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Federal Court of Australia |
COURT
IN THE FEDERAL COURT OF AUSTRALIACATCHWORDS
Trade Practices - Consumer protection - Misleading or deceptive conduct - Agreement for sale of nursery business and lease of parcel of land - Misrepresentations as to turnover and varieties of plants being cultivated - Rescision of agreement and lease - Damages - Injunctive relief.Trade Practices Act 1974 (Cth), ss.52, 75B, 82, 87
HEARING
CANBERRACounsel for the applicants: Mr R.H.B. Pringle
Solicitors for the applicants: Freehill, Hollingdale & Page
Counsel for the respondents: Mr N.P. Hasluck
Solicitors for the respondents: Stone James Stephen Jaques
ORDER
It be declared that the applicants lawfully rescinded the agreement made on 20 December 1983 and the lease dated 10 February 1984.There be judgment for the applicants against the respondents and each of them in the sum of $18,095.
The first respondent, Bickley Vale Pty Ltd, be restrained from proceeding further with the proceedings numbered 25200 of 1984 pending in the Local Court of Western Australia and the proceedings numbered 1454 of 1985 pending in the District Court of Western Australia and from instituting any other proceedings against the applicants or any of them in respect of the agreement made on 20 December 1983 or the lease dated 10 February 1984.
There be judgment for the applicants upon the counterclaim filed herein on behalf of the first respondent.
The respondents pay the applicants' costs of the proceedings, including
reserved costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
DECISION
The applicants, Finstock Pty Ltd, Harvey William Du Cros and Roswitha Ingeborg Du Cros, claim damages and other relief against Bickley Vale Pty Ltd, Francesco Rosario Nesci and Barbara Constance Nesci who are named in the proceeding respectively as first, second and third respondent. The claim arises out of the making of an agreement on 20 December 1983, whereby the applicants agreed to purchase from Bickley Vale Pty Ltd a business of growing and marketing cut flowers and to take a lease of part of the land on which that business was being conducted. The applicants allege that they were induced to enter into the agreement by conduct in trade or commerce on the part of Bickley Vale Pty Ltd which was misleading or deceptive, or likely to mislead or deceive, in contravention of s.52 of the Trade Practices Act 1974 (Cth) ("the Act"). Mr and Mrs Nesci are alleged to be persons involved in that contravention within the meaning of s.75B of the Act and thus to be liable in damages to the applicants. In the alternative, the applicants claim damages for deceit, for negligent misrepresentation and for breach of contract. They also claim declaratory and injunctive relief. The first respondent has counterclaimed against the applicants for amounts allegedly due under the agreement and the lease or, alternatively, for damages consequent upon the alleged wrongful repudiation by the applicants of the agreement and the lease.2. The applicants allege that, in the course of the negotiations leading to
the making of the agreement, representations concerning
the business, on which
they relied, were made by or on behalf of the first respondent. The substance
of those representations is
set out in par.7 of the applicants' statement of
claim in the following terms:
"(a) that there were 8,000 chrysanthemum
plants planted on the premises whichEach of the representations, except that set out in sub-par.(h), is alleged to have been false or, alternatively, misleading and deceptive (statement of claim, par.14).
would yield between 10,000 to 15,000
bunches for Mother's Day;
(b) that sales of chrysanthemums on Mother's
Day would be around $15,000.00 to
$20,000.00;
(c) that the said chrysanthemum plants could
be split in November 1984 to double the
quantity of flowers available for
Mother's Day for the following year;
(d) that there were 30,000 carnation plants
in yield and 3,000 new plants which
would flower in 10 weeks;
(e) that the productive life of carnation
plants was 2 1/2 years and that only
3,000 of the said carnation plants were
'old stock' being 2 years old;
(f) that there were 5,000 gladioli bulbs and
2,000 ranunclas (sic) bulbs 'on hand'
for planting;
(g) that the average weekly income of the
business was $1,500;
(h) that the average weekly flower
production of the business would be
1,200 bunches; and
(i) flowers from the business could lawfully
be sold to the public from roadside
stalls situated at Hardey Road between
the railway lines and Hale Road,
Forrestfield."
3. Finstock Pty Ltd is the trustee company for the Du Cros family trust. At all material times it carried on the business of a real estate agent, its business relating almost exclusively to residential properties. The directors of the company are, and were at all material times, Mr and Mrs Du Cros. Mr Du Cros, who had, at the time of the making of the agreement, been a licensed real estate agent for some 7 or 8 years, was concerned with the selling side of the business, his wife with the accounting and administration side. It appears that neither Mr Du Cros nor his wife had any background in horticultural matters.
4. Mr Du Cros first became acquainted with Mr Nesci towards the end of 1980 when Mr Nesci, or the company of which he and his wife were and are the sole shareholders and directors, Bickley Vale Pty Ltd, purchased through Mr Du Cros two blocks of land known as Lots 46 and 47 Edney Road, High Wycombe, a suburb of Perth. The agreement for the purchase of the land was made on 21 November 1980 and the transfer was registered on 20 January 1981. At the time of the purchase some lemon and orange trees were growing on part of the land. There was one well and some fencing.
5. At that time, Bickley Vale Pty Ltd, a wine and spirit merchant, was carrying on the business of a winery on some 10 acres of land known as Lot 8 Carolyn Place, Forrestfield, some 2-3 kilometres distant from the land at High Wycombe. The property at Forrestfield was used for the growing of table grapes. On the property were two large sheds, an office and a small wine cellar.
6. After purchasing the land at High Wycombe, Mr and Mrs Nesci began to cultivate grape vines on part of the land and to use other parts of the land for the growing of flowers for the cut flower trade. At the time of the transaction which has given rise to this proceeding, somewhat less than half of Lot 46 was used for the growing of grapes and oranges and the remainder for the growing of flowers. The flowers were grown in greenhouses and in open beds. There were 12 greenhouses on the lot, arranged in four rows of three. The greenhouses in the first row were larger than the remainder. On Lot 47 there were grape vines and orange and lemon trees while about half of that lot was also devoted to the growing of flowers in open beds. There was a water bore on each lot.
7. There is a conflict of evidence as to what took place during the
negotiations which led to the making of the agreement for the
purchase of the
business by the applicants. It is, therefore, necessary to examine in some
detail the course of those negotiations.
Mr Du Cros' Version
8. Mr Du Cros gave evidence that, after the purchase by Bickley Vale Pty Ltd of the land at High Wycombe, he visited Mr Nesci occasionally at the winery. The visits were either social visits or for the purpose of purchasing wine. He said that, on one of those visits, on an unspecified date in 1983, Mr Nesci mentioned to him that he wished to sell both the winery and the cut flower business as going concerns, disposing of both the land and the improvements.
9. According to Mr Du Cros, he received a telephone call from a Mr Graham Peter Blair, a nurseryman in High Wycombe, on or shortly before 15 December 1983. Mr Blair inquired whether Mr Du Cros knew of any nurseries for sale as a Mr Lim was visiting from Malaysia and was interested in purchasing a nursery. Mr Du Cros agreed to make inquiries as to availability and to show Mr Lim what was available. Mr Du Cros telephoned Mr Nesci and confirmed that the property at High Wycombe was still for sale. Mr Du Cros said that Mr Nesci was very excited at the possibility of a sale being effected. Mr Du Cros mentioned that the prospective buyer was a Mr Lim. Mr Nesci said the asking price was $200,000 although previously he had mentioned $220,000. Mr Du Cros informed Mr Nesci that he would be meeting Mr Lim the following day, that he would bring him to the winery to meet Mr Nesci and then show him the nursery at High Wycombe. Mr Du Cros told Mr Nesci he would need some details of the property for Mr Lim. Mr Nesci said he would arrange for Mrs Stuart, an employee, to produce the necessary documents.
10. Mr Du Cros said that on the following day, 16 December 1983, he took Mr Lim to the winery where they met Mr Nesci. Mr Du Cros said that he did not see Mrs Stuart at the winery on that occasion. He said that Mr Nesci handed to him a sketch (Exhibit "A") showing the layout of the nursery and a sheet of paper (Exhibit "B") headed "Mr Lim Requires Today". It is common ground that Mrs Stuart prepared those documents though there is a dispute as to the time at which, and the circumstances in which, they were prepared.
11. The sketch indicated the location on Lots 46 and 47 of the two bores, the citrus trees, the grape vines, the greenhouses and the open beds used for flower production. Notations on the sketch indicated the type of flowers being grown and the number of plants in the greenhouses and the various beds. The numbers of carnation plants shown on Exhibit "A" totalled 33,000 of which 11,000 were in the greenhouses. The number of chrysanthemum plants totalled 8,000, the words "Mother's Day" appearing in brackets after the word "chrysanthemums" where it appeared in each of the two notations relating to those plants.
12. The document Exhibit "B" consisted for the most part of a list of matters upon which a prospective purchaser might be expected to require information. There were various blank spaces to be completed by the insertion of the necessary figures. Thus, the document listed the improvements as "bore & reticulation, greenhouses, fruit trees, vines" with provision for a value to be inserted against each item. Similarly, spaces were left for the insertion of the number of full-time and casual staff, the wages paid and the income per annum. Information was, however, given as to the types of flowers grown and the number of citrus trees on the property. It was stated that production was approximately 80,000 bunches annually including Mother's Day, that the life expectancy of carnation plants was approximately 2 1/2 years, that there were 30,000 carnations in yield plus 3,000 new plants to flower in ten weeks, that there were 8,000 chrysanthemum plants to flower for Mother's Day yielding between 10,000 and 15,000 bunches, and that there were 5,000 gladioli and 2,000 ranunculi bulbs on hand. Throughout the hearing the word "bulbs" was used in this connection though it may be more accurate to speak of gladioli corms and ranunculi tubers. However, I shall continue to use the work "bulbs".
13. Mr Du Cros said that he drove Mr Lim and Mr Nesci to the nursery and they walked through it. While walking past the second and third rows of greenhouses (these being the first two rows of small greenhouses), Mr Nesci said that the carnations in those greenhouses were very old (over two years) and that Mr Lim "should not worry about them". Mr Nesci said that about 3,000 carnation plants were in that category.
14. After inspecting the nursery, Mr Du Cros drove Mr Lim and Mr Nesci back to the winery where Mr Nesci remained. Mr Du Cros then showed Mr Lim other nurseries and returned him to his hotel in Perth. Mr du Cros then returned to the winery alone and there saw Mr and Mrs Nesci.
15. Mr Du Cros said that he asked Mr and Mrs Nesci to provide the information
necessary to complete the document Exhibit "B". According
to Mr Du Cros, he,
in the presence of Mr and Mrs Nesci, then wrote various figures on Exhibit
"B", being figures given to him by
them. He added certain additional items.
He confirmed with Mr Nesci the figures concerning the plants and bulbs that
had been written
on the document by Mrs Stuart. According to Mr Du Cros, the
document then read as follows:
"Mr Lim Requires Today16. The figure of $1,500 per week as the income generated by the business was said by Mr Du Cros to have been given to him by Mrs Nesci and to have been confirmed by Mr Nesci. The figure was understood by Mr Du Cros to relate to the immediately preceding period of 12 months. He said that Mr Nesci mentioned the figures of $2,500 per week and $4,000 per week as the amount of income that could be generated if the business were built up by increasing the number of plants under cultivation. Mr Du Cros also said that in the course of the discussion he was informed that the number of chrysanthemum plants then under cultivation was double the number grown in the previous year.
Acreage & Location 2.05 HA 80,000
Value
Improvements Bore & Reticulation 30,000
Greenhouses 15,000
Fruit trees 40 each L & O 5,000
Vines 500 4,000
Fences 3,000
Plants 20,000
Winter covers 1,000
Plant frames & wire 3,000
Staff Full Time
Casual 4 Pickers 16 hrs ea.
4 Bunchers contract
15, 20, 30 c bunch
Elec $1,200 annual
Approx Wages $1,500 P.M.
Production Approx. 80,000 Bunches Annually inc
Mothers Day
Income approx per annum $1,500 p.w.
Anticipated $2,500 p.w. - could reach
$4,000 p.w.
Plants purchased and planted. Maturing from 12-16 weeks.
Cost per 1000 ?
Life expectancy carnations approx 2 1/2 years
Blooming Period 12 months of year. Carnations
Outdoors heavier in summer
Greenhouse same all year round
Extras Annuals Chrysanthemum
Winter Gladioli
Gypsophilla (sic)
Stocks
Calendula
Ranuculus (sic)
Annuals Gladioli
Summer Asters
Chrysanthemum
Daisies
Dahlia
Lemon Trees Export Quality 40? trees
Orange Trees Type Navels 40 trees
Vines rooted on virus free stock to be grafted on for table
grapes.
30,000 plants carnations in yield + 3,000 new plants to
flower in 10 weeks
8,000 Chrysanthemum plants to flower for Mothers Day
yielding between 10,000 to 15,000 bunches.
Annuals depend on what is planted.
Gladioli bulbs approx 5000 on hand
Ranuculas (sic) bulbs approx 2000 on hand".
17. At the conclusion of the conversation Mr Du Cros took with him the document Exhibit "B". From the information contained on Exhibit "B" he typed a document which he gave to Mr Lim on the following day. It may be mentioned that Exhibit "B" bears further notations in Mr Du Cros' handwriting, those notations having been made at a later stage to record further information given to him by Mr or Mrs Nesci or Mrs Stuart.
18. Mr Lim decided that he was not interested in purchasing the property and
so informed Mr Du Cros. The latter discussed the situation
with his wife.
They considered the figures set out on Exhibit "B" and decided that they were
interested in the business. On the
evening of 18 December 1983, Mr Du Cros
telephoned Mr Nesci to inform him that Mr Lim was not interested in the
property and in the
course of the conversation made the comment, which he said
was not a serious comment at the time, that "the figures looked good,
that if
I had the money I would have been interested myself in purchasing it". Mr
Nesci responded:
"Well, it may be possible to finance you into theMr Nesci further said that, if Mr and Mrs Du Cros were seriously interested in the business, he would be happy to see them the following day. An appointment was made to meet at the winery at 12 noon on the following day, 19 December 1983.
business."
19. At that meeting, Mr and Mrs Du Cros, Mr and Mrs Nesci and Mrs Stuart were
present. This, according to Mr Du Cros' evidence,
was the first time he had
met Mrs Stuart. Mr Du Cros had with him the sketch (Exhibit "A") and the
document Exhibit "B". Mr Du Cros
said that there was no way that he could buy
the business; that he did not have the finance available. Mr Nesci said that
he could
finance Mr Du Cros into the business. Mr Nesci said it was possible
for Mr and Mrs Du Cros to have that part of the business concerned
with the
production of flowers for sale - that they could lease the land where the
flowers were actually grown. Various of the items
listed on Exhibit "B" were
then discussed. Mr Du Cros asked about the number of staff employed and was
informed that the staff doing
the spraying, picking, bunching and other work
concerned with looking after the production side of the business were employed
as
casuals. Mr Nesci explained that the picked flowers were transported to
the winery and the process of bunching carried out in one
of the sheds on that
property. Mr Nesci then gave the figures for electricity and wages. Mr Du
Cros was informed that there were
12 shops which were serviced twice a week,
on Mondays and Thursdays. Flowers were supplied on a Monday on a credit basis
and, when
the second delivery was made on a Thursday, payment for both
deliveries was made. Information was also given as to how deliveries
were
made. Reference was made by Mr Nesci to two caravans used as mobile roadside
stalls from which they had been selling cut flowers.
The flowers were sold
from two sites in Forrestfield, one in Hale Road and the other in Hardey Road.
Mrs Nesci said that the production
figure of 80,000 bunches annually (as shown
on Exhibit "B") was too high and that the correct figure was 1,200 bunches per
week.
Mr Du Cros amended Exhibit "B" accordingly. As to the income of the
business, Mr Nesci said:
"We make $1,500 per week."According to Mr Du Cros, Mr Nesci was very excited and repeated over and over again, while patting his back pocket:
"You make a lot of cash money."Mr Du Cros asked whether production could be increased and Mr Nesci said they could build up to $2,500 per week and could reach $4,000 per week. The possibility of leasing more land, if necessary, to build up the business was discussed. Mr Nesci was agreeable and pointed out on the sketch Exhibit "A" the land which they could lease to increase the business.
20. There followed a general discussion about the growing of the various plants and their life expectancy. Mr and Mrs Du Cros were told that they would have no difficulty in selling whatever flowers they could grow as the demand was there. The details shown on Exhibit "B" as to the number of plants were confirmed by Mrs Stuart and Mr Nesci. There followed a discussion as to how one could be sure that the chrysanthemums would flower for Mother's Day. Mrs Nesci said that takings on the sale of chrysanthemums for Mother's Day in 1983 had amounted to $8,000, that being described as a good result, and that the yield for Mother's Day in 1984 should be between 10,000 and 15,000 bunches which would be double the yield for Mother's Day in 1983. The figures of gladioli and ranunculi bulbs in storage on the property and shown on Exhibit "B" as being on hand were confirmed.
21. Mr Du Cros said that there was also a discussion of the various terms and conditions under which they were to make the payments necessary to enable them to purchase the business and lease the land.
22. Mr Du Cros said that he and his wife, in the presence of the others,
discussed what return they could derive from the business.
He said:
"The very simple breakdown that we had was thatThis, he said, was crucial to their consideration of the matter. They did not have the funds available to purchase the business outright and the only basis upon which they could enter upon the venture was to make sufficient out of the business to pay the instalments, the rent and the other expenses with some profit for themselves. He said that the figure of $500 per week profit was discussed at the meeting, Mr Nesci saying that, if they both worked in the business, they would be able to reduce the amount paid out in wages and thus increase the profit figure.
Mr Nesci would be receiving basically $500 per
week; that the bunchers and pickers - that the
actual wage component would be around about $400
per week and that the electricity, etcetera,
sprays, other overheads, would be about $100 per
week. Those items altogether totalled
approximately $1000 per week which would then
have left us with about $500. I discussed it
very briefly with my wife actually at the meeting
because she wanted to confirm - she wanted me to
confirm that her figures were the same as the
figures that I had worked out and I agreed with
her - this was actually at the meeting - that her
figures worked out the same as mine did, so that
all the expenses - the actual running expenses,
repayment to Mr Nesci and the lease - we would
then be left with $500 per week."
23. In addition to making some additional notations on the document Exhibit "B", Mr Du Cros made notes on a separate sheet of paper (Exhibit "H") of the matters discussed and agreed. He said that Mr Nesci requested him to prepare an agreement for signature by the parties using the notes he had taken as a basis for its preparation.
24. Mr Du Cros said that on the evening of 19 December 1983 he prepared a
typewritten document (Exhibit "C") setting out what had
been agreed. He also
said that he and his wife further discussed the figures which they had been
given and he made notes on the
back of Exhibit "H" of a number of questions or
queries on which they wished to have further information. The questions or
queries
as appearing on Exhibit "H" are as follows:
"1. $1500 per week average. Does this25. Mr Du Cros said that a further meeting, attended by Mr and Mrs Nesci, Mrs Stuart, Mrs Du Cros and himself, took place on the following day, 20 December 1983. Mr Du Cros raised the questions or queries which he had noted on the back of Exhibit "H". He said that, in relation to the turnover of the business, Mrs Nesci supplied figures for the Mother's Day period in 1983, and for the months of October, November and December 1983. According to Mr Du Cros, Mrs Nesci appeared to be reading the figures from what he described as "a small exercise book". His recollection, unaided by reference to Exhibit "H", was that the figures quoted for October and November 1983 were $4,500 and a little over $5,000 respectively and that Mrs Nesci had said that December 1983 had been a good month, quoting a figure of around $6,000. In cross-examination, he said he thought the figure given for December 1983 was somewhat higher. I interpolate that Mrs Du Cros' recollection was that the figure quoted by Mrs Nesci for December 1983 was $8,000. It is also to be noted that Exhibit "H" bears the following notations in relation to question 2 (see above):
include Mother's Day figures.
2. See October & Nov. figures '82 & 83
3. Find out age of all plants
4. ? extra no. of bunches each week now
compared to last year
5. Accurate figures for past year
6. ? what happens to plants at end of
lease.
7. ? wages breakdown also Mrs Stuart's
wages
8. Breakdown of goodwill & stock?"
"Oct. $5,000+The abbreviation "M D" clearly refers to Mother's Day.
Nov. $4,556+
April/May $12,000
($8,000 M D)"
26. Mr Du Cros produced the typewritten document he had prepared. It was
amended by crossing out the last paragraph, par.16, which
referred to Mrs
Stuart agreeing to help and advise Mr and Mrs Du Cros during the settling in
period at an hourly rate of $4.50.
The document was then signed by Mr and Mrs
Du Cros and Mr and Mrs Nesci. The agreement as signed read as follows:
"PRELIMINARY DISCUSSION ON CUT FLOWER BUSINESS ON27. Mr and Mrs Du Cros went into occupation on 2 January 1984. A lease of part of Lot 46 and of the two caravans used for the sale of cut flowers was executed on 10 February 1984.
LOTS 46 AND 47 EDNEY ROAD, HIGH WYCOMBE.
Present Mr Nesci, Mrs Nesci, Mrs Stuart, Mr H du
Cros and Mrs R. du Cros.
Venue Old Mill Wine Office, Caroline Place,
Forrestfield. 12.00 Noon 19th December 1983.
The following points were discussed and agreed.
1. Lease period to be 4 years plus 4 years option.
2. Bore on Lot 47 to be used to water everything
on both blocks until Mr Nesci has repaired bore on
Lot 46. After that one bore will be used
exclusively for the flowers.
3. Reticulation from bore:- priority to be given
to the flowers with fruit trees and vines getting
second preference.
4. Mr and Mrs du Cros to be given first option to
purchase the land if it is put on the market for
sale.
5. If cut flower business is sold, new owner is to
be approved by Mr Nesci.
6. Mr du Cros to insure plants, shade houses and
equipment.
7. Only the plants and goodwill are being sold,
everything else is to be leased.
8. Maintenance of flower growing area, shade
houses and reticulation in that area to be done by
Mr du Cros.
9. Mr Nesci will use his tractor to spray flowers
twice each week and rotary hoe as required until
Mothers Day 1984. Sprays, diesel and fertiliser
used to be paid by Mr du Cros at approximately $6 -
$7 per hour.
10. Buckets to be purchased from Mr Nesci by Mr du
Cros at cost price.
11. Lease payments to be $300.00 per week, payable
in advance on the Monday of each week.
12. Payment for the purchase of the business to be
$40,000, to be paid over Three (3) years in equal
quarterly instalments, commencing 3 months after
start of lease.
13. Lease to commence on 2nd January 1984.
14. Rates. 1/2 Shire Rates, total water rates and
3/4 of all electricity used for bore to be paid by
Mr du Cros. Balance to be paid by Mr Nesci.
15. Area of Lot 47 currently under flowers to be
used by Mr du Cros until flowers all sold, or can
be transplanted. Mr Nesci agrees to make further
land available for flowers if and when it is
required."
28. Mrs Du Cros' evidence as to what occurred at the meetings on 19 and 20
December 1983 was not as detailed as that given by Mr
Du Cros and there were a
number of matters of which she had no recollection. Her evidence was,
however, consistent with that given
by Mr Du Cros.
Mr Nesci's Version
29. Mr Nesci agreed that he first met Mr Du Cros when Bickley Vale Pty Ltd was purchasing the land at High Wycombe. He said that towards the end of 1983, probably in November, he spoke with Mr Du Cros and engaged him to sell the nursery business including the land on which it was being conducted. The price he wanted for the nursery was $200,000 to $220,000.
30. He denied that he had ever had a conversation with Mr Du Cros concerning Mr Lim as a prospective purchaser. He said that he had never met Mr Lim though he knew of his interest in purchasing the property through a message given to him by Mrs Stuart following a telephone conversation she had had with Mr Du Cros. He thought that this conversation had taken place about a week prior to 19 December 1983. He could not recall giving Mrs Stuart instructions to prepare the sketch Exhibit "A" or the document Exhibit "B". He thought, however, that Mrs Stuart had prepared the sketch and he agreed that some of what appeared on Exhibit "B" was in Mrs Stuart's handwriting. He said that he was delivering goods at Fremantle on the day Mr Lim came to the winery with Mr Du Cros. He was told of the visit by Mrs Stuart. He said that Mrs Stuart had no authority to give anyone any details concerning the financial affairs of the nursery business.
31. Mr Nesci also denied that he had given Mr Du Cros the document Exhibit "B" or any of the information recorded on it. Indeed, he said he had not seen the document Exhibit "B" until it was shown to him by his solicitors after this proceeding had been commenced. He also denied that any such information was given to Mr Du Cros in his presence by either Mrs Nesci or Mrs Stuart. In particular, he denied giving Mr Du Cros any information as to the value of the improvements on the land at High Wycombe, the number of staff employed, the amount of the wages paid, the income of the business, the number of bunches of flowers produced, or the number of shops supplied with flowers. As to the latter, he said that, after the agreement for the purchase of the business was signed, he took Mr Du Cros with him when delivering flowers so that he would know which shops were supplied.
32. Mr Nesci said that he received a message, again through Mrs Stuart, that Mr Lim was not interested in purchasing the nursery. He said that, subsequently, Mr Du Cros approached him and said "he would like to have the nursery but he has not got the money". According to Mr Nesci, Mr Du Cros was considering selling his house in order to go into the nursery business. He said that Mr Du Cros approached him personally on four occasions at the winery seeking to obtain a lease of the land on which the nursery business was being conducted. Mr Nesci said he was reluctant to enter into a leasing arrangement because of what he referred to as a "bad experience" he had had with people by the name of McGuckin to whom he had given a lease of the land in December 1982. He said he also considered that Mr Du Cros did not have the physique to do the work involved in running the nursery. Eventually, according to Mr Nesci, he agreed to grant a lease over part of the land and to accept payment of the purchase price of the business by instalments. He was, however, unable to explain the course of the negotiations which led to that result. He could not recall whether Mr Du Cros had asked questions concerning the type of plants in the nursery or their cultivation but said that any such questions would have been referred by him to Mrs Stuart who was involved in that side of the business. He denied that Mr Du Cros asked him any questions concerning the turnover of the business and said that, if any questions had been asked, he would not have given any information. Mr Nesci gave as his reason for not giving any information concerning the business the "bad experience" previously mentioned.
33. The experience with people by the name of McGuckin to which Mr Nesci, and
later Mrs Nesci, referred was this. In November 1982
Paul Henry McGuckin and
Fiona Catherine McGuckin negotiated with Mr Nesci on behalf of Bickley Vale
Pty Ltd an agreement for the
lease for a term of two years of Lot 46 Edney
Road, High Wycombe, the use of a bore on the land and certain caravans and the
right
to cultivate and harvest the flower beds. An agreement evidencing the
arrangements between the parties was executed on 29 November
1982. Mr and Mrs
McGuckin went into possession on 6 December 1982 and a lease of Lot 46 was
executed on 9 December 1982. By letter
dated 14 January 1983, Mr and Mrs
McGuckin elected to treat the agreement and lease as discharged by reason of
alleged fraudulent
misrepresentations on the part of Bickley Vale Pty Ltd,
through the agency of Mr Nesci, which induced them to enter into the agreement
and lease. It was alleged that the company had represented that:
"(a) The gross income from the sale of34. Proceedings were commenced by Mr and Mrs McGuckin against Bickley Vale Pty Ltd in the District Court of Western Australia in 1983 seeking a declaration that they had lawfully rescinded the agreement and lease and claiming unspecified damages. The company filed a defence and counterclaimed for rental alleged to be owing under the lease and damages for the wrongful repudiation by Mr and Mrs McGuckin of the lease. The proceedings did not come to trial but were settled by the payment to the company of $2,000 representing four weeks' rental at $500 per week and an amount for costs.
flowers from the flower farm was a
minimum of $1,500 per week;
(b) That the costs of cultivating and
harvesting the flowers from the flower
farm were approximately $500.00 per
week;
(c) That the defendant had established 6
wholesale outlets which outlets
regularly purchased flowers;
(d) That the Defendant had established 2
roadside positions serviced by trailer
vans from which flowers could lawfully
be sold."
35. To return to the narrative, Mr Nesci agreed that a meeting took place at the winery on 19 December 1983 at which Mr and Mrs Du Cros, Mrs Nesci, Mrs Stuart and himself were present. Mr Nesci said he suggested the meeting as, having agreed to give Mr Du Cros a lease of the land, "we have to agree what will go in the lease". That suggestion, he said, was made three or four days before the meeting was held. According to Mr Nesci, Mrs Stuart had a pad and wrote down what was agreed. No one else present at the meeting, he said, had any papers or documents.
36. Mr Nesci was unable to recall everything that was discussed at the meeting on 19 December 1983. He said the meeting was directed to agreeing upon the matters to be included in the draft agreement including the instalments to be paid for the purchase of the business, the term of the proposed lease and the rent. He said the meeting lasted for two to three hours and at the end of it Mr Du Cros took away Mrs Stuart's notes in order to prepare a typed document for signature by the parties.
37. Mr Nesci said that about a week later Mr Du Cros returned with the typed
document for signature (Exhibit "C"). He denied that
there was any discussion
prior to the document being signed. In particular, he denied that Mrs Nesci
quoted monthly turnover figures
from an exercise book. He was asked whether,
at any time prior to the signing of the agreement, he or Mrs Nesci had made
statements
to Mr Du Cros in terms of the representations alleged in par.7 of
the statement of claim filed on behalf of the applicants, the text
of which is
set out above. He categorically denied that he or his wife had made any such
statements. He also said that, except
as appears on Exhibit "B", Mrs Stuart
had not made any such statements. He said, however, that he did mention to Mr
Du Cros, though
not at the meeting on 19 December 1983, that flowers were sold
from roadside stalls, that there was some difficulty with the local
shire
council and that it would be a matter between Mr Du Cros and the shire
council. He denied the suggestion that he had patted
his hip pocket and said
that there was plenty of cash in the business.
Mrs Nesci's Evidence
38. Mrs Nesci's role in relation to the nursery was to help bunch the flowers for sale after they had been cut and to prepare the orders for the retail shops twice a week. In January 1983 she began keeping the financial records for the nursery. She was not aware who had been keeping them before 1983. She produced a blue covered foolscap size book approximately one centimetre thick (Exhibit "V") in which the pages were ruled in the nature of a cash book. The book was labelled "Flower Account Book" and contained details of the takings of the cut flower business and the expenses directly related thereto from January 1983 to December 1983 and from August 1984 to February 1986.
39. Mrs Nesci said that towards the end of 1983 she was anxious to sell the nursery as they were having a few difficulties and the nursery was "making a big drain on all of us". She said she was desperate to sell.
40. She said she met Mr Lim "for about a minute" when Mr Du Cros brought him
to the winery. She said she told them Mr Nesci was
not there and they left.
She had not heard of Mr Lim until Mr Du Cros and Mr Lim walked in to the
winery that day. No appointment
had, so far as she knew, been made for Mr Lim
to see Mr Nesci. She denied that Mr Du Cros returned to the winery that day
and obtained
any figures relating to the business. She said: "He would not
have got any figures from me." In explanation of that answer she
said that Mr
Nesci had instructed her never to give out any figures because of their
previous experience with the McGuckins which
was very upsetting. She added:
"I was determined I was never going to giveShe said it was up to Mr Nesci to decide whether any prospective purchaser would be given any figures. In cross-examination she said that, if anyone had been interested in buying the nursery, she or Mr Nesci would have consulted the accountant for Bickley Vale Pty Ltd and asked him to speak to the prospective purchaser.
anybody any figures on the nursery or the
winery."
41. Shown the document Exhibit "B", Mrs Nesci said she had never seen that document until a week before she gave her evidence. Mrs Stuart had not mentioned the document to her after its preparation on the day Mr Du Cros and Mr Lim came to the winery.
42. Mrs Nesci said that after Mr Lim's visit to the winery, Mr Du Cros came to the winery to see her. Mr Du Cros informed her that he had no other prospective purchasers of the property but that he was very interested himself. He also said he could not afford to buy and wanted to lease the land. Mrs Nesci said she replied that she was definitely not interested in leasing to anybody. She said he came back on two occasions. On one of those occasions she explained to him what had happened with the McGuckins. (Mr Du Cros denied that there had been any reference to the McGuckins in any conversation he had with either Mr or Mrs Nesci.) Mrs Nesci said that a period of two weeks elapsed between Mr Lim's visit and the signing of the agreement with Mr and Mrs Du Cros.
43. Mrs Nesci could not recall much of what was discussed at the meeting on 19 December 1983. The meeting, she said, lasted about one hour. She said she was not taking much notice as she was not interested in leasing and was upset at Mr Nesci agreeing to lease the property. She said, however, that Mrs Stuart was taking notes and that she could not recall seeing Mr Du Cros writing anything. She was unable to recall whether there was any discussion about the plants under cultivation at the nursery. She said there may have been such a discussion but, as she did not know anything about the plants, she would not have been attentive. She denied that she had a document or book with her or that she quoted any figures. She denied that she mentioned any amount as the average takings per week of the business. She was not prepared to deny that it was represented to Mr and Mrs Du Cros at the meeting that flowers from the business could be lawfully sold to the public from roadside stalls situated at Hale Road and Hardey Road, Forrestfield.
44. Mrs Nesci said the agreement was signed two or three days after the
meeting on 19 December 1983. She denied that there was any
discussion on that
occasion concerning the takings of the business. She said she did not have
the Flower Account Book with her at
the time.
Mrs Stuart's Evidence
45. Mrs Nellie Stuart gave evidence that she had been associated with Mr Nesci since 1973. After the purchase of the land at High Wycombe, she assumed responsibility for the ordering of plants for the nursery, their planting and the general upkeep of the property. After a time she became fully occupied with the nursery. Mr Nesci did the heavy work such as ploughing and spraying. Mrs Nesci's only involvement with the nursery was the book-keeping for it.
46. Mrs Stuart said that she recalled an occasion towards the end of 1983
when Mr Du Cros called at the winery with a Mr Lim. She
said that she had met
Mr Du Cros when the property at High Wycombe was being purchased and that she
had seen him on other occasions
at the winery. Her evidence was that Mr Nesci
was not at the winery at the time Mr Du Cros and Mr Lim called. Prior to that
occasion
she had not heard anything about Mr Lim or a prospective Asian buyer
of the nursery although she had been told by Mr Nesci that Mr
Du Cros had been
engaged to sell the land at High Wycombe. According to Mrs Stuart, Mr Du Cros
said he required certain information
for Mr Lim and that, as Mr Nesci was not
there, she listed what Mr du Cros asked her to procure from Mr Nesci. She
denied that Mr
Nesci had asked her to write down information for Mr Du Cros to
provide to Mr Lim. Mrs Stuart identified certain writing on Exhibit
"B" as
being what she wrote by way of listing the information required for Mr Lim.
She included certain figures as to the quantity
of plants at the nursery. She
said, that having written the document she left it on the desk in the office
in a cellar forming
part of the winery. She said that she mentioned the
document to Mr Nesci when she saw him at the winery the next morning. Mr
Nesci
said:
"There's no need for any figures; I'm onlyIn cross-examination she said that Mr Nesci had said:
selling the land, so I'm not interested in giving
anybody any figures."
"I'm not interested in leasing it and that's it.At that stage there was, of course, no suggestion that the property be leased: Mr Lim was introduced as a prospective purchaser, not as a prospective tenant. She had not, she said, seen the document again until it was shown to her by the solicitors for the respondents after the present proceeding had been commenced.
I am not interested in doing anything else except
selling the property."
47. The document Exhibit "B" was, she said, incorrect in stating that there were "8,000 Chrysanthemum plants to flower for Mothers Day yielding between 10,000 to 15,000 bunches". She said that, to be correct, it should have referred to 6,000 plants to flower for Mother's Day and 2,000 plants of an early flowering variety to flower at Easter. She agreed that she also made a mistake when preparing the sketch Exhibit "A" by indicating thereon that all the chrysanthemum plants were to flower for Mother's Day. She said that she had not realised that an error had been made until shortly before giving her evidence.
48. According to Mrs Stuart, the sketch plan Exhibit "A" was not prepared until after agreement had been reached for Mr and Mrs Du Cros to purchase the nursery business and take a lease of part of the land at High Wycombe. According to her, she was asked by Mr Nesci to prepare a sketch. He told her the solicitors had requested a plan for incorporation in the lease they were preparing. It was prepared, she said, "a long while after" 19 December 1983. She said that she went to the nursery and drew a rough sketch of the layout, measuring the size of the greenhouses and the open beds and calculating the number of plants in each. She then returned to the winery and prepared the sketch Exhibit "A". She agreed that Exhibit "A" had not been used as part of the lease document.
49. Mrs Stuart said that she did not again see Mr Du Cros until a couple of weeks later, on 19 December 1983, when Mr and Mrs Du Cros, Mr and Mrs Nesci and herself were present and when "they were writing up a document to take on the lease". The meeting, she said, lasted about one hour. She said that Mr Nesci and Mr Du Cros asked her to write down what was agreed and that she made notes accordingly. She was, she said, the only person writing things down. She could recall little of the detail of what was discussed. She said that Mr Du Cros "definitely did not" have the document Exhibit "B" with him at the meeting. She said she was sure of that because she could not recall ever seeing that document between the time she prepared it and a date shortly before giving her evidence. In cross-examination she said that Mr Du Cros did not have any notes or documents with him. The only matters discussed were the rental, the sharing of the electricity charges, the loan by Mr Nesci of his tractor to Mr du Cros and the question whether she, Mrs Stuart, was to work at the nursery for Mr Du Cros. She could not recall Mr or Mrs Nesci telling Mr and Mrs Du Cros anything about the takings of the business. She said there was no discussion concerning the plants under cultivation at the nursery. At the conclusion of the meeting, the notes she had prepared, which she called a "pro-forma lease", were handed to Mr Du Cros. She said he took them away to prepare a typed document for signature. Mrs Stuart was shown the document (Exhibit "C") which Mr Du Cros said he had prepared after the meeting. At first she said that that document was a typewritten copy of her notes but later agreed that that was not so. She said she had not seen her notes again.
50. Mrs Stuart said Mr Du Cros returned after a few days with an agreement
for signature. She said she was not present at the meeting
between Mr and Mrs
Du Cros and Mr and Mrs Nesci when the document was signed and that she had had
no discussion with Mr Du Cros between
19 December 1983 and the date of that
meeting.
Events Subsequent to Making of Agreement
51. As has already been mentioned, the applicants entered into possession of the nursery on 2 January 1984 and the lease was executed on 10 February 1984.
52. It is clear on the evidence that, although Mr and Mrs Du Cros continued to operate their real estate business, they both spent a considerable amount of their time working in the nursery or on tasks associated with the nursery business. Casual staff were also employed in that business and Mr Nesci carried out certain spraying operations as he had undertaken to do. The weekly takings, however, were not what Mr and Mrs Du Cros had hoped for.
53. Mr Blair, who had spoken to Mr Du Cros concerning Mr Lim and whose evidence I accept, visited the nursery on more than one occasion at Mr Du Cros' invitation. Mr Blair had qualifications in horticulture and park administration and had followed the occupation of a horticulturist for some 13 or 14 years. His first visit to the nursery was, he thought, in mid-February 1984 though Mr Du Cros' recollection was that it occurred in January. Mr Blair's evidence was that the carnations growing in a number of the greenhouses were "in an advanced stage of their life cycle". He also described them as being "very, very old stock". He said that there was fairly widespread evidence of fusarium oxycatum, a fungal disease which affects the flow of nutrients up the stem, resulting in wilting and the demise of the plant, and which will spread from plant to plant. He was also concerned, he said, with the state of the soil in the greenhouses which had a caked or sealed appearance, a condition which would prevent aeration of the soil. The chrysanthemum plants, he thought, required cutting back to increase lateral growth and thus increase the number of flowers produced. He also noted that there was excessive weed growth around the perimeter of the cut flower growing area. The carnations growing in the open beds were, he considered, in good condition.
54. Curiously, Mr Blair did not express to Mr Du Cross any of his concerns as to the state of the carnations or the soil in the greenhouses or the weed growth. He sought to explain this by saying that he did not think he should interfere as he knew that Mr Du Cros was obtaining advice from the person from whom he had purchased the business. He did, however, make a comment to Mr Du Cros about the chrysanthemum plants and advised him that, in his opinion, the spraying equipment being used, while suitable for applying liquid fertilizer, was not suitable for pestisides or fungicides. Mr Du Cros, acting on this and other advice, subsequently purchased different spraying equipment.
55. Mr Blair again visited the nursery in June 1984. He described the carnations in the greenhouses at that time as being "totally a disaster". He concluded that this was due to the plants having exceeded their life cycle and the spread of disease and not to any lack of effort on the part of Mr and Mrs Du Cros.
56. The evidence establishes that there are different varieties of chrysanthemum, some early flowering and others later flowering. I accept the evidence of Mr Blair, which was contrary to that given by Mrs Stuart, concerning the flowering process of the chrysanthemum plant. Chrysanthemums are photo-periodic, the initiation of the flowering process being induced by the reduction in the hours of daylight. This initiation of the flowering process takes place at the same time in all varieties. Those varieties which are referred to as the earliest flowering require an interval from initiation to the production of a flower suitable for cutting and marketing of only 9-10 weeks while others require 11 or 12 weeks and those varieties referred to as the latest flowering require such an interval of 14 weeks.
57. The number of chrysanthemum flowers which Mr and Mrs Du Cros were able to market for Mother's Day 1984 was considerably less than expected. On the evidence, this was due to a combination of two factors. First the flowers opened too early suggesting that they were not the appropriate variety to be grown for Mother's Day. Secondly, rain fell on the opened flowers resulting in the flowers becoming heavy and falling over and encouraging the entry of fungus causing rotting of the petals.
58. A problem was also encountered when the stored gladioli and ranunculi bulbs were being prepared for planting. Many of the gladioli bulbs and all of the ranunculi bulbs powdered when they were handled suggesting that they had not been properly treated before storing. Of the gladioli bulbs only 1,000 were able to be planted. Of the ranunculi bulbs, none could be planted.
59. Another problem for Mr and Mrs Du Cros concerned the operation of the caravans used by Mr and Mrs Nesci as mobile stalls for the selling of flowers in Hardey Road and Hale Road, Forrestfield. I shall refer to this in a little more detail later in these reasons.
60. In July 1984 Mr Du Cros had discussions with Mr Blair and with another nurseryman, Mr Eric Payne, during which they brought to his attention that different varieties of chrysanthemum have differing intervals, varying from 9 to 14 weeks, between the initiation of the flowering process and the production of a flower suitable for cutting. He had known nothing of this prior to these discussions.
61. Also in July 1984 Mr Du Cros made enquiries of F & I Baguley Flower & Plant Growers of Victoria which had supplied carnations and chrysanthemum plants to Bickley Vale Pty Ltd during the years 1981 to 1983. From the information supplied he became aware of the age of some of the carnation plants on the property in December 1983 and of the varieties of chrysanthemums which had been ordered for planting in November 1983. An examination of the latter orders showed that of 5,000 chrysanthemum plants ordered, 4,200 plants were of varieties requiring a period of 9, 10 or 11 weeks between initiation and full flower while only 800 plants were of varieties requiring a period of 14 weeks. As Mother's Day in 1984 fell on Sunday, 13 May, the later flowering varieties were those which should have been ordered to ensure that flowering would occur at the right time.
62. Mr and Mrs Du Cros left the nursery property at the end of July 1984. At about this time they had a discussion with members of the McGuckin family. On 1 August 1984 their solicitors wrote to the solicitors for the respondents purporting to rescind the agreement for the purchase of the business and terminating the lease on the ground that they had been induced to enter into the transaction by reason of the false representations made to them by the respondents. It was said in that letter that Mr and Mrs Du Cros were treating the agreement and the lease as void and of no effect.
63. On 2 August 1984 proceedings (No.25200 of 1984) were commenced in the Local Court of Western Australia by Bickley Vale Pty Ltd against the present applicants seeking $3,933.33 representing two weeks' rent at the rate of $300 per week for the weeks commencing 23 and 30 July 1984 pursuant to the lease dated 10 February 1984 and one quarterly instalment of $3,333.33 under the agreement made on 20 December 1983.
64. The solicitors for the respondents wrote to the solicitors for the
applicants on 9 August 1984 denying that any representations
as alleged in the
letter dated 1 August 1984 had been made. The letter went on:
"In view of your clients' repudiation of theirThe respondents resumed possession of the nursery at or about that date.
agreements with our client and their vacation of
the premises our client has no alternative but
to mitigate its damage and go back into
possession of the premises. Our client reserves
its right in damages under both the agreement
and the lease and will pursue these damages once
it is in a position to quantify them."
65. On 19 April 1985, Bickley Vale Pty Ltd commenced proceedings (No.1454 of 1985) in the District Court of Western Australia against the present applicants claiming damages for the wrongful repudiation of the agreement for the sale of the business and of the lease.
66. On 19 June 1985, on the application of the present applicants, an
injunction was granted by this Court (Toohey J.) restraining
Bickley Vale Pty
Ltd, until further order, from further prosecuting both sets of proceedings.
Costs of the application were reserved.
The Main Witnesses
67. Before dealing with the representations relied upon, I should make a general comment upon the evidence of Mr and Mrs Du Cros, Mr and Mrs Nesci and Mrs Stuart.
68. Mr Du Cros impressed me as a witness of truth. I have no doubt that he was sincere in giving his best recollection of the events as they occurred and of the conversations he had with Mr and Mrs Nesci and Mrs Stuart prior to the agreement of 20 December 1983 being signed. It must be said, however, that his version of what took place exhibits some unusual features. Not the least of these is that the relevant events began with a jocular remark, when reporting to Mr Nesci that Mr Lim was not interested in purchasing the property, to the effect that if he had the money he would himself be interested in the property and concluded, within the space of a few days, with the signing of an agreement to purchase the business and take a lease of part of Lot 46. Another unusual feature is that, notwithstanding that he was an experienced real estate agent who recognised the need to obtain financial details for Mr Lim as a prospective purchaser, when it came to his own involvement in the venture he did not insist upon inspection of the financial records of the business although, according to him, Mrs Nesci read some monthly turnover figures from an exercise book in her possession. This failure on his part is all the more suprising when regard is had to the crucial importance to him of the turnover figures as the means of financing the purchase of the business depended exclusively upon the future income being sufficient to pay the rental under the lease, the instalments of the purchase price and the outgoings (including wages) of the business and to provide some return to his wife and himself.
69. I also have some reservation concerning his account of how the document Exhibit "B" came to be prepared by Mrs Stuart. My reservation arises only from the heading of the document itself "Mr Lim Requires Today", a heading which may seem a little unusual for a document which, on his evidence, Mrs Stuart was preparing on Mr Nesci's instructions but which accords quite readily with Mrs Stuart's version that what she did was record on the document the headings which Mr Du Cros dictated to her as being the headings under which he required information for Mr Lim.
70. It may be that Mr Du Cros' recollection is at fault and that the first telephone conversation concerning Mr Lim took place not with Mr Nesci, as Mr Du Cros said, but with Mrs Stuart and that he dictated to her in some detail the matters on which he required information for Mr Lim. If that occurred, it would accord with Mr Nesci's evidence that he first heard of Mr Lim's interest in purchasing the property through a telephone message given to him by Mrs Stuart following a conversation she had with Mr du Cros. It would not, however, accord with Mrs Stuart's evidence.
71. It was submitted for the respondents that I should not accept Mr or Mrs Du Cros as reliable witnesses because, on their own admission, at no time between 2 January 1984 when they took possession of the nursery and 1 August 1984 did either of them voice any complaint to the respondents that there had been some blameworthy conduct on their part. The fact that no complaint was made is just one more curious feature of this case but, in fairness to Mr Du Cros, it must be said that on his evidence, which I accept, it was not until July 1984 that he became aware of the factual material necessary to sustain a claim against the respondents. Whether he should have been alerted by events, particularly the early flowering of the chrysanthemums, to make enquiries earlier than he did may be debatable but in this connection it must be remembered that he had no background in horticultural matters. In my opinion, a satisfactory reason has been advanced to explain why no complaint was made prior to the sending of the letter dated 1 August 1984.
72. Notwithstanding the unusual features of his evidence to which I have referred, I accept Mr Du Cros' evidence that the document Exhibit "B" in its incomplete state was handed to him by Mr Nesci about 16 December 1983 and that it was subsequently completed by him by inserting therein material furnished to him by Mr or Mrs Nesci. I also accept Mr Du Cros' evidence as to what was said at the crucial meetings on 19 and 20 December 1983. His evidence carried conviction and, with the qualification I have mentioned, was consistent with the documentation.
73. A very significant matter is the remarkable consistency between the
figures written on the reverse side of Mr Du Cros' document
Exhibit "H" in
juxtaposition to his question numbered 2 as being the turnover figures for the
business in April/May, October and
November 1983 and the figures recorded for
those periods in Mrs Nesci's Flower Account Book. The Flower Account Book, in
a summary
for the period January to December 1983, sets out the following
figures for the takings of the business.
1983 $74. The figure of $4,556 for November 1983 shown on Exhibit "H" is identical with the figure for that month recorded in the Flower Account Book. Similarly, the other figures shown on Exhibit "H" in relation to the income of the business approximate the figures recorded in the Flower Account Book. On the evidence, Mr Du Cros can only have become aware of those figures either from the book itself or from what Mrs Nesci read from it at the meeting on 20 December 1983. I am satisfied the figures were quoted to him by Mrs Nesci at that meeting. There is nothing in the evidence to support the suggestion that he inserted the figures on Exhibit "H" after the Flower Account Book was produced on discovery in the course of the proceedings. It is to be noted that no suggestion to that effect was put to Mr Du Cros in cross-examination. I reject it as a possible source of the figures appearing on Exhibit "H".
January 811.00
February 3,424.10
March 4,375.80
April 3,736.25
May 7,894.50
June 2,621.30
July 2,867.70
August 3,793.90
September 3,553.30
October 4,879.60
November 4,556.10
December 7,728.70
$50,242.25
75. I also accept Mrs Du Cros' evidence though, as already mentioned, it is not as detailed as that of Mr Du Cros.
76. On the other hand I am unable to accept the evidence of Mr and Mrs Nesci
as to the conversations which took place on 19 and 20
December 1983 or Mrs
Stuart's version of the meeting on the first of those dates. Much of Mr
Nesci's evidence was unresponsive to
the questions put to him, even allowing
for some degree of language difficulty. There are substantial inconsistencies
between the
evidence of Mr Nesci, Mrs Nesci and Mrs Stuart which make it
difficult to accept the evidence of any one of them as accurate. There
were
many questions addressed to Mr and Mrs Nesci which drew the response that they
could not recall. Yet they were adamant in their
denials that any relevant
financial or other information was given to Mr and Mrs Du Cros during the
negotiations which admittedly
took place. They could offer no explanation as
to how Mr Du Cros obtained possession of Exhibit "B" part of which was
admittedly
in Mrs Stuart's handwriting. It is not a case in which they agree
that the subject matters of interest to Mr and Mrs Du Cros were
discussed but
a differing version is put forward. It is a case of a denial that any
questions at all were asked or any discussion
on the subject matters took
place. To accept their evidence would involve a finding that Mr and Mrs Du
Cros entered into the agreement
and the lease knowing absolutely nothing of
the financial side of the nursery business. I am not prepared so to find. Mr
and Mrs
Nesci's evidence was unconvincing. I prefer that of Mr and Mrs Du
Cros.
Findings as to Representations
77. I turn now to the representations as alleged in par.7 of the statement of
claim. I shall deal with them seriatim.
The first representation
78. The first of the representations, as pleaded, is that there were 8,000 chrysanthemum plants on the premises which would yield between 10,000 and 15,000 bunches for Mother's Day. A statement to that effect was made by Mrs Stuart in the document Exhibit "B" and the statement was confirmed, according to Mr Du Cros, at the meeting on 19 December 1983. I have already said that I accept Mr Du Cros' evidence as to how Exhibit "B" came into his possession and as to what took place at the meeting on 19 December 1983. That the number of chrysanthemum plants on the premises totalled 8,000 and that they were to bloom for Mother's Day also appears from the sketch Exhibit "A" which I find was also given to Mr Du Cros by Mr Nesci at the same time as Exhibit "B".
79. It is clear from Mrs Stuart's evidence that the figure of 8,000 plants to flower for Mother's Day was incorrect, she agreeing that the figure was no more than 6,000. Whether even that figure is accurate may be doubted when regard is had to the evidence concerning the orders, to which I have already referred, placed on F & I Baguley Flower & Plant Growers for the delivery of chrysanthemum plants in November 1983.
80. I am satisfied, and I so find, that a representation in the terms pleaded
was made and was confirmed at the meeting on 19 December
1983. I find also
that the representation was untrue as to the number of plants that were of the
appropriate variety to flower for
Mother's Day 1984. The statement that 8,000
plants could be expected to produce 10,000 to 15,000 bunches is one of
judgment or opinion
and there is no evidence to show that it was a statement
made without belief in its accuracy. The inaccuracy of the statement again
lies in the assertion that it would be during the Mother's Day period that
that number of bunches would be marketable.
The second representation
81. The second representation pleaded is that the sales of chrysanthemums on Mother's Day (1984) would be around $15,000 to $20,000.
82. The only evidence to support this representation is that of Mr Du Cros that Mrs Nesci quoted the figure of $8,000 as being the takings on the sale of chrysanthemums for Mother's Day in 1983 and that the yield in 1984 should be double that achieved in 1983.
83. I am not satisfied that a representation in the terms pleaded was made at
any stage of the negotiations.
The third representation
84. The third representation is that "the said chrysanthemum plants could be split in November 1984 to double the quantity of flowers available for Mother's Day for the following year".
85. I am not satisfied that any representation was made as to splitting the
plants in November 1984, that is some eleven months after
the date of the
discussions in December 1983.
The fourth representation
86. This representation is that there were 30,000 carnation plants in yield and 3,000 new plants which would flower in 10 weeks.
87. The figures shown on the sketch Exhibit "A" as representing the number of carnation plants growing on the premises total 33,000. The document Exhibit "B" contained a statement in the terms pleaded. Those statements were made by Mrs Stuart. Accepting Mr Du Cros' evidence as I do, the statements were confirmed at one or other of the meetings held on 19 and 20 December 1983. I accept that a representation in the terms pleaded was made.
88. The question is whether the representation was false. There is nothing in the evidence to show that the total number of plants was less than 33,000 or that less than 30,000 were "in yield" although their yield might not have been at its maximum because of the age of some of the plants.
89. On the evidence, I think it would be unsafe to find that the
representation was false and I decline to do so.
The fifth representation
90. It is alleged that the respondents represented that the productive life of carnation plants was 2 1/2 years and that only 3,000 of the carnation plants were "old stock", being two years old.
91. Again, the statement that the productive life of carnation plants was 2 1/2 years was made by Mrs Stuart in Exhibit "B". There was a difference of opinion amongst the witnesses as to the productive life of a carnation plant of the type being cultivated on the property. It would seem to be the ideal situation in a commercial environment for plants to be retained only for 12 to 18 months though it is also clear on the evidence that in many instances they are retained for periods ranging up to three years and, perhaps, even longer. It seems also that, with changes in the industry, it is normal now for plants to be replaced more frequently than was the case in 1983.
92. On the whole of the evidence, I am not prepared to find that the statement that the productive life of carnation plants was 2 1/2 years was false.
93. I am also not satisfied, on the evidence, that a statement was made, prior to the agreement being signed on 20 December 1983, to the effect that no more than 3,000 of the carnation plants were "old stock", that is to say two years old.
94. The evidence relied upon to support the assertion that such a statement was made prior to the signing of the agreement on 20 December 1983 is the evidence of Mr Du Cros that, when Mr Lim was inspecting the nursery with Mr Nesci and himself on 16 December 1983, Mr Nesci said that the carnations in the first two rows of small greenhouses (numbering about 3,000 plants) were very old (over two years) and that Mr Lim "should not worry about them". Mr Nesci, of course, denies having been at the nursery with Mr Lim. But, wherever the truth may lie, any statement made by Mr Nesci on that occasion was made to Mr Lim, not to Mr Du Cros. It does not appear to have been a matter of any concern to Mr Du Cros at that time as it was not a matter which he raised at either of the meetings on 19 or 20 December 1983. There is, however, evidence from Mr Du Cros that, some days after the agreement was signed, he inquired of Mr Nesci as to the age of the carnation plants on the property and was informed by Mr Nesci that 3,000 plants were old stock - 2 years old - and that 5,000 plants were 4 months old. Mr Nesci was not able to say, according to Mr Du Cros, how old the other plants were.
95. I am not prepared to find, on the evidence, that the alleged
representation was made to Mr and Mrs Du Cros prior to the agreement
being
signed.
The sixth representation
96. This representation relates to the number of gladioli and ranunculi bulbs "on hand" for planting.
97. A statement in the terms alleged was clearly made by Mrs Stuart in
Exhibit "B" and I am satisfied it was confirmed in the discussions
on 19 or 20
December 1983. However, there is no evidence to show that the statement was
not correct at the time it was made. The
fact that a large number of the
gladioli bulbs and the whole of the ranunculi bulbs were found to be in a
state which made it impossible
to use them when planting time came around is
not sufficient, in my view, to establish the falsity of the statement made.
The seventh representation
98. The representation that the average weekly income of the business was $1,500 is the most important of the representations alleged for it was upon that figure, in combination with the figures quoted for expenses of the business, that Mr and Mrs Du Cros primarily relied in determining to enter into the agreement of 20 December 1983.
99. Mr Du Cros' evidence is that the figure was quoted to him by Mrs Nesci and confirmed by Mr Nesci at the meeting on 19 December 1983. As has already been mentioned, Mr and Mrs Nesci's evidence was not that some figure other than $1,500 per week was quoted to Mr and Mrs Du Cros but that no figures at all were quoted relating to the turnover of the business, either actual or average, in respect of the period from January to December 1983.
100. According to Mr Du Cros, the figure of $1,500 per week as representing the income of the business during the preceding twelve months was written on to Exhibit "B" by him when he returned to the winery after returning Mr Lim to his hotel and obtained that information from Mr and Mrs Nesci. He said that the matter was also discussed at the meeting on 19 December 1983 and that it was the subject of one of the queries or questions noted on Exhibit "H" and raised at the further meeting on 20 December 1983.
101. There are only two possible explanations as to the source of the figure of $1,500 per week as appearing on Exhibit "B". Either Mr Du Cros was given the figure by Mr and Mrs Nesci in the circumstances mentioned above or it was fabricated by him at a later point in time. It was suggested that it had its origin in his being informed by members of the McGuckin family of the representation alleged to have been made to them prior to the agreement of 29 November 1982 being executed.
102. I reject the latter suggestion as being the source of the figure of $1,500 shown on Exhibit "B" as the weekly income of the business. There is no evidence at all to support it. I accept Mr Du Cros' evidence that the figure was quoted to him by Mrs Nesci and confirmed by Mr Nesci.
103. I am, therefore, satisfied that the representation was made.
104. It is common ground that, if it were made, the representation was false.
The summary for the period January to December 1983
already quoted from the
Flower Account Book is sufficient to demonstrate its falsity. While there is
no evidence to suggest that
Mr Du Cros requested access to the books of
account of the nursery business - a matter to which I have already adverted -
it is understandable
why Mr and Mrs Nesci would have been reluctant to produce
them. The evidence establishes that the nursery business was not in a
good
financial position. It appears from the Flower Account Book that the income of
the business during the period 21 January - 31
December 1983 was $50,242.25
while the direct expenditure of running the business during the same period
was $43,354.72. In an answer
to an interrogatory administered to the
respondents the expenditure during the relevant period was put at the higher
figure of $45,996.95
and it may be that that figure includes a proportion of
the overheads attributable to the carrying on by Bickley Vale Pty Ltd of
the
whole of its business activities including the nursery. But, however that may
be, the profit from the nursery business during
the period, accepting the
lower figure for expenses, was $6,887.53 or approximately $140 per week. On
those figures, the business
was obviously not a viable venture for Mr and Mrs
Du Cros and this must have been known to Mr and Mrs Nesci at the time.
The eighth representation
105. This representation is that the average weekly flower production of the business would be 1,200 bunches.
106. Accepting, as I do, Mr Du Cros' evidence, I am satisfied that such a
statement was made to Mr Du Cros by Mrs Nesci, prompting
him to vary Mrs
Stuart's figure of 80,000 bunches as appearing on Exhibit "B". It is not,
however, alleged that the statement made
by Mrs Nesci was untrue or that she
had no belief in its truth at the time it was made. In those circumstances, I
need say no more
about it.
The ninth representation
107. This representation is that flowers from the business could lawfully be sold to the public from roadside stalls situated at Hardey Road and Hale Road, Forrestfield.
108. Again, I am satisfied on Mr and Mrs Du Cros' evidence that Mr Nesci said words to the effect that flowers were being sold from two caravans situated at the sites mentioned and that Mr and Mrs Du Cros could continue with that practice when they took over the business. The two caravans were specifically mentioned in the lease executed on 10 February 1984. The word "lawfully" was not used by Mr Nesci but it is implicit in what he said that there was no impediment to the caravans continuing to be used for the sale of flowers from the sites in Hardey Road and Hale Road.
109. In fact, Mr Nesci knew that the use of at least one of the sites for the sale of flowers was being questioned by the Kalamunda Shire Council at the very time when the negotiations with Mr and Mrs Du Cros were proceeding. At that time Mr Nesci was in correspondence with the council seeking to have it reverse its decision not to give permission for the sale of flowers from the site in Hale Road.
110. I am, therefore, satisfied that the representation was made and that it
was false.
Conclusion on Liability
111. In summary, I am satisfied, and I so find, that the following
representations were made by Bickley Vale Pty Ltd and that they
were false
when made:
(i) that there were 8,000 chrysanthemum112. Although I have followed the course of examining the representations relied upon seriatim, that being the way in which the matter was approached at the hearing, I have had regard to the content in which the various statements relied upon by the applicants were made and to the relevant surrounding facts and circumstances. Looking at the matter as a whole I am satisfied that Bickley Vale Pty Ltd, through its agents, engaged in conduct, in trade or commerce, that was misleading or deceptive and thus contravened s.52 of the Act.
plants planted on the premises which
would flower for Mother's Day 1984;
(ii) that the average weekly income of the
business was $1,500; and
(iii) that flowers from the business could
lawfully be sold to the public from
roadside caravans situated at Hardey
Road and Hale Rod, Forrestfield.
113. I am also satisfied that the applicants were induced by those representations to enter into the agreement made on 20 December 1983 and the lease dated 10 February 1984.
114. I further find that Mr and Mrs Nesci were involved in such misleading or
deceptive conduct within the meaning of s.75B of the Act.
Damages and Other Relief
115. It follows from the findings I have made that the appliants were entitled to rescind the agreement made on 20 December 1983 and the lease dated 10 February 1984 on the ground of the false representations made by the respondents. I am satisfied that the letter dated 1 August 1984 addressed by the applicants' solicitors to the solicitors for the respondents was effective for that purpose and I so declare. I might add that, had I not been of that opinion, I would have considered that the circumstances of this case warranted the exercise of the power conferred by s.87(1A) of the Act to declare the agreement and the lease to have been void ab initio.
116. The applicants are entitled to damages representing the loss they have suffered by reason of the misleading or deceptive conduct in which the respondents, on my findings, engaged. The principles in accordance with which those damages are to be assessed are now well established.
117. The applicants paid the first instalment of $3,333 under the agreement for the purchase of the business and amounts totalling $8,400 by way of rent in respect of the period 2 January 1984 to 22 July 1984. They are clearly entitled to recover those amounts from the respondents.
118. The case is, in my opinion, an appropriate one in which to allow the applicants to recover the trading losses incurred in running the business over a reasonable period. What the length of that period should be is a matter for debate. On the whole, I think it would be just to allow such losses for the period from 2 January to the end of July 1984. In reaching that conclusion I have relied upon the same considerations as led me to conclude earlier in these reasons that the applicants had satisfactorily explained the absence of any complaint to the respondents during that period.
119. During the relevant period the excess of income over expenditure
(excluding rent and the instalment of the purchase price paid),
as shown in
the accounts of the first applicant, was $1,388 particulars of which are as
follows:
Income $24,568The amount of $23,180 for expenses of the business, however, does not include any amount representing the value to the first applicant of the services performed by Mr and Mrs Du Cros in connection with the business. It would be just, in my view, to make an appropriate allowance in that regard. The applicants claim the sum of $7,750 based on an estimate of 50 hours as representing the average number of hours worked by Mr and Mrs Du Cros each week in the nursery business and an assessed value of $5 per hour as the value of that work to the first applicant whose employees they were. I did not understand those figures to be challenged by the respondents and I accept the figure of $7,750 as being a reasonable estimate.
Expenditure $23,180
Balance $ 1,388
120. The trading losses which are, thus, allowable in the calculation of the damages to which the applicants are entitled is $6,362 ($7,750 less $1,388).
121. There will be judgment for the applicants against the respondents in the sum of $18,095.
122. The applicants also seek an injunction restraining Bickley Vale Pty Ltd from proceeding further with the proceedings numbered 25200 of 1984 pending in the Local Court of Western Australia and the proceedings numbered 1454 of 1985 pending in the District Court of Western Australia and from instituting any other proceedings against the applicants or any of them in respect of the agreement for the sale of the business or the lease dated 10 February 1984.
123. As any amount recovered by Bickley Vale Pty Ltd in the pending
proceedings or in other proceedings of the kind mentioned would
represent an
additional loss which the applicants could properly recover in the present
proceedings, it is appropriate to grant injunctions
in the terms sought and I
propose to do so.
Counterclaim by Bickley Vale Pty Ltd
124. The basis of the counterclaim filed on behalf of the first respondent, Bickley Vale Pty Ltd, is that the agreement for the sale of the business and the lease remained operative until that company, accepting the wrongful repudiation of the agreement and the lease by the applicants, resumed possession of the nursery early in August 1984.
125. In relation to the wrongful repudiation of the agreement, the claim is for $36,666.67 being the difference between the agreed price of $40,000 at which the business was sold reduced by the amount of the instalment ($3,333.33) which was paid and the value of the business as returned to the company, which is put at nil. Alternatively, the company claims an amount not less than $6,666.67 being an amount equal to the first two instalments payable under the agreement.
126. In relation to the wrongful repudiation of the lease, Bickley Vale Pty Ltd claims to be entitled to retain the sum of $8,400 paid to it by way of rent under the lease, to recover the sum of $600 representing accrued rent in respect of the weeks commencing 23 and 30 July 1984 and to have damages by way of compensation for a period after it resumed possession of the nursery calculated by reference to the weekly rental that would have been payable in respect of that period if the lease had not been terminated. The period in respect of which this claim is made is a period of approximately six months during which, it is said, the notion was seriously entertained that the premises might be reinstated as a productive nursery.
127. It is clear from what has already been said that the substratum for the
counterclaim, namely that the applicants wrongfully
repudiated the agreement
for the sale of the business and the lease, has not been made out.
Consequently, there will be judgment
for the applicants on the counterclaim.
Orders
128. I make the following declaration and orders:
1. Declare that the applicants lawfully
rescinded the agreement made on 20
December 1983 and the lease dated 10
February 1984.
2. There be judgment for the applicants
against the respondents and each of them
in the sum of $18,095.
3. The first respondent, Bickley Vale Pty
Ltd, be restrained from proceeding
further with the proceedings numbered
25200 of 1984 pending in the Local Court
of Western Australia and the proceedings
numbered 1454 of 1985 pending in the
District Court of Western Australia and
from instituting any other proceedings
against the applicants or any of them in
respect of the agreement made on
20 December 1983 or the lease dated 10
February 1984.
4. There be judgment for the applicants
upon the counterclaim filed herein on
behalf of the first respondent.
5. The respondents pay the applicants'
costs of the proceedings, including
reserved costs.
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