Re TN Lucas Pty Ltd v Centrepoint Freeholds Pty Ltd [1984] FCA 4 (3 February 1984)

FEDERAL COURT OF AUSTRALIA

Re: T.N. LUCAS PTY. LTD.
And: CENTREPOINT FREEHOLDS PTY. LTD.
No. VG188 of 1981
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIAN DISTRICT REGISTRY
GENERAL DIVISION
Jenkinson J.

CATCHWORDS

Trade Practices - lease of shop in shopping mall - misleading or deceptive conduct - conduct likely to mislead or deceive - false statement - fraudulent misrepresentation - breach of warranty - negligence.

Trade Practices Act 1974 - ss. 52, 53, 53A, Part V Division 1, ss. 82, 87, Part VI.

Judiciary Act 1903 - s.79

Local Government Act 1958 (Victoria)

Uniform Building Regulations 1974 (Victoria)

HEARING

MELBOURNE
3:2:1984

DECISION

Trial of a proceeding for damages.

2. Ttoolis Neophytou Lucas is a pastry-cook, born in Cyprus 56 years ago, who settled here in 1949. He worked as an hotel waiter, bought and conducted and then sold a suburban milk bar. In 1954 he bought a business in North Balwyn : cake shop and bakery, with a dwelling upstairs. The price he paid fell a little short of $7,000. He sold the business in 1971 for $40,000. In the year before sale the assets of Mr. Lucas and his wife, other than the assets of the business, exceeded their liabilities by more than $100,000. The surplus had been achieved by employing the profits of the business in the acquisition of real property. Mr. and Mrs. Lucas had also discharged out of those profits the expenses of rearing, and educating at private schools, their four children. In 1974 Mr. Lucas bought a similar business at "the Doncaster Shopping Town" for $8,000. He sold the business in November 1977 for $45,000. Mr. Lucas learnt the pastry and bakery crafts from tradesmen he employed at North Balwyn. All the stock of both businesses was manufactured in the shops : nothing sold was bought in. He and his wife worked in the shops, making and selling.

3. Mr. Lucas and his wife have at all material times been the only members, the only beneficial owners of the issued capital, and the directors, of the applicant T.N. Lucas Pty. Ltd. The activities of the applicant with which this proceeding is concerned were in execution of a trust, accepted by the applicant in March 1979, of a fund for the benefit of Mr. and Mrs. Lucas and certain relatives of theirs. The powers conferred on the applicant by the trust deed authorised those activities.

4. By a deed dated 16 May 1979 the applicant and the respondent agreed for a lease by the respondent to the applicant of certain premises in the basement of a building in Bourke Street, Melbourne, known as the Centrepoint Mall, for a term of 4 years from a date to be ascertained in accordance with provisions of the deed. Pursuant to the provisions of the deed the applicant took on 10 October 1979, and for about 15 weeks retained, possession of the premises, and conducted therein a retail cake shop and bakery. Then the respondent excluded the applicant from possession of the premises, which the applicant has not re-taken. In this proceeding the applicant claims against the respondent damages in respect of conduct proscribed by s.52(1), s.53(aa) and s.53A(1) of the Trade Practices Act 1974, and constituting fraudulent misrepresentations, which is alleged to have caused the applicant to execute the deed, and damages in respect of breaches alleged of warranties, which the same conduct was said to have constituted, collateral to the execution of the deed, and damages for negligence in respect of the same conduct. The several statements of which the impugned conduct consisted are alleged in sub-paragraphs, alphabetically designated, of paragraph 4 of an amended statement of claim which was filed on 19 October 1982.

5. Paragraph 4(a) of that amended statement of claim alleges that it was said on behalf of the respondent that "the Centrepoint Mall would be open for trading in June 1979". Such a statement was made on behalf of the respondent to the applicant, but I am not persuaded that when the deed was executed either director of the applicant thought that the prophesy might be fulfilled, nor am I persuaded that when the deed was executed either director was at all influenced to cause the applicant to execute the deed by reason of the circumstance that the statement had been made.

6. Paragraph 4(b) alleges that it was said that "there would be only one bakery and cake shop in the Centrepoint Mall". I find that Craig Robertson, who was the respondent's leasing agent at all material times, did make that statement to Mr. Lucas. I find that the statement was not at any relevant time falsified in the event. Mr. Lucas gave evidence that some kinds of cake made and sold by the applicant in its premises were made and sold, only for consumption on its premises, by a tenant of other premises in the basement of the Centrepoint Mall. That tenant traded under the name "The Pancake Parlour". I am not persuaded that those circumstances falsified the assertion alleged in paragraph 4(b) of the amended statement of claim, or justify a conclusion that the statement constituted misleading conduct.

7. Sub-paragraphs (c), (d) and (e) of paragraph 4 allege that it was represented and warranted that:

"(c) Shops B.01 and B.02 were the only shops in the Centrepoint Mall specially designed for use as a bakery and cake shop in a manner which complied with all health and building requirements;

(d) Shops B.01 and B.02 had been specially designed and did comply with -

(i) all relevant building regulations;

(ii) all relevant health regulations; and

(iii) all other relevant municipal and statutory requirements;

so as to enable the applicant to use the said Shops for the purpose of conducting a bakery and cake shop for the duration of its lease and any renewal thereof;

(e) the applicant's proposed occupation and use of the Shops was lawful and would remain lawful for the duration of the lease and any renewal thereof."

The expression "Shops B.01 and B.02" designates the premises which the applicant leased.

In October 1978 Mr. Robertson stated to Mr. Lucas that the premises of which a lease was later agreed to be taken by the applicant would "comply with all the regulations". I am not persuaded that by any other communication any of the representations and warranties alleged in sub-paragraphs (c), (d) and (e) of paragraph 4 was made or given. The statement by Mr. Robertson was made in a conversational context which gave to the expression "the regulations" a meaning which would comprehend the Uniform Building Regulations 1974, made under the Local Government Act 1958. I find that in several respects the premises failed to comply with those Regulations. I am not otherwise persuaded that any of the representations or warranties alleged was falsified or breached. In so far as there might be said to have been constituted a contract concerning compliance with the Uniform Building Regulations, no damage was proved to have been caused by any breach. In so far as the statement might be said to have been negligent, no damage was proved to have been caused thereby. The conduct which the statement constituted was not, as I find, misleading or deceptive or likely to mislead or deceive; nor was the statement "false", in the sense in which that word is used in s.53A(1)(b) of the Trade Practices Act 1974.

Where a prophetic statement, not held to be a contractual promise, is made about the physical characteristics of part of a building then being constructed or - if the maker of the statement is to be credited with advertence to the mutability of enacted law - about those physical characteristics and the future content of whatever the expression "the regulations" might comprehend, the statement should ordinarily be understood as an expression by the maker of his belief and, in certain circumstances, of the intention of the maker of the statement or of some other person as to those physical characteristics. I am not persuaded that Mr. Robertson misstated his belief, or that, if and in so far as his statement might be understood as a representation of the respondent's intention in that regard, the statement was false or likely to mislead or deceive, or was negligently made. The proved instances of failure to comply with the Uniform Building Regulations 1974 were not serious, and were of a kind which might well have occurred in consequence of accidental oversight in the course of executing a large construction project, such as the respondent and persons associated with it were undertaking in order to create the Centrepoint Mall, when Mr. Robertson's statement was made.

8. Paragraph 4(f) alleges that the following statements were made on the respondent's behalf to the applicant:

"(f) The shops initially requested by the applicant being Shops B.30 and B.07 were not available to the applicant because only Shops B.01 and B.02 had been specially designed for a bakery and in any event they had already been leased to Gilbertsons butchers."

I find that in January 1979 Mr Lucas suggested to Mr. Robertson that he would be interested in taking a lease of premises which may be identified on the plan forming part of the deed by the expressions "B.30 and B.07". I find that Mr. Robertson responded by saying that those premises had already been taken by a butcher, Gilbertsons, and that only the shops known as B.01 and B.02 had been specially designed for a bakery business. By the assertion that those premises had been taken by Gilbertsons Mr. Robertson intended, and was understood by Mr. Lucas, to assert that agreement had been reached for a tenancy of B.30 and B.07 between the principal on whose behalf Robertson was then acting and a person entitled and intending to carry on a butchery in the basement under the well known butchery business name Gilbertsons. From the circumstance, which was proved, that no such a business has been conducted in the Centrepoint Mall I infer that no such an agreement had in fact been made. I am encouraged to make that inferred finding by the absence of any evidence on behalf of the respondent that such an agreement had been made or had been contemplated and by the evidence of the credit manager of the group of companies which included the respondent, Paul Powderly, that "Gilbertsons" was never a tenant in the Centrepoint Mall. The statement by Mr. Robertson, who died before trial, was a misrepresentation of fact. I am also persuaded that the misrepresentation was fraudulently made by Mr. Robertson. I am encouraged to make that inferred finding by the absence of any evidence on behalf of the respondent that there were circumstances from which it might have been inferred that Mr. Robertson believed what he said to be true. I am persuaded that the statement by Mr. Robertson constituted conduct which was misleading and that it misled Mr. Lucas into the belief that such an agreement had been made; and I find that the belief influenced Mr. Lucas to cause the applicant to execute the deed.

The assertion that only the shops of which the applicant took a lease had been specially designed for a bakery business was not shown to have been false. The statement concerning Gilbertsons will be further considered with those alleged in paragraphs 4(g) and 4(h), which read:

"(g) Shops B.21 and part of B.22 had already been leased to Macdonalds (sic).

(h) the shops already leased in the basement included: -

(i) a continental delicatessen;

(ii) a fruit shop;

(iii) a fresh fish shop;

(iv) a large number of shops each selling food from various countries."

I find that in the first week of October 1978 Mr. Robertson told Mr. Lucas, while they were discussing the possibility that Lucas might take a tenancy of premises in the basement of the Centrepoint Mall, that "McDonalds" had agreed to occupy premises in the basement. And I find that by the word "McDonalds" Robertson intended to designate, and Lucas understood him to designate, a person or persons entitled, and intending, to trade in the basement under that name as one of a very popular chain of restaurants, all of which traded under that name in Melbourne and elsewhere in the world. On the same occasion Mr. Robertson told Mr. Lucas that "Gilbertsons would be there", by which, as I find, Robertson intended to be understood and was understood by Lucas, as asserting that a butchery under that well known retail butchery trade name would be conducted in the basement. In January 1979 Mr. Robertson told Mr. Lucas, in response to questioning by Lucas as to whether he was sure that McDonald's and Gilbertson's would be trading in the basement, that he was sure of that.

Even if those latter statements, considered alone, might be taken, not as representations that an agreement had been entered into by each of the persons who fell within the description expressed by the words "McDonalds" and "Gilbertsons" respectively for a tenacy of premises in the basement, but only as representations of Mr. Robertson's belief that each of them would take such a tenancy, each statement was, considered with reference to the other statements about those persons, an affirmation of each of the representations that each had agreed to be a tenant in the basement.

The evidence that no business under the name "McDonalds" has been conducted in the basement justifies the inference, which I draw, that no agreement for a tenancy of premises in the basement had been made with a person for whom or for which the designation "McDonalds" would be appropriate. No evidence was adduced on behalf of the respondent from which any other inference might have been drawn about the making of such an agreement or about Mr. Robertson's belief concerning such an agreement. The statement that such an agreement had been made was a misrepresentation of fact. I am persuaded that it was fraudulently made and that it constituted conduct which was misleading and that it misled Mr. Lucas into the belief that such an agreement had been made; and I find that the belief influenced Mr. Lucas to cause the applicant to execute the deed.

The representations alleged in paragraph (h) were not, as I find, made in the terms or to the effect alleged. Mr. Robertson stated in substance that shops of the descriptions specified in paragraph (h) would be in the basement, but I am not persuaded that what he said amounted to an assertion that a shop had been leased, or agreed to be leased, to a person who proposed to conduct in it a business of a kind specified in that paragraph. I am not persuaded that what Mr. Robertson said amounted to more than an expression of his intention that shops of those descriptions should be established in the basement, and of his confident belief that they would be. The evidence does not justify a conclusion that either Mr. Robertson or the respondent did not have that intention, or a conclusion that he had no such a belief.

9. The pleadings in this proceeding, in so far as they concern misrepresentation and misleading conduct, treat the statements alleged in paragraph 4 of the amended statement of claim only as assertions of fact: none of the statements is alleged to have been made, or to have been understood, as an assertion of intention, or of belief. But counsel for neither party was embarrassed by that circumstance: in submission and discussion during argument counsel and judge canvassed the evidence in relation to those causes of action as if the pleadings had been so drawn as to include allegations that those statements expressed the intentions of the respondent or of the maker of the statements and the beliefs of the maker. It was not submitted on the respondent's behalf that any of the intentions and beliefs which in the submission of counsel for the applicant had been misrepresented by those statements could not found a cause of action cognisable in the proceeding by reason of the applicant's failure to plead that the intention or the belief had been represented. In those circumstances I think myself free to deal with the proceeding as if the pleadings had been so drawn, and to pass by the difficulties which are discussed in Lyons v. Kern Konstructions (Townsville) Pty. Ltd. (1983) A.T.P.R. para. 40 - 343.

10. It was alleged further in the amended statement of claim:

"4. In order to induce the applicant to make and enter into the lease, the respondent represented to the applicant and in consideration of it (sic) doing so warranted that:

(i) the respondent would provide free of charge to the applicant three phase power at Shops B.01 and B.02 to enable the running of heavy duty plant and equipment;

(j) the respondent would provide free of charge to the applicant all necessary sprinkler systems and other fire prevention installations at Shops B.01 and B.02 as required by the Metropolitan Fire Brigade:

(k) the respondent would provide free of charge to the applicant all necessary plumbing installations to Shops B.01 and B.02 to enable the applicant to conduct a bakery and cakeshop therefrom."

I find that statements substantially to the effect of what is alleged in sub-paragraphs (i), (j) and (k) of paragraph 4 were made by Mr. Robertson to Mr. Lucas before the application for lease was signed. I am not persuaded that the statements constituted conduct which contravened a provision of Division 1 of Part V of the Trade Practices Act 1974. Considered as representations of the respondent's intentions, the statements specified in sub-paragraphs (i) and (j) constitute little, if anything, more than a representation of the respondent's intention to perform obligations which would be contractually imposed on it by the agreement for lease. The evidence does not persuade me that the respondent did not have that intention. Nor am I persuaded that the respondent did not have, at the time when the statements were made, the intention to do what is specified in sub-paragraph (k). In so far as the statements specified work to be done by the respondent beyond what would be contractually imposed by the agreement for lease, they constituted promises offered in consideration of the applicant's entering into the agreement for lease, in my opinion, and may conveniently be called warranties.

Breach and consequent damage were pleaded in the amended statement of claim in respect of the warranties alleged in sub-paragraphs (i), (j) and (k), but the evidence on the issues raised in respect of those allegations was exiguous and confusing; nor did counsel for the parties direct submissions of any length to those issues. Some of the evidence suggested that, if there were any breach, it was not by failure to do the work, but by attempt to recover the cost of the work, and that relief other than by the award of damages might be appropriate. I propose to invite counsel to make further submissions before I further consider the causes of action upon the warranties alleged in those sub-paragraphs.

11. It is alleged in paragraph 4 that the respondent represented to the applicant and warranted:

"(l) the initial rental payable by the applicant in respect of Shops B.01 and B.02 would be $27,680.00 per annum;

(m) the said initial rental would not be increased for a period of 2 years from the commencement date."

In January 1979 Mr. Robertson told Mr. Lucas that the rent of the shop of which the applicant later took a lease would be $27,680 per annum and that the rent would be reviewed every two years and that the term of the lease would be four years with an option for renewal. Under cover of a letter dated 5 February 1979 from the respondent to Mr. and Mrs. Lucas a form of application for tenancy of the shop was forwarded to the couple. That letter read:

"Further to recent discussions with our Mr. C. Robertson, we confirm that the lease document will state the annual rental as being $27,680 for the first year of the lease and that you will be given an "advertising allowance" of $3,500 which will be treated as a proportionate reduction from the monthly rental statement over the first year.

We can assure you that we will honour our obligation in this matter and advise you that it is not our intention to have a legal document drawn up to cover this allowance. In the event of the centre being sold during the first year of your lease, we confirm that the balance then outstanding of monies owed, will be paid by our company to your company in a lump sum on settlement of sale.

We wish to stress that this agreement is to remain confidential and would be pleased if you would sign the duplicate copy of this letter confirming your acceptance to our offer and return to the writer at the earliest possible date."

Part of the application form was in these terms:

"Term of Lease 4 years Options 4 years Comm. Date

June
1979

Rental Per Annum $27,680 Per Month $2,306.66 **See note on attached letter re rental deposit.

Rental Deposit Paid $2,306.80 being one month's rental in advance

Rental Review Mutual Agreement Period 2 yearly

Rates & Taxes, Common Area Outgoings, Merchants Association contribution payable by lessee.

Special Conditions Advertising allowance of $3,500 to be granted during first year of lease. This is to be confirmed confidentially by exchange of letters."

Under cover of a letter dated 6 February 1979 from the respondent's solicitors to the solicitors for Mr. and Mrs. Lucas an agreement for a lease of the shop by the respondent to Mr. and Mrs. Lucas was forwarded. Mr. and Mrs. Lucas having decided, upon advice, that a company of which they would be the members should make the agreement, a further agreement was prepared between the respondent and the applicant, but the terms of the two agreements were otherwise the same.

Peter Charalambos Gregory, a son-in-law of Mr. and Mrs. Lucas, was at that time a solicitor employed by their solicitors. He told Mr. Lucas that terms of the agreement for lease differed from that which the contents of the application for lease had suggested would be the terms. Mr. Lucas told Mr. Robertson by telephone that his solicitor had advised him of differences between the two documents. Mr. Robertson responded by assuring Mr. Lucas that the lessors wanted him to take a tenancy and would treat the tenancy as being on the terms stated in the application, and that the lessors had a standard lease which it would be very expensive for him to have altered. Mr. Robertson advised him to leave the agreement unaltered because of the expense of alteration. Mr. Lucas believed what Robertson said and in reliance on what Robertson said he caused the applicant to execute the agreement in the belief that the lessor would treat the tenancy as upon the terms as to rent which are stated in the application. Mr. Robertson's statements were intended to be understood, and were understood by Mr. Lucas, as a representation that the lessor's intention was to treat the tenancy as upon those terms. I infer, from the circumstance that the lessor did not treat the tenancy as upon those terms in respect of rent and the circumstance that no evidence was adduced on behalf of the lessor that its intention had at any time changed after the representation was made, that the lessor's intention in respect of rent was not as represented and I hold that Mr. Robertson's representation constituted misleading conduct. Further, the letter dated 5 February 1979 and the enclosed application form constituted a representation of the respondent's intention that the "lease document" would contain terms as to rent in accordance with what was expressed in the letter and application form, except for the "advertising allowance". The "lease document" contained, not those terms, but different terms. The respondent's failure to draw the difference to the attention of the applicant's directors constituted misleading conduct in my opinion. No evidence was adduced on behalf of the respondent in explanation of the difference. I infer that either the respondent's intention was misrepresented by the letter and application form or the respondent's change of intention after the letter was sent and before execution of the "lease document" was not communicated to the applicant, and thereby the respondent's intention at the time when the applicant executed the agreement for lease was misrepresented. (Cf. Spencer Bower and Turner : Actionable Misrepresentation (3rd ed.) paras. 74, 101-104.)

The agreement for a lease provided for a term of 4 years which should commence on a future date to be fixed in accordance with certain terms of the agreement, and for an annual rental, payable by equal calendar monthly instalments in advance, as from that date, of $27,680 "subject however to adjustment in accordance with" certain provisions of the agreement. The adjustment prescribed by those provisions included increase of the amount of $27,680 "by the proportion of such sum which is the same as the proportionate increase (if any) in the All Groups Consumer Price Index Six Capital Cities as published by the Australian Bureau of Statistics for the quarter proir to that in which the commencement date falls over that for the quarter ending on 31st December 1978." The expression "the commencement date" was defined to mean the date on which the term of 4 years should commence. In the result that date was 10 October 1979 and there was a "proportionate increase" of the description specified in the agreement. No reference to those provisions for adjustment which I have quoted is contained in the letter dated 5 February 1979 or in the application for lease. I am not persuaded that Mr. Lucas had apprehended, before he caused the applicant to execute the agreement, that the provisions of the agreement might operate to prescribe, before the expiration of the first two years of the tenancy, a rental greater than that stated in the application. But I am persuaded that what Mr. Robertson said in February 1979 in response to Lucas's reference to differences between the application and the agreement confirmed, and was intended by Robertson to confirm, in Lucas's mind the belief, which Mr. Robertson's statement of the rental in January 1979 had induced and which the contents of the letter dated 5 February 1979 and the application form had confirmed, that the rent the lessee would be required by the lessor to pay in respect of the first two years of the term would be $27,680 per annum. The misrepresentation made by Robertson in February 1979 was material, was intended to induce the making of the agreement, and in fact influenced Mr. Lucas to cause the applicant to make the agreement; and constituted a contravention of s.52(1) of the Trade Practices Act 1974.

12. The following further representations are alleged in paragraph 4:

"(n) in addition to the rental payable under the lease, the only other costs and charges the applicant had to pay were -

(i) MMBW rates in respect of Shops B.01 and B.02;

(ii) Council rates in respect of Shops B.01 and B.02;

(iii) Merchant's Association annual subscription;

(iv) the respondent's legal costs and stamp duty in respect of the lease;

(o) Clauses 6.02 and 6.03 of the lease would not be relied upon by the respondent."

The expression "Clauses 6.02 and 6.03 of the lease" designates those terms of the agreement for lease which express agreement for payment by the lessee to the lessor of a specified proportion of the aggregate of a number of amounts payable by the lessor by reason of its proprietary interest in the Centrepoint Mall or by reason of its provision of services in connection with the Centre. Those amounts are in the agreement comprehended by the expression "Apportionable Outgoings", which expression is so defined in the agreement as to include within its meaning rates, taxes, insurance, maintenance, repairs, waste disposal, lighting, cleaning and caretaking expenses, as well as "any other expenditure reasonably and properly incurred by the Lessor in the operation of the Centre". The expression also comprehends, according to one possible interpretation of the definition, "any provisions made in the accounts or records of the Lessor for depreciation of the buildings and other improvements in the Centre and all the Lessor's plant equipment fixtures fittings and furnishings therein and such other provisions and adjustments as are reasonable and appropriate".

In January 1979 Mr. Robertson specified in conversation with Mr. Lucas the different kinds of expense in addition to rent which a tenant in the basement would have to bear in respect of his tenancy. He specified municipal rates, Board of Works rates, fees connected with membership of a tenants' association and the costs of the lease. I am not persuaded that he omitted reference to expenses of the kind which clauses 6.02 and 6.03 oblige the tenant to bear; nor that the context in which Robertson spoke rendered what he said conduct which was misleading or deceptive. Mr. Lucas had subsequent notice that some such expenses would be charged to tenants: the words "Common Area Outgoings" in the application for tenancy were noticed by him and were the subject of some explanation to him by his son-in-law, Mr. Gregory, before he and his wife signed the application and submitted it to the lessor. I am not persuaded that any reference was made to the subject of "outgoings" during the telephone conversation between Lucas and Robertson to which reference is made in paragraph 11 hereof. The expression "Common Area Outgoings" in the form of application for lease is of so uncertain a meaning that I would hesitate to understand what Robertson said during that conversation as asserting that the lessors would treat the tenancy as being on the terms which that expression might signify rather than on the terms stated in the agreement for lease with respect to "Apportionable Outgoings". I am able to find no more about the content of the telephone conversation than I have stated in paragraph 11 hereof. In any event, I am not persuaded that Mr. Lucas adverted to the subject of "outgoings" at any time after he signed the form of application for a lease and before he caused the applicant to execute the agreement for lease. I am not persuaded that Mr. Gregory mentioned that subject to his father-in-law when he spoke to Mr. Lucas of differences between the application for lease and the agreement for lease. I am not persuaded that Mr. Lucas was induced to procure the applicant to execute the agreement for lease by any belief that the obligations of the applicant with respect to "outgoings" would be regulated otherwise than by the terms of the agreement for lease. I am not persuaded that anything said to Mr. Lucas by Mr. Robertson constituted a misrepresentation or a breach of s.52 or of s.53A of the Trade Practices Act 1974 of the kind alleged in paragraph 4(n) or 4(o). But, if anything said by Robertson did constitute such a misrepresentation or a breach of either of those provisions, I am not persuaded that thereby the applicant was induced to execute the agreement for a lease.

13. Sub-paragraphs (p), (q), (r), (u) and (v) of paragraphs 4 and 5 of the amended statement of claim contain allegations of misrepresentations concerning the positions in which certain shops and open spaces in the basement would be arranged. There are differences between what in the basement floor plan annexed to the agreement for lease, and in other plans shown to Mr. Lucas before execution of that agreement, are represented to be the positions of some shops and of some open spaces, and the actual arrangement, which was effected after execution of the agreement, of shops and public spaces in the basement. But I am not persuaded that any of those differences were of any significance: if they had been proposed as alterations to Mr. and Mrs. Lucas before execution of the lease, it is I think improbable that either of the couple would have been concerned; and I am not persuaded that, when the differences came to the attention of Mr. Lucas, he conceived the applicant to be prejudiced thereby. Nor am I persuaded that in fact any prejudice was suffered by the applicant in consequence of the circumstance that the actual arrangements differed in the respects proved from the arrangements as they were represented in plans and in discussions with reference to plans.

14. In paragraph 4(s) it is alleged that the respondent represented that the escalators between the ground floor and the basement would be wider than standard escalators.

It was proved that the escalators in fact installed, some time after the agreement for tenancy was made, between the ground floor and the basement near the Bourke Street frontage of the Centrepoint Mall, are 800 millimeters wide. That width and the 1200 millimetre width of the escalators near the same frontage from the ground floor to the first floor are within the range of what could be characterised as "standard". A brochure published in 1978 by the respondent, advertising tenancies in the Centrepoint Mall, contained what was represented by words printed on the brochure to be a drawing of the front of the Centrepoint Mall, as it would appear when it had been constructed. The impression which the drawing gives is that the escalators between the ground floor and the basement which are depicted in the drawing are at least one metre wide, and perhaps wider. In January 1979 Mr. Robertson referred to the escalators as "big, wide escalators" in a discussion with Mr. Lucas in which Robertson asserted that the position of the shop, proposed for letting to Mr. Lucas, near such escalators would be good for the business proposed to be carried on in the shop.

In paragraph 4(t) it is alleged that the respondent represented that the shop of which the applicant took a tenancy would be visible to the 170,000 people who walked down Bourke Street each day. In February 1979 Mr. Robertson pointed to the drawing on the brochure and stated to Mr. Lucas that the shop would be visible from Bourke Street and that 170,000 people passed that position in Bourke Street each day. The relevance of the drawing to the statements made while Robertson pointed to it lies in the circumstances that part of the window of the shop is depicted in the drawing and that below the drawing are printed these words: "You are in Bourke Street Mall looking into Centrepoint Mall . . . . . . Melbourne's new Mall-to-Mall retail environment". But when construction of the Centrepoint Mall was completed after the making of the agreement for tenancy no part of the shop was visible from Bourke Street, or indeed from any place on the ground floor of the Centrepoint Mall.

I am not persuaded that either of the representations pleaded induced the making of the agreement for tenancy. The view which the drawing represents is of a part only of the shop front, glimpsed through a transparent vertical screen bordering an escalator and supporting, it is to be supposed, one of the escalator's running handrails. I think it improbable that Mr. Lucas supposed that much notice would be taken from the ground floor of anything which he might have thought would be visible of his shop. Nor do I think it probable that the width of the escalators descending to the basement much concerned him. What may have had an influence on his mind is the impression the drawing creates of spaciousness in the approaches to the escalators, and of a vistaed prospect of food shops in the basement: an impression induced by perspective technique and owing little to the depicted width of the escalators, but a good deal to the width and length of the floor area which the artist has depicted as excised from the ground floor. That impression is certainly misleading to one naive enough to rely upon the drawing as a representation of what would meet a pair of eyes looking into the Centrepoint Mall from Bourke Street. That impression is not the subject of complaint in the amended statement of claim. But if it were, I would not find an intention on the part of anybody for whom the respondent might be legally responsible to mislead by means of the drawing any prospective tenant into a mistaken belief as to what such a pair of eyes would see. Nor do I think the drawing at all likely thus to have misled such a person.

"Section 52 does not expressly state what persons or class of persons should be considered as the possible victims for the purpose of deciding whether conduct is misleading or deceptive or likely to mislead or deceive. It seems clear enough that consideration must be given to the class of consumers likely to be affected by the conduct. Although it is true, as has often been said, that ordinarily a class of consumers may include the inexperienced as well as the experienced, and the gullible as well as the astute, the section must, in my opinion, be regarded as contemplating the effect of the conduct on reasonable members of the class. The heavy burdens which the section creates cannot have been intended to be imposed for the benefit of persons who fail to take reasonable care of their own interests. What is reasonable will of course depend on all the circumstances."

(Parkdale Custom Built Furniture Pty. Ltd. v. Puxu Pty. Ltd. [1982] HCA 44; (1982) 42 A.L.R. 1 at 6, per Gibbs C.J.). I would not expect to find in the class of persons for whom a tenancy in the Centrepoint Mall may be contemplated one who would take a drawing of the kind reproduced in this brochure as a reliable representation. And, whatever subliminal impression the drawing and the statements of Robertson may have made on Mr. Lucas's mind, I am not persuaded that he was influenced to cause the applicant to take a lease by any belief he entertained about the visibility of a part of the shop front from the ground floor, or about the width of the escalators, or about the extent to which a view might be had of the basement from the ground floor.

15. Of the representations alleged in paragraph 4 of the amended statement of claim, or treated in submission as if alleged, I have found that Mr. Robertson represented to Mr. Lucas that leases of premises in the basement of the Centrepoint Mall to "McDonalds" and to "Gilbertsons" had been agreed upon; and that, notwithstanding the terms of the deed presented by the respondent for execution by the applicant, the respondent's intention was to treat the applicant's tenancy as upon the terms, including the terms as to rent, specified in the written application for tenancy. I have also found that other unidentified officers or agents of the respondent made the latter representation by presenting that application to Mr. and Mrs. Lucas with the letter dated 5 February 1979 and by abstaining thereafter from drawing attention to the differences, as to rent, between the application and the deed. I have found those representations to be false and the representations concerning McDonalds and Gilbertsons to have been fraudulently made, as well as constituting conduct done in contravention of s.52(1) of the Trade Practices Act 1974. And I have found that each of those representations which were made by Robertson induced the applicant to execute the deed dated 16 May 1979. I turn now to the question of damages, in the first instance for deceit.

16. The applicant's claims for damages, for deceit and under Part VI of the Trade Practices Act 1974, were of two kinds: first, the aggregate of the amounts expended and the liabilities incurred in fitting the leased premises for use as a bakery and cake shop, in advertising the business to be conducted there, in conducting the business, and in extricating the applicant from contractual obligations undertaken to establish and conduct the business, less the aggregate of the amounts received or likely to be received on disposal of what had been acquired in fitting the premises for use, and less the receipts from the conduct of the business; second, the amount of the profit which the applicant would, if it had not taken the lease, probably have derived from the conduct of a bakery and cake shop in the Melbourne metropolitan area during the period when the applicant was engaged in the enterprise into which it had been induced to enter by the fraudulent misrepresentations and the misleading conduct for which, as it was alleged, the respondent was liable in damages.

It was the submission of Mr. Goldberg Q.C., who appeared with Mr. Finkelstein for the respondent, that, because the lease had been affirmed by the applicant, what was recoverable in damages, whether at common law or pursuant to Part VI of the Trade Practices Act 1974, was the difference between the real value of the leasehold interest enjoyed by the applicant and the amount payable by the applicant to the respondent under the lease in respect of the short period during which that interest had been enjoyed. Mr. Goldberg founded that submission on a careful and comprehensive analysis of many authorities. For an example of the actual computation of damages in accordance with what he submitted was the applicable measure he referred only to Trivett v. Hurst (1937) St.R.Qd. 265. Under the inducement of a fraudulent misrepresentation of takings the plaintiff in that case took from the tortfeasor a lease of an hotel for a term of one year. Having gone into possession and having complained of the fraud, the plaintiff was given notice to quit for failure to pay the rent. On the day she received the notice to quit her action for damages for fraudulent misrepresentation was commenced in a Magistrates Court. Later a judgment for recovery of possession of the hotel was obtained by the tortfeasor and the plaintiff went out of possession less than three months after the commencement of the term. On appeal to a judge of the Supreme Court by the plaintiff against the judgments of the Magistrates Court on her claim for damages and on the counterclaim for arrears of rent and double rent for holding over, the plaintiff contended that the damages were inadequate and the defendant contended that they were excessive. Blair C.J., observed ((1937) St.R.Qd. at 269, 270):

"It is admitted that she (the plaintiff) elected to affirm the contract with full knowledge of the alleged fraud . . . . . .

First, then, as to the Magistrate's finding of fraud on the part of the respondent. No one disputed his jurisdiction to decide that it was established. In the result, he reduced the rent to 2 pounds 10s and the premium to 20 pounds. It was open to him as a reasonable man, properly directing himself as to the law, to find as he did upon the evidence before him, and I think therefore that his decision was not manifestly wrong.

It is true that the appellant had paid only 20 pounds premium and 12 pounds rent under the lease and had also defaulted in due payment of her rent. She had not been called upon to pay that rent and was still holding over. But that holding over had not been declared 'contumacious' at the time she brought her action for deceit. In this case the tort, that is, the misrepresentation, also preceded the notice to quit.

The measure of damages in such an action is the difference between the value of the premises at the time of the execution of the lease in question and what the lessee paid or had made herself liable to pay thereunder for the same. (Holmes v. Jones [1907] HCA 35; (1907) 4 C.L.R. 1692; Hardman v. McLeod (1926) 26 S.R. (N.S.W.) 578).

By his findings the Magistrate inserted new terms in the original lease. He reduced the rental from 3 pounds 10s. per week to 2 pounds 10s. for the period, and the premium from 30 pounds to 20 pounds, that is from 212 pouns to 150 pounds and awarded the appellant the difference between these two sums, namely 62 pounds as damages."

The judgment on the plaintiff's claim was not disturbed on the appeal. Nothing else appears in the reasons for judgment. concerning that judgment in the plaintiff's favour.

It will be observed that the calculation of damages was in respect of the whole term of the lease granted, not of the period during which the tenancy endured. But the contrast between that mode of calculation and the measure suggested by Mr. Goldberg was not considered in argument. It is to be noted also that the report of Trivett v. Hurst contains no information as to what other measure of the plaintiff's damages than that adopted in the Magistrates Court had been proposed.

The reasoning of Mr. Goldberg's submission concerning the measure of the applicant's damages commences with the proposition that, if a contract to purchase a business, the making of which was induced by fraudulent misrepresentation, be affirmed, loss sustained in carrying on the business is, except in certain exceptional circumstances, irrecoverable in an action for damages by the purchaser for deceit. The next step in Mr. Goldberg's argument is the submission that the suggested irrecoverability of such a loss is a consequence of the breaking of the legally significant causal connection, between the tortious act and the loss, which in his submission the affirmation of the contract effects. The final step in the argument is the submission that, since irrecoverability of the loss is a consequence of a breaking of the causal nexus between the inducing conduct and the loss, recovery of the loss is also to be denied in an action upon the cause of action conferred by ss. 52(1) and 82(1) of the Trade Practices Act 1974, and is to be denied whether the contract is for the purchase of a business or merely for a lease of premises in which a business is to be commenced by the lessee.

Mr. Goldberg relied upon obiter dicta of Jordan C.J. in McAllister v. Richmond Brewing Co. (N.S.W.) Pty. Ltd. (1942) 42 S.R. (N.S.W.) 187 at 191-193:

"A person who has been induced to purchase property by the deceit of the vendor, upon discovering the fraud can, as a general rule, at his election, either rescind the purchase, or affirm it and recover the amount of any damage occasioned to him by the fraud.

The former course is available only if the parties can be restored substantially to their former position - as if the fraud had never been perpetrated or acted-on. For this purpose, the defrauded purchaser must return the property to the vendor, and is entitled to recover from him so much of the price as he has paid. All other adjustments must be made which are necessary to restore the parties to the status quo ante. The vendor must pay interest on any purchase money which he has received. The purchaser must account for the rents and profits or the value of the use of the property whilst he had it. Any loss directly occasioned to the purchaser by the fraud must also be made good to him, as part of the process of restitutio in integrum. The vendor must, for example, recoup to him any expenses incurred in effecting the purchase. He must recoup the value of any improvements reasonably made to the property by the purchaser before notice of the fraud: Brown v. Smitt [1924] HCA 11; 34 C.L.R. 160; 9 Austn. Digest 291. He must also make good to the rescinding purchaser any other detriment which he has suffered as the direct consequence of the fraud. As is pointed out by Bowen L.J., in Newbigging v. Adam 34 Ch. D. 582 at 592:

'Common law recognised a rescission if the case shaped itself so that a Court of Common Law had jurisdiction to decide whether there should be rescission or not, but, besides this, the common law gave damages for deceit, and in my opinion gave them, not as an alternative remedy, but as an alternative or cumulative remedy as the case might be. The Court of Chancery had a concurrent jurisdiction, and in cases of fraud, so far as I know, there can be no doubt that complete indemnity could be given by a Court of Equity to the person who had been defrauded, so as to protect him as fully in equity as he could have been protected in law.'

But it is only if the purchase has been induced by deceit as contrasted with innocent misrepresentation that the process of restitutio in integrum can include damages: Whittington v. Seale-Hayne 82 L.T. 49.

If the purchaser, instead of rescinding the contract, elects to affirm it and recover damages for the deceit, he is entitled to recover from the vendor the amount of any damage which in fact directly results to him from the deceit, irrespectively of whether it was intended or probable; any resulting damage which was intended, whether direct or not; and any resulting damage which was natural and probable and ought to have been contemplated, whether direct or not. This is the measure of damages in tort generally and in deceit in particular; and there is no reason in principle why it should not be applied to deceit inducing a contract of purchase as well as to any other form of deceit: Clarke v. Urquhart (1930) A.C. 28 at 67-8. A rule of practice is, however, now well established that where a person complains that he has been induced by deceit to buy something and pay more for it than it was worth, the amount of damages which he is entitled to recover is restricted, prima facie at any rate, to the amount by which the price which he has paid exceeds the true value of the thing bought at the time when he bought it: Potts v. Miller [1940] HCA 43; 64 C.L.R. 282; Austn. Digest (1941) 179. The rule is well settled, and exceptional circumstances are necessary to justify an award of anything more by reference to the general principle, but such circumstances may occur. Thus, in Mullett v. Mason L.R. 1 C.P. 559, the buyer-plaintiff recovered from the seller not only the price paid for the diseased and therefore valueless cow which he had been induced to buy by the seller's deceit, but also the value of five other cows which the purchased cow had infected: cf. Cooke v. Caldwell's Wines Ltd. 25 S.R. 161 at 168-9, 173; 9 Austn. Digest 277; Selman v. Minogue 37 S.R. 280 at 284; Austn. Digest (1934-1939) 903. 'The measure of damages ought never to be governed by mere rules of practice, nor can such rules override the principles of law on this subject': Admiralty Commissioners v. S.S. Chekiang (1926) A.C. 637 at 643. In order, however, that anything may be recovered over and above the price paid, less the value, if any, of the thing bought, it is necessary to show that it is a loss which is properly referable to the deceit complained of and not to something else: Potts v. Miller 40 S.R. 351 at 362-3. Where the thing bought is a business, and the buyer claims to recover also the amount of losses sustained in carrying it on before discovery of the fraud, it may not unfairly be said, if he elects to keep a business which he could have rejected by rescission, that if it had some value at the date of purchase, the probability of such losses must be taken to be allowed for in that value: Selman v. Minogue 37 S.R. 280 at 285; Austn. Digest (1934-1939) 903, whilst if it then had no value there is no reason why he should be compensated for losses which he could have thrown upon the seller by rescission and which were incidental to the carrying on and retention by him of a business which he has preferred to retain. Different considerations would arise when, as a result of deceit, the purchaser has been led to have dealings with a third party which made rescission impossible. In such a case, the circumstances might be such as to entitle the buyer to recover by way of damages any unavoidable loss which was fairly referable to the deceit."

Those observations were made upon a complaint of misdirection by the trial judge. The plaintiff had purchased the lease, licence, fixtures, goods, stock in trade and goodwill of an hotel upon a fraudulent misrepresentation as to the takings. The plaintiff claimed, in a common law action for deceit, in addition to the difference between the true value of what she had purchased and the price she had paid, the amount she had lost in conducting the hotel. The trial judge directed the jury that the measure of damages was restricted to the amount by which the purchase price exceeded the value, if any, of the property bought. Davidson J. observed (42 S.R. (N.S.W.) at 200-201):

"The remaining question as to damages arises from the plaintiff's claim that the contract of purchase into which she was induced to enter was so onerous that it was found not only that the property she acquired was valueless but also that she lost the sum of approximately 137 pounds whilst conducting the hotel before she could reasonably conclude that she had been deceived.

Apart from a recent remark by Lord Atkin that he still considered the matter is open for argument: Clark v. Urquhart (1930) A.C. at 69 the principles upon which damages in an action for fraud should be assessed have generally been regarded as finally settled. The measure of damages usually is the difference as at the date of the contract between the market value of what was purchased and the price that was actually paid: Holmes v. Jones [1907] HCA 35; 4 C.L.R. 1692; 9 Austn. Digest 273; McConnell v. Wright (1903) 1 Ch. 546. In the cases dealing with the subject however it has mostly happened that the property taken under the contract was of some value in the market. If the value having regard to all the circumstances is nothing then the damages recoverable are represented by the amount of the purchase money: Twycross v. Grant 2 C.P.D. 469 at 504; Selman v. Minogue 37 S.R. 280; Austn. Digest (1934-1939) 903. Ordinarily in arriving at an estimate of value as at the date of the contract if the business had since been conducted by the purchaser at a loss this fact would be taken into account in the valuation: Selman v. Minogue 37 S.R. at 285. Evidence of such a fact would be relevant to the same degree that it would be in a lawsuit referable to the verity or otherwise of the original representations. But a further question could arise if whilst the value of the business and its assets would be nothing the plaintiff could also prove that by reason of the contract she was fettered with a financial burden from which she could secure no release without payment of damages. Having instituted proceedings at Common Law he would be debarred from equitable relief in the form of rescission of the contract: cf. Fuller's Theatres v. Musgrove [1923] HCA 12; 31 C.L.R. 524 at 544-5; 19 Austn. Digest 67; and in any event the purchaser although defrauded is entitled in any circumstances to retain the property and ask to be compensated in damages for her loss: Derry v. Peek 37 Ch. D. 541 at 593; Selman v. Minogue 37 S.R. at 285. In such circumstances it is difficult to see why compensation should not be recovered as in the case of other torts for a loss beyond the amount of the purchase money provided that such extra loss arose directly from the wrongful act if found to have been committed: In re Polemis and Furness Withy & Co. Ltd. (1921) 3 K.B. 560; Cooke v. Caldwell's Wines Ltd. 25 S.R. 161 at 168; Selman v. Minogue 37 S.R. at 284.

The plaintiff could not claim the sum of 137 pounds as representing the amount of damage she suffered because the losses indicated might properly be reflected in an assessment of nothing as the market value of the premises. But I can see no sound reason to prevent the plaintiff from proving if possible that even if she were awarded the full amount of the purchase money as damages she could still incur a further loss. In the present case for instance the evidence of Ellsmore, an expert, was given that if the takings were 120 pounds per week the property would have no value on the market. Consequently if the plaintiff could prove further by proper evidence that the actual takings were really only 80 pounds a week in my opinion she could lay the basis for the award of additional damages beyond the amount of the purchase money she had paid."

The other member of the Court, Halse Rogers J., declined to express an opinion on the complaint of misdirection.

17. The observations of Jordan C.J. upon which Mr. Goldberg relied were in exposition of the working out of a "rule of practice" governing the assessment of damages upon purchase for a price, and may have been intended to have no wider application. Cf. Yorke v. Ross Lucas Pty. Ltd. [1982] FCA 180; (1982) 45 A.L.R. 299 at 316. Further, the observation by the learned Chief Justice, that there is no reason why a plaintiff should be compensated for losses, incurred in carrying on the business purchased before discovery by him of the fraud, which he could have thrown upon the seller by rescission and which were incidental to the carrying on and retention by him of a business which he has preferred to retain, is in my opinion to be understood as the product of a reasoning upon the principles relating to mitigation of damage. Jordan C.J. may have had in contemplation a purchaser who chooses to make his election at a time when there is available to him information which would indicate to a plaintiff acting reasonably that the loss caused and to be caused to him by the tort is best mitigated by his then rescinding the contract. The reference by the learned Chief Justice to the throwing of losses upon the seller by rescission seems to be a reference to the indemnification of a plaintiff purchaser, upon rescission, against expenses and liabilities incurred pursuant to obligations imposed by the contract of sale or, in the case of a sale of a business, necessarily incurred as incidents of the continuing existence of the subject of sale. That was one of the means which equity had, and the common law lacked, "to ascertain and provide for the adjustments necessary to be made between the parties in cases where a simple handing back of property or repayment of money would not put them in as good a position as before they entered into their transaction" (Alati v. Kruger [1955] HCA 64; (1955) 94 C.L.R. 216 at 224): see Halsbury (4th ed.) vol. 31, para. 1115, note 10; Spencer Bower and Turner: Actionable Misrepresentation (3rd ed.) paras. 255, 256 and note 4. Losses incurred by a purchaser in carrying on a business before discovery of the fraud which induced its purchase would after rescission be compensable by means of those adjustments effected in exercise of equitable jurisdiction, or by means of a common law judgment for damages awarded concurrently with rescission, or partly by the one means and partly by the other. (See the exposition of the concurrent remedies in Salmond and Williams on Contracts (2nd ed.) pp. 269-270, to which reference is made in Alati v. Kruger [1955] HCA 64; (1955) 94 C.L.R. 216 at 222.) It is in my opinion impossible to regard the purchaser's election to affirm rather than to disaffirm the purchase as in itself affecting the legal conception or characterisation of the causal relationship between the fraudulent misrepresentation and the losses. Before election is made the causal connection is regarded as sufficient in law to justify an award of damages in respect of the losses. If the election is to rescind, those damages are rendered irrecoverable, or the quantum of the damages is reduced, only because the equitable processes of adjustment have included a complete or a partial compensation for those losses. If the election is to affirm the contract, the damages will be rendered irrecoverable as a separate item if the mode of assessment for the tort is in accordance with the "rule of practice" to which Jordan C.J. refers and if the susceptibility to the losses in fact sustained has augmented the award of damages through the allowance made in respect of that susceptibility in the estimation of the true value at the date of purchase of the business. The damages are rendered irrecoverable as a separate item, not because any significance has been attached to the affirmation of the contract in relation to causation of damage, but because those damages are regarded as having been comprehended in application of the measure adopted under that "rule of practice". To the extent that those damages are not comprehended in the application of that measure, they are in my opinion recoverable, as Davidson J. asserted. If the observations of Jordan C.J. upon a business of no value contradict the assertion, those observations may have been based on two assumptions: first, that restoration upon rescission to the vendor of what had been sold under the contract (the business and whatever other property was sold with it) would confer a benefit on the vendor, which was to be taken into account in considering whether the purchaser had acted reasonably to mitigate the damages flowing from the tort; and, second, that at the time when the contract was affirmed there was available to the purchaser information sufficient to require a person acting reasonably to conclude that rescission then was the course by which the damages could best be mitigated. If those assumptions are made, the observations of Jordan C.J. may perhaps be reconciled with the observations of Davidson J. But what for present purposes is in my opinion important is to insist first, that the observations of Jordan C.J. were made in relation to the assessment of damages according to a "rule of practice" for deceit inducing the purchase of something for a price; and, second, that, even in relation to such an assessment, those observations ought not to be taken to attribute to an election to affirm such a contract the necessary effect of precluding recovery of trading losses, but only such an effect, if any, as the application of established principles concerning mitigation of damages to the particular circumstances may require. I think that the latter observation is supported by the reasoning of Asprey J., in which Sugerman and Walsh JJ. concurred, in S. Gormley and Co. Pty. Ltd. v. Cubit (1964-65) N.S.W.R. 557. And in my opinion the reasoning of Barrowclough C.J. and of F.B. Adams J. in Canavan v. Wright (1957) N.Z.L.R. 790 also supports that observation. Mr. Goldberg sought support for his submissions in so much of the reasoning of Barrowclough C.J. as was avowed by that learned judge to follow the judgment of Jordan C.J.. But an examination of the whole of the reasons for judgment in Canavan v. Wright demonstrates, in my opinion, that none of the judges in that case gave any support to the contention that a plaintiff's election to affirm a contract induced by deceit necessarily precludes recovery by him of losses sustained in carrying on a business purchased under the contract or a business conducted on land in which he has acquired an estate under the contract.

18. Barrowclough C.J. observed ((1957) N.Z.L.R. at 799-800) that the incurring of losses (which he described as "something in the nature of a loss of profits") as a result of performing "an obligation which is entered into as part and parcel of the contract which was fraudulently induced" fell within the "exceptional circumstances" to which Jordan C.J. referred in the passage I have quoted from the judgment of the Chief Justice in McAllister's Case; and he justified on that ground the award of damages - in addition to any award which might have been based on the difference between the true value of what was bought and the price paid - in respect of those losses after affirmation of the contract. Without expressing any opinion on that reasoning of Barrowclough C.J., I observe that the lease which the applicant in this proceeding agreed to take from the respondent included a covenant by the applicant that it "shall keep the demised premises fully stocked and will operate the demised premises during the entire term of this Lease with due diligence and efficiency and in a proper and businesslike manner and as proper in a high class shop or establishment of the type specified in Part V of the Schedule hereto". Part V of the Schedule specified "Bakery and Pastry Cook". There was also a covenant that the applicant would not without the respondent's consent use or permit use of the demised premises for any purpose or activity other than that specified in Part V of the Schedule.

19. It is, I think, clear that - as Jordan C.J. pointed out - to measure damages for deceit inducing a purchase by the difference between the price and the true value of what was purchased is to apply a rule of practice which must yield to the principles governing the assessment of damages; and that the application of the rule of practice is likely to offend those principles in a wide variety of commercial circumstances: Clark v. Urquhart (1930) A.C. 28 at 67-68; Potts v. Miller [1940] HCA 43; (1940) 64 C.L.R. 282 at 297-300; Hornal v. Neuberger Products Ltd. (1957) 1 Q.B. 247 at 259-260, 264, 267; Doyle v. Olby Ltd. (1969) 2 Q.B. 158. It is true, as Mr. Goldberg pointed out, that in South Australia v. Johnson (1981) 42 A.L.R. 161 at 169-170 there occurs the following unqualified statement by the High Court of the measure of damages for deceit:

"The principle which underlines the award of damages in tort is, generally speaking, that of restitutio in integrum. The object is to restore the plaintiff to the position in which he would have been placed if the wrongful act had not been committed. The measure will vary as between deceit and negligence. In deceit, the plaintiff recovers the difference between the amount paid and the value of the property acquired, the object being to place him in a position equivalent to that which he would have occupied had the transaction not taken place. The defendant being guilty of a deliberate wrong, the damages will include the whole loss directly flowing from the fraudulent inducement because, as Lord Denning MR declared in Doyle v. Olby (Ironmongers) Ltd. (1969) 2 Q.B. 158 at 167, 'it does not lie in the mouth of the fraudulent person to say that they could not reasonably have been foreseen'.

It is otherwise in cases of negligent misrepresentation. Although the wrongdoer is liable for the damage which flows directly from his wrongful act or omission, the plaintiff's damages are limited to that which was reasonably foreseeable. This limitation applies in accordance with the general principle in negligence.

Subject to this limitation, the consequence is that if the effect of the negligent misrepresentation is that the victim has lost profits or income which he would otherwise have earned, he should recover damages in respect of them. We are speaking here, not of loss of profits under a contract into which the plaintiff enters by reason of the misrepresentation, but of profits which the plaintiff would have made had he not acted on the misrepresentation. So, in Hopkins v. Butts (1968) 65 D.L.R. (2d) 711 there was included in the damages assessed an amount for loss of profits, the misrepresentation having caused a delay in the commencement of the plaintiff's rooming-house operation. And in Esso Petroleum Co. Ltd. v. Mardon (1976) Q.B. 801 the plaintiff's damages included his capital loss, the overdraft which he incurred in running the business, loss of earnings and interest.

The measure of damages recoverable in the United States for negligent misrepresentation is similar. There the plaintiff recovers what is necessary to compensate him for the pecuniary loss caused by the misrepresentation, including (a) the difference between the value of what he has received in the transaction and its purchase price or other value given for it; and (b) other pecuniary loss suffered as a consequence of the plaintiff's reliance upon the misrepresentation: see the Restatement (Second), Torts; para. 552B.

In Shaddock, as no question of loss of profits arose, it was appropriate to award the plaintiff compensation by reference to the difference between the amount paid by the plaintiff for the property and its actual value plus other incidental expenses.

The precise application of these principles will depend on the circumstances of the case."

But the High Court was not dealing in that case with any cause of action but negligence and breach of contract, and the reference to deceit appears to me to have been occasioned by the circumstance that the tortious conduct under consideration was a statement which was untrue, and by the circumstance that the Court was concerned to insist that the damages recoverable for negligent misrepresentation were limited, unlike damages for deceit, by reference to what was reasonably foreseeable. Considered in its context, the statement of the measure of damages for deceit ought not in my opinion to be regarded as intended as an exhaustive statement on that subject. That statement ought, as I think, to be understood as subject to the same qualification as was expressed by Gibbs J. in Ted Brown Quarries Pty. Ltd. v. General Quarries (Gilston) Pty. Ltd. (1977) 16 A.L.R. 23 at 31 ("the normal measure of damages in an action for deceit, where the plaintiff has been induced by the fraudulent misrepresentation of the defendant to enter into a contract of purchase, is . . .") and by Dixon J. in Toteff v. Antonas [1952] HCA 16; (1952) 87 C.L.R. 647 at 650. ("When what he has been induced to do is to make a purchase from the defendant and part with his money to him in payment of the price, then, if the transaction stands and is not disaffirmed or rescinded, what is recoverable is . . ."). Cf. Frith v. Gold Coast Mineral Springs Pty. Ltd. (1983) A.T.P.R. 44072 at 44085.

20. Late in October 1979 the applicant received a statement by the respondent of its account with the respondent in respect of the tenancy. The rent was charged at a rate increased in accordance with the provisions of the agreement for the lease which I have quoted in paragraph 11 hereof. Charges were raised in respect of the "Apportionable Outgoings" to which I have referred in paragraph 12 hereof and in respect of the applicant's membership of an association of tenants for which that agreement also provided. After allowing the applicant credit in respect of $2,306.66 previously paid, as Mr. Lucas believed for the first month's rent, and in respect of a proportionate part of the "advertising allowance" (to which reference is made in the letter dated 5 February 1979 from the respondent to Mr. and Mrs. Lucas), the respondent asserted that the balance due in respect of the period from 10 October 1979 until 30 November 1979 was $4,433.81.

By a summons issued out of the County Court of Victoria on 14 November 1979 the respondent sued the applicant as lessee and Mr. and Mrs. Lucas as guarantors for that balance (in the summons stated to be $4,457.47), together with interest on that sum at a rate of $1.82 per day from 14 November 1979 until payment or judgment. The evidence does not disclose when that summons was served.

A letter dated 16 November 1979 from the applicant's solicitors to Centrepoint Custodian Pty. Ltd., a company associated with the respondent, was in these terms:

"We act for T.N. Lucas Pty. Ltd. ("the company") which is in occupation of the abovementioned shops and which executed a lease document with Centrepoint Freeholds Pty. Ltd. in respect thereof. We also act for Vasiliki Lucas and Ttoolis Lucas.

Our clients relied upon representations made and warranties given by Centrepoint representatives that the Centre would open at a specified time which (in the event) was significantly earlier than the date upon which the Centre in fact opened. Indeed, as late as February 1979, letters to our clients confirmed that the Centre was to open in March 1979. When the Centre did not open in March, our clients were given further assurances as to an early opening date and were induced thereby to act to their prejudice.

Further, representations were made and warranties were given to our clients as to the nature of the other tenancies in the Centre, and these representations have now been discovered to be demonstrably untrue and the warranties have been breached.

The next matter concerns proceedings in the County Court at Melbourne S931016 by Centrepoint Custodian Pty. Ltd. against "B. & T. Lucas". Agreement was reached in negotiations with the lessor of the shops that all costs associated with the provision of three phase power and as much electricity and other requirements as were needed for the establishment of the bakery and cake business to be established at the shops would be met by Centrepoint. In any event, it is noted that, on no view of the facts, are Mr. & Mrs. Lucas the occupants of the shop nor the proprietors of the business conducted thereat. The proceedings which have been instituted will be strenuously resisted.

The company has received from Centrepoint Custodian Pty. Ltd. a letter dated the 24th October 1979 requiring payment of what are alleged to be "apportionable outgoings" under the lease document that has been executed. Whilst the company would join issue in any event with its liability to pay all or any of the items which are claimed to be "outgoings" and to contest the amount thereof, it is observed that the whole of those "outgoings" are stated to relate to an assessment "for the period to 30 June 1979". The whole of the period to which the "outgoings" relate therefore antedates the commencement date stipulated by your letter dated 3rd August 1979. On no view of the matter, therefore, can the company be liable for any part of those "outgoings". Accounts rendered in reliance upon the same are manifestly without foundation, and the company denies liability to pay any part thereof. The company also disputes the purported increase in rental above the level of $2,3066-66 per month.

In the circumstances, our clients have an entitlement to rescind and determine any tenancy or other transaction into which they or any of them may have entered and to claim damages from Centrepoint. They are, however, prepared to abstain for the time being from exercising their various rights pending your response to this letter. Their abstentation is, however, not to be construed in any way as derogating from or an abandonment of the rights that they have or may have. Failing a response satisfactory to our clients within seven days, we are instructed that, without further notice to you, we are to take such steps as may be necessary to protect the position of our clients.

We should be pleased if you would bring the contents of this letter to the attention of the various Centrepoint companies, including Centrepoint Freeholds Pty. Limited, the lessor of the premises.

The foregoing is not to be taken as an exhaustive statement of the matters of which our clients complain and they reserve to themselves the right to raise such other matters (including, for example, the flooding of the shops by the sprinkler system) as they may be advised."

The letter dated 24th October 1979, to which reference is made in the letter just quoted, was from Pacific Shopping Centres Pty. Ltd., another company associated with the respondent, not from Centrepoint Custodian Pty. Ltd., and it was posted with the statement of account to which I have referred.

At the request of Mr. Powderly, the credit manager of the group of companies which included the respondent, Mr. Lucas called at an office in South Melbourne on or about 21 November 1979. Mr. Powderly asked him why he would not pay the rent of his premises at the Centrepoint Mall. Mr. Lucas asserted in reply that he had already paid the rent for October and that the amount claimed for rent was not "according to the original agreement" Mr. Lucas claimed to have with the respondent. During the conversation a Mr. Tallent, who was sworn by Mr. Powderly to be, at the time Powderly was giving evidence, the property manager of a company associated with the respondent, joined Powderly and Lucas. Mr. Tallent said something during the conversation which Mr. Lucas understood to be an expression of the respondent's willingness to accept, for the time being, rent at the rate of $27,680.00 per annum (the amount specified in the form of application for a lease), together with a promise to send Mr. Lucas the next day a letter confirming what Mr. Tallent had said. No such a letter was received. I am not persuaded that Mr. Lucas correctly reproduced in evidence the words Mr. Tallent used, nor that Mr. Lucas correctly reproduced the conversational context in which Mr. Tallent's statement concerning the rent was made, nor that Mr. Lucas's understanding of what Mr. Tallent said was justified by the words Mr. Tallent spoke. It is not that I doubt Mr. Lucas's veracity in relation to the conversation, but the evidence of Lucas and Powderly leaves me uncertain what was said.

On 27 November 1979 the applicant's solicitors received from the respondent's solicitors a letter in these terms:

"Your letter to our client dated 16th November, 1979 has been referred to us and is to be answered in the near future.

In the interim kindly refrain from directing further correspondence direct to our client."

On or about 8 January 1980 the applicant received from the respondent's solicitors a notice in these terms:

"TO: T.N. LUCAS PTY. LTD. of 8 The Moor, North Balwyn, being the Lessee of shops No. (B.01) and (B.02), Centrepoint Mall, Bourke Street, Melbourne, pursuant to a Lease dated 16th May 1979 made between you and Centrepoint Freeholds Pty. Ltd. of 158 City Road, South Melbourne.

BY THE ABOVEMENTIONED LEASE you the Lessee covenanted to (inter alia)

(i) Pay to the Lessor throughout the said term thereby created annual rental in the sums therein specified by equal calendar monthly instalments in advance.

(ii) Pay to the Lessor the Lessee's proper proportions of the apportionable outgoings as estimated in advance by the Lessor and charged to you the Lessee in accordance with the provisions of Clause 6.02.

(iii) Pay to the Lessor interest as the rate of fifteen per centum per annum on any rentals or other monies payable by the Lessee thereunder and remaining unpaid (whether demanded or not) for seven days such interest to be computed from the date upon which monies in question became due and payable to the date upon which they are fully paid to the Lessor.

THE ABOVEMENTIONED COVENANTS have been broken and the particular breaches complained of are:-

(a) That you the said Lessee have failed to pay to the Lessor the monthly instalments of the annual rental reserved by the Lease assessed and applicable to the calendar months of October, November, December 1979 and January 1980.

(b) That you the said Lessee have failed to pay to the Lessor the Lessee's proper proportions of the apportionable outgoings assessed by the Lessor and charged to you pursuant to Clause 6.02 of the Lease, the particulars whereof have been notified to, and are known to you.

(c) That you the said Lessee have failed to pay to the Lessor interest at the rate of fifteen per centum per annum on any rentals or other monies payable by you to the Lessor and remaining unpaid for seven days.

THEREFORE TAKE NOTICE that Centrepoint Freeholds Pty. Ltd., the Lessor of the abovementioned premises, requires you within fifteen days after the date of service of this Notice upon you to remedy the aforementioned breaches of covenant insofar as the same may be capable of remedy by you.

AND FURTHER TAKE NOTICE that in the event of you the said Lessee failing to comply with this Notice within the time aforesaid it is the Lessor's intention to re-enter upon his dimised premises and determine the said Lease.

DATED the 7th day of January, 1980.

Madden Butler Elder & Graham

Signed by the said Madden Butler Elder & Graham of 500 Collins Street, Melbourne as duly authorised Solicitors and Agents for Centrepoint Freeholds Pty. Ltd."

At about the same time the applicant's solicitors sent to the respondent's solicitors a letter, dated 8th January, 1980, in these terms:

"We refer to our letter dated the 18th November 1979, your letter dated the 27th November 1979, and our more recent attempts to communicate with you by telephone, and now advise that our client is contemplating to vacate the shop premises if no response is received within 14 days of the date hereof.

We further advise that as a result of the flooding of our client's shop, at least one of its employees has suffered injuries and will be seeking damages."

The "monthly instalments of the annual rental reserved by the Lease" (to which the notice dated 7 January 1980 refers) exceeded the monthly instalments appropriate to an annual rent of $27,680 by reason of the operation of the provisions of the lease with respect to adjustment of the rent, which I have quoted. Accounts claiming rent instalments in respect of the months of October, November and December 1979 and January 1980 had been rendered to the applicant : the instalments claimed exceeded the instalments which would have been payable in respect of an annual rent of $27,680.

Accounts had been rendered which claimed amounts in respect of "maint.", by which "the Lessee's proper proportions of the apportionable outgoings assessed by the Lessor" was designated in those accounts. The agreement for lease did provide for estimation, "in advance", of apportionable outgoings and for payment of the estimated amount in advance, as well as for subsequent adjustment if the estimate should prove inaccurate.

The agreement for lease made provision for the payment of interest on monies payable by the lessee under the agreement, but the provision made was for payment on demand and there was no evidence that any demand in respect of interest had preceded service of the notice dated 7th January 1980, unless the claim for interest in the summons issued on 14 November 1979 be regarded as such a demand.

While the applicant's leased premises were unattended and closed agents of the respondent entered the premises and re-took possession thereof late on 25 January 1980, and thereafter the respondent excluded the applicant from possession of the premises.

The applicant had before "the commencement day" of the lease paid $2,306.66 to the respondent in respect of rent, but the applicant has otherwise made no payment to the respondent in respect of rent, "apportionable outgoings" or interest.

By writ issued on 8 February 1980 out of the Supreme Court of Victoria the applicant and Mr. and Mrs. Lucas claimed damages against the respondent and an associated company for breaches of contract. The statement of claim endorsed on the writ included allegations that the applicant at "all material times from October 1978 (sic) or thereabouts . . . . was a tenant of or alternatively was a party to an agreement for the lease" of the shop in the basement of the Centrepoint Mall; and allegations that terms of the contract under which the applicant's interest in the shop arose, or alternatively warranties by the defendants, stipulated that the Centrepoint Mall would be ready for occupation in March 1979 and would be opening for business then, and that the shop would be suitable for use for a bakery and pastry cook business and would "comply with the requirements of the Department of Health, any relevant planning scheme or interim development order and the Uniform Building Regulations in relation to its use for a bakery and pastry cook business". Breaches of those terms or warranties were alleged to have caused damage to the plaintiffs. No reference is made in the statement of claim to the applicant's loss of possession of the shop.

The statement of claim filed with the application by which this proceeding was commenced on 26 October 1981 alleged that on and since 26 January 1980 the respondent had wrongfully excluded the applicant from the shop and that on that date the respondent had "wrongfully . . . . purported to terminate the . . . . lease". The application claimed relief in these terms:-

"1. A declaration that -

(a) the conduct described in paragraph 4 of the said Statement of Claim constituted conduct of the respondent in trade or commerce which was -

(i) misleading or deceptive;

(ii) likely to mislead or deceive

in contravention of Section 52(1) of the Trade Practices Act 1974;

(b) the representations described in the said paragraph 4 were made in contravention of the provisions of Section 53(aa) of the Trade Practices Act 1974;

(c) the statements described in the said paragraph 4 were made in contravention of the provisions of Section 53A of the Trade Practices Act 1974.

2. (a) A declaration that the applicant is entitled to set off the amount of the loss and damage payable to the applicant pursuant to the claim set out in paragraph 3 hereof against any amounts due and owing by it under its lease of Shops B.01 and B.02 from the respondent at the Centrepoint Mall.

(b) An order that the amount found to be payable by the respondent to the applicant under the claim set out in paragraph 3 hereof after deduction of the amount declared to be set off under sub-paragraph (a), be paid forthwith by the respondent to the applicant.

3. Alternatively to paragraph 2, an order that the respondent pay to the applicant the amount of loss and damage suffered by the applicant by or in consequence of the conduct, representations and/or statements of the respondent described in paragraph 1 hereof.

4. Orders pursuant to Sections 87(1), (1A) and/or (2) of the Trade Practices Act 1974 varying the terms of the deed creating or constituting the lease of the applicant in respect of the said shops in such manner as the Court thinks fit and in particular and without limiting the generality of the foregoing orders that the rent, maintenance charges and outgoings payable under the terms of the said lease for the duration of the said lease be reduced to such amount as the Court thinks fit and that the said lease have effect as varied from such date as to the Court seems appropriate.

5. (a) A declaration that the applicant is entitled to possession of Shops B.01 and B.02 under the terms of the lease as varied by the Orders of this Honourable Court pursuant to paragraph 4 hereof.

(b) Alternatively a declaration that the said Deed has as and from the 26th January 1980 been determined and at an end and that as and from the said date the defendant has had no entitlement thereunder to the payment of any sum from the applicant in respect of rent, maintenance charges, outgoings or any other sums in relation to any period after the said date.

(c) Alternatively to subparagraph (a) hereof, orders pursuant to Sections 87(1), (1A) and/or (2) of the Trade Practices Act 1974 avoiding the said Deed ab initio or from such date as to the Court seems appropriate.

(d) Alternatively to subparagraphs (a) and (b) hereof orders rescinding the said Deed at common law.

6. Damages at common law.

7. Such further or other relief as to the Court may seem fit.

8. Costs."

An amended statement of claim was filed on 19 October 1982. The allegation of exclusion of the applicant from the shop was repeated, in paragraph 11(a) of the statement of claim, and was coupled, in paragraph 11(b) thereof, with an allegation that on 26 January 1980 "no monies were owing by the applicant to the respondent under the said lease whether for rental, outgoings, interest or otherwise". To the latter allegations what are described as "Particulars" are subjoined in these terms:

"(i) after the respondent had received the applicant's letter dated the 16th November 1979 the applicant on the 21st day of November 1979 met with the representatives of the respondent at their invitation at South Melbourne to discuss the differences between the parties ("the South Melbourne Meeting").

(ii) At the South Melbourne meeting it was agreed orally between Mr. Powderly as agent for the respondent and Mr. T. N. Lucas as agent for the Applicant that the applicant would pay the rental (being the calendar monthly rental of $2,006.66 (sic) referred to in the said Lease), but would not pay any other charges pursuant to the said lease and that the said rental would become payable on the oral agreement and being confirmed in writing by the respondent.

(iii) the said oral agreement was never confirmed in writing by the respondent."

Paragraph 11 then concludes:

"(c) By reason of the matters referred to in paragraphs 11 (a) and (b) hereof and the particulars thereto the respondent repudiated the said lease which repudiation was accepted by the applicant by issuing proceedings in the Supreme Court of Victoria on the 8th day of February 1980 (later stamped) (sic) or further or alternatively by issuing these proceedings in the Federal Court of Australia."

It was further alleged that damage was sustained "by reason of the 'lockout' and repudiation of the said lease by the respondent", particulars of which damage were that as "a result of the 'lockout' the applicant incurred legal fees in respect of actions against it, inter alia, from suppliers of equipment, fittings and ingredients".

During the course of the hearing counsel for the applicant disavowed any claim to relief of the kind specified in paragraph 4 or sub-paragraph 5(a) of the application.

21. In my opinion the applicant had not affirmed or disaffirmed the agreement for its lease before it was dispossessed by the respondent. In the letter dated 16 November 1979 the applicant's right to abstain for the time being from electing between affirmation and disaffirmation was asserted. The respondent's reply by the letter received on 27 November 1979 impliedly invited the applicant to defer election and to defer any other change in the course which the applicant was then following until the answer of the respondent should be received. I do not consider that the giving of the notice dated 7 January 1980 requiring remedy of breaches of covenants should be regarded as the answer for which the applicant had been, in effect, asked to wait. The giving of the notice was a course of action available to the respondent under the terms of the lease and constituted an assertion by the respondent that the legal relationship between the applicant and the respondent with respect to the shop was still regulated by the provisions of the agreement for lease. Such an assertion was not inconsistent with the assertions contained in the applicant's solicitors' letter dated 16 November 1983 (although allegations of breaches specified in the notice were contradictory of assertions in that letter), nor inconsistent with the intention expressed in the letter received on 27 November 1979. It may be inferred, from the terms of the letter dated 16 November, 1979, that the applicant's directors then knew of the rights, which misrepresentation inducing the making of the agreement for lease conferred on it, to disaffirm or to affirm the agreement at its election. By continuing in possession of the shop the applicant may be said to have exercised rights which would not exist unless that agreement remained in force and to have thereby affirmed that agreement. But, as the letter suggests and as I find, the applicant's directors and agents were not at that time aware of the falsity of the representation that the respondent would treat the applicant's tenancy as upon the terms as to rent which are stated in the form of application for tenancy. The accounts rendered and to be rendered before possession of the shop was re-taken by the respondent suggested that the respondent would not treat the tenancy as upon those terms, but the conversation between Messieurs Lucas, Powderly and Tallent on or about 21 November 1979 gave Mr. Lucas ground for believing that the respondent would treat the tenancy as upon those terms. It might be said that no such a belief could be held in the face of the notice given by respondent on or about 8 January 1980. But even on 25 January 1980 the applicant's directors and agents could reasonably have expected an explicit answer to the letter dated 16 November 1979 and in all the circumstances I consider that the applicant's retention of possession of the leased premises until that time did not constitute an affirmation of the agreement for lease. (See Cheshire and Fifoot : Law of Conract (3rd Aust, ed.) pp. 324-5; Spencer Bower and Turner, op. cit., paras. 236-238, 288-293; and cases there cited; Sargent v. A.S.L. Developments Ltd. [1974] HCA 40; (1974) 131 C.L.R. 634).

22. If, contrary to my opinion, the applicant did affirm the agreement for lease before it was dispossessed of the shop, I do not consider that the affirmation would, per se, prejudice the claims which the applicant makes for damages. Nor would any subsequent affirmation, whether by issue of the writ out of the Supreme Court of Victoria or by claims made in this proceeding. For the reasons given in paragraphs 17, 18 and 19 hereof, the enquiry which affirmation by one party of a contract induced by the deceit of the other party should in my opinion evoke is whether by affirming the contract the victim of the deceit has so acted as to be debarred, by the application of the principles concerning mitigation of damage, from recovering any of the damages he claims. (I shall assume, but without deciding, that the exercise of the right which the law confers to choose between affirmation and disaffirmation of such a conract may be allowed by the law to have such a consequence. Cf. Gormley and Co. Pty. Ltd. v. Cubit (1964-5) N.S.W.R. 557.) Any affirmation which the conduct of an officer or agent of the applicant before dispossession on 25 January 1980 were thought to have effected at any time before that date would not, as I would find, have been unreasonable as a decision taken in order to mitigate damage. It was not possible at any time before 25 January 1980 for a person furnished only with the information which was available to the applicant to prophesy the commercial future for the basement tenants of the Centrepoint Mall. Events have shown that at an annual rent of $27,680 the premises leased to the applicant could not be utilised profitably, but that was not at all clear before 25 January 1980. The monthly gross receipts of the businesses in the basement might have grown very substantially during the first six months of 1980, if the unpredictable movements of those who frequent the central retail shopping area of the City of Melbourne had been favourable to the Centrepoint Mall.

Any affirmation of the agreement for lease which occurred after 25 January 1980 was without effect on the quantum of damages as I shall assess them, and without effect on the conduct of the respondent, so far as appears by evidence. The applicant was out of possession and its damages are claimed and will be assessed on the footing that it was free after 25 January 1980 to act as it should choose, free of any right and of any obligation (other than rights and obligations which had accrued and which would be vindicated by curial order for the payment of money or for relief pursuant to s.87 of the Trade Practices Act 1974) in respect of the Centrepoint premises of which it had been tenant.

23. The items of damage claimed were categorised by Mr. Lloyd Q.C. who appeared with Mr. P. J. Kennon for the applicant, in the course of final addresses. Counsel for the respondent took no objection to the enlargement of the claims beyond what had appeared in the particulars of damage filed on 21 October 1982.

The first category was labelled "setting up expenses". Comprehended in that category were accountant's fees for establishing books of account and registers of the applicant company, and moneys paid on the applicant's behalf in respect of statutory fees payable by companies ($324), costs of advertising (various signs $1422, telephone directory listings $720), electrical and plumbing work to fit the premises for use as a bakery ($2761), legal expenses of the agreement for lease of the premises ($411) and other sundry expenses incurred in procuring licenses and the supply of electricity ($883.96). The remaining items are the legal and accountancy expenses of vesting the share capital of the applicant, which was described in evidence as having been a "shelf company", in Mr. and Mrs. Lucas. Those expenses are not in my opinion recoverable as damages by the applicant, nor do I consider that the first item of $324 is recoverable. Otherwise I allow the "setting up expenses", which aggregate $6197.96. The course of action best calculated to mitigate the damage caused by the applicant's entering into the lease was, as I find, the course which the respondent's dispossession of the applicant forced on the applicant: abandonment of the applicant's business in the Centrepoint Mall and termination of the applicant's leasehold interest there. Loss of the benefit of the expenditure comprehended by the items I have allowed was a consequence of that abandonment and the expenditure is in my opinion recoverable as damages. Such benefit as the applicant might be said to have derived from the expenditure until 25 January 1980 was so small that it may for present purposes be ignored.

24. The second category, under the title "purchase of equipment", included the cost of a collection of shop fittings, equipment and furniture removed by the respondent's agents from the leased premises, when possession was taken of the premises by the respondent, and delivered by the respondent's agents to the premises of Graham Cassidy Taxi Trucks at Nunawading for storage. In addition, equipment taken on hire purchase by the applicant, but repossessed, was the subject of two claims in this second category, one for $1000 and the other for $1575. Those two sums, which I allow, were paid by the applicant in settlement of claims by the re-possessing owners. Another claim, for $327.43 in respect of "scales and weights - Avery Australia Ltd", is made in the second category and also in the third category, entitled "Sundry Equipment". Deleting that last claim from the second category, I allow the other claims in that category, which aggregate $25195.76, less the sum of $7000, the amount for which, as I find, the articles sent by the respondent to Nunawading could have been sold by the applicant if it had exercised reasonable judgment to mitigate its loss, by selling those articles during the first half of 1980.

It was submitted on behalf of the respondent that equipment, furniture and fittings installed in the Centrepoint basement shop were not shown to be incapable of use in another bakery and cake shop business, which it was submitted that the applicant might have commenced in 1980. For that reason, it was submitted, the applicant should not be compensated in damages in respect of those items on the basis of their cost less market value on re-sale or, in respect of chattels under hire purchase, on the basis of the cost to the applicant of achieving a discharge of its obligations under the hire-purchase agreements.

The applicant has not in fact undertaken the conduct of any such a business since 25 January 1980. No evidence was adduced which might have justified a conclusion that the damages claimed would have been mitigated by its undertaking the conduct of such a business after that date. Nor was cross-examination directed to suggest such a conclusion. In any event, it seems unlikely to me that, if the question had been explored in evidence, the applicant's failure to venture a substantial capital sum in entering upon another bakery and cake shop business, for the purpose of mitigating loss in respect of those items of equipment, would have been held unreasonable : see Mcgregor on Damages (14th ed.) pp. 168-174. The applicant had no means of finding the money for such a venture, unless Mr. and Mrs. Lucas had been willing to advance, or to guarantee repayment of a loan of, further funds. If Mr. and Mrs. Lucas had been minded to venture further funds in a bakery and cake shop business in or after 1980, they might well have preferred to leave the applicant weltering in the financial difficulties into which its engagement in the Centrepoint enterprise had brought it and to commence a business unconnected with the applicant.

I allow all of the miscellaneous claims in the third category - "sundry equipment" - at the amounts claimed, which aggregate $2643.08.

25. It is convenient to deal next with the item of loss claimed in respect of the conduct of the business by the applicant in the basement of the Centrepoint Mall. The cost of purchases of stock and raw materials was about $12700. Other expenses totalled about $11000. To the latter sum should be added the amount of $2306.66, which was paid on account of rent before the applicant took possession of the premises. Counsel for the respondent invited me to assume, for the purpose of any calculation of damages, that no more than that sum will be sought to be recovered on account of rent, and offered an undertaking on behalf of the respondent that the assumption would not be falsified. The value of stock and raw materials on hand when the applicant was disposessed was $8000. All that stock and materials were spoiled and their value lost. For reasons to be stated in paragraph 26 hereof, the loss of $8000 in respect of the stock and raw materials is not in my opinion recoverable as damages. The sum of $8000 should therefore be treated as a gain in calculating loss sustained in carrying on the business, in my opinion.

Mr. and Mrs. Lucas intended to draw a salary of $200 per week in respect of their work in conducting the business. They refrained from drawing any sum in respect of their work because of the applicant's lack of funds. But the applicant is liable to each of them, in my opinion, in the sum of $3000 for salary in respect of the work done by each during the 15 weeks when they were conducting the business.

Receipts from the business totalled about $23000. Accordingly I allow $1006.66 in respect of loss incurred by the applicant in conducting the business:

GAIN LOSS

Receipts 23,000
Stock and raw materials 8,000
Purchases 12,700
Other expenses 11,000
Rent 2,306.66
Salary (Mr. and Mrs. Lucas) 6,000
BALANCE 1,006.66

-------------------------
32.006.66 32,006.66

26. The claim in respect of the stock and raw materials spoiled in

consequence of the unexpected dispossession of the applicant and cessation of its business may be considered as damage alleged to have been caused by the deceit which induced the applicant's entry into the lease and into the conduct of the business, or as damage alleged to have been caused by the dispossession of the applicant. The amended statement of claim could be understood as including, in respect of the dispossession, a cause of action in trespass.

In my opinion the dispossession was no trespass : the respondent lawfully determined the applicant's tenancy by forfeiture upon re-entry on 25 January 1980.

The lease forming part of the agreement between the parties dated 16 May 1970 contained the following clause:

"14.01 If the rent hereby reserved or any part thereof or any other moneys payable by the Lessee hereunder shall at any time be in arrear and unpaid or if the Lessee shall at any time fail or neglect to perform or observe any of the covenants conditions or agreements herein contained and on the Lessee's part to be performed and observed and such default is continued for fourteen days after notice in writing calling on the Lessee to remedy such default shall have been given by or on behalf of the Lessor or if the Lessee while the said demised premises or any part thereof shall remain vested in a Company shall enter into liquidation whether compulsory or voluntary (not being a voluntary liquidation for the purpose of amalgamation or reconstruction) or enter into arrangement or composition for the benefit of its creditors or not being a Company shall assign his estate or enter into a deed of arrangement for the benefit of his creditors (PROVIDED ALWAYS that any deed of assignment or deed of arrangement made under the Bankruptcy Act 1966 and any suit or action by or against the Lessee or his property which is or may be deemed to be an act of bankruptcy under the said Act shall be excluded from the operation of this clause) or if any execution either by writ or warrant or by appointment of a Receiver be levied on or against any of the property or assets of the Lessee then and in any such case it shall be lawful for the Lessor or any person or persons duly authorised by it to re-enter the demised premises or any part thereof in the name of the whole and to hold and enjoy peaceably the demised premises thenceforth as if these presents had not been made without prejudice to any right of action or remedy of the Lessor in respect of the breach or non-observance of any of the covenants by the Lessee or the provisions hereof."

The notice dated 7 January 1980 (which is set out in paragraph 20 hereof) was given, and possession of the applicant's premises in the Centrepoint Mall was taken on 25 January 1980 by the respondent, in purported exercise of rights conferred by that clause 14.01. I shall assume, but without deciding, that the second and the third categories of breach of covenant alleged in the notice had not been committed : the second because of conversations between Lucas and Robertson and between Lucas and Powderly and Tallent (see paragraphs 11 and 20 hereof), and the third because demand had been made for interest (see paragraph 20 hereof). In my opinion no conversation between Lucas or any other agent of the applicant and any agent or officer of the respondent had absolved the applicant from the obligation to pay rent monthly in advance at the rate of $2015 ($2306.66 reduced by $291.66 in respect of the "advertising allowance") per month, or had rendered inoperative those terms of the deed dated 16 May 1979 which were not inconsistent with the statements made to Lucas by Robertson and, later, by Powderly and Tallent. Whatever legal analysis were made of the effect of either of those conversations on the operation of the deed - and estoppel seems the likeliest mode of analysis - the provisions of clause 14.01 concerning rent would in my opinion have contractual operation according to their tenor as if the orally agreed rent were "the rent hereby reserved". Nothing in those conversations would in my opinion support a conclusion that the deed executed by the parties, or, in the case of the conversation with Robertson, the deed to be executed, was to have no contractual effect. Even if I had accepted, as an accurate account of what Mr. Tallent said to Mr. Lucas on 21 November 1979, the understanding Mr. Lucas communicated in evidence of that conversation (see paragraph 20 hereof), I would not have found an agreement in the terms alleged in paragraph (ii) of what are described as "Particulars" under paragraph 11 of the amended statement of claim, for the promise to send a letter confirming what Tallent had said (if such a promise were given) was not a term, in my opinion, of the oral agreement alleged in that paragraph. The provisions of clause 14.01 in my opinion obviated the requirement of a common law demand for the rent : Commissioners of State Savings Bank v. Millane (1931) V.L.R.18; Lo Guidice v. Biviano (No. 1) (1962) V.R.412. And in my opinion the circumstances, that the notice dated 7 January 1980 included allegations of a breach which had not been committed (that is, the allegation of failure to pay the rent in respect of October 1979, to which, upon the findings I have made, the payment of $2306.66 would be allocated) and allegations of breaches which I have assumed not to have been committed, did not render that notice ineffective in relation to the applicant's failure to pay the rent for the months of November and December 1979 and January 1980 : Pannell v. City of London Brewery Co. (1900) 1 Ch. 496; Gair v. Smith (1964) V.R.814 (Cf. Green v. Sommerville [1979] HCA 60; (1979) 141 C.L.R. 594.) Compliance having been made by the respondent with the requirements of clause 14.01, and the rent remaining unpaid, the respondent's taking possession of the premises on 25 January 1980 was lawful and worked a forfeiture of the term, in my opinion.

The letter dated 16 November 1979 from the applicant's solicitors to Centrepoint Custodian Pty. Ltd. (which is set out in paragraph 20 hereof) shows the applicant to have been then contemplating rescission for fraudulent misrepresentation. I have found the applicant's abstention form election between rescission and affirmation to have been a reasonable course to take in the circumstances as they were known to the applicant's officers until 25 January 1980, and it is understandable that the applicant would, if it safely could, avoid making payments of rent (at whatever rate) which might be held to have constituted an election to affirm the deed or to affirm any agreement which the conversations that preceded execution of the deed might have constituted. But after service on it of the notice dated 7 January 1980 the applicant could not reasonably continue in the course which it had been taking, in my opinion. If it desired still to abstain from election between rescission and affirmation and could not procure any protection in the meantime by agreement between its solicitors and the respondent's solicitors, then reasonable care and judgment to mitigate the damages flowing from its entry into the tenancy, which the deceit had induced, demanded that the applicant take legal action forthwith to forestall the sudden dispossession which the notice threatened and which clause 14.01 of the deed might be held to authorise, and which could be expected to occasion the loss of stock and raw materials that in fact occurred. Unless and until the applicant disaffirmed the agreement for tenancy, rent at a rate of not less than $2015 per month was undoubtedly payable to the respondent. The applicant's failure either to pay rent at that rate or to institute an action, in which interlocutory provision for payment of rent into court and for restraint of the respondent from taking possession of the shop were sought, constituted a failure to act reasonably to mitigate the damage caused by Robertson's fraudulent misrepresentations, in my opinion. The loss of $8000 is therefore not recoverable as damages for that deceit, in my opinion.

27. After the applicant was dispossessed legal action for money due was taken against Mr. Lucas or the applicant or both by a number of persons who had supplied goods, or had done work, which related to the leased premises or to the business conducted there. Most of these legal proceedings were brought against Mr. Lucas rather than the applicant. Most of the proceedings were defended. One defence taken to several of the claims was that it was the applicant and not Mr. Lucas who had contracted for the goods or the services. Other defences were taken to some of the claims. One of the objects sought to be achieved by defending most of these claims was to delay the time for payment. In some instances an object sought to be achieved was compromise of the claim. Whether it was Mr. Lucas or the applicant who was contractually liable to the plaintiffs in these proceedings, the liability was in each case the applicant's as between itself and Mr. Lucas. The applicant was insolvent and wholly dependent for funds on Mr. and Mrs. Lucas, by whom it had been advanced substantial amounts. I have found, as will appear hereafter, that the applicant was not charged interest on those amounts. Mr. and Mrs. Lucas were unwilling, as I infer, to advance immediately to the applicant the additional monies required to satisfy without delay the claims being made for payment in respect of goods supplied, or services rendered, to the applicant. In those circumstances the course adopted - of defending the claims to gain time and to achieve compromises - was reasonably calculated, as I find, to mitigate the damage caused by Robertson's deceit which had induced the applicant to undertake a commercial enterprise, the expenses of which were beyond the applicant's capacity to bear, and the income from which was so low as to make abandonment of the enterprise in January 1980 the best means of minimising the applicant's losses. I accept the evidence of the solicitor, Peter Charalambos Gregory, that the legal fees charged Mr. Lucas and the applicant which were claimed as items of damage in this proceeding were fair and reasonable remuneration for the legal work done. Also claimed are amounts paid, pursuant either to curial orders or to agreements for compromise of proceedings, to plaintiffs claiming in respect of goods supplied, or services rendered, to the applicant. The aggregate of the amounts claimed under this category - entitled "legal expenses" - was $9887.70. For the reasons given in evidence by Mr. Gregory, $1500 should be deducted in respect of estimated costs of a County Court action by "Sophos Cabinets & Joinery". I allow in respect of that category $8387.70. It is true that some parts of that aggregate amount were payable by Mr. Lucas rather than the applicant to the solicitor for his remuneration or disbursements, or to a plaintiff for his costs. It may also be true that some of the legal work for which Mr. Lucas was charged was directed to establish that certain liabilities had been incurred by the applicant rather than Mr. Lucas. To the extent that the legal work prevented entry of a judgment against Mr. Lucas, he may be said to have had a benefit from that work in which the applicant did not share. But the principal objects sought to be achieved by the legal work - delay and compromise for less than the amounts claimed - were for the benefit of the applicant. In respect of all of the items in this category Mr. Lucas in my opinion was entitled to indemnity by the applicant.

28. The first four of the categories of damage with which I have so far dealt may in my opinion by conceived as comprehending what was described in Doyle v. Olby (Ironmongers) Ltd. (1969) 2 Q.B. 158 and in Esso Petroleum Co. Ltd. v. Mardon (1976) 1 Q.B. 801 as "capital loss" and as "cash put into the business and lost". All the sums so far allowed are, I think, "loss or expenditure incurred by the plaintiff in consequence of the inducement upon which he relied, diminished by any corresponding advantage in money or money's worth obtained by him on the other side" : per Dixon J. in Potts v. Miller [1940] HCA 43; (1940) 64 C.L.R. 282 at 297.

It is convenient to deal next with a category of damage claimed in respect of monetary gain which it was alleged that the applicant would have achieved if it had not been induced to enter into the lease.

29. When Mr. Lucas had sold the cake shop and bakery in Doncaster in November 1979 he and his wife rested from shop keeping for almost a year. Then he began to look for another cake shop and bakery business and contacted Mr. Robertson in response to an advertisement inviting applications for tenancies in the projected Centrepoint Mall. Before he decided to take a shop in the Centrepoint Mall he had considered at least one other shop as a place in which to resume business : a "hot bread" shop in Camberwell. He and his wife had conducted their businesses in partnership. But they procured the applicant to enter into the lease of the Centrepoint shop. By a deed dated 7th March 1979 the applicant had declared itself trustee of a trust fund of which the primary beneficiaries were Mr. and Mrs. Lucas, his children and remoter issue and spouses of his children and remoter issue. Wide discretionary powers were conferred by the deed on the applicant, which was also empowered to carry on any business as trustee, and to employ any servants or agents. The applicant entered into the lease and fitted the shop and conducted the business in the shop as trustee of that trust fund and in exercise of the powers conferred on it by that trust deed. If the applicant had not entered into that lease in May 1979, it would have entered upon the conduct of some other bakery and cake shop business in the Melbourne metropolitan area at about that time and would probably have achieved financial gains of a substantial order, according to the submissions of counsel for the applicant. The deceit which induced the applicant to take the lease and to conduct the business in the Centrepoint Mall had caused the loss of those gains and the loss was recoverable as damages, according to those submissions.

I find that the applicant would have entered into such a business venture if it had not been induced to take the Centrepoint lease. The period during which, as I find, the applicant was prevented, by reason if its having been induced to enter into the Centrepoint lease, from engaging in another venture was the period of one year from May 1979 until April 1980. (The evidence might have justified a finding that the period was a little longer, but the particulars of damage specify one year, application to amend was not made, and Mr Goldberg relied in submission on the limitation which the particulars imposed.)

If the evidence justifies a conclusion that during that year the applicant would probably have achieved a financial gain by conducting a bakery and cake shop business if it had not been induced to enter into the Centrepoint lease by the deceit for which the respondent is vicariously liable, then in my opinion damages are recoverable in respect of the financial gain which the applicant was prevented from deriving : South Australia v. Johnson (1981) 42 A.L.R. 161 at 169-170. The evidence did not disclose why, after dispossession, the applicant did not enter into another such a venture. The applicant was wholly dependent on Mr. and Mrs. Lucas both for managerial and technical capacity to conduct a bakery and cake shop and for financial capacity to undertake any business activity. The sum settled by the settlor pursuant to the trust deed was $25 and all the evidence compelled the inference, which I draw, that at relevant times the applicant's only sources of substantial funds were its two shareholders. The unwillingness of Mr. and Mrs. Lucas - if it be assumed that they were unwilling - to provide the applicant with the means of again venturing into business in a bakery and cake shop after 25 January 1980 may have been a consequence of their having incurred loss by advancing to the applicant funds which it could not repay. But the applicant's inability, by reason of that unwillingness, to resume business is not in my opinion to be regarded as having been caused by Mr. Robertson's tortious conduct. Nor did counsel for the applicant submit that a period longer than one year was the period during which that conduct prevented the applicant from making financial gains by business activity. I have allowed a period of just over three months after 25 January 1980 as the time which the applicant would have required for the purpose of finding suitable premises in which to resume business in a bakery and cake shop and for the purpose of disposing of those chattels and fixtures from the Centrepoint shop which could not have been utilised to greater advantage in the new business.

The evidence upon which a conclusion may be based as to whether the applicant would probably have achieved a financial gain in the period from May 1979 until April 1980 may be divided into two categories : projections based upon the experience of the applicant in the conduct of its business in the Centrepoint Mall and projections based upon the experience of Mr. and Mrs. Lucas in the conduct of their businesses at North Balwyn and at Doncaster. Both categories of evidence were defective in several respects as bases of inferred findings concerning what would, or might, have happened if the applicant had conducted a bakery and cake shop business elsewhere in Melbourne during that year. And, of course, the uncertainty inherent in an attempt to determine what might have been, but never was, must be kept in mind when assessing damages on the basis I have adopted. The evidence was carefully analysed by counsel for the parties in the course of their final submissions.

My finding on this issue is, first, that the applicant would probably have made a trading profit in the conduct of such a business during the year ended 31 April 1980 of about $5000. In the estimation of what I have called a trading profit I exclude from consideration as an expense any interest on any money advanced to the applicant by Mr. or Mrs. Lucas to enable the applicant to enter upon, or to conduct, the business. My reason for taking that course is that I do not think that any interest would have been charged. (As will hereafter appear, I find that the applicant was not charged interest by Mr. and Mrs. Lucas on the substantial advances to the applicant of moneys for the Centrepoint venture.) I have treated as an expense, by which trading profit would have been reduced, salary of $200 per week to each of Mr. and Mrs. Lucas (aggregating $10,400), because I think that they would have caused the applicant to pay those salaries in respect of their management of the business and their labour in the conduct of the business. Each of Mr. and Mrs. Lucas has, if I am correct in that finding, lost that amount of $10,400 in respect of that year, although each will, if my findings are correct concerning the applicant's liability to pay each of them $3000 for their work in the business at the Centrepoint Mall, gain $3000 in respect of his work during a period of 15 weeks in that year. But the loss is theirs, not the loss of the applicant, and is not in my opinion recoverable as damages by the applicant.

My second finding on this issue is that the applicant would probably have achieved during that year a capital gain of about $10,000 by reason of an accretion of that amount to the market value of the business. There was expert opinion evidence inconsistent with a finding of that kind in relation to the goodwill of the class of business under consideration, but I decline to accept that evidence as contradicting a conclusion, which in my opinion the evidence of the business history of Mr. and Mrs. Lucas justifies, that a bakery and cake shop business conducted by Mr. and Mrs. Lucas would, as a matter of probability, steadily and substantially increase in market value.

It is in my opinion improbable that the applicant would have been subjected to any income tax liability, except perhaps in a trifling amount, in respect of the trading profit of $5000 which I have estimated that it would have derived as a trustee. Accordingly, I disregard questions of income tax in the assessment of this item of damages and allow the sum of $15000 in respect of loss of the financial gain which the applicant would have made if it had not been induced, by the deceit for which the respondent is vicariously liable, to enter into the lease of the premises in the Centrepoint Mall.

30. A further item of damage claimed was interest on moneys advanced by Mr. and Mrs. Lucas to the applicant and applied by the applicant in discharge of liabilities incurred by it in connection with the tenancy of the Centrepoint premises or in connection with the establishment or the conduct of the business in those premises. The applicant had neither funds nor bank account during the relevant period : the funds were advanced by Mr. and Mrs. Lucas and cheques in discharge of the applicant's liabilities were drawn on their account. The evidence justified a conclusion that the moneys provided were by way of loan and not gift, but not a conclusion that the applicant had incurred a liability to pay interest to Mr. and Mrs. Lucas on the money lent. I therefore hold that the claim cannot be sustained, without expressing any opinion whether, if the applicant had incurred a liability to pay interest to Mr. and Mrs. Lucas on the moneys advanced, the amount of the liability would have been recoverable as damages in this proceeding.

Support for this claim for interest was said to be found in the reasoning of the members of the Court of Appeal in Esso Petroleum Co. Ltd. v. Mardon (1976) 1 Q.B. 801. Part of the money which had been expended by Mr. Mardon in conducting the service station of which he had taken a lease for a term of years was held to be recoverable, upon his counterclaim, as damages for the plaintiff lessor's negligence in estimating incorrectly the volume of petrol which would be sold by Mr. Mardon, whereby he was induced to enter into the lease, notwithstanding that that part of the money expended had been provided by a company of which Mr. Mardon and his wife were the only shareholders. Ormrod L.J. dealt with the point thus ((1976) 1 Q.B. at 829-830):

"It remains to consider Mr. Ross-Munro's final submission that in fact no capital loss fell on Mr. Mardon personally because the 6,270 pounds came from a private company in which he and his wife held all the shares. The judge, who examined with meticulous care the trading arrangements which Mr. Mardon adopted in this business, came to the conclusion that his and the company's finances were so inextricably intermingled that it was impossible to differentiate between them. I agree with this conclusion. This is one of those cases of a business run partly on a one-man company's account and partly on a personal account by the only person who was active in the company. Mr. Mardon simply regarded the capital of the company as, to all intents and purposes, his own money. At an earlier stage in the company's history someone wrote out some very formal-looking minutes; but it is absurd to suppose that Mr. and Mrs. Mardon sat down from time to time and held a board meeting. The reality is that the money was made by Mr. Mardon's efforts and whether it found its way into the company's account or his personal account was largely a matter of chance unless his accountant kept him straight. It would be extremely unrealistic and a denial of justice in a case like this to allow the plaintiffs, who were quite unaffected by the existence of this company, to take advantage of a piece of legalistic purism. As Lord Reid once said: 'The life blood of the law is not logic but common sense': Reg. v. Smith (Roger) (1975) A.C. 476, 500."

Shaw L.J. said ((1976) 1 Q.B. at 833-834):

"Another argument on behalf of Esso in relation to damages was that it was not Mr. Mardon's money that had been brought into the venture and lost. It was, said Mr. Ross-Munro, the money of a company in which Mr. Mardon and his wife were the only shareholders. It was a company which had no business, for it had sold the goodwill of the business which it had once conducted. It does not appear to have had any creditors either. So Mr. and Mrs. Mardon could at any time have wound the company up by their own resolution and taken the money standing to its credit in its bank account for themselves as their own money.

Mr. Mardon did not go through this formality which could have been initiated over the breakfast table in his home. Instead, he drew cheques on his company's account. It was to all intents and purposes his and his wife's money. If the bare title was with the company then I would hold that Mr. Mardon borrowed the money and remains accountable to his dormant company. I thought the argument a very unattractive one. It is also a bad one and can be forgotten."

The sums which in this proceeding are in like case with the 6270 pounds in Mardon's Case are the moneys advanced to the applicant by Mr. and Mrs. Lucas, not interest on those moneys. But, it was said, since Mr. and Mrs. Lucas were at relevant times charged interest on the debit balance of their bank account, from which those moneys were advanced, the reasoning which I have quoted supported the conclusion that interest on those moneys, calculated at the rate and in respect of the period applicable to each amount advanced, was recoverable as damages by the applicant.

The applicant company received the moneys advanced for use in the conduct of the business as trustee, as Mr. and Mrs. Lucas well knew. And they were not the only beneficiaries of the trust. In those circumstances it is in my opinion impossible to treat the lenders and the borrower, for the purposes of an assessment of damages, as if they were one entity.

Support for the claim for interest was also said to be found in the reasoning of Fisher J. in Yorke v. Ross Lucas Pty. Ltd. & Ors. [1982] FCA 180; (1982) 45 A.L.R. 299. In that case damages were assessed in respect of a contravention of s.52 of the Trade Practices Act by the vendor of a record shop business. The takings and profits were misrepresented and thereby the applicants were induced to buy from the vendor the goodwill, plant, equipment and stock of the business and to take from a person not a party to the proceeding a tenancy of the premises in which the business was conducted. Judgment in a single money sum was entered for the applicants against the vendor, Treasureway Stores Pty. Ltd., and the vendor's agent, Ross Lucas Pty. Ltd., which had also been held to have contravened s.52 by making those misrepresentations. The form of the judgment and the reasons for judgment contradict any supposition that equitable relief upon rescission, or relief of a kind which is authorised by paragraphs (a), (c) and (d) of s.87(2), was being granted. But among the amounts "taken into account" in the assessment of the judgment sum was interest on the purchase price from payment thereof until judgment. The reason for that can be gathered, I think, from the following passages of the reasons for judgment (45 A.L.R. at 314-320):

"I turn . . . to the question of damages. Section 82 of the Act provides a statutory entitlement . . . (p.314) . . . Decisions of this court at first instance have proceeded on the basis that the relevant measure of damages is that generally adopted in actions of tort but more particularly in deceit. I refer to the relevant passages in the reasoning of these trial judges in this regard, but particularly wish to emphasize that such measure of damage is seen as a guide rather than a positive requirement. (p.315) . . . Counsel for the applicants submitted that the approach of the High Court in Alati v. Kruger [1955] HCA 64; (1955) 94 C.L.R. 216 provided by analogy the most satisfactory way to assess damages in the present instance. It was a case in which an order for rescission was made, an important and relevant factor the absence of which in this matter does not, in my opinion, disentitle me to apply generally the same approach. In Alati v. Kruger, supra (at p.222) the majority of the court, referring to a contract induced by fraudulent misrepresentation, indicated the choices open to the defrauded vendor. They said of one alternative: 'Or, thirdly, provided that he was in a position to restore to the appellant substantially that which he had received under the contract, he might avoid the purchase and sue to recover his purchase money back from the appellant, with interest and also with damages for any loss which he may have suffered through carrying on the business in the meantime: cf. Salmond and Williams on Contracts 2nd ed, (1945), p.269' (my emphasis).

In this present case the interests of a third party, the lessor of the premises is involved. No reassignment of the lease, as in Alati v. Kruger, supra. was considered by any of the parties, but the lessor has re-entered and is claiming his loss. Under the contract the applicant virtually acquired only stock and fittings and fixtures and at the time when, at the behest of Treasureway, business ceased, these fixtures and fittings were available to that company although stock had been reduced in value to $16,351. None of these matters of difference persuade me I should not obtain as much advantage as I can from the High Court's approach. (pp.319-320) . . . In the circumstances I find that it was possible, at least notionally, for the applicants when they ceased operating the business (albeit perhaps as caretakers for the vendor as contemplated by the High Court in Alati v. Kruger (at pp. 226 and 228), to return substantially what they acquired. (p.320) . . . In accordance with the approach in Alati v. Kruger (at p. 226) he is entitled to receive interest and in my opinion on the whole of the purchase price. Such interest should be assessed at the ruling rate at the time, and bears no necessary relation to the rate of interest which Yorke was obliged to pay when borrowing $40,000 of the purchase money. The vendor and the purchaser agreed 10 per cent as an appropriate rate of interest in respect of the purchase of the surplus stock and I see no reason why this figure should not be adhered to.

The applicants are entitled to interest at the rate of 10 per cent per annum from the date they settled on the purchase of the business to the date of this judgment. I have taken this amount into account in arriving at my final figure." (p.320)

The passage from the reasons for judgment of Dixon C.J., Webb, Kitto and Taylor J.J. in Alati v. Kruger at p.226 of the report of that case, to which Fisher J. refers as the source of the "approach" in accordance with which he allowed interest on the purchase money, makes it plain that the allowance of interest on the purchase money paid by Kruger to Alati was not an element of damages assessed for deceit, but an element of the equitable restitutory process on rescission for fraud. It may be that Fisher J. utilised, in assessment of damages pursuant to s.82(1) and s.87 of the Trade Practices Act 1974, one of those "means which the common law lacked" (94 C.L.R. at 224) to achieve a more complete restitutio in integrum. But what his Honour did is not, in my opinion, authority to justify what I am invited to do : the interest he awarded was on a sum of money which passed from applicant to respondent and was to be restored (as part of the damages assessed) by respondent to applicant, and the use of which, during the period when the respondent had the use of it, would have remained with the applicant if the contravention of s.52 had not induced the applicant to pay it to the respondent. The respondent Centrepoint Freeholds Pty. Ltd. had no use of any of the money upon which interest is claimed, except the sum of $2306.66 paid on account of rent.

Other reasoning of Fisher J. in Yorke v. Ross Lucas Pty. Ltd. & ors. might be thought an impediment to any claim for interest of the kind now under consideration. The applicants Mr. and Mrs. Yorke had borrowed money at interest for use in purchasing and conducting the record shop business. Of those borrowings his Honour observed (45 A.L.RR. at 321):

"I do not regard the cost of financing the borrowings from Electrical Investment Ltd. or Treasureway under the two bills of sale as being a direct consequence of the purchase of the business. They were the result of the decision, albeit obligatory in the circumstances, of Mr. Yorke to finance his purchase in this way. To some extent the interest component is partially compensated for by the interest allowed on the purchase price, and the balance interest was not a direct consequence of the purchase but of Yorke's lack of ready money."

With that may be contrasted what Fitzgerald J. had to say of similar claims in Frith v. Gold Coast Mineral Springs Pty. Ltd. & Ors. (1983) 47 A.L.R. 547 at 572:

"As a matter of principle, if borrowing or the termination of an investment occurs in reliance upon misrepresentations, I cannot perceive why the cost of those steps to the injured party ought not be recoverable."

That passage was preceded by a more general statement (47 A.L.R. at 565-566):

"The broad statement of the appropriate measure of damages in deceit which was adopted in Dolby's case, supra, accords with the statutory test, if, as I think, applicants who establish a cause of action under the Act are entitled to those losses which are the immediate result of the offending conduct and also to consequential losses if sufficiently direct. It is on that footing that I proceed in this case.

There is a further matter to be kept in mind in some cases, and this is one, in which damages are sought under the Act. A purchase of property may be one element in a course of conduct which is embarked upon in reliance on conduct which is misleading or deceptive or likely to mislead or deceive. The statutory entitlement to compensation is not restricted to losses involved in the single element constituted by the transaction of purchase.

Applicants for relief under the Act are entitled to have each act or omission shown to have been taken in reliance upon offending conduct considered for the purpose of a determination of whether they thereby suffered loss or damage.

In my opinion, therefore, irrespective of how the applicants' damages might have been calculated had their claim been made and pressed in deceit, it is appropriate, in the determination in these proceedings of the damages to which they are entitled under the Act, merely to seek to identify what were the immediate and what were the direct consequential losses sustained by the applicants by the conduct of the respondent. The operation of that test will, as in all cases, depend on the circumstances."

In Esso Petroleum Co. Ltd. v. Mardon (1976) 1 Q.B. 801 at 828-829 Ormrod L.J. observed:

"In addition to this loss of capital Mr. Mardon has lost the income which he could reasonably have expected to earn from the business, made up partly by loss of the use of his capital and partly by the loss of his time and energy in running the business. This head of loss, of course, continued after the closure of the business because Mr. Mardon no longer had the capital to reinvest in another business. A further source of loss is the interest which has accrued on the overdraft. . . . . . . . . . . . . . . . . he is entitled to recover his capital losses up to the time when the business finally closed.

The income losses present greater difficulties. There has been serious delay in bringing this action to trial which has made matters worse than they might have been. On the other hand, the plaintiffs have had the use of the money representing Mr. Mardon's capital losses up to the present. It is, therefore, not unreasonable that they should be liable for the interest on the overdraft, and on his capital investment.

The claim for loss of profits is, in my opinion, virtually incapable of proof, and I will not deal with that."

In what sense Ormrod L.J. conceived that Esso Petroleum Co. Ltd. had "had the use of" Mr. Mardon's money is not clear to me. Since it was that company's petroleum products which were sold at the service station, his Lordship may have thought of Mr. Mardon's money as forming part of the capital fund which yielded to Esso Petroleum Co. Ltd. the income which was measured by those sales. Or he may have been adverting to a statutory provision concerning interest on damages.

The applicant would, but for its involvement in the Centrepoint venture, have made profits capable, as I have found, of proof, by the expenditure of the "time and energy" of Mr. and Mrs. Lucas. The applicant's "capital losses", out of the funds Mr. and Mrs. Lucas supplied, have been compensated in the first four categories of damage considered. But the overdraft on which interest was charged was not the applicant's, nor did the applicant incur, as I have found, a liability to pay interest on the moneys provided to it by Mr. and Mrs. Lucas. The respondent had not the use of the applicant's money, other than the $2306.66 for which it gave value, except in the metaphorial sense in which, between accrual of a cause of action and judgment thereon in a money sum, a defendant may be said to have the use of the plaintiff's money.

31. Interest was also claimed on the amount of the compensatory damages otherwise recoverable from the time when each item of loss was sustained until judgment in the action. I have been considering, in relation to the assessment of damages, a judgment upon the cause (or, perhaps, causes) of action for deceit. In my opinion each of the fraudulent misrepresentations constituted also a contravention of s.52(1) of the Trade Practices Act 1971. In the circumstances which the evidence in this proceeding discloses there is in my opinion no difference in the amount of compensatory damages recoverable by the applicant upon those two different causes of action, unless it be a difference arising from an award of interest. Upon the cause of action for deceit no allowance is made by the common law for interest on damages between the time when the loss is sustained for which those damages are awarded and the time of judgment : see Simonius Vischer and Co. v. Holt and Thompson (1979) 2 N.S.W.L.R. 322 at 339, 340, 362-367, and the cases there cited. In respect of that common law cause of action no statutory authority for such an allowance was suggested by counsel for the applicant, but it was submitted that sections 82 and 87 of the Trade Practices Act 1976 authorised such an allowance, without which, so it was submitted, the judgment for damages in respect of the respondent's contraventions of s.52(1) would not afford the just compensation which those two sections required.

The rationale of the common law denial of interest on damages for tort was stated by Latham C.J. (70 C.L.R. at 525) in terms which were adopted by the Court of Appeal in Simonius Vischer and Co. v. Holt and Thompson : "The loss of the use of the money ultimately awarded as damages is not part of the loss occasioned by the tort or breach of contract. It is a loss due entirely to delay in the payment of money ultimately held to be due, and is not recoverable as part of the damages." The verbiage in which causation of damage is expressed in ss. 82(1) and 87 - "suffers loss or damage by conduct" - does not suggest to me a conception of causality inconsistent with the conclusion reached by the Court of Appeal. I do not think that either of those provisions authorises the allowance of the interest claimed.

Nor do I think that the claim can be justified by reference to s.79 of the Judiciary Act 1903. In this proceeding the jurisdiction of the Court is being exercised in the State of Victoria. Section 79A of the Supreme Court Act 1958 provides:

(1) The Judge upon application shall in all actions for the recovery of debt or damages give damages in the nature of interest at such rate not exceeding the maximum rate approved by the Australian Loan Council at the time the judgment is entered or the order made for long-term borrowing for new public securities issued by semi-government authorities as he thinks fit from the commencement of the action until the entry of the judgment unless good cause is shown to the contrary over and above the debt or damages awarded by the court or jury.

(2) Nothing in this section shall -

(a) authorize the granting of interest upon interest;

(b) apply in relation to any sum upon which interest is recoverable as of right by virtue of any agreement or otherwise;

(c) affect the damages recoverable for the dishonour of a negotiable instrument;

(d) authorize the allowance of any interest otherwise than by consent upon any sum for which judgment is pronounced or entered by consent;

(e) apply in relation to any sum on which interest might be awarded by virtue of section seventy-eight or section seventy-nine of this Act; or

(f) limit the operation of any enactment or rule of law which apart from this section provides for the award of interest.

(3) Where the damages awarded by the court or jury include or where the Judge in his absolute discretion determines that the damages so awarded include any amount for -

(a) compensation in respect of liabilities incurred which do not carry interest as against the person claiming interest;

(b) compensation for loss or damage to be incurred or suffered after the date of the award; or

(c) exemplary or punitive damages -

the Judge shall not allow interest in respect of any amount so awarded or in respect of so much of the award as in his opinion represents any such damages.

(4) The Judge may if he thinks fit request a jury to specify in its verdict any amount included in the verdict in respect of the matters referred to in sub-section (3) of this section."

In Australian National Airlines Commission v. Commonwealth and Anor. [1975] HCA 33; (1975) 6 A.L.R. 433 the plaintiff recovered damages against the defendants for negligence causing damage to its aeroplane, in an action in the High Court, which was exercising its jurisdiction in the State of New South Wales. The second defendant recovered damages against the plaintiff and the first defendant for negligence causing damage to the second defendant's aeroplane, caused by collision with the plaintiff's aeroplane. In his reasons for judgment the trial judge (Mason J.) said (6 A.L.R. at 435-436):

"Both the plaintiff and the second defendant claim interest on damages up to judgment. The claim is based on s.94 of the Supreme Court Act 1970, as amended, (NSW) which confers a power on the Supreme Court of New South Wales to award interest in respect of damages as part of the judgment, a power which is said to be applicable in these proceedings by virtue of s.79 of the Judiciary Act 1903, as amended. Whether this step in the argument is well founded is a familiar question not without its difficulties - see John Robertson & Co. Ltd. v. Ferguson Transformers Pty Ltd. [1973] HCA 21; (1973) 129 C.L.R. 65 at 80-1, 84, 88, 94-5; Pedersen v. Young [1964] HCA 28; (1964) 110 C.L.R. 162; (1964) A.L.R. 798.

However, it is my view that s.79 does not operate to pick up and apply in proceedings in the High Court a provision such as s.94 which is contained in a statute designed to define and regulate the powers and procedure of the Supreme Court and which confers power on that court to order interest on damages in judgments entered by that court in proceedings before it. No matter how widely it may travel in some respects s.79 does not, in my view, pick up and apply in this court a provision which empowers a particular court of a State to make orders and enter judgments in proceedings in that court. The relevant powers of this court are conferred by the Judiciary Act and the High Court Procedure Act 1903, as amended; as I see it they are not to be supplemented by the operation of s.79 of the Judiciary Act in the manner suggested. Section 26A of the High Court Procedure Act, which provides that judgments of the court shall carry interest, should be regarded as a comprehensive expression of the entitlement in this court of a litigant to interest on damages to the exclusion of any provision in State law which would otherwise be made applicable by virtue of s.79."

Section 79A is in Part VII of the Supreme Court Act 1958. Section 60 of that Act provides:

"The several rules of law enacted by Part VII of this Act shall unless express provision is otherwise made be in force and receive effect in all Courts whatsoever so far as the matters to which such rules relate shall be respectively cognisable by such Courts."

Section 79A operates not only as "a provision which empowers a particular court" of the State of Victoria "to make orders and enter judgments in that court", but as a provision in force in all Victorian courts having jurisdiction to determine "actions for the recovery of debt or damages". But the conclusion of Mason J. that s.79 of the Judiciary Act did not make applicable in the High Court the provisions of s.94 of the New South Wales Supreme Court Act seems to rest, not on the circumstance that s.94 conferred a power to award interest only on a particular New South Wales court, but on the circumstance that what Mason J. called "the relevant powers" of the High Court had been conferred by Commonwealth statutes and were "not to be supplemented by the operation of s.79 of the Judiciary Act in the manner suggested". The Federal Court of Australia Act 1976 makes provision with respect to the powers of this court on most of the subjects with which the High Court Procedure Act 1903 deals. In particular, s.52 of the Federal Court of Australia Act makes a provision with respect to interest on judgments which is very similar to the provision made by s.26A of the High Court Procedure Act. Applying, as I think that I should, the reasoning of Mason J., I reach the conclusion that s.79 of the Judiciary Act does not operate to make applicable in this proceeding the provisions of ss. 60 and 79A of the Supreme Court Act 1958. That conclusion comprehends both a claim for damages cognisable in the courts of the State of Victoria, such as the claim for damages for deceit, and also a claim for damages under s.82 of the Trade Practices Act 1974, which no Victorian court has jurisdiction to hear. In relation to a claim of the latter kind, the conclusion is fortified by the reasoning of Walsh and Gibbs J.J. in John Robertson and Co. Ltd. (in liquidation) v. Ferguson Transformers Pty. Ltd. [1973] HCA 21; (1973) 129 C.L.R. 65 at 81-85, 87-89, and by the judgment of Lockhart J. in Hubbards Pty. Ltd. v. Simpson Ltd. (1982) 41 A.L.R. 509.

32. Exemplary damages were sought. Assuming, but without deciding, that exemplary damages might be awarded upon the causes of action held to have been established by the applicant, I do not consider that the conduct of the respondent, or of any person for whose conduct the respondent might be liable, has been shown by the evidence to merit an award of exemplary damages.

33. Claims for damages in respect of "physical inconvenience" and "mental distress" were advanced, but not pressed in submission. Having regard to the applicant's incorporeity, I reject those claims.

34. No submission was advanced by either party in relation to the causes of action pleaded in negligence, or, except concerning the allegations discussed in paragraph 10 hereof, in relation to breach of warranty. There will be a judgment for recovery of damages in the sum of $51431.16, to be pronounced on a later day. I will hear submissions by the parties as to whether any other order should be made.