue later in my reasons. At 1-10 to 1-11 of the transcript MrGoodhew actually told his Honour that he had the tax returns “in relation to losses” and his Honour told him that was a matter for evidence.

9. [9]
   As to the other evidence, at the start of the trial a number of issues were discussed with Mr Goodhew. When he was self-represented, as he was at the trial, he had amended his counterclaim on 14 November 2011 (paras 12, 13 dealing with damages), such that the amount claimed exceeded the jurisdictional limit of the Magistrates Court. His Honour was prepared to give him an adjournment to apply to transfer the proceedings to this Court on the basis that he could be faced with an order for costs thrown away by the late application to transfer. MrGoodhew decided to accept the jurisdictional limit of the Magistrates Court and proceed. He informed his Honour that he intended to “present … statutory declarations”. His Honour correctly informed him that he could only place evidence before the court by calling the witnesses and having them available for cross-examination. MsSmith informed his Honour that she had not seen the statutory declarations and did not know what the evidence was about. MrGoodhew then informed his Honour that he had asked two witnesses (presumably to come to court) but work commitments prevented that happening. He had not subpoenaed anyone. Again, his Honour quite fairly told MrGoodhew that if he wanted an adjournment he would consider it but, again, given the attitude of Ms Smith he may face an adverse costs order. The statutory declaration of MsStockdale was made on 21 October 2011 i.e. well before the hearing, so I infer that she was one of the witnesses he was referring to, however he never told his Honour what the evidence was or who the witnesses were and he decided to proceed. It follows that the evidence is not fresh, and, for reasons I will later disclose, its reception would have no important influence on the outcome of the case.

Discussion

10. [10]
    The key issue at trial was whether or not MrGoodhew had proved that MsRachinger had made the only representation said in the pleadings to be deceptive and misleading. It is pleaded in para 5.5:

“5.During the course of negotiating with the plaintiff’s (sic) for the purchase of the business:

…

5.5the plaintiff’s (sic) disclosed to the defendant that the average weekly number of enrolled students was 105 (‘the representation’);

…”

11. [11]
    Paragraph 5 pleads a number of other factual matters but 5.5 is the only representation said to be misleading and deceptive (see para 9.2). It is this representation of fact that is the focus of the defendant’s pleading that led him to complete the purchase of the business and enter into the lease.

12. [12]
    His Honour specifically found against MrGoodhew on this key piece of evidence as he did on many other areas of factual dispute between he and MsRachinger. They were the only witnesses who gave evidence at the hearing. His Honour accepted MsRachinger’s evidence that at no time did she tell MrGoodhew that she had an average weekly enrolment of 105 students. Not surprisingly, this alleged misleading and deceptive representation was the focus of cross-examination. Indeed MrGoodhew’s cross-examination of MsRachinger and his own evidence disclosed a different representation to that pleaded. At para [40] of his Honour’s judgment, he writes:

“Mr Goodhew admitted during the hearing that at no point had MsRachinger during negotiations represented that the average weekly number of enrolled students was 105.”

13. [13]
    His transcript reference footnote is incorrect, but, on a number of occasions in cross-examination Mr Goodhew did make such admission. At 1-81 there is this exchange:

“Right. At no time in the negotiations did the plaintiff ever say that the average weekly number of enrolled students was 105, did she?-- She had given me when I asked-----

No, just answer the question. At no point during the negotiations did MsRachinger ever say that the average weekly number of enrolled students 105, did she?--  No, she didn’t say that. What she did say-----

She didn’t - hang on - she didn’t-----?--  I-----

Did not say that?--  Yeah I’m repeating myself again, she did not say that, but what she did do was, ‘look, I worked out the goodwill based upon the formula of Aldon Tutoring in page 67 of the manual’, and she gave me a copy of the manual so that I would understand it. So if you’re - if you’re suggesting that that’s not misleading conduct, well, we can argue that later.”

14. [14]
    At para 5.6 of the counterclaim it is alleged:

“5.During the course of negotiating with the plaintiff’s (sic):

…

5.6the plaintiff’s (sic) told the defendant that the goodwill component of the purchase price, being $63,000, was calculated on the basis of $600 per average weekly number of enrolled student, (sic) or 105 students x $600.”

15. [15]
    This alleged representation, which was not said to be deceptive or misleading, but which takes up para 5.5,became the focus of Mr Goodhew’s case both at trial and on appeal. He also raised a new issue not pleaded, that through her silence MsRachinger on behalf of the company had engaged in misleading and deceptive conduct.

16. [16]
    The issue about the calculation of goodwill was dealt with by his Honour on the basis of his assessment of the credibility and reliability of MsRachinger and MrGoodhew, as were most of his factual findings.

17. [17]
    MsRachinger told his Honour that during negotiations, Mr Goodhew was provided with the company’s profit and loss statement for the year ending 30 June 2007 which is Exhibit M, and the “Business Summary”, Exhibit O. He was also working as a tutor at the business for a period prior to 24 March 2008, the date on which the business contract was signed, and there were papers and records that he had access to concerning the business. He did not ask to see student figures for 2007 and previous years which amazed MsRachinger. The Business Summary states:

“Current Franchise Purchase Price $22,000

Enrolment value based on 105 students $63,000

Walk-in Walk-out Equipment/Furnishing$11,500

Purchase Price$96,500.”

18. [18]
    The business contract did not break up the price into component parts. It certainly did not value “goodwill” at $63,000. As his Honour noted, the Business Summary does not refer to an average weekly enrolment of 105 students. In fact, as he found based on documents tendered through MsRachinger, which documents his Honour found MrGoodhew never asked to see prior to signing, 105 was the peak figure for enrolments in 2007.

19. [19]
    MrGoodhew asserted that MsRachinger told him that goodwill was calculated on the basis of the calculation in the manual. As this was a franchised business, there was a manual provided by the franchisor to the franchisee. MrGoodhew alleges that MsRachinger gave him a copy of the manual during negotiations. His Honour accepted MsRachinger’s evidence that she did not provide MrGoodhew with a copy of the manual during negotiations and he made this finding on a number of bases. Firstly he accepted her as a careful, credible and reliable witness. Secondly he accepted her evidence that there was a notation in the manual which stated (understandably) that a franchisee is not to give the manual to anyone. His Honour described MrGoodhew’s evidence on this point as “confusing”. MrGoodhew now complains that his Honour never raised this with him. That complaint misses the point. MrGoodhew was given every chance to explain his case during the trial. As his Honour found, he is a man with significant educational training. He has a commerce degree, a masters in commercial law, was a qualified teacher and clearly (in relation to his cross-examination on this issue), had knowledge of accounting and accounting practice. His evidence on when and how he received a copy of the manual during negotiations is confusing. In his evidence-in-chief in answer to questions from his Honour he referred to going to the business premises in 2008 after seeing an advertisement in the Queensland Teachers’ Union Journal and from there he met MsRachinger and in due course received a copy of the Business Summary and he commenced tutoring for her. In that part of his evidence he says when he asked her about the figures of $22,000 and $63,000 in the Business Summary she said, “Well, here it’s described in the manual on page 67”. He said, “She showed me where it was. So, I took that away with me to study later on.”

20. [20]
    Later his Honour was asking him why he didn’t negotiate on her price of $96,000 and he responded (at 1-67 – 1-68T):

“Everyone negotiates the price down. You didn’t. You just accepted the figure?--  Well, I did accept the figure because I thought she was telling the truth, and I did accept what she was saying that she had used the manual’s basis for working out the goodwill, and in relation to what was said earlier on about the cooling off period, I may have taken a different tack altogether if I wasn’t shown where it was all written in the manual and given the manual to study because I would have got that manual at the training, which I did, and then I would have seen the basis. So at this stage when I went to particular training, I understood her to mean 105 on average for the past 12 months. I took her at her word that that’s what it was, and I’d like confirmation from the franchisor at the training that she was doing really well, and I didn’t have in my possession the 2008 figures, but only seen the actual working documents, daily working documents for March, a bit of April.”

21. [21]
    Although there was a copy of the manual in the courtroom it was never tendered. MrGoodhew quoted from p 67 in his cross-examination of MsRachinger:

“The ATC believes a fair request would be at least $500 per the average number of students enrolled over the previous 12 months of your business plus the current value of equipment you had purchased for your franchise.”

22. [22]
    Page 67 was never tendered, although there was no dispute about what it said.

23. [23]
    His Honour took this to be the formula for calculating goodwill suggested by the franchisor which was not binding. MsRachinger denied telling MrGoodhew that she used the manual for this purpose, and his Honour accepted her evidence on this point. In fact she calculated goodwill based on a peak figure of 105 students attained in 2007 using a multiplier of $600 which she thought was more reasonable given the successful growth of her business. During cross-examination of MsRachinger by MrGoodhew there is this exchange:

“Okay. Then I asked for the explanation of the franchise cost and the enrolment value based on 105 students, $63,000 and you proceeded to give me at that time first of all by showing me your manual and going to page 67 of the manual which actually says this:  ‘The ATC believes a fair request would be at least $500 per the average number of student enrolled over the previous 12 months of your business plus the current value of equipment you had purchased for your franchise’?--  Excuse me, could I ask you a question?  Did you say that I had shown you that document?

Yes, you had given me the manual. You had given me a copy of your-----?--   I’m not allowed-----

This is my manual that – you’re not allowed to.

BENCH:  No, no, let’s just clarify this. Can you answer the question he’s putting?  MrGoodhew is saying that you showed him the manual, is it?

DEFENDANT:  That’s right, the manual. You gave me your manual at that time. I know that it was your manual and you had to later return it, but during the training I got mine, but by then of course I already knew about how a business price was to be fairly determined according to the franchisor of Aldon Tutoring for Australia. Is that correct?--  Correct

Okay. So you agree now that in fact you gave me a copy of your manual to have a look at?--  I actually doubt that I did because it says at the front of that manual that I’m not allowed to give it anyone, so I think the first time you saw the manual was at the training.

BENCH:  At the training?  Which training?--  When a business is sold, a franchise with Aldon Tutoring Centres, the franchisors give a two day training.

So this is after the contract had settled?--  No-----

DEFENDANT:  No, this is before the contract had been signed, sir.”

24. [24]
    As I have noted his Honour’s factual findings on these critical issues were against MrGoodhew essentially on the basis of his Honour’s assessment of the respective credibility and reliability of the main protagonists.

25. [25]
    His Honour also referred to three letters sent by MrGoodhew to MsRachinger after settlement dated respectively 12 June 2008, 4 March 2009, and 22 March 2009. In none of these letters did he allege that the representation pleaded in 5.5 of the Amended Defence and Counterclaim was made.

26. [26]
    It is common ground that on two occasions prior to MrGoodhew abandoning the premises, it was necessary for MsRachinger’s solicitors to formally serve him with a Notice to remedy Breach of the Lease which breach was remedied but which involved costs which formed part of the damages awarded. Again there is no evidence of any response to those notices from MrGoodhew alleging deceptive and misleading conduct by MsRachinger on behalf of the company which he now says vitiates both the business contract and the lease.

27. [27]
    His Honour concluded that MrGoodhew did not prove that the allegedly misleading and deceptive representation was made. His conclusion was based on findings of fact essentially following on from his preference for the evidence of MsRachinger over that of MrGoodhew on the key issues. None of these findings have been shown to be unreasonable or not based on the evidence. He had the advantage of hearing and seeing the two key witnesses and the reluctance of appellate courts to interfere in findings of fact in these circumstances is well-known.

28. [28]
    MrGoodhew has on appeal challenged the finding of fact based on MsRachinger’s evidence that he commenced tutoring in late 2007. She relied on her recollection of her records. MrGoodhew could have challenged this evidence at trial by reference to the business records but chose not to. Rather, he simply stated that he thought he started later. There is no merit in this point.

29. [29]
    His Honour dealt with the issue of silence or non-disclosure at para [65] of his judgment. What he could have said is that silence or non-disclosure was not the case pleaded by MrGoodhew in his Amended Defence and Counterclaim. His whole case was based on an alleged representation, found by his Honour not to have been made, that was said to be deceptive and misleading. His Honour did not err in his judgment on this issue.

30. [30]
    In light of my conclusions as to the complete lack of merit in the appeal it follows that the reception of any of the so-called new evidence would not have made any material difference to the outcome.

31. [31]
    I mentioned at the start MrGoodhew’s complaint about the tax records. It is clear that at the start of the case MrGoodhew mentioned that he had his copy of the manual and the tax returns that he intended to rely on. It was made clear to him that if he wish he could rely on these documents as part of his case. It appears that he had only brought one copy of each document to court. As I’ve noted he merely read from p67 of the manual and did not seek to tender it, and he did not place the tax returns into evidence. Whatever happened, it could not be said that he was in any way prejudiced in the conduct of his case and his complaint is not a proper ground for appeal. He has never clearly articulated how the tax returns relate to his pleaded loss,  however any diminution in income from the business after he acquired it was attributed by his Honour to MrGoodhew’s own business style and personality and not to any misrepresentation by MsRachinger. This was a conclusion reasonably open on the evidence before his Honour.

32. [32]
    On the day his Honour delivered judgment, MrGoodhew, by prior arrangement to suit him, appeared by telephone. When the decision was announced, MsSmith for the plaintiff disclosed a previous written offer to settle for a sum less than the amount claimed and sought indemnity costs. MrGoodhew did not dispute that such an offer had been made. MsSmith then asked his Honour to assess costs himself based on documents handed up which were not made exhibits but which are on file. His Honour explained all of this to MrGoodhew, and also that the interest claimed was $11,305.22 and the costs are $33,757.08. Mr Goodhew was more concerned about his appeal rights, and did not make any submissions to his Honour and, of course because he was on the phone, he did not have copies of the costs assessments or the cases that MsSmith handed to his Honour. His Honour indicated he would award indemnity costs and “make an assessment after reading of the documents …”. The file is endorsed by his Honour as to the damages, interest and costs. The file records (in his Honour’s hand) that the costs documents are to be sent to MrGoodhew. There is no ground of appeal or complaint from MrGoodhew relating to the award of interest or costs.

33. [33]
    The appeal is dismissed with costs.